2010 Conference Proceedings

The Association on Employment Practices

and Principles (AEPP)

Proceedings of the

18th Annual International Conference 2009

ISBN 1-878583-64-6

Conference Theme:

Modern Workforce Challenges, Responsibilities and Rights

in the Global Community

September 29 – Oct. 1, 2010

San Francisco, CA

Edited by:

John P. Keenan, Ph.D

The Institute for Leadership and Global Education (ILGE)

www.aepp.net

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© 2010 Association on Employment Practices and Principles (AEPP). All rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the prior permission of the AEPP. Published by the Association on Employment Practices and Principles, Orchard Park, NY, USA, October 2010. ISBN 1-878583-64-6

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AEPP 2010 Conference Proceedings

Table of Contents

Contents Page

i. Acknowledgments 8

ii. Letter from the President 9

iii. The Association On Employment Practices And Principles (AEPP) 10

iv. 18th Annual International Conference Organizers For AEPP 2009 12

v. AEPP 2010 Conference Program 14

vi. Call For Papers – AEPP 2011, 19th Annual International Conference 19

FULL PAPERS

1. Improving Organizational Performance

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

24

2. Linking Leadership For Reducing Performance Inhibiting

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

38

3. Leaders and Listening: An Empirical Exploration of Nonprofit

Leaders Jyoti Bachani, St. Mary’s College of California and Mary Vradelis,

Consultant, Second Wind Consulting, Berkeley, CA

46

4. The Determinants of Trust Among the Turkish Consumers in

Online Retail Banking (ROB) Dababrata Chowdhury, SLM, University of Plymouth Business School,

Vipul Mudgal,,Orange France Telecomms,Plymouth, UK, Lynne Butel,

University of Plymouth Business School Drake Circus, Plymouth, UK,

and Murat Kasimoglu, Canakkale Onsekiz Mart University,Biga,Turkey

53

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

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

63

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

Making: A Phenomenological Examination of the Statue of

Liberty/Ellis Island Decision Makers on September 11, 2001 Diane H. Dayson and Jean Gordon, Walden University

72

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

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

Turkey

79

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8. The Black Swans and Retirement Strategies: Is “Buy and Hold

Best? Barry Doyle, Robert Mefford, and Nicholas Tay, University of San

Francisco

85

9. What Financial Risk Managers Can Learn From Six Sigma

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

Francisco

91

10. Labor Reform Through Executive Orders and EFCA: The Impact

on Workers Today Anne M. Fiedler, Barry University, and Mark A. Aeschleman, Caterpillar

Inc.

99

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

Opportunities Phil Man and Anne Fiedler, Barry University

108

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

Wheatley, Troy Univesity

115

13. The Nature and Purpose of Decision Making James R. Forcier, University of San Francisco

126

14. Long Term Incentive Plans: Not a Panacea for Executive

Compensation William J. Heisler, Troy University

134

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

Personnel Selection Ghardir Ishqaidef, University of Kansas

144

16. Modern Workforce Challenges: Leadership and Partnership in

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

University

154

17. Succession Planning: A Modern Workforce Challenge in Public

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

162

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18. Organizational and Career Expectations of Turkish College

Students Tugba Karabulut, Istanbul Commerce University, Turkey

170

19. Teachers’ Cultural Values and Conflict Approaches

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

Turkey

179

20. Modern Workforce Challenge: Appropriately Evaluation

Employees” Job Performance Jack N. Kondrasuk, Nick Slepnikoff, Justin Gomez, Jessica Peters, and

Danielle Castr, University of Portland

187

21. Facilitating Workforce Adaptation To Changing Global Work

Realities Mitchell L. Marks, San Francisco State University

195

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

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

University of Lefke, Turkey

203

23 Changing Face of Women Workforce: A Qualitative Study on

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

210

24. Transactional and Transformational Leadership and Their

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

217

25. Managerial Responsibility for Meritocracy – Perspectives on the

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

225

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

Turkey Alaeddin Tileylioglu, Çankaya University, Turkey

231

27. Internalization vs Externalization of Human Capital Strategy: A

Trust Climate Perspective Chih-Yuan Wang

and Nien-Chi Liu, National Central University,

Graduate Institute of Human Resource Management, Taiwan

240

DEVELOPMENTAL PAPERS

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

250

29. Integrated Workforce Enrichment Solution for Modern

Workforce Challenges Ripple Gupta and Sudhir Rai, Prin L.N. Weleingkar Institute of

Management Development and Research, Mumbai, India

253

30. The Status of Parking Lot Gun Laws: Annie Get Your Gun

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Marsha Katz, Governors State University, and Helen LaVan, Yvette Lopez, Wm Marty Martin, Charles Naquin, DePaul University

258

31. Volunteerism and Gender in Terms of Ethics of Care

Cigdem Kirel and Ilke Oruc, Anadolu University, Turkey

262

32. Employees in Performing Nonprofits: Workers Adrift in the

Ephemeral Arts Paul Lorton, Jr. University of San Francisco

266

33. Building Sustainable Capacity Development Through

Participatory Governance and Sub-National Capacity Development:

Why Development and International Support Failures in Africa?

Call for Action Israel Jacob Massuanganhe, Center of Excellence in Public Policies

And Local Governance, University Agostinho Neto, Angola

270

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

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

Slovenia

275

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

Resource Professional Ranjan Phadke, Pune India

280

36. Gender, Organizational Justice, Job Attitudes and Absenteeism Betty Jane Punnett, Priscilla Glidden, and Dion Greenidge, University of Wes

Indies, Barbados

288

ABSTRACTS

37. Corporate Innovation: Growing New Business Through New 298

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

38. Strategic Management of Corporate Social Responsibility and

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

299

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

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

Bogota, Colombia

300

40. An Examination of the Information Processing and Emotional

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

301

41. New Trends of Human Resource Management in Public and

Business Organizations of Pakistan

M. Abuzar Wajidi, University of Karachi, Pakistan

302

WORKSHOPS/PANELS

42. International Perspectives on Responsible Employment

Pracatices and Principels in Times of Economic Uncertainty John P. Keenan, The Institute for Leadership and Global Education,

Nuria Calvo, University of Coruna, Spain, Ali M. Al-Khouri, Emirates

Identity Authority, United Arab Emirates, Sutada Mekrungruengkul,

National Institute of Development Administratio, Nonthaburi, Thailand,

Tomokazu Sakumot, Kinawa International University, Debra McKinney

Gehman, Seguros Bolivar, S.A., Bogota, Colomba

304

43. Emerging Trends in Leadership and Management Education and

Development John P. Keenan, Institute for Leadership and Global Education (ILGE),

Sonia Ghumann, University of Hawaii at Manoa, Marilyn Cash Mathews,

Networker, Inc., Saint George, Utah, Raj Parikh, Southern Oregon

University

305

44. Challenges and Opportunities in American Higher Education

Raj Parikh and James Klein, Southern Oregon University, Barry Doyle,

University of San Francisco

307

45. How Youth Entrepreneurship Fosters Creativity in High School

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

Francisco, CA

308

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ACKNOWLEDGMENTS

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

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

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

Principles (AEPP)..

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

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

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

Leadership and Global Education (ILGE) for AEPP.

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

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

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

Deniz Kebabci, Ginette Roberge, and all others involved.

The AEPP gratefully acknowledges the assistance of the AEPP 2010 conference

committee. Thank you all.

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LETTER FROM THE PRESIDENT

Dear Conferees,

Welcome to the 18th Annual International Meeting of the Association on Employment Practices and

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

We also sponsor the International Journal for Responsible Employment Practices and Principles

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

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

Our venue this year is at the beautiful campus of the University of San Francisco, close to downtown. San Francisco. The University setting is ideal and our location in San Francisco provides ready access to the culture, arts, fine cuisine, and shopping in one of world’s most beautiful cities and favorite tourist destination. Attendees will have an excellent selection of hotels to choose from including those close to the University. Selected papers will be invited to be submitted for review for possible publication in the official publication arm of CERR and the Association – the International Journal for Responsible

Employment Practices and Principles (IJREPP). For further information on IJREPP, please contact the Editor-in-Chief Dr John Keenan at [email protected]

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

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

John P. Keenan, Ph.D. President, Association on Employment Practices and Principles (AEPP)

Executive President, The Council on Employee Responsibilities and Rights (CERR) Editor-in-Chief, IJREPP

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THE ASSOCIATION ON EMPLOYMENT PRACTICES AND PRINCIPLES (AEPP)

How it all started

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

Employment Practices and Principles (IJREPP). This is now the official top-tier publication.

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

Employment Practices and Principles (IJREPP) as well as AEPP President.

Birth of AEPP

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

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

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18TH ANNUAL INTERNATIONAL CONFERENCE ORGANIZERS FOR

AEPP 2009

"Modern Workforce Challenges, Responsibilities, and Rights

in the Global Community"

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

University of San Francisco

Conference Chair Alev Efendioglu Conference Host University of San Francisco, San Francisco, CA AEPP Executive Committee Lynne Bennington, RMIT University, Melbourne, Australia Amalia De Jesus, The Institute for Leadership and Global Education (ILGE), Dubai, UAE Alev Efendioglu, University of San Francisco, San Francisco, CA John P Keenan, The Institute for Leadership and Global Education (ILGE), Orchard Park, NY Richard FitzPatrick, Manhattan College, Riverdale, NY Ben Lev, University of Michigan – Dearborn, Dearborn, Michigan Robert Preziosi, Nova Southeastern University, Ft. Lauderdale, FL AEPP 2010 Proceedings Sponsor The Institute for Leadership and Global Education (ILGE) List of Reviewers Brian Altman Lynne Bennington Andy Li-Yueh Chen Dababrata Chowdhury Bobbie Dillon Alev Efendioglu Ann Fiedler Hank Findley Bill Heisler Marilyn Jenkins Tugba Karabulut Jahanvash Karim Marsha Katz Deniz Kebabci Askin Keser Jack Kondrusak Tim Loney Suleyman Ments

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

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2010 CONFERENCE PROGRAM

DAY I – Wednesday September 29

Room MH 250

Opening Session 1:00am – 1:45 Dean Mike Duffy – USF College of Business and Professional Studies

John Keenan, President of AEPP

Alev Efendioglu , Conference President and Program Chair

Session 1 2:00 pm – 3:30pm

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

Session 2 3:45pm – 5:15pm

Hank Findley, Eva Dodd- Walker, Lee Vardaman, Ping A Hostile Sexual Environment: How hostile does it He, and Robert Wheatley have to be? (F) S. Ahmet Menteş and Zeynep Is Glass Ceiling in Turkey Thicker Than It Seems? Duren A Study on ISE 100 (Istanbul Stock Exchange) (F)

A Case Study About Workplace Bullying and

Cathy Taylor and Heather Harassment From a Non-Supervisory Zeng Basis (F)

Welcome Reception/Social – 5:15pm – 7:00pm Room MC 252

DAY II– Thursday, September 30th

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

New Trends of Human Resource Management in

Abuzar Wajidi Public and Business Organizations of Pakistan (D)

William J. Heisler, Marilyn

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

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

Leaders and Listening: An Empirical Exploration of

Jyoti Bachani and Mary Vradelis Nonprofit Leaders (F)

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

Marie-Elene Roberge and Ozge Ucan Transactional and Transformational Leadership And

Their Effects on Individuals and Organizations (D)

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

Analysis of the effects of contraction in demand on Nuria Calvo maintaining knowledge at consulting companies (F)

A Research On Determining The Relations Of Corporate Governance Between The Corporate

Ebru Karpuzoglu Performance And Reputation (F) Linking Leadership for Reducing Performance

Brian Altman and Mesut Inhibiting Workplace Dynamics: Implications for Akdere Organizational Effectiveness (F)

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

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

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

Donald Lee Vardaman, Jr. and Faculty Recruiting: Do’s and Don’ts in the Search for Henry Findley Talent (F) Murat Colak and Guler A Research Devoted to the Perception of University Tozkoporan Students on Diversity (F)

Long-Term Incentive Plans: Not a Panacea for Executive William Heisler Compensation (F)

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

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

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The Effects of Downsizing: A Case Study in IT Alaeddin Tileylioglu Company in Turkey (F)

Building Sustainable Capacity Development Through Participatory Governance and Sub- National Capacity Development: Why development

Israel Jacob Massuanganhe and international support failure in Africa? (D

Lunch – 12:00 – 1:30pm Room MC 250

Keynote Speaker: Dean Mike Duffy, School of Business and Professional Studies - USF

Session 9 1:30pm – 3:00pm Room: MH230

The Nature and Purpose of Firm Decision-Making James R. Forcier (F)

The Role Situation Awareness (SA) in Command Decision Making: A Phenomenological

Diane Dayson, Jean Gordon, Examination of Statue of Liberty/Ellis Island and David Milen Decision Makers on September 11, 2001 (F) Serkan Dolma, Yag zhan The Incompatibility of the Dual-Concern Model Yazar, and Ozlem Yavas and Conflict Management Styles Scales (F)

Session 10 1:30pm – 3:00pm Room: UC222

Strategic Management of Corporate Social Responsibility and Workforce Issues in the Global Arena: A

Michele V. Gee Developmental Paper (D)

Influence of Workplace Religiosity on Transfer of Yalman Ansari Training in Banking Sector (F) Marilyn Ohlsen Jenkins and Succession Planning: A Modern Workforce Challenge in

Kirsten Kim Loutzenhiser Public Administration (F)

Session 11 3:30pm – 5:00pm Room: MH230

Organizational Expectations and Career

Tugba Karabulut Expectations of Turkish College Students (F)

John Keenan, Raj Parikh, Challenges and Opportunities in American Higher James Klein, and Barry Doyle Education (PANEL) Durations 1hr

Session 12 3:30pm – 5:00pm Room: UC222 Corporate Innovation: Growing New Business through

Roger (Rongxin) Chen New Business Incubators, Challenges and Solutions (A) An Implementation Road Map for High-Impact, Low-Cost Employee Assistance Strategies. The Bolivar Group

Debra McKinney

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e-Idealized Influence Attributed Leadership Development Sarwar Chaudhary (A)

Welcome Reception/Social – 5:15pm – 7:00pm Room MC 251

DAY III– Friday, October 1

Session 13 8:30am – 10am Room: MC251

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

John Keenan, Nuria Calvo Babío, Ali M. Al-Khouri,

Sutada Mekrungruengkul, International Perspectives on Modern Workforce Tomokazu Sakumoto, and Challenges, Responsibilities, and Rights in the Debra McKinney Gehman Global Community (PANEL) Duration 1hr

Session 14 8:30am – 10am Room: UC222

Temporary Staffing Agencies: State-of-the-Art Practices Ghadir Ishqaidef of Personnel Selection (F) Anne M. Fiedler and Mark A. Labor Reform through Executive Orders and EFCA: The Aeschleman Impact on Workers Today (F)

Facilitating Workforce Adaptation to Changing Global

Mitchell Marks Work Realities (F)

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

Phil Mann and Anne M. Business Education, Social Responsibility, and Fiedler Nonprofit Opportunities (F)

Employees in Performing Nonprofits: Workers Paul Lorton Adrift in the Ephemeral Arts (D)

Volunteerism and Gender in Terms of Ethics of Cigdem Kirel and Ilke Oruc Care (D)

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

Marsha Katz, Helen LaVan, Yvette Lopez, Wm Marty, The Status of Parking Lot Gun Laws: Annie Get Your

Martin Charles Naquin Gun (D) Nida Afridi and Fatima Junaid Procedural Justice and Its Effects on Organizational

Outcomes (D)

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‘Being Human’ - The Essence of Being a Successful Ranjan Phadke Human Resource Professional (D)

Lunch/Conference Awards – 12:00 – 1:30pm Room MC 250

Session 17 1:30pm – 3pm Room: MC251

Chih-Yuan Wang and Nien- Internalization vs. Externalization of Human Chi Liu Capital Strategy: A Trust Climate Perspective (F)

Dababrata N. Chowdhury, Vipul Mudgal, Murat The Determinants of Trust among the Turkish Kasimoglu, and Lynne Butel Consumers in Online Retail Banking (ORB) (F) Ali Al-Khouri Improving Organisational Performance (D)

Session 18 1:30pm – 3pm Room: UC222

Barry Doyle, Robert Mefford, and “What Financial Risk Managers Can Learn from Six Nicholas Tay Sigma Quality Programs” (F)

Murat Colak The Effect of Privatization on Efficiency and Working Values: Turkey’s Cement Industry Example (F)

Managerial Responsibility for Meritocracy:

Tomokazu Sakumoto Perspectives on the Japanese Wage System (F)

Session 19 3:30pm – 5pm Room: MC251

How Youth Entrepreneurship Fosters Creativity in High School Students and May Help You in

Krista Katsantonis and Teaching College Undergraduates (Workshop) Deborah Reinerio Duration 1.5hrs

Session 19 3:30pm – 5pm Room: UC222

John Keenan, Amalia De Jesus, Marilynn Cash Mathews, and Raj Emerging Trends in Leadership and Parikh Management Education and Development

(PANEL) Duration 1.5hrs

ENJOY SAN FRANCISCO RESTAURANTS AND ENTERTAINMENT!!!

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CALL FOR PAPERS/PROPOSALS

The Association on Employment Practices and Principles (AEPP) Nineteenth Annual International Conference

Oct. 5-7, 2011 University of Hawaii at Manoa, Honolulu, HI Sponsored By: University of Hawaii at Manoa

Raj Parikh, Ph.D., Conference President and Program Chair, Southern Oregon University

The Association on Employment Practices and Principles (AEPP) and its parent, the Council

on Employee Responsibilities and Rights (CERR), focus on the quality of life in work

organizations, and promote an awareness of ethics, social responsibility and justice. We host

annual international conferences that are personal, inclusive, supportive and democratic. We

also sponsor the International Journal for Responsible Employment Practices and Principles

(IJREPP), our official journal that continues in the tradition of our 21 year history of

accomplishments and success in developing and editing the premiere journal in this field.

Special emphasis this year will include encouraging “practitioner” engagement in varied track

areas in addition to our traditional scholar emphasis.

Special Paper Awards Best Paper Award Best Practitioner Award Best Paper Based On a Dissertation Award Best Case Studies Paper Award

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

Opportunities

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

Highlights From Honolu Honolulu, Hawaii Location Reasonably Priced Room Rates Keynote Speaker on Conference Theme Special Night on the Town

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

Content Areas/Tracks

• Management and Organization Studies: Organizational Behavior, Organization Theory, Organization Change Management, International Comparative Studies, Emotions at Work.

• Strategic Management: Corporate Social Responsibility, Corporate Governance, Technology Management, Industry Studies, Alliances and Ventures, Entrepreneurship, Knowledge Management.

• Employee and Employer Rights and Responsibilities: Ethics, Equal Opportunity and Affirmative Action, Marginalization and Discrimination, Bullying, Collective Bargaining, Conflict, Privacy, Psychological Contracts.

• Entrepreneurship and Innovation: The development and management of new businesses, special problems of entrepreneurs (including small businesses), new venture ideas, strategies, and venture capital management; economic development effects, innovation strategies

• Policy and Administration: Regulation, Business and Society, Public Administration, International Trade Agreements.

• Health Policy, Health Strategy, Health Insurance and Health Programs: Health policy, health insurance, health strategy, innovative health programs in the health industry, and employee health benefits and programs. International health programs and health policy submissions are encouraged.

• Human Resource Management and Development: Management Development, Education and Training, Performance Management, Compensation, Benefits, Human Resource Planning, Strategic Human Resource Management, Labor and Employee Relations, Outsourcing.

• Leadership: Strategic leadership, organizational leadership, leadership education, training and development, leadership models and frameworks, cross cultural leadership, virtual leadership, leadership legacy, leading in times of economic crises, case studies, leadership assessment.

• Eclectic Paradigms and Perspectives: Postmodernist, Feminist, or Critical Perspectives and Insights, New Methodological Approaches.

• Curriculum/Instruction: Issues and challenges associated with teaching in the above areas as well as specific strategies or innovations.

• Production/ Operations Management: The design, operation and control of production systems in both manufacturing and service organizations, capacity planning, production and inventory control, facility location and layout, operations strategy, just-in-time production systems, process technologies.

• Finance/Accounting/Economics: The traditional disciplines of finance, accounting, and economics, with respect to relationships to current employment practices and principles, ethical dimensions, CSR.

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• Human Resource Management in the International Context: Contemporary issues and practices in HRM related to the evolving international context, cross-cultural studies, and related areas.

• Public Sector: Labor relations in public management, policy making and decision making, formal public and private partnerships, public personnel management leadership, decision making and strategic management related to public sector organizations.

• Education Sector: Administrative leadership, higher education, secondary education, primary education, curriculum and instruction, innovative educational initiatives, teacher education and professional development, continuing education, research and development.

• Information Technology: Development and operation of computer-based information systems related to human and organizational factors, ethical issues, privacy, property rights, access, and related topics.

• Marketing and Customer Relations Management: Marketing management, customer relations management, strategic planning in marketing and development, CRM implementation strategies, case studies in exemplary customer relations management programs, training and development issues and perspectives.

• Violence in the Workplace, Bullying, and Terrorism: The causes and consequences of violence in the workplace, forms of violence, social psychological factors impacting violence, strategic approaches to control, bullying, employee abuse, terrorism and its causes, strategies to control terrorism, terrorism and its impact on business and governmental institutions.

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

For Papers. Only full, complete papers (no abstracts) may be submitted and will be double-blind peer reviewed. Accepted papers will be published in the Conference Proceedings “CD and website Publication”. Authors of “best papers,” based on audience feedback and response will be invited to submit their papers for publication consideration in a special issue of the International

Journal for Responsible Employment Practices and Principles (IJREPP). The AEPP website, www.aepp.net, provides specific details for the proper format for submissions. ALL

SUBMISSIONS MUST CONFORM TO THESE GUIDELINES IN ORDER TO GO FOR REVIEW. For Developmental Papers. The purpose of developmental papers is to allow authors to discuss work that is still in its developmental stage. All developmental papers will be presented together in the same sessions during the conference. The main focus of the sessions will be on discussion rather than on a standard presentation. Submissions to the developmental thread should be extended abstracts of 1000-2000 words (excluding references). A comment should be included at the end of the extended abstract on how the authors expect to advance the paper between now and the conference. For Proposals. In addition to formal page submissions, we invite submission of proposals for panels, symposium, roundtables, or workshops. Coordinators of such proposals should include a

22

theme or title for the session as well as a one-page description of each participants role and contribution. Submissions and Program Inquiries: Please address inquiries to AEPP and include email and full contact information for each author and email all papers and proposals in MS Word (APA Format) to BOTH: (1) AEPP Admin - [email protected]; and (2) Conference President Dr. Raj Parikh at [email protected]. For any questions on specific track chair area, please copy Dr. Parikh. For information on accommodations, Honolulu, location - see website (www.aepp.net); for other questions - contact President and Program Chair, Dr. Raj Parikh at Southern Oregon University. Submissions and Inquiries: Please email all papers and proposals in MS Word (APA Format) to BOTH (1) AEPP Admin at: [email protected] , AND (2) Conference President Dr. Raj Parikh at [email protected]. The absolute deadline for receipt of full papers (no abstracts) for review as well as for refereed and non-refereed panels and symposia is 15

April, 2011, although early submission is encouraged and appreciated Authors of accepted presentations must register for the conference by 22 July, 2011 to ensure inclusion in the conference Proceedings. For information on Conference theme, Honolulu, and Conference location: contact President and Program Chair, Dr. Raj Parikh at Southern Oregon University: [email protected]. For information on Conference theme, Honolulu, and Conference location: contact President and Program Chair, Dr. Raj Parikh at Southern Oregon University: [email protected].

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FULL PAPERS*

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

24

IMPROVING ORGANISATIONAL PERFORMANCE

Ali M. Al-Khouri, Emirates Identity Authority,

Abu Dhabi, UAE, [email protected]

ABSTRACT

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

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

1. INTRODUCTION

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

2. LEFT-BRAIN AND RIGHT BRAIN MANAGEMENT

If our life experiences and culture shape our mental models of the world then our

own unique thinking styles and sensory preferences will shape the way we know the

world ..... Our thinking is shaped by our very existence in our world, our thinking

styles and sensory preferences, these styles and preferences are the ones we have

always been comfortable with and familiarity is comforting. [4] A useful theory for management to always keep in mind is the Right-Brain and Left-Brain thinking. Most of us have one side of our brains dominant which influence the choice of thinking and learning styles. Figure 1 illustrates the differences between the two sides of the brain.

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Figure 1: Left and Right Brain thinking model

Numerous management styles can originate from the left or the right side of the brain[5]. The left side has an exasperating devotion to numerical figures, details, analysis, time-bound logic, and sequential thinking, etc, concerning itself with cash flow and the dire consequences of mismanagement of finances. It processes information in an analytical and sequential way, looking first at the pieces, then putting them together to get the whole. The right side is often based on intuitive, emotional decisions, synthesis, and holistic thinking i.e., it processes information in an intuitive way, looking first at the whole picture then filling in details. While this approach can yield immediate success in the short run, it often comes at the risk of long-term sustainability and growth. Our experience in projects also shows that it is important that we follow a 'balanced-thinking' (i.e., to engage both sides of the brain) to analyse and identify elements that contribute towards the achievement and maintenance of highest performance and productivity levels see also [6]. It was found vital that we constantly promote this way of thinking to enhance the overall performance of projects. Organisations aiming to improve productivity, with rigorous planned strategies, staff with balanced and mixed thinking skills can produce more efficient and innovative organisational outcomes [7]. The left-brain and right-brain model goes beyond mere issues of management style but it reflects organisational thinking and how it approaches problem solving, and can better addresses the situational uniqueness of projects and conquer the challenges of contemporary projects.

3. BELIEFS AND PERCEPTIONS

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

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

Figure 2: Motivation Factors

To it is also important for management to understand the association between our unconscious mind and how it may determine particular motivated behaviours i.e., how beliefs may be part of our unconscious mind and play the role of regulating many of our behaviours and actions we take in life. We correlate this to Freud's topographical model [9] that represents the configuration of the mind. The model makes three classifications of the human mind: • Conscious: awareness of one's environment and one's own existence, sensations, and thoughts i.e., part of the mind that holds what we are aware of. We can verbalize about our conscious experience and think about it in a logical fashion. • Preconscious: memories or feelings that are not part of one's immediate awareness but that can be recalled through conscious effort

• Unconscious: part of mind containing elements of psychic makeup, such as memories or repressed desires, that are not subject to conscious perception or control but that often affect conscious thoughts and behavior. Figure 3 uses an iceberg metaphor to facilitate the understanding of Freud's topographical theory. It shows that more than 90% of an iceberg is beneath the water (preconscious and unconscious) whereas only 10% of it is visible (conscious).

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Only 10% of an iceberg

is visible ( conscious)

The preconscious is

allotted approximately

10% - 15%

Unconscious is

allotted

75% - 80%

Conscious level

Thoughts

Perceptions

Memories

Stored KnowledgePreconscious level

Unconscious levelFears Unacceptable

Sexual DesiresViolent Motives

Immoral UrgesIrrational Wishes

Selfish NeedsShameful

Experiences

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

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

4. THEORIES AND PRACTICE

"We all have preferred unconscious and conscious habits of thought that influence

how we make decisions, communicate, learn and interact with others…. Our mental

models and maps are 'configured' by the very nature of our experiences; they are

'configured' by our cultures. The western concept of time is very linear, whereas the

Australian Aboriginal notion of time is very holistic! Neither are right or wrong they

are just different". [10] A survey of global employers in 2005 [11] revealed that:

• More than 50% of employees lack the motivation to keep learning and improving; • 4 in 10 people cannot work cooperatively; • Only 19% of entry level-applicants have enough adequate self-discipline for their jobs; • 70% of all change initiatives fail due to people issues-inability to lead, lack of

teamwork, unwillingness to take initiative, inability to deal with change, etc.; and • Primary derailleur of top executives: a lack of impulse control.

In today's competitive knowledge-driven organisations, leadership is more important than ever, and requires more than just possessing the right technical skills. Today's leaders need to

28

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

4.1 Theory X and Theory Y

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

Figure 4: Theory X & Theory Y

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

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

Theory X Theory Y

The average employee is lazy, dislikes work, and will try to do as little as possible

Employees are not inherently lazy. Given the chance, employees will do what is good for the organisation.

To ensure that employees work hard, managers should closely supervise employees

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

Mangers should create strict work rules and implement a well defined system of rewards and punishments to control employees

Managers should decentralise authority to employees and make sure employees have the resources necessary to achieve organisational goals

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

• Opportunities for advancement

• Responsibility

• Recognition

• Financial rewards

• Praise

• Threats

• Reprimands

• Financial penalties

• Suspension

• Termination

Negative

Motivation

Positive

Motivation

Figure 5: Positive vs. Negative Motivation [13]

As we have stated this earlier, our perceptions, attitudes and behaviours are normally driven and motivated by our needs, beliefs and values. The same applies to others around us. If we want to understand ourselves and/or others, we need to look at such motivators which would probably help us modify our perceptions and thereafter our behaviours. Many methods have been developed to explain why people choose to follow particular behaviours. Two categories of motivation theories are covered next; content and process theories. Content theories are concerned with what motivates behaviour. Process theories are concerned with how the content of motivation influences behaviour. The next section starts the discussion with a content theory; Maslow's theory. 4.2 Maslow's Hierarchy of Needs Theory (Content Theory)

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Self-Actualizationdesire for self-fulfillment.. To Become the

best one is capable of becoming.

EsteemNeed for reputation, prestige, & recognition from others.

Also contains need for self-confidence & strength

LoveThe desire to be loved & to love. Contains

the needs for affection & belonging

SafetyConsists of the need to be safe from

physical & psychological harm.

PhysiologicalMost basic need Entails having enough

food, air, and water to survive.

Figure 6: Maslow's Hierarchy of Needs [14] Maslow's theory is one of the very common tools used to understand human needs. It mainly identifies five basic levels of needs as illustrated in Figure 6 namely; physical, safety, social, esteem and self-actualisation needs. The principle argument of the theory is based around the following four premises:

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

To us, the theory represented a workable motivation framework that we utilised in analysing specific attitudes and behaviours to identify a particular need level an individual may attempt to satisfy, which gave us the opportunity in turn to assist and or/guide the individual to satisfy those needs. 4.3 Herzberg's Two-Factor Theory (Content Theory)

Another relevant needs theory is called the two-factor theory. It principally uncovers two sets of factors: (1) motivators: factors that produce satisfaction and motivation (2) maintenance, or hygiene factors: factors that lead to dissatisfaction.

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Hygiene Factors

SatisfactionLess

Absence of

factor

Motivators

• Promotion opportunities

• Opportunities for personal growth

• Recognition

• Responsibility

• Achievement

More

Presence

of factor

• Hygiene Factors

• Pay

• Organisational policies

• Physical working conditions

• Relations with others

• Job security

Motivators

SatisfactionLess

Absence of

factor

More

Presence

of factor

Figure 7: Herzberg's Two-Factor Theory

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

(1) Hygiene factors are predominantly related to lower level needs. (2) Herzberg’s motivators target higher level needs.

Motivators

Hygiene

conditions

Higher

order

needs

Basic

needs

Maslow

(need hierarchy)

Self-actualization

Esteem

Belongingness,

social, and love

Safety and

Security

Physiological

Herzberg

(two-factor theory)

The work itself

• Responsibility

• Advancement

• Growth

Achievement

Recognition

Quality of inter-

personal relations

among peers, with

supervisors, with

Subordinates

Job security

Working conditions

Salary

Figure 8: Maslow vs. Herzberg

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

4.4 Vroom's Expectancy Theory (Process Theory)

Figure 9: Expectancy Theory [16]

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

Figure 10: Performance dimensions

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

33

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

SOME FURTHER REFLECTION

There has been so much debate about the applicability of the presented theories in today's world specially that some of them have been developed as early as 1920's [3][18][19]. From our own personal perspectives, we see those theories still valid today as tools and frameworks for understanding human motivation. For example, we agree with Maslow that only an unsatisfied need can motivate a person's behaviour. We are never satisfied with what we have as we always want more; thinking that what we do not have will seemingly make us happier. This is our nature. Some of the presented theories also do not believe that human beings are pushed and pulled by mechanical forces, either of stimuli and reinforcements (behaviorism) or of unconscious instinctual impulses (psychoanalysis) [20]. It rather promotes the idea of focusing on human potentials, with the belief that they continuously and characteristically strive for an upper level of our capabilities (ibid.). In our opinion, the theories explored here provide sound theoretical frameworks to better analyse and understand the basis of individuals' perceptions, behaviours, and attitudes. Table 2 shows some examples of our interpretations and understanding of the presented theories. Such understanding should enable us to enhance and improve our own thinking styles, motivation, and overall performance.

Table 2: Theories & Further Reflection

Theory Examples

Theory X &

Theory Y • perceptions of how people view human behaviour mainly at

work and organisational life

Maslow's

Need Theory • Confirms that human needs are an important part of human

nature. • Identity trial model vs. self-actualisation

Herzberg's

Theory • Provide the foundation to build motivation and influence

behaviour

Vroom's

Expectancy

Theory

• A framework to understand why people choose particular need (behaviour influence by perception of outcome)

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

34

thoughts. Thus motivation, for organisations need to be considered essential to learn best and maximise effectiveness. For management, effective performance improvement needs to deal with the performance of the organisational system as a whole. It requires an analysis of the deeper, underlying systemic blockages for performance in organisations and/or broader systems by the actors [21]. Such interventions should involve well managed learning processes which should in turn lead towards continuous performance-driven competence development. Leading in successively larger contexts (from individuals to groups to organisation-wide efforts) requires successively larger sets of competencies in terms of knowledge, skills and abilities. To create the conditions and space necessary for such an objective, it is important for management to foster change processes within the organisation to allow competency development. Figure 11 shows a competency framework that we used to develop core personal competencies. The framework looks at two prime competencies; personal and social. Personal competencies are those that determine how we manage ourselves, where social competencies are those that determine how we handle relationships. It sets out the skills, abilities, and personal qualities that leaders need to develop. We used this framework to develop leadership competencies and further identify training and development needs.

Personal Competence Social Competence

Aw

are

nes

s

Self-Awareness: Knowing one's internal

states, preferences, resources, and intuitions

• Emotional awareness: Recognizing one's emotions and their effects

• Accurate self-assessment: Knowing one's strengths and limits

• Self-confidence: A strong sense of one's self-worth and capabilities

Social Awareness: Awareness of others feelings,

needs, and concerns

• Empathy: Sensing others' feelings and perspectives, and taking an active interest in their concerns

• Organisational awareness: Reading a group's emotional currents and power relationships

• Service orientation: Anticipating, recognizing, and meeting customers' needs

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Act

ion

s

Self-Management: Managing ones' internal

states, impulses, and resources

• Self-control: Keeping disruptive emotions and impulses in check

• Trustworthiness: Maintaining standards of honesty and integrity

• Conscientiousness: Taking responsibility for personal performance

• Adaptability: Flexibility in handling change

• Achievement Orientation: Striving to improve or meeting a standard of excellence

• Initiative: Readiness to act on opportunities

Social Skills: Adeptness at inducing desirable

responses in others

• Developing others: Sensing others' development needs and bolstering their abilities

• Leadership: Inspiring and guiding individuals and groups

• Influence: Wielding effective tactics for persuasion

• Communication: Listening openly and sending convincing messages

• Change catalyst: Initiating or managing change

• Conflict management: Negotiating and resolving disagreements

• Building Bonds: Nurturing instrumental relationships

• Teamwork & Collaboration: Working with others toward shared goals. Creating group synergy in pursuing collective goals.

Figure 11: Competency Framework [10]

CONCLUSION

Human nature can be very simple, yet very complex. An understanding and appreciation of this fact is essential to effective employee motivation and therefore effective management and leadership of result oriented organisations. The content of this article was prepared to raise management awareness and provide them with some fundamental pieces of knowledge about behaviours in organsiations and how much they are determined by perceptions and personalities. The different learning lessons from the projects and the work we carried out to complete this paper, played a major role in clearing out what is to be 'set of foundations and pivotal ingredients' for self motivation, assertive communication [22], personal empowerment, enhancing personal behaviours [23], and interpersonal relationships. The presented theories are considered important tools and frameworks for management to understanding human motivation. The presented lessons, overall, should assist in formulating an effective learning contract for management to understanding the rudiments for building complementary teams, concerned with methods, systems, and procedures and at the same time with direction and results. To acquire a functional balance, management need to exercise the weaker side of the organisational brain. For example, a team with left-brain skills should include individuals with right-brain minded, who could participate creatively in problem solving, and facing the challenges of contemporary projects.

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

ACKNOWLEDGEMENT

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

REFERENCES

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[6] Leonard, D. & Straus, S. (1997) 'Putting your company's whole brain to work', Harvard Business Review, , 1997, 75(4), pp. 111-121.

[7] Cohen, E. Left-Brain Staff Management Strategies for Right-Brain Firms, STEP Magazine, 2008 [Online]. http://www.stepinsidedesign.com/STEPMagazine/Article/28887 [Accessed 1 August 2009].

[8] Lock, C. Motivation [Online]. Internet Marketing Resource Center, 2001. Available from: http://www.i-m-r-c.com/article/lock8.htm [Accessed 3 March 2009].

[9] Person, E., Figueira, S. & Fonagy, P. (Editors) On Freud's 'Creative Writers and Day-dreaming'. USA: Yale University Press, 1995.

[10] Herrmann, N. (1996) The Whole Brain Business Book. New York: McGraw-Hill, 1996, cited in: Potts [4].

[11] eDison. Emotional Intelligence, 2005 [Online]. UK: eDison Personal Development LTD. Available from: http://www.edisonuk.com/emotional_intelligence.htm [Accessed 26 March 2005]

[12] McGregor, D. The Human Side of Enterprise. New York: McGraw-Hill, 1960.

[13] Newstrom, J. W., & Davis, K. Organizational Behavior Human Behavior at Work. (11th ed.). New York: McGraw-Hill Higher Education, 2002.

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[13] Maslow, A.H. (1943) 'A theory of human motivation'. Psychological Review [Online], 50, pp.370-396. Available from: http://psychclassics.yorku.ca/Maslow/mo-tivation.htm [Accessed 5 March 2009].

[14] Herzberg, F. One More Time: How Do You Motivate Employees?, USA: Harvard Business School Press, 1987.

[15] Herzberg, F., Mausner, B., & Snyderman, B. B. (1959). The motivation to work (2nd ed.). New York: John Wiley & Sons.

[16] Vroom, V. H. Work and motivation. New York: John Wiley & Sons, 1964.

[17] Blumberg, M. & Pringle, C.D. (1982) 'The Missing Opportunity in Organisational Research: Some implications for a Theory of Work Performance', Academy of Management Review, 1982, 7, pp. 560-567.

[18] Keuning, D. Management: A contemporary Approach. London: Pitman Publishing, 1998.

[19] Mullins, L.J. Management and Organisational Behaviour (4th ed.). London: Pitman Publishing, 1996.

[20] Simons, J.A., Irwin, D.B. & Drinnien, B.A Psychology - The Search for Understanding [Online]. New York: West Publishing Company, 1987. Available from: http://honolulu.hawaii.edu/intranet/committees/FacDevCom/guidebk/teachtip-/maslow.htm [Accessed 1st May 2009].

[21] Hagmann, J., Peter, H., Chuma, E., Ngwenya, H.J., Kibwika, P. and Krebs, K. Systemic competence development - An approach to develop the facilitation capacity to manage systemic change and performance enhancement, 2009. [Online]. www.picoteam.org [Accessed 1 Feb 2010].

[22] Wertheim, E.G. The Importance of Effective Communication, 1998 [Online]. USA: Northeastern University, College of Business Administration. Available from:http://web.cba.neu.edu/~ewertheim/interper/commun.htm [Accessed 1 August 2009].

[23] Kagan, M. Do Something That Scares You Everyday, 2004 [Online]. Available from: http://www.extraordinary-jobs.com/V2I42.htm [Accessed 3 March 2009].

ABOUT THE AUTHOR

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

38

LINKING LEADERSHIP FOR REDUCING PERFORMANCE INHIBITING

WORKPLACE DYNAMICS:

IMPLICATIONS FOR ORGANIZATIONAL EFFECTIVENESS 2

Brian A. Altman

University of Wisconsin-Milwaukee Department of Administrative Leadership

2400 East Hartford Avenue, Enderis Hall, Milwaukee, WI 53211 Tel: (414) 229-5771, Email: [email protected]

Mesut Akdere

University of Wisconsin-Milwaukee Department of Administrative Leadership

2400 East Hartford Avenue, Enderis Hall, Milwaukee, WI 53211 Tel: (414) 229-6684, Email: [email protected]

ABSTRACT

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

Keywords: Leadership, performance, performance inhibiting workplace dynamics, Human Resource Development (HRD)

INTRODUCTION

Noting that there are many definitions of leadership, Northouse incorporates what he sees as the key aspects of leadership in his definition of leadership as “a process whereby an individual

influences a group of individuals to achieve a common goal” [13, p. 3, italics in original]. Altman and Akdere reviewed literature indicating that interpersonal dynamics in the workplace can be associated with reduced employee performance, and proposed a theoretical model of performance inhibiting workplace dynamics in which problematic employee interactions taking place in the workplace can have a negative influence on the performance of individual employees, which can adversely impact quality, and the team and the organization levels [1].

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

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The interested reader is referred to Altman and Akdere [1] for a full discussion and examples of performance inhibiting workplace dynamics. Possible responses by managers and consultants in addressing such performance inhibiting workplace dynamics have been articulated [2]. Although there is a role for organizational leadership in reducing workplace dynamics that interfere with performance [2], in general the wide range of leadership models that have been proposed to explain and recommend forms of leadership in organizations [13] have not focused on this role, and the issue does not appear in a recent review of current leadership literature [4]. Exceptions are Kogler Hill’s model of team leadership which incorporates team leaders addressing team member conflicts which harm team level performance [10], and Baker, Walsh, and Marjerison’s suggestion that “to bring out the best performance in the team, the leader teaches the team to…resolve group conflicts” [5, p. 57]. However, the notion of performance inhibiting workplace dynamics is broader than the notion of conflicts in teams. If leaders aim to help their organizations achieve performance goals and improve performance, it is important for those leaders to address factors that inhibit individual employee performance. Wilson, Boudreaux, and Edwards describe “eliminates barriers to performance” [19, p. 92] as a leadership competency with reference to the individual level of performance. There is a need for models of leadership addressing the leadership phenomenon at all levels and in a broad range of contexts that incorporate the notion of leaders addressing and ultimately eliminating performance inhibiting workplace dynamics. It would also be most broadly applicable if such a model is open to all leaders, without requiring that they possess particular unique traits, skills, or styles (see [13] for trait, skill, and style-based leadership models). This paper begins this task by outlining the role leaders should play in reducing performance inhibiting workplace dynamics, and in so doing extends the prior literature on performance inhibiting workplace dynamics [1] [2]. The intent of this conceptual paper is to work within the framework of Northouse’s definition of leadership cited above to propose a process through which leaders can play a role in improving performance by reducing performance inhibiting workplace dynamics. In particular, we intend for this process to be applicable by leaders who draw from a range of different leadership approaches and models, rather than integrating the process into only one or several of the host of leadership models and approaches extant in the literature. Furthermore, we aim to present this process to have resonance for an international audience and with applicability across national and global contexts.

A MODEL FOR LEADERS TO REDUCE PERFORMANCE INHIBITING

WORKPLACE DYNAMICS In Figure 1, we propose a model that illustrates a process through which leaders can play a vital role in working towards employee and organizational performance by addressing workplace dynamics which inhibit employee performance. Leaders and Influence on Organizational Followers At the top left of Figure 1, the two arrows extending from the “Organizational Leaders” box represent the two roles that leaders need to play with regard to performance inhibiting workplace dynamics. First, leaders can reduce performance inhibiting workplace dynamics themselves

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

FIGURE 1

The Role of Leaders in Addressing Performance Inhibiting Workplace Dynamics

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

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

Improved performance

Organizational Leaders

Organizational Followers

Understand workplace dynamics can inhibit performance

Change behaviors and/or systems to reduce performance inhibiting workplace dynamics [2]

Identify performance inhibiting workplace dynamics in context (may be overt, subtle, or inadvertent)

Organizational Culture

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interpersonal dynamics must be added to their personal conceptualizations of factors that can potentially inhibit individual work performance within their organizational contexts. For example, all leaders and organizational followers would likely agree that individual employees cannot perform at the best of their abilities if they do not have the equipment necessary to do their jobs, and that this equipment is in good working order. However this conceptualization of factors that inhibit employee performance, which includes a lack of necessary functioning equipment, should be extended to include the notion that certain interpersonal dynamics are additional factors that can inhibit performance at the individual level. In other words, when we think of factors that inhibit employee performance, we should think about interpersonal dynamics as well as issues such as a lack of necessary functioning equipment and other non-interpersonal factors which might more quickly come to mind. How can leaders gain an understanding that certain workplace dynamics can inhibit performance? We posit that this is, in essence, an act of learning. Merriam, Caffarella, and Baumgartner, drawing on work by Coombs, conceptualize adult learning as taking place in “formal institutional settings, non-formal settings, and informal contexts” [12, p. 29] as well as online. Using this framework, we suggest that the learning that workplace dynamics can inhibit performance can occur in any of these settings. For example, graduate courses for leaders could include this content. Alternatively, leaders might gain this learning through workplace training and development programs implemented by Human Resource Development (HRD) professionals. Leaders could also gain awareness of the performance inhibiting aspects of some workplace dynamics through their own informal reading and discussions. Finally, leaders can gain awareness of performance inhibiting workplace dynamics simply by observation in their workplaces. And, it may be that many leaders and organizational followers have already acquired this learning, and have an understanding that interpersonal dynamics in the workplace can hurt employee performance. Identifying Performance Inhibiting Workplace Dynamics in Context

Once leaders and followers gain an understanding that certain workplace dynamics can inhibit employee performance, the next step is to identify performance inhibiting workplace dynamics in their unique organizational contexts. It is important for organizational leaders and followers to analyze their organizations with an eye to dynamics that are reducing performance. One way to identify performance inhibiting workplace dynamics in the organizational setting is as follows. Extending a suggestion made for HRD scholars and practitioners [1] and for leaders with reference to signs of workplace bullying [20], as part of the leadership role, when leaders encounter examples of performance that is lower than expected, they should carefully examine the situation to see if negative interpersonal dynamics may be one of the root causes for the diminished performance. Such dynamics may be causing the reduced performance in and of themselves, or in combination with other factors such as resource issues and non-interpersonal employee actions. The process of identifying performance inhibiting workplace dynamics is not a simple one. The dynamics that are inhibiting performance may be overt, subtle, or inadvertent [3] [8] [11] [15]

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

Taking Action to Reduce Performance Inhibiting Workplace Dynamics The next step is for leaders and other organizational followers to take action to reduce performance inhibiting workplace dynamics. First, leaders should work to change their own behaviors to reduce performance inhibiting workplace dynamics and encourage others to do the same. Leaders must consider whether their own behaviors related to interpersonal dynamics might be negatively influencing the performance of others, and in so doing have negative repercussions for the team and organizational systems. Second, based on Altman and Akdere’s [2] application of Swanson’s [17] Taxonomy of Performance, leaders should respond to performance inhibiting workplace dynamics when found in the organization by addressing such dynamics as individual situations, and/or changing organizational systems to reduce the future prevalence of performance inhibiting workplace dynamics. In addition, as noted above, leaders should influence other organizational followers to engage in these processes, to examine their own behavior for dynamics that negatively influence the performance of others, work to reduce these behaviors in themselves, and act in the organization to reduce these behaviors in the larger context.

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

Organizational Culture

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

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

CHARACTERISTICS OF THIS PROCESS

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

IMPLICATIONS FOR THEORY AND RESEARCH Researchers who are developing models of leadership should incorporate the notion of performance inhibiting workplace dynamics into their conceptualizations of leaders’ awareness and behaviors. Future empirical research should explore the prevalence of leader awareness of the negative performance implications of certain workplace dynamics. To what degree are leaders in organizations aware of how performance goals may be thwarted by certain interpersonal dynamics in the workplace? Further, to what degree are leaders working to influence others in the organization to address performance inhibiting workplace dynamics, and to what degree are they engaging in efforts to identify and reduce performance inhibiting workplace dynamics? Beyond these issues of prevalence, future research should explore how those leaders who are aware of performance inhibiting workplace dynamics came to that awareness. Such insights will be of value to HRD practitioners working to improve performance. Also of benefit to practitioners, future research should work to identify what obstacles leaders perceive in engaging in the process outlined in Figure 1, and what strategies they have used to successfully circumvent those obstacles.

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

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

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

CONCLUSION

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

REFERENCES

[1] Altman, B.A. & Akdere, M. Towards a Theoretical Model of Performance Inhibiting

Workplace Dynamics. Human Resource Development Review, 2008, 7(4), 408-423. [2] Altman, B.A. & Akdere, M. Responding to Interpersonal Dynamics Inhibiting Workplace

Performance. International Journal for Responsible Employment Practices and Principles, 2009, 1(1), 10-21.

[3] Andersson, L.M. & Pearson, C.M. Tit for Tat? The Spiraling Effect of Incivility in the

Workplace. Academy of Management Review, 1999, 24(3), 452-471. [4] Avolio, B.J., Walumbwa, F.O. & Weber, T.J. Leadership: Current Theories, Research, and

Future Directions. Annual Review of Psychology, 2009, 60, 421-449.

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[5] Baker, D.E., Walsh, M.B. & Marjerison, L. High-performance Leadership at the Process

Level. Advances in Developing Human Resources, 2000, 2(2), 47-72. [6] Bass, B.M. & Avolio, B.J. Transformational Leadership and Organizational Culture. Public

Administration Quarterly, 1993, 17(1), 112-121. [7] Cummings, T.G., & Worley, C.G. Organization Development & Change (9th ed.). Mason,

OH: South-Western Cengage Learning, 2009. [8] Einarsen, S., Hoel, H. & Notelaers, G. Measuring Exposure to Bullying and Harassment at

Work: Validity, Factor Structure and Psychometric Properties of the Negative Acts

Questionnaire-Revised. Work & Stress, 2009, 23(1), 24-44. [9] Hogg, W. What Barroom Brawls and Marital Disputes Have in Common. American Journal

of Forensic Psychiatry, 2007, 28(4), 45-64. [10] Kogler Hill, S.E. Team Leadership. In P.G. Northouse, Leadership: Theory and Practice

(5th ed., pp. 241-270), Thousand Oaks, CA: Sage, 2010. [11] McLeod, J. Cruel Intentions? Nursing Management, 2007, 14(4), 16-18. [12] Merriam, S.B., Caffarella, R.S. & Baumgartner, L.M. Learning in Adulthood: A

Comprehensive Guide (3rd ed.). San Francisco: Jossey-Bass, 2007. [13] Northouse, P.G. Leadership: Theory and Practice (5th ed.). Thousand Oaks, CA: Sage,

2010. [14] Pearson, C.M. & Porath, C.L. On the Nature, Consequences and Remedies of Workplace

Incivility: No Time for "Nice"? Think Again. Academy of Management Executive, 2005, 19(1), 7-18.

[15] Rayner, C. & Keashly, L. Bullying at Work: A Perspective from Britain and North America. In S. Fox & P.E. Spector (Eds.), Counterproductive Work Behavior: Investigations of Actors and Targets (pp. 271-296). Washington, DC: American Psychological Association, 2005.

[16] Ribière, V.M. & Sitar, A.S. Critical Role of Leadership in Nurturing a Knowledge-

Supporting Culture. Knowledge Management Research & Practice, 2003, 1(1), 39-48. [17] Swanson, R.A. Analysis for Improving Performance: Tools for Diagnosing Organizations

and Documenting Workplace Expertise (2nd ed.). San Francisco: Berrett-Koehler, 2007. [18] Tsui, A.S., Zhang, Z.-X., Wang, H., Xin, K.R. & Wu, J.B. Unpacking the Relationship

between CEO Leadership Behavior and Organizational Culture. The Leadership Quarterly, 2006, 17(2), 113-137.

[19] Wilson, L.S., Boudreaux, M.A. & Edwards, M. High-performance Leadership at the

Individual Level. Advances in Developing Human Resources, 2000, 2(2), 73-103. [20] Yamada, D.C. Workplace Bullying and Ethical Leadership. Journal of Values-Based

Leadership, 2008, 1(2), 48-60. Retrieved from http://www.valpo.edu/cba/jvbl/onlinejournal.htm

[21] Zapf, D. & Einarsen, S. Mobbing at Work: Escalated Conflicts in Organizations. In S. Fox & P.E. Spector (Eds.), Counterproductive Work Behavior: Investigations of Actors and Targets (pp. 237-270). Washington, DC: American Psychological Association, 2005.

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LEADERS AND LISTENING: AN EMPIRICAL EXPLORATION OF NONPROFIT

LEADERS

Jyoti Bachani, Assistant Professor, Graduate Business, Saint Mary's College of California,

Rheem Campus, 380 Moraga Road, Moraga, CA 94556 [email protected], Phone: 650.948-4090

Mary Vradelis, Consultant, Second Wind Consulting

Berkeley, CA 94706 [email protected], Phone: 510.368-0587

ABSTRACT

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

INTRODUCTION

In this study, we set out to answer the questions, “What do integrative leaders do? And what, if any, traits and behaviors characterize integrative leaders?” The Center for Integrative Leadership at the University of Minnesota defined the concept of an integrative leader as a boundary-spanning leader, proposing that the most intractable problems of society can only be solved by leaders who can work across the boundaries of their organizations to integrate all key stakeholders. Since the concept of integrative leadership is relatively new, we thought it would be useful to test it in the real world. We started this exploratory study with the crucial assumption that the nonprofit and the government sectors require integrative leadership. This assumption was based on the anecdotal evidence that these organizations have to work with multiple constituents more routinely than for-profit organizations. A nonprofit’s success depends on being able to serve its constituents, keep the trust of its donors, win the commitment of its employees, and collaborate with other organizations that serve the same constituency. We interviewed eight leaders of nonprofit organizations to learn first-hand what leadership means to them, and how they lead. As expected, we found that leading a nonprofit organization has its own special set of challenges, including balancing increasing service needs with diminishing resources; and designing a radically different income stream than the average business model. Leadership also requires a significant amount of boundary-spanning activities. The most consistent skill for these leaders was the ability to listen. The leaders in this study

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

METHOD, PROCESS, AND ANALYSIS The purpose of this research is to empirically explore the concept of integrative leadership, and describe the role, activities and skills that integrative leaders may display. This is an exploratory and descriptive study. The Center for Integrative Leadership (CIL) defines an integrative leader to be one who has one or more off the following six behaviors (found on the CIL website):

(1) Inclusion of stakeholders who can affect change, (2) Identification of shared purpose to build sustainable solutions, (3) Systemic thinking to help groups resolve problems and support the solutions, (4) Questioning all of the stated or unstated assumptions, (5) Constructive dialogue, and (6) Innovation.

Based on our combined prior work experiences of over four decades, we made a critical assumption that integrative leaders are more likely to be found in not-for-profit organizations. We interviewed a total of eight leaders of different nonprofit and government organizations from all over the United States. The leaders were all referred to us as alumni of the James P. Shannon Leadership Institute, an institute that is dedicated to the personal and professional renewal of leaders in community-serving organizations. Until the informants give permission, their information has been disguised. In this exploratory study, we wanted to learn from these leaders about what they do and what leadership meant to them, rather than confirming or disproving any theoretical model of leadership. To understand their professional experiences in their own language, interviewing occurred in an open-ended free format that would allow us the flexibility to follow the conversation where it led us. After that, we set out to collect detailed descriptions of the leader’s values, day to day activities, what mattered to them, what they were working on. Because the interviewees had all participated in the Shannon Institute, we asked them for their Myers-Briggs personality type and their three core values (both components of the institute’s curriculum). We also asked about the organization where they worked, particularly its values, mission, and primary programs. Our inquiry included understanding the leader’s personal values in relation to the organization’s mission, including examples of conflicts of values and their resolutions. Challenges faced by nonprofit organizations Based on analyzing the data collected during our interviews, we recognized some of the key differences between nonprofit and for-profit organizations. We had explicitly asked three of the informants how they saw these major differences, since they had extensive experience in both sectors. Identifying these unique challenges can help modify the organizational theories in a manner that would make these more applicable to this context. The following is a sub-set of the answers that were present across all of the interviews:

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1) Within the nonprofits sector, organizations serve an existing and often growing unmet need. The

challenges of meeting a high level of existing demand with decreasing resources are seldom a problem in the business world.

2) The role of funding for a nonprofit organization makes it substantially different from a business organization. In our sample, all but one, reported the challenges of funding their cause and organizations. Some lamented that they had to devote 50% of their time to fund-raising efforts.

3) Nonprofits tend to attract employees who are loyal to the cause of the organization, and are therefore usually willing to work for lower compensation than they would expect in the for-profit world. In return, they often expect a work-life balance that is not common in the highly competitive corporate world. This means that sometimes businesslike policies adopted by the nonprofit leaders may end up de-motivating their employees rather than motivating them.

4) The nonprofit leaders were unusually dedicated to their cause or organization’s mission and showed a high level of commitment. They had long tenures in the job; they were ready to take personal risks and showed a high degree of self-awareness in championing their cause. They displayed a lot of empathy for others, but did not feel that anyone, including their closest business or relationship partners truly understood what they needed to feel supported in their roles.

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

Nonprofit leaders’ behaviors: listening and engaging

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

Table I: Leadership Behaviors

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

confidence in their capabilities and consulting to obtain their ideas and opinions.

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When we reviewed the typical leadership activities identified in Table I, we found that depending on the organization and its leader, some of these activities were more salient for some than for others. Explicit examples of their activities and projects helped us identify which of their activities was not theoretically represented in the abstract theoretical descriptions. The data showed that all the leaders spent a lot of their time in various situations that required them to be actively listening. In describing their day to day activities, the nonprofit leaders we interviewed explicitly mentioned how a majority of the activities they engaged in were essentially “to listen.” They needed to find out what their employees, donors, collaborators, customers, policy makers, boards, and various other stakeholders needed or wanted. Based on these empirical findings, we propose that listening is a significant activity essential to the role of a leader. We consider it an important leadership activity that needs to be listed explicitly in addition to the others in Table I. The last activity listed in Table I, ‘consulting with subordinates..’ implies a listening role for the leader but often becomes an exercise in ‘selling’ the leader’s ideas or a low level ‘involvement’ by the followers. However, we believe a leader articulates the aspirations of a collective of followers, who are much greater in strength of sheer numbers. To be able to do that with any authenticity, a leader needs to be a good listener and an empathetic one, too. The data shows that listening really well is what allows a leader to capture the zeitgeist and the collective aspirations of the followers. By listening and paying attention to the content and emotion of what they hear, the leaders are able to capture the imagination of their followers and articulate their collective aspirations. Below are two examples of the way the nonprofit leaders, who we interviewed, were engaging in listening. In one organization, there were 12 employees who were responsible for the largest advocacy group in the state on a certain issue, with an annual operating budget of one million dollars. The process to hire a new executive director for this organization took a total of nine months. A board member for this small organization, who worked in the corporate world, felt that a similar position within the business world would have been filled in a fraction of the time. A Board Search Committee designed a consultative process to solicit input from the organization’s stakeholders so they could formulate the right job description and find the right person. The board listened to the employees who would be led by this person. They listened to their donors who would donate based on the trust in the vision and leadership of the executive director. They listened to the community they served by including various opinion leaders for their cause. By listening to all the stakeholders, within and outside the organization, they learned about the key challenges in terms of the issues and the donations, and about what the leader was expected to achieve. This helped formulate what was expected from the person taking the position, and thus was an important part of the hiring process and the final decision. Specifically, by listening, they learned that a major donor group had become alienated from the organization and had decreased the amount of their donations. In response, the selection included the ability to re-build connections with this specific donor group and reintegrate them to serve their shared cause. Another organization’s purpose was to provide enrichment programs for grade school students. A Chief Operating Officer (C.O.O.) was hired because he brought over a decade’s experience from the corporate world. Recognizing how popular and effective the school programs were, he created a growth strategy for the organization. The strategy was developed by the senior management team and presented to the employees in a meeting. The goal was to serve a million

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school students in 20 cities by 2020. Based on the C.O.O.'s corporate experience, he expected a specific target-oriented strategy to motivate employees and align their actions to help achieve the corporate objectives. In this nonprofit organization, it had the opposite impact. The staff members hated it and were de-motivated by it. They told the C.O.O. that he was attempting to bring the corporate world’s growth-for-growth’s sake mentality to their mission, without appreciating how they were different. They publicly declared their concerns about how this growth would impact the quality of the programs and the work-life of the employees. Program employees would be required travel to schools far away from their home districts, or maybe even be transferred to new locations. They were not interested in doing that. The C.O.O. listened intently to their concerns and agreed to reconsider the strategy. He reformulated it to be more consistent with the organization’s key resource, its people. The revised strategy focused less on target numbers and more on the impact of the programs on participating youth. In these examples, the leaders recognized that listening and paying attention to all stakeholders was critically important for achieving the goals of their organization. The leader’s ability to listen well affected the vision, the role the leader, the assumptions the leader makes, and how the leader communicates his/her vision to the employees. It was critical for leaders to listen to the employees, the donors, the community they serve and to understand how these different needs and demands can be balanced to achieve the organization’s mission. While the evidence in the previous section focuses on how the leaders were listening, their effectiveness really depended on how they engaged their organizations, their employees, donors and their constituents once they had listened and learned. How does the balancing act with multiple, and sometimes conflicting, interests play out? The data we collected showed that effective listening was combined with the ability to engage the different constituents in a manner that brought a balance to the different interests using the leader’s personal values and/or the organization’s declared mission as the uniting thread. We want to emphasize that the leaders are not just listening to build consensus. They are also not just listening to provide what is being asked for by the various stakeholders. The leaders in our study, were listening-- paying attention to understand empathetically the real concerns. They then found a way to address concerns, without compromising on the main goal and vision and values of the organization.

LITERATURE REVIEW: LEADERSHIP AND LISTENING

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

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The only studies that explicitly mentioned listening in the context of leadership were these: One study found that perceptions of leadership were positively correlated with listening effectiveness (Bechler & Johnson 1995, Johnson & Bechler, 1998). Orrick offers some prescriptions for leaders on how to be more effective listeners by looking the speaker in the eye, paraphrasing to ensure understanding the speaker’s message, keeping an open mind and not getting emotional or defensive, and being respectful by not betraying the confidence of the speaker (Orrick, 2002). A few other authors have recognized the importance of listening for managers and supervisors (Ambrose, 1984, Imberman, 1969, and Weinrauch & Swanda 1975). Supervisory listening impacts subordinate support, trust, intrinsic motivation and performance (Stine, Thompson, et al. 1995) and affects community building efforts (Purdy, 1991). Listening can affect success at work (Sypher, Bostrom, et al. 1989). One study acknowledged that it is the ‘toughest management skill” (Brownell, 1987). We also focused on the research related to listening. The earliest reference that we found was the 1925 work, “Science of listening” authored by W. Tucker. Yet, the ‘father of listening’ was Late Dr. Ralph G. Nichols, of the University of Minnesota. In 1972, he wrote, “Listening is good business,” “Listening is a 10-part skill,” (1987a) and “Manipulation versus persuasion” (1987b). His successor, Lyman K. “Manny” Steil, started the International Listening Association to promote the practice, teaching and research of listening. This professional organization hosts annual meetings and publishes the International Journal of Listening. The most recent review of the listening literature that we could find was by Witkin (Witkin, 1990). Listening as an area of research does not seem to be as active as it is important. This gap in research is particularly puzzling since business practitioners and academics claim to recognize listening as one of the most important skills for effective professionals (Smeltzer, 1993). Listening ability and effectiveness affects the perceptions of individual performance in general and communicative competence in particular, in the workplace (Haas & Arnold, 1995). Yet, according to one count, only 1.5% of articles in business journals dealt with listening effectiveness (Smeltzer, 1993). There are different ways to practice the art of listening based on general properties of listening (Duker, 1964, Duker & Petrie 1964, Bigelow, 1976, Barrett-Lennard, 1988), for e.g. active listening, empathetic listening, etc. Listening in certain contexts can create healing, growth, relationship enrichment, tension reduction, problem solving, and knowledge advancement (Barrett-Lennard, 1988). Managers and leaders can use listening for all these. Based on this survey, we want to emphasize that leadership literature has a huge gap until it starts to include listening as an important leadership skill. Leaders can be measured on their listening competence, trained in the behaviors of active listening, based on research already available. What is urgently needed is research that will focus on how leaders and managers can use active listening skills to get organizationally beneficial outcomes, like effective relationship building, problem solving, knowledge creation, and motivated subordinates. Our empirical data offers an illustration of how these nonprofit managers are using listening to engage with their stakeholders and communities to do just this. For this group of managers listening is an important leadership activity. Their effectiveness really depends on their ability to use listening to truly engage the stakeholders in the collective endeavors of the organization.

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LIMITATIONS AND FUTURE RESEARCH

We found evidence to convince us that listening is fundamental and crucial for leadership studies, and may be a distinguishing characteristic of integrative leaders. We are now most concerned with how far can we generalize this claim. This study may be based on a small sample, but for qualitative research, this is not unusual. The data we have collected is describing the world in the words of the practitioners without theoretical filters creating any biases. Weick (1999) made a call for ‘feeling theories’ that theorize from the perspective of the people and the situations they face, so we can see and appreciate the world they live in, not from our own or some neutral external perspective, but from the same one as them. We feel that by inductively arriving at our findings from the evidence we collected systematically, we have provided such a key discriminating feature of integrative leaders – those who want to, and know how to, listen. Our sample constituted leaders of nonprofit and public sector organizations only, based on our starting assumption that we are more likely to see integrative behaviors in this context. This assumption needs to be tested out by further work in other contexts. Although we did find some research that supports our intuition that this was a good place to start. In his monograph written for nonprofits Good to Great and the Social Sectors, Jim Collins suggests that for-profit leaders have executive powers to reward or punish based on being higher up in the pyramidal hierarchical structure of the business world. While, he conjectures, that because of their diverse stakeholders, nonprofit leaders must rely on legislative powers. Without use of executive authority, nonprofit leaders advance their organizational missions by listening to the concerns of their employees, donors and constituents, and re-framing their message in an empathic manner, while being guided by their values, to create an engaged community that supported their mission. When we review the initial comparison of for-profit and nonprofit organizations, we see that these differences do not preclude the generalizability of these results. However, they may be less relevant to the more traditional hierarchical organizations where leaders can rely exclusively on their executive and reward powers, and do not need good listening skills. We feel that the next logical extension of our results will be to the networked flat organizations in the corporate world. Leaders in these types of organizational structures deal with similar challenges of having to satisfy multiple stakeholders and may benefit from better listening skills. This study points to the potential for further work: to include listening literature more actively with leadership literature and develop specific propositions for listening strategies that leaders and managers can use to be more effective. We would like to use a larger sample to better describe and document how leaders listen and engage their constituents to create effective organizations. We would also like to conduct a comparative study with leaders of for-profit businesses. Listening should also be made an explicit part of theoretical communication models. References available upon request from Mary Vradelis ([email protected])

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THE DETERMINANTS OF TRUST AMONG THE TURKISH CONSUMERS IN

ONLINE RETAIL BANKING (ROB)

Dababrata Chowdhury, Programme Manager for SLM, University of Plymouth Business School,Drake Circus, PL4 8AA, Devon, UK., Email: [email protected]

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

Plymouth, UK, Email: [email protected]

Lynne Butel, Associate Head of University of Plymouth Business School Drake Circus, Pl4 8AA, Plymouth, Email: [email protected]

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

University,Biga,Turkey, Email:[email protected]

ABSTRACT

The online banking has changed to great extent since the introduction of e-commerce,

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

INTRODUCTION

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

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

LITERATURE REVIEW

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

ideas from economics, marketing, sociology, psychology, organisation behaviour, strategy, information systems and decision sciences”( Nath and Mukherjee, 2003, p.6). Similarly, according to Moorman et al (1992, p.315) trust is “willingness to relay on the exchange partner in whom one has confidence”. While researching the literature for the study, it has been noticed that the most common approach in all of the studies conducted to find the level of trust in the internet banking till date, is the commitment-trust theory of relationship marketing given by Morgan and Hunt (1994).The paper links the three components as “trust is the calculation of

the likelihood of future cooperation and is a defining feature of virtual cooperation. As

trust declines, people are increasingly unwilling to take risks and demand greater protections against the probability of betrayal”, (Ratnasingham, 1998).According to the researcher the customer’s trust always influenced by the attractive services (Kassim et al 2006). The author means by this that if the website of the bank is attractive and looks prominent than the chances of trading through it increases. On looking more in the detail of the theory, undoubtedly internet banking is the fully customer oriented market; therefore, the customer is the one who should always be considered. According to Payne, (1995), the relationship commitment theory comprises of: Focus on Customer retention, Orientation to customers values, Long time-scale, High customer service emphasis, High customer contact, Quality is the concern of all.In the process of the literature review many studies on the different trust models in e-tailing of online banking has been noted. For example, in one of the study the proper implementation of relationship commitment theory in one of the UK’s largest bank Barclays, has been noticed. Barclays Bank has made a major commitment to relationship marketing though the implementation of the Corporate Market Programme (CPM).This is the reason of their high profits in every year’s balance sheet. In the same literature we have come across the other, evidence which again points the whole study towards trust viz. “The building of long term, royal,

committed and profitable relationships with potential and existing customers through

communication and the provision of quality good and services” (Irving et al, 1997).

THE THEORETICAL BACKGROUND

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

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

behaviour and Communication. Similar antecedents were taken in one of the other study which we have already discussed.

THE ANTECEDENTS OF TRUST

Now as we going to see the different antecedents through which we measure the trust. In our research we have used four antecedents viz. Shared Value, Opportunistic Behaviour,

Attraction ,Communication. The reason for choosing all these four antecedents is their bonding with trust. We have left the one of antecedent viz. Social bond. And in place of the social bond the shared value has been chosen. As social bond only reflects the emotional contents and on the

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

Shared value in general means when both the parties has the common beliefs of what

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

b) Opportunistic Behaviour

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

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inadequately developed rules and regulations, customers frequently have low levels of trust in online banking.Even sometimes, the customer’s perception about the bank taking undue advantage of the customer lack of knowledge or opportunistic behaviour is due to its limited or less technical knowledge about the system. As customer trust on an automated system is dependent on the systems perceived technical competence and performance (Jarvenpaa et al, 2000). Due to this fact the customer always think negatively even if he or she is getting the accurate information as they sometimes unable to explore the whole database of the bank website. This certainly will reduce the customer trust in online banking. Lastly, due to the lack of adequate regulatory control and the presence of substantial information asymmetries (Bejou et al, 1998), could also affect customer’s trust when engaging in online activities such as banking. Therefore, the higher risk of opportunistic behaviour in online bank may result to low levels of trust in the internet banking (Kassim et al, 2006). c) Communications:Communication is a major precursor of trust. It can be defined as the formal as well as the informal sharing meaningful and timely information between firms (Anderson and Narus, 1984, 1990). Anderson (1984) also suggested that communication is positively related to trust in marketing channels. As suggested by Moorman (et al, 1993) and Etgar (1979), that communication in internet banking refers fostering trust by assisting in resolving issues like “disputes and ambiguities” and further arranging perceptions and expectations. Further, Nath and Mukherjee (2003), considered such communication in terms of speed of responses, openness and quality of information. As these are the parts of social communication, therefore, displaying high degree of social communication by the bank on their website, leads to high degree of customer trust and as a result will increase the chances of the customer engaging themselves in the online banking and transactions. Further, Duncan and Moriarty (1998), identified the factors like accurate, comprehensive and two-way communication lead to an increase in trust. To explain this further, they have resembled computer as a device which allows two-way dialogue that assist in information sharing and creating acquaintances. In the similar way, the information technology in the form of the banks website can also prove to be great support in the communication by providing all the information under one tree. This type of information is both ways (Rogers, 1995). The IT is such tools for the banking industries that can prove to be very helpful for the communication purpose, which definitely make the communication bond strong, which again lead it to the high degree of customer trust. This is because, once the customer realises that he or she is being responded in the proper way, they automatically starts trusting the bank. This will increase the chances of the customer engaging themselves in the online banking and transactions. (Kassim et al, 2006), suggested that favourable communication environment results in the customer attraction towards internet banking. After analysing the importance of the communication in the online banking, it can easily be said that this is the one of the most important antecedent in the study, and which need to be seen very carefully. d) Attraction :Attraction means that there is something which makes the customer interesting to a given service provider say bank, or vice versa ([Gronroos, 2001] and [Kassim et al, 2006]). Attraction can be based on the three factors such as financial, technology and social constructs ([Sathye, 1999] and [Kassim et al, 2006]). Attraction is somewhat very important antecedent in the customer and bank trust. In this fast growing arena of technology, every service provider wants to gain the competitive advantage to remain in the race. For instance take the example of

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

Based on the review of the literature, a link between online banking and the level of trust in

the customer for it has been developed. The level of trust in the online banking among the Turkeyn customers can only be measured by finding out the impact of the antecedents of customer trust in online banking viz. Shared Value, Opportunistic Behaviour, Attraction and

Communication. For this the hypothesis has been made to measure the impact of the antecedents of trust in the online banking.

H1: There is a positive relationship between online shared value provided by the bank and

the customer’s trust in the internet banking.

H2: There is a positive relationship between online communication and customer’s trust in

the internet banking.

H3: There is a positive relationship between online attraction and customer’s trust in the

internet banking.

H4: There is a negative relationship between perceived bank online opportunistic behaviour

and the customer’s trust in the internet banking.

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

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

working websites, like Face-book and Google’s Orkut. Further the respondents have been asked to further distribute the link in their social circle. In this way the questionnaire has been circulated and responded by the successful respondents.

DATA ANALYSIS AND RESULTS

The total numbers of respondents who have hit or clicked the counter of the survey were 222, but out of this only 172 have gone through the whole survey and clicked the survey end button. Out of 172 respondents as well, 17 were such respondents who doesn’t fit to the selection criteria of online banking user. Out of these 17 respondents, there were some who are the online banking user but have completed the survey partially. Therefore such respondents have been deleted from the final included data for the analysis. Finally the total 155 respondent’s data has been taken into consideration for the further analysis. As the whole study is based on to investigate that whether there is any relationship or the impact of the trust antecedents on the trust among the online banking customers. Therefore to find out the relationship, the Regression method of the quantitative data analyses has been used. As regression has become a powerful tool for summarising the nature of relationship between variables of both types i.e. dependent and independent (Alan Bryman et al, 2002), therefore such method has been adopted in this research. On the basis of the hypothesis the following model of dependent and interdependent variables has been formed (H1) (H3)

Shared Value

Trust

Attraction

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(H2) (-H4)

Proposed model

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

The above figure shows the dependent and independent variables. The dependent variable

is the TRUST, whereas the independent variables are ATTRACTION, COMMUNICATION,

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

Results on the basis of correlation and regression test between trust and variables

Antecedents Mean Standard Deviation Β

Shared value 7.89 0.99 0.243

Communication 2.16 0.98 0.357

Opportunistic

behaviour

7.59 0.99 - 0.294

Attraction 8.03 0.99 0.33

RESEARCH RESULTS

Selection of Hypothesis based on the Regression and Correlation test

Further, these regression and correlation analysis from all the calculated values, brought

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

Communication Opportunistic Behaviour

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

FINDINGS

After the analysis of the results and on that base the selection of the appropriate

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

DISCUSSION

After scrutinizing the entire research and the analysis, lots of recommendations are need

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

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

LIMITATIONS AND FUTURE RESEARCH

As the study is conducted by the means of online, therefore it cannot be measured that

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

References available on request.

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A RESEARCH DEVOTED TO THE PERCEPTION OF UNIVERSITY STUDENTS ON

DIVERSITY

Murat Çolak Dokuz Eylül University

Faculty of Economics and Administrative Sciences email: [email protected] phone: +902324204180/20298

Izmir, Turkey

Güler Tozkoparan Dokuz Eylül University

Faculty of Economics and Administrative Sciences email: [email protected] phone: +902324204180/20610

Izmir, Turkey

ABSTRACT

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

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

INTRODUCTION

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

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

DIVERSITY MANAGEMENT

Definition and Importance of Managing Diversity

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

The approach of management of diversities offer suitable solutions that maximize potential advantages of diversity while minimize their disadvantages for organizations [7]. Programs for management of diversity, if practiced successfully, will result in creation of equal opportunities for every individual, so that the stabilization of organizational power, participation in making resolution and organizational competition advantage are ensured [8] [9]. Diversity Dimensions Notion of “diversity” in literature points at the diversity in personal characteristics between individuals [10]. Differences exist in the definition of dimensions of diversity also just as in the definition of it as a concept. For example, Gardenswartz and Rowe (1994) define four dimensions for diversity. They consist respectively of personality (those, which cannot be realized/seen at first sight), inherent dimensions (those, which can partially be realized/seen like age, gender, race, ethnic origin, sexual tendency and physical capacity), external dimensions (income, marital status, physical appearance, occupational experience, educational status etc) and organizational dimensions (content of the job, department, work experience, membership to the union, managerial position etc) [11]. However, Choy defines three dimensions for diversity. These are demographic diversity, organizational diversity and socio-cognitive diversity [12]. It is seen in the aforementioned classifications that diversities are mostly handled in two dimensions as primary and secondary. Primary dimension has a very important effect on personal identity and shapes an individual’s image and world-view as well as directly affecting his/her occupational and general behavior and attitude towards other individuals and groups [13] [14]. It consists of the elements of age, ethnic origin, gender, race, physical capacity and sexual tendency [15].

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

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

METHODOLOGY

The Objective and Importance of the Research

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

The Method and Technique of the Research

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

The Target Population and Sample of the Research

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

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

RESEARCH FINDINGS

Demographical Findings

According to reliability analysis findings, general reliability value of the question form used in the research (Cronbach Alpha Coefficient) is as follows for three criteria;

Individual’s general perception of diversity α = 0.89 Individual’s perception of diversity regarding colleagues α = 0.90 Individual’s perception of diversity regarding his/her staff when he/she is a manager α = 0.88

As Alpha values are not much lower than 1.00, which is deemed to be full reliability, it may be concluded that the question form used in the research is reliable. Demographical findings related to the sample obtained by descriptive statistics and 59% of the students participating in the research are between the ages of 20 to 22. 52.8% of the sample is male students. Students participating in the research are mostly students of Business, Labor Economics & Industrial Relationships, and Economics Departments. 61.4% of the sample is constituted of first and fourth year students. Whereas 39% of the sample has graduated from Anatolian/Science High Schools, 35.2% are Regular High School graduates. 43.6% of the sample lived with his/her friends, and 40% were brought up according to the Aegean Region culture.

Statistical Findings

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

Table 1 Mean and Standard Deviation Value of Diversity Perception of the Individual Variables Mean Standard Deviation

The General Diversity Perception of the Individual 2,8980 ,88713

The diversity perception of the individual regarding their work colleagues

4,1345 ,62735

The diversity perception of the individual regarding their staff when they are managers

3,7128 ,70633

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

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

1: Strongly Disagree 5: Strongly Agree α=0.05 Questions analyzing students’ perception of diversity comprised the components of gender, ethnicity, race, age, disability, nationality, religion, sexual preference, physical appearance, marital status, previous conviction, socioeconomic status and mother tongue.

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

General

Diversity

Perception

Mean Standard

Deviation

Work

Colleague

Perception

Mean Standard

Deviation Management

Perception Mean

Standard

Deviation

Q1 2,80 1,372 s29 4,40 ,810 s41 4,14 1,041 Q2 2,59 1,360 s30 4,27 ,840 s42 4,07 ,998 Q3 2,45 1,305 s31 4,31 ,811 s43 4,14 ,929

Q4 3,40 1,211 s32 4,19 ,867 s44 3,09 1,208

Q5 2,64 1,341 s33 4,20 ,848 s45 3,33 1,114

Q6 2,74 1,366 s34 4,30 ,798 s46 4,01 1,003 Q7 2,62 1,419 s35 4,34 ,810 s47 4,17 ,983

Q8 3,40 1,344 s36 3,42 1,304 s48 3,31 1,327

Q9 2,90 1,374 s37 4,22 ,834 s49 3,56 1,161 Q10 2,90 1,289 s38 4,48 ,725 s50 4,10 ,984 Q11 3,45 1,149 s39 3,25 1,087 s51 2,62 1,119

Q12 3,30 1,385 s40 4,25 ,865 s52 4,02 1,042 Q13 2,74 1,382 s41 4,27 ,840 s53 4.07 ,998

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

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

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

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

Table 3 Comparison of Group regarding Diversity Perception Groups Compared* Diversity Mean t p (Sig.(2-tailed)**

1-2 -1,236 -40,811 0,000

1-3 -0,815 -24,160 0,000

2-3 0,421 26,320 0,000 *1= Individual’s general perception of diversity 2= Perception of diversity regarding colleagues 3= Perception of diversity regarding staff when he/she is a manager ** Sig.(2-tailed) value at 0.05 significance level

“Paired samples test” was used to test the hypotheses, which is a t-test between two matched groups. As a result of the analysis, significant differences were found between each group, therefore hypotheses were verified. As it can be observed in the table, the second group, perception of diversity regarding colleagues came out to be higher than other groups, and this difference is statistically significant. The students indicated that they would be more tolerant against the diversity of their colleagues.

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

Findings of the analyses are given below in Table 4.

Table 4 T-Test and Anova Analysis Results for the Diversity Perception of Individuals

General Diversity

Perception

Diversity

Perception

Towards Work

Colleagues

Diversity

Perception

Towards Staff for

a Manager

Demographic

Variables

t/F p t/F P t/F p

Sex 0,030 0,862 11,393 0,001 8,584 0,003

School year 0,538 0,656 6,388 0,000 1,672 0,171

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Age 5,683 0,001 3,940 0,008 2,747 0,042

High School Graduated From

1,921 0,104 7,056 0,000 1,358 0,246

Who they live with 1,266 0,281 5,637 0,000 2,008 0,091 Whereas no significant difference was found between genders regarding general perception of diversity, significant differences were found between genders regarding students’ perception of diversity regarding colleagues and perception of diversity regarding staff when they are managers.

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

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

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

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

CONCLUSION AND RECOMMENDATIONS

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

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

Within the framework of this research the diversity perception of students towards people that they think are different from them has been tried to be determined on the basis of “general”, “when they are work colleagues” and “when they are managers”. To this end, it has been tested whether there are any significant differences among these three different situations and among the demographic variables and these three variables.

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

REFERENCES

[1]Ashkanasy, N. M., Hartel, C. E. J & Daus, C. S. (2002). Diversity and Emotion: The New Frontiers in Organizational Behavior Research. Journal of Management. 28: 3. 307-338. [2]McMahan, G. C., Bell, M. P. & Virick, M. (1998). Strategic Human Resource Management: Employee Involvement, Diversity, and International Issues. Human Resource Management Review. 8 : 3. 193-214. [3]Certo, S. C. (1997). Modern Management. Seventh Edition, New Jersey: Prentice Hall. [4]Hatch, M. J. (1997). Organization Theory: Modern Symbolic and Postmodern Perspectives. New York: Oxford University Press. [5]Gilbert, J.A., Stead, B.A. & Ivancevich, J.M. (1999). Diversity Management: Anew Organization Paradigm. Journal of Business Ethics, 21: 1. 61-76. [6]Loosemore, M & Al Muslmani, H. S. (1999). Construction Project Management in the Persian Gulf: Inter-cultural Communication. International Journal of Project Management. 17: 2. 95-100. [7]Mollica, K. A. (2003). The Influence of Diversity Context on White Men’s and Racial Minorities’ Reactions to Disproportionate Group Harm. The Journal of Social Psychology. 14: 4. 415-431.

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[8]Kirby, S. L & Richard, O. C. (2000). Impact of Marketing Work-Place Diversity on Employee Job Involvement and Organizational Commitment. The Journal of Social Psychology. 140: 3. 367-377. [9]Schermerhon, J. R., Hunt, J. G., & Osborn, R. N. (2000). Organizational Behavior. New York: John Wiley & Sons Inc. [10]Bhadury, H., Mighty, E. J.&Damar, H. (2000). Maximizing Workforce Diversity in Project Teams:A Network Flow Approach. The International Journal of Management Science. 28. 143-153. [11]Gardenswartz, L. & Rowe, A. (1994). The Managing Diversity – Survival Guide. Boston: McGraw Hill. [12]Choy, W. K. W. (2007). Globalisation and Workforce Diversity : HRM Implications for Multinational Corporations in Singapore. Singapore Management Review.29: 2. [13]Treven, S. & Matjaz, M. (2007). The Systemic Approach to the Encouragement of Innovativeness through Employee Diversity Managemen. Kybernetes. 36: 2. 144-156. [14]Christian, J., Porter, L. W. & Moffitt, G. (2006). Workplace Diversity and Group Relations: An Overview. Group Processes & Intergroup Relations. 9: 4, 459-466. [15]Parvis, L. (2003). Diversity and Effective Leadership in Multicultural Workplaces. Journal of Environmental Health. 65: 7. 37-65. [16]Bertone, S. & Leahy, M. (2000). Report to Department of Immigration and Multicultural Affairs Business Benefits of Productive Diversity. Case Studies. October. [17]Knouse, S. B. (2008). Issues in Diversity Management. Defense Equal Opportunity Management Institute Directorate of Research. USA. [18]Ely,R. J. & David, A.T. (2001). Cultural Diversity at Work : The Effects of Diversity Perspectives on Work Group Processes and Outcomes. Administrative Science Quarterly. Vol.46. [19]Lorbiecki, A. (2000). Critical Turns in The Evolution of Diversity Management. British Journal of Management. 11: 3. [20]Salomon, M. F. & Schork, J. M. (2003). Turn Diversity to Your Advantage. Research-Technology Management, 46: 4. 37-44.

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THE ROLE OF SITUATION AWARENESS (SA) IN COMMAND DECISION MAKING:

A PHENOMENOLOGICAL EXAMINATION OF STATUE OF LIBERTY/ELLIS

ISLAND DECISION MAKERS ON SEPTEMBER 11, 2001

Diane H. Dayson* Walden University

155 5th Avenue South Minneapolis, Minnesota 55401-2511

[email protected] [email protected]

602-626-5122

Jean Gordon Walden University

155 5th Avenue South Minneapolis, Minnesota 55401-2511

[email protected] [email protected]

954-923-2404

David Milen Walden University

155 5th Avenue South Minneapolis, Minnesota 55401-2511

[email protected] 219-365-0927

ABSTRACT

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

INTRODUCTION

The Role of Situation Awareness in Command Decision Making: A Phenomenological Examination of Statue of Liberty/Ellis Island Decision Makers During World Trade Attacks of

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September 11, 2001 Overview will begin with brief introduction and background, next section briefly discusses literature review, then research and findings, and final section provides conclusion. The World Trade Terrorist attacks of September 11, 2001 created a day of total chaos and confusion among those who experienced the event firsthand. The attacks were a true test of strength, courage, the ability to assess the situation and make command decisions. On that day, this is just what the National Park Service (NPS), STLI/ELLIS National Monuments decision makers were expected to accomplish. As park managers these decision makers are considered stewards of the park land. They “bear significant responsibilities for decisions about park resources that affect how future generations will see this multifaceted natural and cultural heritage” [11]. These men and women were expected to assess the situation quickly and make command decisions to insure the safety of the employees, visitors, and the park’s resources. Like so many others, the STLI/ELLIS decision makers had never experienced an incident of this magnitude and were placed in a dilemma to make command decisions prior to any assistance from other agencies. The purpose of this phenomenological study was to advance the understanding STLI/ELLIS decision makers ability to make command decisions under high levels of stress. The study sought to identify, describe, and understand the lived experiences of STLI/ELLIS decision makers’ ability to develop, form, and maintain SA for CDM in times of crisis management. Prior research has been conducted by Richard B. Gasaway [4] on command decisions and situational awareness in stressful environments. This theory and theoretical framework states “that improving the understanding of SA barriers may enhance CDM under stress” [4, p. 4]. The theoretical framework draws upon two models: the first theoretical model comes from the seminal work of Klein [5] [7] [8] [9] and his Recognition Primed Decision (RPD) model [6]. This model was developed following a study to understand how decisions were made on the fireground. The second theoretical model contributing to the conceptual framework of this study comes from focusing on the role of one component of RPD model that being Endsley’s [3] work with SA. The research findings from other environments supported the notion that when decisions are made under stress, SA was a contributing factor in the decision making. In spite of this, there was a void in the academic literature in understanding the impact of SA and CDM on STLI/ELLIS decision makers during the 9/11 attacks. However, there was an opportunity for scholarly investigation to understand SA, its effects on CDM, and its influences on STLI/ELLIS decision makers during the 9/11.

BACKGROUND The STLI/ELLIS National Monuments are a part of the National Park System. This monument is considered an international icon and management policies are clear as to the mission and responsibility of the STLI/ELLIS decision makers. The National Park System’s mission is: Caring for the American Legacy: to promote and regulate the use of the national parks which purpose is to conserve the scenery and the natural and historic objects and the wild life therein

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and to provide for the enjoyment of the same in which such manner and by such means as will leave them unimpaired for the enjoyment of future generations. [11] STLI/ELLIS decision makers are considered the stewards of these two sites and have a responsibility for the care and sustainability of the resources. In times of emergencies and crisis the “National Park Service decision maker must use his or her professional judgment” [11]. National Park Service policies have defined professional judgment as: A decision or opinion that is shaped by study and analysis and full consideration of all the facts, and that takes into account the decision maker’s education, training, and experience; advice or insights offered by subject matter experts and others who have relevant knowledge and experience; good science, and scholarship; and, whenever appropriate, the results of civic engagement and public activities relating to the decision. [11]. “This means that decision maker must consider the impacts of the proposed action and determine that the activity will not lead to an impairment of park resources and values” [11]. STLI/ELLIS decision makers were well aware of these management policies and had challenges adhering to them during the events of 9/11.

LITERATURE REVIEW

Naturalistic Decision Making (NDM) Paradigm

CDM is of significant importance in times of crisis management. There are many different components that contribute to a decision makers’ superiority. “Decision superiority is achieved not just by acquiring and assessing the right information, but by translating it into actionable knowledge that can be exploited in the decision making process” [13]. To understand CDM superiority one must understand the components that create a naturalistic decision making paradigm. The U.S. Army Research Institute sponsored a conference in Dayton, Ohio, 1989 in which 30 behavioral scientists attended. The conference provided an opportunity for the researchers to discover their work shared a common theme, with emphasis on decisions made under time pressure, with high levels of uncertainty, often with ill-defined goals, and the presence of high personal stakes [10]. As a result of this conference, the Naturalistic Decision Making (NDM) paradigm emanated and resulted in a research study focused on how decision makers functioned in their real-world decision making environments. One exemplar of an NDM method is the Recognition-Primed Decision model that “attempts to describe what people actually do under conditions of time pressure, ambiguous information, ill-defined goals, and changing conditions”[5, p. 287]. The Recognition –Primed Decision (RPD) model and the role that SA plays in all three variations is essential to CDM and contributes to how decisions are made. It is important to understand the model and how it applies SA and CDM.

Recognition-Primed Decision (RPD) Model

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RPD model was developed by using cognitive task analysis (CTA) methodology to determine how critical decisions were made under stress. As a result of the study, Klein formulated the Recognition-Primed Decision (RPD) model to explain how decision makers in naturalistic environments were able to make decisions in nontraditional ways (i.e., without comparing and weighing out options to find the optimal solution) [8]. The explanation was “the key is that people use expertise to evaluate the situations and recognize typical courses of action as the first ones to be considered” [9, p.55]. It was also stated that the expertise used in NDM centered on the decision maker’s ability to establish and maintain SA [9]. The RPD model stresses the roles of SA [6] and how decision makers form SA by sizing up the situation and respond with the first options they identify [10]. The RPD model reveals that if the situation being evaluated by the decision maker is ambiguous, the experienced decision maker relies on a process when he or she fits the cues together to build a story in his or her mind about what is happening. Then the decision maker mentally simulates the events leading up to what is currently being observed to help form his or her SA [7] [12]. The model provides evidence that a decision maker can evaluate a single course of action without comparing it to other options. In addition, it was revealed that the decision maker can mentally simulate a chosen course of action into the future to see if it will work. If the mental simulation results in an acceptable result, the decision maker will implement that decision. If not, the decision maker, will, in serial fashion, evaluate the next course of action in the same way, repeating the process until an acceptable result is achieved and the decision is implemented [10]. It was stated, the RPD model relies heavily on the decision maker’s expertise to properly identify and process cues in the formation of their SA [10]. In support it was observed that “expertise in a particular domain has a significant role in allowing people to develop and maintain SA in the face of high volumes of information transfer and system complexity”[1, p.637]. The RPD model was a result of research conducted to determine how decisions were made in NDM environments. This research finding uncovered that SA is an essential contributing factor in the process.

RESEARCH

The research using phenomenological approach sought to advance the understanding and describe through lived experiences STLI/ELLIS decision makers’ abilities to develop and maintain SA for CDM during the events of September 11, 2001. The research examined five areas to determine the influences of SA on CDM. First, the study sought to understand the effects of SA on STLI/ELLIS decision makers. Second this study sought to understand the how SA influenced CDM of STLI/ELLIS decision makers during 9/11. Third, this study intended to understand the importance of SA in times of crisis management. Fourth, this study sought to identify how STLI/ELLIS decision makers can successfully use SA in times of crisis management. Finally, this study identified lessons learned and best practices for developing and maintaining SA for CDM barriers in times of crisis. The components within the data collection procedure entailed a three step process predicated on research participants’ shared lived experiences and interview protocol. This was significant to describing, understanding, and capturing the true essences of the lived experiences of STLI/ELLIS decision makers during the World Trade attacks of September 11, 2001. The

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researcher instituted the following steps: overview of the research, definitions and key terms, and interview protocol for the research participants and study. The procedures for this study involved having STLI/ELLIS decision makers share their lived experiences of the events of September 11, 2001 and provide answers to semi-probe questions to enhance the understanding of their lived experiences. The semi probe questions the decision makers responded to were:

1. Discuss SA and the effects it may have had on your ability to make command decisions during the events of September 11, 2001.

2. Discuss any challenges that may have occurred with the levels of SA and CDM. 3. Describe how the levels of SA influenced command decisions on September 11,

2001. 4. Describe how you developed and maintained SA. 5. Describe how you overcame the challenges that may have influenced levels of SA

in CDM on September 11, 2001. 6. Share what you learned as a result of developing and maintaining SA to make

command decisions during this crisis. 7. Based on your experience, offer some advice for novice decision makers that

would help them to develop and maintain all three levels of SA for CDM in times of crisis management.

FINDINGS

The data analysis and findings revealed that the research participants’ responses to SA and command decisions were similar to those reported in previous research studies. All participants agreed that effective communication, experience, institutional knowledge and memory, training, and working as a team were key components for SA and CDM. Like so many on that day, STLI/ELLIS decision makers were the first responders of their park resources. As a result, these decision makers had to take action and rely on themselves to protect park lands, employees and visitors. The attacks were a true test of strength, courage, the ability to assess the situation and make command decisions during this catastrophic event. In the height of the chaotic events the STLI/ELLIS decision makers had to quickly develop and maintain SA for CDM. Endsley revealed in the development of SA , decision makers must grasp incoming cues and clues, make sense of what those cues and clues mean (in context to other cues and clues that are present and absent), and use those cues and clues to formulate mental models to forecast subsequent events [3]. Under high levels of stress the STLI/ELLIS decision makers were able to use cues and clues to effectively develop and maintain SA to influence CDM for park resources, employees, and visitors. The significance of this study was to increase decision makers understanding and ability to utilize SA to make command decisions in times of crisis. It sought to advance the understanding of developing and maintaining SA, which is an essential part of Recognition Prime Decision (RPD) model for making decisions under stress [8]. There was very little information, if any, available to STLI/ELLIS decision makers for developing and maintaining SA and its influences on CDM during the events of September 11, 2001.

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RECOMMENDATION FOR FURTHER STUDY

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

CONCLUSION

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

REFERENCES

[1] Endsley, M. R. (2006). Expertise and situation awareness. In K. A. Ericsson, N. Charness, P. J. Feltovich, & R. R. Hoffman (Eds.), The Cambridge Handbook of Expertise and Expert Performance (pp. 633-652). New York: Cambridge University Press.

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[2] Endsley, M. R. (2000). Theoretical underpinnings of situation awareness: A critical review. In review. In M.R. Endsley & d. J. Garland (Eds.), Situation Awareness Analysis and Measurement (pp. 3-32). Mahwah, NJL Erlbaum. . [3] Endsley, M. R. (1988). Design and evaluation of situation awareness enhancement. In Proceedings of the Human Factors Society 32nd Annual Meeting (97-101). Santa Monica, CA: Human Factors Society. [4] Gasaway, R. B. (2008). Fireground command decision making: Understanding the barriers challenging command situation awareness. Capella University, 208 pages, AAT 3310697. [5] Klein, G. (1997). The recognition-primed decision (RPD) model: Looking back, looking forward. In C. D. Zsambok & G. Klein, Naturalistic Decision Making , 285-292, Mahwah, NJ: Lawrence Erlbaum Associates. [6] Klein, G. A. (1989). Recognition-primed decisions. In W. B. Rouse (Ed.) Advances in man-machine systems research .Vol.5, 47-92, Greenwich, CT: JAI. [7] Klein, G. A. & Crandall, B. (1995). The role of mental simulation in naturalistic decision making. In P. Hancock, J. Falck, J. Caird, & K. Vicente (Eds.), Local Applications of the Ecological Approach to Human Machine Systems, Vol.2, 324-358. Mahwah, NJ: Lawrence Erlbaum Associates. [8] Klein, G. A., Calderwood, R. & Clinton-Cirocco, A. (1986). Rapid decision making on the fire ground. In Proceedings of the 30th Annual Meeting of the Human Factors Society, 576-580, Santa Monica, CA: Human Factors Society. [9] Klein, G. & Weick, K. E. ( June 2000). Decisions. Across the Board, 37(6). [10] Lipshitz, R. Klein, G., Orasanu, J. & Salas, E. (2001). Taking stock of naturalistic decision

making. Journal of Behavioral Decision Making 14:5, 331-352. [11] National Park Service (2006). Management policies: Decision making requirements to identify and avoid impairments. http://www.nps.gov/policy/mp/policies.html. [12] Pennington, N. & Hastie, R. (1988). Explanation-based decision making: Effects on memory

structure on judgment. Journal of Experimental Psychology: Learning Memory, and Cognition, 14:3, 521-533. [13] Sorenson, B., Madni, A. M., & Madni, C. C. (2008). Decision superiority process model. Society for Design and Process Science. 12(4), 39-48.

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THE INCOMPATIBILITY OF THE DUAL-CONCERN MODEL AND CONFLICT

MANAGEMENT STYLES SCALES

Serkan Dolma Yagizhan Yazar

Ozlem Yavas Istanbul University

Email: [email protected]

ABSTRACT

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

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

INTRODUCTION

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

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

THE DUAL-CONCERN MODEL

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

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FIGURE 1

Conflict Management Styles

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

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

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

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

Avoiding

Obliging

(Accommodating) (Yielding)

Dominating (Competing)

(Forcing)

Integrating (Collaborating)

(Problem Solving)

Compromising

Con

cern

for

Sel

f (P

arty

’s D

esir

e fo

r O

wn

Con

cern

)

Concern for Others (Party’s Desire to Satisfy Others

Concern)

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

THE PROBLEM WITH CMS SCALES

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

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

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

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

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

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

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

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

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

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

CONCLUSION

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

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

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

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

REFERENCES

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[1] Bell, C., & Song, F. (2005). Emotions in the conflict process: An application of the cognitive appraisal model of emotions to conflict management. The International Journal of Conflict Management, 16:1, 30-54.

[2] Blake, R.R., & Mouton, J. S. (1964). The managerial grid. Houston,Texas: Gulf Publishing.

[3] Botto, R. A., & Dumlao R. (2002). How do conflict and communication patterns between fathers and daughters contribute to or offset eating disorders? Health Communication, 14:2, 199-219.

[4] Butt, A. N., & Choi, J. N. (2006). The effects of cognitive appraisal and emotion on social motive and negotiation behavior: The critical role of agency of negotiator emotion. Human Performance, 19:4, 305-325.

[5] Ivancevich, J. V., & Matteson, M. T. (1996). Organizational behavior and management (4th Ed.). Irwin Professional Publishing.

[6] Janssen, O., & Van de, Vliert E. (1996). Concern for the other’s goals: Key to (de)escalation of conflict. The International Journal of Conflict Management, 7:2, 99-120.

[7] Komarraju, M., Dollinger, S. J., & Lovell, J. L. (2008). Individualism-collectivism in horizontal and vertical directions as predictors of conflict management styles. International Journal of Conflict Management, 19:1, 20-35.

[8] Lee, K. L. (2008). An examination between the relationships of conflict management styles and employees’ satisfaction. International Journal of Business and Management, 3:9, 11-25

[9] Posthuma, R. A., White, G. O., Dworkin, J. B., Yánez O., & Swift, M. S. (2006). Conflict resolution styles between co-workers in US and Mexican cultures. International Journal of Conflict Management, 17:3, 242-260.

[10] Purinton, E. F., Rosen, D. E., & Curran, J. M. (2007). Marketing relationship management: Antecedents to survival and dissolution. Journal of Business-to-Business Marketing, 14:2, 75-103.

[11] Rahim, M. A. (1983). A measure of styles of handling interpersonal conflict. Academy of Management Journal. 26:2, 368-376.

[12] Rahim, M. A., Antonioni, D., & Psenicka C. (2001). A structural equations model of leader power, subordinates’ styles of handling conflict, and job performance. The International Journal of Conflict Management, 12:3, 191-211.

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

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

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

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

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

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

Barry Doyle, University of San Francisco, [email protected], 415-422-6129 Robert Mefford, University of San Francisco, [email protected], 415-422-6408

Nicholas Tay, University of San Francisco, [email protected], 415-422-6100

ABSTRACT

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

INTRODUCTION The recent market crash which has led to as much as a 47% drop in the value of the S&P500 index has made some of us wonder if there is a cost effective way for us to hedge our retirement portfolios against such a drastic loss. In the case of a portfolio that tracks the S&P500 index, a straight forward approach to hedge against such downside risk is to simply long a put (protective put) on the S&P 500 index. Would the losses that could be averted with the protective put strategy justify the hedging costs for a long term investment strategy? From an efficient market view point, if the put option is correctly priced, we should not expect the protective strategy to produce excess returns. However, recent studies [12] [13] have suggested that market participants tend to underestimate the likelihood of black swan events. If this is true, options could be underpriced and this may make it worthwhile to pursue the protective put strategy described above. Our objective is to investigate empirically the tradeoffs that will arise from using a protective put strategy for hedging retirement portfolios over an investment horizon that is long enough to be comparable to the average holding period for retirement portfolios. Since the modern day option markets were not developed until the 70s, we have a relatively short period of time series of actual option price data. In a later section we describe how further extensions of this work will provide more robust justification for our strategy. Our results favor the use of a protective put strategy for hedging retirement portfolios. Results are presented in Section III. The conventional wisdom for retirement planning and, indeed, any long-term investment strategy, has been buy and hold for the equity portion of the portfolio. Numerous people in the academic and practitioner fields have advocated this, beginning with Burton Malkiel’s academic classic “A Random Walk down Wall Street”, to the advocacy of Vanguard’s John Bogle, to the recent advice of popular advisors such as Suze Orman. However, the recent drastic plunge in

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equity value is making some of us wonder if the buy and hold strategy is in fact the best approach to retirement planning. Clearly there are good reasons for advocating the buy-and-hold strategy. One well known piece of evidence from the Vanguard Group shows that on average actively managed equity mutual funds underperforms the Wilshire 5000 index by about 1.09% annually for the period from 1972 to 2001. Further, Malkiel [11] and others find the performance of most professional money managers to be inconsistent from one period to the next which suggest that these managers are not skillful investors and therefore it is useless to invest in actively managed mutual funds. Most of the advocates of buy and hold have made the implicit assumption of “semi-strong” market efficiency; that is, current market prices reflect all available public information. Absent access to inside information, attempts to time the market will ultimately prove fruitless. There is ample empirical evidence in the literature that show that on average active professional money managers are unable to outperform a passive index (see [10], for example) . Fund managers that have superior performance over one time period do not , on average, exhibit superior performance over subsequent time periods Portfolio theory has generally focused on achieving an efficient portfolio: one that achieves the minimum amount of risk for a given level of expected return. In the popular business press, attacks on the value of portfolio theory often center on comments such as “….Or you could have just bought the gold ETF and made 17%. That’s the difference figuring out which way the wind is blowing can make” [4]. Of course, generating superior returns is easy if one knows how the market will move next month or next year, or even tomorrow. The value of market timing should not be underestimated, though. In the period from 1978 until 2005 the S&P500 earned a mean annual return of 9.6%. If you could avoid the worst fifty days, your mean annual return would have been 18.7%. Conversely, if you missed the best 50 days, your mean annual return would have been a mere 2.2%. Analyses of other time periods yield similar results; in the period from January 1960 through December 2008, a buy and hold strategy will generate ending wealth of $15.07 from an initial $1 investment. However, missing the ten best days over this time period would have reduced your ending wealth to $8.90. This result emphasizes the danger of attempting to time the market (and “missing”). Conversely, avoiding the ten worst days would generate ending wealth of $28.25 [6] [8]. From a practical perspective, the question arises: absent market timing skills, can an investor avoid some of the losses associated with the worst performing days without sacrificing the gains associated with the best days? Does one need a crystal ball to achieve superior performance? In an efficient long-term investment market, the answer to the preceding question should be “no”. In such a market, the cost of any type of portfolio insurance should offset any gains associated with avoiding the impact of the worst performing days. If this condition did not exist, portfolio managers would exploit any existing inefficiencies and drive insurance prices into equilibrium. However, we show evidence that a strategy exists that will outperform basic buy and hold investing over the long term by taking advantage of potential inefficiencies in the pricing of

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

STRATEGY DESCRIPTION AND MOTIVATION Motivation For our strategy to provide superior performance, consistent long-term mispricing of long put options must exist. Why might one expect to observe systematic mispricing of a widely traded financial instrument? Estimated option prices derived via the Black-Scholes (B-S) model are highly sensitive to volatility; other model inputs are generally known with a fair degree of certainty. Since the model volatility input is forward-looking--- the volatility that will occur over the time to expiration--- it is implicitly unknown. Of course, one may estimate volatility from historical data. Whenever historical data is used to predict future events, though, two major factors influence the reliability of the estimate: first, this process assumes that the future distribution of events will approximate past distributions. Second, one must choose an appropriate historical time period over which to make estimates. Both of the factors influencing model reliability form the core of our motivation to develop the theory, as well as providing a possible explanation for our observed results. First, the B-S model assumes that volatility has a normal distribution. Several articles [1] [7] have questioned the reliability of underlying distributional assumption of B-S. We observe large price swings, both positive and negative, in the markets than are inconsistent with underlying distributional assumptions of B-S. Research has shown that large daily returns occur more frequently than are consistent with a normal distribution; this return characteristic is often described as being “fat-tailed” relative to the normal. Casual observation, as noted in the introduction, suggests that a substantial portion of returns to the S&P 500 (as well as any well-diversified equity portfolio) are contained in a relatively few number of days, confirming the fat-tailed nature of observed return distributions. We characterize these influential events as “Black Swans” (henceforth “swans”). The existence of swans by itself should not provide an adequate explanation for the availability of a strategy to generate long term returns in excess of a buy-and-hold strategy. The impact of a few days of unusual returns on long term returns, discussed earlier, is well known. The existence of this apparent opportunity for excess long term returns must have another motivation. The motivation is likely to be found by examining the time horizon over which the strategy operates. Our strategy requires the annual purchase of put options on the S&P 500. As a consequence, substantial monthly cash outflows are required to follow it. The value comes from the long-term application of this strategy. The very nature of it takes advantage of the large gain associated with the swan events against the relatively small outflows required to maintain the position. As swans are, by definition, rare, this implies that returns to this strategy will underperform a buy-and-hold for most periods, and substantially outperform it on an infrequent basis. As such, following the strategy requires considerable discipline, as it will underperform the benchmark

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during most time periods. The implications of this will be explored further in the Results section following. Description To implement our strategy, a portfolio consisting of the S&P 500 index is formed. During each year that the portfolio is in existence, we purchase at-the-money put options (or, more precisely, the put option that is closest to at the money); the number of index put options is equal to the value of the portfolio. As the option expires in the following year, new options are purchased in the same fashion, thus generating the “roll-over” strategy. These “near-the-money” options are used for this strategy to take advantage of the relatively well known characteristic of the put option “smile”. In practice, the implied volatility of put options is lowest for at the money options. Implied volatility is the volatility consistent with the current market price of the option according to the B-S pricing model. Further, at-the-money options are generally more liquid than other options, thus reducing the spread associated with the transaction. These long near-the-money puts provide a form of portfolio insurance; specifically, the option position pays off in the event of a drop in the underlying portfolio. As noted in the Introduction, one would expect, a priori, this strategy to not provide higher ending wealth than a basic buy-and-hold, as the option premiums should offset any gains associated with the insurance payoff.

DATA AND RESULTS We use data from VFINX (Vanguard Index Trust 500 Index), a tradable index security, as the base equity portfolio. We construct the protective put portfolio by purchasing long positions on 365 day index put options such that there are just enough puts to cover the amount invested in the portfolio at the beginning of the time period. Consequently, the number of puts purchased will rise as the portfolio accumulates value. We also use two treasury investments as a benchmark. In one, we simulate a 1-year constant maturity treasury portfolio that invests/rollovers the entire contribution annually in treasury bonds with one year remaining to maturity. In the other we simulate an investment in one year treasury strips. We provide results only for the rather simple strategy of buying one year put options on the S&P 500 index for a very pragmatic reason. The intended market for this strategy is not sophisticated investors; rather, this is appropriate for the average investor with a 401-k type retirement asset that wishes to provide some insurance against a dramatic decline in asset values. Certainly, other forms of insurance may well provide better results, and are a potentially fruitful avenue for future research. The results of our analysis are shown in Figure 1. We have made the following assumptions in constructing the graphs:

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

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• The protective put portfolio invests the entire contribution in a mixture of SP500 shares and long positions in put in such a manner that there are just enough puts to cover the investment in the SP500 (VFINX) shares that are held in the protective put portfolio; the puts purchased are at-the-money or nearest to the money 365-day puts.

• The 1-year constant maturity treasury portfolio invests/rollovers the entire contribution annually in treasury bonds with one year remaining to maturity

• The 365-day zero coupon portfolio invests the entire contribution in 365-day zero coupon STRIPS.

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

IMPLICATIONS/FUTURE RESEARCH POTENTIAL The current results obtain only from late 1996 as index options were not widely available prior to that time. The results presented here, while showing the superiority of the protective put versus a buy and hold strategy, do not provide compelling evidence of such a strategy providing superior performance in future. A more robust argument may be made by estimating option prices in earlier years based upon historical volatility. In effect, one can argue that if index options existed in the earlier parts of the twentieth century, then the prices of such options would be consistent with the inputs of current options pricing models, notably B-S. However, such an analysis, while providing more evidence than the restricted sample that we provide, would still not provide a rigorous justification for following this retirement strategy. A proposed approach to providing a more robust justification is to use a bootstrapping technique to evaluate our proposed strategy. In brief, as applied to this paper, the bootstrapping methodology would assume that observed market returns over the past decades represent samples from a larger underlying population. By analyzing multiple simulations, using samples from the observed returns distribution, one may make robust inferences of the value of the proposed strategy versus a buy and hold one. Chernick, [3], and Davison & Hinkley [5] provide a comprehensive overview of bootstrapping technique. Our results indicate that the protective put strategy may well be superior to a buy and hold, which begs a rather obvious question: since this strategy, by design, is uncomplicated, why isn’t it widely used? A possible explanation lies with the manner in which portfolios are measured . Virtually all portfolios, retirement or not, provide quarter, 1-year, 5-year, and perhaps 10-year performance measures. During “normal” return years, the protective put portfolio will underperform a buy and hold one. The business literature, both academic and popular, is filled with stories about how managers focus on short term performance. Investors look at these returns as well, and often base investment decisions based upon them. A challenge for managers of a portfolio based upon these results would be as follows: how to convince investors that underperformance for substantial periods of time (a likely occurrence) is in their best interests.

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

REFERENCES

[1] Abbas, S., S.H. Poon and J Tawn, Hedging the Black Swan: Conditional Heteroskedasticity and

Tail Dependence in S&P 500 and VIX, Working Paper, 2009. [2] Bouye, E., Portfolio Insurance: A Short Introduction, Working Paper, SSRN #1416790, 2009. [3] Chernick, M.R. Bootstrap Methods, A practitioner's guide, Wiley Series in Probability and Statistics, 1999. [4] Considine, G., , Black Swans, Portfolio Theory and Market Timing: 12 comments, Seeking Alpha, 2008, Article 64111 [5] Davison, A. C.; Hinkley, D. Bootstrap Methods and their Application. (8th ed.). Cambridge: Cambridge Series in Statistical and Probabilistic Mathematics. 2006. [6] Estrada, J., Black Swans, Market Timing, and the Dow. Working Paper, SSRN #1086300, 2007. [7] Goldstein, D. and N. Taleb, We Don’t Quite Know What We Are Talking About When We Talk

About Volatility, Working Paper, SSRN# 970480, 2007. [8] Harris, E., Investing: In Search of Better Odds in Retirement Planning, NY Times, 2002. [9] Leland, H. and M. Rubinstein. The evolution of portfolio insurance in Dynamic Hedging: A Guide to Portfolio Insurance, edited by Don Luskin, John Wiley and Sons, 1988 [10] Ibbotson, R. and A. Patel, Do Winners Repeat With Style? Summary of Findings, Ibbotson Associates, 2002 [11] Malkiel, B., Returns from Investing in Equity Mutual Funds 1971-1991, Journal of Finance, 1995, 50. [12] Mallinaris, S. and H. Yan, Nickels versus Black Swans: Reputation, Trading Strategies, and

Asset Prices, Yale ICF Working Paper No. 08-26, 2009. [13] Taleb, Nassim, , The Black Swan: The Impact of the Highly Improbable, Random House, 2007

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WHAT FINANCIAL RISK MANAGERS CAN LEARN FROM SIX SIGMA QUALITY

PROGRAMS

Barry Doyle, University of San Francisco, [email protected], 415-422-6129

Robert Mefford, University of San Francisco, [email protected], 415-422-6408 Nicholas Tay, University of San Francisco, [email protected], 415-422-6100

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

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

INTRODUCTION In March of 2008 Bear Stearns was acquired by JP Morgan Chase after becoming insolvent. Bear Stearns had been considered one the best Wall Street firms in managing risk. Within a few months Lehmann Brothers had gone bankrupt, Merrill Lynch had been acquired by Bank of America, Wachovia merged with Wells Fargo, and Washington Mutual with JP Morgan Chase. American International Group (AIG) was bailed out by the federal government and many hedge funds have failed. What had caused so many prominent financial institutions to succumb in such a short time? The common explanation is sub-prime mortgages defaulting, but the real problem is much more fundamental—a failure of risk management. The no down-payment, no income verification mortgages issued by many reputable financial institutions may have started the problems, but they would not have spread worldwide without the explosive advance in securitization of these assets (Collateralized Debt Obligations or CDO’s) by financial firms and the high credit ratings assigned to them by the rating agencies Standard & Poor’s and Moody’s. The problems would probably not have grown to be a global financial crisis if so many other financial institutions had not purchased these risky assets including many banks in Europe and hedge funds around the world. Once the dominos began falling, liquidity dried up, and equity markets plummeted. The outcome became a financial crisis leading to a global recession which still continues. How could these sophisticated financial institutions have been so wrong in their assessment of credit and market risk? After all, many had invested millions of dollars in risk modeling and believed that they had a good handle on risk management. With increasing power of computer

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hardware and software, firms were able to build complicated models using advanced statistical techniques and Monte Carlo simulations. To develop these models they hired dozens of mathematicians, statisticians, physicists, and computer scientists, and a new profession was created—the financial engineer. Very few top executives responsible for risk management likely understood these models, but they confidently used them to take ever-riskier positions to increase profitability, often driven by competitive pressures. Short-term oriented compensation schemes fostered excess risk-taking in many of these financial firms. Few believed that there were any flaws in the model. Clearly there were some critical elements in the risk models that caused them to fail when they were most needed. In the next section we will examine some of the deficiencies of these models. In subsequent sections Six Sigma quality programs will be explained and it will be shown how the process and methods of Six Sigma can be applied to financial instrument and portfolio design. The case will be made for robust portfolio design and reliability engineering used as the way to achieve robustness. The last section draws some conclusions.

FLAWS IN RISK MODELING The most commonly used model to measure risk is the VaR or Value-at-Risk. It is based on the Gaussian or normal probability distribution widely used for many applications in business, science, education and other fields. By specifying an acceptable confidence level for unlikely occurrences (such as a 20% chance of a fall in the price of a stock), risk managers could feel comfortable that these rare events had such a low probability they could be neglected. A three sigma confidence level indicates a 0.3 percent chance (3 in 1000) of the event occurring. The probabilities were based on historic price and volatility data for various types of assets. This stochastic approach to risk management seemed safe and reasonable as long as the underlying

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

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SIX SIGMA QUALITY PROGRAMS Beginning in the 1980’s at Motorola Corporation, Six Sigma quality programs have slowly spread through American manufacturing and recently have been applied in service businesses like banking, hospitals, and even government. The basic idea behind Six Sigma is to reduce variability in processes to improve quality and increase efficiency. The name Six Sigma refers to six standard deviations from the mean. This signifies a level of quality equal to three defects per billion opportunities based on the normal distribution. To many observers this seems like an unnecessarily high level of quality that is not only unattainable but too expensive. However, when one considers several characteristics of products and processes as well as how Six Sigma programs are carried out, these objections are not valid. The cost criticism can be rejected based on the experience of companies like GE that have found that the savings from reduction in defects (i.e. scrap, rework, warranties, etc) and improved process efficiency far outweigh the costs of implementing the program [4]. For a product with multiple parts, the reliability of the product is a multiplicative function of the reliability of its component parts. For example, in a product with a thousand parts, each one having a reliability of six sigma, the overall reliability of the product is about three sigma (3 defects per thousand). Many products have more than one thousand parts—a car has about 2000-3000 parts and a jetliner 200,000-300,000 parts and components. Therefore, designing in very high levels of individual component performance is essential to reliability of the finished product. This suggests one fundamental aspect of Six Sigma that has direct applicability to financial modeling—what we might call over-engineering. Rather than assume that we are correctly modeling the underlying distribution with the Gaussian, Six Sigma builds in a margin or error for fat tails. Although Six Sigma statistical processes are also based on the normal distribution, the high levels of sigma applied provide a much greater safety margin than the normal three sigma assumption of VaR. Mean shifts, another weakness of financial models, is allowed for explicitly in Six Sigma by targeting a high level of standard deviations. Even if the mean does shift, as it is assumed likely to do, in Six Sigma the confidence level is still very high. This again illustrates the concept of over-engineering the process to account for rare but expected or unexpected occurrences. A further weakness of traditional financial models is the interactive effects between financial instruments and markets. Six Sigma quality programs face a similar problem in complex processes with many interacting variables. An example is a metal plating process where temperature, humidity, fluidity, and other factors all affect process results. Six Sigma has developed ways to analyze these interactive effects and determine the best combination of variables to maximize process efficiency. Another element of Six Sigma that has applicability to financial risk modeling is reliability

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

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instruments and markets and attempt to build in reliability. It would involve extensive stress testing and simulation of performance under a variety of conditions. This concept will be considered in the next section along with other suggestions and a process for applying Six Sigma to the design of financial products. Applying a Six Sigma Approach to Risk Management Six Sigma quality programs emphasize a process approach to improving system reliability and performance. A process approach stresses the sequencing and interactive effects in a system rather than compartmentalizing the steps and activities. As was discussed above, the failure of risk managers to account for systemic risks in investment portfolios contributed to the financial crisis. The most widely used framework is the DMAIC process developed at General Electric which includes the following steps: Define Measure, Analyze, Improve, and Control (DMAIC). This same approach is applicable to portfolio design for financial instruments and risk management systems for these portfolios. In this section we will discuss how the DMAIC process can be used by financial firms to better design investment products and control for risk. The first stage in applying the DMAIC process to portfolio design is to Define the types of financial products to be considered in terms of the desired return to risk profile, the types of instruments that can be considered, and the investment horizon. These of course should be determined by top management of the firm, not by the quant’s developing the products. Without these parameters clearly defined, financial engineers will not have clear guidance in terms of the products they should develop. As the recent financial crisis illustrates, this failure to have clear goals and constraints led to some products being offered that were not well thought out and introduced a high level of unexpected and undesired risk. The second step in the DMAIC process is to Measure. In a manufacturing process this would normally involve collecting statistical data and finding process capabilities. The analogue in financial product design would be to perform statistical tests and simulations using historical data to determine the density distributions of the instruments. The goal of these tests would be to ascertain how the instruments perform independently and together in a portfolio. More advanced measurements would attempt to find the systemic effects on the portfolio of liquidity and credit crises. This was a deficiency in the design of many of the financial products that imploded in 2007 and 2008 such as CDO’s. A process capability study determines the distribution of results of a machine or process in terms of a density function (usually the normal distribution) to see if it can meet design specifications. For a financial instrument this would involve finding the distribution of returns over a period. The third stage of the DMAIC process is to Analyze. For financial products this could involve the technique called Design of Experiments (DOE). This method has been used in manufacturing for many years to determine interactive effects in processes. As noted above, interactive effects between financial instruments such as varying and asymmetric correlations were poorly understood and modeled. DOE provides a tool to analyze these kinds of influences on an investment portfolio. For financial instruments this could be done by simulation methods. For example, various asset categories could be combined in a systematic way in hypothetical portfolios to see how they perform under differing market scenarios. These interactive effects

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are a key element in another portion of analysis of portfolios called stress testing. The systemic effects of disappearing market liquidity and rapidly changing credit-worthiness on portfolios were poorly modeled in the recent crisis. Stress testing using DOE and simulations can provide valuable insight into how investment portfolios will respond under different economic and market scenarios. To Improve is the next step in designing financial products by the DMAIC process. Here a couple of techniques from the Six Sigma tool box can be useful. The first of these is reliability

engineering. Reliability engineering involves designing products to be robust under difficult operating conditions. This is accomplished through several techniques including standardization

and redundant systems as well as the previously discussed DOE. Standardization tends to make physical products more robust because of fewer number of parts reducing complexity and interactive effects and the streamlining of assembly and testing improving quality and reliability. Applied to financial products the analogue would be to use established financial instruments that have a track record of performance under different market conditions rather than new and customized instruments. Redundancy is an essential element in complex products to assure reliability. This can take the form of parallel systems that backup the primary system in case of failure. In the case of financial products this could be achieved by the use of financial hedges that will offset any opposite movement in the underlying instrument. The concept of portfolio insurance is relevant here. There are various ways to achieve this in an investment portfolio by taking offsetting long and short positions and the use of options. A common hedge is to take out-the-money puts to hedge against a large market drop. For hedging against counterpart risk, Credit Default Swaps (CDF) can be used. CDF’s contributed to the recent financial crisis because of the huge volume outstanding and their lack of transparency. They were undoubtedly being used as a speculative instrument rather than a hedge by many of the participants, but can be an effective hedge against credit risk if used properly. The last stage of the DMAIC process is to Control. Although risk management issues should be considered throughout all five steps in the process, they are the main focus of the last stage for financial products. The most important part of the control process is assigning clear-cut responsibility for this activity. It should be at a high enough level in the firm to have real control which was a problem with some of the financial firms most impacted by the recent crisis where control responsibility was diffuse and ineffective. Control also involves frequent reporting of essential information and separation of the trading, sales, and reporting roles. Compensation systems should not encourage excessive risk taking. The overall process for designing and controlling financial products following the DMAIC model will allow for a more systematic and thorough process that has the potential to prevent some of the problems which surfaced in the recent financial crisis. The ad hoc and diffuse nature of risk management in many financial firms was revealed during this crisis, and a more integrated and rational process is clearly called for. In the next section we will discuss the case for robust portfolio design.

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The Case for Robust Portfolio Design The financial crisis that began in 2007 affected many financial firms in commercial and investment banking, hedge funds, private equity funds, and insurance companies. But one major category of financial institution escaped the havoc. These are the derivatives exchanges throughout the world. Not one derivates exchange experienced distress in the crisis [15]. The reason for this is that derivative exchanges apply, and have applied for years, over-margining of positions. The margins that counterparties must maintain with the exchange are very conservative. The primary approach to establishing margin requirements at most derivative exchanges is the SPAN (Standard Portfolio Analysis of Risk) developed by the Chicago Mercantile Exchange (CME) in 1988. SPAN calculates the potential worst-case asset loss based on several price and volatility scenarios to set the margin. This conservative approach worked well with the chaos in the global asset and credit markets in the face of a sudden increase in volatility and correlation breakdowns. It is a financial equivalent of over-engineering. In contrast Basel-II did not provide the necessary protection to banks that it was designed for. Basel-II was based on a belief that banks had sophisticated risk modeling and could establish the levels of capital needed to assure solvency. However, these risk models were mainly VaR types of models and proved clearly inadequate to the task. Varma [15] calls Basel-II a “sophisticated but fragile” system in contrast to the derivatives exchanges risk management approach which is “crude but robust”. The need for a conservative approach and a margin of safety is revealed here. As was mentioned previously, asymmetrical and non-normal distributions cannot be modeled adequately using VaR techniques. Attempts have been made to improve upon VaR which have some potential. Goh, et al [7] recently developed PVaR for Partitioned Value-at-Risk. Their method divides the asset return distribution into positive (gains) and negative (losses) half-spaces. This generates better risk-return tradeoffs for portfolio optimization than the Markowitz model and is useable when asset return distributions are skewed or abnormal. In the next section we will discuss some new approached to stress testing and reliability engineering methods that can contribute to robust portfolio design. Reliability Engineering for Robust Financial Products

The obvious failure of risk management models based on VaR has triggered a search for new approaches that improve upon VaR or replace it. Several methods that adjust VaR for asymmetries and non-normality were discussed in the previous section. Increasingly there is interest in Expected Shortfall (ES) models that focus on the area in the tails of the distribution rather than the cutoff at 95% or 99% confidence levels as VaR does. The ES models are specifically designed to measure the potential for large losses and the amount of capital required to be prepared. ES allows losses to be calculated in the tail of a fat-tailed distribution whereas VaR does not. This can be accomplished by using a power law as described in Varma [15]. Pang’s [12] approach models the stock or option prices as a simple, deterministic non-linear transformation of a log-normal hidden process. He does not assume stationarity nor normality and thus his approach can deal with asymmetric and leptokurtic distributions. His model is able to explain some anomalies in financial markets such as negative volatility skewing and realized

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volatility being lower than implied volatility. This has application for options pricing and determining hedge ratios as well as giving indications of rich-cheap stocks or options. Diversification across asset categories and countries can provide some degree of risk mitigation in a portfolio, but this can break down as markets become more correlated in times of market stress. Building portfolios to maximize returns and minimize volatility using historical data and sophisticated models is essential in portfolio design. But to be truly robust, the portfolio must be over-engineered. This can be accomplished through several hedging methods that provide portfolio insurance.

There are several persuasive reasons to insure an investment portfolio against large and unexpected losses. The most obvious is the revealed weaknesses of VaR models to protect against large losses. The flaws in the VaR models were discussed above and include non-normal distributions with fat-tails and skewness and non-stationarity. This leads to poor performance of these models, particularly in the short-run [2]. It has proven extremely difficult to “time the market” and foresee changes in direction. Estrada [3] found that if an investor had been able to avoid the 10 worst days on the NYSE from 1900 to 2006, they would have had a portfolio 206% more valuable than a passive investor in the Dow Jones Industrial Average (DJIA). Conversely, an investor who missed the 10 best days during this same period would have a portfolio 65% less valuable than a passive investor. Predicting these market booms and busts is practically impossible, and the investor is much better off to insure the portfolio against extreme events. Portfolio insurance methods include the use of offsetting long and short positions for price and market risk. These positions can be costly in terms of return that is sacrificed to reduce risk. Another hedging method is to use options. Far out-of-the-money options can be used to insure against extreme price moves at a modest cost of the premium which is low for such options. To reduce the premium cost further one can write an offsetting option but, of course, must assume some risk to do so. Simulations [6] find that out-of-the-money put options reduce ES and coincident extreme losses. To insure against counterparty risk one instrument that can be used is the Credit Default Swap (CDS). For a series of premium payments counterparty risk can be transferred to someone else. This of course assumes that the CDS counterparty does not themselves default which has turned out to be a problem in the recent credit crisis. Other methods of portfolio insurance will probably be developed in reaction to recent events allowing for further refinement of reliability engineering for investment portfolios.

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

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

REFERENCES [1] Black, F. & M. Scholes, 1973, The Pricing of Options and Corporate Liabilities, Journal of Political Economy, 81(3), 637-654

[2] Considine, G., , Black Swans, Portfolio Theory and Market Timing: 12 comments, Seeking Alpha, 2008, Article, 64111 [3] Estrada, J., Black Swans, Market Timing, and the Dow, 2007, SSRN 1086300

[4] Evans, James R. and William M. Lindsay, Managing for Quality and Performance Excellence, Thomson/South-Western, Mason, OH, 2008. [5] Fama, Eugene, The Behavior of Stock Prices, Journal of Business, 1965, 47, 244-280 [6] Goldberg, L., M.Y. Hayes, J. Menchero, and I. Mitra, Extreme Risk Analysi”, MSCI Barra Research Insights, 2009,1-29 [7] Goh, J., K. Lim, M. Sim, and W. Zhang, , Portfolio Value-at-Risk

Optimization for Asymmetrically Distributed Asset Return, 2009, SSRN 1394922

[8] Kon, S.J., Models of Stock Returns—A Comparison, Journal of Finance, 1984, 39, 147-165 [9] Markowitz, H.M., “Portfolio Selection”, Journal of Finance, 1952, 7, 77-91 [10] Mandelbrot, B., The Variation of Certain Speculative Prices, Journal of Business, 1963, 36, 394-419 [11] Mandelbrot, B. and R. Hudson, The (mis)Behavior of Markets,New York: Basic Books, 2004. [12] Pang, H., A Novel Simple but Empirically Consistent Model for Stock Price and Option

Pricing, 2009, SSRN 1374688

[23] Sharpe, W.F., Capital Asset Prices: A Theory of Market Equilibrium, Journal of Finance, September 1964. [14] Taleb, N., , The Black Swan, New York: Random House, 2007 [15] Varma, J., Risk Management Lessons from the Global Financial Crisis For Derivative

Exchanges, Indian Institute of Management, Ahmedabad W.P. No. 2009-02-06, 2009,

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LABOR REFORM THROUGH EXECUTIVE ORDERS AND EFCA:

THE IMPACT ON WORKERS TODAY

Anne M. Fiedler Andreas School of Business

Barry University Miami Shores, FL 33161 [email protected]

305-899-3545

Mark A. Aeschleman Caterpillar Inc.

[email protected]

ABSTRACT

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

INTRODUCTION

Employees operated at the whims of employers until the mid-1930s when the National Labor Relations Act was passed. Since then labor has had the right to organize and bargain collectively with their employers free from restraint and coercion. These rights are enforced by the NLRB. The AFL-CIO spent $53 million in 2008 to help elect Barack Obama to the Presidency of the United States [1]. This ushered in what some describe as the most pro-labor administration since Lyndon B. Johnson [2]. At the start of his term in office, Obama signed into law numerous pro-labor executive orders. The labor agenda was temporarily put on the hold so that the President could focus on healthcare reform and deal with the economic crisis. Now, backed by a Democratic Congress, President Obama plans to push through the Employee Free Choice Act, the strongest pro-labor legislation since the National Labor Relations Act. Many question whether enabling employees to limit or avoid managerial intervention in union campaigns is an appropriate goal for federal law [3]. A recent study published by Cornell University provides a data-driven look at the claims in the EFCA controversy. Based on a survey of employees involved in National Labor Relations Board (NLRB) union representation elections and card-check campaigns, the study found that management pressure on employees to oppose unionization is greater than pressure from co-workers of union organizers to support the union. However, an overwhelming majority of the respondents (elections, 82.5%; card check,

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

NATIONAL LABOR RELATIONS ACT (WAGNER ACT)

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

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

The purpose of Executive Order 13494 is to promote economy and efficiency in Government contracting. It prohibits federal contractors from passing on to contracting agencies the costs of attempting to persuade employees to exercise – or to refrain from exercising – their rights to organize or engage in collective bargaining. The order specifically disallows costs associated with the following activities when they are undertaken to persuade employees to exercise or not exercise their rights to organize and bargain collectively: (1) preparing and distributing materials; (2) hiring or consulting legal counsel or consultants; (3) holding meetings (including paying the salaries of attendees); and (4) planning or conducting activities by managers, supervisors or union representatives during work hours. The order does allow for costs associated with "maintaining satisfactory relations between the contractor and its employees. Such costs include 'costs of labor-management committees, employee publications (other than those undertaken to persuade employees to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively), and other related activities'.” Executive Order 13495

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

The successor contractor has following rights: (1) to employ fewer employees than the predecessor contractor; (2) to employ any employee who has worked for the successor contractor for at least three months immediately preceding the commencement of the federal service; (3) not to offer a right of first refusal to any employee of the predecessor employer who is not a service employee within the meaning of the Service Contract Act of 1965; and (4) not to offer a right of first refusal to any employee of the predecessor contractor who has failed to perform suitably on the job based on the employee's past performance. [9] As a result of Executive Order 13495, many successor contractors will probably have to recognize and bargain with the labor unions that represented their employees when they were employed by the predecessor contractor. Noncompliance with Executive Order 13495 may result in orders requiring hiring of the employees not offered right of refusal and payment of wages lost. The contractor may also face federal-contract ineligibility for up to three years. [10] Executive Order 13496

Executive Order 13496 repeals a Bush order which had stated that government contracts and subcontracts must include a clause requiring government contractors and subcontractors to post notices informing their employees that they have the right to refuse to join a union. The new order requires government contractors to post notices informing employees of their right to organize under the National Labor Relations Act and to designate representatives of their own choosing for the purpose of negotiating the terms and conditions of their employment. Failure to comply may result in possible cancellation, termination, or suspension of the contract and being declared ineligible for future government contracts. In addition, this includes every subcontract entered into in connection with its federal contracts. [11]

Impact of Executive Orders 13494, 13085, and 13496

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

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

EMPLOYEE FREE CHOICE ACT

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

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

• Employees could still hold a secret ballot election if 30% of the bargaining unit signs authorization cards. However, a union would have the right to be recognized as the exclusive bargaining representative of your employees without a secret ballot election if a majority of those employees sign authorization cards.

• If a majority of employees sign cards, an employer must begin bargaining within 10 days after the union is certified.

• If the union and the employer cannot agree upon the terms of a first collective-bargaining contract within 90 days, a federal mediator steps in.

• If, after 30 days of mediation, the union and employer still have not agreed on a contract, a federal arbitrator would be empowered to determine the terms of the agreement, and your employees would lose their current right to ratify the terms of the agreement.

• If an employer is found to have unlawfully terminated pro-union employees, the law would provide for liquidated damages of three times back pay. In addition, you’d be hit with a $20,000 penalty per occurrence if the National Labor Relations Board or a court finds against you.

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

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

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

THE IMPACT OF LABOR REFORM ON EMPLOYEES

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

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

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

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

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

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

Negative Impact of the Pro-Labor Laws

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

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

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

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

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

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

It is estimated that the implementation of EFCA would translate into a loss of more than 600,000 jobs [2]. An analysis by Layne-Farrar [20] indicates that a 3% growth in union membership will result in a 1% increase in unemployment. In addition, it is predicted that job creation will decrease by nearly 1.5 million jobs. Bronars, Deere and Tracy [21], in a study determined that a 10 percent increase in union growth would translate into a decrease in employment by as much as 1.1%. Yet another study found that a one percentage point increase in bargaining coverage will increase unemployment rates by 7.5% [22]. There are various reasons behind the projected rise in unemployment rates due to increased unionization. As employees unionize, employers are required to dedicate more resources to wages and benefits, which have a negative impact on capital investments. Decreased investments in capital will ultimately slow the growth of the company and, in many cases, may cause a decline [22]. Additionally, as the cost of supporting the union membership increases, employers will reduce union positions [20]. As employer’s profit margins begin to shrink, they will begin to seek other alternatives in the area of labor such as sending jobs offshore [22]. Freedom of Choice and Threat of Coercion. Even though EFCA has been coined as the most significant legislation on labor since the enactment of the National Labor Relations Act, legislative acts often result in unintended outcomes, and opponents see the passage of EFCA as a significant attack on employee’s freedom of choice. The Card Check component of EFCA is designed to allow for immediate certification of the union and does not provide an opportunity for employers to develop a campaign against the unionizing effort. The card check procedure would replace the current procedure whereby employees sign an authorization card expressing their interest in collective bargaining. This is not, however, a vote in favor of unionization. The same procedure would apply with the card

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check process except instead of the employee expressing merely an interest in holding an election, if the majority sign the card, that card would suddenly become a vote in favor of unionization. Furthermore, employers may be completely unaware that an organizing attempt is being made which disallows employees from being presented both sides of the unionization story. An argument can be made that this would violate the employee’s freedom of choice. There is much talk about how EFCA will eliminate employer’s ability to use coercive actions to prevent unionization. EFCA does not, however, address or prevent coercive action by union bosses or coworkers during the authorization process. Employees may be intimidated and harassed by co-workers in an attempt to have them sign authorization card. This action creates turmoil for the employee often resulting in giving up their resolve and signing the card. This form of coercion and one-sided communication does not afford employees the opportunity to make an educated decision [23]. Compulsory Arbitration. A portion of the EFCA bill that is often overshadowed by the card check option is compulsory arbitration which would take place 120 days after certification if the company and union cannot come to an agreement on a contract. Knowing that both sides feel the other is asking for too much, compulsory arbitration is a real likelihood in many instances. Currently, employers and the union negotiate a contract. Although they are required to bargain in “good faith,” an agreement is not always reached. If that happens, the union can call a strike. However, strikes are costly to both sides and a compromise is typically reached. Through arbitration, a government-appointed lawyer determines what is fair for both sides. The decision of the lawyer is final. Currently, once a contract is negotiated by union officials and management, it has to be ratified through a vote of rank-and-file members. Under compulsory arbitration, workers do not get this vote. As a result workers have lost their right to vote twice: first, to certify the union and then to ratify the contract [24]. George Meany, president of the AFL-CIO for nearly 30 years, refers to the lack of voice resulting from mandatory arbitration as "an abrogation of freedom." [25] There are numerous instances where arbitration has not served the people well. For example, Compulsory arbitration nudged some Michigan cities into bankruptcy. This was costly not only to the taxpayers, but to the workers whose jobs were subsequently cut. Compulsory arbitration is now being rejected in Michigan and other states as an alternative to negotiation. Recently, Michigan voters rejected a union-sponsored ballot proposition that would have extended compulsory arbitration to all state employees. [24].

CONCLUSIONS

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

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

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BUSINESS EDUCATION, SOCIAL RESPONSIBILITY, AND NONPROFIT

OPPORTUNITIES

Phil Mann Andreas School of Business

Barry University Miami Shores, FL 33161 [email protected]

305-899-3523

Anne M. Fiedler Andreas School of Business

Barry University Miami Shores, FL 33161 [email protected]

305-899-3545

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

INTRODUCTION

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

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

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2. Areas of study related to nonprofit organizations and needs are not usually an important part of regular business school curriculum.

3. The area of nonprofit organization study and response to needs of this sector in terms of business continuing education and community involvement is neglected.

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

• There is little opportunity for entrepreneurial activity in nonprofit endeavors. • Nonprofits are sustained through donations. • Nonprofits do not engage in for-profit activities. • Business education is the same for nonprofits as it is for for-profit firms so why “tamper

with” existing courses. • There are only a few nonprofit organizations and most of them deal with religion, education,

some aspect of health or poverty and probably would be better served under the purview of social work.

• Nonprofits do not play a significant role in the economy of the United States. Further research is needed in the areas of the perception of nonprofit organizations by various groups. In the area of social responsibility it is becoming evident that a growing number of companies are looking to business schools for assistance in redefining the concept of social responsibility with respect to strategic planning and the delineation of leadership responsibilities of key company employees. These plans also include specific initiatives that pertain to global expansion. Issues related to social concerns in identified countries are deemed important. If you are doing business in India, for example, it cannot be avoided. Companies have also expressed concern over the type of branding that highlights their social effect on communities and the efforts made to shape community perception of their public image. A Wall Street Journal article [2] stated that “fifty-seven percent of consumers say a company or brand has earned their business because it supports good causes,” (Edelman SA, a large financial-service company). The Bridgespan Group, a nonprofit-advisory firm projects long-term shortages of up to 640,000 managers by 2016 as workers retire and organizations grow larger [3]. “Nearly three fourths of the nonprofits surveyed by Bridgespan indicated that they value for-profit experience. Skills most in demand include project management, stretching scarce resources, flexibility, and adaptability.”

BACKGROUND

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

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

In the United States as well as in Europe and in Latin America where nonprofits are known as civil society sector programs, not for profit organizations contribute as much to gross domestic product as such major industries as construction and finance. According to Lester Salamon, director of the Johns Hopkins Center for Civil Society Studies, “We now have an officially sanctioned method for capturing the economic scale and importance of civil society and volunteering around the world, and what is revealing is that this set of organizations is far more important than we have realized.” [4] According to the National Center for Charitable Statistics (NCCS) [5], the following information was published in a report dated 1/14/2010: • Total number of registered nonprofit organizations in the United States in 2009 was

1,515,629. • Total number of nonprofit organizations in Florida in 2009 was 69,804. • Total number of nonprofit organizations in Miami-Dade County (the location of Barry

University) was 9,591. • Florida’s nonprofit sector is the fourth largest employer among Florida industries with nearly

630,000 workers including 380,000 paid workers and an additional 250,000 full-time equivalent volunteer workers [6].

• This same report stated that nonprofit enterprises account for 7% of the GDP capital of the United States.

• The workforce of Florida’s nonprofits alone represents a significant 4.9% of the total workforce (1 out of every 20 workers). This represents more than the state’s banking and insurance industry.

Under Studied

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

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• None of the texts defined the terms nonprofit or not for profit. • It was also noted that sixteen of the texts made no reference to social responsibility, but some

did deal briefly with the concept of ethics and business. One of the texts did deal with social responsibility in a more comprehensive manner.

Some of the concerns indicated by nonprofits that have important implications for higher education were uncovered in a survey conducted by a C-One Survey dealing with the effects of the economy on nonprofits serving Miami-Dade County published in March 2009 [7]. They found that the main concerns for these organizations centers around three themes: quality of services, operational inefficiencies, and staff burnout. The findings indicated that there is a paucity of donors and the fact that private funds continue to be cut back in our present economy. It is predicted that this will continue for some time in the future. Conversely given the decrease in funding, the demand for services is up having important implication for future jobs for our graduates. This appears to be both a national and international trend. The demand for services has become “a key driver” in terms of adding new programs or expanding the scope of existing programs. With respect to educational needs related to identified strategies, five major areas have been identified that need to be considered in terms of continued business education.

1. Information regarding the role of boards in fund raising 2. Marketing information that would provide greater visibility to organizations and their

programs 3. Programs addressing internal operations, planning and adjustments 4. Suggestions regarding board roles in strategic planning 5. Suggested strategies for collaboration and partnering with others to jointly raise funds

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

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

assistance

Under Served

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

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Students should understand the effects nonprofits have on communities and their role in bringing vitality to local economies. The needs of nonprofit organizations have generated a list of community service areas that with student involvement could be improved and expanded. In a larger sense providing services to nonprofit organizations has been shown to have a positive effect onsite in strategic areas in neighborhood revitalization. The C-One Survey of nonprofit organizations [7] generated a list of community service areas that could be improved or expanded with additional training and support. Many of the topics identified as integral relate to the utilization of business model practices that focus on management, accounting, marketing, and fund raising as well as governance issues. Nonprofit organizations need assistance in the development of business plans. One goal is to broaden exposure and identify sources of potential assistance for the community. Another major application of workshops and seminars is to assist nonprofit firms in securing grants and contracts as well as to be in a better position to offer more comprehensive services in meeting community needs.

IMPLICATIONS FOR MANAGEMENT EDUCATION

Since there is a paucity of information about nonprofits in many business texts, it cannot be expected that students will become focused on this area as relevant to their studies in business. Therefore, it becomes a matter of including supplementary materials and developing activities that would introduce students to this area. There are several activities that have been successfully implemented that resulted in a better understanding of the area of nonprofit organizations with concomitants in social responsibility.

The following suggestions are meant to be practical and doable. Simulation activities are good that involve reenacting problem solving situations designed to stimulate a mindset for thinking about responsible behavior. Examples such as analyzing mining accidents or oil spills as well as other corporate catastrophes are informative. There are a variety of moral quandaries that can be introduced into courses through case studies involving nonprofit organizations. Case studies that provide for a differentiation between for-profit and nonprofit firms are useful. Case studies involving nonprofit organizations and situations dealing with social responsibility should be a part of the requirements of every management, marketing, and entrepreneurship course. The SWOT Analysis technique has been introduced and found to be very useful in these situations. An example of how a simple nonprofit case study requirement for an MBA Course in Entrepreneurship can have far-reaching implications is a study done by a student of the Florida Department of Juvenile Justice, a governmental nonprofit organization. What began as a limited SWOT Analysis of a local correctional institution became a comprehensive survey of six circuits

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(institutions) in Florida. In collaboration with the Chief Probation Officer/Superintendent, the student accomplished a very useful basis for offering possibilities for better coordination of South Region correctional services. Additional recommendations include the following: • A section of an existing course in entrepreneurship, for example, can be geared to benefit the

students interested in nonprofit business employment. • Students can do business plans developed around a nonprofit start up or expansion. • Case studies can be presented dealing with nonprofit enterprises. • SWOT Analysis assignments centered on nonprofit enterprises offer experiential

opportunities. • Internship in nonprofit situations can be provided for students. • Voluntary services in nonprofit organization can be made available. • “Shadowing” experiences where the student spends a number of hours (days) following the

daily routine of a CEO or CFO of a nonprofit firm. This activity has been an excellent learning experience for students who shadowed (followed) the CEO of a local hospital.

The following is a list of topics that could be covered in seminars, workshops, and courses that would complement standard business information offered [8]:

Measuring/Assessing Performance Managing the Nonprofit Organization Community Needs Assessment How to Start a Nonprofit Enterprise Website Auditing Techniques Developing and Managing Volunteers Developing Service Programs Sustainability Issues Basics of Grants and Other Funding Project Development and Management Grant Writing Fundraising Methods Budgeting Essentials Community Demographics The Strategic Planning Process Use of Social Enterprises Board Governance Roles of Foundations Doing a SWOT analysis Use of Social Networking Tools Board Selection and Development Organizational Assessment Techniques Creating Visions and Missions Supply Chain Management Issues Finance and Accounting for Nonprofits Branding the Organization Role of the Executive Director Tax (990) Considerations Economic Indicators Affecting the Legal Requirements Organization

SUMMARY AND CONCLUSION

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

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

REFERENCES

[1] Middleton, D. (June 2010). Deans Set Priorities for Tough Times. The Wall Street Journal. [2] Dizik, A. (2009) Networking for Social Responsibility. The Wall Street Journal, November 19, 2009, 88.

[3] Smith, A.K. (2010). How to switch careers. Kiplinger’s, Fall 2010. [4 ] Johns Hopkins Economic Data Project based on ES-202 data. Retrieved on January 14, 2010. [5] National Center for Charitable Statistics (2009). Number of Nonprofit Organizations by State. Retrieved on January 14, 2010. [6 ] Joint report of the Johns Hopkins center for civil society studies and the Florida Philanthropic network (2008). Florida’s Nonprofit Sector: An Economic Force. Retrieved January 14, 2010. [7] C-One Survey (March, 2009) The Effects of the Economy on Nonprofits Serving Miami-Dade County. Retreived January 14, 2010. [8] Kleban, J. (2010). Topics for Nonprofit Seminars and Workshops. Barry Institute for Community and Economic Development (BICED).

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

Henry Findley,TROY University,Troy, AL,[email protected],334-670-3271 Eva Dodd-Walker,TROY University,Troy, AL,[email protected],334-670-3976 Lee Vardaman,TROY University,Troy, AL,,[email protected],,334-670-3151

Ping He, TROY University, Troy, AL, [email protected], 334-670-3709 Robert Wheatley, TROY University, Troy, AL, [email protected], 334-670-3459

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

INTRODUCTION

Sexual harassment has been recognized as a violation of the Civil Rights Act under Title VII since the late 1970’s [Twomey, 2007]. In 1980 the Equal Employment Opportunity Commission [EEOC] propagated guidelines regulating sexual harassment in the workplace [29CFR1604.11]. Since then, charges have steadily risen until they peaked in 2001 at 15,475 [EEOC]. Complaints slowly declined until 2008, when they suddenly displayed a 10.8% increase [EEOC]. Currently, sexual harassment cases comprise 14.5% of all claims filed with the agency. There has been comparatively little recent research on court interpretation of the sexual harassment guidelines [Shoenfelt, Maue & Nelson, 2002; Miller, 2001]. Given that sexual harassment litigation represents a significant amount of the EEOC caseload, is rising again, is very costly to organizations, and is such a controversial and complex issue, it would be helpful to review the recent case law interpreting the EEOC regulations on the subject. In particular, the review should focus on the area where there is the most confusion and litigation--sexual hostile environment. To that end, a LEXIS-NEXIS key word search was conducted that yielded over 400 cases at the appeals court level [chosen because the legal principles are more settled and accepted than at the district level] since the Supreme Court set forth its hostile environment guidelines in Faragher v. City of Boca Raton [Faragher v. City of Boca Raton, 1998]. Over 200 usable cases were identified and examined for guiding principles as to the circumstances that constitute an illegal sexual hostile environment. Cases cited are representative or highlight special issues/circumstances that assist in determining the hostile environment threshold. Female on male and same-sex harassment cases were not included because some research has suggested there are differences among the sexes as to their perceptions/reactions to sexual harassment [Shoenfelt, Maue & Nelson, 2002]. Recommendations for administrators and legislators are provided.

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HOSTILE SEXUAL ENVIRONMENT

Sexual harassment is defined under the EEOC guidelines as

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

The Supreme Court upheld the EEOC guidelines in Meritor Savings v. Vinson and distinguished between quid pro quo and hostile environment claims [Meritor Savings v. Vinson, 1986]. It is the third definition that deals with hostile environment cases and is the subject of this article. In Faragher v. City of Boca Raton, the Supreme Court clearly enunciated the factors to be considered in determining hostile environment claims filed under Title VII [Faragher v. City of Boca Raton, 1998]. First, it must “be both objectively and subjectively offensive, one that a reasonable person would find hostile or abusive” [Faragher v. City of Boca Raton, at 286]. Second, all circumstances must be examined, including the “frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance” [Faragher v. City of Boca Raton, at 286]. The Supreme Court pointed out that “Title VII does not prohibit genuine but innocuous differences in the ways men and women routinely interact with members of the same sex and the opposite sex. Simple teasing, offhand comments, and isolated incidents [unless extremely serious] will not amount to discriminatory changes in the terms and conditions of employment” [Faragher v. City of Boca Raton, at 286]. In fact, the Supreme Court had previously made clear in Meritor Savings v. Vinson that no one is guaranteed a pristine work environment [Meritor Savings v.

Vinson, 1986]. The Faragher Court underscored this point when it said that the guidelines when properly applied would filter out “the ordinary tribulations of the work place, such as the sporadic use of abusive language, gender-related jokes, and occasional teasing [Faragher v. City of Boca Raton, at 286]. It should go without saying that nonsexual behavior is not covered by the guidelines. However, these cases do occur.

NONSEXUAL CONDUCT

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

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

SEXUALLY RELATED CONDUCT

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

PHYSICAL CONTACT

Physical touching of another person is generally the most serious form of conduct according to the Supreme Court. For example, in Lapka v. Chertoff, a female adjudication officer with the Bureau of Customs and Immigration Services was assaulted by a fellow employee on a business trip [Lapka v. Chertoff, 2008]. While the agency tried to argue that a single isolated event of assault was not pervasive, the Seventh Circuit disagreed. It noted that sexual assault alone can be sufficient to create an objectively hostile work environment because such an act by its very nature is considered severe [Lapka v. Chertoff, 2008]. It further explained that the continued presence of the perpetrator exacerbates and reinforces the fear and anxiety suffered by the victim [Lapka v. Chertoff, 2008]. The nature of the job does not necessarily ameliorate the conduct of the perpetrator[s] [Randolph v. Ohio Depart. of Youth Services, 2006]. A female prison guard was subjected to multiple physical attacks, in addition to verbal harassment and threats. The court found that these actions, even though in a prison setting, were severe and breached prevailing social norms and would be traumatic and humiliating to anyone in that situation [Randolph v. Ohio Depart. of Youth Services, 2006]. In a case involving customers physically harassing a waitress, the victim was able to prove a hostile environment existed with only one incident of physical touching [Lockard v. Pizza Hut, 1998]. A male customer at a Pizza Hut pulled the waitress’s hair, along with other verbal comments. Following this incident, she asked to be reassigned to another customer, but the manager refused. Upon returning to the customer, he pulled her to him by her hair, grabbed her breast, and then placed his mouth on her breast. Pizza Hut argued that this was just one isolated incident and as such did not qualify as a hostile environment. However, the Tenth Circuit Court of Appeals found the offending conduct was both physically threatening and humiliating; therefore, it was sufficiently severe and pervasive to be declared illegal [Lockard v. Pizza Hut, 1998]. Nevertheless, less extreme forms of physical conduct do not always result in a hostile environment. In an often cited case, Gupta v. Florida Board of Regents, a male supervisor at a college touched a female subordinate’s ring and bracelet, the hem of her dress [moving it a few inches], and her knee [briefly] over a 6 to 7 month period [Gupta v. Florida Board of Regents, 2000]. Additionally, he repeatedly called her at her home [though of personal nature, the calls were not sexual, intimidating or threatening], complimented her on her looks, and invited her to lunch

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several times; once when she walked into his office, he was putting on his dress shirt and tucking it in his pants, which were partially opened. The Eleventh Circuit Court of Appeals denied the claim because much of this conduct occurs in normal workplace interactions. The dress shirt incident was found to be nonsexual. The touching of the hem and knee, though more serious, were ruled to be isolated, infrequent momentary events, and his actions were neither physically threatening nor humiliating [Gupta v. Florida Board of Regents, 2000]. In another Eleventh Circuit case, a sales associate filed a hostile environment claim after she had been touched twice on the buttocks by two different co-workers and asked by another if she had seen or worn panties with a “built in butt” [Dar Dar v. Associated Outdoor Club, Inc. at 85]. Another worker once told her that he had seen a “whale of a d--k” in the restroom [Dar Dar v. Associated

Outdoor Club, Inc. at 85]. Given that the incidents occurred over a 22-month period, the appeals court found the conduct fell in the realm of simple teasing, offhand remarks, and isolated incidents [not extremely serious][Dar Dar v. Associated Outdoor Club, Inc., 2007]. The Seventh Circuit has gone so far as to say that some physical contact that is relatively minor and infrequent may be considered insufficiently abusive to be described as severe or pervasive [Hosteletler v. Quality Dining, Inc., 2000]. This includes a hand on the shoulder, a brief hug, a peck on the cheek, an attempted kiss on the lips, a hand on the thigh, or pinch on the buttocks as long as these incidents occur infrequently [Hosteletler v. Quality Dining, Inc., 2000]. For example, there was no hostile environment in Adusumilli v. City of Chicago when in four separated incidents a co-worker briefly touched a female employee’s arm, fingers, and buttocks over a 10-month period [Adusumilli v. City of Chicago, 1998]. The same result occurred in Quinn v. Green Tree, where a male supervisor deliberately touched a subordinate’s breasts with some papers he was holding and on another occasion told her she had been voted the sleekest ass in the office [Quinn v. Green Tree, 1998]. In Bussell v. Motorola, a temporary employee was subjected to a co-worker rubbing up against her back as he passed her in cramped quarters some 10 to15 times over a two-month period [Bussell v. Motorola, 2005]. He also made various sexually related comments; on one occasion, he lifted her shirt up and pulled her pants down slightly to view her tattoo. While the behavior was crass, inappropriate, and unprofessional, the appeals court did not find the conduct to be sufficiently severe, pervasive, or repetitive enough to create a hostile work environment [Bussell v. Motorola, 2005]. Even a supervisor pulling back a lady’s shirt to see the type of bra she was wearing has been ruled to be insufficient due to the isolated/infrequent nature of the action [McPherson v. City of

Waukegan, 2004]. However, in the same case, the work environment became hostile when the supervisor later put his hands inside her blouse and felt her breasts and then a few days later did it again along with running his hand down inside her pants and touching her private areas. At this point, even though it was only two actions, they were very serious and both were physically threatening and humiliating [McPherson v. City of Waukegan, 2004]. Nevertheless, more frequent but “less serious” physical acts can create a sexually hostile work environment. For example, in Harvil v. Westward Communications, over a seven month period, a

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male co-worker, not only grabbed and kissed a new female employee on the cheek, but repeatedly made comments about her sex life, popped rubber bands at her breasts, fondled her breasts, patted her on the buttocks [at least once a week], and came and rubbed his body parts against her [from behind]. Although not as serious as the actions in McPherson v. City of Waukegan

[2004], these acts occurred frequently enough to create a hostile work environment [Harvil v.

Westward Communications, 2005]. In Schiano v. Quality Payroll, the Second Circuit reversed a summary judgment for the employer stating that the jury could find the harasser’s actions repetitive enough as to change the conditions of the victim’s work environment to one that was hostile [Schiano v. Quality Payroll, 2006]. In this case, a corporate financial assistant was subjected to a co-worker putting his hand on her thigh at a company party; he then pulled her skirt up a few inches and took a picture of his hand on her thigh. When leaving the party he suggested that he join her in her hotel room. Over the next 3 to 4 months, he came from behind her on 5 to 6 occasions and placed his hands on her back or neck and leaned into her while she worked. During this time, he made various verbal comments to her: He told her that she was sleeping with the wrong employee, remarked she was really hot, and asked what type of underwear she wore. Even after complaining about his behavior several times, he would pass by her cubical and leer at her [Schiano v. Quality Payroll, 2006].

VERBAL CONDUCT

The vast majority of hostile environment charges involve verbal comments of a sexual nature. In general, verbal comments are considered less serious by the courts than physical contact. As a result, verbal comments must be more frequent in order to reach the hostile environment threshold. In Reeves v. Robinson Worldwide, a transportation sales representative was subjected to nearly three years of co-workers using sex specific language in her presence and playing sexually offensive radio programs every morning [Reeves v. Robinson Worldwide, 2008]. Comments included referring to women as “c--ts” or “whores” as well as vulgar references to sexual acts such as “f--- your sister,” conversations concerning ejaculation, men’s erotic dreams, female sexual anatomy, and sources and indications of female sexual arousal [Reeves v. Robinson Worldwide at 1145]. She was also once exposed to a pornographic image on a co-worker’s computer. None of the conduct was physically threatening, but the language and radio programs could be found to be a humiliating work environment, particularly because she was the only female in the work group. Taken together, the comments could be considered severe in that the words or phrases used fell within the spectrum of language that is particularly offensive to most women [Reeves v. Robinson Worldwide, 2008]. Clearly, the conduct was pervasive throughout the work environment. The court pointed out that her performance could have also been adversely affected because she testified that all of the conduct made it difficult for her to concentrate and caused her to often leave her workstation and stand in the hallway [Reeves v. Robinson Worldwide, 2008]. She also claimed that she started to shake when she was exposed to the pornographic image. The court noted that while no single episode crossed the Title VII threshold, it was the repeated exposure over three years to the verbal comments and the pervasive nature of all the actions that

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

Columbia Palms, 2007]. In Lockett v. Choice Hotels, a co-worker made sexually-related comments to a female reservations clerk when she visited the company café during her breaks [Lockett v. Choice Hotels, 2009]. Over a four month period, he talked about sexual positions and indicated that “he would lick her p---y,” that “he would go down on her good,” that “her boyfriend ain’t f---ing her right,” and that she needed “to get with a real guy” [Lockett v. Choice Hotels, at 867]. She stopped going to the café for three weeks, but when she returned he indicated that he wanted to hug her; she refused, however. On another occasion, he touched her bottom quickly, but it did not affect her performance. The Eleventh Circuit Court of Appeals concluded that based on the totality of the circumstances the offending behavior did not meet the threshold of a hostile work environment because it was infrequent, insufficiently severe or pervasive [Lockett v. Choice Hotels, 2009]. In another case that failed to meet the conditions of a hostile work environment, a supervisor of a female deputy sheriff, over a three month period, made comments [about once or twice a week] to her about wearing tighter clothes, that she looked hot, and that he wished his wife wore hot clothes; once he also made a comment to her husband over her cell phone that he was “eating her” [Webb-Edwards v. Orange County Sheriff’s, at 1019]. In Patt v. Family Health Systems, eight gender-based comments over several years, which included hearing “the only valuable thing to a woman is that she has breasts and a vagina,” were not pervasive enough to support a hostile environment claim [Patt v. Family Health Systems, 2002]. Similarly, in Rhonda L. Moser v. Indiana Department of Corrections, a co-worker talked down to a secretary and other females, made a reference to her “tits,” told several new male employees to “watch out because she likes good-looking men,” asked her “if she had gotten a new set of legs,” used profanity in her presence, “told a joke about a boy’s anatomy,” commented on physical appearance of female job applicants, and “made an innuendo about his penis size when a dimension was mentioned by a female co-worker”[Rhonda L. Moser v. Indiana Department of

Corrections at 904]. He also made sexually related comments to others outside her presence, but the courts generally do not allow these comments into evidence [that is, offensive statements must occur in the victim’s presence]. The Seventh Circuit concluded that “sporadic use of abusive language, gender-related jokes, and occasional teasing are fairly commonplace in some employment settings and do not amount to actionable harassment” [Rhonda L. Moser v. Indiana

Department of Corrections at 905]. In a recent Wal-Mart case, the Seventh Circuit went so far as to state that using vulgar language [such as calling an employee “a f---ing bitch” or cursing], yelling at the victim, and making isolated comments about older women in the workplace over a five month period was not actionable, although crass [Anne B. Raciot v. Wal-Mart, 2005].

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Nevertheless, given enough repetition and seriousness of the comments a hostile environment will occur. In Parker v. General Extrusions, a “loose” atmosphere pervaded the night shift of a fabrication department where there was a tremendous amount of horseplay in the work area replete with shop/locker room talk that included the use of profanity as well as crude and vulgar terms [Parker v. General Extrusions, 2007]. Male employees routinely made sexual comments about and to female employees. The victim, over about a three year period, was referred to as a “f---ing whore” and endured vulgar comments about her possible sexual activities, implying that she was promiscuous [Parker v. General Extrusions at 600]. When she reported the problems to her supervisor, he told her that she should consider it a compliment. She was repeatedly referred to as “whore,” “bitch,” “slut,” and “crybaby,” sometimes in front of the foreman [Parker v. General Extrusions at 600]. Although she complained a number of times, little or nothing was done and the comments continued. Eventually, all of the inappropriate conduct caused her to take two separate medical leaves of absence. The Sixth Circuit found that the harassment was sufficiently continuous and serious enough and that given her performance was adversely affected by the leaves of absence were sufficient grounds to create a hostile work environment [Parker v. General Extrusions, 2007]. In Boumehdi v. Plastag Holdings, the supervisor of a female production worker, over a period of 10 months made at least 18 sex-based comments to her [Boumehdi v. Plastag Holdings, 2007]. These included on at least five or more occasions telling her that women do not belong in the production area and that women think they know everything [Boumehdi v. Plastag Holdings, 2007]. He once commented when she was bending over that she should remain in that position as it was perfect. He also told her that women should work in flower shops and that she should wear a low cut blouse and shorter shorts. When she was pregnant, he asked her if she had gotten a breast enlargement over the weekend; upon finding out that she had miscarried, he asked her what business she had getting pregnant at her age [Boumehdi v. Plastag Holdings, 2007]. On another occasion, he told her that her gender did not exempt her from taking out the trash, and he also told her to clean the production room, noting that he did not ask men to do the cleaning because that’s what women were supposed to do [Boumehdi v. Plastag Holdings, 2007]. Additionally, he once told her that he had to leave work to get a lap dance down the street [Boumehdi v. Plastag Holdings, 2007]. The Seventh Circuit concluded that the sexist comments were pervasive and frequent enough to reverse a summary judgment for the company [Boumehdi v. Plastag Holdings, 2007]. However, it doesn’t have to take nearly a year or more to obtain a hostile environment ruling. In Fairbrother v. Pamela Morrison, a female forensic treatment specialist at a maximum-security facility for the criminally insane was called the “b” word almost daily for several months; she was also called a whore approximately 10 to15 times [Fairbrother v. Pamela Morrison, 2005]. Also, “she was asked why she wasn’t wearing a French maid outfit” [Fairbrother v. Pamela Morrison at 52]. Over about a six-month period, male employees routinely talked about their sexual activities and asked her about hers, pornography was left in bathrooms and the staff office where meetings were held. Co-workers would yell to one another with comments about their private parts. At any given time, there were at least two or three sexually offensive jokes posted on the staff office bulletin boards [Fairbrother v. Pamela Morrison, 2005]. The Second Circuit found “these

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

VISUAL CONDUCT

Conduct of a visual nature can lead to a legitimate hostile environment claim as well. Visual conduct includes gestures, staring, displaying pornography, and revealing or directing attention to body parts. In Valentine v. City of Chicago, a co-worker in the City’s Department of Transportation rubbed his crotch in front of the victim nearly every day for about six months [Valentine v. City of Chicago, 2006]. He repeatedly asked her for dates [30 to 40 times] and made repeated comments about her “tits” and “ass”; he also asked her on at least 20 occasions to leave her fiancé [Valentine v. City of Chicago at 681]. On at least 6 occasions, he rubbed her arm or shoulder. He also humiliated her in front of her co-workers with an unwelcome sexual prank that involved him mimicking masturbating. Even though she continually made him aware that his behavior was unwelcome, it continued, causing her to experience anxiety, inability to concentrate, and depression. The Seventh Circuit reversed a summary judgment for the employer and allowed the case to go to trial because of the frequency, severity, and the pervasiveness of the conduct. In Ocheltree v. Scollon Productions [2003], a new female shoe production worker began to be increasingly subjected to male sexual antics that went on for about a year. Almost daily, the male employees would make sexually explicit comments, talk about intimate sexual activities with their wives or girlfriends, and use sexually-related gestures, involving a female-form mannequin [Ocheltree v. Scollon Productions, 2003]. These actions included fondling the mannequin and demonstrating various sexual techniques on it. The harassment was so offensive at times that it would drive the victim from the workroom. The courts found the actions to be pervasive, repetitive, and humiliating enough as to create a hostile work environment [Ocheltree v. Scollon Productions, 2003]. The context, however, can mitigate the severity of the conduct. In Duguie v. City of Burlington, janitorial staff would be cleaning men’s bathrooms in a police department, and the male police officers would come in and undress or urinate while the janitorial staff cleaned [Duguie v. City of

Burlington, 2006]. However, there were only a few such isolated incidents and they were not considered sufficiently severe or pervasive to create a hostile work environment. Although usually innocuous, staring can rise to the level of actionable hostile environment as it did in Billings v. Town of Grafton. A secretary to the town administrator began to notice after a few months that her supervisor was looking at her chest during conversations with her. He would make eye contact then his eyes would shift to her breasts and he would stare at them for approximately five seconds or longer. She started avoiding being alone with him and would hold a piece of paper in front of her chest while walking through the office. He once stared at her so many times in the first half hour of the day that she went home to change the sweater she was wearing [Billings v. Town of Grafton, 2008]. Even after complaining, the conduct did not stop. This lasted for some two and a half years. In reversing a summary judgment for the city, the First

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Circuit stated that the conduct was not isolated and could be found by a jury to be satisfactorily severe and pervasive [Billings v. Town of Grafton, 2008]. Exposure to pornographic pictures in just a handful of incidents can lead to a hostile environment verdict. In Criswell v. Intellirisk, the Eleventh Circuit Court of Appeals ruled that exposure to explicit pornographic pictures on three separate occasions were so extreme and severe that a hostile environment ruling was appropriate [Criswell v.Intellirisk, 2008]. In Bright v. Hill’s Pet

Nutrition, male production workers would try to make women view pornographic material on the men’s computers while they were training them [Bright v. Hill’s Pet Nutrition, 2007]. When the women refused to view the pictures, the men would not conduct any further training. In addition, the workplace was replete with unwelcome sexual overtures by males, and they would make streams of misogynistic invective remarks [Bright v. Hill’s Pet Nutrition, 2007]. This lasted for over two years and was ruled to constitute a hostile environment. However, in Lucero v. Nettle Creek School, on one occasion a student held up a picture of a student's naked buttocks, and on another occasion 20 playboys were placed in the same teacher’s classroom by some of her students [Lucero v. Nettle Creek School, 2009]. While the courts found these incidents to be deplorable behavior that no teacher should be subjected to, the incidents were nevertheless “isolated and were neither sufficiently severe nor pervasive as to rise to the level of actionable harassing conduct” [Lucero v. Nettle Creek School at 730]. Likewise, in Coolidge v. Consolidated City of Indianapolis and Marion County, a female crime lab worker discovered two pornographic videotapes left by a man who had retired. Given that the exposure was brief, the nature of her job was such that she was used to seeing nudity as part of her job, and due to the accidental nature of the discovery, the courts found no violation [Lucero v. Nettle Creek School, 2007].

CONCLUSION

Determination of a hostile environment is not a simple process because each case must be considered in its own context with varying circumstances requiring interpretation of the conduct involved, which is inherently complex; therefore, it is difficult to present precise directions as to determining an exact hostile environment legal threshold. However, some general guidelines can be provided. Usually, it takes a significant amount of frequent unwelcome sexually-related behavior over a considerable period of time to cross the hostile environment demarcation point unless it is clearly humiliating and involves touching of private parts and/or is threatening. Often, less severe forms of physical touching that are nonthreatening when isolated and occur over a number of months are not usually deemed illegal. In general, based on the appeals court decisions reviewed, sexually related comments by themselves must generally be more frequent and often take 6 to 10 months or more to become hostile [though not always]. Visually related behavior that is severe only takes a few instances to create a hostile workplace, but less severe incidents may take many occurrences and months to create a hostile environment. Teasing, joking, or vulgar language is not commonly protected activity. There were no systematic discernable differences among the various circuit courts. However, this may be due to the comparative lack of usable cases for a number of the circuits.

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Administrators are under no legal obligation to withhold corrective action until the hostile environment limit is reached. Nor are they required to tolerate teasing, vulgar, crass, or unprofessional [sexually-related or not] behavior in the workplace. In fact, sexually-related behavior and any unprofessional or vulgar behavior could affect workplace productivity and morale long before legal stipulations are breached. Even though workers are not guaranteed a pristine environment, organizations are well within their legal rights to formulate policies and procedures that go so far as to have virtually zero tolerance for such conduct. This would be particularly important for high profile managerial and media positions as well as government, education, religion, and child care institutions which are often held to higher social standards due to the nature of their work. It would also be important in other work environments as well, such as hazardous occupations where “horse play” of any type can result in serious injury. In fact, legislators at both the federal and state level should at the very least consider tightening the sexual harassment rules governing these types of occupations and work environments. In any event, it makes much more sense for organizations to propagate policies that are intolerant of such behavior. These policies may be in addition to or incorporated into the organization’s current sexual harassment policy. This accomplishes two important purposes. First, it will minimize legal exposure to sexual harassment litigation. Second, and perhaps more important, it creates a work environment free from unprofessional and sexually-related conduct, however benign, which can only detract from workplace productivity and ultimately affect worker motivation, morale, well-being, and performance.

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REFERENCES

[1] Adusumilli v. City of Chicago, 164 F.3d 353 [7th Cir.1998]. [2] Ann M. Hostetler v. Quality Dining, Inc., 218 f.3d 798 [7th Cir. 2000]. [3] Anne B. Raciot v. Wal-Mart Stores, Inc., 414 F.3d 675 [7th Cir. 2005]. [4] Code of Federal Regulations, [2006] 29CFR1604.11. [5] Donna Randolph v. Ohio Department of Youth Services, 2006, No. 04-3468 [6th Cir. 2006]. [6] Donna Valentine v. City of Chicago, 452 F.3d 670 [7th Cir. 2006]. [7] EEOC, [2009] http://archive.eeoc.gov/stats/harass.html. [8] Elaine Webb-Edwards v. Orange County Sheriff’s Office, 525 F.3d 1013 [11th Cir. 2008]. [9] Elizabeth A. Bright v. Hill’s Pet Nutrition, Inc. 510 F.3d 766 [7th Cir. 2007]. [10] Fairbrother v. Pamela Morrison, 412 F.3d 39 [2nd Cir. 2005]. [11] Faragher v. City of Boca Raton, 524 U.S. 775 [1998]. [12] Geraldine Dar Dar v. Associated Outdoor Club, Inc., 248 fed. Appx. 82 [11th Cir., 2007]. [13] Harvil v. Westward Communications, 433 F.3d 428 [5th Cir. 2005]. [14] Ingrid Reeves v. C.H. Robinson Worldwide, Inc., 525 F.3d 1139 [11th Cir. 2008]. [15] Julie Boumehdi v. Plastag Holdings, LLC., 489 F.3d 781 [7th Cir. 2007]. [16] Kelly S. Coolidge v. Consolidated City of Indianapolis and Marion County, 505 F.3d 731 [7th Cir.

2007]. [17] Latrece Lockett v. Choice Hotels International, Inc. 315 Fed. Appx. 862 [11th Cir. 2009]. [18] Leah A. Lapka v. Michael Chertoff, 517 F.3d 974 [7th Cir. 2008]. [19] Lisa L. Ocheltree v. Scollon Productions, 335 F.3d 325, [4th Cir. 2003]. [20] Magalena Pomales v. Celulares Telefonica, 447 F.3d 79 [1st Cir. 2006]. [21] Mary Dianne Tatt v. Atlanta Gas Light Company, 138 Fed. Appx. 145 [11Cir. 2005]. [22] Meghan Bussel v. Motorola, Inc. 141 Fed. Appx. 819 [11th Cir., 2005]. [23] Meritor Savings Bank v. Vinson, 477 U.S. 57, 1986. [24] McPherson v. City of Waukegan, 379 F.3d 430 [7th Cir. 2004]. [25] Miller, G.L. [2001]. What the general practitioner needs to know to recognize sexual

harassment claims. The Alabama Lawyer, 62, July, 246. [26] Nancy M. Billings v. Town of Grafton, 515 F.3d 39 [1st Cir. 2008]. [27] Nancy Parker v. General Extrusions, 491 F.3d 596 [6th Cir. 2007]. [28] Nicole Schiano v. Quality Payroll Systems, Inc., 445 F.3d 597 [2nd Cir. 2006]. [29] Nurse “BE” v. Columbia Palms West Hospital, 490 F.3d 1302 [11th Cir. 2007]. [30] Patricia Duguie v. City of Burlington, 161 Fed. Appx. [2nd Cir. 2006]. [31] Patt v. Family Health Systems, Inc. 280 F.3d 749 [7th Cir. 2002]. [32] Quinn v. Green Tree Credit Corp., 159 f.3d 759 [2th Cir. 1998]. [33] Rena Lockard v. Pizza Hut, Inc., 162 F.3d 1062 [10th Circuit, 1998]. [34] Rhonda L. Moser v. Indiana Department of Corrections, 406 F.3d 895 [7th Cir. 2005]. [35] Sharon A. Lucero v. Nettle Creek School Corporation, 566 F.3d 720 [7th Cir. 2009]. [36] Shoenfelt L., Maue A., & Nelson J. [2002]. Reasonable person versus reasonable

woman, American University Journal of Gender Social Policy & Law, 10, 633. [37] Srabana Gupta v. Florida Board of Regents, 212 F.3d 571 [11th Cir. 2000]. [38] Twomey, D. P [2007] Labor & Employment Law Text and Cases Thompson/West;

Australia. [39] Vicki Criswell v. Intellirisk Management Corporation, 286 Fed. Appx. 660 [11th Cir. 2008].

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THE NATURE AND PURPOSE OF FIRM DECISION-MAKING

James R. Forcier School of Business & Professional Studies

University of San Francisco 2130 Fulton Street

San Francisco, California, USA 94117 415-422-2127 (O), 415-422-5036 (F), [email protected].

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

Key Words: Decision-making, human capital, innovation

THE NATURE AND PURPOSE OF FIRM DECISION-MAKING Over a fifteen-year period, research and direct observations were undertaken at 37 firms in conjunction with business strategy and microeconomic analysis consultations [1]. The research concludes that: • Flattened firm hierarchies have pushed greater responsibility to managers at the operating

level who must function within environments that are characterized by increasing market sophistication and decision complexity.

• Greater decision volume/complexity and competitive market pressures have transformed the former “labor” factor of production into “intellectual capital” which is now the firm’s predominant competitive differentiator.

• The management of intellectual capital has not kept pace with the changes in decision-making and economic production, and firms are at risk of failing to generate the innovation needed for success in the competitive marketplace.

1. DECISION-MAKING EVOLUTION

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

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executives increasingly fall to a wide-array of informally tethered mid- and low-level managers, and are carried-out through a process of what might be called “collaborative determination.” This process vests individual managers with greater authority to make decisions under the implicit understanding that they will do so in collaboration with their colleagues. In addition to the greater volume of decisions that is being handled at lower organizational levels, decision difficulty has increased as responsibility is pushed downward and subject matter complexity grows in conjunction with technological advancement. The challenges of decision-making are also heightened as a result of the evolved environment in which today’s choices are made: the growing sophistication of economic participants, the internationalization of markets, the increased velocity of capital flows, the diminished time-frames in which transactions are carried out. As a result, today’s business decisions demand that managers function on a higher plane – by making use of better tools, more accurate and targeted data, and choice-making processes appropriate to both the subject matter and the decision context. Most economic needs are met in developed nations through market transactions using a form of “bounded” maximizing behavior [2][3] and a process that might be called a “free market transactional model.” The model captures the components needed to achieve a transfer of property rights perceived as beneficial by the contracting parties, and provides a baseline against which real-world transactions may be evaluated. The ease with which such a theoretical ideal may be achieved diminishes with the complexity of a given transaction and the evolutionary state of the environment in which it is made. The burden such decisions impose on business managers is significant. Particularly vulnerable are managers working in high technology, pharmaceuticals, and financial services, for their decisions are disproportionately characterized by transaction complexity and market sophistication. In other words, the realm in which decisions are made varies.

2. DECISION-MAKING INFLUENCES It falls to the decision-maker to function effectively within this daunting milieu. Software applications available as decision aides may help in aggregating, organizing, and comparing data, but not in identifying which applications and data to use for a given decision, nor in determining whether specific analytical findings are decision-relevant. In the latter cases, managers exhibit less reliance on programmed or academic/research-type tools than on what they have learned in school and in the workplace, shaped by societal and cultural influences. Research carried out over fifteen years across multiple sector industries suggests that individual managers’ approaches to handling market and decision complexity are driven by “educational”, “experiential”, and “intuitive” decision-making influences.

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TABLE 1. DECISION-MAKING INFLUENCES

Educational Experiential Intuitive

Business Administration (MBA) • Business case study orientation • Emphasis on prevailing B-

school approaches • Tool du jour influence common

Department-Specific Approaches: • Supervisor-preferred • Prevailing/accepted in

department • Prevailing/accepted in function

or discipline

Socio-Economic: • Market-based economy • Peer affiliations • High quality schooling • Available information • Emphasis on trade & travel

Accounting & Finance (MA, MBA) • Numerical/analytical

orientation • Emphasis on statistics/

operations research • “Quantifying the un-

quantifiable” common

Firm-Specific Approaches: • Top management-preferred • Prevailing/accepted in firm

Cultural: • “Western” v. “eastern”

orientation • Strong v. weak work ethic • Prevalence of literacy (esp.

English) • Emphasis on knowledge-based

decision-making Legal/Regulatory (JD) • Legal case study orientation • Emphasis on contracts/

confrontation • “Winner vs. loser” mentality

common

Firm Culture-Influenced Approaches: • (Use and rank depends on

market share and prestige of firm)

Geographical: • Climate • Hemispherical location • Abundance of natural

resources • Proximity to cultural &

commercial centers Engineering (EE) • Technical/product orientation • Emphasis on the physical and

functional • Technique misapplication

common

Industry-Specific Approaches: • Prevailing/accepted in industry • Industry-leading firm-preferred

Religious/Political: • Authoritarianism v. democracy • Self-sufficiency v. community • Preordination v. empowerment • Politico/military viability &

stability • Strength of religious and

political institutions

Organizational Planning & Development (MA) • Human resources orientation • Emphasis on organizational

design • Paternalism/humanism

common

Industry Culture-Influenced Approaches: • (Use and rank depends on

public attention to and prestige of industry)

Market/Technology Developmental: • State of economic and

institutional evolution • Technological status

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

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

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

FIGURE 1. PRODUCTION FACTOR TRANSFORMATION

Factors of Production:Factors of Production:Economic SignificanceEconomic Significance

2007

Land Capital Technology Labor

1907

Land Capital Technology Labor

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

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

FIGURE 2. FROM LABOR TO INTELLECTUAL CAPITAL

Intellectual Capital asIntellectual Capital as

Production FactorProduction Factor

0%

20%

40%

60%

80%

100%

Labor Capital Technology

Land Capital Technology Labor

Intellectual Capital

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

4. THE ENDS OF DECISION-MAKING As a result of the “flattening” of corporate structures and the dispersion of decision-making authority, the workforce – through its decisions and actions – has become the major source of

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competitive advantage and the primary determinant of success in today’s business environment. For example, a primary driver of business value – productivity – is determined by the effectiveness with which human capital transforms a firm’s inputs into outputs. But the greatest contribution made by human capital is innovation. Given the growing sophistication of goods and services, the disintermediation of production chains and transactions, the internationalization of markets, and the ascendancy of global competition, the firm must be dedicated to the pursuit of innovation in support of not only its products and services, but to achieve efficiency in production and effectiveness in meeting customer needs. As Charles Hill and Gareth Jones have noted, innovation is “the most important building block of competitive advantage” [4]. Innovation allows a business to charge a premium for the uniqueness of its products, or maintain its costs below those of competitors. It is the predominant driver of superior profitability and value creation. Four aspects of a culture of innovation were observed in this research:

1) Ensure a company-wide awareness of need to change to the point where managers know they must step outside their pre-existing comfort zones.

2) Encourage innovative ways of thinking – to not only assess what is and isn’t working, but to continually promote improvement. “How can we do this better, faster, less expensively?” “What entirely new things should we be doing to delight our customers and enter new or grow existing markets?”

3) Implement processes and tools to support new ways of thinking, company-wide awareness of the need to change, and to reinforce the change process.

4) Adopt attitudes and mechanisms to minimize risk, but most importantly embrace – and be willing to tolerate and pay for – failures that the firm will experience.

Staffing with Innovators The seminal step in maximizing intellectual capital’s value through the pursuit of innovation is acquiring superior human assets. A firm’s workforce, its officers, managers, salespeople and customer service representatives must have the requisite knowledge and skills for their roles, and the ability to upgrade them as the changing marketplace requires. Yet firms perform cursory candidate assessments, emphasize resumes versus capabilities, and increasingly rely on internet searches and automated tools to identify, sort and track candidates – rather than assess their ability to function effectively in given positions. Inordinate attention is paid to educational qualifications (which are easy to verify) , at the expense of the competencies that are essential for achieving strategic objectives. Given time and resource constraints, candidate-provided work histories, augmented by an interview of 1 to 3 of the leading candidates, continue to provide the bulk of the evidentiary support for external hiring. Work Group Blends Scholars such as Cohen, March and Olsen demonstrate convincingly that work group are human capital blends from which any addition or withdrawal results in a unique decision reflecting the

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participants who contributed to it [5]. Further, these participant mixtures have influence not only at the margins of decision-making, but can – and frequently do – alter the slate of decision alternatives, how the alternatives are analyzed, and the manner in which choices are implemented. This is an important consideration not only in the general hiring process, but in the use of cross-functional integration to maximize the likelihood of innovation success. Cross functional integration can the firm ensure that new products reflect customer needs and are designed for ease of manufacture; that development costs and time-to-market are minimized; and that innovation-related decisions are aligned with the firm’s prevailing business model and strategic objectives [4]. The Development Funnel & Open Innovation

In their explicit pursuit of an innovative culture, some firms have adopted a process for identifying and selecting among promising ideas at an early stage of their development. One way in which this process is formalized is by means of a “development funnel” that isolates and routinizes [6] the major components of the assessment process, and ensures that ideas are not subject to personal or departmental interests that might obstruct an objective evaluation of them. Another means of building innovation competency is what is referred to as “open innovation.” Rather than set up an internal “skunk works” or R&D group, open innovation is outer-directed: The firm collaborates with and enlists the support of customers, universities, suppliers, inventors, think tanks, and makers of complementary goods who then contribute to the development of products, services or processes. Over time, innovation leads to new products, processes, and strategies that create competitive advantage.

5. SUMMARY AND CONCLUSION Advances in markets, organizations, technology, and the economic means of production are transferring business decision-making responsibility to the individual manager. The complexity and resolution difficulty of decisions have also increased due to more sophisticated economic participants, the growth and internationalization of markets, the increased velocity of transactional flows, and the diminished time-frames in which decisions are carried out. As a result, decision-makers demand a wider array of tools, data, and processes. While decision-making aides are available, managers rely greatly on what they have learned in school and in the workplace and are constrained by “educational”, “experiential”, and “intuitive” decision-making influences and the limitations of rationality and cognition. As a result of this evolution in decision-making, firms require “intellectual capital” rather than “labor” as a factor input. Intellectual capital is the key competitive differentiator for businesses which must deploy innovation as the predominant driver of superior profitability. Doing so requires an innovation culture fostered through such means as effective staffing, work group configurations, development funnels, and open innovation.

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

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LONG-TERM INCENTIVE PLANS: NOT A

PANACEA FOR EXECUTIVE COMPENSATION

William J. Heisler

Sorrell College of Business Troy University Troy, Alabama

Email: [email protected]

ABSTRACT

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

INTRODUCTION

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

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

ANNUAL INCENTIVE AWARDS In most of the media-related discussion of executive compensation, criticism is raised regarding executive bonuses. However, this term is erroneous in most instances. Typically, a “bonus” is a discretionary payment awarded after-the-fact for performance that occurred during a previous time period. Most annual executive compensation payouts are in fact “incentive awards” in that they are based on meeting or exceeding preset performance targets. Bonuses are discretionary and more subject to abuse because they tend to be based on subjective decision making processes. Incentive awards are determined more objectively because they are based on measured performance against target. This paper discusses the problems associated with annual incentive awards, those awards that are performance-based rather than discretionary. This is the form of annual award that is used by most large business organizations as part of the executive compensation package. Even prior to the recent economic meltdown, annual incentive awards (also referred to as short-term incentive plans or STI plans) were viewed skeptically by many. First, they are typically directed at a relatively small percentage of the workforce. Thus, within any organization, individual incentives will create haves and have not’s. Second, these incentives are purported to be based on performance, but performance is not always easy to measure and often bonuses are paid to executives even when the organization’s performance has declined. An excellent discourse on the dysfunctional aspects of executive bonuses appeared recently in an op-ed piece in the Wall Street Journal [17]. Written by the noted management expert Henry Mintzberg, the problems cited with incentive pay include the following. First, bonuses are typically based on financial measures alone, which Mintzberg contends is ineffective because companies are more complicated than that. Further, he notes, and quite correctly, that measures of financial performance encourage abuse from impatient CEOs who may manipulate their outcomes by delaying maintenance and capital investment, reducing R&D, or eliminating various forms of customer service. Another concern he cites is the assumption that the CEO and a few other top executives are primarily responsible for the success of the organization. He argues that the success of an organization depends on the contributions of all the players, not just the select few at the top who receive massive bonus payouts. Many at the top, he contends, have merely happened to be in the right place at the right time.

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Others have also raised issues with individual annual incentives. In addition to the criticisms cited by Mintzberg [17], Gebhart & Milkovich [11] note that (1) individual incentives often lead to motivating employees to do only what they get rewarded for, and little else, and (2) individual incentives do not foster a collaborative approach. Further, in an article in Director’s Monthly,

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

LONG-TERM INCENTIVE AWARDS

According to Milkovich and Newman [16], long-term incentives (LTI) are “inducements offered in advance to influence longer-rate (multi-year) results.” Their intent is to get executives to focus on long-term organizational objectives. Both the diversity and use of long-term incentive plans have grown considerably [4]. The proportion of executive pay that is comprised of long-term incentives has also increased and is now approximately one-half the total value of the executive’s pay [18]. Long-term incentives now take several forms. Most long-term incentive plans can be categorized as either appreciation-based or performance-based. Among the most popular appreciation-based LTI plans are stock options and stock appreciation rights. Full-share programs are typified by restricted stock. Performance-based plans can include any of the stock plans identified previously except that they incorporate vesting conditions based on company performance against pre-set performance standards. Typically, these plans are performance

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share plans or performance unit plans. Under both of these plans, the company normally retains the option to pay the executive the equivalent cash value in lieu of stock. In a recent study [1] conducted by Deloitte, a major international accounting and consulting firm, sixty-seven percent of companies participating in a compensation survey stated that they offered long-term incentives to motivate and compensate high-performing employees and executives. Sixty-four percent of these companies offered granted stock options, sixty-seven percent awarded restricted stock, and forty-five percent used multi-year performance plans payable in stock or cash. While this article will focus on the use of performance share/unit plans because these are the most performance-driven types of plans, several observations are necessary regarding changes in the use of other types of stock plans by companies. Prior to the recent recession which began in 2008, executive compensation plans were heavily stock-based, primarily in the form of stock options. However, due to the volatility of stock prices and the prospect of depressed stock prices for the near term, many companies have suggested the need to turn from stock options to restricted stock in their executive compensation plans. Often, the change to restricted stock is being reported as a responsible move by companies to reduce the criticism associated with the wealth built up by executive stock option grants during the last bull market. However, the change to restricted stock may also be viewed as an action by company executives to move to a form of compensation that has greater potential to provide a guarantee of value to executives. Stock options have the potential for unlimited gain, but they also have the ability to drop to a value of zero. In fact, they can even become “underwater.” That means that the current value of the company’s stock is less than the exercise value or grant price of the option. When this occurs, a company’s stock price must appreciate back to the original grant price before the option can again achieve positive value. Restricted stock, however, retains a positive value as long as the company does not enter bankruptcy. Hence, it is a more secure form of compensation. While its value will rise and fall with the company’s stock price, it is unlikely to be worth nothing. Options have value only if the price of the underlying stock appreciates. Restricted stock retains the value of the underlying stock. While the change to the use of restricted stock on the part of companies may appear to be more “sensitive” to the current economic climate, it may simply be a move to ensure that executives have a greater guarantee of receiving the value originally conveyed by the stock grant. Performance share and performance unit plans provide executives with an opportunity to earn cash or stock payouts when specific organizational goals are achieved or exceeded over a multi-year period, typically three years. Under performance share plans, executives are awarded contingent grants of stock annually that can be earned over a multi-year period. Each year, company performance is compared to that year’s goals and shares are earned based on the terms of the plan. At the end of the full period, earned shares are paid out in company stock. For example, in a given year an executive could be awarded 3,000 performance shares which could be earned over a three-year period at a rate of 1,000 shares per year. Depending on the terms of the LTI plan, the executive could earn the 1,000 shares in year 1 for meeting the company’s objective (e.g., EPS target). However, the executive could earn less than 1,000 shares if the objective is not met or more than 1,000 shares if the objective is exceeded. For

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

Year 1 Year 2 Year 3 Year 4 Year 5

Grant 1 XXXXXXX XXXXXXX XXXXXXX Grant 2 XXXXXXX XXXXXXX XXXXXXX Grant 3 XXXXXXX XXXXXXX XXXXXXX Performance unit plans (PUPs) are very similar to performance share plans. In this type of plan, an executive is given a number of performance units, which have no value when issued. If the executive achieves the stated goals over a defined period (e.g., 3 – 5 years), each unit earns a cash award based on the percentage of attainment of specified goals. While performance goals or targets can also be based on increases stock price or earnings per share, companies also use performance units to focus on goals they want to achieve other than stock price performance (e.g., increasing market share, achieving a greater number of new products). Long-term incentive plans are being advocated as an alternative to annual incentive awards or bonuses for several reasons. Primarily, they are seen as a way to reduce the likelihood of executives focusing on short-term gains at the expense of a company’s longer-term strategic perspective. Performance share plans are particularly attractive because they typically pay out in restricted stock which provides executives with an ownership interest in the company. If desired, in addition to the overlapping performance periods, the terms of the plan may include additional vesting requirements for restricted stock payouts that can serve as a vehicle for executive retention. And since both performance share plans and performance unit plans involve performance targets, they communicate to executives the financial measures and levels that drive company value and create a greater link between executive and shareholder rewards.

CONCERNS WITH LONG-TERM INCENTIVE AWARDS While there is much that is appealing about long-term incentive awards when contrasted with annual incentives or bonuses, LTI plans bear a marked similarity to STI plans in terms of the problems that may be encountered. Hence, they may not resolve the multitude of concerns that have been raised about executive pay. To understand the concerns, it is first necessary to explain more about how performance share/unit plans are developed. As noted previously, these plans are performance target plans. They involve setting performance targets (e.g., EPS goals) for the performance period (e.g., three years). In most companies these

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three-year grants are made annually to executives based on the value of compensation that the company desires to award to the executive. For example, if the company, as part of its pay package, wants to provide an executive with $120,000 of compensation in the form of performance shares, and if the value of the company’s stock at the time of the grant is $20.00 per share, it would award the executive 6,000 performance shares. If the performance period is three years, the executive would be eligible to earn 2,000 performance shares per year if the performance targets for each of the three years are met. As with similar annual incentive programs, the LTI plan often includes the opportunity to earn a percentage of the shares even if the target is not met since achieving the target involves a level of “risk” if the targets involve “stretch goals.” Also, these plans typically afford the executive the opportunity to earn more than the awarded number of shares in a given year if the performance target is exceeded. For example, if actual performance reaches 80% of the performance target, the plan may specify that the executive may earn 50% of the shares awarded; similarly, if the performance target is exceeded, the executive may earn up to 150% or even 200% of the shares awarded, depending on the terms of the plan. In the grant year, the award to the executive will identify the targets for each of the three years comprising the performance period. For example, if earnings per share (EPS) is the metric, the grant award will identify the target EPS values for year 1, year 2, and year 3 of the grant. Thus, using the example cited above, a grant of 6000 performance shares may have EPS targets of $2.00 in year 1, $2.20 in year 2, and $2.30 in year 3. These targets should be set in conjunction with expected company earnings as determined by the company’s finance department and the finance committee of the board of directors. Earned shares are based on a comparison of actual EPS vs. the EPS target each year according to the terms of the LTI plan. The following year, the executive may receive another LTI grant with new EPS targets for year 1, year 2, and year 3 of the new grant. However, since new data regarding company EPS performance is now available, the EPS targets for Grant #2 in years 1 and 2 will not necessarily be the same as the EPS targets of Grant #1 for years 2 and 3 (refer back to previous annual grant schedule illustration). Below is a grant schedule (Table 1) using fictitious data for the EPS targets and projecting an EPS growth rate of 10% per year. For each grant year, the initial EPS targets will be based on actual earnings from the previous year as well as future earnings expectations. Table 1. Typical LTIP Grant Schedule

Year 1 Year 2 Year 3 Year 4 Year 5

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

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

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directors. The establishment of performance targets remains key to the likely success of the LTI plan in equitably rewarding performance. For example, in the table shown above, if the EPS targets for years 1 – 3 are set unrealistically low, the executive is likely to receive maximum share awards for what is, in effect, average performance. And this windfall will be cumulative since grant targets for a given year’s performance share award do not change with the award of the next grant. The targets in the annual grant are fixed for the entire term of the performance period. This concern over the setting of performance targets is reinforced by the results of a recent study by Yang and Kim [28]. In a sample of S&P 500 firms over a three year period, they found that EPS targets established by companies were lower than analyst consensus, and that EPS growth targets (annual earnings increases projected in the plan) were lower than historical EPS growth for the firm and its industry. In addition, they discovered that the annual payouts, on average, were 114% of the established targets. This evidence strongly suggests that the performance targets established in LTI plans may be understated and that actual performance may consistently exceed established targets, except perhaps in the case of extraordinary, unforeseen events. While performance targets can be manipulated, so can actual performance outcomes. Holthausen, Larcker, and Sloan [15], while examining confidential annual bonus plans, found evidence that executives manipulate annual earnings downward when their bonuses are at the maximum. This can occur for several reasons. Primarily, executives may not want the board of directors to begin to question the level of performance targets. Additionally, if executives are already likely to achieve the maximum payout, or even payouts that are just substantially above target, restraining earnings in a given year will make it more likely to achieve higher payouts in the following year as these earnings are carried forward, providing a hedge against future earnings weakness that could adversely affect bonus payouts. While the Yang and Holthausen studies cited previously relate to annual incentive awards, performance-based LTI plans are subject to the same earnings issues and concerns.

SUGGESTIONS FOR IMPROVING LTIPS

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

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targets proposed by the company, payouts should be based on how much better or worse the company performs than its industry peers. For example, shares can be earned only if the company’s performance exceeds the median of a peer group on the performance measure used in the plan. For example, in absolute terms, a company could establish performance goals that increase EPS by 10% per year. However, in relative terms, a company could establish performance goals that match the median EPS growth for a peer group. That could be more or less than 10% per year. A relative approach also protects executives from unexpected factors that may affect their company and the industry as they can still outperform their peers even in a down market. Conversely, the plan will not reward executives for simply improving with everyone else in an up market; they must still meet or exceed the performance of their peer group to qualify for share vesting. In a survey of 82 companies, Bickford [3] found that 65 of the companies used absolute measures, 14 used relative measures, and 3 used both. This distribution most certainly reflects the fact that executives prefer absolute performance measures over which they have more control -- all the more reason to move toward relative measures. LTI plans could also be designed to incorporate a clause permitting the board of directors to amend or revise the EPS targets in outlying years of a grant based on actual performance during the preceding year. For example, in a given grant, if the EPS target was stated as $2.20 for year 2 and $2.42 for year 3, but actual performance in year 1 resulted in an EPS of $2.45, the EPS targets for year 2 and year 3 could be increased to better reflect the realities of the company’s performance. However, to ensure that the LTI plan doesn’t become merely a series of annual incentives and retains its risk-based characteristics, downward adjustment in targets would be prohibited. After all, the purpose of LTI is to improve the company’s performance in the long-term. Alternatively, LTI plan designs could simply incorporate a single performance target as of the end of the total performance period (e.g., a year 3 performance target for a three-year performance period). Executive payouts could be based on how well this target is attained at the end of the entire performance period. This approach would remove the “annual” characteristics of a LTI plan with shares earned each year. The annual nature of LTIP vesting leads many executives to view them as a series of annual awards rather than as an incentive to improve long-term performance. LTI has become, but is not intended to be, a guaranteed amount of compensation for executives. Rather, it is intended to be “at-risk” pay. Company boards of directors must demand greater performance accountability in LTI plans to put the risk back into this form of compensation. This approach would require the company to attempt better long-range forecasting and, because a higher level of risk would be associated with a target three years out, the payout range for performance above and below target that is typically associated with a LTIP (e.g., 50% for achieving 80% of target and up to 150% for attaining 120% of target or higher) would be better justified. Another suggestion is for the compensation committee of the board of directors to retain its own outside consultant to advise it in the development of LTI plan parameters (e.g., award ranges at various levels of performance, length of performance period). The consultants should report to and be paid by the board of directors. A number of companies currently rely on recommendations by consultants that work with and are paid by executive management.

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

CONCLUSION

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

REFERENCES

[1] Anonymous. (2009, December 15). Corporate compensation strategies driven by past pessimism rather than future optimism: Deloitte Study. PR Newswire. New York, NY. [2] Anonymous. (2010, January 25). Germany plots bonus crackdown. Derivatives Week.

[3] Bickford, L. (1981). Long-term incentives for management, part 6: Performance attainment plans. Compensation Review, 13 (3), 14-29. [4] Bickford, L., & Sorkin, J. (1990). Long-Term incentives for management, part 5: Selecting the right program. Compensation and Benefits Review. March/April, 38-46. [5] Bones, C. (2009, October). How to restructure executive pay. Human Resources, p. 19. [6] Bureau of Labor Statistics. (2010, March 5). Employment situation summary. USDL-10-0256. Retrieved on March 7, 2010 from: http://www.bls.gov/news.release/empsit.nr0.htm [7] Chapman, E. (2009). Where executive & employee compensation is headed in the next 12 months. Workspan. 52 (7), 22-25. [8] Cho, D., & Appelbaum, B. (2010, January 15). Anger over big bonuses resurfaces; Banks resume their payouts. The Washington Post, p. A17. [9] Choudhury, A., & Martinuzzi, E. (2010, January 14). Bank may make bonuses stock-heavy. Boston Globe, p. B9.

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[10] Gauthier-Villars, D. (2009, December 17). World news: France plans to tax bankers’ bonuses at 50%. Wall Street Journal (Eastern Edition), p. A18. [11] Gebhart, B., & Milkovich, G. (1992). Employee compensation: Research and practice. In, M. Dunnette and L. Hough (Eds.), Handbook of industrial and organizational psychology, Volume 3. Consulting Psychologists Press: Palo Alto, CA. [12] Hamilton, W. (2009, March 18). Bonuses seen as abuse prone. Los Angeles Times, p. B1. [13] Heisler, W. (2006, May). Toward more rational executive compensation. Director’s

Monthly, 15-17. [14] Herb, J. (2010, January 22). Frank taking aim at Wall Street bonuses: Panel to discuss ways of capping executive bonuses. Boston Globe, p. A2. [15] Holthausen, R., Larcker, D., & Sloan, R. (1995). Annual bonus schemes and the manipulation of earnings. Journal of Accounting and Economics. 19 (1), 29-75. [16] Milkovich, G., & Newman, J. (2005). Compensation. New York: McGraw-Hill. [17] Mintzberg, H. (2009, November 30). Compensation – No more executive bonuses! The problem isn’t that they are poorly designed. The problem is that they exist. Wall Street Journal

(Eastern Edition), p. R3.

[18] Moate, L., & Ng, M. (2006, October 9). There’s more to long-term incentives than stock options. Canadian HR Reporter, pp. 16-19. [19] Rexrode, C., & Rothacker, R. (2010, March 4). No bonuses for Wells Fargo executives – just bigger salaries and stock grants. McClatchy Newsletter. Retrieved on March 16, 2010 from: http://www.mcclatchydc.com/2010/03/04/89815/no-bonuses-for-wells-fargo-executives.html [20] Rich, J., & Larson, J. (1984). Why some long-term incentives fail. Compensation Review.

16 (1), 39-55. [21] Rollert, J. (2009, December 18). Goldman Sachs bonuses: more than just bad PR. The

Christian Science Monitor.

[22] Schultz, E., & McGinty, T. (2009, November 3). Pensions for executives on rise – Arcane techniques, generous formulas boost payouts as share prices fall. Wall Street Journal (Eastern

Edition), p. C1. [23] Shierholz, H. (2009, September 4). Jobs picture. Economic Policy Institute. Retrieved on March 7, 2010 from: http://www.epi.org/publications/entry/20090904_jobs_picture/ [24] Vroom, V. (1964). Work and motivation. New York, NY: John Wiley and Sons. [25] White, B. (2008, November 16). No bonuses for 7 senior executives at Goldman. The New

York Times. Retrieved on March 16, 2010 from http://www.nytimes.com/2008/11/17/business/economy/17goldman.html [26] Williamson, E. (2009, December 14). Obama slams ‘Fat Cat’ bankers. Wall Street Journal

(Eastern Edition), p. A4. [27] Wolf, M. (2009, November 20). Tax the windfall banking bonuses. Financial Times, p. 9. [28] Yang, J., & Kim, D. (2010). Beating the target: A closer look at annual incentive plans. SSRN Working paper series. Rochester, NY.

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

PERSONNEL SELECTION

Ghardir Ishqaidef

School of Business University of Kansas 1300 Sunnyside Ave.

Lawrence, Kansas 66045 Telephone: (484) 686-4777

Fax: (785)864-5328 E-mail: [email protected]

ABSTRACT

The expansion of temporary staffing business and its impact on economy warrants a better understanding than the current status of research provides on staffing personnel selection practices. This paper attempts to adopt the staffing agency perspective to better understand the staffing practices that enhance its performance. Models explaining the staffing agency-client organization relationship are reviewed. The shift in the staffing paradigm from traditional to strategic and the implications of selection practices are addressed by discussion leading questions: Who is involved? Why has the use of staffing agencies expanded among companies? Why do employees choose to take temporary positions via staffing companies? What makes staffing agencies more successful at what they do? What are staffing agencies’ state-of-the-art selection practices? Keywords: Employee screening; personnel selection; temporary staffing companies. The intermediary staffing business has grown for decades as work force and businesses alike appreciate flexibility and choice that temporary staffing provides. Now, America’s staffing companies place millions of people in jobs every day. Statistics by the American Staffing Association show that 2007 annual average daily employment for temporary staffing companies exceeded 2.9 million workers, up from almost 1 million in 1990. Over the course of 2007, staffing companies in the US placed more than 11 million in job assignments. Temporary staffing sales totaled $73.5 billion in 2007, up from $63.8 billion in 2000 and $17 billion in year 1990. Furthermore, the staffing industry generated $17.5 billion in sales from search and permanent placement services in 2007 (ASA, 2008). Contrary to widely held misconceptions, the temporary staffing industry employs workers from occupations including office-clerical, industrial, professional accounting and finance, health care, legal, IT/technical, executive and management. The strong effect of this industry on the economy is not unique to the United States. Literature has considered the market mediated labor trend in other countries as well such as Germany (Mitlacher, 2006 & 2008), Australia (Hall, 2006), UK (Forde & Slater, 2005;

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Stanworth & Drucker, 2006; Drucker & Stanworth, 2004; Ward et al, 2001; Purcell et al, 2004) and the Netherlands (Torka & Schyns, 2007). Despite the significant economic impact of temporary agency work, academic research on this topic is still in the initial stage. There is strong reason to lament the scarcity of theoretical and empirical research on personnel selection methods used by staffing agencies. The fact that staffing agencies major services offered to client organizations are the search, screening, selection and placement of talent warrants the need to understand such practices and how they influence performance. This paper attempts to fill the gap in literature on staffing agency practices. Although some portion of this paper will describe the current nature of the temporary staffing business, I will focus the majority of the paper on the agency’s perspective. Qualitative and quantitative literature on this arena has considered the subject from the perspectives of temporary workers (e.g. Torka & Schyns, 2007; Moorman & Harland, 2002; Bauer & Truxillo, 2000), and client organization (e.g. Mitlacher, 2004; Feldman et al, 2001; Houseman, 2001; Davis-Blake & Uzzi, 1993). Rarely has this subject been studied from the staffing agency’s perspective (e.g. Mitlacher, 2006; Cai & Kleiner, 2004). The staffing paradigm has witnessed a shift from traditional to strategic involvement with client firms. In an attempt to understand this shift and its implications of selection practices are addressed by discussion-leading questions: Who is involved? Why has the use of staffing agencies’ services expanded among firms? Why do employees choose to take temporary positions via staffing companies? What makes staffing agencies more successful at what they do? What are staffing agencies’ state-of-the-art selection practices?

Who is Involved in the Temporary Staffing Process? Staffing firm, also known as temporary help agency, is one part of this labor intermediary relationship. Those firms recruit, screen, select, train, compensate and manage workers’ performance in client companies (Heneman & Judge, 2009). Legally, the staffing company is considered the employer and responsible for required insurance (e.g. social security, workers compensation). For these services, client organizations pay the staffing company fees plus markup to cover labor costs. If the client decides to hire the temp on permanent basis, a fee based on employee annual salary is then due to the staffing firm. The key member involved in this relationship is the temporary worker. Business between the agency and client organizations will not be done without the labor performed by employees. Traditionally, temporary workers used to pay the agency to place them in one of the openings at client sites. Things look differently now for all parties involved. The agency, usually, does not get any money till the temp is placed on client primes and the latter is satisfied with the service. The staffing agency has to cater to two different customers, the client companies and candidates who will become temps. Between attending to sales calls for new business and keeping a sufficient flow of temporary workers in line and ready to fill incoming positions, a careful balance of effort within the temporary staffing agency is required. In order to better understand this “triangular” employment relationship, we must understand the reasons beneath this relationship.

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Why has the Use of Staffing Agencies Expanded Among Companies? And Why Do

Employees Choose to Take Temporary Positions Via Staffing Companies? Answering these two questions in combination would potentially explain the thriving staffing business and the implications on personnel selection procedures. Several research papers have been dedicated entirely to address these questions. I will begin by summarizing the literature addressing the employers’ perspective followed by employees’. Companies first started to use the temporary staffing option to fill in for core employees’ sick and vacation leaves. Having noticed the strategic potential of temporary work, employers, with the help from staffing agencies, have altered the traditional view. Companies now have positions that are staffed only by temporary workers (Von Hippel et al, 1997). The noticeable flexibility became an attractive solution to solve several interlocking issues. Employers found haven with staffing agencies as they secured a solution for the internal labor shortage. Some companies frequently deal with unsteady business through the year as demand might pick up around particular events or seasons. Temp workers can also assist in special or new projects that companies implement every now and then. Whether the interim need is for unique skills or simply massive effort in such projects (Paul & Townsend, 1998), temporary worker could fill in if internal labor falls short. Another flexibility venue that employers appreciate is the ability to reassign tasks. Some of the core employees in client companies are overworked (Cuyper et al, 2008), so managers can use temporary employees to take over simpler tasks while core workers free up to more important tasks. Some researchers argue that permanent workers might end up with the most socially and cognitively demanding tasks (Connelly & Gallagher, 2004; Davis-Blake & Uzzi, 1993). No matter how employers perceive flexibility, a 2004 poll conducted by the American Staffing Association shows that 9 out of 10 businesses appreciated the flexibility offered by the staffing agencies. In addition to flexibility, employers prefer temporary employment as a way to drive labor costs down. This goal can be achieved in several ways. One obvious way is the shift of “employer” responsibility to the staffing agency as the latter is responsible for the costs of recruitment and testing, training, paying for benefits and administration of payroll. During an interview conducted for research purposes, workplace managers asserted that despite the hourly rate and agency fees they had to pay, they still saved money from avoiding paid vacation and sick leaves had the temporary employees been on their payroll (Ward et al, 2001). Since organizations spend a significant amount of time and money on the recruitment and selection steps. Doing business with staffing agencies saves the company a lot of time as staffing agencies enjoy economies of scale that allow them to screen and place more candidates faster (Byham & Riddle, 1999). In addition, companies would have to pay considerable amount of money on developing and acquiring the best recruitment and testing methods that agencies can provide as part of their service (Byham & Riddle, 1999). In particular, use of flexible staffing arrangements was found to be positively related to intensity and cost of screening core employees. Intensity and cost of screening was measured by number of screening methods (Gramm & Schnell, 2001) or by a scale of selecting methods including intelligence tests, skill

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tests, letters of reference, physical exams, and drug tests (Roger Ko, 2003). That is, employers find it reasonable to use temporary staffing arrangements as a buffer of their core employees when they use more extensive selection methods as turnover costs will be higher for companies that use more intensive selection procedures. Employers believe this kind of flexibility allows them, even in tough economic times, to warrant job security for their core employees. Another reason to use temporary staffing arrangements is to screen temps for potential permanent positions in the organization. Employers may increase productivity and simultaneously reduce costs of screening (Houseman, 2001). Hedger recommends that managers “think temp to hire” as a way to strengthen the quality of their staff (2008). Hiring temporary workers with the intention to screen them for future permanent position is welcomed by both temps and managers. Both of them get a chance to assess the situation and actual job conditions without long-term commitment (Paul & Townsend, 1998). Employers are comforted with the “try out” option and the fact that they do not have to deal with the unpleasant experience of firing those who do not fit (Houseman, 2001). They can closely observe workers’ behaviors and assess their value to the organization (Hall, 2006). At the same token, workers are paid to get a realistic perspective of the job and preview the company as a potential employer (Von Hippel et al, 1997). Other temps might find in temporary work a way to get their foot at the door especially in highly competitive industries or in prestigious companies (Smith & Neuwirth, 2008). Temporary workers too have their reasons to actually seeking employment through temporary staffing agencies. The commonly cited reasons for that are as follows. First, the typical profile of a temporary worker used to be a mother with children or a student who looked for a few hours a day for work. That kind of demand for flexibility allowed staffing companies to seek more and different talent. Beside flexibility and ability to preview the company without commitment, employees work as temps because they need to earn business experience, get trained, and learn new skills (Von Hippel et al, 1997) that would make them more marketable and eventually get them full-time permanent positions. Others registered with agencies with the hope of finding a permanent position (Hall, 2006) especially if they were unable to get a job on their own due to competitive industry or highly sought after corporations (Smith & Neuwirth, 2008). It is not surprising to assume that candidates approach temporary agencies with a specific choice of company to work for as they might learn from other temp workers who are registered in the agency about the various client companies. Interestingly, in their survey of one thousand temporary workers, Von Hippel and her colleagues (1997) found that respondents worked as temps because of the quality of job assignments and the variety in temporary jobs. These research findings displaying reasons from both sides refute the stereotypical view of temporary workers that probably still exist today but in a lesser magnitude. This stereotype depicts temps as lazy workers, who are not productive, unable to find jobs or maintain full-time status, lack experience or loyalty to organizations. Even if some of such facts do exist (e.g. lack of experience), the focus should be on the intention of temporary workers to eventually land permanent positions. Employers did not escape the criticism for using temporary work as they were accused of lacking commitment to their core employees. With the use of temporary work, employers are sometimes viewed as breakers of the psychological contract. However, there is ample evidence that businesses now use staffing agencies and temporary workers for strategic reasons that allow them to hold on to their core employees and at the same time remain

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competitive. Forde and Slater (2006) found firms that have a formal strategic plan covering the staffing requirements were more likely to use agency workers. Jeffery Pfeffer (1998) would argue that use of temporary work is not the best message to send core employees on job security. However, this universalistic view does not make sense to employers anymore as they are moving into partnership with agencies that do hire temps. In fact, companies using innovative work systems were not more or less likely to use flexible staffing options (Forde & Slater, 2006). With this said, staffing agencies have found solid grounds to offering more services to client firms which go beyond recruiting, screening and placing temps. They moved towards strategic partnerships offering on-site management, consulting, forecasting, and hiring for that partner companies on continuous basis. But how are staffing agencies are managing this triangular employment relationship? What makes them fulfill their complex and dynamic role successfully? Before I attempt to answer this question, exposure to previously suggested models might be helpful. Models of Staffing Agency – Client Company Relationship Some previous research that was not concerned with developing models of the staffing agency-client company relationship at least addressed the fact that staffing companies ought to adopt the new paradigm. This new model imposes a supply relationship in which the staffing company learns the skill needs for the client company and continuously attracts and the appropriate labor to register (Purcell, Purcell, & Tailby, 2004). From a human capital and transaction cost economics perspectives, Lepak and Snell (1999) suggest that not all jobs are appropriate for outsourcing. In fact, they identify two types of jobs that are appropriate for outsourcing to staffing companies: (1) jobs that can be performed by workers with low levels of human capital and do not require training to better understand internal operations and (2) jobs that are performed by workers with high human capital but do not need firm-specific skills to perform satisfactorily. The main criticism to Lepak and Snell’s model is that there are not many jobs that do not require firm-specific skills or training on internal operations. The expanding role of staffing companies certainly does not follow the footsteps of this model. Different models of the agency-client relationship management and strategic partnership have been suggested in the literature. For example, Byham and Riddle (1999) suggest five different levels of outsourcing relationship between staffing companies and hiring organizations. Types of services offered and expected from staffing agencies vary and increase in sophistication as the level increases. These five levels are: (1) vendor-customer, (2) supplier-customer, (3) strategic supplier-customer, (4) partners, and (5) strategic partners. At a minimum, clients retain full responsibility for staffing and recruiting and staffing companies might conduct or assist in few of the following: analyzing key job requirements, design selection and assessment procedures, select testing batteries and other selection methods, administer the selection process and validate the selection system. At a higher level of this relationship, the staffing company usually provides all of the services previously mentioned in addition to on-site management services to all business units on a permanent basis. Staffing company at this level has a lot of discretion in the client company’s staffing and recruitment functions.

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Von Hippel and her colleagues advise organizations to establish policies on staffing, training and orientation, career development paths, and rewards if they want to attract and motivate temporary workers (1997). Their advice is not generic to all organizations as dedication to temporary workers would range based on company’s philosophy towards them: strategic partners, necessary evil, or avoid if possible. What Makes Staffing Agencies More Successful at What they Do? A quick answer to this question is that they strive to understand and acquire strategic long-term relationships with both their client companies and employees. Staffing firms came to realize if they offer cutting edge and creative solutions to emerging labor problems, and guarantee their service, their clients will become more dependent on them and eventually take them as strategic partners. The nature of the triangular relationship causes communication issues especially when strategic agency-client relationship does not exist. Such issues are resembled in the lack of understanding the culture of the client organization, jobs and assignments to be staffed by the agency. As a result, temps would quickly become dissatisfied because they were not informed of what to expect. With this kind of operating environment, agency recruiters cannot explain the nature of the job (e.g. if it is temp-to-hire) and will not be able to manage their workers’ expectations. Frustration, dissatisfaction, lower productivity and loyalty, absenteeism, and possibly early project turnover are expected outcomes of temp-client mismatch. However, with a stronger agency-client relationship, the client gets to be involved in the selection process while the agency is involved with managing its own employees on the client’s premises, a win-win-win situation. Moreover, better understanding of what constitutes temporary workers’ performance in clients’

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

Figure I: Proposed model of testable relationships

--------------------------------- Insert Figure I about here ---------------------------------

Success in Placement and Matching

Employee Performance

- Specific skills training - Intensive selection process - Benefits - Manage expectations - Perception of Agency fairness

- Repeat business - Repeat staffing

techniques in case of strategic Partnership

Client Org. Satisfaction

Staffing Agency Performance

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There is not much consensus in the research on performance in the staffing context. In fact additional research in this arena is needed (Connelly & Gallagher, 2004). In a study that was concerned with agency compliance with EEO requirements in a staffing agency performance was considered as the criterion. The scale was based on client supervisor ratings of temporary workers on measures such as accuracy, cooperation, production, grooming, punctuality, and attendance (Ryan & Schmit, 1996). (Bauer & Truxillo, 2000) is another empirical study that looked into temp-to-perm employees’ progression overtime used client organization objective and subjective ratings of performance as proxies for temporary selection success. In addition to understanding what constitutes performance, temporary staffing agencies must guarantee their service if they want to build strong relationships with their clients. With service guarantee, they assure their clients that they care about their needs and that they do not have to pay for what does not satisfy them. Having this policy forces the agency to tease out the reasons for service failure and quickly remedy and avoid them in the future. Manpower, one of the largest players in the staffing industry, has long adopted this practice. They did not necessarily pay more for their screening procedures, they just made them better over time. Their skills-testing methods and customer-needs diagnosis cost them less overtime (Hart, 1988) because they have implemented 100% customer satisfaction strategy via service guarantee. Successful staffing agencies have developed a deeper understanding of their workers’ needs. They learned to listen to them in order to better manage their expectations and communicate to them the opportunities they have in a realistic manner that would hopefully close up the gap between the agency’s opportunities and the temps’ expectations. Smith and Neuwirth (2008) call this “aligning aspirations with opportunities.” I have pointed out previously that one of the reasons individuals register with staffing companies is to locate permanent positions, but such opportunities are not always available. Other employees enter the market with the anticipation to earn experience and learn new skills. Such employees might have more developed career aspirations that might affect their performance on site. Moorman Harland (2002) suggest that in this case, Moorman and Harland (2002) suggest that in this case, pre-employment screening that focuses on employees’ reasons for joining the temporary agency might positively influence organizational citizenship behavior. Furthermore, successful agencies manage their image very carefully. They care to be perceived as capable with strong practices and market specialization. They also know their clients watch for financial stability and market share position. On the other hand, they manage their image in front of their candidates. Successful agencies show professional and respectful treatment of their candidates. They want to be perceived as fair and generous in their benefits and training opportunities.

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What are Staffing Agencies’ State-of-the-Art Selection Practices? As mentioned before, research on this issue is rather scarce. Antecedents show that staffing industry practice is based on a systematic approach to eliminating guesswork and client service dissatisfaction. Staffing agencies managers understand the “benefits of scientific analysis, the power to control outcomes and the industry’s concern with its high quality product” (Smith & Neuwirth, pp. 41: 2008) which can be achieved by testing (technical skills, aptitude, personality, and behaviors) and by offering service guarantee. In addition to being successful with establishing a strong market for their services, they seek out good talent that accepts the reality of temporary work. Successful staffing agency selection is based on both the ability and the willingness of workers to perform in a temporary environment detecting the candidates with the good temp profile. From an agency’s perspective, they must strive to have the most valid selection techniques that allow the agency flexibility to tailor testing to fit clients’ needs. Manpower, for example, uses a job-related testing approach. It selects assignments that are most suited for workers based on their skills, abilities, work preferences and availability to work (Wiley, 1995). After they select their employees, they test them further on work skills, abilities and tasks preferences. Staffing companies, successful like Manpower, want to make sure they know who is motivated and able to perform what so they can insure a highly successful matching rate. One of the most critical characteristics of testing and screening procedures in staffing companies is their flexibility to fit in the need of the client companies (Mitlacher, 2006). The fact that staffing agencies have to continuously screen candidates for temporary and temp-to-hire positions even though they do not have vacant positions at the time of assessment makes it harder on them to determine prematurely the types of questions they ought to interview their candidates for. However, generic questions that can be applied to a wide array of settings cannot be difficult. Note taking and record keeping are important steps in the interview. In case they locate good employment opportunity for temps, some agencies review the interview notes, and call back the temp for another interview during which they ask more specific questions targeting that particular position and client organization. Many organizations use the structured interview as an attempt to understand the temporary worker, their skills, needs, interests, specific knowledge and work-related behaviors. Campbell et al (1993) suggest 8 components to job performance. Three of which are present in any job and three others are present in almost all jobs. The three present in any job are: Job specific task proficiency, demonstrating effort, maintaining personal discipline. The three present in most jobs are: non-job specific task proficiency, written and oral communication task proficiency, and facilitating peer and team performance. Therefore, in the condition of lack of knowledge on nature of position, staffing agencies could be relying, at the least, on those criteria for future temp performance prediction. A qualitative study of the temporary staffing business in Chicago, Peck and Theodore (1998) state that structured interviews and techniques of employee of assessments are more common in the highly unstable daily-based temporary staffing. They suggest that intensive preliminary screening gives staffing firms functioning in this segment a competitive edge to cut further screening costs (e.g. drug tests and criminal background checks) and to provide the best quality of daily temporary workers.

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Staffing agencies use various tests and inventories to become more familiar with the “good temp” profile. They are able to better their understanding through systematic techniques of employee ability and trait assessment. Cognitive ability, personality and vocational interest batteries in addition to initial telephone interviews help agencies build an initial picture of workers’ interests. Structured and behavioral interviews, reference checks and more special skill testing would follow. Unfortunately, research is behind in understanding current practice and its role in explaining staffing agency success. This kind of research is still in its infancy. Below I attempt to review some relevant yet perplexing research. Lancaster and her colleagues found that job applicants at an employment agency who had similar cognitive ability and vocational interests chose similar jobs. However, they were not able to show that applicants with similar personality characteristics chose similar jobs (Lancaster et al, 1994). Another research studied the personality and cognitive differences between the employed and unemployed staffing company workers and found that the sensing-perceiving type of personality was associated with lack of employment for some temps. It also found that a mixed or no clear thinking style was more prevalent among the unemployed temps (40.3 percent) compared to employed temps (23.6 percent) (McTurk & Shakespeare-Finch, 2006). Furthermore, research supports that employees who are sensation seekers and show a higher degree of occupational self-efficacy will be more satisfied with agency work (Torka & Schyns, 2007). In a less glamorous picture of staffing testing practice, some agencies rely on basic requirements. They test such requirements by general cognitive ability batteries. In a study attempting to measure Equal Employment Opportunity statistics in a temporary staffing agency located in the Midwest, researchers considered the employment tests as predictors of performance (Ryan & Schmit, 1996). They reported that the agency used three short ability tests in their screening for all jobs. Those tests were measuring math skills, proofreading, and vocabulary and were supposed to predict job performance. Evidence from the only survey-based research, that I am aware of, contradicts this general belief of the staffing market practice. The survey which addresses predictors of performance shows that executive recruitment consultancies in the UK employ selection methods with low validity and higher reliance on subjective judgment (Clark, 1992). The survey interestingly points out that 840 consultancies base their choice of selection methods is restrained by expectations of clients who in turn prefer predictors of low validity (e.g. astrology and graphology). This finding is not generalizeable as the use of graphology and astrology is much less prevalent in the US. Unstructured interview and references were widely used by recruitment consultancies while less than 45 percent of them used psychological tests. An alarming finding shows that over 70 percent of those executive consultancies never used cognitive ability tests and over 64 percent never used personality tests. When recruiting and selection practices are considered strategic and competitive tools of a client organization, the expectations of accuracy and efficiency go way up (Byham & Riddle, 1999). Staffing companies partnering with clients with such profile must upgrade their skill search and screening techniques. What worked for agencies a few years ago did certainly change in today’s

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practice. For example, Adecco uses Xpert assessment and training system that evaluates candidates on proven skills, motivation and attitude, work style, and experience. In Express, office services workers are assessed on ability to perform basic computer skills (Word, Excel, etc.), 10-key, spelling, math, and basic office skills. Express brags its hands-on and computerized test system which includes analyses of manual dexterity, workplace safety, inventory, general maintenance, industrial math, assembly, warehouse, electronics, industrial skills, and manufacturing skills. Furthermore, Express, through behavioral assessments, can evaluate an applicant's likelihood of success in a particular position and find out if it is something they will enjoy doing. They also offer applicants to complete integrity testing to determine the probability of violent, dishonest, fraudulent or unreliable behavior to avoid placing applicants with those tendencies. Snelling evaluates candidates based on the clients’ unique culture, personality and requirements of the business in need, ensuring the right fit both clients and employees in areas such as clerical, sales, payroll, light manufacturing and many others. Future research should systematically assess current recruiting, selection, and placement methods implemented by temporary staffing firms. In addition, understanding the effectiveness of employment agency-client firm relationship can be an interesting venue for future research. References available on request.

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MODERN WORKFORCE CHALLENGES:

LEADERSHIP AND PARTNERSHIP IN EDUCATION

Marilyn Ohlsen Jenkins Barry University

11300 NE Second Avenue Miami Shores, FL 33161-6695

[email protected] Phone: 239-278-3041, Ext 16

Jia Wang

Texas A&M University College Station, TX 77843

[email protected] Phone: 979-862-7808

ABSTRACT

Leaders of educational organizations are being challenged to offer more diverse programs and better respond to their community, while facing competition from many educational institutions. One strategy to meet these challenges was to develop a university partnership center (UPC). Managing a UPC has proven to be challenging due to the complexity and diversity of organizational cultures. This case study explored leadership and organizational culture with a specific focus on two lines of inquiry: (a) the practice of leaders in creating a shared culture in the UPC, and (b) leadership qualities that contribute to the positive culture in the UPC. Key Words: Leadership, Partnership, Culture

INTRODUCTION

Leaders of today’s educational institutions are facing intense challenges worldwide. Technology has ushered in a new modern type of learning institution which has no geographic boundaries. For-profit and non-profit institutions have risen drastically in number, and have moved rapidly into territories that traditionally were occupied by local colleges and universities. What was once Leaders also face a global demand for a high quality workforce. These factors have propelled educational institutions to actively seek strategies that enable them to reach more students, create innovative programs and learning options that satisfy the students’ needs, and better prepare graduates for the changing workplace. Many institutions struggle with their identity, mission, and purpose in light of these challenges. Partnering with other academic institutions is one strategy to meet students’ needs and survive the market competition. This paper examines one shared university partnership center (UPC), as well as the leadership traits and characteristics that contribute to the success of that UPC.

LEADERSHIP IN EDUCATION

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Most educational leaders now operate in performance-driven cultures. Academia has had to transition to a more corporate entity while facing increasing challenges and threats (Yorke, 2000). These ever-changing educational environments have not only made organization management more complex, but also prompted the need for leaders with more qualifications. The leaders of educational institutions today must manage their workforce, fundraise, please the board of trustees, be active in the community, maintain political relationships, ensure accreditation, deal with legal issues, facilitate student interaction, resolve problems, expand enrollment, manage budgets, display high moral and ethical standards, maintain and expand the physical campus, ensure new curriculum is developed, and deal with increasing competition. What characterizes an effective leader that can handle these diverse responsibilities? Some institutions seek self-confident transformational leaders who bring charisma, motivational and intellectual stimulation to the organization; while others seek transactional leadership where there is a bargaining exchange process between leaders and followers (Bass & Avoli, 1993). McLaurin and Al Amri (2008) suggest that charismatic and transformational leadership styles have evolved from a change-oriented perspective of leadership. In contrast, laissez-fare leadership, where leaders allow the organization to essentially run itself, does not attempt to help organizations grow. Leaders are the conduit for communicating and clarifying shared organizational meaning and vision in educational institutions (Bennis, 2000). According to Ensby (2005), there are four general styles of leadership namely, coaching, directing, participating, and delegating. Northouse (2007) presents a trait approach to leadership. First developed as “great man” theories aimed at identifying the innate qualities that differentiate leaders from followers, this approach focuses on the influence of trait on leadership. While personal factors related to leadership, such as intelligence, self-confidence, determination, integrity, sociability (e.g., Kirkpatrick & Locke, 1991; Lord, DeVader, & Alliger 1986; Mann 1959; Northouse 2007; Stogdill 1948, 1974) continue to be important, they need to be put in a specific context for consideration. Lewis et al. (2006) explores the use of Appreciative Inquiry in effective leadership where it was noted that effective leaders facilitate, collaborate, and participate in the organization. Schein (1992) considers leadership and organizational culture as “two sides of the same coin with a constant interplay between these two constructs” (Bass & Avolio 1993, p. 115). Gupta (2000) proposes six major categories of organizational culture: information systems, people, process, leadership, reward system, and organizational structure. Al-Alawi (2007) describes organizational culture as knowledge sharing (critical for an organization’s success), which is created through trust, communication, information systems, rewards and organization structure. Obviously, many factors contribute to creating culture; however, this study focuses on one factor, leadership for there is constant interplay between culture and leadership (Bass et al. 1993).

PARTNERSHIP IN EDUCATION

As educational leaders become increasingly concerned with competition, they seek alternative solutions for growth and expansion of curriculum. One means to accomplishing this growth is through partnerships (Idsvoog, 2007). There is a long history of educational institutions

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partnering with local businesses and high schools to expand enrollment bases and offer internships for students. A relatively new partnership model is the establishment of a UPC where a variety of different education institutions are invited by one college to conduct their business side-by-side under one roof in one community. This type of partnership is a strategic choice to enhance communities where there is little access to specific programs in higher education. Students, who might have left their home community for particular degree programs, may now remain in their own communities. Communities, which had little access to diversified growth in sectors associated with professional programs and technology, are able to tap these resources through UPCs.

LEADERSHIP OF UNIVERSITY PARTNERSHIP CENTERS

Leadership of UPCs varies by person, title, responsibilities, and qualifications. Managing a UPC is a challenging task due to the complexity and diversity of the partners. Partners from private institutions may be more bottom-line focused because they are tuition driven (Risher, 2007). Partners from public institutions may have very different beliefs and ideas about organizational goals and standards of behavior to achieve these goals (Risher, 2007). Leaders of UPC’s must have the ability to create a collaborative and cohesive organizational culture; this is critical to a UPC’s success. In a UPC, the partners work within the rules and norms of the host college (reducing their autonomy) and accept the authority of the leader of the partnership in exchange for rewards and benefits that the leader might bring to them. The rewards and benefits in a UPC might include exclusive use of preferred classrooms or assigning larger or additional office space, complimentary advertising, or personal invitations to join external or internal college groups. In the case studied, the Director of the UPC had no direct control of the employees of partner colleges and universities; however the partners were willing to abide by the UPC’s policies and procedures in exchange for a positive relationship with the UPC director and staff.

THEORETICAL FRAMEWORK

This study explores leadership in one UPC located in southern US with two specific foci: (1) what did UPC leaders do to help build a collaborative culture in the UPC; and (2) what leadership qualities contribute to the development of a collaborative culture in the UPC? The leadership theory that guided this study is the social exchange theory. According to Birnbaum (1988), social exchange theory is best suited for academic organizations. It posits that “there is a reciprocal relationship whereby leaders provide needed services to a group in exchange for the group’s approval and compliance with leader’s demands… the group agrees to collectively reduce its own autonomy and to accept the authority of the leader in exchange for the rewards and benefits the leader can bring to them” (Birnbaum, 1988, p. 23).

METHOD

A qualitative case study approach was adopted for this study. A case study is “the study of the particularity and complexity of a single case, coming to understand its activity within important circumstances” (Stake, 1996, p. xi). It is an “inquiry that investigates a contemporary

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phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident” (Yin, 2003, p. 13). The case study method was selected because it is unique, bounded, and it may reveal information about a phenomenon that might not be revealed otherwise (Merriman1988). The case selected for this study was a UPC located in southern United States. This center was purposely chosen because this UPC was known for its success as a viable growing partnership center. Data was collected from multiple resources, including individual face-to-face interviews, participant observations, and review of organizational archival data. An open-ended, semi-structured interview was conducted with 13 employee participants who represented three distinct groups within the UPC: one group worked for the community college at the partnership center location, but were not associated with the management of the university center; another group worked for the partner colleges and universities that have face-to-face classes (not on-line); the final group worked for the community college and were associated with the management of the university center. All the participants were fully informed of the purpose of the study and their right as study participants prior to the actual interviewing. Each interview was tape recorded and lasted approximately one hour and was conducted with an interview guide consisting of seven pre-developed open-ended questions. Interview data was transcribed verbatim by the first author and sent to the participants to check for accuracy. In this case, the unit of analysis included two levels—the UPC as a whole and the 13 interviewees. The entire data was sorted and segmented prior to analysis. The constant comparative analytical method was employed to analyze each data set and across different sets. Open coding was used to identify major themes. Findings were organized and reported around the two research questions. The credibility issue was addressed using multiple sources for data collection and checking with the participants for verification.

FINDINGS

The following major themes were elicited from our data analysis. They are organized around two research questions: leadership practices and leadership qualities. Leadership Practices in the UPC

When participants were asked to describe the culture of the UPC and to explain what they thought created this culture, two issues became apparent. First, they unanimously described the UPC culture in a very positive manner. Second, they emphasized that the welcoming culture was created by the leadership. Table I summarizes findings in these respects.

Table I Leadership and Culture in the UPC

Theme Supporting Evidence The organizational culture was created by the leadership

• Respect and loyalty is important here. • The leadership & culture is wholesome. • We have many welcoming rituals. • Logistics are important • The leadership & culture stress values.

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• The leadership & culture stress collaboration and cohesion.

• The leadership & culture is inviting. • The leadership & culture is friendly. • The leadership & culture makes me

appreciate my job. • Leadership and conflict. • Diversity is important.

Supporting the theme that organizational culture was created by the leadership were statements such as the leadership and culture is “wholesome,” “stress values,” “is inviting,” “is friendly,” “makes me appreciate my job,” and “stress collaboration and cohesion.”Of the 13 participants in this study, all validated the actions and choices of the leaders in some manner. This is consistent with French et al.’s (2000) argument that in an ideal setting, an organizational culture is composed of employees who internalize their commitment to the actions and choices made by the organization. Branson (2007) argues that people want leaders with moral codes. Emery (2007) suggests that the effects of transactional and transformational leadership styles have a correlation to organizational commitment and job satisfaction. Leaders with transformational factors such as charisma, intellectual stimulation, and individual consideration typically had employees who indicated high levels of job satisfaction and organizational commitment (Emery 2007). In addition, the fact that the leaders in the UPC encouraged cooperation and collaboration reflects a partnership leadership style (Evink, 2000). Key Qualities for Leadership of the UPC

The 13 participants identified 29 different key leadership qualities when asked about what leadership qualities might have contributed to the successful organizational culture of the UPC. Among these, communication, interpersonal skills, flexibility, knowledge, and integrity were highlighted by most of the participants as the top five traits that led to this success. Six other elements were identified by half of the interviewees as equally important, including problem solving skills, being open minded, enthusiasm, being caring and visionary. The frequency of these comments is noted in Table II below. Communication was noted by almost all the participants as a critical factor for successful leadership in the UPC. They indicated that positive communication (both informal and formal) and the ability to communicate regularly with their leaders were crucial for them to do their jobs. In describing the center director specifically, participants perceived him as a good problem solver who made thoughtful decisions, and was good at building relationships.

Table II Key Leadership Qualities in the UPC

Theme Top Qualities Frequency of Occurrence Leadership qualities contribute to the positive culture in the UPC.

• Communication • Interpersonal skills • Flexibility

11/13 9/13 8/13

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• Knowledge • Integrity & Honesty • Problem solving • Open mindedness • Enthusiasm • Community orientation • Caring • Vision

8/13 7/13 6/13 6/13 6/13 6/13 6/13 6/13

In addition to good communication, the participants highlighted other qualities such as flexibility. One participant indicated: “(The leader) is very protective of the UPC and flexible with all of us. If he was rigid, it would never work…we are all loyal to him, even though we are like lottery balls—all different.” Noticeably absent was the importance of the leader’s experience, which was not identified by the participants as an important attribute.

DISCUSSION

Within the context of higher education, this study examined the notions of leadership and culture in a successful university partnership center. Findings from the constant comparative analysis of the 13 participants as well as well as observation and archival data revealed that the cooperative and cohesive culture of the partnership center (in terms such as positive, friendly and ethical) was primarily the direct result of effective leadership. The finding that leadership can create a positive, caring, and cohesive organizational culture through good communication and inclusiveness is consistent with the current literature (Bennis 2000). Bennis (2000) tell us that people who are able to change the focus of an organization are not just leaders, but innovators. Findings of this study also illuminated several innovative leadership qualities that were significant to the success of the partnership. This finding is consistent with other studies of leadership traits and characteristics (e.g., Kirkpatrick & Locke 1991; Lord et al. 1986; Mann 1959; Northouse 2007; Stogdil 1948, 1974). Armandi (2003) argues that leaders create a vision of an emotional image that is inspirational and value centered. The UPC leadership under study could be understood from the visionary leadership perspective where power, responsibility, purpose and respect are all shared by the employees in the partnership.

IMPLICATIONS AND NEED FOR FURTHER RESEARCH

This study contributes to education and leadership by examining the important connection between leadership and partnership. Specifically, the qualitative information on leadership practice as revealed by this study (i.e., the patterns, styles, values, and qualities of a successful leader) provides valuable insights. Since educational partnerships are an emerging phenomenon on which little research has been done, this study is a necessary and timely effort. It is particularly significant for educational leaders and institutions that might be entering into a partnership relationship. Continued research on similar partnerships is necessary to provide reliability of the findings of this study.

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Methodologically, this study presented one approach, qualitative case study. There is a need for studies using different methods, such as quantitative methods to examine a larger sample pool. Other qualitative approaches such as ethnography and phenomenology will also be useful in generate deeper insights into the culture of a UPC and lived experiences of members within this partnership could look more closely at the individual experience with partnership. A longitudinal approach could also be used to trace the developmental process of specific UPCs or other types of partnerships. Last but not the least, this study focused on one case of success. While we can learn much from the success stories, we are likely to learn from the cases of failures. In that sense, it is worth studying partnerships that have failed to create a shared vision and culture.

REFERENCES

[1] Al-Alawi, A., Al-Marzooqi, Y., & Mohammed, Y. (2007). Organizational culture and knowledge sharing: critical success factors. Journal of Knowledge Management 11(2), 22-39. [2] Armandi, B., Oppedisano, J., & Sherman, H. (2003). Leadership theory and practice: A “case” in point. Management Decision 41(10), 1076-1080. [3] Avolio, B. & Bass, B. (1999). Re-examining the components of transformational and transactional leadership using the multifactor leadership questionnaire. Journal of Occupational & Organizational Psychology 72(4),441-463. [4] Bass, B. & Avolio, B. (1993). Transformational leadership and organizational culture. Public Administration Quarterly 17(1),112-122. [5] Bennis, W. (2000). Managing the Dream: Reflections on Leadership and Change. Perseus Publications, Cambridge, MA. [6] Birnbaum, R. (1988). How colleges work. San Francisco, CA: Jossey-Bass. [7] Branson, C. (2007). Improving leadership by nurturing moral consciousness through structured self-reflection. Journal of Educational Administration 45(4), 471-495. [8] Emery, C. & Barker, K. (2007). The effect of transactional and transformational leadership styles on the organizational commitment and job satisfaction of customer contact personnel. Journal of Organizational Culture, Communication, and Conflict 11(1), 77-95. [9] Ensby, M. (2005). Quality leadership situational style. American Society for Quality ASQ World Conference on Quality and Improvement 59, 341-347. [10] Evink, J. (2000). Leadership & spirit: breathing new vitality and energy into individuals and organizations. The Academy of Management Executive 14(2), 128-131. [11] French, W., Bell, C. & Zawacki, R. (2000). Organization development and transformation, managing effective change. Boston, MA: Irwin McGraw-Hill. [12] Gupta, B., Ilyer, L. & Aronson, J. (2000). Knowledge management practices and challenges, Industrial & Data Systems 100(1), 17-21. [13] Kirkpatrick, S. & Locke, E. (1991). Leadership: Do traits matter? The Executive 5, 48-60. [14] Idsvoog, K. (2007). Adapt or die of irrelevance, Nieman Reports 61(3), 63-66. [15] Lewis, D., Medland, J., Malone, S., Murphy, M, et al. (2006). Appreciative leadership: defining effective leadership models. Organization Development Journal 24(1), p. 87-100. [16] Lord, R., DeVader, C. & Alliger, G. (1986). A meta-analysis of the relation between personality traits and leadership perceptions: An application of validity generalization procedures. Journal of Applied Psychology 71, 402-410.

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[17] Mann, R. D. (1959). A review of the relationship between personality and performance in small groups. Psychological Bulletin 56, 241-270. [18]McLaurin, J. R. & Al Amri, M. B. (2008). Developing an understanding of charismatic and transformational leadership. Allied Academies International Conference, Academy of Organizational Culture, Communication and Conflict. 13(2), 15-19. [19] Merriman, S. B. (1998). Qualitative research and case study applications in education. San Francisco, CA: Jossey-Bass. [20] Northouse, P. G. (2007). Leadership theory and practice. 4th ed. Thousand Oaks, CA: Sage. [21] Risher, H. (2007). Fostering a performance-driven culture in the public sector, Public Manager 36(3), 51-57. [22] Schein, E. H. (1992). Organizational culture and leadership. San Francisco, CA: Jossey-Bass. [23]Stake, R. E. (1995). The art of case study research. Thousand Oaks, CA: Sage. [24] Stogdill, R. M. (1948). Personal factors associated with leadership: A survey of the literature. Journal of Psychology 25, 35-71. [25]Stogdill, R. M. (1974). Handbook of leadership: A survey of theory and research. New York, Free Press. [26]Yin, R. K. (2003). Case study research design and methods. 3rd ed. Thousand Oaks, CA: Sage. [27]Yorke, M. (2000). Developing a quality culture in higher education. Tertiary Education and Management 6, 19-36.

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SUCCESSIION PLANNING: A MODERN WORKFORCE CHALLENGE IN PUBLIC

ADMINISTRATION

Marilyn Ohlsen Jenkins. Barry University

11300 NE Second Avenue Miami Shores, FL 33161-6695

[email protected] Phone: 239-278-3041, Ext 16

Kirsten Kim Loutzenhiser

Troy University 5201 West Kennedy Blvd., Suite 110

Tampa, Florida 33609 [email protected]

786-246-6932

ABSTRACT

This paper looks at the definition, challenges, and benefits of succession planning in government. The federal government is the largest single employer in the United States, an employer who has the potential to lose much of its workforce due to retirements of the Baby Boomer generation. The federal government has created an extensive guide for succession planning, however the success of these plans both depends on the ability of personnel and an appropriate budget. Linking and aligning succession management and other human resource strategies with organizational mission and goals is critical to the success of succession management programs. Key Words: succession, planning, government

INTRODUCTION

All organizations must understand that to ensure their future vitality and meet their strategic mission and goals, they must have prepared adequate succession planning. Succession planning is important for every organization, public and private. This paper will examine succession planning in the public sector. The competency of a public organization depends on the diversity of talent at all levels. This includes front line workers, public managers and leaders. Leaders will be the most difficult vacancies to replace, therefore special emphasis should be placed on developing and attracting leaders whose values and goals mirror the public organization. Succession planning has come to the forefront of many government agendas because of rapidly changing demographics of talent in the work force. It is well known that the Baby Boomer generation is preparing for retirement. Baby Boomers are the largest generation in the history of the United States. According to the U.S. Census (2006), this generation has a population of 77,980,296, the equivalent of one fourth of the U.S. population. This generation is perceived to be the result of increased birth rates between the years 1946 to 1964. In 2006, 74.1% of all Baby Boomers were employed, making them the largest segment in the employed U.S. population, compared to 71% employed age 18-41 and 21.6% employed age 61and older. In 2030 it is

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estimated that when the Baby Boomers retire, there will be a loss of over 20,000,000 working people. The Baby Boomers represent the most highly educated segment of the U.S. population (U.S. Census Bureau, 2008), bringing a new challenge for organizations to hire educated employees for the future workforce. According to Liebowitz (2004), a 2002 survey to 100,000 respondents found that one in every three federal employees was considering leaving their job. In 2004, 53% of federal civil servants and 71% of federal senior executives were eligible to retire. Along these aging demographics, fewer persons are in the talent pipeline and less people are going into government service. Reester (2006) claims that more than 46 percent of existing state and local governments are comprised of Baby Boomers age 45 and older. Baby Boomers that retire leave behind vacancies without available workers with experience and skills to fill their jobs. Without targeted planning there will be no way to maintain a viable pool of civil servants or ensure that organizational knowledge is maintained through transitions of talent. Schall (1997) argues that succession planning and change management must be on the agendas of all public organizations, not only for the organization’s future leadership plan, but for the public good.

DEFINING SUCCESSION PLANNING

The terminology “succession planning” is not commonly used by public administrators; it’s more often associated with the “private sector” (Schall, 1997). There has been a lack of attention on public sector transitions of Baby Boomers retiring until recently (Schall, 1997). Some have called succession planning in government two dirty words when it clashes with merit system principles and traditional hiring practices of filling one position at a time after it becomes vacant (Green, 2000). Today’s public agencies and organizations must prepare, plan, and multi-task to ensure smooth transitions between retiring and hiring. Succession planning has many definitions, although there is an underlying theme of recruitment and selection. Succession planning is defined by Rothwell (2005) as the way to “identify and ensure leadership continuity in key positions, retain and develop intellectual capital and knowledge for the future, and encourage individual advancement.” Crumpacker (2007) portrays succession planning as the way an organization identifies and strategically develops a methodology to reduce or eliminate gaps in human capital that take into account skills and leadership. Kim (2003) identifies succession planning as an ongoing process to identify, assess, and develop leadership to enhance performance. According to Helton & Jackson (2007) succession planning (or workforce planning) is usually considered to be a broad plan that impacts an organization’s entire workforce. The International Public Management Association for HR (2010) defines workforce planning as strategic alignment of an organization’s human capital with a focus on business that includes a methodical process of analyzing the current workforce, determining future workforce needs, identifying the gap between the present and future and implementing solutions so the organization can accomplish its mission, goals and objectives. Anderson (2008) defines succession planning as a future-oriented procedure where knowledge, skills and abilities are identified that are necessary to a job, then a plan is developed to prepare

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multiple individuals to perform those jobs. Herra (2002) portrays succession planning as the “who” and the “how” in staffing; who takes the place of an employee after the position becomes vacant; and how the position is filled after the employee is gone.

SUCCESSION PLANNING IN THE FEDERAL GOVERNMENT

The federal government employs more than 1.9 million persons and represents the largest single employer in the United States. More than half of these employees are scheduled to retire in the next 20 years. Many of these employees hold management positions in government. 90 percent of our nation’s federal managers run some of the largest public programs (Bilms, 2009). Congress has recognized that there is a succession planning crisis in the United States. To that effect they mandated the creation of a succession planning model for federal agencies. In response to Congress, the United States Office of Personnel Management (OPM) created a comprehensive 165 page document titled A Guide to the Strategic Leadership Succession

Management Model (2009). The OPM provides a very detailed step-by-step guide to succession planning. Congress established (5 U.S.C. 4121) mandating that the head of each federal agency shall establish a comprehensive management succession program to provide training to employees to develop managers. Furthermore, the Federal Workplace Flexibility Act of 2004 requires all federal agency leaders to establish a succession program to develop future leaders in consultation with the OPM. “OPM recognizes the need for a strategic succession planning system for strengthening current and future organizational leadership capacity rather than just replacing individuals” (U.S. Office of Personnel Management, 2009). OPM reports that there will be “large deficits in leadership” in the 21st century, and they designed this model to “build leadership capacity and shape Federal agency leadership.” OPM developed the Strategic Leadership Succession Management Model (SLSM Model) in conjunction with the Human Capital Assessment and Accountability Framework (HCAAF) for federal employees. The Chief Human Capital Officers (CHCO) Act of 2002 sets up expectations for human capital management in government. The HCAAF, in conjunction with the OPM, and in accordance with all of these federal laws and mandates, developed the following five human capital systems as the core of the SLSM Model:

1. Strategic Alignment Planning and Goal Setting

2. Leadership and Knowledge Management Implementation

3. Results-Oriented Performance Culture Implementation

4. Talent Management Implementation

5. Accountability Evaluating Results

Defining and understanding each of the five human capital systems of the SLSM Model is crucial to implementation. The strategic alignment system is led by the upper level management team to ensure the initiative is aligned with the “the agency mission, goals, objectives through analysis, planning, investment, measurement, and management of human capital programs.” Some of this language carries many similarities with strategic planning literature which offers a

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streamlined succession planning that does more than seeking continuity from one leader to the next. Key to the success of this system is change management, integrity and inspiring employee commitment, continuous learning, and knowledge management. The Results-Oriented Performance Center system enables performance management and awards systems and programs to be enacted and maintained. The Talent Management system identifies “competency gaps, particularly in mission-critical occupations” and ensures recruitment for these positions. The Accountability system is the monitoring, assessment, and evaluation arm of the HCAAF. By addressing benchmark strength, accountability gaps and talent needs, it is possible to make succession planning an urgent priority. The OPM (2009) established five phases of implementation for the SLSM Model: 1) establish strategic alignment (analyze requirements, develop business plan); 2) identify succession targets & analyze talent pool; 3) develop succession management plan (analyze current policies, programs, practices, identify strategies, develop implementation plan, develop evaluation and accountability plan); 4) implement succession plan (and accompanying strategies for recruitment, selection, development and retention including collection of metrics data); and 5) evaluate succession strategies by analyzing results and recommending improvements.

STRATEGIC SUCCESSION PLANNING PROCESS

Linking and aligning succession management and other strategies with organizational mission and goals is critical to the success of any succession program. Succession planning is not strategic unless it includes a systematic way to comply with merit systems and representative bureaucracies. Strategic succession planning includes a defined process and an understanding of the benefits and barriers. Strategic Succession Planning Process

Many types of strategic succession planning instruments and processes are available in the private sector that could be modified to accommodate public agencies. We will examine one model presented by Bohlander & Snell (2010) who purport succession planning as a strategic planning process with six distinct steps: Step 1: Understand the mission, strategic vision and core values of an organization; Step 2: Conduct an external analysis of the environment. This involves a continuous scanning of the external environment and the major forces that influence the organization; Step 3: Develop the strategic succession plan through an internal analysis of environmental opportunities, threats, strengths and weaknesses, also known as a SWOT analysis with emphasis on culture, capabilities and composition. To accomplish step three, governments must know the composition of their workforce (strategic knowledge workers, core employees, supporting labor, alliance partners) and how they interact. Step 4: Forecast into the future for organizational threats, opportunities, weaknesses and strengths. This forecast must include corporate strategy, strategic alliances, and business strategy. Forecasting the demand for future employees can be accomplished quantitatively (through statistical analysis) and qualitatively (through interviews, opinions and judgments), or through a combination of both methods. Human capital readiness will be determined by applying this internal analysis to the key processes of the organization. Step five: Implement the strategic plan. This is the time when the new strategic plan is put into place. During this step, strategies are evaluated and the

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organizational capability to change and be flexible will be evident. Adjustments to current employees working conditions and terms of employment may be deployed in this step. Step 6: Evaluation and assessment, a continual process that ensures a strategic focus on succession planning. Assessment activities must be continual to meet the needs of the agency in the future. Benefits to Strategic Succession Planning

Helton & Jackson (2007) present the following benefits of succession planning, they (a) enable organizations to assess its talent needs by establishing competency models; (b) allow leaders to identify and tap key people who are available to fill critical work functions; (c) provide avenues for present and future succession planning and discussions about how to develop talent; (d) define career pathways for employees to increase the breadth and depth of their organizational knowledge; (e) provide for a higher return on investment from employees and (f) lead to the appropriate promotion of people to meet organizational goals. Roddy (2004) indicates that succession planning is a critical component of human capital management that must take a strategic look at the organization 10 years into the future. Plans must evaluate technical skills, leadership skills, and management skills necessary to meet future demands and expectations. Management skills involve hard skills (budgeting, problem solving, time management, ability to develop business proposals) and soft skills (administration, diversity, finance and reporting requirements). Roddy (2004) adds that mentoring and coaching are a key component in succession planning, not just to build leadership capacity but to strengthen organizational loyalty which will enhance the transfer of knowledge. Another benefit of succession planning is the ability of organizations to hire strategically to develop a diverse workforce. Diversity in culture, gender, age, and ethnic heritage enhances a public organization’s ability to serve their diverse community. Diverse employees will also bring new ideas to the organization and new ways to solve problems. To ensure the ability of the agency to meet the public need, talent pools should be developed with a strategic emphasis on diversity. Barriers To Succession Planning

Succession planning may face many barriers in public agencies. First there may be a reluctance of leaders to take on succession tasks. In addition there is the notion that the scope of a leader does not mean providing for a smooth transition. There is also a lack of understanding on how to frame succession. Should it be strategic positioning or replacing leaders? There is also a lack of information on how to do strategic succession planning. These barriers exist in a context of a political environment that has constant shifts and changes. According to the literature, many of these barriers can be overcome by addressing organizational change and organizational culture simultaneously. The detailed OPM succession plan, and any succession plan, is not likely to succeed without commitment by the leadership, constant communication, and alignment with the strategic plan of each department. The OPM plan is very detailed will require motivated leaders to shepherd the plan through an organization. Another problem is that the OPM mandate for federal agencies to

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do succession planning does not offer a budgetary incentive to commit each agency is set with the task of budgeting for their succession planning. This means that there is likely to be a huge variation in budgets depending on the level of commitment. Without specific federal dollars budgeted, it is difficult to sell the importance and timeliness of succession planning in the public sector. Ongoing budgeting for succession management must not be an oversight. Conversely, the budget crisis provides additional reasons to do succession planning. Succession plans must become an integral part of government budgets. According to the Society for Human Resource Management (Logan, 2008) “implementing a succession plan is one of the key strategies for organizations to reduce turnover costs, and ensure for smooth transition.” Every hiring decision must be a strategic hire that aligns with the succession plan. According to Bohlander (2010, p. 254) “the cost of hiring someone wrong for an intermediate position is approximately $20,000, the cost of hiring someone for a wrong for a senior management position is $100,000.”

PROPOSAL

Significant to succession planning is the projected demographics of future workforces. We propose that all public organizations take an immediate in depth look at their employee demographics and determine employees who will be eligible to retire over the upcoming decade, similar to the federal government’s OPM model. Friendly individual conversations with these employees might establish a more accurate timeline of when they intend to retire, or determine if they might be willing to remain in a full time or part time status after retirement age. Many agencies may have to become more flexible to encourage these employees to remain. Organizations may want to consider offering retirees partial benefits, more time off, and flexible work schedules to retain older employees past their retirement threshold. Strategic succession plans must be developed to determine if there are employees in the pipeline to promote, and if there are potential employees in the external environment whose values and goals would match the organization. The true costs of replacing retirees will need to be established, along with an accurate budget and timeline using one or more of the existing succession planning instruments developed for private or public organizations. Organizations must also take a close look at the younger employees in their existing workforce and determine which younger employees might be candidates for future promotion. If there is a shortage of candidates with potential, the organization should focus on hiring. Organizations will want to develop mentoring, coaching, training, and education programs to fast track all individuals who have been identified as potential candidates for promotion. Organizations must also consider the generational trends of the younger employees that will eventually become future leaders. According to Green (2004) several generational characteristics of younger employees must be considered when creating succession plans: (1) younger employees hired today have shorter career cycles, they typically will not stay in same job in 20 years; (2) younger employees not only accept but demand technology; (3) employees want to continually learn in the workplace; and (4) there is renewed focus on lifestyle as a condition of employment. These generational characteristics bring the realization that organizations will have to continually develop and enhance the workplace with specific strategies and benefits to attract and retain

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younger employees, while at the same time becoming more flexible and creative to retain both older and younger employees. While flexibility and government are not often found in the same context, governments will have to adapt to a more flexible workplace to attract and retain employees of all ages.

CONCLUSION

Succession planning cannot be an afterthought. Without a focus on succession planning and a willingness to implement one, the public service loses knowledge, skills and abilities on a daily basis. While much emphasis has been placed on the transition of leaders, today’s succession planning requires an organization wide effort of all talent in an organization. Succession planning provides a proactive and future focused step-by-step methodology for organizational leaders to assess, evaluate, and develop a pool of talented individuals who are willing to fill positions when needed. Effective succession plans consider the quantity of available candidates and focus on the quality of the candidates. Effective plans provide leaders with a strategy to tap the institutional knowledge that would be lost due to retirement, promotion, and attrition. Succession planning is a critical component of management at the every level of government. Succession management is not only about leadership but also about representative government talent and diversity. Talent pools should not just happen. There must be a deliberate effort by government agencies to bring new talent and new diversity into the workplace. This does not happen without strategic systematic methods such as succession planning.

IMPLICATIONS AND NEED FOR FURTHER RESEARCH.

Understanding the importance of succession planning would be of interest to all government agency leaders. Although succession planning is common in the private sector, there is a gap in research in public management succession planning. There is little empirical research on succession planning in the public sector (Boyne and Dahya 2002). The next phase of this research might be a quantitative study of age demographics of select government agencies and a study of their individual succession plans. A qualitative study of agencies that have implemented succession planning might include the degree of success they have managed. This research would be of special interest to all public organizations, their leaders, their human resource professionals, and the younger generation of potential leaders.

REFERENCES

[1] Anderson, C. (2008). How low should succession plans go? Society for Human Resource

Management Online.

[2] Bilmes, L. (2009, April 15). Help wanted in public service. The Boston Globe. [3] Bohlander, G. & Snell, S. (2010) Managing Human Resources, (15 ed) South-Western Cenage Learning. [3] Boyne G. & Dahya J. (2002). Executive succession and the performance of public organizations. Public Administration, 80(1), 179-200. [4] Crumpacker M. & Crumpacker J. M. (2007) Succession planning and generational stereotypes: should HR consider age-based values and attitudes a relevant factor or a passing fad? Public Personnel Management 36(4), 349-369.

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[5] Green, M. E. (2000) Beware and prepare: the government workforce of the future. Public

Personnel Management 29 (4), p 435-444. [6] Helton, K. A. & Jackson, R.D. (2007) Navigating Pennsylvania’s dynamic workforce: succession planning in a complex environment, Public Personnel Management, 36:4, 335-347. [7] Herrera, F. (2002) Demystifying succession planning. Employment Relations Today, 29:2; p. 25-31, [8] Kim, S. (2003). Linking employee assessments to succession planning. Public Personnel

Management, 32(4), 533-547. [9] Lavigna, R. J. & Hays, S. W. (2004) Recruitment and selection of public workers: an international compendium of modern trends and practices. Public Personnel Management 33(3), 237-253. [10] Liebowitz, J. (2004). Bridging the knowledge and skills gap: tapping federal retirees. Public Personnel Management , 22(4), p. 421-448. [11] Logan, K. (2008). Percentage of Employees Involved in Succession Plans. Society for

Human Resource Management, http://www.shrm.org/Research. [12] Reester, K. & Braaten, M. (2008). Succession planning NOW, say Colorado municipal executives. American Society for Public Administrators, May, page 3-4. [13] Roddy, N. (2004) Leadership capacity building model: developing tomorrow’s leadership in science and technology, an example in succession planning management. Public Personnel

Management 33(4), 487-496. [14] Rothwell, W. J. (2005) Effective succession planning: ensuring leadership continuity and

building talent from within (3rd ed.) New York: Amacom. [15] Schall, E. (1997). Public-sector succession: a strategic approach to sustaining innovation. Public Administration Review, 57(1), 4-10. [16] United States Census Bureau, Age and Special Populations Branch of the U.S. Census (2008). Selected characteristics of baby boomers 42-60 years old in 2006. Retrieved November 18, 2009 from www.census.gov [17] United States Office of Personnel Management (2009). A guide to the strategic leadership. Retrieved November 18, 2009 from www.opm.gov/hrd/lead/index.asp

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ORGANIZATIONAL AND CAREER EXPECTATIONS OF TURKISH COLLEGE

STUDENTS

Tuğba Karabulut

İstanbul Commerce University, Faculty of Commercial Sciences, Dept. of Management Selman-i Pak Cad. 34672 Üsküdar İstanbul Turkey

E-mail: [email protected] Phone: +90-216-5539422/2278 ext.

ABSTRACT

The purposes of this study are to explore the organizational and career expectations of Turkish college students from companies which they will work for when they graduate. The study also tries to find out the associations between sex and organizational characteristics, sex and career offerings, work experience and organizational characteristics, and work experience and career offerings. The study was conducted on 131 senior college students in the faculty commercial sciences in a foundation university in Turkey. The frequency distribution analyses, mean analyses and chi-square analyses were conducted to the data. Keywords: Organizational Expectations, Career Expectations, Turkish College Students, Turkey

ORGANIZATIONAL CHARACTERISTICS AND CAREER OFFERINGS OF

COMPANIES

College students are aware of changes in organizational characteristics to figure out the appropriate organization to work for. They prefer to work for modern, decentralized and team-oriented companies which they can manage themselves and play leadership roles. The characteristics of traditional organizations are centralization, hierarchy, formalization, bureaucracy, labour sharing, work specialization, clearly expressed tasks, formation of structural skills, authority, functional divisions, stability, coordination, top to bottom and written communication [1][2]. Large, bureaucratic, and hierarchical structures can not respond to environmental changes. Thus, companies have to restructure their organizations continuously to adapt internal and external changes. Modern organizations have the following characteristics: staff participation, the delegation of tasks and responsibilities, development of the communication system, etc. [1]. The characteristics of entrepreneurial organizations are autonomy, team oriented, minimum job description, innovation supportive, creative, horizontal, bottom. Nowadays, functional, linear, linear-staff-organizations are criticized whereas matrix, tensor, divisional, Likert’s organizational structures with communicating groups, network and virtual organizations have become popular [2].

College students who are aware of global changes in career offerings can have high expectations from companies. They prefer to work for companies which make long term career planning,

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provide safe working environment, personal development opportunities, comprehensive and tailored compensation packages. The job market needs to know the characteristics and expectations of students to tailor conditions to hire, retain and motivate them. Performance appraisals are critical to determine the appropriate compensation strategy.

Companies can use 360 degree feedback evaluation method, rating scales, critical incident method, essay method, work standards method, ranking method, forced distribution method, behaviorally anchored rating scales method, and results based system as performance appraisal methods [3, pp. 252-259]. Base pay, merit pay, incentive pays, sales incentives, bonuses, group-based incentive plans, managerial and executive incentive pay are widely used pay system methods [4, pp. 255-297]. Major objectives of companies in human resource management are attracting, retaining, recognizing and motivating employees. Rewards can be categorized as follows: individual rewards (base pay, contingent pay, incentives, bonuses, profit sharing, shares), transactional rewards (pensions, healthcare, holidays, other perks, flexibility), relational rewards (training, career development, learning and development) and communal rewards (leadership, recognition, values, job design, achievement, work-life balance) [5, pp. 635-641]. Companies focus on flexible work arrangements such as flextime, telecommuting, permanent part-time work, job sharing, compressed work weeks, more work/fewer hours to provide work-life balance and adapt the needs of the business environment and workforce. Companies can provide paid vacations, sick pay and paid time off, sabbaticals as payment for time not worked. Employee services can include relocation, food services/subsidized cafeterias, financial services, legal services, scholarships for dependents. Companies also focus on managing stress, repetitive stress injuries, ergonomics, burnout, and physical fitness programs [3, pp. 317-377]. Employers have to get precautions for employee safety, create a safety culture and provide training to employees to understand nature hazards of the workplace, and safety rules [5, pp. 540-542].

STUDIES ON CAREER EXPECTATIONS OF STUDENTS

The needs of students from work can be determined as salary, work conditions, work guarantees, good work atmosphere, understanding supervisor, good interpersonal relations, wish to belong a social group, possibility to use skills and knowledge, quick career, prestige, possibilities of promotion. A study conducted in Lithuania and Estonia shows that students have positive attitudes to work. They want to work to have financial independence and continue their education in lifelong learning concept. Most of the students want to perform as better as possible regardless their salaries [6]. Job satisfaction, positive job attitudes, work ethics, social and economic work motivations can determine positive work attitude [7]. A study conducted on undergraduate business students in US shows that male students expect higher starting salaries than female students [8]. According to a study conducted on Turkish college students, money attitudes of college students relating to past and future were linked to some demographics especially gender and age variables. Money in the past indicated that when families’ economic situation change during childhood and the perception of importance of money for their family members and themselves vary according to age and gender. It was found that happiness with a financial situation during the past 6 months vary depending on age. On the other hand, perceptions about their families’ financial position varied according to family type. Money in the

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future indicated that changes in expectations about their economic situation in the next 5 years varied according to gender and age. However, expectations related to their country’s economic situation in the next 5 years varied according to gender [9]. Novack & Novack (1996), Thorn & Gilbert (1998), Sanders, Lengnick-Hall, Lengnick-Hall, & Steele-Clapp (1998), Stone & McKee (2000), Peake & Harris (2002) conducted studies in the literature about the future expectations of work and family activities of students [10]. A study shows that family leave, sick leave and vacation leave are more important to women than to men. Women also believe that maternity leave and paternity leave are more important than men. Family leave is the most important benefit for both women and men [11].

METHODOLOGY

This study is a leading study to determine organizational and career expectations of Turkish college students. The purposes of this study are to explore the organizational and career expectations of Turkish college students from companies which they will work for when they graduate. The study also tries to find out the associations between sex and organizational characteristics, sex and career offerings, work experience and organizational characteristics, work experience and career offerings. The study was conducted on 131 senior college students in the faculty of commercial sciences in a foundation university in Turkey. These students took courses in the fields of management and human resource management. The data was collected via questionnaire which had questions in three sections. The first section consists of questions about sex, age, major and work experiences of students. The second section has 19 questions about organizational expectations of students. The third section has 29 questions about career expections of students. The 5 point Likert scale was used to learn expectations of students for the second and the third sections. The questionnaires were filled by students before their courses in their classrooms. The frequency distribution analyses, mean analyses and chi-square analyses were conducted to the data. The 5% significance level is used for chi square analyses. The observed frequencies were merged to conduct chi-square analyses (very important and important were merged as one of the observed frequency whereas very unimportant, unimportant, neither important, nor unimportant were merged as another observed frequency in a crosstab).

FINDINGS OF THE STUDY The findings of the study show that 55% of respondents are males whereas 45% of them are females. When the ages of the respondents are analyzed, 32% of respondents are 23 years old, 30% of them are 22 years old, 13% of them are 24 years old, 13% of them are 21 years old, 9% of them are 25 years old and 3% of them are more than 25 years old. The findings show that 34% of respondents are international trade major, 25% them are business administration major, 21% of them are banking and finance major and 20% of them are tourism major. Most of the students (59%) worked in any business whereas few of them (41%) did not have any job experience except internships. Most of the respondents (64%) have less than a year job experience. On the other hand, 26% of respondents have more than 2 years and 10% of respondents have 1-2 years job experiences. The Cronbach´s Alpha for organizational characteristics is 0,748 whereas the Cronbach´s Alpha for career offerings is 0,866.

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Table I. Importance of Organizational Characteristics of The Company

ORGANIZATIONAL CHARACTERISTICS OF THE COMPANY

Very Important

n (%) Important

n (%)

Neither Important, Nor Unimportant

n (%) Unimportant

n (%)

Very

Unimportant n (%)

Total n (%)

Missing

n (%) Total n (%)

Mean

Std. Dev.

1. The company is institutionalized 61 (46,6) 59 (45,0) 7 (5,3) 3 (2,3) 0 (0) 130 (99,2) 1 (0,8) 131(100,0) 4,369 0,695 2. The general manager and key managers of the company are professional managers 52 (39,7) 69 (52,7) 8 (6,1) 0 (0)

0 (0) 129 (98,5)

2 (1,5)

131(100,0)

4,341

0,593

3. Job descriptions of employees are written 61 (46,6) 49 (37,4) 15 (11,5) 6 (4,6) 0 (0) 131 (100,0) 4,260 0,838

4. Authorities of employees are written 49 (37,4) 54 (41,2) 20 (15,3) 7 (5,3) 1 (0,8) 131 (100,0) 4,092 0,898

5. Responsibilities of employees are written 43 (32,8) 51 (38,9) 24 (18,3) 4 (3,1) 3 (2,3) 125 (95,4) 6 (4,6) 131(100,0) 4,016 0,942 6. Relations of employees with people inside and outside of organization are written & determined 17 (13,0) 51 (38,9) 37 (28,2) 15 (11,5)

11 (8,4) 131 (100,0)

3,366

1,111

7. Performance appraisals of employees are conducted based on their job descriptions, systematically & regularly 35 (26,7) 71 (54,2) 19 (14,5) 2 (1,5)

0 (0) 127 (96,9)

4 (3,1)

131(100,0)

4,095

0,695

8. Awards of employees are based on their performance appraisals 57 (43,5) 54 (41,2) 17 (13,0) 0 (0)

0 (0) 128 (97,7) 3 (2,3)

131(100,0)

4,313

0,696

9. The organizational structure of the company is hierarchical 19 (14,5) 53 (40,5) 40 (30,5) 13 (9,9)

6 (4,6) 131 (100,0)

3,504

1,011

10. The manager-subordinate relations are based on giving commands & sending reports 13 (9,9) 47 (35,9) 36 (27,5) 23 (17,6)

10 (7,6) 129 (98,5)

2 (1,5)

131(100,0)

3,233

1,101

11. The decisions are made centrally by top management 25 (19,1) 57 (43,5) 30 (22,9) 13 (9,9)

3 (2,3) 128 (97,7)

3 (2,3)

131(100,0)

3,688

0,978

12. The manager makes decisions by himself without the participation of subordinates 18 (13,7) 33 (25,2) 23 (17,6) 29 (22,1)

24 (18,3) 127 (96,9)

4 (3,1)

131(100,0)

2,937

1,350

13. Employees are tied (bound) to one manager 14 (10,7) 37 (28,2) 43 (32,8) 23 (17,6) 9 (6,9) 126 (96,2) 5 (3,8) 131(100,0) 3,191 1,086 14. Employees can work in teams with their colleagues 47 (35,9) 58 (44,3) 22 (16,8) 1 (0,8)

2 (1,5) 130 (99,2)

1 (0,8)

131(100,0)

4,131

0,830

15. Employees can manage themselves (being autonomous) 57 (43,5) 55 (42,0) 14 (10,7) 2 (1,5)

0 (0) 128 (97,7)

3 (2,3)

131(100,0)

4,305

0,727

16. Giving authority to employees to use organizational resources 67 (51,1) 50 (38,2) 12 (9,2) 1 (0,8)

0 (0) 130 (99,2)

1 (0,8)

131(100,0)

4,408

0,690

17. Forming innovative/creative organization climate 73 (55,7) 45 (34,4) 11 (8,4) 2 (1,5)

0 (0) 131 (100,0)

4,443

0,714

18. The organization has a leader 49 (37,4) 61 (46,6) 16 (12,2) 4 (3,1) 0 (0) 130 (99,2) 1 (0,8) 131(100,0) 4,192 0,769 19. Developing leadership characteristics of employees 56 (42,7) 60 (45,8) 12 (9,2) 2 (1,5)

1 (0,8) 131 (100,0)

4,282

0,757

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The findings about the importance of organizational characteristics of the company show that students prefer to work in modern, decentralized organizations which support innovation/creativity (Table I). They would like to manage themselves and have authorities to use organizational resources. On the other hand, students are aware of the importance of institutionalization and prefer to work institutional organizations where they can work with professional managers and be awarded based on their performance appraisals. Maslow define five needs of people. They are physiological needs, safety/security needs, love/belonging needs, esteem needs and self-actualization needs. Herzberg distinguishes two factors which companies need to provide for their employees: hygiene factors and motivation factors. Work itself, responsibility, achievement, recognition, advancement and growth are hygiene factors whereas working conditions, job security, company’s policies and administration, salary, supervision, interpersonal relations and status are motivation factors [12, p. 53-702]. Providing legal social security insurance, clean and modern working place, meal coupons/meals, and shuttle service for employees satisfy physiological and security needs of employees. They can also be considered as hygiene factors. However, promoting employees satisfy self-actualization needs of employees. It can be considered as motivation factor. Hygiene and motivation factors can vary depending upon the development level of a country. Providing flexible working hours, distance working opportunities, nursery, gym, maternal/paternal leave and family leave can be considered as hygiene factors for employees in developed countries such as US. However, these factors can be motivation factors for employees in developing countries such as Turkey. Promoting, providing long term career planning, good business relations, prestige, career opportunities abroad and in the country, nonmonetary rewards, training and personal development can be considered as motivation factors in Turkey. Although there are laws and regulations in Turkey, there are also several companies which work off-the book. The GNP per capita is around 10.000 USD. Although respondent students attend to a foundation university and pay tuitions around 8.000 USD every year, they seem that they are aware of the real working conditions in Turkey. They don’t have very high expectations from companies which they will work in the future. When the findings about the importance of career offerings of the company are analyzed (Table II), it is found out that students would like to satisfy their physiological and safety/security needs. They focus on finding hygiene factors more than motivation factors in their workplaces. They want to be promoted to satisfy their self-actualization needs.

It is also tried to determine the associations between sex and organizational characteristics, sex and career offerings, work experience and organizational characteristics, work experience and career offerings in this paper. The rejected hypotheses are shown in Table III. It can be concluded that employers in Turkey need to consider sexes and work experiences of their employees to determine organizational characteristics and career offerings of their companies. Female students give more importance to work for organizations where they can work independently, have authority to use organizational resources and behave according to work ethics than male students. They also give more importance to work for organizations which will provide shuttle service, good business relations, career opportunities abroad, nonmonetary rewards, maternal/paternal leave and nursery, gym etc. than male students. Students who have work experiences give more importance to work in organizations which have leaders than students who don’t have work experiences. Female students prefer to work in decentralized and ethical organizations which will help them to improve themselves and ease their lives more than male students. On the other hand, students who have work experiences want to work with leaders more than students who don’t have work experiences.

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Table II. Importance of Career Offerings of the Company

CAREER OFFERINGS OF THE COMPANY

Very Important

n (%) Important

n (%)

Neither Important, Nor Unimportant

n (%) Unimportant

n (%)

Very

Unimportant n (%)

Total n (%)

Missing n (%)

Total n (%)

Mean

Std. Dev.

1. Providing long term career planning for employees 63 (48,1) 57 (43,5) 8 (6,1) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,411 0,645 2. Providing sector average salaries to employees 64 (48,9) 58 (44,3) 6 (4,6) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,434 0,623

3. Providing legal social security insurance to employees 91 (69,5) 29 (22,1) 8 (6,1) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,628 0,638

4. Providing private health insurance to employees 71 (54,2) 45 (34,4) 10 (7,6) 2 (1,5) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,445 0,708 5. Providing private retirement insurance (pension) for employees 63 (48,1) 50 (38,2) 15 (11,5) 0 (0)

0 (0) 128 (97,7)

3 (2,3)

131(100,0)

4,375

0,687

6. Providing meal coupons/meals to employees 88 (67,2) 30 (22,9) 10 (7,6) 0 (0) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,609 0,631

7. Providing shuttle service for employees 81 (61,8) 35 (26,7) 8 (6,1) 4 (3,1) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,508 0,753

8. The working place is clean and modern 88 (67,2) 33 (25,2) 4 (3,1) 2 (1,5) 1 (0,8) 128 (97,7) 2 (2,3) 131(100,0) 4,602 0,703

9. The job requires travel in the country 22 (16,8) 28 (21,4) 61 (46,6) 15 (11,5) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,395 0,980

10. The job requires travel abroad 22 (16,8) 36 (27,5) 51 (38,9) 17 (13,0) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,442 0,999

11. Providing good business relations (network) 47 (35,9) 63 (48,1) 16 (12,2) 3 (2,3) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,194 0,740

12. Providing career opportunities in the country 52 (39,7) 60 (45,8) 15 (11,5) 1 (0,8) 0 (0) 128 (97,7) 3 (2,3) 131 (100,0) 4,266 0,726

13. Providing prestige to careers and personal lives of employees 56 (42,7) 54 (41,2) 14 (10,7) 2 (1,5) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 4,250 0,832

14. Providing career opportunities abroad 48 (36,6) 52 (39,7) 23 (17,6) 3 (2,3) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 4,078 0,924

15. Providing company cars to employees 39 (29,8) 49 (37,4) 28 (21,4) 8 (6,1) 5 (3,8) 129 (98,5) 2 (1,5) 131 (100,0) 3,845 1,049

16. Providing company cell phones, laptop etc. to employees 47 (35,9) 52 (39,7) 21 (16,0) 7 (5,3) 2 (1,5) 129 (98,5) 2 (1,5) 131 (100,0) 4,047 0,943

17. Providing monetary rewards to employees 73 (55,7) 43 (32,8) 8 (6,1) 3 (2,3) 0 (0) 127 (96,9) 4 (3,1) 131 (100,0) 4,465 0,722 18. Providing company stocks to employees as monetary rewards 36 (27,5) 53 (40,5) 34 (26,0) 3 (2,3) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 3,922 0,884

19. Providing nonmonetary rewards to employees 69 (52,7) 38 (29,0) 18 (13,7) 4 (3,1) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,333 0,832

20. Promoting employees 91 (69,5) 32 (24,4) 6 (4,6) 0 (0) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,659 0,566 21. Providing precautions for work safety of employees in the workplace 77 (58,8) 43 (32,8) 8 (6,1) 0 (0)

0 (0) 128 (97,7)

3 (2,3)

131 (100,0)

4,539

0,614

22. Providing arrrangements in machineries & tools for employees to work comfortably & appropriately 65 (49,6) 55 (42,0) 7 (5,3) 1 (0,8)

0 (0) 128 (97,7)

3 (2,3)

131 (100,0)

4,438

0,637

23. Providing training & personal development opportunities to employees 69 (52,7) 52 (39,7) 7 (5,3) 1 (0,8)

0 (0) 129 (98,5)

2 (1,5)

131 (100,0)

4,458

0,673

24. Behaving according to work ethics in the organization 67 (51,1) 51 (38,9) 9 (6,9) 2 (1,5) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,419 0,693

25. Providing flexible working hours to employees 42 (32,1) 58 (44,3) 24 (18,3) 3 (2,3) 2 (1,5) 129 (98,5) 2 (1,5) 131 (100,0) 4,047 0,865

26. Providing distance working opportunities to employees 36 (27,5) 42 (32,1) 38 (29,0) 10 (7,6) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,760 1,042 27. Providing nursery, gym etc. to employees 45 (34,4) 42 (32,1) 30 (22,9) 9 (6,9) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 3,930 1,005 28. Providing maternal/paternal leave to employees 71 (54,2) 34 (26,0) 9 (6,9) 5 (3,8) 5 (3,8) 124 (94,7) 7 (5,3) 131 (100,0) 4,298 1,040 29. Providing family leave for employees for their sick relatives 69 (52,7) 49 (37,4) 8 (6,1) 2 (1,5) 1 (0,8) 129 (98,5) 2 (1,5) 131 (100,0) 4,419 0,747

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Table III. The Rejected Hypotheses of The Study & Results of The Chi Square Analyses

Hypotheses df X2 P Table value

Results

H1: There is no association between sex and being autonomous (employees can manage themselves)

1 5,206 0,023 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H2: There is no association between sex and giving authority to employees to use organizational resources

1 5,245 0,022 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H3: There is no association between sex and providing shuttle service for employees

1 7,307 0,007 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H4: There is no association between sex and providing good business relations

1 8,052 0,005 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H5: There is no association between sex and providing career opportunities abroad

1 4,966 0,026 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H6: There is no association between sex and providing nonmonetary rewards to employees

1 8,114 0,004 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H7: There is no association between sex and behaving according to work ethics in the organization

1 6,507 0,011 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H8: There is no association between sex and providing nursery, gym etc. to employees

1 6,873 0,009 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H9: There is no association between sex and providing maternal/paternal leave to employees

1 15,530 0 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

H10: There is no association between having work experience and having a leader in the organization

1 8,527 0,003 3,84 The null hypothesis is rejected at the 5% level. There is an evidence in the data against the hypothesis.

CONCLUSION

Turkey is a developing country. Almost 99% of companies are SMEs in Turkey. Most of them are noninstitutionalized family businesses. Functional organizational structure is widely used by companies. Several public and private companies use bureaucratic management style. Students in this study have learned modern organizational structures but they have not experienced them. They prefer to work in modern, decentralized organizations which offer creative/innovative organizational climate, being autonomous and having authority to use organizational resources. On the other hand, they give importance to institutionalization, and being awarded based on performance appraisals. Turkish students have low career expectations. First, they focus on satisfying their physiological and safety/security needs by having sector average salaries, legal social security, meals, safe, clean, modern, comfortable working place. They give importance to work ethics and family leave. They focus on hygiene factors more than motivation factors. However, they also focus on promotion and training and personal development to satisfy their self-actualization needs. Having nonmonetary rewards, network, prestige, national and international career opportunities are not their priorities. They do not demand comprehensive compensation packets. They don’t care alot about travel requirements of their jobs. Their major focus is not having company cars,

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laptops, etc. Since, respondent students have not experienced real worklife, they can not judge its difficulties and opportunities. On the other hand, there are differences between female and male students for their organizational and career expectations. Female students give more importance to work for modern, decentralized, and ethical organizations where they can be appreciated, satisfy their self-actualization needs and work easily than male students. Students who have work experiences understand the importance of working with leaders more than students who do not have work experiences. This study is a leading study to determine organizational and career expectations of Turkish college students. Cross-cultural studies can be conducted to find out the differences in the expectations of students in developed and developing countries. Conducting this study in only one foundation university in Turkey and its sample size are major limitations of this study. If this study is conducted on larger sample of students, other differences can be observed between male and female students, and students who have work experiences and students who don’t have work experiences. However, it is a leading study in Turkey to figure out organizational and career expectations of college students. As it is observed that Turkish college students are not very demanding about organizational characteristics and career offerings of companies. It is believed that when the development level of Turkey increases, students will be more demanding about their organizations and careers. Companies can use the findings of this study to make organizational changes and customize their offerings to new graduates.

* This paper is financially supported by Istanbul Commerce University.

REFERENCES

[1] Kubrak, A., Koval, K., Kavaliauskas, V., & Sakalas, A. Organizational Structure

Forming Problems in Modern Industrial Enterprise. Engineering Economics, 2007, 1(51), 103-109. [2] Sakalas, A., & Venskus, R. Interaction of Learning Organization and Organizational

Structure. Engineering Economics, 2007, 3(53), 65-70. [3] Mondy, R.W. Human Resource Management. Upper Saddle River, N.J.: Pearson Prentice Hall, 2008. [4] Bernardin, H.J. Human Resource Management: An Experiential Approach. International Fourth Edition, Boston: McGraw Hill, 2007. [5] Torrington, D., Hall, L. & Taylor, S. Human Resource Management. 7th Edition, Harlow: FT Prentice Hall, 2008. [6] Kumpikaite V., & Alas, R. Students’ Attitudes to Work and Studies: Practical Case. Economics and Management, 2009, 14, 582-588. [7] Josiam, B.M., Crutsinger, C., Reynolds, J.S., Dotter, T-V., Thozhur, S., Baum, T., & Devine, F.G. An Empirical Study of the Work Attitudes of Generation Y College Students in

the USA: The Case of Hospitality and Merchandising Undergraduate Majors. Journal of Services Research, 2009, 9(1), 15-30. [8] Black, G.S., & Benavides, A. Socioeconomic Factors and Business Student Plans and

Expectations. Atlantic Economic Journal, 2008, 36, 365-366. [9] Özgen Ö. & Bayoğlu, A.S. Turkish College Students’ Attitudes Towards Money. International Journal of Consumer Studies, 2005, 29(6), 493-501.

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[10] Weer, C.H., Greenhouse, J.H., Colakoglu, S.N., & Foley, S. The Role of Maternal

Employment, Role-Altering Strategies, and Gender in College Students’ Expectatitions of

Work-Family Conflict. Sex Roles, 2006, 55, 535-544. [11] Waner, K.K., Winter, J.K., & Mansfield, J.C. Family Benefits-What are Students’

Attitudes and Expectations by Gender? Journal of Education for Business, 2007, 82(5), 291-294. [12] Daft, R.L. The New Era of Management. Mason, Ohio: Thomson-South Western, 2006.

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TEACHERS’ CULTURAL VALUES AND CONFLICT APPROACHES

Aylin Kirisci Ali Ilker Gumuseli

Yildiz Technical University Yildiz Technical University Faculty of Education Faculty of Education

Istanbul-Turkey Istanbul-Turkey [email protected] [email protected] Phone: +90 0505 887 71 68 Phone: +90 212 383 48 20

Fax: +90 212 383 48 08

ABSTRACT

This study aims to figure out whether there are statistically significant relationships between teachers’ value preferences and approaches to conflict. Among value groups, teachers prefer mostly self-transcendence, secondly conservation, thirdly openness to change, and lastly, self-enhancement. The mean of the traditional approach statements of teachers to conflict is higher than the mean of their modern approach statements. There is a positive correlation between the modern approaches to conflict and the value placed on openness to change value group. There are positive correlations between the traditional approaches to conflict and the value placed on openness to change, conservatism, self-enhancement and self-transcendence.

Keywords: value, culture, conflict, teachers

CULTURE AND VALUES

The concept of culture is a widely analyzed social subject, and it gains different meanings as various disciplines define it in their own boundaries. Therefore there is no consensus on its definition. In support, in the words of Hofstede [7, p.25]: “Culture is to a human collectivity what personality is to an individual”. In the present study, the following definition is utilized, based on Hofstede [7] [9], Kluckhohn & Strodtbeck [13], Triandis [26], Bodur & Kabasakal [3] and Harcar [6]’s work: “Culture distinguishes the members of one human group from another; has been developed throughout the history; consists of traditional (i.e. historically derived and selected) ideas, values, attitudes and common behaviors.” Schwartz [23] has pointed out that values are considered the most appropriate means for measuring and comparing two cultures. Schwartz and Bilsky [21] define values as people’s conceptions of goals that serve as guiding principles in their lives. They classify the value types into ten and then divide these ten value types into two dimensions. The first dimension represents “openness to change” (combining value types of self-direction and stimulation) versus “conservation” (combining security, conformity and tradition). The second dimension represents “self-transcendence” (combining benevolence and universalism) versus “self-enhancement” (combining power and achievement)”. Hedonism value type is related to both openness to change and self-enhancement value groups [22, p.90] [25]:

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CULTURAL VALUES AND CONFLICT MANAGEMENT

Conflict is inevitable among humans. When two or more social entities (i.e. individuals, groups, organizations and nations) come into contact with one another, there may be inconsistent relationships due to different attitudes, values, beliefs and skills. Conflict is a crucial concept for organizations as well as social issues. As Baron [2, p.198] indicates, “Organizational conflict is an important topic for both managers and for scientists interested in understanding the nature of organizational processes”. There are three views about organizational conflict [19, pp.7-15]: According to the classical organization theorists such as Fayol, Gulick and Urwick, Taylor, Weber conflict was detrimental to organizational efficiency and should be minimized. Organizational effectiveness could only be possible via harmony, cooperation and the absence of conflict. Again neo-classical organization theorists such as Mayo, Lewin, and Whyte viewed conflict as an evil, a symptom of the lack of social skills. So they tried to eliminate it by improving the social system of the organization. However the modern view of conflict emphasizes the necessity of conflict, and states that “healthy” organizations should have intra-organizational conflict to a certain extent. A moderate amount of conflict is not necessarily dysfunctional for organizations.

OBJECTIVES OF THE STUDY

The main aim of this study is to verify the personal value preferences of teachers having various socio-economic and ethnic backgrounds, at different maturity levels, having different interests and abilities, different needs and points of view, and their perceptions of conflicts. In order to attain the objectives, the following research questions were asked:

1. What are the cultural value preferences of teachers? 2. What are the teachers’ approaches to conflict? 3. Are there any statistically significant relationships between teachers’ cultural value

preferences and approaches to conflict?

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METHOD

Sample The universe participants of this study are the teachers working at 81 public schools in the counties of Sisli and Esenler in Istanbul, Turkey. There is a total of 3674 teachers working in these schools. By random sampling, data were collected from 367 teachers; 201 from Sisli and 165 from Esenler (the two counties of Istanbul having different socio-economic background) during the 2008-2009 education year.

Measures

Data were collected by means of a questionnaire containing closed-ended questions. The questionnaire has got three sections: 7 multiple choice questions of demographic information, followed by Schwartz’s Value Survey consisting of 57 values, and the Survey of Approaches

to Conflict [12] consisting of 22 items. Data were analyzed by percentage, arithmetical mean, standard deviation, and series of t-tests, ANOVA and LSD tests and Pearson product –correlation.

RESULTS AND DISCUSSION

Results about the Cultural Values of Teachers

The value preferences of teachers according to the Schwartz’s two dimensions are given in Table I: Table I: Mean and Standard Deviation of Teachers’ Value Preferences

Values N S

Openness to Change 367 4.045 1.014 Conservation 367 4.432 0.875

Self-Enhancement 367 3.808 1.062 Self-Transcendence 367 4.977 0.871

As it is seen from the table, Turkish teachers value self-transcendence ( =4,977) more than others. To prioritize, conservatism ( =4,432) is the second, openness to change ( =4,045) is the third, and self-enhancement ( = 3,808) is the last value. It is very favorable and positive that teachers chose self transcendence as the first value group in ranking. Because self transcendence value group consists of the values supporting the refusal of selfishness for the benefit of the people and the nature. In this regard, the results are in consistent with the expectations and coherent with the values that are desired to be internalized by teachers. Teachers chose conservation as the second value group in ranking. Conservation consists of conformity and security value types, is very much in line with the social structure of Turkish people. Furthermore Schwartz [23] put conservation and self transcendence value groups under the umbrella of collectivism. Therefore it can be inferred that teachers are in consistent with the collectivist structure of Turkish society [1] [9] [18] [20]. The third value group chosen by teachers was found as openness to change. Turkish culture highlights the importance of the maintenance of custom and usage and finds change as a malign thing [4]. On the other hand, Turkish society has a new structure adopting the western technology, institutions and approaches over the traditional values [15]. Therefore we can say that quite naturally teachers discount the value type of openness to change. The

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last value group in the rank was found as self enhancement which includes the value types of power, achievement and hedonism. We can say that this is reasonably appropriate to the requirements of being a teacher and appropriate to the expectations. Results about the Conflict Approaches of Teachers The teachers’ approaches to conflict are given in Table II: Table II: Mean and Standard Deviation of Teachers’ Approaches to Conflict

Values N S

Modern Approach 367 2.965 0.805

Traditional Approach 367 3.304 0.750

As seen from the table, Turkish teachers’ approaches to conflict are respectively

= 2,965 and = 3,304 on a scale of 5 point Likert. Just looking at the means, we can say that although traditional approach has a higher mean, teachers said “neither agree nor disagree” for both traditional and modern approaches. This can be interpreted as Kongar [14] indicated: “Turkish society has lost its traditional values though lots of reforms placed with the republican era and it hasn’t possessed the “modern” characteristics yet. Moreover the relationship among people hasn’t taken shape of a stabilized capitalist relation as it is in Western societies and so Turkish society is not a real industrialized society.” Kozan and Ergin [17, p. 406] think similarly: “Turkey is a country in transition to mature industrialized society, and its culture reflects a duality created by the coexistence of Western institutions and traditional values […..] This is reflected in a high power distance score indicating low participation and reluctance to disagree with superiors [7].” On the other hand this result can mean that teachers don’t find conflict as a chance for revolution or change, but rather, as a violation of order and a problem that should immediately be solved. This can be a result of bureaucratic structure and being a civil servant. Because government agencies and state-owned companies are subject to by-laws and regulations so as Kozan and Ergin [16, p. 255] claims, formal mechanisms may substitute for the traditional methods of conflict resolution used in the society. Results about the Relationship between the Cultural Values and Conflict Approaches of

Teachers

As it is seen from the table III, a positive relationship between the modern approach to conflict and the openness to change value group is observed: Table III: Regression Analysis between the Modern Approach and Openness to Change

Value Group

Dependent Variable: Modern Approach

Independent Variables Coefficients Standard Error t-statistic P

Constant 2.61927 0.17222 15.20922 0.00000

Openness To Change 0.08556 0.04130 2.07140 0.03902* *p<.05 Modern approach sees conflict as an inevitable occurrence and accepts it to a certain extent as a prerequisite for efficiency. On the other hand unmanaged or uncontrolled conflicts are dysfunctional [11, p.9]. Openness to change value group combines value types of self-

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direction and stimulation. Self-direction means independent thought and action-choosing, creating and exploring; stimulation means excitement, novelty, and challenge in life [24]. In the light of these definitions, it is very reasonable to say that teachers who prefer openness to change value group are brave and open to take risks so they don’t hesitate in taking part in conflicts, and even they can start conflict when necessary. There is a positive relationship between the traditional approach to conflict and openness to change value group. The table below shows this: Table IV: Regression Analysis between the Traditional Approach and Openness to

Change

Dependent Variable: Traditional Approach

Independent Variables Coefficients Standard Error t-statistic P

Constant 2.99044 0.24431 18.63602 0.00000

Openness to Change 0.07751 0.04835 2.01398 0.04475* *p<.05 This is an unexpected result, because traditional approach advocates conflict as an evil and dysfunctional whereas people standing in the openness to change value group are brave and take risks, they are independent and they favor change to passive self-restriction. Teachers adopting such values are expected to prefer modern approach. However statistical results show that teachers in openness to change value group prefer traditional approach during conflict. This may be the reflection of being a civil servant and working in a government school. Because as Kozan and Ergin [16, p. 255] states: “Compared to private companies, government agencies and state owned companies are subject to a myriad of laws, by-laws, and regulations. These place restrictions on the conflict management choices available to members. Formal mechanisms may substitute for the traditional methods of conflict resolution used in the society. The whim of personality and the role of personal values in administrative decisions are comparatively more limited in state bureaucracies.” From a different point of view, teachers who are situated in the openness to change value group are self indulgent, challenging, and independent, they choose their own goals, so during conflicts their being self assertive, obstinate and oppressive, in other words their adoption of traditional approach to conflict is not an unsurprising thing. We can say that the government organizations choose traditional approach to conflict according to their administration strategies. Because of this, it may not be an inconsistent situation that self indulgent and brave teachers favoring the change adopt traditional approach in order not to submit the suppressive structure of conflict in government schools. There is a statistically significant positive relationship between the traditional approach and conservatism value group. Table V shows this relationship: Table V: Regression Analysis between the Traditional Approach and Conservatism

Value Group

Dependent Variable: Traditional Approach

Independent Variables Coefficients Standard Errors t-statistic P

Constant 2.21858 0.19412 11.42879 0.00000

Conservatism 0.24491 0.04298 5.69876 0.00000*

*p<.05 This is an expected result, because teachers who have traditional approach to conflict most probably adopt traditional value group combining tradition, conformity and security value types. So we can say that, teachers favoring harmony and stability of society and relationships; restraint of actions, inclinations likely to upset or harm others and violate social

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expectations or norms; being moderate, humble, devout and respectful for tradition, see conflict as an undesirable occurrence and do their best to suppress it. There is a statistically significant positive relationship between the traditional approach and self enhancement value group. The table below shows this: Table VI: Regression Analysis between the Traditional Approach and Self-

Enhancement Value Group

Dependent Variable: Traditional Approach

Independent Variables Coefficients Standard Errors t-statistic P

Constant 2.91886 0.14457 20.18963 0.00000

Self Enhancement 0.10113 0.03657 2.76488 0.00598* *p<.05

The self enhancement value group is an orientation toward self-interest which means priority of individual interest. It includes the value types of power, achievement and hedonism. Therefore, it is not a surprising result that teachers who adopt these values see conflict from the traditional viewpoint and try to suppress it by using force and dominance. As a value type power stresses “social status and prestige, control or dominance over people and resources” [23, p.3] Similarly, Kozan and Ergin [16, p.253] expected a relationship between forcing (i.e. competing, dominating) style in conflict and values of power and achievement.

There is a statistically significant positive relationship between the traditional approach and self transcendence value group. Table VII shows this relationship: Table VII: Regression Analysis between the Traditional Approach and Self

Transcendence Value Group

Dependent Variable: Traditional Approach

Independent Variables Coefficients Standard Errors t-statistic P

Constant 2.48397 0.22346 11.11600 0.00000

Self Enhancement 0.16475 0.04423 3.72503 0.00023*

*p<.05 Teachers situating in self transcendence value group have given up their selfish purposes, think the benefit of the people and the nature, they are benevolent and universal people. For this reason we can say that their adoption of traditional approach is not an unexpected result. Most probably they don’t want any conflict to occur. So they may choose avoidance or accommodation in order to prevent or suppress conflict. Accommodation places high concern for others and low concern for self. Schwartz [23] [16, p.253] also provides empirical evidence for this relationship; in the prisoner dilemma experiment, benevolence and universalism were the best predictors of concern for others’ gains.

CONCLUSION

Conflict is a very natural phenomenon in democratic societies. From this perspective it could be said that the existence of conflict in schools, between headteachers and teachers or among teachers is also very natural and healthy. Even the promotion of conflict in order to enhance the efficiency and productivity of the organization could be the case.

Gumuseli [5, p.2] finds conflict because of cultural differences very usual and common and says that conflicts are more evident in schools since the main input, process and output of schools are humans. The school environment is appropriate to conflicts between and among teachers, students, parents, administrators and other stakeholders from society.

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One of the keys of conflict management is to detect the exact source of the conflict and to clear out the approaches to conflict. Therefore it is very important to display the conflict approaches and the reasons of these approaches of teachers. To sum up, the results of the research are below:

1. Teachers prefer mostly self-transcendence, secondly conservation, thirdly openness to change and lastly self-enhancement as a value group.

2. Teachers prefer traditional approach to conflict more than modern approach.

3. There is a positive relationship between the modern approach to conflict and the openness to change value group. In other words teachers who are open to change choose modern approach during conflict.

4. There is not any significant relationship between the teachers’ having modern approach to conflict and preferring conservatism, self transcendence and self enhancement value groups.

5. There is a positive relationship between the traditional approach to conflict and openness to change, conservatism, self transcendence and self enhancement value groups.

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Values. Journal of Personality and Social Psychology, 1987, 53, 550-562. Retrieved from http://psycnet.apa.org/?fa=main.doiLanding&doi=10.1037/0022-3514.53.3.550

[22] Schwartz, S. H. & Huismans, S. Value Priorities and Religiosity In Four Western Religions. Social Psychology Quarterly, 1995, 58, 88-107. Retrieved from http://www.jstor.org/pss/2787148 [12.04.2009].

[23] Schwartz, S. H. Value Priorities and Behavior: Applying a Theory Integrated Value System. In C. Seligman, J. M. Olson, & M. P. Zanna (Eds.) The Psycology of Values.

The Ontario Symposium, 1996, 8, 119-144 Retrieved from http://www.palermo.edu/cienciassociales/publicaciones/pdf/Psico2/2Psico%2007.pdf

[24] Schwartz, S. H. Basic human values: Their content and structure across countries. In A. Tamayo & J. B. Porto (Eds.) Values and Behavior In Organizations. Petrópolis, Brazil: Vozes. 2005, 21-55 Retrieved from http://segrdid2.fmag.unict.it/Allegati/convegno%207-8-10-05/Schwartzpaper.pdf

[25] Schwartz, S. H., Melech, G., Lehmann, A., Burgess, S., Harris, M., & Owens, V. Extending the cross-cultural validity of the theory of basic human values with a different method of measurement. Journal of Cross-cultural Psychology, 2001, 32 (5), 519-542.

[26] Triandis, H. C. Culture and social behavior. New York: McGraw-Hill, 1994.

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MODERN WORKFORCE CHALLENGE: APPROPRIATELY

EVALUATING EMPLOYEES’ JOB PERFORMANCES

Jack N. Kondrasuk* Nick Slepnikoff Justin Gomez Jessica Peters

Danielle Castro

*Pamplin School of Business Administration University of Portland

5000 N. Willamette Blvd. Portland, Oregon 97219

U.S.A.

[email protected] 1-503-943-7278

1-503-943-8041 (fax)

ABSTRACT U.S. organizations use a variety of performance appraisal formats, but an ideal form still eludes us. This article is designed to move closer to an ideal performance appraisal system. Research conducted to ascertain all problems that are occurring with present performance appraisal systems produced a list of 76 performance appraisal problems (reduced to 4 general categories). Performance appraisal systems are improved by rectifying common shortcomings (e.g. reducing biases, training those involved, using formats with research substantiation). Additional changes included 1) clarifying goals of performance appraisal, 2) focusing on both results and behaviors, 3) adding an appraisal category, 4) better timing, and 5) better involving constituencies.

INTRODUCTION Performance appraisal is both very important to the functioning of organizations and also very problematic. The latest edition of one of the most prominent human resource management textbooks [1] points out that “every manager needs some way to appraise employees’ performance” [p. 306], that performance appraisal (PA) will be done in each case—whether by the supervising manager or others (e.g. peers), and “few things managers do are fraught with more peril than appraising subordinates; performance” [p. 321]. The appraisal of employee job performance is one of the most important, most common, and probably the most disliked human resource management activity. Thomas and Bretz [8] state that PA, as typically conducted, “has remained a largely unsatisfactory endeavor” for years even though it is a very important HRM area; “both managers and employees tend to approach appraisal feedback sessions with fear and loathing” [p. 28]. Thomas and Bretz state that managers and employees dislike the PA process because neither was involved in developing the forms nor processes, neither’s suggestions for changes are solicited nor acted upon, managers don’t like to give nor do subordinates like to receive negative messages, negative PA ratings have negative effects on employee careers and perceptions

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of their managers, and there are no rewards for taking the manager’s valuable time to appropriately conduct the PA. Performance appraisal has been said to be “one of six deadly diseases” that keep organizations from performing at their peak [7]. Purpose of the Paper What would be an ideal PA? The purpose of this paper is to develop an ideal PA—or come as close as possible to a panacea in this area. To accomplish this we need to understand the terminology in the field (define PA), how is PA usually conducted, what are the problem areas encountered in typical performance appraisals, and then propose an ideal PA to meet the concerns. The ideal PA system proposed here will seek to rectify the problem areas and achieve the goals of PA. The ideal PA system is meant to be theoretical but with enough details to make it pragmatically useful now. We start with the general background and the specific definition of PA.

BACKGROUND OF PA Performance Appraisal” (PA) has been synonymous with performance review, performance evaluation, and other terms and combinations of terms. PA has, over time, referred to 1) an instrument or form to assess an employee's job performance, 2) an interview where an employee's job performance is assessed and feedback is given to the employee, 3) a system of setting employee job expectations/employee actual job performance/assessing that performance/feedback to the employee on the performance assessment and how to improve it in the future/setting new goals and expectations for another period, or 4) performance management with job performance appraisal a part of it [1]. More recently a fifth entry has been Integrated Organizational Performance Management with vertical and horizontal loadings and strategic/operating plans and individual goals and metrics as described by McGrath [6]. At the present time, PA typically refers to more of a systems approach as stated in #3 in the preceding. That is the definition of PA that we will use in this study.

WHAT ARE THE PROBLEMS IN DOING PA?

It is much easier to find problems in doing PA than to find solutions or suggestions for improvement. PA systems have been criticized in many areas. It would seem that the present problems could be ascertained by surveying the research and practitioner literature about PA. Such a survey was completed which led to 76 different problems with PA as it is typically conducted. The list of problems seeks to be a representative, comprehensive list of PA problems, not an exhaustive list of all references to those problems. It is still an overwhelming, confusing list of problems regarding the typical PA system. Kondrasuk, Crowell, Dillon, Kilzer, and Teeley [5] found 76 problem areas in present PA systems; these were reduced to four general categories. The categories are problems with: 1) the purpose of PA, 2) those involved with PA, 3) what is measured and how, and 4) the system and process of PA.

RECENT SUGGESTIONS FOR IMPROVING PA Academic scholars and industrial practitioners have suggested many aspects to change, add, or tweak. Grote [3] recently stated that the ideal PA should consist of a 4-step process: 1) Employee performance planning where the manager meets with each employee for an hour at the beginning of the year to discuss goals for the year. 2) Employee performance

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execution where the employee performs his job and seeks to achieve his established goals. At the middle of the year, the manager and subordinate meet to discuss progress toward achieving those goals. 3) Employee performance assessment where the manager fills out the PA form and discusses it with his boss before discussing it with the subordinate. 4) Employee PA interview where the manager meets with the appraisee for an hour to discuss the manager’s appraisal, the subordinate’s self-appraisal, and how to improve. They set a date to reconvene to set next year’s goals/start the process over and set individual improvement plans. Other authors have recommended trying to produce more measurable goals to begin with, give more frequent feedback on performance to the operating employee, reduce biases in appraising employees, and periodically and continually auditing/reviewing the effectiveness of the PA system. There is also unanimity among authors that the ideal PA should be pragmatic, cost-effective, and legal (especially regarding EEO requirements). Regarding what is measured and how, Thomas and Bretz [8] suggested that managers and subordinates both be more involved in the development of the general PA system/process as well as the PA forms used. They also suggested that there should be more rewards for appropriately using the PA system. Strive for clear, specific, measurable expectations that are as free from biases as possible. Use evidence-based techniques that are shown by quality research to be valid and reliable. In fact, some, like Jafari, Bourouni, & Amiri [4], have even developed mathematical approaches to comparing and selecting the best PA technique to use in given circumstances. A strong emphasis is being placed on better training of those involved in the PA system. All managers who currently perform performance appraisals, or any who would potentially do so, should be required to participate in PA training. A trained HR specialist should conduct the training programs; the HR specialist can better convey the corporation's culture and values as well as the legal aspects of PA. New employees should also be trained in PA as part of their corporate orientation. Present employees should go through refresher training annually to brush up or learn new and improved elements of the PA process. This learning should never stop.

ENHANCEMENTS TO THE IDEAL PA

To have an “Ideal Performance Appraisal System” it is assumed that many present performance appraisal (PA) system components should be retained in general. The components to retain are 1) establishing expectations for employee performance, 2) allowing the employee the resources to perform the job, 3) appraising that employee’s job performance, 4) reviewing the appraisal process, and 5) continuing the cycle of steps 1-4. However, there are six additional aspects where important changes could be made to produce a more “ideal” performance appraisal system. Those aspects are: 1) Performing the changes recently recommended, 2) clarifying the goals and role of performance appraisal, 3) focusing on both results and behaviors, 4) adding an appraisal category, 5) properly timing the PA process, and 6) involving more constituencies in the process. 1. Perform the Changes Recently Recommended

Recent articles recommend improvements to conduct PA such as those mentioned above. Those as well as some others listed here should be employed if possible. For instance, regarding who does the measuring--the evaluator, it has often been recommended that the appraisers be trained in the process of appraisal. This way the manager can have more motivation and more skills to do a better job of appraising her subordinates’ job performances. With the greater use of computerization, it is more likely to get input from

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additional sources (e. g. 360-degree feedback) for a more well-rounded and accurate view of the appraisee’s job performance. Regarding the process of the PA system, assess the evaluatee’s job performance on a more frequent basis—continuously if possible. This could include daily progress reports/feedback sessions between supervisor and subordinate(s). Have the performance appraisals flow through the total organization including, and having support from, the top management of the organization. Make the PA system clear and relatively easy to perform so appraisers are not overwhelmed and over-extended. Make sure that audits of the PA system are conducted—that the system is reviewed frequently to spot problems and to make improvements. Make sure that users of the PA system are rewarded for properly/accurately conducting the PA system and applying the results. It has also been recommended that all PA’s be conducted at the same time in the calendar year—not on each employee’s anniversary date—to be more consistent in standards used for judgment. Also have specialists from the human resource department (HR) review the PA results for the same reason and to pick up biases [7]. Responses to different achievement levels should also be relatively standardized. For example, meeting standards gets a 3 % raise while exceeding standards obtains a 6 % pay increase. Many have recommended that there be more training of appraisers on how to appraise and how to use the results. Have PA manuals (preferably online) available for further review and as-needed information. But as with any other area of PA, the ideal PA system must be practical in the sense that it is easy to use, understand, and administer. It must be useful for making decisions, and it must be cost effective. 2. Clarifying the Goals of Performance Appraisal

As stated previously, the ideal PA system could refer to a specific instrument, the PA interview, a PA system, or performance management. We have chosen to focus on PA as a system as described above. It is very important to realize that the ideal PA system is a format (process) and not a form (specific instrument). We need to clarify the purpose of the PA system. Many years ago it was asserted that organizations typically try to concurrently achieve two goals in their PA’s which produces a conflict and less than ideal results. Organizations seek to use the PA to a) make

administrative decisions (such as whether to fire/retain/promote, the level of pay increase, training needs, etc.) and b) improve employee performance (by learning the shortcomings of the employee and seek to help the employee improve in those areas). The first is a judicial process where the latter is a counseling process. The appraiser must act as a judge in the former and a guide/counselor in the latter. It is very difficult to be a judge and counselor at the same time. On the other side of the desk, the appraisee tends to selectively hide potentially damaging information that could hurt his being judged highly but tends to openly state weaknesses that could be rectified when the appraiser is acting as a counselor. So there are conflicts within both the appraiser and the appraisee in a typical PA. The proposed best way to deal with these conflicts is to clearly separate the two goals (administrative and developmental) so that both the appraisee and the appraiser know when each purpose is occurring. It should be clear when the appraiser is evaluating the evaluatee on administrative standards (tied to organization goals) or on developmental goals (tied to what the employee personally wants to achieve in that work setting). This separation also

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has implications for the training of appraisers; they should be trained in how to be a good counselor as well as a good evaluator.

3. Focus on Both Results and Behaviors Appraisals As some have previously stated, if we assess both objective aspects like results and subjective aspects like attitudes, we get a fuller picture of the employee’s performance. Likewise, if we assess both specific end results and also the process/behaviors that led to the results, we get a fuller picture of the employee’s performance. But let’s take that another step further. If we go back to the basic goals of the PA, we start with goals of making administrative decisions and improving employee performance. Now let’s separate those two goals and tie them into the results and process dimensions. If our goal is to make better administrative decisions (e.g. regarding employee retention and promotion, compensation, training), focus on objective appraisals like performance results. If the goal is to develop the employee and improve that employee’s job performance, focus on the subjective/process elements. Administrative decisions, such as employee termination, should and often are legally required to be based on objective data—not subjective opinions. The number of items produced or sold, the revenues or profits obtained, even the number of hours worked to achieve the end result are all objective results and can be defended to the employee or the judge/jury in a court setting. However, when we talk about improving an employee’s performance, we tend to take the objective results as givens and focus on what the employee could do differently; the employee must behave differently to achieve different (better) results. Doing the same thing (behaviors) should get the same results (less than perfect performance results). So to improve job performance, the behaviors (and their motivation, attitude, etc.) should be changed. The employee should do something differently/behave better to get better objective results. 4. Adding an Appraisal Category Changing job behaviors may not always be the most efficacious move to make to increase job performance. We assume that if the employee changes/improves his job performance behaviors, that his job performance results will improve. However, that assumption misses one very important ingredient of job performance—the situation. If the economy deteriorates or the salesperson is suddenly assigned a territory with a dearth of prospects or the engineer’s computer breaks down or the store check-out clerk has vastly fewer customers, the job performance will diminish in all cases even if the employee adds job skills and increases her motivation to perform better. Consequently, the ideal PA must

measure the situation—the opportunity to perform and the organization’s support to perform well. As to how to assess the appraisee’s situation, one could look at the instrument to assess the situation in Fiedler’s [2] contingency theory of leadership. His “situation favorableness” assessment instrument is not necessarily a panacea to measure the situation for performance appraisals, but it can be a starting point for developing such an instrument.

5. Timing and Arrangement of the Process An important aspect in developing the ideal PA system is the timing and arrangement of the elements in the process. The typical PA has been conducted by setting goals with each employee at the beginning of the year. This is laborious and also contentious as the typical

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conflicting appraiser PA goals of guiding and judging cause the skeptical appraisee to withhold information and resist suggestions or demands by the evaluator for the evaluate to list certain goals. Since the supervisor, at whatever level, tends to meet with each subordinate one at a time and each session averages about an hour, it is very time consuming. Considering that the supervisor has other responsibilities to attend to such as producing products or services for customers, PA interviews can be drawn out over lengthy periods of time. Likewise at the end of the period when the supervisor sits down with the evaluatee to discuss the annual or semi-annual appraisal of the employee’s performance, that also takes a great deal of time and has even more subordinate resistance whenever the employee is judged for administrative decisions such as pay raises or promotions. After all, the average employee believes he is above average—or at least 75% of the employees believe they are above average. So how do we deal with these challenges? To alleviate some of these aforementioned problems, it is recommended that the PA be split into two parts with quick decisions being made regarding administrative decisions at the front end in setting the standards for the position for the year (or other time period) and at the end where the PA is done based on achieving the standards based on objective (measurable) results) and subjective (process, behaviors) evaluations. This will reduce the “limbo” time between ending one period and starting another as well as increase the consistency of evaluations across appraises. Then take more time to establish the developmental goals at the beginning and the end-appraisal of individual goal achievement at the end of the period. The discussions of extent of goal achievement are to help the subordinate look at how to meet his personal goals (e.g. be rated ”excellent”) for improving his work performance (e.g. sell more widgets) to achieve what he wants to on the job (e.g. be promoted to manager). The supervisor does not have to act as a nasty judge because all administrative decisions have already been made. The supervisor can focus on helping the self-motivated subordinate achieve her personal goals-- what she wants to accomplish—and increase the job performance of that employee. Focusing on employee goals encourages more involvement and engagement of the employee—thus increasing employee motivation to do the work on the job. 6. Involve More Constituencies in the Process The more people that are involved, the more chances for better ideas and fewer mistakes—to a point. If more sources can make suggestions to improve the job standards and goals, they should be “better” standards and goals—more accurate, more challenging, more measurable, etc. Therefore, besides the supervisor and the subordinate(s) developing the goals, reviewing it by specialists in the organization’s human resource department (someone who knows the qualities required to write good objectives and who has a system-wide view of what needs to be done and what others are doing) should result in “better” employee goals. Also, at the other (performance appraisal) end, having input from others (basically a 360-degree appraisal) should give a more complete picture of the actual achievements in comparison with the expectations of what to accomplish (the goals, standards). Getting evaluations toward the standards and goals from the supervisor and self-evaluations from the subordinate are routine. Getting evaluations from interacting and knowledgeable peers and the subordinate’s subordinates have been recommended. It is also recommended to get assessments from the subordinate’s customers. Even with all of these recommendations for changes to improve the PA, it is still questionable if it will work in all situations for all people. Can the same, ideal PA be

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applied the same way in all situations? Will there still be problems with different appraisers, evaluatees, jobs and levels of jobs, companies, sizes of organizations, types (public and private; local, regional, national, international), industries, geographical locations, cultures, countries? Many questions still remain unanswered. More will be known about that after these suggestions are applied and further research is conducted.

CONCLUSION The ideal PA system is a format, not a form. It is a process that involves setting expectations (of the supervisor and subordinate), having the subordinate perform to achieve the expectations, of appraising and feeding back the results, and applying the results of the assessment in ways that benefit the organization, the supervisor, and the subordinate involved. Remember that the ideal PA system has two separate purposes (administrative and developmental)—which must be separated and not attempted to be achieved simultaneously. It appraises both standards applied to many as well as goals applied uniquely to each individual. Administrative decisions, based on standards and objective results, should be made first and quickly; Developmental aspects, based on individual goals, are made later and take more time. Both assess objective and subjective aspects of the employee’s job performance. The appraisal considers the appraisee’s skills and motivation within the context of a changing job situation to judge the appraisee’s job performance. The process and techniques applied are based on evidence-based management that applies valid and reliable approaches. Implementation of the ideal performance appraisal may not be feasible, or possible, for all organizations. But for those who can and do use the PA system proposed herein, it should be an improvement.

REFERENCES

[1] Dessler, Gary. (2011). .Human Resource Management. 12th ed., Upper Saddle River: Pearson Education Inc. [2] Fiedler, F. E., Chemers, M. M., and Mahar, L. (1977). Improving Leadership

Effectiveness: The Leader-Match Concept. New York: Wiley. [3] Grote, Dick (2010). Employee performance appraisal—An ideal system. Buzzle.com, Retrieved 7 April 2000 at http://www.buzzle.com/articles/employee-performance-appraisal-ideal-system.html. [4] Jafari, Mostafa, Bourouni, Atieh, and Amiri, Roozbeh Hesam. (2009). A new framework for selection of the best performance appraisal method. European Journal of

Social Sciences, 7 (3), 92-100. [5] Kondrasuk, J. N.; Crowell, Emi; Dillon, Kelly; Kilzer, Steven; & Teeley, Jarad (2008). Appraising performance appraisal: The problems. Proceedings of the 16

th International

Conference 2008 of the Association on Employment Practices and Principles, Chicago, IL. [6] McGrath, Chris (2010). Integrated organizational performance management. The

Industrial-Organizational Psychologist. 47 (3), 17-19. [7] Staff of Employee Recruitment & Retention (January, 2010). Performance appraisals: Improve the process and avoid the problems. Employee Recruitment & Retention, Retrieved April 12, 2010 from http://www.managementresources.com/ME2/Sites/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications::Article&mid=8F3A7027421841978F18BE895F87F791&SiteID=473418383454426DA53DD03044F159BD&tier=4&id=5C3C747F192D44528E2412F439748CA7.

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[8] Thomas, S. L., and Bretz, R.D., Jr. (1994). Research and practice in performance appraisal: Evaluating employee performance in America’s largest companies. SAM

Advanced Management Journal, Spring, 59(2), pp. 28-34 Special thanks to the following University of Portland students for their help in developing this paper: Emi Crowell, Kelly Dillon, Steven Kilze, and Jared Teeley.

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FACILITATING WORKFORCE ADAPTATION TO CHANGING GLOBAL WORK

REALITIES

Mitchell Lee Marks Department of Management

San Francisco State University San Francisco, CA 94132

(415) 817-4343 [email protected]

ABSTRACT

One outcome of the global economic crisis has been a sharp increase in the number of downsizings, restructurings, mergers, acquisitions and other organizational transitions. Mismanaged transitions have unintended negative consequences on organizations and their members. Ironically, the characteristic of transitions that prompts individual and organizational strife—the capacity to disrupt the status quo—also enables an opportunity for organization and individual renewal. This presentation provides a framework for facilitating adaptation to organizational transition, to both overcome the unintended consequences of transitions and to accelerate achievement of the transition’s strategic objectives. Keywords: Transition, mergers, acquisitions, restructurings, downsizings.

FACILITATING WORKFORCE ADAPTATION TO CHANGING GLOBAL WORK

REALITIES

Studies consistently show that, in the aftermath of transitions involving layoffs, survivors’ job attitudes such as job satisfaction, job involvement, organizational commitment, and intention to remain with the organization become more negative (Hallier & Lyon, 1996). Organizational trust falls (Cascio, 1993), while fear increases (Buch & Aldridge, 1991). Layoff survivor sickness has been well documented, including symptoms ranging from job insecurity, feelings of unfairness, depression, stress and fatigue to reduced risk-taking, lessened motivation, distrust and betrayal, and lack of management credibility, (Brockner, 1992). The unintended consequences of mismanaged transitions are manifested behaviorally as well as attitudinally. Staw, Sandelands & Dutton (1992) note that under conditions of threat, an event or situation which individuals or groups perceive as having negative or harmful consequences (e.g., downsizing), organizations undergo a “mechanistic shift” (p. 516) and centralize information, restrict communication, and rely on habitual responses that are likely to be dysfunctional. More specific to downsizings, mergers, and other major transitions, studies have shown that organizational communication deteriorates (Dougherty & Bowman, 1995) and managerial rigidity increases (Cameron, Sutton, & Whetton, 1987). In addition, employees who survive major transitions report a lack of direction in prioritizing work, risk avoidance, and increases in role ambiguity, political behavior, and work team dysfunction (Marks & DeMeuse, 2003). They also report working harder but not any more effectively—the workload doesn’t get smaller when the work force does (Greenberg, 1990). Adaptation Following Workplace Transitions

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The capacity for a transition to disrupt the current equilibrium and jar people from their status quo—that is, to unfreeze them (Lewin, 1947)—also gives transitions the potential to be an impetus for renewal at both the organizational and individual levels. If properly managed, a transition can be used to replace outmoded organizational structures, cultures, and processes with new ones more consistent with emerging environmental conditions and competitive challenges. Concurrently, a transition can be a stimulus for helping individuals abandon attitudes, expectations and behaviors that may have been congruent with old workplace realities and identify and adopt new attitudes, expectations, and behaviors consistent with new global work realities. Despite this opportunity to spark renewal, research shows that “holding on” tends to predominate over “letting go” during and after transitions as organizations and their members tend to maintain the status quo during difficult times (Chattopadyhah, Glick, & Huber, 2001). Thus, employees are likely to experience real or perceived unintended consequence of transitions but not realize enhancements to their personal work situation or to overall organizational effectiveness. The Two Tasks and Two Levels of Facilitating Adaptation Progress through the adaptation process will occur only when people are prepared to relinquish what they hold dear for the purpose of acquiring something new or can find ways of carrying what they value in the old into the new. In the event that it does not exist naturally, it may be necessary for the organization to create transitional phenomena through planned interventions (Morgan, 1997). This would aid the letting go of attitudes, expectations, and behaviors appropriate to the pre-transition organization and adoption of attitudes, expectations, and behavior congruent with the post-transition organization.

The forces for the old and for the new are varied and cover both the emotional realities and business imperatives associated with a transition or a series of transitions. Emotional realities are the ways in which people experience transition in the workplace. Research has shown that workplace transitions are always connected with emotional experiences (Kusstatscher & Cooper, 2005). Leaders who manage transition effectively rely on and cope with emotions by bringing them to the surface and understanding how they affect work activities and relationships as groups face challenges and organizational changes (Urch Druskat & Wolff, 2001). In the ending of the old phase, adaptation benefits from weakening emotional forces that individuals carry over with them from before the transition and that may be inadvertently generated during a mismanaged transition. In the accepting of the new phase, adaptation benefits from strengthening the emotional pull of the characteristics of the new organizational realities that motivate employees and attract their attention.

Business imperatives comprise what needs to get done for business success to occur. These include everything from setting strategies to selecting work procedures, from patterns of communicating with people to ways of rewarding them. To facilitate ending the old, certain aspects of the organization should be abandoned or made less prominent—that is, the forces for their maintenance should be weakened. To strengthen forces for accepting the new, employees should understand not only what is changing, but also why the changes are being made and how those changes will contribute to both

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business and personal success. This contributes to the social process of “organizational sensemaking” through which organization members interpret their environment through interactions with others and construct accounts that allow them to comprehend the world and act collectively (Weick, 1995). Sensemaking activities are particularly critical in dynamic and turbulent contexts, where the need to create and maintain coherent understandings that sustain relationships and enable collective action is especially important and challenging (Gioia and Thomas, 1996).

A FRAMEWORK FOR FACILITATING ADAPTATION TO CHANGING GLOBAL

WORK REALITIES

The two tasks and two levels produce four elements for facilitating individual adaptation to workplace transitions brought on by changing global work realities (see Figure I):

1. Empathy. Letting people know leadership acknowledges that things have been difficult and, for at least awhile longer, will continue to be difficult.

2. Engagement. Creating understanding of and support for the need to end the old and accept new organizational realities.

3. Energy. Getting people excited about the new organizational realities and supporting them in realizing them.

4. Enforcement. Solidifying new mental models that are congruent with the desired post-transition organization.

Figure I

A Framework for Facilitating Adaptation to Changing Global Work Realities

Tasks Weakening the Old Strengthening the New

� Levels Emotional Realities EMPATHY ENERGY Business Imperatives ENGAGEMENT ENFORCEMENT Empathy

The first element weakens emotional forces for holding on to the old by conveying empathy to employees regarding what they have experienced during a difficult transition. The objective of empathy is to make clear that leadership is cognizant of the needs, feelings, problems, and views of employees who have lived through a merger, acquisition, downsizing, or restructuring. Empathy facilitates adaptation by legitimizing employees’ responses to the transition, raising their awareness of the adaptation process and accelerating the pace at which they move through it.

Tannenbaum and Hanna (1985) have identified three steps in the process of holding on

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and letting go—consciousness raising, reexperiencing, and mourning—that provide a sequencing for activities to convey empathy. Consciousness raising helps employees acknowledge what they are personally holding on to and become aware of their reasons for doing so. Workshops or other learning interventions promote consciousness raising by educating employees on the difficulties of transitions and making the internal process of adaptation explicit to them. In a study of an acquired manufacturing firm, researchers found that employees who were given a realistic assessment of the transition and insight into the adaptation process had less negative reactions in both job satisfaction scores and actual work productivity than employees who attended a workshop with a sanguine content (Schweiger & DeNisi, 1991).

The reasons for and implications of holding on become truly understood only when they are expressed experientially. Talking through where they have been and what they are currently experiencing as a result of the transition helps employees bring their feelings to a conscious level. This is typically an emotional and highly charged process, in contrast to the more intellectual level at which initial consciousness raising occurs. However, most employees find it difficult to express negative feelings at the workplace (Ciulla, 2000). To aid in the reexperiencing step, organizations can sanction events in which employees vent their pent up anger and other negative feelings. A carefully facilitated venting meeting can get people to open up in a supportive and safe environment. Even for employees who do not speak up, vicariously listening to others express similar views is beneficial in weakening the negative emotions left over from living through a difficult transition (Marks, 2003b).

Letting go is completed through an active mourning of what is being left behind—old ways of seeing and doing things, abandoned hopes and expectations, and the loss of what was once satisfying, meaningful, or simply familiar. This mourning is sometimes accompanied by remorse—a sense of guilt for the time wasted, the life that could have been but will never be. Yet it also instills a sense of renewal and rebirth, and an acceptance for what lies ahead. From the most primitive to the most modern cultures, there has always been a recognized need for rituals to carry individuals form one phase of life to another (Morgan, 1997). Adaptation is facilitated through symbolic events, like funerals or graduation ceremonies to mark the transition from ending the old to accepting the new (Gutknecht & Keys, 1993). Engagement The second element weakens forces for the status quo by engaging employees at an intellectual level in understanding the business imperatives associated with needing to end the old and by identifying and eliminating roadblocks to the adaptation process. Engaging employees directly or through representation has long been advocated as a method to help people contend with disruptions to their work situation (Coch & French, 1948). Engagement would seem especially pertinent to major transitions such as mergers and downsizings in which survivors experience a perceived lack of control over their fate (Marks & Mirvis, 2010). One way to engage people is to communicate with them. Effective top-down communication that is open, timely, and frequent counters feelings of uncertainty, distrust, fear, anger, and frustration common in organizations during and after transitions (Krackhardt & Hanson, 1993). During difficult times, there is also a need to convey to employees the principal

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business challenges facing the organization and to involve them in addressing those challenges (Pascale, Millemann, & Gioja, 1997). Employee participation in matters directly related to their work situation also weakens forces against ending the old and helps movement through the adaptation process. Participation gives survivors a sense of control over their destinies and a means of influencing events that heretofore had been seen as threats to their livelihood and well-being (Graddick & Cairo, 1998). In a four-year longitudinal study of survivors of a downsizing in which a full 40% of the workforce was eliminated, for example, there were significant increases in both employee productivity and employee well-being despite an increase in demands placed on the survivors (Parker, Chmiel, & Wall, 1997). The potential negative effects of high demands were counterbalanced by an engagement strategy that enhanced work characteristics including clarity and participation. Employee engagement also is useful for weakening forces inhibiting the adaptation process itself. Despite being a natural and healthy response to transition, the human adaptation process is rarely facilitated, let alone acknowledged, in most work settings. It is likely that many forces inhibiting the letting go process are present in the work environment. Leaders frequently think they know what is going well and what is not during and after transitions (Marks & Baitch, 2005). But when they consult exclusively with their peers and direct reports, which typically is all they have time for during and after transition, what managers hear is often censored and self-serving (Marks & Mirvis, 2010). This gives them a distorted picture of progress and false assurance that problems will pass so long as they stay the present course. It also prevents them from speeding up the adaptation process by identifying and eliminating barriers, perceived or real, that employees feel are hindering their progression. These barriers may range from structural issues like narrow job categories that undermine efforts to adopt new approaches to getting work done to the political power bases of superiors who refuse to change themselves and who downplay the requirements of adaptation or the need to rebuild relationships. Common employee research methods such as attitude surveys and focus group interviews can be used to identify barriers to letting go. Energy

The third element strengthens forces for desired change by generating energy for its attainment. This occurs on an emotional level by getting people excited about the prospects of the post-transition organization and reviving their confidence in themselves and their workplace. As organizational members come to terms with ending the accustomed old, they need something new to latch onto to direct their contributions in the workplace and continue progress through the adaptation process. Pederit (2000) suggests that, especially when numbed by constant and on-going change and transition, employees may be more ambivalent to change rather than outright resistant to it.

A starting point for generating energy is a clear sense of strategic direction and a compelling mission for the organization; that is, a clear vision of a new and better organization (Kotter, 1995). Shared commitment to a vision can be built either through wide-scale participation in the act of its creation or through involvement immediately thereafter in its dissemination. This addresses key unintended consequences of a difficult transition in ways including renewing trust and breeding confidence that leadership has a plan for realizing new opportunities. Comprehending the vision also counters the decreases in sense of direction, risk taking and innovation that typically accompany major organizational transitions

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(Chattopadyhah, Glick, & Huber, 2001).

Abandoning old routines and then identifying and adopting new approaches to work require trial-and-error learning in the neutral zone between the old and the new (Bridges, 1991). Trial-and-error is a powerful way to learn, but also a painful way to learn—relatively few organizations reward employees for raising up and discussing their errors. Thus, sustaining the energy for moving forward is enhanced by developing a learning environment in which employees can experiment with and deliberate the value of new approaches to achieving personal and organizational success.

Workplaces having leaders and managers who connect with their people, provide emotional support, accept the confusion and backsliding as normal and give their people time to move through the natural adaptation process, should be more likely to rebound from a difficult transition with innovative approaches to getting work done and an energized work force looking forward to new realities rather than holding onto the old. With research showing that managers and supervisors having more impact on shaping employees’ reactions to a transition than senior executives, this support would be most beneficial coming from immediate superiors (Larkin & Larkin, 1996). Thus, a component of generating and sustaining energy would be to set expectations with middle managers and lower level supervisors to be sources of emotional as well as practical support for employees.

Enforcement The fourth element solidifies perceptions, expectations, and workplace behaviors that are congruent with the desired post-transition organization. Enforcement brings the momentum for desired change to the level of consistency required for true cognitive and cultural change (Cartwright & McCarthy, 2005). It complements the emotional base of energy by supporting people on a practical level in conducting work and, in particular, by linking individual roles and responsibilities with the new vision and business strategy (Burke, 2002).

The literature on large scale organizational change suggests three components of enforcement—involvement, alignment, and measurement. Involvement is a basic component of organizational change management (Kotter, 1995; Burke, 2003), and its role in weakening forces for the status has been discussed. Involvement also can contribute to strengthening forces for the new. One way to do this—both because they know the work and because involving them in problem analysis generates ownership of solutions—is to have employees participate in bringing the desire post-transition organization to life. Pursar & Petranker (2005) note that transformational change occurs when a critical mass of people can actually "live the vision" in everyday organizational life. This occurs, however, not by engaging in detached, rational planning in order to avoid uncertainty, but only after the constricting structures of the old organization have been unfrozen and people—as well as their time and other resources—are freed up to dream, think about, and enliven the post-transition organization. Marks (2003a) describes a process for living the vision which builds upon senior leadership’s vision and strategic direction for the post-transition organization.

A second component of enforcement is to align the various components of the post-

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transition organization, including its structure, tasks, culture, and people. Consistency compels people to accept new organizational realities and abandon old perceptions or expectations. However, some elements of the organization typically lag behind others as transition unfolds. A compensation system that punishes team leaders for short-term declines in productivity when they experiment with new ways of approaching work will not sustain a CEO’s vision of “innovation.” Boring staff meetings plagued by dysfunctional group dynamics will not contribute a desired culture of “teamwork and respect.” Managers and supervisors who feel their authority is undermined by involving rank and file employees in determining how to approach work will sabotage a process like “living the vision.” Contributing to the difficulty of alignment following a difficult transition is that many of people who specialized in designing compensation systems, facilitating group effectiveness, or designing and delivering management development interventions may have been downsized from the organization.

A third way to enforce the desired post-transition organization is to measure and track its development. Collecting valid data and monitoring the extent to which the desired organization is truly being realized—that is, the extent to which forces for maintaining the old are being weakened and forces for developing the new are being strengthened—provides the foundation for feedback to all organizational members. On-going periodic measurements also alert leadership to when things are veering off course. This is important, given that even the most carefully planned and successfully implemented transitions like mergers and acquisitions are characterized by flexibility and mid-course corrections (Marks & Mirvis, 2010). Some methods for tracking the development of the desired new organization are objective (e.g., measures of productivity, quality, and voluntary turnover); others, like attitude surveys and focus group interviews, have the added benefits of involving people and enhancing upward and downward communication. This seems especially important when the newly espoused vision includes intentions to increase involvement and communication.

IMPLICATIONS FOR RESEARCH AND PRACTICE

The framework presented here guides both research and action in facilitating the process of individual adaptation to workplace transitions brought on by changing global work realities. The basis of the model—the need to weaken forces for the old organizational order and strengthen forces for the new organizational order at both the emotional and intellectual levels—has solid conceptual support through enduring models of organizational change management as well as anecdotal support through practitioner reports. The four elements of empathy, engagement, energy, and enforcement—along with their component activities—should direct empirical inquiry into factors that can facilitate the natural adaptation process during and after major organizational transitions. However, researchers seeking to study organizational transitions face some substantial hurdles. To begin, gaining access to workplace approaching, in the midst of, or recovering from a transition is difficult. And, there are many methodological dilemmas when studying transitions such as when a merger “begins” (i.e., does a merger begin when it is planned, when it is announced, or when it receives legal approval from regulators?) or is “over.”

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Facilitating the adaptation process should counter the many undesirable consequences of difficult transitions by focusing people on looking ahead and weakening their attachments to the “good old days” during pre-transition or “dark days” of the transition itself. In addition to wringing out pent up emotions and loosening grips on the old ways, it also should contribute to building optimism for the future and strengthening attention to new ways of thinking and acting congruent with emerging global realities. A formal effort to facilitate adaptation provides employees with a clear sense of where the organization is headed and how individual success can be achieved as that vision is attained. And, it contributes to a sense of workplace stability in the ever changing global environment. The pace of change and the intensity of major transitions are much more likely to increase rather than decrease globally. Given that poorly managed mergers, acquisitions, downsizings, and restructurings have had a substantial negative impact on organizational effectiveness and employee well being, the need to facilitate the natural adaptation seems substantial and, in fact, essential if transitions are truly to be used by organizational leaders as vehicles for becoming more highly competitive and responsive to environmental demands and if employees are expected to adapt to changing global work realities.

REFERENCES

References are available upon request from Mitchell Lee Marks at [email protected]

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IS GLASS CEILING IN TURKEY THICKER THAN IT SEEMS?

A STUDY ON ISE 100 (ISTANBUL STOCK EXCHANGE)

Zeynep Duren Istanbul University

Faculty of Social Sciences Beyazit-Istanbul/ Turkey [email protected]

Tel: 90 (212) 440 0000

S. Ahmet Menteş European University of Lefke

Department of Business Administration Gemikonagı,Lefke- Mersin/Turkey

[email protected]

Tel: 90 (392) 660 2000 Ext: 2795

ABSTRACT

The detection of glass ceiling on boards of directors is an interesting issue because it provides a good opportunity to observe the obstacles confronted by women in the corporate world. The descriptive study analyzes ISE100 firms for the period of 2002-2009. As of 2009, the portion of female board members is 10.07% which is close to EU average. Although the averages are close, assuming that the intensity of glass ceiling problem in Turkey is not any worse than in Europe can be misleading. The study discusses the different factors that should be taken into account at analyzing the problem. Keywords: Glass Ceiling, Board of Directors, Ownership Concentration, Culture

I. INTRODUCTION The term “glass ceiling” which indicates the obstacles confronted by women, who aim for the senior management positions in various organizations was introduced by Hymowitz and Schellhardt at a Wall Street Journal report in 1986. It is defined as an impassable wall or barrier made up of procedures, structures, power relations, beliefs or habits that complicate a woman’s access to high directive positions (Powell & Butterfield 1994, p. 69). In 1995, the U.S. Department of Labor's Glass Ceiling Commission issued a report saying: “a glass ceiling exists and that it operates substantially to exclude minorities and women from top levels of management"(United States Department of Labor 1995, p.7). A vast number of articles have dealt the issue and found that the glass ceiling exists in executive market (Duleep & Sanders 1994, p. 416).

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Bertrand and Hallock conclude that the glass ceiling is cracking in the executive market. They find the participation of female executives at Standard & Poor’s firms has been growing dramatically through the period 1992-1997 and point out that female's increasing access to larger firms is the main reason for the cracking glass ceiling (Bertrand & Hallock 2001, p.3). Judging from relative compensation and increasing female representation in the top rung in the executive market, researchers are optimistic and conclude that, though not as fast and widespread as hoped, the weakening and cracking glass ceiling is not just a false hope, but has some substance (Hu & Yun 2008, p. 10). Within this context, studying women’s presence on boards of directors is especially interesting because board of directors represents the last step (the peak) in a professional career and a good opportunity to quantify the obstacles confronted by women (glass ceiling) in the corporate world. This study mainly discusses and evaluates the change in female presence in boards of ISE100 firms and analyzes the developments experienced for the period of 2002 to 2009. The presence and the perception of women’s role in business life differ from one culture to another. It is obvious that in societies that have relegated women to secondary role the presence of glass ceiling will be more evident. The Turkish society has traditionally relegated women to a secondary role in the labor market. A distinguishing feature of Turkish firms is the fact that they are mostly owned by families. Families are not only the controlling shareholders, but they also are very involved with the management of the family firms. Family members hold the key management positions. It is not a surprise that female members of the families will hold executive positions, board memberships and CEO positions in the family firms (Yurtoglu 2000, p. 211). The study will give a special emphasis to the females on boards of directors who are members of the controlling shareholder of the family firm. This is really important because the change in number of female board members who are also the members of the controlling shareholder family may give us more insight about the changing management culture in Turkish firms.

II. ANALYSIS AND IMPLICATIONS OF THE LOW PRESENTATION OF

FEMALES ON THE BOARDS OF DIRECTORS OF TURKISH FIRMS. The evidence shows that, women’s participation in the labor market is not only low but also has a decreasing trend in Turkey. The low rate of women’s participation in labor force in Turkey looks more alarming when compared to positive trends witnessed in EU, OECD and other countries (Table I).

Table I: Female Labor Force Participation Rates

2002 2003 2004 2005 2006 2007 2008

OECD

59,6 59,7 60,1 60,4 60,8 61,1 61,3

EU

60,7 61,2 62,1 62,7 63,3 63,6 64,2

Major Seven

65,0 65,1 65,4 65,7 66,2 66,3 66,7

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Source: U.S. Census Bureu, https://www.census.gov/compendia/statab/2010/ tables /10s1330.xls There are many reasons for the low rate of women participation to labor market in Turkey. The persisting patriarchal values and unfavorable economic conditions adversely affect the educational status of girls. Women and girls continue to lag behind men and boys at all levels of education and that significant discrepancies exist in the literacy levels of women and men (CEDAW 2005, p.17). In 1999, national regulations establishing objective criteria for promotion of governmental employees for lower and middle level management was adopted in Turkey. These measures, by favoring competency and career based skills, have been effective in preventing and gender discrimination in promotions. However, the situation in the private sector is far from satisfactory. Research reveals that women who are married, pregnant or have children may be denied employment and face discrimination in promotion or access to in-service trainings. There are no effective regulatory mechanisms other than that of an investigation upon a complaint (CEDAW 2003, p.33). The low women’s representation on Turkish boards of directors can be considered as an indicator that, in the Turkish labor market, there must be some kinds of discrimination. In fact, identifying their causes is a key issue, because the type of existing discrimination would provide different conclusions about how to obtain a greater presence of women on the boards and even about whether it is actually desirable to increase their presence. In theory there are two types of discrimination. These are taste based discrimination and statistical discrimination. Becker’s 1957 book introduced the taste based discrimination (Becker 1957). In taste based discrimination employers have a ‘taste for discrimination,’ which means that there is a disamenity value to employing minority workers (women in our case). Hence, minority workers may have to ‘compensate’ employers by being more productive at a given salary or, equivalently, by accepting a lower wage for same level of productivity. Phelps and Arrow have concantrated on the statistical theory of discrimination (Phelps 1972, p.83). The statistical discrimination literature has the assumption that firms have limited information about the skills of job applicants. Statistical discrimination differs from taste-based discrimination in assuming no prejudice by employer or employee. It treats two groups of workers differently may be the rational response of employers to uncertainty about the individual's productivity. It is often almost impossible to identify statistical discrimination versus taste-based discrimination (Grout et al 2009, p. 5). In this paper, the intensity of the glass ceiling problem and the evaluation of this problem in recent years in Turkey is discovered. ISE 100 firms for the period of 2002-2009 are used for the study. The firms that dropped out of ISE 100 for the period covered are excluded from the study. Also, the firms that failed to report the required data or have missing information at

Turkey

29,5 28,1 27,0 26,5 26,7 25,7 26,7

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ISE web site (http://www.imkb.gov.tr) are not included to study. After excluding the firms that do not fit the criteria the number of firms that will be included in the study are 88. The descriptive statistics of the firms are given at the table below (Table II).

Table II: Descriptive Statistics for the Boards of Directors of ISE 100 firms

2002 2003 2004 2005 2006 2007 2008 2009

Size of BODs Average number of directors Average number of female directors % of female directors Number of firms without female directors Number of firms with one female director Number of firms with multiple female directors

669 7.60 0.57 7.47% 55 22 11

673 7.65 0.63 8.17% 51 24 13

687 7.81 0.68 8.73 % 46 28 14

705 8.01 0.66 8.23 % 48 27 13

694 7.89 0.68 8.65% 44 33 11

684 7.77 0.68 8.77% 43 34 11

693 7.88 0.74 9.38% 42 32 14

675 7.67 0.77 10.07% 40 34 14

Source: By the authors. Average size of Turkish BOD (Board of Directors) has showed an immaterial increase from 7.60 to 7.67. The average size of Turkish board is smaller compared to European average board size which is 11.6 (Heidrick & Struggles 2009a, p. 15). The size of boards is a contreversial issue. There are tradeoffs associated with different board sizes. The major advantage of large boards is the collective information that the board possesses about factors that affect the value of firms, such as product markets, technology, regulation, mergers and acquisitions, and so forth. This information is valuable for both the advisory and monitoring functions of boards. On the other hand, the major disadvantages of large boards are the coordination costs and free rider problems (Lehn et al 2003, p.4). Jensen argues that keeping boards small can help improve their performance. When boards exceed seven or eight people, they are less likely to function effectively and are easier for the CEO to control (Jensen 1994, p. 19). Although the average size of Turkish boards are in line with Jensen’s reccommendations the reason behind the comperative smaller size of Turkish boards is closely related with the high ownership concentration of Turkish firms. It is clearly observable from Table II that the percentage of female board members has increased almost 2.5% (from 7.62% to 10.07%) in the period of 2002 to 2009. A more careful look at the figures reveal the fact that this is mostly due to a decrease in the number of firms that have no female directors on their board of directors (the number of firms that have no females on their board decreased from 55 to 40 by year 2009). In other words, the numbers of firms that have one female on their boards of directors have increased from 22 to 34 and the

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number of firms that have more than (multiple) female directors have increased from 11 to 14. Heidrick & Struggles report calculate the female presence on European boards average 10 %. The Turkey supplement of the same report calculates the female presence on Turkish boards as 8% (Heidrick & Struggles 2009b, p. 5). Both of findings are very close to the findings of this study which calculates the presence of female on Turkish boards as 10.07% (Table II). For a country like Turkey where patriarchal values persist, unfavorable economic conditions adversely affect the educational status of girls and female labor force participation rates are very low, having almost the same percentage of female presence on boards is unexpected and surprising. The reasons behind this unexpected result are discovered and analyzed in this study. The kinship of female board members to the controlling shareholder is suspected to be the potential reason behind the unexpectedly high female presence on the boards Turkish firms (compared to EU average). The last names of female board members are used to identify their relationship with the controlling shareholder. Female board members that have the same last name with the controlling shareholder are assumed to be the family member of the controlling shareholder. In year 2002 only 24 of the females sitting at the board of directors were non family members. This figure jumped to 37 in year 2009 which represent a 54.2% increase when indexed to year 2002. On the other hand the number of family member board members increased from 26 to 31 which constitutes an increase of 19.2% indexed to year 2002. Yearly composition of female board members is given at Table III. Table III shows that of 68 female board members in 2009, 31 are the members of controlling shareholder families and that figure constitutes to 45% (52% in 2002) of all female board members.

Table III: Composition of Female Board Members

Source: By the authors.

2002 2003 2004 2005 2006 2007 2008 2009

Total

Index to 2002

50

100.0

55

110.0

60

120.0

58

116.0

60

120.0

60

120.0

65

130.0

68

136.0

# of Family Member Female Index to 2002

26 100.0

23 88.5

27 103.8

27 103.8

31 119.2

29 111.5

28 107.7

31 119.2

# of Non Family Member Female Index to 2002

24 100.0

32 133.3

33 137.5

31 129.2

29 120.8

31 129.2

37 154.2

37 154.2

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Some researchers try to explain the existence of female family members on boards by reduction of statistical discrimination. The highest proportions of female directors are found in family-owned firms, cooperatives and, in general, those companies in which the shareholders have great power when hiring directors. This can be considered as an indicator of the reduction of the so-called statistical discrimination since, as the company has easier access to individual information about the board candidates, women seem to be less exposed to being judged according to the average characteristics of their group (Mateos de Cabo et al 2007, p. 3). Although the figures show that the presence of female board members in ISE100 firms is proportionaly very close to European avarage of 10%, explaining this with an argument such as “reduction of statistical discrimination” or “ highlight of Turkey’s open-minded, quick-learner personality” is far from explanatory (Heidrick & Struggles 2009b, p. 6). Factors like legal system, ownership structure and culture are believed to be the main reasons of the heavy presence of female family members in Turkish boards.

Legal System and Ownership Structure: Common law countries have the strongest protection of investors (both shareholders and creditors) whreas French civil law countries like Turkey have the weakest protection. (La Porta et al 2000, p. 8). An investor in a French civil law country is poorly protected by both the laws and the system that enforces them. The concentration of ownership of shares in the largest public companies is negatively related to investor protections (La Porta et al 1998, p. 1141). In other words, weak investor protection causes ownership concentration. In countries like Turkey where investor protections are ostensibly weaker, the optimal ownership structure obliges families to hold large equity stakes (Himmelberg et al 2002, p. 38). There are numerous studies that observed that equity ownership in Turkish firms is highly concentrated, holding companies had direct ownership stakes in most of the companies and pyramidal structures were common (Yurtoglu 2000, p. 216). In Turkey families hold the control and the ultimate ownership of the firms using these pyramidal structures called holding companies. It is also known that the family members have a heavy presence not only on the board of directors but also at critical management positions of these firms (Ararat & Ugur 2003, p. 66). Culture: Culture and ideology, not only value maximization and self-interest, might influence a country’s choice of corporate law, Licht and others find empirical evidence that corporate laws related with investor protection exhibit systematic cultural characteristics (Bebchuk & Roe 1997, p.37; Licht et al 2001, p. 2). Hofstede’s study on dimensions of culture classify Turkey as a highly collectivist culture. In collectivist societies people from birth onwards are integrated into strong, cohesive in-groups. Loyalty in a collectivist culture is extremely important and over-rides most other societal rules and regulations. The society fosters strong

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relationships where everyone takes responsibility for fellow members of their group (like family) (Hofstede, www.geert-hofstede.com). Loyalty as a dominant future of collectivist cultures is one of the most important explanatory factors of the dominant presence of family members on company boards and at other executive positions of Turkish firms.

III. CONCULUSION The glass ceiling is a barrier against women's advancement into the top rung in the high-paying and high-skill labor market. Studying women’s presence on boards of directors is especially interesting because board of directors represents the last step (the peak) in a professional career and a good opportunity to quantify the obstacles confronted by women (glass ceiling) in the corporate world. If there exists a glass ceiling, it will definitely affect the representation of females in the board of directors. The study analyzes the presence of women on Turkish boards. The findings for Turkey clearly exhibit that the presence of women on Turkish boards has increased 36% for the period of 2002-2009. The findings definitely show a progress in the pathway for cracking the glass ceiling and extinguishing the gender discrimination in boards of directors. The findings exhibit that the percentage of women on Turkish boards are very close to that of EU. Assuming that the glass ceiling problem in Turkey is not any worse than EU, by only comparing the yearly figures can be misleading. Using this type of headcount approach may cause us to misjudge about the density of glass ceiling problem in Turkey. The composition of female board members reveals the fact that as of 2009 almost 45% of the female board members are also the members of the controlling shareholder family. The heavy presence of female board members who are also the members of the controlling shareholder family can be explained by three factors. These factors are legal system, ownership structure and culture. It is obvious that there is still a long way ahead before gender equality is achieved and the glass ceiling is removed in the Turkish executive market. Increasing merger and acquisition activity caused by globalization has and will play an important role in cracking the glass ceiling in Turkey. Increased foreign direct investment is also expected to change the management culture and organizational dynamics of Turkish firms.

References available upon request from S. Ahmet Menteş, European University of Lefke, Department of Business Administration, Gemikonagı,Lefke- Mersin/Turkey [email protected], [email protected], Tel: 90 (392) 660 2000 Ext: 2795

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CHANGING FACE OF WOMEN WORKFORCE: A QUALITATIVE STUDY ON

WOMEN ENTREPRENEURS IN ISTANBUL

Zeynep Hale Öner Doğuş University

Acıbadem, Kadıköy, 34722 İstanbul,Turkey.

[email protected] tel: 0090 216 544 55 55 ext: 1435

ABSTRACT

This study presents an exploratory investigation of Turkish female entrepreneurs in Istanbul, Turkey. Semi-structured, face to face interviews with 20 female entrepreneurs were conducted in Istanbul exploring their motivation for establishing their own business as well as the level of support they received from their personal social networks and women entrepreneurship organizations. Findings indicate that major motivating factors driving Turkish women to set up their own business is a desire for independence, economic necessity and fulfillment of their dreams. The female entrepreneurs have identified themselves mainly as innovator type of entrepreneur i.e. committed to entrepreneurial ideals rejecting conventional female roles. Keywords: Women Entrepreneurs, Turkey, Innovator type, Social network support

INTRODUCTION

Starting from the 1990’s, the issue of women entrepreneurship has increasingly become one of the main topics on the agendas of women organizations, civil society organizations, governmental institutions and international organizations. Women’s entrepreneurship has become a new component of neo-liberal program for the struggle against poverty as well as the participation of women in the labor force has proved to be a major factor in sustainable development (Ecevit, 2007). The unutilized potential of women labor has to be mobilized in the best and effective way possible for economic welfare in today’s increasing instability and economic uncertainty. Moreover, an ageing population coupled with a more skill-dependent economy dictates countries to make better use of their female population. Goldman Sachs calculates that, leaving all other things equal, increasing women’ s participation in the labor market to male levels will boost GDP by 21% in Italy, 19 % in Spain, 16% in Japan, 9% in America, France and Germany and 8% in Great Britain (The Economist, 2010). The level of female entrepreneurial activity is relatively low compared to EU and OECD countries. The women employment in the OECD countries is 62%, in EU countries 52%, whereas it is only 23.5% in Turkey (Kagider, 2010). Turkey is a country, where paternalistic norms and collectivistic values are highly valued and hence women face difficulties to become involved in entrepreneurial activities. More men than women start up their own business and the tendency for women to run business which are on average smaller in size and less growth-oriented than those run by men. Moreover, there is a relatively small number of sectors where women entrepreneurs are concentrated (Aslesen, 1998), while men are more evenly spread across a wider range of sectors (Spilling

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& Jordfald, 1996; Ozen Kutanis & Bayraktaroglu, 2002). Ozen Kutanis (2003)’s study on women entrepreneurship shows that the women’s roles in cultural and social domains are very rigid and predetermined in Turkey. The negative family reactions and financial difficulties as well as family demands as mothers do not support women entrepreneurs. Moreover, the necessity to work much harder as a woman to gain confidence in a man’s world is another main problem of Turkish women entrepreneurs. However, against all these hardships, there is an increasing desire for self actualization and the will to use individual rights as women. Although Greene and Johnson (1995) theorize that women entrepreneurs draw support from their family and friends, many Women Business Center (WBC) directors gave examples where women’s families actively discouraged them from setting up their businesses because the role of an entrepreneur conflicted with women’s caretaking role ( Langowitz et al. 2006). WBC directors noted that disproportionate domestic and family obligations were both motivations for and obstacles to women starting businesses. (cf. Godwyn, M.,2009 ). As will be discussed later, this finding was replicated in this study as well.

Within this framework, there is limited empirical evidence about the reasons why Turkish women choose to become entrepreneurs. Given this important gap in the literature, this paper intends to enable a better understanding of a range of issues pertaining to female Turkish entrepreneurs, explore the motivating factors of Turkish women to develop their entrepreneurial capacity in Turkey, and provide a foundation for further policy action to be taken in female entrepreneurial activity in Turkey. Based on this context, I will firstly analyze the conditions of women workforce and employment in Turkey.

Outlook of women workforce and employment in Turkey

In Turkey, the women participation in labor force was 34.1% in 1990, 24.9% in 2006 according to CEDAW’s reports (Kader, 2009). The World Economic Forum’ s Global Gender Gap 2008 report shows that Turkey ranks 123rd among 130 countries in women’s political empowerment, economic participation and opportunity (Hausmann, Tyson and Zahidi, 2008). According to KEIG’s report (2009), the national household labor force survey of TUIK (Turkish Statistics Institution) November 2008 data shows that the share of agricultural employment in the overall employment of women is 45%. A more in depth analysis shows that 14,4% of employed women work in industrial sector and 37.1% in service industry; out of 100 women 14% is self employed, 47% is salaried and 39% unpaid household workers (European commission, 2009 Turkish Progress report). There are more women working in rural areas i.e.33% versus 19.9% working in cities (Toprak and Kalaycioglu, 2004), but 98% of women working in agricultural jobs in the rural areas of Turkey are not registered and thus are excluded from the social security system. Although the rate of women’s employment in rural areas decreased from 41% to 31% during 2001-2007 due to the neoliberal policies, the nonagricultural unemployment rate of women in rural areas increased from 11% to 19%. As a result, there was a rapid breakaway from agricultural employment; however opportunities in nonagricultural areas of employment for women were far from compensating the resulting gap in favor of women employment (Kegik, 2009).

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Even if women succeed to participate in the labor force, there is a huge pay gap of 22% between the average wages of women and men in cities of Turkey (World Bank, 2006). The pay gap between women and men in the private sector is more than 50% which is an indicator of an undeniable wage inequality between sexes when education and work experience are factored in. Apart from this existing inequality, there is the reality about the male –dominated structure of unions which excludes women union members. The rate of unionization in Turkey is around 9% and the union membership is 892,000 (Gulay, 2007). Women workers make up only 10% of union members and are not represented in union boards where only 19% out of 489 board members are women (Celik, 2007). In this respect, the above statistics prove the unfavorable conditions for women labor force and their insufficient representation in unions and boards in Turkey. Therefore a need for a policy update and encouragement of women entrepreneurship is in urgent need.

RESEARCH METHODOLOGY AND SAMPLE SELECTION

This study was carried out with 20 women entrepreneurs in Istanbul from both Asian and European continents during the last three months of 2009. The female entrepreneurs were interviewed by using a structured questionnaire. The sample mainly consisted of women entrepreneurs in the service sector. The selection of respondents for the empirical research was done through referrals i.e. snowball effect. The face to face interviews were conducted with semi-structured surveys. The respondents were distributed the surveys and then they were interviewed in a face to face fashion at their workplaces. During the one to one interviews, the respondents were given cards which had written descriptions of different types of entrepreneurs (see Goffe and Scase, 1985) and they were asked to choose one definition to identify their entrepreneurship style. This exploratory research is guided by the following key questions:

1) What are the factors motivating Turkish women to become involved in entrepreneurial type of activities?

2) What type of entrepreneurship are they? 3) What are the key characteristics of their entrepreneurial activities? 4) What is their source of financial support?

Approaches to women entrepreneurship When we analyze the basic instincts to become entrepreneurs, the classical economic theories dictate that the maximization of individual wealth and benefits is a key factor in motivating people to become entrepreneurs (Yazıcı and Sahin, 2006). Other factor effecting the emergence of entrepreneurship is the personality and environmental factors. According to Mueller, Thomas (2000) and Koh (1996), trait theory states that entrepreneurs have distinctive characteristics i.e. unique values and behaviours that define them to be different than non-entrepreneurs. The traits theory define the following characteristics to be common to entrepreneurs (cf. Teoh ve Foo, 1997; Hansemark, 1998): Need for achievement, locus of control, risk taking propensity, tolerance for ambiguity, innovativeness, and self efficacy.

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Although these personality factors are at work for the emergence of entrepreneurship, there is an undeniable impact of the environmental factors i.e. market mechanisms and state/government politics (IGIAD Entrepreneurship Report, 2008).

The gender factor in entrepreneurship

For this study, I will use the four categories of Goffe and Scase (1985) to analyze women entrepreneurship. These four categories of woman entrepreneurs are based on two factors i.e. attachment to entrepreneurial values such as individualism and self reliance versus the commitment to conservative gender roles. Simpson (1993) summarizes these four categories as follows: Conventional women entrepreneurs are the traditional ones that bring their entrepreneurial spirit and tie them with gender related roles. They try to achieve a nice balance with work and family. Innovators are keenly motivated by their entrepreneurial ideals and that idealism causes them to prioritize work against family. Domestics are driven by traditional female gender roles, thus their vision of success in business is somewhat limited. Radicals are those types of women entrepreneurs who rationalize their entrepreneurial ideals as to fight women subordination.

RESULTS

The age group of the sample ranged from 20 to 50 plus, half of the sample being within 40 to 49 age range. The educational background of the women entrepreneurs is as follows: 20% primary school, 30% high school, 45% university and 5% graduate school. 50% of the women entrepreneurs were married, 40% is single 10% is widow. 45% of the interviewed entrepreneurs has no kids, 10% has one kid and 45% has two kids. 45% of the sample has three siblings and more, 20% has three, 25% has two and 10% has no siblings.

The face to face interviews show that 30 % of women entrepreneurs have set up their business to be their own boss, the other 30% for economic reasons, 15% for social status, 25% to realize their dreams. The analysis of their business existence since their set up is as follows: 45% of women declared to have been in business between 0-9 years, 35% between 10-19 years, %10 between 20-29 years, %10 more than 30 years. %85 of the respondents expressed satisfaction to be doing their own business as entrepreneurs, however, 15% declared dissatisfaction due to limited time for self, limited income generation and wish to be in a different sector.

The women entrepreneurs have set up their business with personal savings (60%), family aid (5% ), use of debt (20%), and use of credit (15%).

The women entrepreneurs choose different ways to promote their business that is through internet (5%), brochures (15%), referrals (10%), word of mouth (10%) and all of the mentioned ways (60%). 90% of the women entrepreneurs employ workers whereas 10% do not.

The expectations of the women entrepreneurs from the government is tax deduction (45%), easiness of payment of debts (30%), and no expectations in any ways (25%).

The 50% of the women entrepreneurs were not aware of the existence of the support of women entrepreneurs associations and out of the other half of the sample, the declared membership rate is 15%.

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Lastly, women entrepreneurs questioned about their work-life balance have declared that they were trying to have a balance between home and work (30%), prioritize work (40%) and prioritize home (30%).

CONCLUSION

The results show that there is supporting evidence to Goffe and Scase (1985)’s theory: suggestion on female entrepreneurship differing from male entrepreneurship in that women entrepreneurs view their business as part of a wider system of relationships inclusive of family, community and friends. Thus Carter and Cannon (1992) state that there is tendency for female entrepreneurs to hit a balance between interests of family and business. However, the role of Turkish women in Turkish society is undergoing significant changes due to the globalization in the world. That is a good sign as the women employment in the OECD countries is 62%, in EU countries 52% in Turkey, but it is only 23.5% (Kagider, 2010). The fact, that 30 % of women entrepreneurs have set up their business to be their own boss, the other 30% for economic reasons, 15% for social status, % 25 to realize their dreams, reflects the gender perspective view (Kyro, 2001) i.e. women with an attempt to fulfill their dreams, develop their own ideas and set up their own business. Many women entrepreneurs were considered creative with a strong desire for getting things done (Yeager, 1999; Moore & Buttner, 1997; Tang, 1995). Despite this school of thought, women are continually viewed as ‘the other’ in a world where the norms of an entrepreneur is still that of a male and male characteristics are exhibited in entrepreneurial activities. This research gives supporting evidence to the abovementioned view as the women respondents in our sample expressed difficulties while they were trying to survive in a man’s world and have to work extra to gain extra trust from customers.

The push from the government and other organizations to pull women into labor force for economic welfare as well as the urbanization of women forced women to change. The Global Gender report (2009) draws attention to the concept of ‘motherhood gap’ The term ‘motherhood gap’ is defined as the extent of compatibility of motherhood with employment. The employment gap, according to the findings of the report, is related to the compatibility of marriage and motherhood with a lifestyle where women can work. Thus the difference in employment rate of working women within the ages of 35-44 with no children in comparison with the same age group of working women with kids shows a great variation according to countries. This variation can only be homogenized by working women friendly initiatives at workplaces or may be a motivator for women to be either entrepreneurs or non working women workforce. Although women tend to be at work, they still either try to balance their work/life or prioritize family over work. Thus they are still the main caretakers of children and home. TEPAV (Turkish politics of economy research institution) (Sener, 2010) ’s report firmly states that care service has to be institutionalized and socialized, children daily care centers should be obligatory for institutions employing minimum 150 employees and a national action plan is urgently required to mandate these rules (Sener, 2010).

DISCUSSION

This study has limitations due to the lack of adequate sampling size to draw any conclusions. This study took place in Istanbul and the sample in question is not reflective of the whole Turkish population and thus can not be generalized in any ways. Hence, it aims to serve the literature as an exploratory study to reveal women entrepreneurship motivations, the type of

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women entrepreneurs in Turkey. There is a call for further research to explore the reasons for the movement of all women workers from agriculture as well as more interviews with women entrepreneurs in rural and urban locations of Turkey. Following our examination of the available literature, it seems reasonable to conclude that this study highlights the changing trends in Turkey. The female movement at the end of the 19th century in Turkey (Sirman, 1989) is a good indicator for this change. Women show signs of empowerment and self actualization. It is also worth noticing that ‘entrepreneurship is a mechanism by which many people enter the society’s economic and social mainstream, aiding culture formation, population integration and social mobility’ (Hisrich, Langan-Fox, and Grant, 2007). Thus entrepreneurship, as a tool, for women serve the above mentioned purposes, which reflects the sociological dimension of entrepreneurship which examines the relationship between group characteristics and the initiation of business activity. By creating economic stability for a given population and establishing a place in the social and economic power structure, entrepreneurial enterprises directly contribute to group assimilation (cf. Godwyn, M., 2009). As another sociological analysis of this issue, Kaya (2008) suggests that ‘the process of proletarianization with economic globalization in Turkey was also a process of increasing utilization of female labor force. However, we must note that the share of routine non-manual as well as the managerial and professional, and entrepreneurial classes expanded at very significant rates with the contraction of women's employment in agriculture. This shows that women also experienced the process of polarization. While some portion of female workers entered into the labor force at the very bottom and most often on a temporary basis; an increasing number of women are establishing stable careers at the middle and the top of the social strata.’

Although race, ethnicity, and religion have been widely used for analysis of entrepreneurial activity and economic development, gender has increasingly become to be perceived as an important factor. Thus, there have been recent efforts to extend sociological research to include gender as a salient group characteristic in its relationship to entrepreneurial activity (cf. Godwyn, M. 2009).

According to Ozen Kutanis and Bayraktaroglu (2002), Eastern Marmara region and Kocaeli / Adapazari are more industrial and less urbanized, so the type of women entrepreneurs are more traditional and conventional, whereas in this study the results show that the women are mostly innovator and traditional entrepreneur types. The difference between these two studies can be attributed to the regional differences as well as the different sector make up of the sample. Ozen Kutanis and Bayraktaroglu (2002)’s study reflects results on a sample of health and service sector, educational sector unlike this study which is only service sector. However, the common type of women entrepreneur between the two samples is the domestic/traditional type, this result may be interpreted as the cultural expectation of women roles in the Turkish society. This gives supporting evidence to Aldrich (1989) as he suggests that social structures such as workplace, family, and social life affect women’s access to entrepreneurial opportunities. Furthermore, the major motivating factors for our sample to become entrepreneurs are desire for independence, fulfillment of their dreams and economic reasons. These factors have proved to be the same for the Israeli women entrepreneurs (cf. Lerner, M and et al.,1997). This finding may be an indication of the changing values of societies due to globalization.

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Although the gender inequality and the urbanization of women in a patriarchal society with rigid family roles of women make it difficult for women to be entrepreneurs, the research results are encouraging as it signals a positive change. It is inspiring to see evidence that a majority of women either prioritize their work as number one or try to balance work and family. However, this is also a call for help for women as they need more help to cope up with this responsibility. Thus policy implications are in immediate request. Lastly, it is the intention of this paper that further research is pursued in a wide setting of Turkey with a larger sample size to provide feedback for policy actions. Based on my finding that only 50% of the women entrepreneurs sample showed interest in network affiliations, further research should explore the extent to which network affiliations of Turkish women entrepreneurs become prevalent for their success and the reasons underlined. References are available upon request from Hale Oner [email protected].

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TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP AND THEIR

EFFECTS ON INDIVIDUAL AND ORGANIZATIONS

Marie-Elene Roberge

5500 N. Saint Louis Avenue, Chicago, IL, 60625, [email protected]

773-463-1785

Ozge Ucan 1205 N. Wheeling Ave. Mount Prospect, IL 60056

[email protected] 224-210-0375

ABSTRACT

This article presents information about the transformational and transactional leadership, their history, the components of these leaderships, and major differences between them. The research examines the effects of transformational and transactional leaderships on organizational culture, organizational learning, quality management, and individuals. There is a positive relationship between transformational leadership with organizational culture, learning, and quality management. Transformational leadership has a positive impact on individual’s motivation, satisfaction, and trust. This article also examines empathy as a key component of the transformational leadership. The directions for future of transformational leadership are discussed.

INTRODUCTION Leadership theory, research, education, and development focused on leadership as only a transactional exchange between the leader and its followers until the last twenty years. Then a new paradigm of transformational-transactional leadership was introduced that better reflected the practices of the best leaders. The recent literature in leadership is overflowing with articles and books describing the “transactional and transformational” leadership. Three decades ago, the interest in transactional and transformational leadership becomes more popular. There are two reasons for this: the first one is rapid, global, economic, technological change, and the crucial role of leadership style on development of an organization, and the other is the failures of the known leadership theories (behavioral and contingency) to explain atypical qualities of leaders. In this article, after definition, history and components of transactional and transformational leadership, the focus is on the effects of these leadership styles on individuals, groups, and organizations. Finally, futures directions of this leadership styles are presented.

DEFINITION OF TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP

Transactional leadership “…occurs when one person takes the initiative in making contact with others for the purpose of an exchange of valued things” [1]. Transactional leadership is based on an exchange of something the leader possesses or controls that the followers want in return for his/her services. In this exchange, leaders emphasize goal setting; give instructions to clarify conditions, control and reward. Transformational leadership “…occurs when one or more persons engage with others in such

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a way that leaders and followers raise one another to higher levels of motivation and morality”[1].The transformational style inspires followers to share the leader’s values and connect with the leader’s vision. Transformational leaders are successful because they tap into some of our most basic human needs such as the need for a sense of identity, the need to belong, the need to feel good about our efforts, the need to feel that we are part of something special, the need to believe that our future is a hopeful extension of our past, and the need to feel that we are achieving something worthwhile with our lives.

Major Differences between Transformational and Transactional Leadership

Transformational and transactional leadership are complementary to each other as the circumstances dictate. There is no formula that dictates when one is more relevant than the other. Leaders exhibit various degrees of transformational and transactional behaviors as needed. There is evidence that more effective leader’s exhibit a higher level of transformational leadership than transactional leadership [2]. The transformational style can be seen in a leader of innovation, whereas the transactional style can be seen as a manager of planning and implementing policies and procedures [3]. Another view is that the transformational style creates new structure in an organization, while the transactional style depends on existing structures [4]. Whereas the transactional style uses the power and authority that already exists in the organization, the transformational leader motivates people to work for a new and greater good and to create changes in the environment [5]. Transformational leaderships use energy-producing characteristics that generate new changes for the organization, which transactional management cannot produce. What transformational leaders do are that formulating an inspiring vision, facilitating the vision, and encourage short term sacrifices [6]. Transformational leadership can be seen as a parent of transactional leadership. It provides the reference to the transaction of power within the organization [7].

The History of Transformational and Transactional Leadership Research on leadership theory has evolved over the past fifty years. Early leadership research focused on identifying personal characteristics of leaders (trait approach) then researchers focused on leader behaviors that increased followers’ productivity. According to Ohio State Studies, there are two different kinds of leaders. First is oriented toward task, that leader makes sure that the work gets done. Leaders assign tasks and expect workers to maintain definite standards of perform. Second is oriented toward people. Leaders in this group help employees with personal problems, treat all employees equal, and support them. Two major leadership models found contingency leadership [8] and path-goal leadership [9]. The contingency approach proposes that appropriate leadership style is depending on situation. The path-goal leadership model incorporates situational variables to explain employee motivation. These studies established that successful leaders use many types of power and that power alone does not explain leader’s effectiveness in influencing people [10]. Behavioral leadership models have not successfully predicted which leaders could lead organizational change. Researchers have used prior behavioral leadership research to create the concept of transactional and transformational leadership.

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The concept of transformational leadership was initially introduced by leadership expert and presidential biographer James Macgregor Burns [1]. According to Burns [1], transformational leadership can be seen when “leaders and followers make each other to advance to a higher level of moral and motivation". The term of transformational comes from inspiring and developing followers and pushing them to higher levels. Through the strength of leader’s vision and personality, transformational leaders are able to inspire followers to change expectations, perceptions, and motivations to work towards common goals.

Later, researcher Bernard M. Bass expanded upon Burns’ original ideas to develop what is today referred to as Bass’ Transformational Leadership Theory [11]. According to Bass [11], transformational leadership can be defined based on the impact that it has on followers. Transformational leaders garner trust, respect and admiration from their followers.

Transformational leaders have six central personal characteristics. These are creativity, interaction, visionary, empower, passionate and ethical [12]. Other theories of leadership also emphasize the importance of communication, integrity, courage.

Research in transformational leadership focuses more on its outcomes other than its antecedents. The majority of antecedents research of transformational leadership emphasis personality, life experience, and motivation. People motivation and its role in leadership formation and development are related. The study of motivation as an antecedent of transformational leadership shows that leaders’ motivation is highly correlated with their transformational behaviors [13].

The Components of Transactional Leadership

Transactional leadership occurs when the leader rewards the followers depending on the performance. Transactional leadership depends on contingent reward, management by exception, and laissez-faire [14].1. Contingent Reward: This transaction is effective under certain circumstances. With this method, the leader assigns what needs to be done and rewards followers in exchange for doing assignments.2. Management by Exception: This transaction is less effective than contingent reward or the transformational leadership. It can be passive or active. In passive, the leader waits for deviances, mistakes, and errors to occur and then takes action. In the other one, the leader actively monitors deviances and mistakes and takes action as necessary.3. Laissez-Faire: This means absence of leadership. According to all research, it is the one that most ineffective. There isn’t any transaction or exchange between leader and follower. Responsibilities of leaderships are ignored. Decisions are not made and actions are delayed.

The Components of Transformational Leadership

Transactional leadership provides a basis for effective leadership, but satisfaction, innovation, and effectiveness can be achieved through transformational leadership. Transformational leaders act as mentors to their followers by encouraging learning, achievement, and individual development. They provide challenges, evoke emotions, and foster a climate of trust. The literature identifies five dimensions of transformational leadership.1. Idealized Influence: Followers see their leaders as role models and try to copy them. Followers trust

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and admire their leaders. The reason for this is that the leader considers followers’ needs over his or her needs. Followers know that whenever they need help, their leader will be there. 2. Inspirational Motivation: Leaders show empathy, enthusiasm, and optimism. This increases individual motivation. In this dimension, leaders make clear expectations and show commitment to goals.3. Intellectual Stimulation: Leaders stimulate followers by changing problems, questioning conditions, and approaching situations in new ways. And leaders search new ideas and solutions to problems from followers.4. Individualized Consideration: Leaders consider individual’s growth and success. They act as a coach or mentor for followers. By offering new learning opportunities, leaders pay attention to the followers’ achievements. Good communication skills are highly important for this dimension.

EFFECTS OF TRANSFORMATIONAL AND TRANSACTINAL LEADERSHIP ON

GROUPS AND ORGANIZATIONS

In literature, the relationship between transformational leadership and organization performance has been analyzed and found out positive relationship between them. However, there is little research on the mediating process between leadership and organizational success. Researches on mediating process have been focusing on followers’ trust, self efficacy, satisfaction, and group cohesion.

Effects on Quality Management: Transformational leadership is also associated with quality management. Transformational leadership provides the visionary leadership needed for successful quality management. The firms with a higher level of quality management have a higher transactional and transformational leadership. Also, successful firms use a higher level of transactional leadership than unsuccessful firms use [15].

Transformational leaders communicate the team’s objectives effectively. This communication turns the team’s objectives into common identity of groups. This common identity increases the team spirit.

Effects on Organizational Learning: Organizational learning and innovation are positively affected by transformational leadership. The relationship between organizational learning and leadership provides the creation of a positive synergy that increases organizational performance [16].

Transformational leaders trigger followers’ behavior such as Organizational Citizenship Behavior (OCB). OCB mediates the relationship between transactional leadership and follower performance [17]. OCB can be seen in extra-role behaviors such as helping newcomers. Newcomers are easily integrated into the group, then group works efficiently, and performance variance becomes smaller. Therefore, followers’ performance reaches a higher level of quantity and quality.

In general terms, positive affects and the environment enhance problem solving and decision making. That leads to innovation, creation, and success. A research found that the spread of positive emotions among a group could enhance group cooperation and reduce group conflict [18]. Transactional leaders change their environments by influencing followers to embrace positive visions and ideals. Especially in diverse work environment, people are more likely to perceive themselves as different from another, so they are less likely to empathize with one

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another. Leaders act as feeling for and having mutual empathy the people work together create an increase group effectiveness and performance [19].

Effects on Organizational Culture: In transformational leadership process, the organizational culture changes. Leaders transform organization and its culture. After culture becomes transformational, then it turns into an environment for more effective individual growth and organizational performance [20]. Also transformational leaders influence the culture beyond the people of the organization as well as the culture among the people of the organization .The environment in transformational organizations consists of long-term commitments toward organizational goals and mutual interests. Transformational organization cultures are based on shared interdependence, as well as leaders and followers who can pass over their self-interests for the good of the organization.

EFFECTS OF TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP ON

INDIVIDUALS

Transformational leaders understand followers and inspire them to achieve higher outcomes. Leaders support, mentor, and coach them. Transformational leaders trigger follower conscientiousness. Leaders empower their followers and this leads to higher motivation.

Transformational leaders increase their subordinates’ satisfaction and trust .As a transformational leader, Herb Kelleher, the founder and CEO of the Southwest Airlines, focused on building relationships with employees. He became involved in helping out employees personally. He reached down and got to know the employees, so employees understood what he really believed in and why they should trust him [21].

Transformational leadership has a positive impact on the development of followers’ motivation in terms of their self actualization needs and extra effort. Transformational leadership has a positive impact on follower’s performance [22].

Basically, as a result of what transformational leaders do, their followers value them, identify their strengths and challenges, give feedback, guidance for improvements, and support them. When people feel they are valued, they become open to hear negative feedback and motivated to change.

In this complex and fast moving world, one of the key elements of competitive advantages of companies is knowledge creating, sharing, and managing effectively. While knowledge as an asset is continuously growing, leaders should manage this asset successfully. Leaders are the ones for creating structure that foster knowledge creation and cultivation. Transformational leaders facilitate higher level of knowledge creation and sharing. This leads to higher levels of individual performance [23]. Leaders individually consider their followers, motivate them on a day to day basis and encourage them to share ideas with a firm. They reward individuals for coming up with new ideas and sharing the ideas with others. Especially, in high technology firms and other knowledge based companies, transformational leaders increase the level of knowledge creating and sharing. For example, Steve Job used a transformational and transactional leadership style to find out systems and structures that create, share information, and convert it into a product. Jobs created a vision for computer and pushed his Apple employees to reach higher goals.

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TRANSFORMATIONAL LEADERSHIP AND EMPATHY

Emotional intelligence is a strong prerequisite for effective transformational leadership. An important measurement of emotional intelligence is emphatic response. It is the ability to understand follower’s emotional conditions. A major characteristic of transactional leaders is relying on empathy to understand employees’ thoughts, feelings, and point of view. Leaders who show empathy to followers can improve organizational efficiency. A strong connection between leaders and followers brings higher organizational performance [24].

Truly effective transformational leaders are distinguished by a high level of emotional intelligence that includes self awareness, self regulation, motivation, empathy, and social skills. According to a study, senior managers who had emotional intelligence over performed goal by 20%, but division leaders without emotional intelligence underperformed by the same amount [25].

Empathy distinguishes transformational leaders from other leader types. Empathy is the key element that enables the leaders to balance meeting their own goals with regard for people whom they lead. Leaders understand follower’s wants, needs, desires and really care for them with help of empathy. Without empathy, a person with high level of technical skill, IQ, and analytical mind can’t be a great and effective leader.

Empathy is especially important today as a component of transformational leadership. The first reason is in business, the use of teams is really increasing. Empathy plays a role that increases team performance. A team leader can sense and understand the view points of people around the table. The second reason is with increasing globalization, cultural and ethnical differences are getting larger in work places. Empathy helps leaders understand the cultural differences and hear the message beneath the words being spoken. The last reason is reduction of turnover in today’s economy. With the help of empathy leaders develop and keep good people. Overall, a leader who is empathetic toward his/her followers is able to take the place of followers and feels for their welfare and wellbeing.

Future of Transformational Leadership

In the 21st century, the world is going through a transformation. This transformation affects business, industry, economy, politics, and etc. The world is being reshaped by globalization, information technology, and diversity. Transformational leaders are the ones who lead the companies effectively and successfully in this decade. No leader can lead if she/he cannot respond to the wants of the followers, if she/he cannot produce change through innovation, and if she/he cannot empower followers. Leaders who are simply power holders cannot be effective in the long run and not see the ethical effects of their work.

For the future of transformation leadership, Sanders, a research proposes a model that suggests three dimensions of leadership accomplishment. These dimensions are transactional, transformational, and transcendental [26]. In this model, leader’s development along with consciousness (mind), moral character (heart) and faith (soul) is associated with these dimensions of leadership accomplishment. Transcendental leadership incorporates managerial aspects of transactional leadership and the charismatic aspects of transformational leadership. Transcendental leadership is developing of leaders beyond the ego towards a

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higher influence to achieve an extraordinary, spiritual presence in their lives. It is a new and more complex way of effective leadership [26]. Transcendental leaders integrate the immaterial with the material, seek clarity between reality and unreal, and have deepened conviction [27].

REFERENCES

[1] Burns, J. M. (1978). Leadership. New York: Harper & Row [2] Hetland, H., & Sandal, G. M. (2003). Transformational leadership in Norway: Outcomes and personality correlates. European Journal of Work and Organizational Psychology, 12(2), 147 – 170. [3] King, S. (1994). What is the latest on leadership? Management Development Review, 7, 7-9. [4] Mink, O. (1992). Creating new organizational paradigms for change. International

Journal of Quality & Reliability Management, 9, 21-23. [5] Davidhizer, R., & Shearer, R. (1997). Giving encouragement as a transformational leadership technique. Health Care Supervisor, 15, 16-21. [6] Ackoff, R. (1999). Transformational Leadership. Strategy & Leadership, 27, 20-25. [7] Covey, S. (1991). Principle-centered leadership. New York: Simon & Schuster. [8] Fiedler, F. E. A contingency model of leadership effectiveness. In L. Berkowtir (Ed.) Advances in experimental social psychology.New York: Academic Press, 1964. Vol. 1. [9] House, R.J. (1971) “A Path Goal Theory of Leader Effectiveness,” Administrative Science Quarterly, 16, 3, 321-338 [10] Yukl, G. (1994). Leadership in Organizations, Prentice Hall, Englewood Cliffs, NJ. [11] Bass, B. M. (1985). Leadership and performance heyond expectations. New York: Free [12] Hackman, M.Z. and C.E. Johnson (1991), ‘Leadership Communication Skills’, in J.T. Wren, ed., The Leader’s Companion: Insights on Leadership through the Ages, pp. 428–31 [13] Barbuto, J.E (2005). Motivation and Transactional, Charismatic, and Transformational Leadership: A Test of Antecedents. Journal of Leadership &amp; Organizational Studies, 11; 26. [14] Bass, B.M.(1998). Transformational Leadership

[15] Laohavichien T., Fredendall L.D., and Cantrell R.S. (2009).The effects of transformational leadership on quality management. Journal of Quality Management 16, 2:7-24

[16] Morales V.J, Montes F.J., and Verdu’Jover A.J.(2008). The effects of transformational leadership on organizational performance through knowledge and innovation.

BritishAcademy of Management, 19: 299-319. [17] Boerner, Sabine, Eisenbeiss, Silke Astrid, Griesser, Daniel(2007). Follower Behavior and Organizational Performance: The Impact of Transformational Leaders. Journal of Leadership and Organizational Studies, 13: pp. 15-26 [18] Barsade, S.G. (2002). The ripple effect: Emotional contagion and its influence on group behavior. Administrative Science Quarterly, 47: 644-675 [19] Roberge M.E .and Dick R.V. (2008). Recognizing benefits of diversity: when and how does diversity increase group performance? Human Resource Management Review [20] Bass, B. M. & Avolio, B. J. (1993). Trans form adona! leadership: A response to critiques. In M. M. C'hemmers & R. Ayman (F.ds), leadership theory and research:

Perspectives and directions, pp. 49-88.

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[21] Bass, B.M & Avolio, B.J. (1997). Full range leadership development: Manual for the Multifactor Leadership Questionnaire. Palo Alto, CA: Mind Garden [22] Dvir, T., Eden, D., Avolio, B., & Shamir, B. (2002). Impact of transformational leadership on follower development and perfprmance. A field experiment. Academy of

Management Journal, 45(4), 735-744. [23] Bryant,S.E. (2003). The role of Transformational and transactional leadership in creating, sharing, and exploiting organizational knowledge. Journal of Leadership and

Organizational Studies,9: 32-44. [24] Barbuto J.E. & Burbach M.E. (2006). The Emotional Intelligence of Transformational Leaders: A field study of elected officials. The Journal of Social Psychology, 146(1): 51-64. [25] McClelland, D. C. (1999). Identifying competencies with behavioral-event interviews. Psychological Science,9(5), 331-339. [26] Sanders, J.E.(3rd), Hopkins, W.E. & Geroy, G.D. (2003). From transactional to transcendental: toward an integrated theory of leadership. Journal of Leadership and

Organizational Studies, 9(4), pp. 21-31. [27] Kant, I 1997. Prolegomena to any future metaphysics. Edited and translated by Gary Hatfield. New York, NY: CambridgeUniversity PreKing, S. (1994). What is the latest on leadership? Management Development Review, 7, 7-9.

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MANAGERIAL RESPONSIBILITY FOR MERITOCRACY

～～～～PERSPECTIVES ON THE PAY SYSTEM IN JAPAN ～～～～

Tomokazu Sakumoto

Graduate School of Regional Business and Economics Okinawa International University

Residence: Chatan 2-6-8, Chatan-cho, Okinawa, Japan 904-0116 Email [email protected]

Office Tel/Fax +81-98-893-7128 Mobile: +81-90-2859-8507

ABSTRACT

Trends in pay systems of Japanese corporations are considered in terms of comparison to personnel management in the United States, with specific consideration given to such labor issues as long-term employment. Given the fact that each country has its own cultural structures, this study identifies some general characteristics of meritocracy in Japan and in the US as revealed from investigation of corporate pay systems. It is surmised that long-term evaluation systems such a those associated with meritocracy in Japanese corporations are likely to be increasingly significant for the career development of a company’s core workers as implemented by Managerial Responsibility. Meritocracy, Pay System, Human

Resources Management

MERITOCRACY IN JAPAN AND IN THE US

The expression ‘meritocracy’ as used it in this paper refers to pay systems reflecting ability-centered evaluation. Ability is either ‘existent’ or ‘potential.’ Evaluation is either ‘job evaluation’ or ‘individual evaluation.’ This categorization enables contrastive differentiation of characteristics of meritocracy in Japanese and US corporations. Overall View of Meritocracy in Japan and in the US

Corporations in Japan have, in general, the following features of personnel management. Workers expect to remain with their employer until their designated retirement age, though this is only a custom and is not clearly prescribed by the contract. Layoffs are perceived as being the last resort for handling managerial difficulties. In addition, most Japanese companies prefer long-term employment in which the accrued duration of the working period is closely linked to increases in the employee’s pay. Under such a seniority-pay system, promotion and raises in salary are affected by, and strongly tied to, the length of service with the company (specifically, in-house service). Because companies usually ignore previous work experience in the determination of payment or rank, comparatively few workers who have obtained a secure job are willing to change to a different employer. Additionally, the initial pay scale is fundamentally determined by the year of graduation, despite actual age at graduation, so there is a financial incentive not to delay or prolong one’s education. In Japan, the labor market is not a factor than affects pay scales. Employees are appraised for potential and demonstrated ability but are expected to do whatever work they are assigned, so payment within a company is not so much related to the specific types of jobs undertaken.

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Corporations in the US, by contrast, tend to hire and lay off employees according to the current needs of the company. Payment is strongly affected by conditions current in the labor market and is less affected by a worker’s duration with the company. Corporations seek to improve competitive competence by actively seeking either better or cheaper employees. Salaries thus become competitive, but sometimes the resulting discrepancies in pay and benefits tend to promote resentment among employees and loss of corporate loyalty. Such corporate and employee uncertainty and instability favors short-term management planning within a more fluid market. Ability and Evaluation in Japanese and US Corporations

The characteristic features of Japanese personnel management compared with US corporations and their payment systems can be categorized according to variant perceptions of employee ability, and the establishment of a connection between that perception and the resultant pay system. Management in terms of payment systems can be categorized based on the type of assessment of employee ability and performance. Ability can be existent ability (EA) or potential ability (PA), and performance can be job evaluation (JV) or individual evaluation (IV). The degree of emphasis on each of these four factors provides a basis for recognizing the comparative degree of corporate (or cultural) meritocracy. As evident in Figure 1, emphasis on EA and IV results in pay for skill and knowledge whereas emphasis on PA and JV results in pay reflecting the working period. In the case of strong EA and JV, there is pay for the job and performance. By contrast, strong PA and IV results in pay for potential ability and qualification. The opposition of these factors is revealed in the differing pay systems of Japanese and US corporations: the pay system for US corporations more strongly reflects EA and JV while the Japanese pay scale is seen to put emphasis on PA and IV. These factors are closely related with the formation of each pay system.

Existent Ability (EA)

Pay for Job Pay for Skill and Knowledge

Pay for Performance

Pay for Seniority and Service

Pay for Personal Ability

Pay for Qualification

Potential Ability (PA)

Job Evaluation (JV) Individual Evaluation (IV)

Japanese

Corporation

US Corporation

FIG. 1. The Relation of Pay System and Meritocracy

Recently in Japan, it has been found that workers are remaining supportive of long-term employment and seniority pay/promotion. According to the survey of a labor institute in Japan, more than 86% of employees hope to remain in long-term employment until retirement, and over 71% willingly accept the seniority system for maintenance of their living

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status [1]. Clearly, Japanese workers still support retention of long-term employment without contractual specification. As for a similar investigation viewed from the side of the companies, almost 96% of Japanese corporations are trying to keep the lifetime employment system with seniority. Moreover, almost 76% of companies retain long-term employment with employee training at company expense because of their belief that employee training is important for a Japanese company to be able to succeed indefinitely into the future [2].

It seems that recent pay systems in Japan exhibit several factors combined with employees’ in-house training under long-term employment systems. For example, as reported in a recent survey, in the case of general workers, most Japanese corporations ranked the following as significant factors for payment: seniority system (61.9%), ability (80.9%), and job content (56.7%), though the percentage points of personal elements such as seniority and potential ability has gradually decreased in 2007 survey [3]. It appears that the pay systems of these companies overlap each other. According to a questionnaire of the Ministry of Health, Labour and Welfare in 2009, Japanese companies’ non-manager pay determinants were composed primarily of the following five factors, in descending order: job content, job ability, school career, seniority, and job achievement. The specific figures are given below in Table 1.

TABLE 1 ManagerManagerManagerManager Job ContentJob ContentJob ContentJob Content Job AbilityJob AbilityJob AbilityJob Ability AchievementAchievementAchievementAchievement SchoolSchoolSchoolSchool SenioritySenioritySenioritySeniority1998199819981998 70.170.170.170.1 69.669.669.669.6 55.155.155.155.1 72.672.672.672.6 NANANANA2001200120012001 72.872.872.872.8 79.779.779.779.7 64.264.264.264.2 73.973.973.973.9 72.572.572.572.52009200920092009 77.977.977.977.9 69.969.969.969.9 46.946.946.946.9 55.955.955.955.9 54.954.954.954.9Non ManagerNon ManagerNon ManagerNon Manager Job ContentJob ContentJob ContentJob Content Job AbilityJob AbilityJob AbilityJob Ability AchievementAchievementAchievementAchievement SchoolSchoolSchoolSchool SenioritySenioritySenioritySeniority1998199819981998 68.868.868.868.8 69.269.269.269.2 55.355.355.355.3 78.578.578.578.5 NANANANA2001200120012001 70.670.670.670.6 77.377.377.377.3 62.362.362.362.3 80.680.680.680.6 79.079.079.079.02009200920092009 72.772.772.772.7 69.369.369.369.3 46.646.646.646.6 65.465.465.465.4 63.763.763.763.7 Ministry of Health, Labour and Welfare “Shuro Jouken Chosa” 1998～2009.Pay Determinants （％）Pay Determinants （％）Pay Determinants （％）Pay Determinants （％）

It is worth noting that of these five pay determinants, the contribution of school career has decreased the most in the past decade. This may indicate increased reliance on in-house training.

PAYMENT FEATURES OF SPECIFIC CORPORATIONS

Toyota Motor Corporation in Japan

Established at 1937, Toyota had by the year 2000 grown to over sixty-eight thousand employees with product sales valued around 120 billion dollars. The production of cars amounted to about 4.5 million vehicles in 2001. Some of Toyota’s distinctive managerial characteristics are as follows.

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Paternalism: Toyota’s CEO Hiroshi Okuda insists that a company which parts too readily with its employees will suffer from the loss of reliability of their workers. In times when the company is in need of many workers, the company will be unable to retain eligible workers and as a result will lose its competitiveness. Okuda also stresses education for human development to make better quality vehicles. Toyota’s managerial philosophy encompasses human development. In-house training: In 2002, the Toyota Institute for Human Development was established. The purpose was to educate employees for knowledge, process and product improvement, manager training, and human development according to the philosophy of the Toyota Way. An internship system has been developed for providing 2 or 4 weeks of work experience along with reports and lectures given without pay except for commuting fees, lodging and meals. The purpose is to promote company appeal and to foster creative personal development. Pay: For four hundred positions which are surveyed and evaluated, promotion and increase of pay is dependent on global personal appraisal by MBO (Management by Objective) and perception of competency based on evidence of understanding of the Toyota Way. As explained by the CEO, the Toyota Way is a kind of managerial philosophy which includes long-term employment, a model of competency, personal skill development for multiple skills, loyalty that supports an “upbringing” attitude towards other employees, and an unceasing effort at improvement “from the bottom up.”

Toyota’s Pay Systems in Japan and at NUMMI

The Toyota system of pay for white- and blue-collar workers is similar. Pay for white-collar workers is based on job grade (50%) and personal job function (50%). For blue-collar workers, it is based on job grade 30%, experience 20%, personal job function 30%, and age 20%. For blue-collar workers, emphasis is on working-period experience. However, the designation of blue-collar and white-collar position is not according to assigned job but by skill grade, as shown in Table 2, which shows skill development with working experience. Workers at the same grade, however, may receive different pay because of a “broadband” pay scale that includes appraisal for job-related functions such as evidence of skill and success at problem-solving, and capacity for teaching their “know-how.” This system is seen to promote the learning/teaching of skills on a long-term basis in both job categories.

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TABLE 2

Position Pay Grade Based Pay Position Pay Grade Based Pay

1 Grade Base on

2 Grade Job Grade

Job Grade SX 2 Grade 30%

3 Grade Experience

50% 4 Grade 20%

Personal 5 Grade Personal

6 Grade Job Function

5 Grade Job Function 7 Grade 30%

6 Grade 8 Grade Age

7 Grade 50% Basic Skill 9 Grade 20%

4 Grade

EX

Mid Skill

Profesional

White Collar Blue Collar

Pay System in Toyota

Toyota Motor Corporation in 2002.

SkillClerk

CX 1 Grade

3 Grade

Expert

Hourly pay for the job is used for blue-collar workers at NUMMI (New United Motor Manufacturing Incorporated), which was established in 1984 in Fremont, California, with 50/50 investment by Toyota and GM. The payment of union members is at a uniform rate without appraisal except for maintenance workers. Pay raises are relatively small and automatically allotted according to six-month working periods without personal-performance evaluation [4]. The variability of the pay system of Toyota in Japan is clearly related to rotation of production and maintenance workers, though NUMMI adopted only a division-internal rotation system. Therefore NUMMI workers have only job experience but do not learn solution skills for unusual operation as is the case with workers in Japan. For this reason, the NUMMI pay scales are separated, and there is no need for a broadband pay range to accommodate the different skill capacities of each worker.

RECENT TRENDS OF PAY SYSTEMS IN JAPAN

Most corporations in Japan have tried to use job-based pay systems for both blue-collar and white-collar workers under long-term employment. Unfortunately, this seems to have created several difficulties of the evaluation system based on jobs or performance, difficulties such as cost and time for job evaluation and the lack of working flexibility. As seen overall, many Japanese corporations have tried to employ several types of pay system in heading towards personal ability-centered pay [5]. Several corporations employed pay systems for personal ability, including a type of competency and broadband pay scale such as used by Toyota corporations. Evaluation tends to center on personal potentiality because personal ability does not link so well with job performance under group-focused working situations without a definite working sphere. This paper has attempted to consider more relevant pay system under the long-term viewpoint of Meritocracy. It seems that the pay system in Japan is converging for working flexibility and employee training. I would like to stress that most CEOs in Japan have a

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management philosophy to encourage employee career development within long-term employment and to keep in balance employees’ pay, as is done in the Toyota Way. This is closely related to the pay system under OJT in long-term employment. Considering general pay systems, most Japanese companies have employed pay systems for meritocracy based on personal potentiality under long-term employment, more so than the average US corporations. It appears to me that considerable managerial responsibility remains in combined pay systems based on career development of employees.

REFERENCES

[1] The Japan Institute for Labor Policy and Training, “Kinro seikatsu ni kansuru chosa” 2004 and

2007. [2] Japan Productivity Center, “Nihonteki jinji seido no genjo to kadai ” 2008. [3] Japan Productivity Center, “Nihonteki jinji seido no genjo to kadai ” 2000-2008. [4] NUMMI and UAW, Local Agreement in 2004. [5] The Japan Institute for Labor Policy and Training, “Kongo no kigyou keiei to chingin no arikata ni

kansuru chosa” 2009.

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THE EFFECTS OF DOWNSIZING: A CASE STUDY OF AN IT COMPANY IN

TURKEY

Alaeddin Tileylioglu Çankaya University

Ögretmenler cad. No: 14 Yuzuncuyıl 06531 Ankara-Turkey [email protected]

phone: +90 312 2844500/237 fax: +90 312 2871672

ABSTRACT

This paper presents findings of a case study, which describes experiences of top management team together with the human resource (HR) managers implementing a downsizing program in an IT company in Turkey. The downsizing practice took place at the end of 2009 due to the ‘global financial crises’. Downsizing was intended as a permanent separation, but due to a new development only three months later, the management made a decision to re-call all terminated ‘victims’ to offer them their old positions. This decision was unusual for implementation of permanent termination. The explanation given by management was that ‘since the company has contracted a sizeable project, now we can afford to re-employ all the ‘victims’ of the downsizing’. Not many empirical studies have paid attention to the processes by which downsizing can be accomplished. The present study, however, investigated the three groups of the concerned parties: the ‘victims’ of termination, the ‘survivors’ and the decision makers of the downsizing, the implementers. We, therefore, in this paper made an in-depth analysis of several issues: We examined the feelings of the ‘victims’ after returning to the company, the post-downsizing ‘survivor syndrome’, and management feelings and their interpretation of the situation. Key words: Downsizing, lay-off, survivor, commitment, global financial crises

INTRODUCTION Downsizing refers to planned reduction in the size of the workforce with intent to cut costs and to improve organizational performance (Kets de Vries & Balazs, 1997; Kozlowski, Chao, Smith, & Hedlund, 1993). It is also referred as rightsizing, re-organization, restructuring, (Cummings & Worley, 2002). The organization chooses this strategy when executives are unable to predict future business activity and the environment and particularly at times of downturn of the economy. According to Noronha & D’Cruz, 2006, downsizing will have impact not only on those who are separated from the organization but also on those who survive the lay-off and stay in the organization, as well as the implementers, those involved in executing the downsizing intervention in the organization.

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Downsizing may have positive or negative consequences. Positive consequences involve decrease in personnel cost and increase in efficiency and productivity while negative effects include reduced job involvement (Allen et al., 2001), reduced commitment to the organization (Brockner, Konovsky, Cooper Schneider, Folger, Martin & Bies, 1994) reduced self-esteem (Wiesenfeld et al., 2001) and reduced performance of the survivors (Brockner, Grover, Reed & DeWitt, 1992), downsizing is also studied as a violation of the psychological contract (Spreitzer & Mishra, 2002).

There are more empirical studies indicating the long-term negative effects of downsizing on surviving employees, (Armstrong-Strassen 1998), productivity, and profitability (Madrick 1995; Rubach 1995) than its long-term benefits. According to some researchers (Baily, Bartelsman, and Haltiwanger 1994; Cascio 1995; Dougherty and Bowman 1995; Lewin and Johnston 2000) there is lack of explicit evidence supporting long-term benefits of downsizing.

Downsizing effects work processes as well: it causes loss of individual security as a result of job losses, it reduces commitment to the company by survivors, increases moral problems and reduces motivation and increases the need to develop new skills among survivors. In addition it increases the need for new organizational form and for re-allocation of resources and power. The use of downsizing as management's strategic response to environmental and institutional changes is prevalent in many industries, particularly during the times of recession and financial crises.

THE COMPANY The company under consideration, let’s call it XYZ, was established in 1992 in the capital city of Turkey, in Ankara. It was established to produce software to the strongly growing defense industry of the country. The company is owned by both private sector entrepreneurs as well as the state defense industry companies. The company has been very successful and profitable over the years. Despite very strong competitors, in the last 3 years prior to 2009, it was growing at a very fast rate reaching eight to ten times its previous software sales, making their shareholders extremely happy. In 2009 due to the world financial crises, XYZ started to show a decrease in its activities. XYZ’s uses a matrix type organization, with highly centralized structure. It employs 350 people more than half of whom are computer, software and electronic engineers. XYZ is managed by a general manager and two deputy general managers. It has four operations departments: namely software, system, certification, and contracts and programs, each of which is run by a director. They also have strong human resource as well as marketing and sales departments. Over 90% of the employees are graduates of very good universities, many of them hold a master degree in various relevant fields. During the last year, due to the very high growth and particularly diversification in their outputs, the top management started to seriously talk about restructuring the organization. In addition to the contracts that are already under operation, at the end of 2008 and beginning of 2009 they contracted several other projects that would resume work at the beginning of 2010. But following the world financial crises, in 2009, the business started to slow down and

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as a result, some of the contractors asked XYZ to cancel their software project’s contracts while some others asked for negation or deferment. The management of XYZ was alarmed. Top management believed that they need to reduce the number of software engineers, professionals and other support personnel. Top management met twice to discuss the situation. They believed that if they lose some more contracts, the high cost of very qualified professional employees may lead to an inevitable collapse of the company. They panicked. The meetings were held in secrecy. They did not even inform the human resource manager of the company. The decision was made to reduce overhead cost significantly, including payroll expenses. In the third meeting, they shared the downsizing decision with the human resource manager and decided to implement it immediately as an effective step towards saving XYZ. Senior managers together with the human resource manager decided to proceed with a downsizing program as follows: A list of employees who would be terminated was drawn up. Final decisions on which employees should be sent were made by the senior managers through selective judgments. The immediate supervisors were not involved in the process. During the operation they did not take into account performance data. Terminations were not handled properly. There was discussion over how much notice employees should be given prior to termination day. Due to the concern that there could be destruction particularly of software, it was decided that the day of the receipt of the letter that is sent through the Public Notary would also be the last day worked. The process started with sending to each of the selected170 employees, through the public Notary, a letter informing them that their work contract was terminated as of the day of the receipt of the letter. They also informed the ‘victims’ that their legal severance and notice pay will be made immediately. Following considerable debate among senior managers about use of outplacement services, it was decided that outplacement services would not be provided. There was a rumor that some of the senior managers asked their main competitors not to hire any of terminated employees in the short run. Despite this rumor, some of the ‘victims’ believe that managers did not do this to harm their ex-employees, instead probably they did it because they thought they would need to rehire some of them in the near future. Still this rumor was strong enough to shock not only those who were laid-off, but also the survivors. The selection criteria used were not comprehensive at all. Some of new hires together with those who have been working in XYZ since its establishment were terminated. In selecting people to terminate performance appraisal results were not used, neither other criterion, such as seniority. Senior managers decided to lay-off most of the software engineers upon the recent cancellation of work contracts. They believe that XYZ will not need that many software engineers, at least in the short run, or until business activity is better. There were no termination interviews after the operation. Three month later, unexpectedly XYZ won a large new contract. The top managers met again and decided to re-call all the 170 ex-employees. According to the human resource manager about 90% of the laid-off employees returned to their old jobs with no change in their previous status or salaries. However, it was reported that the best of the ‘victims’ were offered jobs in other companies. The operation ended with a loss of several best employees.

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Soon after the re-call is made XYZ invited an expert to investigate the present situation in the company and particularly to report any positive or adverse effect caused by the two recent decisions made. Also top management was concerned with investigating the need for re-structuring the organization.

METHODOLOGY

Data for this study were collected with the help of primary sources through face-to-face interviews with the top management team (total of 7 people), a questionnaire filled by both the returning ‘victims’ and survivors (total of 46) and a focus group interview which included a total of 40 employees selected by the HR department among both survivors and re-called ‘victims’. In addition the company’s documents were also analyzed.

FINDINGS

The findings of the investigation provide insight into an unusually awkward situation that can set example to other downsizing practitioners and raise questions about top managers’ making decisions about implementation of downsizing. Interview with top managers The interview with top managers revealed that the decision for downsizing was very sound at the time it was taken. They stood behind the decision to advise the Board of Directors for reducing the work force. They admitted that they were under pressure during the time of the decision. The pressure was due to cancellation of two very large contracts that they were expecting to round 2010 and 2011 profitably. When senior managers were asked about how they selected employees to be terminated they said that ‘it was not easy to make such a decision, since nearly all employees were very qualified and we were happy to work with them. For that reason we believe that until a new and sizeable work contract is underway, there would be very little work for particularly the software engineers in the company. We also were not very optimistic about the future of the market. Many companies were closing down and many others were reducing their workforce. We were afraid that the uncertainty will prevail for longer time than we foresee. This is why we were forced to make a very fast decision’. On the question about not including the human resource manager in the two meetings prior to the downsizing decision: They said that firstly, it was top management meeting and secondly they are a software company producing software to the defense industry and the arm forces of country. For these reasons most of the meeting has ‘top secret’ priority. They’ did not want any information leaking before a decision is made for a downsizing operation. They added that the human resource manager was involved in every other step of the downsizing operation. We asked them if they had in mind re-calling employees at the time of lay-off. They replied ‘No, this is why we did not mention any dates for re-calling employees. Because we had no idea about how long the world financial crises will last. Therefore we considered our action to be understood as permanent separation. We believe that everybody understood it that way. But frankly, we were not happy to hear rumors that we asked our competitors not to hire the

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‘victims’. This was never the case. It would have been very unethical to mention anything like this. Besides, there was no reason to do so.’ Why did you not offer them outplacement services? We asked. ‘We were also criticized for this. We could have done so. We could have used this as a good example for publicity. We were ‘also’ hoping that the economic crisis will not last very long. We sincerely were sorry to lose them. They were very valuable for us. In addition, we did not want to lose them to our competitors’ they said. Now, having re-called everyone, do you think that the decision of downsizing was wrong? Do you regret your decision? This question was answered by the general manager and a director as ‘We still think that our decision was correct at the time it was taken. For that reason we never regretted it.’ Other directors and the deputy general manager however, were not that sure about their decision. They said that ‘the decision was taken very quickly. It was taken during a ‘panic attack’ we believe that we lacked experience of such decisions’. Two other top managers despite standing behind their decisions said that ‘XYZ lost several its excellent software engineers to their competitors during this operation.’ They believe that ‘they should have been more selective’, they should have used performance criterion in the process.’ They also said that ‘involvement of the human resource manager in the process from the very beginning would have ended in more satisfactory results both for the company and the employees. Therefore we think the whole process would have been handled better’. Did you notice any change in the attitudes of the ‘survivors’ after the downsizing, we asked. ‘On the one hand we believe they were happy and grateful to have survived the downsizing which left nearly 50% of total employees jobless. On the other hand, we can observe a change of attitude: the ‘survivors’ are feeling insecure, some of them seem to lost self-confidence and they were communicating less with management. They seemed to concentrate on doing their jobs only.’ Do you mean they are more productive than they used to be? We asked. ‘No, they were somehow less productive and we think they are concentrating on their jobs less than before. But this was expected because after all they have lost their best friends and they have uncertainty about their future. We also believe that they lost their trust in management. For all of these reasons our management was triggered to ask an expert to investigate the situation’. Another question asked was related to the re-calls or ‘victims’. According to the top managers, ‘they are happy to be re-called. After all in such a market situation it would have been very difficult for them to find a decent job. But they still seem to feel insecure. They believe that during a new crises, they will be first to get lay-off. Similar to the ‘survivors syndrome’ they lost self-confidence and trust in the top management. Accordingly since their return to the company they do not seem happy. We believe that they should work hard to bring back the previous climate of XYZ.’ Questionnaire results

The questionnaire was designed to find out about several important organizational issues including relationship between employees and top managers, the level of communication, motivation, performance appraisal and reward, authority and responsibility, delegation, autonomy, training and development, participation in decision making, trust by customers, performance feedback, structure of wages, human resources compared with competitors,

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corporate culture, trust in the top management, top management trust in employees, and the effect of fast growth on XYZ. Our aim was to reveal some of the realities underlying the decisions made to lay-off half of the workforce and after a short period of time to re-call them all. A summary of the findings is presented below It is established that the relationship between top management and employees have never been very warm. One of the issues that reduced the trust is related to performance appraisal and reward. The employees claim that while they are working on a particular project that last more than a year, their performance was evaluated by the manager of the department they originally worked for, instead of being assessed by their team leader with whom they are presently working. They believe that it is not fair to be evaluated by someone who knows little about your recent work, since he/she would have very little contact with you during that period. Another issue is related to the level of communication between managers and employees. The present state of communication has never satisfied the employees’ expectations. Some employees openly declare that management is not open at all to communication and particularly to criticism. They tend to take nearly every point raised by employees personal. They are very susceptible to criticism. This makes the relations very fragile. This situation eventually leads employees to refrain from making comments on issues raised by senior managers. There is also a wide belief held by employees that the senior managers are not empowered enough by the Board to make critical decisions on their own. This belief reduces the respect to top managers and impairs their relations with employees. Another point the employees stress in the questionnaire is related with the balance between authority and responsibility assigned to employees. In other words it is claimed that too much responsibility and very little authority is handed over to them. This situation weakens their positions and forces them to consult with their immediate supervisors or managers on every point under their responsibility. This is also important from the point of view of their autonomy. Another topic of interest raised was on participatory management. Sharing views or decisions with employees is not very common in XYZ. The end result of this is plenty of gossips and rumors taking over the real facts in the company. Particularly during review periods of performance, reward, wage increase as well as times of economic crises. During the last few years the image of the company in the market improved greatly. Trust by customers is also excellent. Employees claim that this is the result of very hard work by everybody, not only senior management. This should have been recognized and declared. Employees are grateful to the senior managers for their emphasis on training and development. Training activities are becoming part of the corporate culture. The Human Resource Department uses the training budget to cater for the need of XYZ and also to fill the needs of employees. This makes the company one step ahead of their competitors with their good pool of human resource and specialists.

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Employees trust each other but have no trust or faith in the management at all. This feeling has worsened after the terminations. They expressed their opinion on trust with no fear. We think after what has happened during the last three months such feeling did not surprise senior managers. This made employees lose their commitment towards the company. Another point criticized by employees is related with salaries and monetary rewards. They are upset because while XYZ has been growing and making considerable amount of profit, no salary increase or performance reward was made during the last two years. Senior managers admitted that it is time for reviewing the salary structure and performance reward. An investigation is also underway about some managers and supervisors not providing feedback related to the performance of the employees. Another common point derived from the questionnaire was on the growth rate experienced by the company in the recent years. It is said that fast growth rate of XYZ is to blame for many of the above problems. It had adverse affect not only on the structure of the organization but also on several issues that have been mentioned above. Focus Group The meeting with the focus group was very fruitful. We talked to 20 survivors and 20 re-called ‘victims’ selected by the human resource manager to represent several departments. It was interesting to observe the similarities of thought that were expressed. The company’s goals and strategies are not discussed or shared with employees properly. This is viewed as weakness by employees. They feel as if they are deprived from learning about long-run plans of the company. They are only informed of daily duties, they said. They interpret this situation as de-motivating. The explanation given by top managers to such a complaint is more interesting. They say that even they do not know much about the companies long term objectives. This is mostly due to the uncertainties of the Turkish economy. They are forced to revise the goals and strategies very often. Due to the fast growth of the company the organization need restructuring, according to the focus group. The number of employees has increased and the span of control is wider now. Similarly a new department is established to deal with projects for the Navy. The first contract won by this department is far from being a software or consultancy project. It is a production contract. This alone requires a thought for restructuring the organization. In addition one of the two Deputy General Managers positions is vacant. The general manager is substituting this position. It should be filled urgently. Otherwise the general manager, occupied with daily operations, will be losing the control of strategic issues and the company. It was also indicated that there are too many different job titles that creates confusion. They should be simplified. Another weakness of the present organization is that all support departments are directly under control of the general manager. They explain this with the general manager’s possessiveness of authority. Both the ‘survivors’ and ‘victims’ agree that they have no trust in the management. This was highlighted by the way downsizing was handled: instead of holding a meeting and informing employees about what is happening, management chose to inform employees of the downsizing through Public Notary. Particularly those who have been working in the company since XYZ was established were very upset about it.

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SUMMARY AND CONCLUSIONS As it was indicated earlier in text, downsizing effects work processes, it causes loss of individual security as a result of job losses, it reduces commitment to the company by survivors, increases moral problems and reduces motivation and increases the need to develop new skills among survivors. It will reduce personnel cost and increase efficiency and productivity. But due to loss of self confidence and motivation it may also reduce productivity. It may also have an adverse affect on job involvement. In addition it increases the need for new organizational form as well as re-allocation of resources and power. In the present study we have observed similar behavior from both the ‘survivors’ and ‘victims’. Fast growths of companies’, unless intervened on time, may adversely affect the organizational structure, and impair relations in the company. In XYZ probably most of the recent chain of events was caused by the unforeseen fast growth of the company. To cope with and manage the change brought by sudden growth, both management and employees must spend dedicated effort. The feeling of employees about trusting senior managers or those involved in the implementation of the downsizing is a serious problem. The management, in our opinion, should hold several meetings and try very hard to repair the broken relationship. When they make promises they should live up to these promises. They should try to be more transparent in their management style and let employees participate in some of the decisions they take. Particularly in those that concern human resources. The most important lesson to derive from this case and other downsizing implementation, in my opinion, is to smoothly execute the process without too much harming the company, survivors and ‘victims’. To do so, the practitioners should observe the following points carefully: Inform employees about the reasons for downsizing, include HR manager from the very beginning in the process, select the most appropriate criteria for employees to be laid-off, such as seniority or performance appraisal, use outplacement services and exit interviews.

REFERENCES

Allen, T.D., Freeman, D.M., Russell, J.E.A., Reizenstein, R.C., & Rentz, J.O. (2001). Survivor reactions to organizational downsizing: Does time ease the pain? Journal of

Occupational and Organizational Psychology, 74, 145-164. Armstrong-Stassen, M. (2002). Designated redundant but escaping lay-off: A special group of lay-off survivors. Journal of Occupational and Organizational Psychology, 75, 1-13. Bailey, M., E. Bartelsman, and J. Haltiwanger. 1994. Downsizing and Productivity Growth: Myth or Reality? Cambridge, MA: National Bureau of Economic Research. Brockner, J., Konovsky, M., Cooper-Schneider, R., Folger, R., Martin, C., & Bies, R.J. (1994). Interactive effects of procedural justice and outcome negativity on victims and survivors of job loss. Academy of Management Journal, 37(2), 397-409.

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INTERNALIZATION VS. EXTERNALITATION OF HUMAN CAPITAL

STRATEGY: A TRUST CLIMATE PERSPECTIVE

Chih-Yuan Wang1 and Nien-Chi Liu2 1National Central University, Graduate Institute of Human Resource Management,

No.300 Jhongda Rd., Jhongli, Taoyuan, Taiwan, [email protected], (886)3422-9588

2 National Central University, Graduate Institute of Human Resource Management, No.300 Jhongda Rd., Jhongli, Taoyuan, Taiwan, [email protected], (886)3422-9588

ABSTRACT

We extend human resource management thinking regarding how human capital strategies affect the trust climate and then facilitates employee outcomes. An empirical study of 497 employees employed in 25 IC design companies in Taiwan shows that internal human capital strategy enforces trustworthy perception, which in turn elicits positive outcomes. In contrast, external human capital strategy may create a cautious perception that negatively relates to employee outcomes. The results suggest that firms need to carefully choose their human-capital-enhancing approaches as well as the ways they implement them in order to effectively elicit appropriate employee outcomes.

Keywords: Human capital strategy; trust climate; social exchange theory; employee attitudes and behaviors

INTRODUCTION

Strategic human resource management (SHRM) theorists have devoted much effort toward the relationship between human resource (HR) practices and organizational performance [12]. In particular, it is proposed that superior competitive advantage is achieved when multiple practices are combined into a coordinated system or a complementary bundle, also known as high-performance work practices (HPWPs) [24].

However, there is much confusion about how the substitutes among HPWPs can really work and motivate employees. Research have proposed that some HR practices may produce ‘deadly combination’ when one practice substitutes another and send inconsistent or conflicting messages [9]. For example, there is a typical ‘make-or-buy’ dilemma between internal development and external staffing practices [23]. Internal approach brings about greater stability and predictability of a firm’s stock of KSAs. External staffing approach acquires ‘ready-made’ talents from outside labor market. Although these two human capital strategies are regarded as important parts of HPWPs [18], the underlying philosophy might be distinct. Indeed, it may lead to different attributions that employees make toward the purpose of management in implementing these human capital practices [26].

This study suggests that the two human capital strategies are likely to be substitutes, and employees may perceive in a different way toward these practices. We propose that the core mechanism between human capital strategies and employee outcomes is trust climate. Trust is one’s expectations, assumptions, or beliefs about the likelihood that another’s future actions will be beneficial, favorable, or at least not detrimental to one’s interests [27]. When firms adopt internal human capital strategy as principal development mechanism, employees would like to believe that their efforts are worth for future advancement. They would like to establish a long-term commitment and investment relationship with the firm to collaborate

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and help others [15] [29]. In contrast, external human capital strategy reflects a short-term and purely economic exchange relationship. This situation may hardly result in voluntary reciprocal obligations from employees to contribute off-role behaviors because implementing well-specified job is the only expectation in this exchange relationship [29].

Therefore, it is interesting and worthwhile to investigate to what extent of trust climate within an organization will be influenced by these two human capital strategies simultaneously, as well as their subsequent effects on employees’ attitudinal outcome of affective organizational commitment and behavioral outcome of organizational citizenship behavior (OCB).

LITERATURE REVIEW AND HYPOTHESES

Human capital simply refers to individual employee’s knowledge, skills, and expertise that provide economic value to firms [31] [32]. The premise of SHRM studies is that HR practices constitute investment in human capital to create sustained competitive advantage of a firm [32]. Traditionally, firms can increase human capital by internally developing the knowledge and skills of their current labors or attracting individuals with high levels of knowledge and skills from the external labor market [23]. However, our focus of here is not further to discuss the antecedents of human capital strategy. In our view, both identifying and attracting potentials from the outside and developing and retaining human capital within the firm are important. The problem is that ‘make-or-buy’ decisions on human capital strategies may influence employees’ perceptions on organizational climate, and then their subsequent attitudes and behaviors. To explore the relationships of human capital strategies and employees’ outcomes, we first examine the theoretical and empirical findings for both internal labor market and external labor market.

Internal and External Human Capital Strategies. Internal human capital strategy is considered as an important part of HR practice in acquiring talents and motivating employees [12] [18]. Several studies have proposed that the reasons why organizations promote employees from within [6] [22] [23]. First, specific human capital can be kept. Firms utilize promote-from-within to retain employees with firm-specific skills. Second, internal human capital strategy reduces uncertainty. For the current employees, firms have abundant information advantage over external labor market and avoid the risk of adverse selection. The third and the most important reason is that firms can elicit self-commitment from employees, that is, internal promotion as an incentive system.

According to the human capital theory [7], both employers and employees evaluate the advantages and disadvantages whether their rewards or feedbacks are worthy of continued investments. Tsui and colleagues [29] suggest that both employers and employees hold expectations about the nature of exchange and then affect the social process. When employers treat employment relationship as a combination of economic and social exchange, they are willing to pay more attention in employee wellbeing [29]. Furthermore, employees are given ample opportunities and a strong motivation to develop their own career on a long-term relationship with the firm and engage in collaborative behaviors [3] [10].

Contrary to the internalization, the externalization of human capital has been concerned that it may reduce employees’ commitment toward the organization. In the essence of exchange, Lepak and Snell [23] used the term ‘symbiotic’ to illustrate the relationship between employees and employers. Employers search for job applicants who have relevant skills to quickly implement designated tasks. Employees ‘sell’ their talents to a variety of

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organizations to exchange the highest returns on human capital investment. Neither the employers nor employees bear any further obligations and expectations to receive anything from the other party beyond the exchange. Since externally oriented firms less concerned employment security and personal potential, employees pay much attention in investing themselves and seeking next employment opportunity rather than developing social exchange with the firms [3]. Therefore, employees working in an externalization setting may engage only in their core tasks but not for non-specified job behaviors. That is, citizenship behaviors or other helping behaviors are likely to be low because such behaviors are not expected in a symbiotic relationship [23] [29].

Drawing on the above rationale, we propose that the following hypotheses:

Hypothesis 1: Employees will show positively (a) affective organizational commitment and

(b) OCB when firms are with higher emphasis on internal human capital strategy.

Hypothesis 2: Employees will show negatively (a) affective organizational commitment and

(b) OCB when firms are with higher emphasis on external human capital strategy.

Trust Climate as a Mediator. Trust is the essence of social exchange relationship in which employees will engage in positive work-related behaviors as currency for reciprocating their treatment (Robinson et al 1994). Several studies have also proposed that trust is a determinant of success or failure of HR activities [27] [30]. Trust begins with an exchange of activity, tangible or intangible, and more or less rewarding or costly, between two or more persons and develops a mutual obligation [30]. That is, employees should perceive the reciprocated care and concern from the company; then, they will put forth more efforts in learning and demonstrating their KSAs as reciprocity. Thus, in an internalization setting, trust is a manifestation of social exchange and elicits the expression of mutual investment, affection, and long-term relationship. In contrast, when employees work in a mistrust environment, they will seek to reduce their vulnerability by emphasizing only those performance areas that can be objectively tabulated and defended [11] [17]. Executing external human capital strategy is difficult to elicit employees’ willingness to show altruistic cooperative behaviors because these behaviors may be perceived as risk from employees. Thus, an outward-oriented human capital strategy is less likely to induce employees’ vulnerability to act benevolently and engage in non-specified behaviors.

These arguments suggest a mediating effect of trust between human capital strategy and employee attitudes and behaviors by hypothesis 3 and 4.

Hypothesis 3: The link between internal human capital strategy and (a) affective

organizational commitment and (b) OCB is positively mediated by trust climate.

Hypothesis 4: The link between external human capital strategy and (a) affective

organizational commitment and (b) OCB is negative mediated by trust climate.

METHODS

Sample and Data Collection. We limit our participants only in IC design industry in Taiwan. According to the lists of Taiwan Stock Exchange (TSE) and traded over the counter (OTC), there are totally 92 companies within the industry as our targets. We mailed a survey packet to HR director of these 92 companies in January 2009. Each company would receive 3 HR questionnaires and 35 employee questionnaires. The first questionnaire, responded by the

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HR managers, is used to measure firm’s human capital strategy. The employee questionnaires, used to measure organizational commitment, OCB, trust climate and assess the demographic characteristics. Three months later, we receive 49 HR questionnaires and 497 employee questionnaires from 25 IC design firms.

Measures. This study uses two criteria as our outcome variables. Affective organizational commitment is measured by 8 items reported by [1]. A 9-item by [16] is used to measure OCB. All items are measured on a scale from 1 (strongly disagree) to 5 (strong agree).

The study includes two human capital strategies as independent variables. Internal human capital strategy is measured by 5 items from the study of [13], which assess internal career opportunities, and from the study of [10], which assess internal selection and career development practices. External human capital strategy is measured by 5 items from the prior studies [28] [30]. Using a scale from 1 (strongly disagree) to 5 (strong agree), we asked HR managers at each firm to rate each item of human capital strategies.

Trust is measured with a 4-item scale adapted from [14]. Employees were asked to assess the degree to which they agreed from 1 (strongly disagree) to 5 (strongly agree). We then compute interrater agreement (i.e., rwg(j)) which refers to the absolute consensus in scores furnished by respondents for 25 firms [19]. For all firms, the value of rwg(j) is between .85 and .96, suggesting strong agreement among the respondents within each firm. Thus, we separately average the scores of trust within each firm to stand for each firm’s trust climate.

RESULTS

Table 1 presents the sample size, means, standard variations, Cronbach’s alpha and correlations for all variables.

Table 2 presents the results of the Ordinal Least Square (OLS) regression. Mediation analyses [4] are conducted to test whether trust climate mediates the relationships between human capital strategies and employees’ outcomes. The results of Model 4 and Model 7 indicate that

TABLE 1

Means, Standard Deviations, and Correlations for All Variables

Variables N Mean SD 1 2 3 4 5 6 7

1. Internal HCS a 497 3.24 .56 (.80)

2. External HCS a 497 3.58 .37 .40 * (.69)

3.Org. Commitment 494 3.48 .62 .07 * -.17 ** (.90)

4. OCB 493 3.65 .49 .00 -.14 ** .66 ** (.87)

5. Trust Climate 497 3.64 .31 .09 * -.25 ** .41 ** .26 ** (.88)

6. Sexb 491 .83 .38 -.08 -.03 .01 .02 .10 * －

7. Education 486 17.11 1.35 -.04 -.07 .10 * .10 * -.01 .32 ** －

8. Tenure 485 3.23 2.65 .07 -.04 .05 -.01 -.07 -.09 -.11*

* p < .05, ** p < .01; The figures in diagonal are Cronbach’s alpha. a HCS = Human Capital Strategy; b Sex is a dummy variable (1=male; 0=female) c Education level is recorded from categories variable to continuous variable based on years of school education (i.e., university = 16, master = 18, PhD = 22)

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TABLE 2

Results of Hierarchical Regression Analysis

Trust Climate (N=483)

Organizational Commitment (N=480)

OCB (N=479)

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Variables

b s.e. b s.e. b s.e. b s.e. b s.e. b s.e. b s.e. b s.e.

Intercept 3.82 ** (.18) 4.56 ** (.23) 2.58 ** (.37) 3.44 ** (.47) -.14 (.60) 3.00 ** (.30) 3.66 ** (.38) 1.81 ** (.51)

Sex b .09 * (.04) .10 ** (.04) -.04 (.08) -.02 (.08) -.10 (.07) -.02 (.06) -.01 (.06) -.05 (.06)

Education -.01 (.01) -.02 (.01) .05 * (.02) .05 * (.02) .06 ** (.02) .04 * (.02) .04 * (.02) .04 * (.02)

Tenure -.01 (.01) -.01 * (.01) .01 (.01) .01 (.01) .02 (.01) .00 (.01) .00 (.01) .00 (.01)

Internal HCS a .13 ** (.03) .18 ** (.05) .08 (.05) .07 (.04) .01 (.04)

External HCS a -.30 ** (.04) -.38 ** (.08) -.14 (.08) -.22 ** (.07) -.10 * (.07)

Trust Climate .79 ** (.09) .41 ** (.08)

R2 .017 .131 .014 .062 .195 .010 .033 .088

Adjusted R2 .010 .122 .008 .052 .185 .004 .023 .077

∆R2 .114 .048 .133 .023 .055

∆F 2.687 * 31.454** 2.235 12.090** 78.278** 1.651 5.541** 28.663**

* p < .05, ** p < .01 Unstandardized coefficients are reported; the figures in parentheses are standard errors. a HCS = Human Capital Strategy b Sex is a dummy variable (1=male; 0=female) c Education level is recorded from categories variable to continuous variable based on years of school education (i.e., university = 16, master = 18, PhD = 22)

internal human capital strategy has significantly positive effect on organizational commitment but an insignificant effect on OCB. External human capital strategy has significantly negative effect on organizational commitment and OCB. Hypothesis 1a, 2a and 2b are therefore supported.

Model 2 shows that both internal human capital strategy and external human capital strategy are related to employees’ perception of trust after controlling sex, education and tenure. Model 5 shows that when trust climate is regressed on organizational commitment, the regression coefficients of internal human capital strategy and external human capital strategy decline significantly to b= .08 (n.s.) and b= -.14 (n.s.) separately. Therefore, Hypothesis 3a and 4a are supported that trust climate fully mediates the relationship between human capital strategies and organizational commitment.

Similarly, Model 8 shows that when trust climate is entered into the equation, the regression coefficient of external human capital strategy has declined from -.22 (p < .01) to -.10 (p < .05) in affecting OCB. Hypothesis 4b is supported that external human capital strategy affects OCB through trust climate.

DISCUSSIONS

This study tries to examine how human capital strategies affect employees’ perceptions of trust climate and then influence their attitudinal outcome of organizational commitment and behavioral outcome of OCB. As predicted, the results revealed that internal human capital strategy indeed elicits employees’ affective attachment and external human capital strategy has negative relationship with affective commitment and OCB. Furthermore, we also provide evidences that employees just gain contradictory perceptions from these two human capital strategies. We argue that the core mechanism in the reciprocal relationship is trust climate.

Some important implications arise from the above findings. First, employees would evaluatethe treatments by employers and then decide exchange relationship with them. It’s much important because most of our research participants are R&D professionals employed in IC design industry. The success of IC design companies relies on invention and innovation in their business strategy. The firms deploy a significant percentage of their financial resources to R&D and employ a relatively high percentage of knowledge-intensive professionals who learn, assimilate, contribute, exchange, and combine their KSAs [25]. How organizations facilitate a climate of actively participation, mutual trust and effective communication to induce spontaneous sociability is a key to gain competitive advantage [4] [21].

Second, we also find that external human capital strategy affects organizational commitment and OCB through trust. According to social exchange theory [8], a long-term mutual investment relationship should be developed when individuals perceive high levels of trust. It is much important for our research participants that IC design industry is facing a relatively dynamic environment and short-life-cycle product market. Employees are not only required to put forth greater efforts on knowledge creation and exchange, but also expected of emotional attachment which keeps firms’ human capital investment. However, trust does not mediate the relationship between internal human capital strategy and OCB. The possible reason is that trust is easier to destroy than create [2]. That is, employees may be more sensitive to outward-oriented human

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capital strategy than inward-oriented human capital strategy because the former injures their expectation and weaken the vulnerability.

Finally, though SHRM researchers have devoted much effort toward understanding the combination effects of HR practices [24], limited efforts have been spent on understanding how these practices interact with each other and whether HR bundles result in a contradictory or deadly combination [9]. We provide initial evidence that outward-oriented human capital strategy, such as competitive compensation and extensive selection process, are easily to acquire ‘ready-made’ human capital. However, climate of trust among employees has been damaged, in turn, decreases their affective commitment to organization and willingness to represent OCB. Whether the same dilemma appears in different set of HR practices or different industries, such as intensive training for teamwork but appraisals for individualistic behaviors, more studies need to be addressed.

As with most studies, our research has several limitations. First, the cross-sectional research design precludes our inferences about causal relationship. Second, we do not consider the influences of contingent variables which may affect the research result. The last limitation is that we only discuss the role of trust in mediating the relationship between HR practices and individual outcomes. It is possible that other climates are appropriate to explain the effects of HR practices on desirable outcomes, or more than one dimension of organizational climate will be affected due to the nature and scope of the particular HR practices [20]. More studies to investigate the effects of other social mechanisms will be valuable.

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[1] Allen, N.J. & Meyer, J.P. The Measurement and Antecedents of Affective, Continuance, and

Normative Commitment to the Organization. Journal of Occupational Psychology, 1990, 63(1), 1-18. [2] Barber, B. The Logic and Limits of Trust. New Brunswick, NJ: Rutgers University Press, 1983. [3] Barnard, M.E. & Rodgers, R.A. How Are Internally Oriented HRM Polices Related to High-

performance Work Practices? Evidence from Singapore. International Journal of Human Resource Management, 2000, 11(6), 1017-1046. [4] Barney, J. Strategic Factor Markets: Expectations, Luck, and Business Strategy. Management Science, 1986, 32(10), 1231-1241. [5] Baron, R.M. & Kenny, D.A. The Moderator-mediator Variable Distinction in Social

Psychological Research: Conceptual, Strategic, and Statistical Considerations. Journal of Personality and Social Psychology, 1986, 51(6), 1173-1182. [6] Bayo-Moriones, A. & Ortín-Ángel, P. Internal Promotion versus External Recruitment in

Industrial Plants in Spain. Industrial and Labor Relations Review, 2006, 59(3), 451-470. [7] Becker, G.S. Human Capital. Chicago, IL: University of Chicago Press, 1975. [8] Blau, P.M. Exchange and Power in Social Life. NY: John Wiley & Sons, 1986. [9] Boxall, P. & Prucell, J. Strategic Human Resource Management: Where Have We Come from and Where Should We Be Going? International Journal of Management Review, 2000, 2(2), 183-203.

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[10] Collins, C. & Smith, K.G. Knowledge Exchange and Combination: The Role of Human

Resource Practices in the Performance of High-technology Firms. Academy of Management Journal, 2006, 49(3), 544-560. [11] Culbert, S.A. & McDonough, J.J. The Politics of Trust and Organizational Empowerment. Public Administration Quarterly, 1986, 10(2), 171-188. [12] Delaney, J.T. & Huselid, M.A. The Impact of Human Resource Management Practices on

Perceptions of Organizational Performance. Academy of Management Journal, 1996, 39(4), 949-969. [13] Delery, J.E. & Doty, D.H. Modes of Theorizing in Strategic Human Resource Management:

Tests of Universalistic, Contingency, and Configurational Performance Predictions. Academy of Management Journal, 1996, 39(4), 802-835. [14] Dietz, G. & Den Hartog, D. Measuring Trust Inside Organizations. Personnel Review, 2006, 35(5), 557-588. [15] Dirks, K.T. & Ferrin, D.L. The Role of Trust in Organizational Settings. Organization Science, 2001, 12(4), 450-467. [16] Farth, J.L., Earley, P.C. & Lin, S.C. Impetus for Action: A Cultural Analysis of Justice and

Organizational Citizenship Behavior in Chinese Society. Administrative Science Quarterly, 1997, 42(3), 421-444. [17] Gould-Williams, J. The Importance of HR Practices and Workplace Trust in Achieving

Superior Performance: A Study of Public-sector Organizations. International Journal of Human Resource Management, 2003, 14(1), 28-54. [18] Guest, D., Conway, N. & Sheehan, M. Human Resource Management and Corporate

Performance in the UK. British Journal of Industrial Relations. 2003, 41(2), 291-314. [19] James, L.R., Demaree, R.G. & Wolf, G. Estimating Within-group Interrater with and

without Response Bias. Journal of Applied Psychology, 1984, 69(1), 85-98. [20] Kopelman, R.E., Brief, A.P. & Guzzo, R.A. The Role of Climate and Culture in

Productivity. In Schneider, B. (Ed.), Organizational Climate and Culture, 283-318, Sam Francisco, Jossey-Bass, 1990. [21] Kramer, R.M. Trust and Distrust in Organizations: Emerging Perspectives, Enduring

Questions. Annual Review of Psychology, 1999, 50(1), 569-598. [22] Koch, M.J. & McGrath, R.G. Improving Labor Productivity: Human Resource Management

Policies do Matter. Strategic Management Journal, 1996, 17(5), 335-354. [23] Lepak, D. & Snell, S. The Human Resource Architecture: Toward a Theory of Human

Capital Allocation and Development. Academy of Management Review, 1999, 24(1), 31-48. [24] MacDuffie, J.P. Human Resource Bundles and Manufacturing Performance:

Organizational Logic and Flexible Production Systems in the World Auto Industry. Industrial and Labor Relations Review, 1995, 48(2), 197-221. [25] Nahapiet, J. & Ghoshal, S. Social Capital, Intellectual Capital, and The Organizational

Advantage. Academy of Management Review, 1998, 23(2), 242-266. [26] Nishii, L.P., Lepak, D.P. & Schneider, B. Employee Attributions of the “Why” of HR

Practices: Their Effects on Employee Attitudes and Behaviors, and Customer Satisfaction. Personnel Psychology, 2008, 61(3), 503-545. [27] Robinson, S.L. Trust and Breach of the Psychological Contract. Administrative Science Quarterly, 1996, 41(4), 574-599. [28] Snell, S.A. & Dean, J.W. Integrated Manufacturing and Human Resources Management: A

Human Capital Perspective. Academy of Management Journal, 1992, 35(3), 467-504.

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[29] Tsui, A.S., Pearce, J.L., Porter, L.W., & Tripoli, A.M. Alternative Approaches to the

Employee-organization Relationship: Does Investment in Employees Pay Off? Academy of Management Journal, 1997, 40(5), 1089-1121. [30] Whitner, E. M. Patterns of Social Exchange: The Relationship between Perceptions of

Human Resource Practices and Employee Attitudes. Paper presented at the Academy of Management Meeting, August, Boston, MA, 1997. [31] Youndt, M.A. & Snell, S.A. Human Resource Configurations, Intellectual Capital, and

Organizational Performance. Journal of Managerial Issues, 2004, 16(3), 337-360. [32] Youndt, M.A., Snell, S.A., Dean, J.W. & Lepak, D.P. Human Resource Management,

Manufacturing Strategy, and Firm Performance. Academy of Management Journal, 1996, 39(4), 836-866.

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DEVELOPMENTAL PAPERS*

* These papers were either submitted as a "full-paper" or as a"developmental paper". The ones submitted as "developmental paper" were not sent out for blind review and a determination was made based on internal review. Some the papers submitted as "full-paper", based on reviewers' comments and internal review, were considered as "work-in-progress" and were accepted as a "developmental-paper".

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PROCEDURAL JUSTICE AND ITS EFFECTS ON ORGANIZATIONAL OUTCOMES Nida Hameed Afridi (Author), Institute of Management Sciences, Phase 7, Hayatabad, Peshawar,

[email protected], Phone: +9291-5829988 Fatima Junaid (Co-author), Institute of Management Sciences, Phase 7, Hayatabad, Peshawar,

[email protected], Phone: +92091-9217452

ABSTRACT This study attempts to find out the importance of justice in the private financial institution like banks and to determine the employee satisfaction, organizational commitment and intent to leave the workplace. This study judged the employee’s perception of procedural justice and its effects on organizational commitment, job satisfaction and turnover intention in the private banking sector only. The research is conducted by personal visits to nine different private banks of Peshawar. The methodology used for the collection of data is questionnaire. The findings achieved after the data analysis suggests that procedural justice has a significant positive relationship with organizational commitment and job satisfaction. On the other hand the association of procedural fairness with turnover intention is found to be negative. These outcomes are consistent with many past researches in the same field. Keywords: Procedural justice, organizational commitment, turnover intention, job satisfaction

ORGANIZATIONAL JUSTICE

The concept of justice is said to be first grounded in the social exchange theory. It represents that procedural as well as distributive justice has a single justice motive – the resource motive i.e. concern of the resources obtained during the process or as an outcome. Justice is considered to be a social phenomenon if Cropanzano and Greenberg (1997) are to be believed for their view of justice i.e. the acts that are perceived to be just by majority of individuals, are just.

PROCEDURAL JUSTICE The concept of procedural justice deals with the fairness of procedures governing decisions as perceived by individuals. It is the equity and the perceived fairness in order to make decisions (Folger and Greenberg, 1985). Procedural justice deals with the norms about the proper procedures (Lind and Tyler 1988). It has been compared to distributive (McFarlin and Sweeney, 1992) and interactional justice (Bies and Moag, 1986) for its effects on job satisfaction, organizational commitment, turnover intention, and several other variables.

PROCEDURAL JUSTICE AND CORRELATES

Procedural justice has been analyzed by different angles such as the influence of work environment on the perception of fairness (Greenberg, 1990a), Leventhal( 1976: 1980) has given the attributes Of procedural justice : (1) accuracy, (2) consistency, (3) unbiasedness, (4) ethics, (5), correctability and (6) representativeness . Representativeness has been erased because it overlaps with the concept of voice. Voice has been discussed by Thibaut and Walker (1975) where they explained the concept of instrumental and non instrumental voices. This concept has

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been further explained by Greenberg and Folger (1983) that if the employees are given an opportunity to express their opinion in the decision making process affecting them, it enhances their perception of fairness but also brings with itself a possibility of a much lower level of fairness perception if the authorities fail to respond to the employee’s input. The initial researches were carried out by Greenberg (1979),Folger and Konovsky (1989),Cropanzano and Folger (1989) and Tyler ( 1990) showing the relationship between procedural justice and these behavioral and organizational constructs. Job satisfaction is undoubtedly a major behavioral outcome if the perception of fairness is higher in employees. Several studies link performance evaluation procedures to job satisfaction (e.g. Brownell, 1982; Harrison, 1992; Lau and Sholihin, 2005) and it is justified because the rewards and compensation received by the employee are reflective of his success and failure in performing a task. If their jobs are justly evaluated, it leads to job satisfaction (Hopwood, 1972:174). Job satisfaction and organizational commitment are mostly studied together. The extensive work of Folger and Konovsky (1989) found that procedural justice is a much stronger predictor of organizational commitment as compared to job satisfaction. McFarlin and Sweeney (1992) seconded the findings saying that distributive justice was a much better predictor of personal outcomes like job satisfaction whereas the reverse was true for procedural justice that predicted the organizational outcomes like organizational commitment and evaluation of the supervisor. A fairly recent research by Arti, Kuldeep & Ekta (2009) also indicates that distributive justice is significantly related to job satisfaction whereas procedural justice does not, though both procedural and distributive justices are related to organizational commitment. A research by Kim (2009) also suggests that when individuals were fairly treated they showed more commitment towards the organization as well as a higher degree of trust and satisfaction. Turnover intention is a very important issue as Robbins (1998) puts it as a behavior that leads to leaving the organization as well as looking for a new job. It is also one noteworthy construct that is influenced by the job satisfaction and organizational commitment of the employee (Mobley, 1982). Higher the perceived fairness, higher will be job satisfaction and organizational commitment which will in turn lead to a decreased level of turnover intention (Poon, 2004). Every organization makes huge investments in training, developing and maintaining their employees. Therefore, managers always strive to minimize turnover. The image theory model (Beach, 1990) has analyzed that employees leave the organization only when they have discovered the reasons for leaving. There are several reasons that compel employees to quit from one organization to another. The effects of job related stress (job stress), lack of commitment in the organization and job dissatisfaction make employees to quit (Firth, Mellor, Moore, Loquet, 2004). Job satisfaction, organizational commitment and turnover intention are taken as dependent variables. Job satisfaction is an extremely essential dependant variable as evident by the Lind and Tyler (1998) research in which they discovered job satisfaction as one of the principal consequences of procedural fairness. They concluded that “the great practical value of procedural justice lies in …its value as a source of… satisfaction.” On the basis of the above discussion, the following hypothesis can be proposed: Hypothesis 1: Procedural Justice Is Positively Related To Job Satisfaction.

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Another dependent variable is organizational commitment. It is perceived to be associated with the fairness of procedures (Hopwood, 1972; Folger and Konovsky, 1989; McFarlin and Sweeney, 1992; Magner and Welker, 1994; Magner, Welker& Campbell, 1995). If employees believe that the organization’s procedures for the determination of compensation and evaluation of performance are fair, they do not develop adverse feelings towards the organization even if their compensation is inadequate On the contrary, if they perceive the organizational procedures to be unfair and compensation to be inadequate, they hold unfavorable views of their organization which give rise to lower organizational commitment (McFarlin and Sweeney, 1992). Accordingly, I propose: Hypothesis 2: Procedural justice is positively related to organizational commitment.

The relationship of turnover intention as a dependent variable along with procedural justice is also studied. Knowles (2004) research discusses some personal, contextual and institutional factors that can prove to be principle antecedents of turnover intention. Supporting the finding of Knowles (2004), Poon ( 2004) finds out that disrespectful behavior and unfair reward system can influence turnover compelling the employee to leave the organization. Hence, it is hypothesized: Hypothesis 3: Procedural justice is negatively related to turnover intention These hypotheses demonstrates a relationship of the dependant variables with procedural justice that has been previously analyzed by Folger and Konovsky (1989), McFarlin and Sweeney (1992)..

METHOD This research is a cross sectional (one shot) study which is based on data collected at one point in time; it is causal in nature. The employees of the nine private banks were surveyed. The data were collected through questionnaires. A total of 150 structured questionnaires were distributed by the researcher herself. Altogether, 101 employees gave their response with the response rate of 67.3 %. Simple random sampling was used for the selection of banks. The instruments used for the variables were previously used several times e.g Mowday, Steer and Porter (1979) for organizational commitment etc.

RESULTS For job satisfaction, the value of beta is positive (.297). It indicates that procedural justice has a positive relationship with job satisfaction and the value indicates that one unit increase in procedural justice will increase the job satisfaction by .297. As we can see that, the significance value is below 0.05 so it shows that procedural justice has a significant relationship with job satisfaction i.e. procedural justice is a predictor of job satisfaction. The model for job satisfaction is significant but the relationship between procedural justice and job satisfaction is weak, though it is positive in nature. For organizational commitment, we found out that the value of beta is positive (0.390). It confirms the positive relationship between procedural justice and organizational commitment and it also shows that if a unit increase in procedural justice happens to occur, an increase of 0.390 units will be witnessed in organizational commitment. The significance value lies below

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0.05 even in this case indicating that procedural justice is a significant predictor of organizational commitment. The model for organizational commitment suggests that the model is significant and the relationship found between them is weak, yet there exists a positive relationship between the two. For turnover intention, the value of beta is negative which means that procedural justice has a negative relationship with turnover intention. It also explains that a unit change in procedural justice will bring a change of 0.228 units change in turnover intention. The significant value is lesser than 0.05 even for turnover intention which means that procedural justice is a predictor of turnover intention. The model for turnover intention is also significant but the relationship of turnover and procedural justice is weak, and is negative in nature.

DISCUSSION This study was conducted to in order to judge the effects of procedural justice i.e. the fairness of the processes being run in the private banks of Peshawar. The effect was studied on three important aspects of organizational commitment, job satisfaction and turnover intention. The banks were randomly selected and the results are based only on branch level analysis. The findings in the research report indicate the procedural fairness is one of the predictors of job satisfaction. The relationship between them is found to be significant and that they have a positive association with each other. This means that fair procedures effects an employee’s satisfaction at the work place. These findings are fairly consistent with the findings of previous researches (McFarlin and Sweeney, 1992; Folger and Konvosky, 1989) carried out on procedural fairness. Some researches regarding procedural fairness do not consider it to be a very strong predictor as far as job satisfaction is concerned (McFarlin and Sweeney, 1992; Folger and Konvosky, 1989). Our results are also aligned with the past researches indicating only a 30% (β= 0.297) change in job satisfaction due to procedural justice. On the other hand, the significance tests of procedural justice considering organizational commitment as dependent variable shows quite a significant association. The positivity of the relationship shows that higher procedural justice is a determinant of higher organizational commitment. Commitment is extremely important for every organization in order to reach their set goals and targets. It is predicted that employees who are treated fairly even go out of their way to favor the organization.. A change brought about in the organization commitment due to the effects of procedural justice happens to be 39 %( β=0.390). This shows that, though procedural justice is not a very significant predictor of organizational commitment yet it is a stronger predictor than job satisfaction. This finding is congruent with that of McFarlin and Sweeney (1992), Folger and Konovsky (1989) and Konovsky and colleagues (1987). Turnover intention is also in a significant relationship with procedural justice but the relationship is found to be weak. The amount of change brought about by perceived fairness in the intent of leaving the organization is very low i.e. 23% (β= 0.23). It predicts that according to our study, turnover intention does not have any major effect due to procedural fairness in the processes of the organization. References available upon request from Nida Hameed Afridi ([email protected])

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INTEGRATED WORKFORCE ENRICHMENT SOLUTION FOR

MODERN WORKFORCE CHALLENGES

Ripple Gupta,+91-9920337178, [email protected]

Sudhir Rai, +91-9821738819 , [email protected]

Prin L.N.Welingkar Institute of Management Development & Research, Lakhmi Napoo Road, near Matunga (Central Rly),

Mumbai, Maharashtra, India – 400019

ABSTRACT

In an age of fast changing markets, limited budgets, increased regulatory compliance issues, increasing competition and significantly higher demands on limited HR resources, most workforce development strategies have become obsolete. In this paper we have highlighted the three most critical and serious workforce challenges and designed an integrated solution to alleviate these issues. These issues are:

• Multi Generational Workforce Issues & Generational Dynamics • Meaning of Work and Employee Retention • Cross-Cultural & Geographical Workforce Differences

The employee needs to overcome these challenges to be successful at work and the organization needs to overcome these to grow in a global economy.

WORKFORCE CHALLENGES AND SOLUTION

Challenge 1: “Multi Generational Workforce Issues & Generational Dynamics”

The workforce now comprises four generations, each with very different needs, drivers and learning styles. The key challenges they have come up are:

� What are each generation’s most pressing concerns with regard to choosing a new job? � How do we attract the right mix of employees to meet our skill needs now and in the

future? � How can we effectively leverage the experience and knowledge of each generation to

benefit the whole organization? � How can we balance meeting the diverse needs of our employees in a simple, cost-

effective manner?

Solution:

Multi-Generational Workforce Collaboration Model

This solution shows how the rights and responsibilities of the employees and the organizations can be brought together to resolve the multi-generational workforce issue.

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What Employees can do

What Organizations can do

Share knowledge, new ideas, lessons learnt, best practices Learning & Development

Share knowledge, new ideas, lessons learned, best practices and inculcate mentoring Workforce Planning Analytics Find experts irrespective of generation, get answers instantly Knowledge Management Display flexibility to collaborate and accept ideas of others Collaborative Innovation

Challenge 2: “Meaning of Work and Employee Retention”

The workplace should be a place where employees can make constructive contributions by doing their job well and where they have a chance to engage with others, help them out, work towards a common goal and see the positive results of their pitching in. Employee retention involves being sensitive to people's needs and imbibing a sense of belongingness towards the company. To retain good people they should be supported in terms of Environment, Relationship, Support, Growth and Compensation. Employee retention takes effort, energy and resources but results are worth it. Solution: There are three primary drivers of employee retention:

We suggest workforce retention model, which incorporates the 3 drivers in the whole process.

Systematic Workforce Retention Model

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Challenge 3: “Cross-Cultural & Geographical Workforce Differences”

Due to globalization companies have started spending more resources in the process of recruiting and training workforce to work in cultures that are foreign to them. Employers these days emphasis on CQ and employees should work on increasing their CQ. Cultural Intelligence (CQ) can be defined as: your capability to grow personally through continuous learning and good understanding of diverse cultural heritage, wisdom and values, and to deal effectively with people from different cultural background and understanding. Cultural intelligence requires having or acquiring the following aspects:

• Cognitive: creating learning strategies to recognize cultural traits (e.g., punctuality, shared preferences)

• Physical: adopting habits and gestures of another culture (e.g., shaking hands, serving coffee)

• Emotional or motivational: confidence and commitment to adapt to a new culture (e.g., overcoming obstacles and setbacks)

It is the responsibility of employers to help their employees to improve their CQ and employee in-turn is responsible to study and work on his cultural intelligence. Solution:

Cultural Adaptability Evolution Model

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The employees should experience, learn the various ethnic, cultural, behavioral and geographical diversities at the workplace and macro-environment and should readily adopt and display the similar traits as a part of continuous evolution process.

INTEGRATED SOLUTION

The diagram below shows an overall view of the Integrated Solution to the aforementioned three critical workforce challenges that need to be resolved now and in near future.

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THE STATUS OF PARKING LOT GUN LAWS: ANNIE GET YOUR GUN3

Marsha Katz, Governors State University [email protected]

Helen LaVan, DePaul University [email protected]

Yvette Lopez, DePaul University [email protected]

Wm Marty Martin, DePaul University [email protected]

Charles Naquin, DePaul University [email protected]

Anyone who reads or listens to the news is bombarded with reports about violence within our society, including reports of violence in the workplace. For example, there were the recent shootings in Henderson, Kentucky that left eight dead (at a plastics plant), in St. Louis that left three dead (at a power plant), and at Alabama University that left three dead. Although the total number of killings in American workplaces remains relatively low, they still average more than one a day. The Bureau of Labor Statistics reported nearly five percent of the 7.1 million private industry business establishments in the United States had an incident of workplace violence in the year prior to the 2005 survey. Homicide, the most severe form of violence, is considered the fourth leading cause of job-related deaths (OSHA, 2007). The Bureau of Labor Statistics (2007) reports that there were 516 workplace homicides across all employees in the United States in 2006. In addition, Lee (2009) reported that while workplace homicides did not increase between 1997 and 2007 (just over 600 occurred in 2007), the rates of homicide from customers and clients has steadily increased. Furthermore, State government workers reported higher percentages of all types of workplace violence than did local government or private industry. Thirty-two percent of all State government workplaces reported some form of workplace violence. Local government reported 15 percent of their workplaces experience some type of workplace violence (BLS, 2006). Precipitating incidents can range from being laid off, being reported to management, or no precipitating incident whatsoever. As this abstract is being written the following workplace homicides have been reported: James Badasci, a dealer for John Deere equipment, was recently laid off after ten years from the company. He showed up with a shotgun, killed a person whom he allegedly “targeted,” then fired several more shots into the equipment, before eventually turning the gun on himself (Ames, 2009). An employee of the Publix store in Tarpon Springs, Florida was killed in the store parking lot and another escaped injury by a dismissed co-worker. The dismissal was related to the gunwoman being reported to management for working on her own time - a violation of company policy. Publix policy did not allow employees to bring handguns into the workplace, 3The musical by Irvin Berlin

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but the gunwoman brought one anyway. According to Florida parking lot law, (which has recently been upheld in Florida Retail Federation, Inc., v. Attorney General of Florida ("Florida Retail")) handguns are permitted in the parking lot where the homicide occurred (Kennedy, 2010). Even if there is no resulting death, the trauma associated with a gun in the workplace can be exceedingly psychologically damaging. The Indiana Chamber of Commerce says an office shooting in Portage shows why the law recently signed by Gov. Mitch Daniels which allows workers to keep firearms locked in their vehicles while parked on company property is a bad idea. Police say a 60-year-old employee became upset during his job review, and then retrieved a shotgun from his car that he fired twice at a state Department of Workforce Development office. He faces a charge of attempted murder, although no one was injured (Chesteron Tribune, 2010). Barling (2009) notes that there are many definitions of workplace violence. The Workplace Violence Research Institute’s definition of workplace violence includes threats, harassment and intimidation. Schat and Kelloway (2005) definition is a behavior by an individual or individuals within or outside an organization that is intended to physically or psychologically harm a worker or workers and occurs in a work-related context. In general, it has been categorized into three major types based on the assailant’s relationship to the workplace. In the first type, the perpetrator of the violence has no legitimate business relationship with the targeted workplace and enters the establishment to commit a criminal act such as robbery. The major occupations that experience this type of violence are taxicab drivers, convenience store employees and gas station attendants. The second type, the perpetrator, is a recipient of an object or service provided by the target workplace. The most common victim are health care provides and social service employees. In the third case, the offender is an employee or former employee of the workplace (LeBlanc, Kelloway, 2002). This type of behavior has captured the public’s attention. For example, the statement “going postal” came into our vocabulary on August 20, 1986, at a post office in Edmond, Oklahoma, when employee Patrick Henry Sherrill, known as "Crazy Pat" to some who knew him, shot two of his supervisors then continued his rampage killing a total of 14 co-workers and injuring seven others. Ultimately, he turned the gun on himself and committed suicide. After this incident, there seemed to be a rash of work-related violence in post offices, hence the term, "going postal (Montaldo, 2009). This paper will be dealing with only gun violence in the workplace. Remarkably, 221 years after the Second Amendment (Right to bear arms), there is still no agreement on the role of possessing guns within the workplace. The legal issues surrounding the Second Amendment are complex. On one hand, there is a Constitutional Amendment right to bear arms. On the other hand, the Fourteenth Amendment prohibits the deprivation of liberty or property without due process of law. This can occur when gun owners are deprived of their property interest in their guns or when owners of workplace property are deprived of their right to use their property. There can be Fifth Amendment issues relating to the confiscation of the gun without due compensation. Furthermore, employers' duties under OSHA would seemingly conflict with the aforementioned constitutional protections. Moreover, state and municipal ordinances are seemingly in conflict with each other. Some have handgun bans while others permit gun possession in workplace parking lots.

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Some studies have found that businesses that allow firearms are five to seven times more likely to have a homicide occur on the premises than those that ban firearms (Loomis et al., 2005). These raise two important social issues: what about the legitimate rights of gun owners who are hunters and court challenges on both sides of the issue. The legal issues behind gun control have been under scrutiny lately. In the District of Columbia v. Heller (2008), the Supreme Court struck down parts of Washington's gun control ordinance, the strictest in the country, and stated for the first time that the Second Amendment gives individuals a right to keep and bear arms for personal use. However, while it held that the Second Amendment guarantees a personal, individual right to keep and bear arms, it also conceded that reasonable regulations on gun ownership might be acceptable (Miller, 2009). However, the court declined to say whether the Second Amendment in general applies to state and local governments. Thus, there have been several recent court cases on this issue. Chicago’s ban on automatic weapons and concealed handguns was upheld. Judge Easterbrook ruled that there was no basis for the court to apply the Second Amendment to the states. He stated that only the Supreme Court, not the appeals court should make such a decision. However, a California court disagreed on the issue. The differing opinions mean that the whole issue of city and state gun laws will probably head back to the Supreme Court for clarification, leading many legal experts to predict a further expansion of gun rights (Schwartz, 2009). With the advent of shall-issue-concealed-carry laws, also known as carrying-concealed-weapons laws ("CCW laws"), many employers and gun-control advocates argue that employers must ban firearms from their property in order to provide for a safe workplace environment. In response to the increasing number of businesses that ban firearms from their premises, the National Rifle Association (NRA) is pushing state legislatures to pass laws that prohibit property owners from banning firearms from their parking lots (Erickson, 2005, Steines, 2008). Oklahoma became the first state to pass such a law by adding new sections to the Oklahoma Self-Defense Act and the Oklahoma Firearms Act on March 31, 2004. The amended sections states: “No person, property owner, tenant, employer, or business entity shall maintain, establish, or enforce any policy or rule that has the effect of prohibiting any person, except a convicted felon, from transporting and storing firearms in a locked motor vehicle, or from transporting and storing firearms locked in or locked to a motor vehicle on any property set aside for any motor vehicle” (Steines, 2008). These laws are now known as the “parking lot laws.” Several months later, a number of interested companies filed suit, seeking to enjoin the law's enforcement. Among other assertions, the companies claimed that such "parking-lot laws" violated their property rights under both the Fourteenth Amendment's Due Process Clause4 and the Fifth Amendment's Takings Clause5. The National Rifle Association has been pushing for the passage of parking-lot laws in all fifty states claiming such laws are necessary for employees to be able to freely exercise their rights to self-defense. While other states such as Florida,

4 The Fourteenth Amendment prohibits the deprivation of liberty or property without due process of law. 5 The Fifth Amendment Takings clause is when the government acquires private property and fails to compensate an owner fairly. A taking can occur even without the actual physical seizure of property, such as when a government regulation has substantially devalued a property.

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Georgia, and Kansas have followed Oklahoma's lead in passing these laws, a number of national and Oklahoma-based companies have challenged the Oklahoma law's constitutionality. Businesses that are in shall-issue states must adopt explicit gun-free policies in order to prevent individuals from bringing firearms onto their properties. These businesses must effectively publicize their policies - by posting signs, for example - to encourage employees and customers to abide by the ban. Businesses may also "refuse entry or bring a criminal trespass action against anyone who violates" their policies (Beaver, 1997). Some businesses have gone so far as to fire employees who have violated their gun-free policies. Some such terminated employees have attempted to challenge their employers' gun-free policies that led to their firings. On October 4, 2007, the U.S. District Court for the Northern District of Oklahoma issued an order in ConocoPhillips Co. v. Henry permanently enjoining the enforcement of the law against employers. The ConocoPhillips plaintiffs alleged that the Oklahoma parking-lot law was a "taking" of their property without just compensation in violation of the Fifth Amendment. The Fifth Amendment states, "private property shall not be taken for public use, without just compensation (Steines, 2008). In addition, the NRA then launched a national boycott of ConocoPhillips and erected billboards that read, "ConocoPhillips is No Friend of the Second Amendment" (Steines, 2008). Thus, there are differences in the states on not only whether or not guns can be owned by individuals, but also on whether they can be concealed and whether or not an employer can ban guns on their property including the parking lot. Indiana was the most recent state to enact legislation that says employees may keep legally permitted firearms out of sight in their locked vehicles while they are working. Furthermore, the National Rifle Association has successfully lobbied for similar laws in 12 other states (Allen, 2010, Volokh, 2006). Research Plans for paper for AEPP This study will analyze Federal and State cases that are illustrative of the conflicts between Federal Constitutional Issues of the Second Amendment and States Rights including the Fifth Amendment and the Fourteenth Amendment of Due Process, which suggest States have the right to ban guns. In addition, it will also analyze the Federal regulations that are imposed by OSHA regulations to have a safe working environment. Thus, in light of the disturbing levels of gun violence in the workplace the focus of this paper will be to ascertain the current legal status of guns in the workplace. and also to make recommendations for improving employee relations and subsequently reduce workplace homicides. References available on request.

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VOLUNTEERISM AND GENDER IN TERMS OF ETHICS OF CARE

Cigdem Kirel and Ilke Oruc

Anadolu University College of Economics and Administrative Sciences Eskisehir 26470

Email: [email protected], [email protected] Phone: (90) 22 335 05 80 Fax: (90) 222 335 05 95

ABSTRACT

This study basically aims at exploring what employees (different gender) in organizations think about volunteerism in terms of ethics of care. This is a qualitative study and the opinions of ten married ten couples working as academicians at a university regarding volunteerism were obtained through individual interviews. It will be interesting to examine the role of gender differences in giving importance to others and sharing social responsibilities. As a result of this study, it can be concluded that there is no significant evidence indicating a difference regarding the volunteerism of the sample with high educational background. Key Words: Volunteerism, ethics of care and gender.

INTRODUCTION

Feminist ethics criticises gender blindness and contradictions in traditional ethics and proposes gender sensitive alternatives [4, pp. 1]. Those studying on feminist ethics try to reveal the inadequacy of the perspective of ethical theories towards women. Starting from this, they focus on actual status of individuals and human relationships caused by the social order [14]. Relationship ethics developing within feminist ethics emphasize importance paid to others, taking relationships as basis. Concept of voluntariness also includes activities indicating care about others. Activities done regarding certain social problems and troubles incurred by others support issues advocated by relationship ethics. Because of these reasons, concepts of voluntariness and ethics of care mentioned above must be clarified. Voluntariness and ethics of care

The relationship between self-sacrificing and voluntariness is quite obvious; self-sacrificing involves giving more importance to wellbeing of others than those of one’s own, and voluntariness is about working for the wellbeing of others without expecting something in return [2, pp. 89-104] [7]. Pragmatically, voluntariness involves individuals’ and organizations’ transferring their resources for the wellbeing of public [10, pp. 1-18]. Voluntariness means transferring knowledge, time, skills, experience and other resources by individuals with their own will in order to increase life quality and to achieve important targets for the benefit of the society without expecting a financial compensation as part of social philantrophy.

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Care highlights various values such as not giving harm to others, giving importance to

relationships with others, sustaining and repairing relationships [13] [16, pp.43] [1, pp.137-138] [6] [3,pp.3] [12,pp.21]. From a different point of view, it might also include devotion and the consideration of others’ physical and psychological needs. Human relationships involve three components necessary to sustain care; namely being open to others, accepting other creatures

and supporting others when they need help [15, pp.111]. In this perspect society is at macro level [9], and interpersonal relationships are at micro level [11, pp.24]. First of all, care theory believes people are primarily relational not individual or free [5, pp.213). From ethics of care point of view, feelings and affection cannot be avoided while making moral judgement. It also focuses on broader social issues such as justice and unfairness by considering individual relationships. Ethics of care, which provides various opportunities and risks for social conflicts, is in fact a different approach [8, pp.15]. The approaches from feminist theory provide a general approach for the emergence of ethics of care and the involvement of experiences by women in the process. Therefore; it is necessary to mention about the values ethics of care, we can highlight these values as follows: It is important to maintaning and repairing relationships; No harm should be given to others; Self is interdependent with others; Situational approach is basic to understanding and care; Feelings and emotions are legitimate and valuable; Motivation guides actions; Intellect and intuition are both valued [15].

METHOD AND DATA ANALYSIS

The main problem of this study is to determine the opinions of individuals in organizations about voluntariness and about non-governmental organizationsin terms of ethics of care. The main scope of the study is to discuss whether the perception of voluntariness differs according to genders on the basis of ethics of care. This research is a qualitative case study. The study was realised in Anadolu University. Sample population was selected from a group with an even level of education in order to determine whether they asses the subject matter in the same perspective or not. Based on the quantitative research, 10 married couples (10 female, 10 male) were selected. Later vis-à-vis interviews were made with the individuals considering the possibility of couples being influenced by each other. In order to analyse data obtained by these interviews, first interview records were transcribed and then these data were analysed. Main themes of the study were defined taking interview questions as basis and subthemes were determined according to the answers of the participants. Subthemes were defined by classifying answers of the participants. Themes; Voluntariness; Contributions to students’ development; NGO’s; Problem; Solution; Relationships; Work- family conflict. Subthemes; Individual development, social development, satisfaction, democratization; Awareness, individual development and contribution for the future career; Society, lack of trust, membership, position; Lack of education, inequality in income, to get used to inappropriate conditions; Education, economic development; Family; Women, time Since the current study is based on qualitative research method, the data cannot be realized to larger contexts.

FINDINGS

They reported that voluntariness is the activities carried out for the wellbeing of society without

expecting something in return or any kind of benefit provided as part of social philantrophy. Voluntary activities are believed to foster individual development, increase awareness and develop sensitivity to social issues. The data clearly presents positive ideas about voluntariness.

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However; female participants care about taking part in voluntary activities and relationships in general more than males, which is in harmony with the principles of ethics of care. The questions about the course Practices in Social Services showed that 9 out of 20 participants have given this course at the university. Those who do not give this course stated that the projects in the course should be based on voluntariness, it should not be a lesson and students should not chosen because it is a lesson that be passed easily. All of the participants thought that the course Practices in Social Services contributed a lot to students in terms of personal development, increased awareness about social issues and acquiring teamwork spirit through voluntary activities. This idea was stated by a male participant as follows: “I believe that this course contributes a lot to students. First of all, they see that they do something useful for the society thanks to this course and have invaluable experiences they might use in the future. In addition, it helps students for personality development and social solidarity. It is important to create feeling of being useful for the society by serving people in the society. Since this is a collective work, this feeling of solidarity is highly likely to trigger future voluntary activities in collaboration with non-governmental organizations”. The data shows that all the participants were quite sensitive to social problems. A male participant, who attributed the problems mainly to economy, stated: “The government gives up its social practices due to increasing liberalization and the problems increase. We cannot solve these problems without eliminating them completely. If we are not successful in these attempts, we just fill in some gaps temporarily. In my opinion, the campaigns of non-governmental organizations in Turkey simply try to fill in these gaps”. Generally speaking, education is the main reason of social problems according to female participants. However; male participants believed that economic inequality is the most important factor for such problems. One female participant talked about problems as follows: “all of our problems are due to lack of organized

actions, lack of education and the continuing presence of feudal structure in Turkey”. As for the solutions to these problems, most of the participants suggested economic development and quality education. As for the question about membership to non-governmental organizations, it was found that 6 participants are members of such organizations: 3 male and 3 female. The most interesting result here is that some of the couples did not remember whether they are members of a non-governmental organization or not. Another outstanding result is the insufficient number of memberships although the participants highlighted the importance of NGOs for a society. Finally, it is clear that women tend to be interested in NGOs working on issues related to women or children. The answers given for the question about the conflicts between family and job responsibilities reflected similar ones observed in almost all societies. Especially, women were observed to experience such conflicts between the family and job more than men. It is inevitable that such a multiple roles conflict leads to considerable stress. A female participant stated: “It is impossible not to have any conflicts since these two (family and job) are quite different areas. There is no possibility to be perfect in both, so it is quite natural to have conflicts if you want perfection”. Although male participants reported about similar conflicts, they feel less anxious and stressful than women. Nowadays, despite the fact that males have more tendencies to help their wifes for child care, they are reluctant to do housework. However; some male participants were observed to care about the time they spend in their jobs as well.

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RESULTS AND DISCUSSION

That study tries to find voluntariness value aspect on ethics of care. This perspective used micro (family) and amcro (society) level. Interviews questions created according to ethics of care values and we are trying to connect volunterism concept. Data showed that results very related to Hofstede’s findings in Turkish culture. Turkey’s have feminine values. All people sensitive society, other people and family but other hand observed indivituation. This study may provide an approach to topic from different perspectives.

REFERENCES [1] Burton, B. & Dunn C. P. Feminist Ethics as Moral Grounding for Stakeholder Theory. Business Ethics Quarterly. 1996, 6(2), 133-147. [2] Chesters, C. & Lawrance S. The Business Doing Good: An Australasian Perspective on

Corporate Philantrophy. The Journal of Corporate Citizenship (JCC ) , 90–104. [3] Ciulla, J. B. Leadreship and Ethics of Care. Journal of Business Ethics. 2009, 88, 3-4. [4] DiQuinzo, P. & Young I. M. Reconciling Equality To Difference: Caring (F)or Justice For

People With Disabilities. Hypatia. 1995, 10(1). [5] Donleavy, G.D. Care, Contracts and Kolhberg. International Review of Business Research Papers. 2007, 3(1), 208-224. [6] Engster, D. Rethinking Care Theory: The Practice and Obligation to Care. Hypatia, 2005, 20(3), 50–74. [7] Godfrey, P.C. The relationship between corporate philanthropy and shareholder wealth: a

risk management perspective. Academy of Management Review, 2006, 30(4), 777-98. [8] Meagher, G. & Parton N. Modernizing Social Work and The Ethic of Care. Social Work&Society, 2004, 2(1), 10-27. [9] Nobbis, N. Feminist Ethics without Feminist Ethical Theory. Philispohy Documentation Center, 2005, 213-225. [10] Schwab, R.G. & Sutherland D. Philantrophy, Non-goverment Organizations and

Indigenous Development. Discussion Paper No.242. Center for Aboriginial Economic Policy Research, 2002, 1-18. [11] Sevenhuijsen, S. Citizenship and Ethics of Care: Feminist Consideration on Justice, Morality and Politics, London: Routledge, 1998. [12] Slote, M. The Ethics of Care and Empathy, Routledge, 2007. [13] Tronto, J. Moral Boundaries. New York: Routledge, 1993. [14] Walker, M. U. Moral Understandings. New York: Routledge, 1998. [15] White, J. Ethical Comportment in Organziation: A Synthesis of the Feminist Ethics of Care

and Buddist Ethics of Compassion. International Journal of Value-Based Management, 1999, 12, 109-128.

[16] Wood, J. T. Who Cares? Women Care and Culture. Southern Illinois University Press, 1994.

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EMPLOYEES IN PERFORMING NONPROFITS:

WORKERS ADRIFT IN THE EPHEMERAL ARTS

Paul Lorton, Jr School of Business and Professional Studies - University of San Francisco

2130 Fulton St. San Francisco CA 94117-1045 415 422 6185 email: [email protected]

ABSTRACT

In this discussion, we will briefly look at the history of performing artists and at the divergence of performing art forms that could be engaged in “for-profit” from those for whom profit was left behind. From this context we will examine the 21st century components of the nonprofit performing arts workforce (performers, designers, directors, technical staff, front of the house personnel and management) to delineate the elements and conditions they share with the broader workforce and those which are unique to their chosen careers which include the elements that impinge on their role as fully franchised members of the labor force.

SETTING THE FRAME Performing arts are a significant component of not only the workforce but also the preservation of our cultural heritage. In particular, those who work for not-for-profit organizations such as Ballet companies, Operas or Symphonies are charged with keeping the classical arts alive and actively in our present. These organizations do not make a profit and have to work very hard to break even. These activities are also labor intensive and the people working in the organizations must bear the brunt of any short fall in the box office (which is never sufficient to meet the payroll) and the solicited contributions. The confluence of the emotion of “culture,” the needs of labor and hardscrabble sources of funding have created some very unique issues for those who seek a living in an industry that may trade on their passion for the art form. The conditions of the employment arrangements are, by and large, more akin to those of the 18th century than those of the 21st. Faine [1] noted, from his long experience, that:

in all probability future collective bargaining in the arts will not be between management on one side and the union on the other, but more likely be between management and union on one side confronting the source of funding on the other. [1, p73]

Live entertainment is expensive and risky. The event, in the finest sense of ephemeral, only

exists at a moment in time. When that moment has past, the event is gone leaving only the memories, perhaps recorded, and the revenue contributed by the audience that shared that moment. The cost of presenting an event can be astronomical. For example, as noted in the Sidney Morning Herald 3 Dec 2004. “ to stage an average full-scale, Australia-wide tour by an A-list international artist now costs between $6 million and $10 million, depending on the act.”[2]

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The components of the performing arts with which we are concerned include performers but, because they are perhaps more affected by the labor practices in these arts, we will most especially want to look at those who support the performing artist:

1. Designers: Costume, Sets, Props 2. Technical staff : Stage Managers, Stage hands and Technicians 3. Front of the House personnel: House Management, Box office, Ushers, etc. 4. Directors: Artistic Directors, Stage Directors 5. Management: Producers, Boards

In addition to this list, the American Guild of Musical Artists adds a useful Schedule “C” to its contracts that define performing roles from Leading and Featured soloist to “Mute Bit” roles of supernumeraries. Supplementing this schedule is a lengthy list of Operas and the cast requirements; for example, Bizet’s Opera Carmen requires 14 named roles and a minimum of 36 in the Chorus. Mozart’s Opera Cosi Fan Tutti requires six lead singers and a chorus of 12.[3]

SOME HISTORY Performers have been around for a very long time, and not uniformly treated with respect or even tolerance. A widely acknowledged first reference to public performing is found in the Twelve Tables of Roman Law:

Table VII, LAW VIII.

When anyone publicly abuses another in a loud voice, or writes a poem for the purpose of insulting him, or rendering him infamous, he shall be beaten with a rod until he dies. [4]

Other laws and regulations throughout history constrained and restricted the performing artist severely. A gradual movement from the 18th century toward allowing more freedom of expression for the individual also provided performing artists with a less restrictive environment in which to display their creativity.

MODERN SCENE One of the most significant developments of the last 100 years, of course, has been the union movement that codified guilds and other workers organizations under the protection of the law.

Performing artists live to perform. But their talents, their skill and the beauty they create won't necessarily pay the rent, put food on the table or guarantee the necessities of life. Without forceful advocacy and defense of their rights, artists may be vulnerable to exploitation or illegal discrimination. They need protection. They can find it by joining AGMA, the American Guild of Musical Artists. [5]

Various organizations to protect the employment rights of those in the performing arts were established in the 20th century. For example:

International Alliance of Theatrical Stage Employees (IATSE) 1893. The IATSE serves wide variety of skilled individual who are part of the craft of the theater and work, specifically, in the

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following areas: Animation / Computer Generated Imagery, Front of House, Laboratory, Make-up and Hair, Motion Picture and Television Production, Post Production, Projection and Audio-Visual Scenic Artists, Stagehands, Television Broadcast, Trade Show/Exhibition, Treasurers and Ticket Sellers, and Wardrobe. [6] These are members of the labor force the attending public seldom see or, as is the case with ticket sellers and other front of the house personnel are part of a general background to which attention is seldom paid. Thus, they were one of the first groups to organize to defend their working rights and improve their work conditions. Other groups to organize to protect their constituent skills and craft groups include:

American Society of Composers, Authors and Publishers (ASCAP) 1914 [7] Actors Equity Association 1913 [8] Screen Actors Guild (SAG) 1933 [9] American Guild of Musical Artists (AGMA) 1936 [5]

Even with this range of associations available to support and represent those working in the performing arts, the ultimate conflicts between wanting to ply one’s trade – create an ephemeral experience for an audience - and need for compensation in order to continue to be able to do that leads to significant opportunities for the workers to be failed by the system.

NO CONCESSIONS FOR NONPROFITS

The various associations noted above are dedicated to protecting their workers. As noted in the statement from the AGMA, performing artists live to perform but they need to put food on the table and pay their rent just the same as those without their talent who are employed in the sectors of the economy that produce more tangible goods and services. These organizations recognize that nonprofit performing arts groups are not as capable of producing revenue as they are in producing opportunities for performers. In some cases accommodation can be made (e.g., guest artist agreement from the AGMA, see [5]). But in most cases there is no available accommodation for a nonprofit for, as one provider of weapons for the stage states, they are all nonprofit.

THE KNOCK-ON EFFECT

In 2005 the Washington ballet voted for the AGMA as their bargaining representative. There was an impasse with enough finger-pointing to populate a year’s supply of a French glove maker. As a consequence of the “misunderstanding” the staging of Tchaikovsky’s Nutcracker Ballet was cancelled for the season. This caused the whole organization to shut down and, as Nutcracker seasons usually contribute 50% of a ballet company’s annual revenue (as well as a substantial amount of community support as the event is perennially popular with the young making them fans of the art form) the damage was extensive.

With a for-profit company the damage can be as large and the knock-on effect substantial (think only of strikes by flight attendants during the summer travel season). For a profit producing organization, the pain hits those for whom the profit is a reward. The solution is also with them.

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With a nonprofit company, the solution is never easy to find, for more money cannot simply come from charging enough for the public performance to cover the costs. In a business where bringing the artistry to the public does focus on prices that are affordable, raising prices to cover the costs is never attractive. Often with nonprofit performing companies experience a short fall in revenue, it is the board who may have to make up that difference from their own resources of that of their friends. Thus the solution inflicts more pain than it relieves.

INTELLECTUAL PROPERTY

One of the ways to recover some income and gain productivity is to have some title to the created work – the song, the play, the ballet or opera might be performed by others with some tribute (symbolic but monetary is usually most appreciated). As a small additional wrinkle in this opportunity to make additional revenue from a performance, the origins of copyright law came from the desire of booksellers to preserve their monopoly on a certain work and not from the creator. Even now, ASCAP, which has some very good arrangements to make sure reproductions of a live performance that create revenue transfer some of that revenue to the creative artists – but they represent the creators (Composers, Authors, Publishers) and not performers. In fact their agreement on residuals with broadcasters sends nothing back to the performers.

EVOLVING APPROACHES

To allow those who wish to perform in the nonprofits sector to do so without exploitation, a process that can educate the public in the need to support these artists (for the general public is, after all, the beneficiary of the artist’s performances and willingness to do so) as well as an effort to make sure that the trade organizations fully realize their obligation to facilitate these artists’ professional desires.

REFERENCES [1] Faine , Hyman R. “Unions and the Arts,” The American Economic Review, Vol. 62, No. 1/2 (Mar. 1, 1972), pp. 70-77 [2] Sidney Morning Herald 3 Dec 2004 www.smh.com.au/news/Music/The-price-of-fame/2004/12/03/1101923322669.html [3] http://www.musicalartists.org/agreements_schedule_c.html [4] Scott, S. P. THE CIVIL LAW. Vol I. Including The Twelve Tables, … Translated from the

original Latin, edited, and compared with all accessible systems of jurisprudence ancient and

modern. Cincinnati The Central Trust Company Executor of the Estate Samuel P. Scott, Deceased Publishers, 1932 (Reproduced on www.constitution.org/sps/sps01_1.htm) [5] www.musicalartists.org [6] www.iatse-intl.org/about/crafts.html [7] www.ascap.com/about [8] www.actorsequity.org/AboutEquity/historicaloverview.asp [9] www.sag.org/content/about-us

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BUILDING SUSTAINABLE CAPACITY DEVELOPMENT THROUGH

PARTICIPATORY GOVERNANCE AND SUB-NATIONAL CAPACITY

DEVELOPMENT: Why development and international support failures in Africa?

Call for Action

Israel Jacob Massuanganhe Public Policies, Governance and Local Development

Center of Excellence in Public Policies and Local Governance University Agostinho Neto - Faculty of Law - Angola

Email: [email protected]

ABSTRACT

A recurrent question in Africa development debates has been: Why development and

international support failures in Africa? Africa, with enough natural resources, possesses large extension of arable land with diversity agro-ecologic conditions, but hungry and misery affects more that 1/2 of the population, with major incidence in Sub-Sahara Africa. Imagine, today is 31st December 2014. What the poor will be told tomorrow about the commitment made to reduce poverty? (Any idea?). This is evident because 1) the concept of Poverty is vague and does not reflect the real dimension of who feels and 2) the concept of capacity development in many debates has mostly stopped at the national level and rarely does the concept sufficient extended to sub national level where needs are felt, services are demanded and less attention is devoted to the role of local institutions and traditional authorities, civil society and grassroots organizations and structures that are the real agents of local development. In Africa development, less attention has been devoted to grassroots perspective and political leadership, looking local institutions and the role of traditional authorities who are leaders, holding local traditional power, spiritual power, knowledge, and essential skills to influence local community and control over the territory and cultural transmission. Traditional institutions and authorities are rarely included within plans of development that are formulated. Have mostly disregarded their potential for collective action that inheres within these institutions, partly because of ignorance and partly also because development paradigm, which is seen as “modernisation and scientific knowledge”. One way to increase the effectiveness of local government is through democratic decentralization, which involves a transfer of powers, resources, and capacity. Many developing countries have initiated this process in an effort to improve the quality of service delivery and strengthen sustainable local development. Decentralization is a vehicle to achieve the MDGs due its nature to operate at local and community level and planning is crucial to ensure participation in governance and local development. Increasingly participatory governance is emerging as a key focal area, both in its own right, and as a means for securing the MDGs, and especially poverty reduction. Decentralization and participatory processes are complex and takes years to implement, but are recognized that should play critical role to achieve the MDGs, it because the nature to work at local level. Sustainable development cannot be realized without robust strong institutions and active citizenry engaged in key decision-making. Political leaders should promote good Governance, by strengthening institutions (formal and informal structures) and public participation to address national and local development agenda. Furthermore, functional local structures and ancestral systems are of particular importance to the flourishing of a strong

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service delivery, which is prerequisite to any meaningful, vibrant, democratic, and decentralized governance. The new development paradigm involves political commitment. In view to address local development, on one hand, capacity, authority and resources have to transferred, and on other hand, it’s crucial to promote citizen´s engagement at all levels. The paradigm should consider a) strengthening of Local governments, b) building capacity of Civil society organizations,

including communities, leaders and traditional authorities, and finally c) Promotion of emerging Private sector - small and medium enterprises through stimulation of local economic development interventions that generate employment and income for the poor, while local institutions create enable set to address local structures and systems to promote local development.

1. INTRODUCTION

A recurrent question in Africa development debates has been: Why development and

international support failures in Africa? This old continent has been to the international community the most privileged recipient of donor support during last 20 years. More than $500 billion in foreign aid6 – the equivalent of four Marshall Aid Plans – was invested in Africa between 1960 and 1997 in development programmes. Instead of increasing development, aid has created dependence. The more aid poured into Africa, the lower its standard of living. Per capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent between 1975 and 2000. Additionally, other direct and/or indirect forms of assistance were provided via technical cooperation/ assistance by multilateral or bilateral partners. Nevertheless, Africa is the poorest in the globe and still being affected by chronic poverty, violence and unstable regimes that are called to carry long term development vision of their people. Africa, with enough natural resources, possesses large extension of arable land with diversity agro-ecologic conditions, but hungry and misery affects more that 1/2 of the population, with major incidence in Sub-Sahara Africa. Child and women mortality, associated with high HIV/AIDS prevalence rate, especially in women; illiteracy and low enrollment level are some critical challenges to be addressed in Africa development agenda. African agriculture itself is in crisis, and according to the International Food Policy Research Institute, this has left 200 million people malnourished. In many debates about Africa development, one issue has been part of the agenda: The need of strong Africa Leadership. In this connection, it is particularly highlighted political problems such as civil strife, refugee movements and returnees. The implication is clear - Africa's years of wars, coups and civil strife are responsible for more hunger than the natural problems that befall it7. By some measures, more that 70 percent of African nations have experienced internal conflicts in the last three decades. Conscious that Africa’s poor are getting poorer and that good governance is essential for successful economic development, the continent adopted fundamental reforms - The New Partnership for Africa’s Development (NEPAD) 8. Researchers have been pointed out that the critical issue in Africa leadership is Good

Governance, meaning strengthen institutions and public administration reforms to address

6 https://www.cato.org/pubs/edb/edb2.html 7 http://www.globalpolicy.org/socecon/develop/africa/2006/0131sistcrisis.htm 8 http://africaunchained.blogspot.com/2005/07/strengthening-african-leadership.html

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national development agenda. In Africa good governance debate, less attention has been devoted to local governance perspective, looking local institutions and their capacity towards response to the local demands and to address decentralization and local development issues. The concept of institutions in many good governance debates has mostly stopped at the level of sub national authorities (local governments) and rarely does the concept sufficient extended to civil society and grassroots organizations and structures that are the real agents of local governance9. Good governance does not means to advocate strong states or centralism, but in market economy is to have state intervening on behalf of the poor (regulatory) and let the poor brings his voice (devolution). It will lead to enhance effectiveness and efficiency of public interventions by the central government, who are distant from the point where needs are felt and service delivery are needed: demand-driven public administration. Persistent rural poverty is one of the most stubborn social problems facing Africa. Considering that tomorrow is 1st January 2015, how far were honored the commitments made to achieve the MDGs? What will be told the world about eradication of the extreme poverty? In many debates about Africa development, one issue has been part of the agenda: The need of strong Africa Leadership. It’s consensual that Africa good governance, less attention has been devoted to local perspective, looking local institutions, traditional authorities and their capacity towards response to the local demands and to address local development agenda, meaning that there is a critical need to promote participatory governance and inclusive local development. This paper is a grassroots perspective that aims to bring the concept of Poverty and MDGs close to the poor, since in many debates has mostly stopped at the national level and rarely does the concept sufficient extended to sub national level where needs are felt, services are demanded. It is noted that less attention has been devoted to the role of local authorities, civil society and grassroots organizations and structures that are the real agents of local development. The concept of poverty is rhetoric and based on our self perceptions and never incorporates the grassroots perspectives or the poor dimension of who fells, what is poverty. The exercise of modeling the MDGs[1] is critical to identify the variable and support the governments to forecast what needs to be done today to achieve the MDGs tomorrow, meaning that the critical variables have to be identified (e.g. good governance, leadership, economic growth, population, etc). The variable determining the MDGs, almost are critical and under control of the governments. In most cases, the variable determining the MDGs are related to endogen factors and internal capability to sustain local development. Simultaneously, national and sub-national debates are needed. It is consensual that transferring capacity and resources to the poor is the most direct and immediate way to reduce poverty and to achieve the Millennium Development Goals. One way to increase the effectiveness of local government is through democratic decentralization, which involves a transfer of powers, resources, and assets to local structures. Effective local governments are vital to achieving the Millennium Development Goals. The MDG’s implies strong commitment, long term development vision and will not be achieved if the governments do not strengthen institutions of governance and build capacity at local level. There are actions to taken in view to touch the poor, e.g promote leadership, public policies, institutions, and pro-active systems that provide better

9 www.eldis.org/static/doc9693.htm

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services, capacity development, and livelihoods improvement. If not, as result, in 2015 the world will continue being constrained and affected by current problems. Participatory Governance and Local Development A recurrent question in development debates has been: Why development agenda and

international support failure in Africa? This old continent has been to the international community the most privileged recipient of donor support during last 20 years. More than US$1 trillion in foreign aid[2] – more that the equivalent of four Marshall Aid Plans – was invested in Africa between 1960 and 2005 in development programmes. Instead of increasing development, aid has created dependence. The more aid poured into Africa, the lower its standard of living. Per capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent between 1975 and 2000. Additionally, other direct and/or indirect forms of assistance were provided via technical cooperation/ assistance by multilateral or bilateral partners. Nevertheless, Africa is the poorest in the globe and still being affected by chronic poverty, violence and unstable regimes that are called to carry long term development vision of their people. Africa, with enough natural resources, possesses large extension of arable land with diversity agro-ecologic conditions, but hungry and misery affects more that 1/2 of the population, with major incidence in Sub-Sahara Africa. Child and women mortality, associated with high HIV/AIDS prevalence rate, especially in women; illiteracy and low enrollment level are some critical challenges to be addressed in Africa development agenda. African agriculture itself is in crisis, and according to the International Food Policy Research Institute, this has left 200 million people malnourished. In many debates about Africa development, one issue has been part of the agenda: The need of strong Africa Leadership. In this connection, it is particularly highlighted political problems such as civil strife, refugee movements, and returnees. The implication is clear - Africa's years of wars, coups, and civil strife are responsible for more hunger than the natural problems that befall it[3]. By some measures, more that 70 percent of African nations have experienced internal conflicts in the last three decades. Democracy and transparent and accountable governance and administration in all sectors of society are indispensable foundations for the realisation of social and people-centred sustainable development (Declaration of the

World Summit for Social Development, 1995). Conscious that Africa’s poor are getting poorer and that good governance is essential for successful economic development, the continent adopted fundamental reforms - The New Partnership for Africa’s Development (NEPAD) [4]. For a long time, the worsening rural poverty levels in Africa were explained principally in terms of poor economic performance, and externally prescribed economic remedies predominated in policy prescriptions. Emerging evidence, however, shows that economic growth alone is not sufficient to bring about, in a sustainable way, the needed poverty reduction. It is particularly worthy to observe that Africa possess extremely low growth elasticities of poverty reduction[5]. This recognition does not minimise the importance of economic growth in poverty reduction and rural development. For poor countries, rapid growth is a necessary, essential and powerful tool for poverty reduction in the medium to long term. In interventions that target poverty, one of the primary conceptual hurdles is to define who the poor are and, consequently, how to target them. Proper targeting of

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the poor has generally proved to be elusive and this is one area where more work is still required. The other challenge regards how best to ensure that there is local ownership of the interventions. This consideration brings to the fore the issues of local governance. One of the lessons from the past failures of poverty-focused interventions is the importance of avoiding a ‘top down’ approach to project design and implementation, as this invariably results in ineffectiveness of the interventions, while a decentralised and participatory approach has resulted in poverty reduction. The global community has recognised the development of Africa, especially Sub-Saharan Africa, as the world’s foremost development challenge. Researchers have been pointed out that the critical issue is Good Governance, meaning strengthen institutions and public administration reforms to address national and local development agenda. UNDP[6] defines governance as the exercise of political, economic, and administrative authority to manage a society’s affairs. This broad concept encompasses the organizational structures and activities of central, regional and local government; the parliament; the judiciary; and the institutions, organizations and individuals that constitute civil society and the private sector. Governance requires concerted efforts by those managing the affairs of developing countries. Elements contributing to the latter concept of good governance include the basic laws and institutions of a nation, the administrative competence, and transparency, decentralization of its administration, and the creation of an appropriate market environment; all of these are needed to support people's participation in every aspect of politics, the economy, and society. These are therefore necessary components of good governance as "the government functioning as the basis for participatory development." In Africa good governance debate, less attention has been devoted to local governance perspective and political leadership, looking local institutions and their capacity towards response to the local demands and to address decentralization and local development issues. Good governance doesn’t means to advocate strong states or centralism, but in market economy is to have state intervening on behalf of the poor (regulatory) and let the poor brings his voice (devolution). Increasingly participatory governance is emerging as a key focal area, both in its own right, and as a means for securing the Millennium Development Goals, and especially poverty reduction. There is a growing consensus that democratic governance creates the conditions for sustainable development and poverty reduction. Local governments can play a major role in this effort by ensuring more effective and accountable local infrastructure and service delivery for the poor and by improving the dialogue between the state, citizens and their communities, and the private sector. Institutional capacity plays a central role in any decentralization process. Failure of institutional setting will result in poor outcomes. It’s evident that the reluctance of decentralization in developing countries mainly is associated with weak systems, poor institutions, weak capacity and administrative diseconomies. Community developers must understand both how to work with individuals and how to affect communities' positions within the context of larger social institutions[7].

References and full paper available on request.

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THE IMPACT OF THE ECONOMIC CRISIS ON YOUTH EMPLOYMENT IN

SLOVENIA

Jasmina Pavlin, [email protected]; Mojca Bernik*, [email protected]; Miha Marič, [email protected]

University of Maribor, Faculty of Organisational Sciences Kidričeva cesta 55a, SI-4000 Kranj, Slovenia

ABSTRACT

Companies in Slovenia have implemented a number of measures to cope with the recent economic crisis and to adapt to market conditions. One of these measures has been eliminating jobs and reducing the number of employees. This led to an expansion in the number of unemployed, while the number of newly employed people has decreased. We have examined the problem of the employability of young people who are seeking employment and are often without the experience necessary for the work place. The aim was to make a systematic review of the programs for promoting youth employment that are carried out in Slovenia and that may reduce the number of unemployed youth. Keywords: employment, unemployment, youth, crisis

INTRODUCTION

Within the dynamics of transitions between the different situations of young people, the transitions from education to employment remain the most demanding and critical. Young people in modern society are placed in a contradictory situation; on the one hand, they are forced into earlier and more informed, which implies a shift of responsibility for their own lives in childhood [11]. On the other hand, the period of education and economic independence has been extended, which is a sharp contrast to the requirements of the early choices and taking responsibilities [15]. Youth unemployment is not a problem only in terms of placement in the system of work and future career opportunities of young people, but also in the form of negative psychological and broader social consequences [14]. The employability of young people or first-time jobseekers is a major problem in Slovenia, as well as throughout the European Union. Since the start of the current economic crisis, the situation in the labor markets has become even worse. A particularly vulnerable group in this difficult situation is youth. This not only includes those with low education, but also those with higher education. This paper highlights the situation of youth in the Slovenian labor market, focusing on current trends and issues that they are facing. We will also examine programs aimed at solving youth unemployment.

YOUTH EMPLOYMENT PROBLEMS IN SLOVENIA Youth labor market in Slovenia

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The term "youth" is usually used for people during the period from childhood to maturity. The term “youth workforce market” identifies the segment in which youth are seeking their first job as well as the supply of jobs that employers are willing to offer to youth without work experience. Youth labor markets constitute the segment of the labor market that is most greatly exposed to different fluctuations, and where pressures for flexibility and adaptability are the greatest. At the same time, young people are often also the least protected sector of the workforce [14]. Youth as jobseekers are currently confronted with a more flexible, less secure forms of employment in comparison to the older work force, i.e., with fixed-term jobs, part-time jobs, with occasional or temporary jobs under contracts [13]. In the case of flexible employment forms, it is especially important to emphasize “student work” via student services that is liberally regulated Slovenia. Such student work has been and is often criticized as one of the key causes for high youth unemployment in Slovenia, because employers meet their needs for unskilled or less qualified workers with student labor. Indeed, for employers, this type of labor is the cheapest and the least demanding form of workforce engagement. At the same time, this form of work is certainly the reason for lengthening the period of education and massive enrollment in higher education because it offers many young people a way to “survive” for several years. Regarding the problem of youth labor market in Slovenia, we also have to highlight some problems directly related to this topic. This is primarily the social exclusion of relatively high proportion of young people who do not finish school, lengthening the period of education to avoid unemployment, a lack of skills and experience in seeking their first job, a mismatch of education with labor market requirements, regional development disparities affecting youth employment opportunities, and the brain drain of highly educated young people.

Youth unemployment in Slovenia

Youth unemployment is a major and an increasingly critical issue problem in Slovenia. According to the cause for the application to the Employment Service of Slovenia, unemployed young graduates are separated into two major groups: first-time job seekers and persons seeking re-employment [17]. The group of first-time job seekers without experience is currently increasing. As a particularly vulnerable group among unemployed youth, we should emphasize low-educated young people, since they have a difficult time competing with educated young people as well as with older people with lower education [14]. A general finding is that youth with high education respond much more to changes in economic opportunities than those with low education levels [12]. By looking at the data of registered unemployment in Slovenia on 31.12.2009, we can see that there were 12,059 people below the age of 25 who were unemployed. Of these, the largest groups of unemployed young people were 3,704 with no education, 2,852 with secondary school (three years), and 4,287 with general secondary education (four years) [20]. Of young people searching for their first employment, 7,462 found it in 2008 and 6,016 found it in 2009; these are very low numbers compared to the data on how many there were searching for it in the selected

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years. The rate of unemployment among those who are searching for their first employment was 14.3% in 2009 [20].

The consequences of youth unemployment in Slovenia

Social exclusion and marginalization are usually indicated as the main consequence of unemployment, not only in the labor market, but also in other areas of life. Youth unemployment in Slovenia is a key risk factor that impedes young people’s overall long-term involvement in society. Research findings indicate that the accumulation of bad experiences of unemployment among youth contribute to economic deprivation, social isolation and the mental health problems [10]. Young people in Slovenia are exposed to the uncertainties in the form of great flexibility, which consequently leads to reduced ability of full economic and social independence because of uncertainty in the youth labor market [1]. Moreover, they remain a burden longer for their parents, leave home later and create their own families later. The result of this delay is also lowering the fertility rate, because there are fewer opportunities to have children [7]. Fergusson et al. [4] argue that unemployment among youth is also associated to increasing risks of disorder. Results of the research showed that young people exposed to six months or greater unemployment in any given year had rates of mental health problems, criminal offense, substance use disorders and suicidal behaviors that were between 1.4 and 8.4 times higher than their non-unemployed peers. The high rate of inactivity among young people (apart from the participation in education and training) and the failure to integrate into the labor market is usually associated with high overall unemployment [3].

YOUTH EMPLOYMENT POLICY IN SLOVENIA The European Union and its member states, of which Slovenia is one, have given a clear priority to young people as the main target group. Employment policies focus more attention on young people, among which are not just employment measures aimed at first-time job seekers and unemployed young people, but also the meaning and place that the issue of youth employment has in employment policies [5]. The state plays a major role in solving youth unemployment. Measures and incentives to tackle unemployment are summarized in active employment policies, which represent key state interventions in the labor market and are targeted at specific groups of people [6]. The programs for solving unemployment in Slovenia and as a target group include young people are: the Programs of Measures to Promote Entrepreneurship and Competitiveness for the period 2007–2013, the Operational Programme for Human Resource Developments for the period 2007–2013, various regional development programs, the partnership program “Young People in the World of Work” for the period 2007–2013 and the Program of Active Employment Policy for the period 2007–2013 [16]. The Active Employment Policy Programme (AEP) has been designed to assist in obtaining employment for the unemployed and for the preservation of threatened jobs and is especially intended for those target groups that face any handicap to entering the labor market [2, 9]. The program is partly financed from the state budget and the rest of the money is obtained from European funds, principally from the European Social Fund [20]. Part of the attention in the AEP program is also given to tackle youth employment. The main substantive attention in 2010 is focused on operations to promote the establishment of scholarships, the promotion of

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employment of young first job seekers, and some other measures that also affect young people, i.e., the promotion of employment of disadvantaged persons, promoting the creation of new jobs, boosting the development of new employment programs for the most vulnerable people in the labor market, developing new opportunities for job creation and others. Young people are particularly exposed to the program of the third measure, i.e., the promotion of employment and self employment, in which incentives are implemented in the form of subsidies for the employment of disadvantaged groups. Here, we should emphasize two projects aim at reducing youth unemployment: a pilot project “Graduate, Activate and Employ Yourself” [18] and the project “Employ.me” [19]. The main goal of the project "Employ.me" is to include young people into training at the workplace, in order to enable them to obtain relevant work experience and subsidized employment through public tenders via the project. A subsidy in this project is offered for employment of particularly youth seeking their first job. The subsidy amounts to €4,000 and is paid after the recruitment of unemployed persons. The employer must enter into a full-time employment contract with its new employee and keep the new employee for at least one year. In 2009, there were 2,904 people involved in this program, of which there were 944 below 26 years of age. For the period of 2010–2011, there is €18 million for the tender: 85% of these funds are supplied by the European Union through the European Social Fund (ESF), the remaining 15% is provided from the state budget [20]. The second project “Training of graduates in the workplace and the subsidy for employment of graduates – Graduate, Activate and Employ Yourself” aims at mobilizing students during graduation to enable them to undergo training in the workplace and to gain the knowledge and skills to facilitate the integration into work as well as promoting the employment of graduates after training for the same employer through an employment subsidy. Training lasts from one to six months. Employers are reimbursed for eligible costs of training graduates as the grant of €2,000 is awarded to employers for employment of graduates for full-time for at least six months [20]. In 2010, the project has intended projected budget of €39.2 million and €23.9 million in 2011 [8].

CONCLUSION Using the full potential of young people and creating a favorable environment in which young people can develop their skills, work and participate actively in society is essential for the economic and social development of the country. This is especially true considering the fact that the economy is knowledge-based, and that we live in an aging society in which it is essential to give all young people the opportunity to fully develop their potential. Labour markets urgently need to respond to these challenges to use the potential of the youth population [3]. For the actual situation of young people following the completion of education in the labor market, the unemployment rates are not the only important indicator of unemployment, but also the question of whether they have managed to get jobs that are appropriate for their qualifications. For an overall assessment, it is therefore necessary to analyze the quality of their employment. Only in this case, is it expected that the investment in education of these people is in fact recovered through an appropriate increase of value added in the economy [17].

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Young people today face many complex challenges. Searching for solutions to increase employability is only one aspect of a much wider problem on the labor market. It is important not only to narrow search channels to raise the employability of young people, but also to broader the search for multidimensional measures that enable young people to get good and decent employment, and conditions that will enable them to find their place in society, achieve independence and realize their personal aspirations. The issue of young people in the labor market is extensive and requires comprehensive investigation. In this article, we have highlighted only some of them. The paper does not cover the role of grants and scholarships in the education and their impact and connection with the recruitment of young people. We have also touched the problem of employment for youth with special needs, which is a specific group of young people and requires much attention.

REFERENCES References available upon request from the authors.

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‘BEING HUMAN’ – THE ESSENCE OF BEING A SUCCESSFUL HUMAN RESOURCE

PROFESSIONAL

Ranjan Phadke 65/1, Erandavana, Ramdhun, Prabhat Road, Lane No 15, Pune-411004, INDIA

Mobile – 91-9890930647 Email- [email protected]

Being Human, what does that mean?

Prof Ramnath Narayan Swami from the prestigious Indian Institute of Management –Bangalore and one of the pioneers in the field of ‘Creativity in Management’ once said, “You know what the problem with today’s Human Resource Professionals is? They have forgotten the meaning of the first word, being HUMAN”. This statement aptly summarizes the perception and frustrations surrounding Human Resource functions in today’s business world. So what does it mean to be human? Does a human resource professional need to have certain personality traits that make them suitable for the role? Do they need to have a code that can dictate their actions towards employees? There has to be one. In the hard world of business, an HR person has the ‘designated’ job to take care of people. To be fair all managers and leaders need have an HR person within them. However since business today is more about profit than people, that task has been given to the HR department. As part of this introduction, let us try and define some traits that an HR professional must have;

1) Basically good natured.

2) Uncompromising about ethics.

3) Aware of social responsibilities.

4) A sense of humor.

5) Natural ability to mentor and counsel.

6) Creativity.

7) Ability to analyze facts within the back-drop of emotions.

8) Ability to express thoughts clearly.

9) Selfless.

10) Good balance between being a conformist and non-conformist

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These I believe are a few decisive character traits that will define the future human resource professional. The reason that the above traits and not others are the most important is due to modernity. Modernity is a series of reforming cultural movements in art, literature, architecture, music etc. Rise in capitalism, representative democracy, individualism, increasing role of science and technology, social movement, urbanization, literacy, media, advances in medicine, pollution, climate change, values related to globalization, information technology, rootlessness, all these have an indelible influence on today’s youth which is tomorrows work force.

We will now discuss some aspects directly related to an HR professionals job and how they are dealt with today and how they can be dealt with better.

My targets – A person is a target

Many believe that an HR professionals targets are defined by numbers. A person is a number. When it comes to people, numbers are important only for analysis of problems. They have no significance in the solution. Let us consider examples;

a) Recruitment – My target is to hire 50 people in a month. If I don’t meet them, my appraisal is doomed.

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b) Training and Development – I have to cover 50 employees a month on conflict management, else I have failed.

c) Compensation and Benefits – I have to ensure a critical balance between giving the least possible raise and still lose the least possible number of employee’s due to a competitor offering more.

d) Employee Relations – I have to have no more than 10% attrition or labor turnover and nothing more than 5% daily absenteeism.

On the face of it, these seem like normal, reasonably common targets that traditionally have seemed to work. This is the most common way an HR unit or team or person approaches his or her job. The consequences of such an approach or attitude are also extremely common and usually the root of all problems that an organization faces.

a) Recruitment – If you are stretched to hire 50 people a month, which in this case is difficult, an HR professional will quickly reduce the threshold for entry consciously or sub-consciously. This affects quality and right fitment in terms or work as well as culture. This has an effect on not only the organization but also the candidate, as they are now in a job that they are either not suitable for or at times too good to do.

b) Training and Development – It’s a myth that the more people you cover the better chances of improved performance. The concept of training needs analysis is often lost while conducting ‘behavioral’ training modules. As is often found, it is a difficult and tedious task to assess training needs for behavioral aspects. Hence it not uncommon to have these conducted for all. Most behavioral trainings are related to a person’s leadership capabilities. Employees need a certain environment, experience and interest in attending and gaining from such programs. Such en-mass trainings only increase training costs, create disillusionment amongst those who are not suited for them, creates unproductive time hence reduces morale as well as profits, which is the reverse of what the training intended to achieve.

c) Compensation and Benefits – To lose sight of employee welfare while deciding remuneration and benefits is common. Compensation has to be decided on , current company profits, future growth targets, current standard of living, inflation, position and placement of employee, skills and motivations, ability and performance, loyalty and honestly. Unfortunately, most first look at the market scenario. In a recession

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year, regardless of company profits, increments will be stopped. It is the childhood mentality of looking at what the other does and then follow, which is prevalent in CnB departments. If my competitor is giving an 8% hike, I will either match it or give a little less and still hope to keep people. The common misconception amongst leaders in the human resource industry is that ‘Compensation and Benefits can never be employee friendly’. With proper research, genuine care of employee welfare, consideration of facts and figures, performance etc an employee can be positively motivated to stay and continue working with an organization by providing for generous yet appropriate increments, compensation and benefits. What is also missing is ‘communication’. In certain genuine cases where an organization is not able to provide the expected raise, they often fail miserably to communicate the real problem to their employees. The worst mistake is to consider the employee unequal and unworthy of being part of the larger picture. It’s definitely not the sole domain of the top management.

d) Employee relations – Absenteeism is an aspect which most ER’s professionals fail to address effectively. On most occasions, the line manager or team leader addresses these on the spot and hence such incidents are never documented.

Here are some common reasons for absenteeism stated by Dr Rao;

i. Maladjustment with Working Conditions: If the working conditions of the company are poor, the workers cannot adjust themselves with them. Then they prefer to stay away, or at home.

ii. Social and Religious Ceremonies: Social and religious functions divert the workers

attention from the work. Most employees today have to give traditional holidays and engagements a miss. This can create a bit of frustration and lead to increased absenteeism during such periods.

iii. Industrial Fatigue: This is simply being drained out, working extra hours, doing 12

instead of 9 hours of work and then finally the employee feels the need to stay away from work.

iv. Unhealthy Working Conditions: Poor and intolerable working conditions might

irritate the employee. Excess noise, low lighting, poor ventilation, poor control over the central air conditioning which either keeps the indoors too warm or too cold for comfort.

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v. Poor Welfare Facilities: Poor welfare facilities include poor sanitation, washing, first aid appliances, ambulance, rest rooms, drinking water, canteen, shelter, crèches etc. Employees dissatisfied with these facilities tend to stay away from the work place.

vi. Alcoholism: Urban, young employees have been known to be lavish in their spending where parties and boozing trips might find common place in their life. These if done during the weekday will lead to absenteeism the next day as they will not even be in a position to wake up, let alone come to work.

vii. Being in debt: Many employees, to cover their costs might end up borrowing from

friends and colleagues at the workplace. Inability to repay them, might lead to them not wanting to face them, hence might result in absenteeism.

viii. Maladjustment with the Job Demands: The fast changing technology demands higher

level of skill and there is a constant pressure to meet targets. Some employees fail to meet these expectations and feel ashamed. This leads them to skip work, to avoid the constant negativity surrounding their performance.

In relation to company policies, unsound personnel policies, inadequate leave facilities and low level of wages might tend to keep the employees away from work as well. Such problems can be analyzed and avoided if a little care is given in understanding the human nature of work. The problem of focusing just on 10% attrition or 5% absenteeism is that you are ignoring most employees as long as the numbers are right.

Have a party – boost morale

The most disturbing trend in employee relations is to have a party to boost morale. This is the worst solution to employee problems, such as stress, disinterest, absenteeism, attrition etc. The thought that having a ‘fun’ work place by arranging a party will reduce problems is false. A fun work place is one where an employee feels welcome, where their work is considered important; their opinions are respected, where they have the freedom to make decisions. These factors give true meaning to the phrase “A fun work place”, not, having a party. The fact that HR professionals and the management now resort to such initiatives is proof of the dying art of understanding people and problems. It is also indicative of a growing casualness in approach by the management towards employee relations and problems.

Continuing education policy really a retention tool

Most organizations have this. A policy which allows employees to enroll in courses, master’s degrees, diploma’s all in the name of skill enhancement and employee welfare. Most organizations provide financial assistance to such initiatives. One would ask, what

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is wrong? It seems like a win-win situation. Unfortunately the reality is different. Though most organizations now offer online, distance learning or weekend learning Master’s degree in association with local institutes, by the end of the course, the organization has no plan to help the employee use their newly acquired skills. Most of these courses, since done while working full time, are conducted in double the normal duration of a full-time course. This keeps the employee locked within the current job as the organization might be providing financial assistance for the same. Another troubling fact is, that though almost all organizations have these programs, when an employee changes jobs and decides to apply for better opportunities based on new degree’s and skills acquired the market does not accept this degree’s as anything special. Human resource professionals seldom afford the candidate the same consideration as candidates with full-time degrees. Such work and study degrees are often considered second rate. Hence the employee or candidate stands to lose twice, the time and enormous effort spent in achieving success in work and study and now being considered unequal to full time degrees.

Hence I conclude that such a policy is a cold “save attrition” gimmick, devised by brilliant but inconsiderate management and HR professionals.

Recruitment, you don’t fit in the template

Most recruiters today have a template. If you do not fit EXACTLY in the profile mentioned no one will consider you. The reason for this is that HR professionals are often considerably removed from the real work environment. Hence they have no experience to bank on to make informed, considerate judgments about a person’s skills and abilities. To avoid ‘thinking’, asking questions to search for the right skills, the recruiter depends on the template come what may. In some cases even this is outsourced and done over the phone. Many a talented candidates fail to make the cut since their CV’s may not fall exactly in the job description and candidate profile given to the HR from Operations. This inability to assess, ask questions, probe and search the best candidate often leads to random, CV centric hiring. We have also now seen a trend of automated software’s filtering profiles based on the choices you select from drop-downs. This maybe an efficient way to dispose of thousands of applications, but a disastrous approach in finding the best or right candidate. It only seems that recruiters now don’t even want to read CV’s let alone ask right questions.

Understanding your problems, over the phone

Most HR professionals have many employees to handle. Hence many now resort to dealing with employee problems over the phone. Even worse, most organizations have software’s and systems in place to allow the employee to ‘register’ their complaints online. These have an SLA and time to resolve. But no one will ever think of meeting the

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employee personally. It is observed that such systems and methods of addressing employee concerns or questions over the phone fail to give an accurate solution leaving the employee even more distressed. Losing human touch and one-on-one interaction, is the start of losing the employee for good.

Overtime, what’s that?

If you work in the IT field then chances are that you work more than 9 hours every day. Why? It’s expected, the work pressure is enormous and I have no choice. After all, we are paying the employee a lot of money, they must meet targets, even if they have to work 24 hours a day. This is such a common trend. The worst part is that no one complains. They feel privileged even obliged to be able to work with great companies for high salaries. It’s no secret that professionals today face a burn out far earlier in life, have higher instances of health related issues and usually have a miserable family and social life. Overtime is becoming so common that, not only does an employee not get paid for it; they are often looked down upon, reprimanded and sometimes even laid off if targets are not met. Why have targets that require more than 9 hours of work in a day? Of all the trends that I have discussed in this paper, this is the most dangerous of them all.

In the blind greed for profits, success, targets, we are losing touch with reality every day, a reality that is so simple yet never considered. It is important that businesses treat their

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employees as human beings, not money minting machines, replaceable after the warranty and service period on ones, mind and body is over.

‘Being human’ is that difficult in business?

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GENDER, ORGANIZATIONAL JUSTICE, JOB ATTITUDES AND ABSEENTEEISM Betty Jane Punnett, Priscilla Glidden, Dion Greenidge

Department of Management Studies, University of the West Indies, Cave Hill Campus, Barbados, 246-256-6434; [email protected]

ABSTRACT

Background

There is a body of literature which finds that women have higher absenteeism rates than men (Akyeampong, 2005; Dionne & Dostie, 2007; Patton & Johns, 2007). There are many possible explanations for these findings, including women taking more home focussed responsibility for children, aging parents and so on. This explanation can be questioned, particularly when good alternatives exist for these responsibilities and where men often have similar responsibilities. An alternative explanation is that women experience a sense of discrimination in the workplace which impacts negatively on their attitudes toward the job and organization. There is abundant literature to show that women are treated differently from men at work (Catalyst, 2009; Diekman & Eagly, 2000; Eagley, Johannesen-Schmidt & van Eagen,

2003; Hausmann, Tyson & Zahidi, 2009; The European Commission, 2006), for example facing glass wall, ceilings, and cliffs (Burke and McKeen, 1990, 1997; Jackson, 2001;

International Labour Office, 2004; Maniero & Sullivan, 2005, Powell and Graves, 2003; Punnett et al., 2006). Given the differential treatment of women at work, it seems likely that women will perceive lower levels of justice at work, this in turn will lead to lower levels of satisfaction, and lower levels of organizational commitment and loyalty. These negative attitudes will result in withdrawal behaviors, such as absenteeism. In addition these negative attitudes may result in higher levels of stress which also leads to withdrawal behaviors. There is literature which more generally links these attitudes and behaviors in both men and women (Cohen-Charash & Spector, 2001; Colquitt et al., 2001; Latham & Pinder, 2005;

Cole, Bernerth, Walter & Holt, 2010). We propose that the relationships will be particularly salient in the case of women, because of their differential treatment and perceptions of injustice. We plan to test this proposition using data from a job attitude survey across 24 organizations.

THE VARIABLES AND MEASURES

Various job characteristics have been investigated as predictors of absenteeism (Johns, 1997; Rentsch & Steel, 1998). The strongest evidence from research in North America is a consistent relationship between job satisfaction and attendance at work. The more satisfied employees are with the workplace, the more likely they are to attend (Hackett, 1989; Harrison & Martocchio, 1998). Job satisfaction is a broad concept, and while a global satisfaction variable has been shown to be related to absenteeism, a variety of facets of job satisfaction have also been identified, and survey instruments have been designed to measure these facets. Broadly, intrinsic job satisfaction has been differentiated from extrinsic job satisfaction – intrinsic is defined as

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satisfaction with the job itself, and extrinsic as the satisfaction with factors external to the job (Weiss, Dawis, England, & Lofquist, 1967). Research has looked at these facets of job satisfaction extensively in North America, and found them, to varying degrees, to be related to absenteeism. It seems that if employees are satisfied with the job itself (intrinsic) and with the workplace environment (extrinsic) they will want to attend, and avoid absences. Some research suggests that intrinsic job satisfaction may be the best predictor of absenteeism (Hackett, 1989). Two other organizational characteristics that have received substantial attention are loyalty and justice (Harrison & Martocchio, 1998). Results of studies in North America have found that the more loyal and committed employees are, the more satisfied they are, and the more likely they are to attend work - loyalty and commitment are thus positively correlated with both satisfaction and attendance (Addae & Parboteeah, 2006; Bennett, 2002; Harrison & Martocchio, 1998; Lok & Crawford, 2001, Yousef, 2000). Some research has suggested that satisfaction leads to loyalty and loyalty in turn leads to attendance, so that loyalty is an intervening variable (Hackett, 1989; Lok & Crawford, 2001). Organizational justice, or perceptions of equity, has also been identified as contributing to absenteeism (Guerts, Schaufeli & Rutte, 1999; Lam, Schaubroeck & Aryee, 2002; Moorman, 1991; Neihoff & Moorman, 1993). Employees who believe they are treated equitably at work are more likely to attend, while those who see the workplace as unjust or unfair are more likely to be absent. The survey instruments used in the project were all existing instruments with previously demonstrated high levels of reliability and validity. A variety of instruments were examined, and these were selected as the best available. Specifically, the instruments were:

• The Minnesota Satisfaction Questionnaire (MSQ short form) - Weiss, Dawis, England, & Lofquist, 1967

• Organizational Commitment - Meyer, Allen & Smith, 1993

• Perceptions of Organizational Justice - Moorman, 1991; Niehoff and Moorman,1993

SAMPLE AND INITIAL ANALYSIS

Based on 773 usable responses (two hundred and ninety five – 38.2% - males and four hundred and seventy eight - 61.8% -females), we have done an initial analysis, comparing male and female respondents on the relevant variables. Table 1 gives the means for all employees and the reliabilities for the scales. An independent sample t-test was computed to test for significant differences between male and female employees on intrinsic job satisfaction, extrinsic job satisfaction, general job satisfaction, affective commitment, continuance commitment, distributive justice, procedural justice, and interactional justice. There were significant differences on (results are summarized in Tables 2):

• intrinsic job satisfaction (t (92, 285) = 4.14, p < .05), with male employees having higher levels of intrinsic job satisfaction 3.77 versus 3.59.

• extrinsic job satisfaction (t (12, 765) = 2.22, p < .05), with males having higher levels of extrinsic job satisfaction 3.13 versus 2.99.

• general job satisfaction (t (98, 679) = 3.81, p < .05), with males employees having higher levels of general job satisfaction 3.55 versus 3.38.

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• affective commitment (t (12, 765) = 2.16, p < .05), with males having higher levels of affective commitment 4.20 versus 4.00.

• continuance commitment (t (12, 765) = 2.49, p < .05), with females having higher levels of continuance commitment 4.16 versus 3.91.

• distributive justice (t (12, 765) = 2.65, p < .05), with males perceiving higher levels of distributive justice 4.42 versus 4.15.

• procedural justice (t (12, 765) = 2.96, p < .05), with males perceiving higher levels of procedural justice 4.19 versus 3.89.

• interactional justice (t (12, 765) = 2.22, p < .05), with males to perceiving higher levels of interactional justice 4.55 versus 4.32.

The results of the t-test showed no significant differences on normative commitment and overall organizational commitment (all ps >.05).

Table 1

Employee Survey Responses

Variables Mean

Standard

Deviation

Reliability

Job Satisfaction

(scores 1-5, 3=midpoint) General Job Satisfaction 3.44 .61 .81 Intrinsic Job Satisfaction 3.65 .61 .80 Extrinsic Job Satisfaction 3.04 .82 .87 Organizational Commitment

(scores 1-7, 4=midpoint) Overall Organizational Commitment 4.04 .93 .83 Affective Commitment 4.07 1.23 .71 Continuance Commitment 4.06 1.33 .74 Normative Commitment 3.98 1.30 . .74 Organizational Justice

(scores 1-7; 4=midpoint) Distributive Justice 4.25 1.42 .83 Procedural Justice 4.00 1.36 .89 Interactional Justice 4.40 1.44 .96

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Table 2

Independent Sample T-test

Males

(n =291)

Females

(n=476) Levene's Test

Test for equality of

means

Variables M SD M SD F p t df p

Intrinsic Job Satisfaction 3.77 .55 3.59 .64 9.30 .00 4.14 92 .00

Extrinsic Job Satisfaction 3.13 .79 2.99 .84 1.49 .22 2.22 12 .03

General Job Satisfaction 3.55 .56 3.38 .64 7.43 .00 3.81 98 .00

Affective Commitment 4.20 1.28 4.00 1.21 2.41 .12 2.16 12 .03

Continuance Commitment 3.91 1.36 4.16 1.32 .17 .68 -2.49 12 .01

Normative Commitment 4.00 1.32 3.96 1.29 .48 .48 .36 12 .71 Overall Organizational Commitment 4.03 .93 4.04 .94 .06 .80 -.06 12 .94

Distributive Justice 4.42 1.33 4.15 1.48 3.64 .06 2.58 12 .01

Procedural Justice 4.19 1.38 3.89 1.35 .16 .67 2.96 12 .00

Interactional Justice 4.55 1.41 4.32 1.46 .42 .52 2.08 12 .03

Of the variables investigated, satisfaction and organizational justice clearly show more positive attitudes among men. The results are not as clear cut for commitment. Men were more positive in terms of affective commitment, but women were higher on continuance commitment and there were no significant differences on normative and overall commitment. Taken together these results suggest support for the proposition that women’s experiences at work may result in negative attitudes which result in withdrawal behaviors.

Advancing the Paper

Our intent is to model gender, organizational justice, and job attitudes, relative to absenteeism (see Figure 1). This analysis will be completed prior to the conference. References available on request.

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Figure 1

A Gender Difference Model of Organizational Justice, Job Attitudes and Absenteeism

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THE GOVERNMENT DECISION-MAKING PROCESS ON THE POLICY

LEVELTOWARDS THAI STATE OWNED ENTERPRISES (SOEs) OPERATING WITHIN METROPOLITAN AREAS

10

Sutada Mekrungruengkul11

43/51 Moo Ban Pokaew, Prachachyen Road, Pak Kred, Nonthaburi 11120, THAILAND Telephone: + 66 1 809 5401 (Cell), + 66 2 984 5492 (Home), + 66 2 696 8624 (Work)

E-mail:[email protected]

ABSTRACT

The developing research study on The Government Decision-making Process on the Policy Level towards Thai State Owned Enterprises (SOEs) Operating within Metropolitan Areas:) offers some ideas that may provide a useful interpretation of the government decision-making process on the policy level to the discipline of public administration. The researcher aims to propose a better understanding towards government policy formulation and implementation towards Thai SOEs through two case studies, The Government’s policy on TMN Privatization and National Shipping Line Establishment Policy by the Thai Maritime Navigation Company Limited (TMN) Joint Venture with 23 Ship-owner Companies and the Government’s policy on the Suvarnabhumi Airport Construction by the Airports of Thailand Public Company Limited (AOT).

Keywords: Organizational Decision-making Process, State Owned Enterprises (SOEs), Satisficing Model, Incremental Model, Garbage-can Model, The Garbage-can model in political institutions as according to Kingdon’s Theory.

Analytical Framework

The developing research analytical framework aims to interpret the dynamics of metropolitan areas or urban regions [1]. The researcher would like to focus on the social forces and SOEs operation and administration within metropolitan environments. Having an assumption that the social forces and SOEs operation and administration are altering the patterns of local decision making from institutional to non-institutional and cross-institutional forms of governance, the metropolitan environments are unique places than they were decades before: the metropolitan

10 This research is developed from the dissertation submitted to the Faculty of Public Administration, National Institute of Development Administration (NIDA) in Partial Fulfillment of the Requirements for the Degree of Doctor of Public Administration. 11 DPA Candidate at the Faculty of Public Administration, National Institute of Development Administration (NIDA)

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have transformed into more complex environments of diversified power centers with cross-jurisdictional issued and demands [2]. Therefore, the Government decision-making on Policy Level towards SOEs Operating within Metropolitan Areas will be understood as a set of skills and tools that are framed around collaborative efforts designed to meet cross-jurisdictional and cross-boundary needs of publics [3], privates and non government organizations (NGOs) [4]. Drawing upon insights from complexity theory [5], the developed research aims to offer some ideas that may provide a useful interpretation of the SOEs operating within the Metropolitan context from which we can understand metropolitan environments and the way in which decisions are made within these environments.

Developmental Research

The research questions explored in the developing research is how are administrative, political,

and policy decisions formed in complex metropolitan environments? This research question contains two different concepts. The first concept is the deeply traditional frame of reference that relies on the oft-touted principles of rational decision making. Long traditional in public administration, rational decision making theories are the bulwark of the field, and most approaches rely on the underlying principles and assumptions of the rationality in conducting and understanding decision making in public administration [6]. Under this concept, the emphasis of the quality of decisions is viewed as a result of a form of rationality that seeks to order policy decisions around the criterion of efficiency.

Problems

Solutions

Choices

Rational Decision making

Efficiency

The second concept places emphasis on the very different question of who is involved ion the decision process. This approach to decision is representative of what is referred to as post-positivist [7] in which there is a reliance on expanding the decision frames of reference to improve policy and administrative deliberation. The second concept that focus on expanding participation will lead to a more fully developed sense of understanding the problem at hand and a more fully committed response to the problem solution once meaningful involvement is achieved.

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Communities

Solutions

Choices

Representative Decision making

Improve policy and

administrative deliberation

Problems Policy evaluation and adaptive strategies

Research Objectives The developing research aims to assess the use of rationality in the study of organizational behavior. As argued by Mary Zey’s [8] that organizational change and adaptation is best understood within the various contexts of organizations. Hence, the decision makers do not make decisions independent of their environments. The researcher believed that this understanding to examining organizations varies greatly from that outlined by rational choice theory and being replaced by organizations “subjected to economic analysis in attempts to make them accountable or productive or competitive [9]. The literatures review will emphasis the boarder, more inclusive nature of administrative and political decision making in public administration as refer to as the “logic of appropriateness” [10] which the decisions are based on shared understandings of the decision situation. The core value concepts will be derived from the work of Waldo [11], March and Olsen [12] and March [13], where it is understand that decision making is deeply contextual and are more attuned to the notions of social construction and sense making [14]. It is to this mentality that this research will focus on.

References

[1[ Stone, C.N., Regime Politics: Governing Atlanta, 1946-1986, Univrsity Press of Kansas, Lawrence. KS, 1989

[2] Wikstrom, N., The city in the regional mosaic, In The Future of Loca Government

Administration, Frederickson, H.G. and Nalbandian, J., Eds., International City/County Management Association, Washington, DC, pp 21-38, 2002.

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[3] Agranoff, R., Leveraging Networks: A Guide for Public Managers Working Across

Organizations, IBM Endowment for the Business of Government, Arlington, 2003

[4] Linden, R.M., Working Across Boundaries: Making Collaboration Work in Government and

Nonprofit Organizations, Jossey-Bass, San Francisco, 2002

[5] Richardson, K.A.,Ed., Managing Organizational Complexity: Philosophy , Theory, Application, Information Age Publishing , Greenwich, CT, 2005

[6] Ferderickson, H.G. and Smith, K.B., The Public Administration Theory Primer, Westview Press, Boulder, 2003.

[7] Fischer, F., Citizens, Experts and Environment: The Politics of Local Knowledge, Duke University Press, Durtham, 2000

[8] [9, pp 88] Zey, M., Rational Choice Theory and Organizational Theory: A Critique, Sage, Thousand Osks, CA, 1998.

[10] Ferderickson, H.G. and Smith, K.B., The Public Administration Theory Primer, Westview Press, Boulder, 2003.

[11] Waldo, D., Development of theory of democratic administration, American Political Science

Review, 46, 81-103, 1952 [13] March, J.and Olsen, J., Rediscovering Institutions, The Free Press, New York, 1989 [14] March, J., A Primer on Decision Making: How Decisions Happen, The Free Press, New York,

1994 15] Weick, K.E., Sensemaking in Organizations,Sage, Thousand Oak, C

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ABSTRACTS*

* These submissions were designated as "abstracts" by the author(s). They were internally

reviewed to determine their contribution to the conference and a decision was made based on these determinations.

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CORPORATE INNOVATION: GROWING NEW BUSINESS THROUGH NEW

BUSINESS INCUBATORS, CHALLENGES AND SOLUTIONS

Roger (Rongxin) Chen Professor of Management,

Chair, Department of Marketing, Globalization and Strategy School of Business and Professional Studies

University of San Francisco Emai: [email protected]

ABSTRACT

Launching a new business is a key element in corporate innovation strategy. Yet growing emerging business is a major challenge to many companies as the organizational capabilities and processes required for new business are drastically different from, and even in conflict with those required for established business. As a result, many companies set up separate venture departments/units to incubate new business. The objective is to use such new venture units to explore and grow future core business. If some of the new business turn out to be not fitting with companies’ strategic directions, the companies can spin off or sell the ventures thus to generate financial returns.

Does this corporate venture strategy work? Can venture units help companies develop future core business or general financial returns? What are the challenges and lessons of pursuing such a strategy? Although these issues have received a lot of attention, our research reveals some important lessons that have not been adequately addressed in the past. Based on detailed case studies and interviews with executives of companies such as IBM, P&G, Nortel, Nokia, Intel, Xerox, NEC, HP etc, our findings have important implications for companies trying to pursue such corporate venture strategies.

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STRATEGIC MANAGEMENT OF CORPORATE SOCIAL RESPONSIBILITY AND

WORKFORCE ISSUES IN THE GLOBAL ARENA

Michele V. Gee, Ph.D.

School of Business & Technology University of Wisconsin-Parkside

900 Wood Road, Kenosha, WI, 53141 [email protected]

ABSTRACT

Corporate social responsibility (CSR): What does it mean philosophically and operationally from the varied perspectives of multinational corporations? This paper examines CSR in the global workplace. Immense social and environmental challenges confront organizations and employees operating internationally. There is increasing pressure for corporations to be more socially responsible. Furthermore, the relevancy of CSR is becoming increasingly important given the current state of national, regional, and global economies. Issues to be explored include differing views of corporate social responsibility and its relationship to global workforces. Keywords: corporate social responsibility, multinational corporations

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AN IMPLEMENTATION ROAD MAP FOR HIGH-IMPACT, LOW-COST EMPLOYEE

ASSISTANCE STRATEGIES THE BOLIVAR GROUP EXPERIENCE

Debra McKinney

Javier Sanchez-Rueda Seguros Bolivar S.A. Cra. 10 #28-49, piso 5

Bogota, D.C. Colombia

South America Phone: +571-243-6888, +571-243-4166, +571-243-4427

[email protected] [email protected]

ABSTRACT

The Bolivar Group has a decade of successful experience in low-cost, high-impact strategies designed to improve the quality of life for employees and their families. This paper focuses on practical implementation of specific programs: small businesses as a source of income generation for unemployed family members, and psycho-social wellness and prevention services for employees and their families. The first program follows a branching linear path, while the second employs a cluster strategy. The key processes include building on existing infrastructure, creating internal and external alliances, enhancing and interrelating existing programs, and a simple growth and development process for strategies. Keywords: Employee assistance, low-cost, high-impact, quality of life, strategy

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AN EXAMINATION OF THE INFORMATION PROCESSING AND EMOTIONAL

TENDENCIES OF SOFTWARE ENTREPRENEURS

Larry E. Pate Professor and Burwell Endowed Chair in Entrepreneurship

Chair, Department of Entrepreneurship College of Business & Public Administration

293 Centennial Drive, Stop 8098 University of North Dakota

Grand Forks, ND 58202 Tel. 701-777-6380

[email protected]

ABSTRACT

This paper examines the primary and back-up information processing patterns, emotional patterns, and rigidity/stability of the decision patters of 217 entrepreneurs who started software businesses between January 2002 through December 2005. Subjects were mostly male, college graduates, and between the ages of 23-29. Subjects completed the 45-item Driver Decision Style Exercise (DDSE) measure of Operating Style; the 60-item Driver-Streufert Complexity Index (DSCI) measure of Role Style; the 72-item Emotional Reactions Inventory (ERI) measure of emotional patterns; and the 15-item ACES Questionnaire (ACESQ) measure of rigidity/stability in their decision patterns. Findings support 8 of the 10 hypotheses. Software entrepreneurs were found to be mostly Flexible with Integrative back-up in their Operating Style, but Decisive with Hierarchic back-up in Role Style. Implications of the findings for entrepreneurship education and research are discussed.

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NEW TRENDS OF HUMAN RESOURCE MANAGEMENT IN PUBLIC AND BUSINESS

ORGANIZATIONS OF PAKISTAN

M. Abuzar Wajidi

University of Karachi, Pakistan

Email: [email protected]

ABSTRACT

Developing countries lag behind in progress because their response to change is very slow. Case of Pakistan is also not different. This country with a large population of about 185 million faces various political, social and economic problems. The agricultural outlook of its economy has left majority of its population un-educated. This uneducated segment of population finds it very hard to accept and adopt changes. For these obvious reasons, human resources in this country have remained greatly underutilized. Global markets are today in easy access of nations by virtue of advancement in communication technology. Pakistan needs to raise quality of its products and reduce costs to compete in the international markets. For this purpose, quality of human resource needs changes according to new trends of human resource management in order to play its role in the development. As observed, developed human resources remain in large demand in this country. Application of modern trends of human resource management is visible in several organizations of private sector. However, the story of the public sector organizations is different. For various reasons, acceptance of change in the public sector organizations seems to be a big and stubborn challenge. This situation leaves the human resource of these organizations unable to contribute their efforts for their organizations with the result that citizens find their grievances and problems increasing day by day. Since the public sector organizations have influence on the production sector, therefore, the productivity and quality of service delivery are affected. The ultimate impact falls on the economy and, obviously, on the people themselves. Since the new trends of HRM tend to filter deficiencies in the organization of human resources, the change brought about in the process of HRM will bring in development of the organizations as well as of the individuals, thereby reshaping outlook of the entire society. Key Words: New Trends, human resource management, Public & Business Organizations

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WORKSHOPS/PANELS*

* These submissions were to provide tools and techniques (workshop) and to discuss concepts, issues in a topical area to provide ideas to attendees for future research or personal growth. These were internally reviewed and a decision was made based on the value of the session and possibility of interest by the conference attendees.

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INTERNATIONAL PERSPECTIVES ON RESPONSIBLE EMPLOYMENT

PRACTICES IN TIMES OF ECONOMIC UNCERTAINTY

Overview

This interactive, international panel examines current and emerging issues with respect to responsible employment practices in times of economic uncertainty as these pertain to individual countries and regions. The focus will be on socio-cultural factors across countries as well as recommendations and strategies for improvements. Both scholarly as well as practitioner perspectives will be included.

John P. Keenan (Session Chair) President and Professor of Leadership Studies,

Institute for Leadership and Global Education (ILGE) Email: [email protected]

Nuria Calvo Babío

Facultad de Ciencias Económicas y Empresariales

Economic Analysis and Business Administration Department. University of A Coruña, Spain

e-mail: [email protected]

Ali M. Al-Khouri

Managing Director, Emirates Identity Authority

United Arab Emirates [email protected]

Sutada Mekrungruengkul

DPA student at School of Public Administration, The National Institute of Development Administration (NIDA)

Nonthaburi, Thailand [email protected]

Tomokazu Sakumoto

PhD. of Business Management Okinawa International University

Okinawa, Japan Email [email protected]

Debra McKinney Gehman

Directora Centro de Formación Gerencial Seguros Bolívar, S.A.

Bogotá, Colombia Email: [email protected]

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EMERGING TRENDS IN LEADERSHIP AND MANAGEMENT EDUCATION AND

DEVELOPMENT

Overview This interactive roundtable examines the emerging trends in the fields of leadership studies, management education, and diverse development programs and initiatives from a global and futuristic perspective. Traditional as well as eclectic approaches are discussed with a focus on both scholarly work and practitioner applications.

John P. Keenan (Session Chair), President and Professor of Leadership Studies,

Institute for Leadership and Global Education (ILGE), Email: [email protected]

Marilynn Cash Mathews, President, Networker, Inc., St. George, Utah

Email: [email protected]

Raj Parikh, Dean, School of Business, Southern Oregon University, Ashland, Oregon, USA Email: [email protected]

Sonia Ghumann, Assistant Professor, Shidler College of Business

University of Hawaii at Manoa, Email: [email protected]

Emerging Trends in Leadership Development - John Keenan

International research studies conclude that traditional leadership development training and development programs and methods provide no evidence to support that they actually help executives and managers make substantial long-term improvements in their leadership behaviors and performance. Today there is an increasing need for more impactful and effective leadership training and development programs. If this is to be achieved, there will need to be new strategies, approaches, and models to initiate real leadership development and change that impacts organizational performance outcomes. Effective leadership development programs and learning methods will need to have more of an applied, “real world” focus and be grounded in new “leadership” paradigms which emphasize principles and practices of personal growth, development, break-through thinking, and transformation. This presentation focuses on emerging new perspectives on developing leadership competencies for the 21st century. Curbing Illegal Corporate Behavior: Where Do We Go From Here? - Marilynn (Cash)

Mathews

While we researchers and academicians were busy engaging in ethics training in corporations and writing about the importance of company codes of ethics, it seems our efforts didn’t deter corporate criminal activity. Corporate managers and executives just keep engaging in unethical and illegal behavior – the latest such as Bernie Madoff, Jeffrey Skilling, etc. etc.

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Beyond the ethics training and writing and revising company codes of ethics, it seemed clear since the late1990’s that corporate wrongdoers would be held legally responsible. Yet the ethics codes, the ethics training, the threat of imprisonment, do not seem to have made a difference. Was anyone deterred? Now we have to ask, where do we go from here? Why don’t ethics training and ethics codes work? Where did we go wrong? We can start by examining other other possible causes, such as:

1. Is illegal activity by some corporate executives a type of gambling or addictive behavior? 2. Is there a personality type that is more predisposed to engaging in illegal behavior in

corporations? 3. Is illegal behavior by corporate executives “contagious” within the organization?

Emerging Trends in Higher Education – Raj Parikh

The growth in international trade has caused an increased demand for business education that conforms to generally-accepted international academic standards. Rapidly developing countries such as China and India, as well as smaller nations such as the United Arab Emirates and Vietnam, have looked to the United States as a possible provider of business education. This has resulted in direct investments by US institutions in these countries as well as collaborative ventures between American institutions and host country academic institutions. This new model is in contrast with the thousands of international students coming to the US each year to study. The new model requires a new kind of leadership – both at the institutional level and at the regulatory level. The presentation focuses on what sort of new educational model is necessary for success, and illustrates the model through a few examples.

Women in Leadership: Embracing the Values of Feminine Leadership Styles - Sonia

Ghumman

Compared to women, men are not only more likely to hold leadership positions but to also be rated more favorably in such positions. Research has focused considerably on addressing various reasons for the underrepresentation of women in leadership positions; discrimination, gender role stereotypes, work-family conflict, low aspirations, low self esteem, and lack of support. The purpose of this presentation is to not just explore the barriers confronting women leaders, but to directly address the growing need for organizations to embrace female values in leadership roles. Although masculine leadership styles are traditionally desired in organizations, feminine leadership styles can provide a competitive advantage for managing in an increasing global environment. As organizations become global, the need for flexible decentralized structures is becoming more necessary as is the need for collaboration and cooperation over competition. Consequently, autocratic styles of leadership associated with masculine values might be too rigid for modern organizations and leaders might benefit by shifting towards more democratic leadership styles associated with feminine values. This presentation will highlight the emerging trends for more feminine leadership styles that encourage participatory decision making, developing team work skills, and building long-term relationships.

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CHALLENGES AND OPPORTUNITIES IN AMERICAN HIGHER EDUCATION

Overview

This panel discusses some of the opportunities and challenges facing American higher education. Faced with shrinking budgets and uncertain economic conditions, American institutions have sought to become more entrepreneurial and expanded domestically and abroad. Panelists present case studies on how their institutions have sought to maintain the quality and viability of their institutions through a variety of activities.

Raj Parikh (Session Chair) Professor and Dean, School of Business

Southern Oregon University Ashland, Oregon

James Klein Provost and Vice President for Academic Affairs

Southern Oregon University Ashland, Oregon

Barry Doyle

Associate Dean University of San Francisco

San Francisco, CA

308

HOW YOUTH ENTREPENEURSHIP FOSTERS CREAIVITY IN HIGH SCHOOL

STUDENTS AND MAY HELP YOU IN TEACHING COLLEGE UNDERGRADUATES

Krista Katsantonis Program Director

Network for Teaching Entrepreneurship San Francisco Bay Area

t 415 422 4438 m 415 797 8048 [email protected]

http://bayarea.nfte.com

ABSTRACT

This 1 hour workshop session is intended to expose educators to techniques used in youth entrepreneurship education which foster creativity and inspiration in the classroom while developing skills necessary for success in the modern workforce. The United States currently has one of the highest dropout rates of any industrialized nation, with only 7 out of 10 students graduating from high school. This failure rate poses a direct threat to the competitiveness of the American workforce in the global economy. According to a Bill and Melinda Gates Foundation report, nearly 47% of students who dropped out of high school did so because their classes weren’t interesting and 69% said they were not motivated or inspired to work hard. Three-fourths (74%) said that if they were able to relive the experience, they would have stayed in school Entrepreneurship education has been used successfully for more than 20 years by NFTE Certified Entrepreneurship Teachers to engage at risk and hard to reach youth by helping them see the relevance of their core studies in language arts and mathematics through the process of developing a business plan for their own small business idea. Participants in this workshop will be exposed to some of the core strategies and experiential activities used to help NFTE students engage in a creative process in the classroom. Participants will learn about how teaching the process of opportunity recognition and learning the fundamentals of business ownership enhances students’ learning, increases their professional and educational aspirations and ultimately can make them more productive members of the workforce. Objective: By the end of this session, participants will be exposed to a unique population of youth entrepreneurs and a specific set of experiential activities that have been successfully used to develop creativity and innovation in the classroom. They will learn about the NFTE model for engaging students in learning and helping them foster a sense of ownership for their futures including their potential for post-secondary education.

Description of Presenters: Deborah Reinerio is a high school teacher who has been teaching NFTE youth entrepreneurship education since 2002. She specializes in integrating creativity and innovation into her classroom and is a certified small business ownership and management teacher credentialed in CLAD. She

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is also a successful entrepreneur, operating her own graphic design business Red Hot Design since 1980. She was NFTE’s Teacher of the Year in 2009. Krista Katsantonis is the Program Director for NFTE Bay Area where she has led program development and teacher training since 2007. A former advertising media manager for advertising agencies and Gap, Inc, she has worked training and advocating for entrepreneurs since 2001. She earned her MBA at the Monterey Institute of International Studies. The Network for Teaching Entrepreneurship (NFTE) provides entrepreneurship education programs to students (11-18) from low-income communities. NFTE's award-winning curriculum and experiential learning activities help middle and high school students engage in their education and improve their academic, business and life skills.

NFTE trains teachers to implement its entrepreneurship program in schools and provides on-going program support. NFTE students learn business concepts including negotiation and pricing and work to complete individual business plans.

THE EFFECT OF PRIVATIZATION ON EFFICIENCY AND WORKING VALUES: TURKEY’S CEMENT INDUSTRY EXAMPLE

Murat Çolak

Dokuz Eylül University Faculty of Economics and Administrative Sciences

email: [email protected] phone: +902324204180/20298 Izmir, Turkey

Oğuz Kara Dumlupınar University

Faculty of Economics and Administrative Sciences email: [email protected] phone: +902324204180/20298

Kütahya, Turkey

ABSTRACT

The objective of the study is to measure the efficiency of factor usage, by starting with

selected cement industry example of Turkey from Public Economic Enterprises which are subject to privatization, and to reveal the interaction between efficiency scores and working values. In the study, regarding to cement industries it is based on first and second data bases and it is benefited from efficiency measure techniques and working values analysis. According to the findings, a hypothesis such as: “The efficiency change, which appears related to the ownership change after privatization in Public Economic Enterprises, is effective on working values” is confirmed. Keywords: Privatization, Efficiency, Values, Working Values. Introduction After the Second World War period, with the influence of Keynesian policies, almost in every country a considerable increase of public sector was seen in economy. But stagflation crisis in 1970s and economic problems related to this crisis caused to interrogate the role of public in economy. After these developments, beginning from 1980s, especially after the importance of Neo-liberal policies the opinion that Public Economic Enterprises cannot use the resources efficiently came out. It is argued out in lots of empirical and theoretical studies whether privatization actually increases efficiency or not. Nowadays, arguments about privatization continue not only in economic meaning but also in social meaning.

Privatization has importance not only for the efficiency of public firms but also it has importance for the workers of these firms. Economic change, which comes into existence after privatization period in privatized firms, causes the workers- who constitute the social completeness of the firms- to change. Each working individual’s sense, thought, attitude and behavior about firm is effected by such a change. With this transformation, lots of working values such as individual’s income requirement, capacity, family, knowledge, education, sense of achievement, interests and pleasures are becoming different.

Public Economic Enterprises which essentially have social utility maximization motive tend to profit maximization motive in conjunction with privatization. This tendency causes worker/manager section to take different priorities in working values. Related to the privatization process, change in ownership also reveals changes in efficiency/productivity of

firms, on the other hand, due to change in institutional identity it effects the workers’ value judgements. This study starts with examples in cement industry and as a reference, it takes efficiency change before and after privatization and reveals change in working values of managers and assistant managers in this sector empirically.

LITERATURE

The Rationality of Privatization and Working Values Privatization increases the global competition and it is presented as a competition strategy for publicly owned firms in order to gain a sustainable regulation and competition power. Here, the fundamental assumption is that public firms can not gain a sustainable regulation power in order to obtain competition superiority and thereby, public firms will be drag to a structure which has a lack of entrepreneurship, creativity; and not being collaborator, not being adaptable to technological developments [1]. There are a lot of studies that extract the necessity of privatization and evaluate the results. In this context, it is reach to a result that in general, public enterprises are less efficient than private sector enterprises which are acting in the same field. And according to the Public Choice Approach, the efficiency which reveals is based upon to a bureaucratic structure which operates on weak comptition conditions and it is based upon to a inspection mechanism which cannot be operated directly [2]. Besides, some fundamental reasons which are the sources of inefficiency in public enterprises can be regard as multiple aspect of aims, form of ownership, market structure, insufficient encouragement on management, bureaucratic and political self-interest relations [3]. In some empirical studies which are made for countries/sectors it is found that in some of countries/sectors public enterprises; in others private enterprises use the factors efficiently. It points out that, as a theoretical aspect, there is not a direct connection between form of ownership and factor usage efficiency [4]. The ownership which varies with privatization changes efficiency/productivity level of firms and related to this, values of firm workers vary. Values, which can be reveal as a measure of individuals’ thought, manner and behavior structure, wholly constitute the components of social integrity. Individuals accept the values of places where they live/work, group/firm, society and culture and use them as a measure of evaluations and choices. So, they reach to general judgements such as much better, more correct, more convenient, more beautiful and more important [5]. Values are cognitive structures which can explain the individuals’ ideals, principles and choices of behavior priorities [6].Values can effect individual’s decisions, people whom they trust, time and energy [7]. In this context, values are “general tendencies which can prefer obvious situations of the events against others” [8]. Values, which shape the individuals’ viewpoint to the components around them, can be classified among themselves according to the degree of importance and they are targets which individuals wish to attain [9]. Perceiving working as a value is related to perceive working as an activity in society or it is related to an approach which working is undertaking as ethical [10]. Working values, which are the individual’s lower group of total values, are the quality, compensation and satisfaction that individual seeks or desires to find at work [11]. According to another definition, working values are general and relative stationary aims which individuals wish to reach at work [12].

In accordance with other definitions, working values are tried to describe with terms like these: social responsibility, honesty, being judicious, golden rules, religious belief, fair working, evident self-interests, comparison of good-bad, conscience, law, social justice, being honourable, things to be required, virtue, leadership, character, being mortal, God, privacy and belonging to society [13].

METHODOLOGY

Aim of the Application and Fundamental Hypothesis Starting from theoretical and methodological analyses which were argued out in the first section of this study, the aim of this application is;

a. For a selected industry, to investigate the factor usage efficiency before and after privatization in Public Economic Enterprises which are subject to privatization,

b. To measure working values of managers and manager candidates after privatization in Public Economic Enterprises which are subject to privatization

As it is stated above, within general aims, the fundamental hypothesis of this study is The efficiency change, which appears related to the ownership change after privatization in Public Economic Enterprises, is effective on working values. As far as the institutional results (efficiency thesis), which reveal gain/loss in enterprise scale, also changes on working values must be considered. Starting out from this fundamental principle, the derivative hypotheses below were tested:

• An increase on firm’s efficiency, which will occur after privatization, will create an increase on values of firm managers’ and manager candidates’. These values are such as power, stimulation, achievement and self-direction.

• A decrease on firm’s efficiency, which will occur after privatization, will create a decrease on values of firm managers’ and manager candidates’. These values are such as benevolence, security and peace, tradition and conformity.

• Even though the efficieny does not change after privatization, due to the change of ownership, there will be a change (increase/decrease) on values of firm managers’ and manager candidates’. Because of psychological effects there will be a change on values such as hedonism, security and peace, achievement and stimulation.

Application Method and Description of Variables The efficiency and working values for 16 completely privatized firms are analyzed in cement industry. For efficiency measurements between 1991-2007 years as input, quantity of total labour force and total capital stock of firms were used; as output, prodution level variables were used. On working values analysis 81 questionnaires were applied to firm managers and manager candidates. Variables which were used for efficiency measurements of industry were obtained from Turkish Privatization Administration, activity reports of firms’, financial reports of firms’-which were audited by in dependent auditing firms-such as balance sheet and income schedules. Monetary variables, which were used in order to calculate capital stock, were deflated with Gross Domestic Product, taking 1987 year as a base. Related to the working value analyses primary data base was used and questionnaires were applied to firms. Some of the questionnaires were applied face to face and others were filled by the managers.

In literature, in order to measure performance effects of privatization on the basis of firm and industry it is benefited from DEA (data envelope) analysis. In efficiency analyses, certain and past periods of production processes were taken into consideration. The changes of productivity on whole factors or on some factors were measured with total factor productivity (TFP) measurement literature (Malmquist-CRS) index. Industry based whole efficiency and productivity calculations were done with the assistance of a computer programme called DEA Solver Pro 4.1. In questionnaires, regarding to determine the working values there were placed some judgements which show working values of managers and manager candidates. Working values which are placed in questionnaires were classified from 1 to 7. While 1 indicates that working value has no importance, 7 indicates that working value has a great importance. In order to designate individual working values of managers and manager candidates 41 value judgements were used in the study. Each value shows the managers’ viewpoint to working. Such values are stated in appendix 1. In order to fix working values Schwartz’s Value Survey (1992, 1994, 2001) was used. As explained above, working values were separated to 10 value tendencies. Factor analysis was applied to data collected by Schwartz’s Value Survey and reliability of them were tested. Besides, relationships between factors and factors which are related with values were estimated by correlation analysis.

APPLICATION RESULTS While DEA analysis results -which covers results of previous and following period of privatization in cement industry- are evaluated as a whole, it is seen that in general, before privatization, technical efficiency speed is becoming bad but in return, there is a recovery on production technologies. When sources of change in efficiency parameters are examined it is seen that 1997 and 2001 crises have been influential. It is seen that, negative effects of crises on production and investment have effected the factor usage of sector. As a matter of fact, average capacity usage rate of most firms was 115 %, but it declined to 80 % in 1997, and then it declined to 16 % in 2001. Before privatization number of workers was 4841 and after privatization it declined to 3253. Alpha values, which are connected with working values, were obtained by Schwartz Value Survey and they are seen on the table below:

Table 1. Reliability Results According to Value Judgements

Value Judgement Alpha ValuePower 0.92Achievement 0.88Hedonism 0.76Stimulation 0.86Self-direction 0.79Universalism 0.62Benevolence 0.79Tradition 0.70Conformity 0.78Security and Peace 0.82

According to the table above, while reliability of working values is examined it is seen that achievement, stimulation and self-direction has a higher value but universalism and tradition has a lower reliability value.

Figure 1. Value Analysis of Managers in Cement Industry

In figure 2, the importance of working values was indicated by managers and manager

candidates. The most important factor among workers was power value, but the least important value was security and peace. Power by taking 6,43, achievement by taking 6,318, self-direction by taking 6,265, stimulation by taking 6,219, universalism by taking 6,168 and hedonism by taking 6,104 were described very important for the management group. Benevolence, tradition and conformity were in a second plan of importance, security and peace symbolized the least importance in order of values. Conclusion and Evaluation According to the aim of the study, in application part of the study it is started by a data base, which covers the previous and following period of privatization of Public Economic Enterprises. Application results can be enumerate as below: As efficieny analysis results are evaluated in cement industry for the period discussed, it is seen that change level of TFP for 16 firms is average 1,007196. Here, an increase of 0,007 can be a sign of increasing returns to scale but while the sources of efficiency is investigated, an increase is seen in technological change level, in response a decrease is seen in technical efficiency level. It is undersood that, negative change of technical efficiency parameter is because of decreasing (especially after an economic crisis in 2001) capacity usage rates. As it is mentioned in theoretical part of this study, the change in efficiency level, which is because of change in ownership, in cement industry is important. Also psychological and sociological dimentions of privatization on workers have great importance. If psychological and sociological dimension on industry is evaluated with working values it is seen that: after

privatization, the values which managers and manager candidates attach importance are, in order, like this: power, achievement, self-direction and stimulation. Because of the change in ownership after privatization “power” value is the most important value among managers. Pressure that occurs with privatization (efficiency, productivity, labour security) forces individuals to be different and productive. This point can be explained with individual’s increase of working performance and request of having power. The increase of individual’s performance provides to increase the performance of the firm at the same time, but also it causes to self-interest conflicts, which are brought by competition. According to the results of the questionnaire other values which are standing out among managers are (achievement, self-direction and stimulation) efficiency and support to increase competition. Security and peace is seen as the lowest value among managers. Decrease of this value shows that managers’ confidence decreases to the institution they work and thus, they are not able to work peacefully. While the employment structure of privatized ciment firms is investigated, it is thought that decrease of employment is effective on decrease of values. According to the other results on working values, it is seen that there is a decrease of benevolence, tradition and conformity values of managers. It can be said that, after privatization managers lose dependency to their firms. As a matter of fact, each individual wishes to have a safe environment in business life. But for an individual being not able to predict her/his own future influences dependence values. Consequently, the fundamental hypothesis of the study, such as “The efficiency change, which appears related to the ownership change after privatization in Public Economic Enterprises, is effective on working values” is confirmed. The derivative hypothesis of the study, such as “An increase on firm’s efficiency, which will occur after privatization, will create an increase on values of firm managers’ and manager candidates’. These values are such as power, stimulation, avhievement and self-direction” is confirmed by efficiency and working values analyses. Also another derivative hypothesis such as “A decrease on firm’s efficiency, which will occur after privatization, will create a decrease on values of firm managers’ and manager candidates’. These values are such as benevolence, security and peace, tradition and conformity” is confirmed by analysis results. References [1] Kara, O. (2009). Ekonomik Regülasyon Modelleri ve Özelleştirme Üzerine Dışsallık İçsellik Analizleri: Türkiye Örneği (1980-2008). DEU SBE. Yayımlanmamış Doktora Tezi. [2] Hayek, F. A. (1978). The Confusion of Language in Political Thought. In F.A. Hayek (Eds.). New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul. [3] Sheshinski, E. & Lopez-Calva, L. F. (2003). Privatization and Its Benefits: Theory and Evidence. Cesifo Economic Studies. 49: 3. 429–459. [4] Megginson, W., Nash, R., Netter, J. & Poulsen, A. (2004). The Choice of Private Versus Public Capital Markets: Evidence from Privatizations. Journal of Finance. 59. 2835– 2870. [5] Tolan, B. (1996). Toplum Bilimlerine Giriş. Ankara: Adım Yayıncılık. [6] Macionis, J. J. (2001). Sociology. New Jersey: Prentice Hall. [7] Licht, A. N. (1998). The Mother of All Parh Dependencies Toward A Cross Cultural Theory of Corporate Governance Systems. Delaware Journal of Corporate Law. Vol.: 26. [8] Stewart, E. W. & Glynn, J. A. (1985). Introduction to Sociology. New York: Mc Graw-Hill Inc. [9] Henslin, J. M. (2004). Essentials of Sociology. Boston: Pearson. [10] Özkul, M. (1997). Çalışma Sosyolojisi. Isparta.

[11] Super, D. E. (1970). Work Values Inventory Manual. Boston: Houghton Mifflin. [12] De Vos, A., Bunyens, D. & Schalk, R. (2005). Making Sense of a New Employment Relationship: Psychological Contract-Related Information Seeking and the Role of Work Values and Locus Control. International Journal of Selection and Assessment.13: 1. [13] Lewis, P. (1985). Defining Business Ethics; Like Nailing Jello To A Wall. Journal Of Business Ethics. Vol.: 4.

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A CASE STUDY ABOUT WORKPLACE BULLYING AND HARASSMENT FROM A

NON-SUPERVISORY BASIS

Heather Zeng, Ph.D., Cathy Taylor, J.D., & Lynn Michelle Thomas, BSM Park University; 8700 NW River Park Drive; Parkville, MO 64152

[email protected], [email protected], [email protected] 786-246-6232, 229-232-5233, 816-389-3842

Submitted August 20, 2010

ABSTRACT

Case studies in workplace bullying and harassment can provide objective frameworks from which to uncover challenging issues in the workplace. Increased economic concerns affirm higher incidences of mental health issues in the workplace. Employers often are ill prepared to approach these issues. This case study identifies aspects of workplace bullying and highlights bullying originating from employees and peers, which goes contrary to much attribution theory that suggests a supervisory basis. A review of applicable literature is provided. Also, an overview of questions is included in the appendix as a springboard for dialogue and effective decision making around the issues. Keywords: Workplace incidents, workplace bullying, mobbing

OVERVIEW The popular cartoon Dilbert [1] focuses on the inequities, injustices, and inhuman environment of the workplace. When this cartoon is presented to college students with limited work experience, the cartoon falls short in laughs and understanding. With a perplexing sigh, students question, “Is this really the world of work?” Yet, for those more seasoned workers, the nervous laugh emitted after viewing the cartoon is reflective of a realization of the pain and predicament of being in the ranks and having fallen prey to the likes of either the characters or the organizations portrayed therein. A case study with commentary follows with questions for further critical thinking. The authors approach workplace mobbing and subsequent decision making by the employee. This case disputes the common belief that supervisors are the harbingers of these negative workplace phenomena; instead, these formed in the following scenario from employee misperceptions of appropriate and acceptable workplace behavior. This highlighting of employee situations is furthered in the research literature as an attempt to address how these negative behaviors can emerge unexpectedly within organizations. Hopefully, these resources will provide a springboard from which critical dialogue can begin.

CASE SCENARIO: MRS. M*, BULLYING OF A MANAGER BY EMPLOYEES *Note: Names have been changed to protect identities.

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Facts of Case Mrs. M., a Federal civilian employee, began working in the civil service educational Division for a Federal Prison. She was able to work with both other Federal civilian employees as well as the Federal guard force, thus establishing close and mission-oriented professional relationships with her co-workers. Mrs. M. was known as a hard worker. As her expertise grew, she moved upward into progressively demanding and higher graded positions. Her immediate supervisor held the highest position in the education section and was a career employee. This individual had no intentions of retiring early or moving to another position, so Mrs. M. knew that in order to move forward and progress in her career, it would be necessary to apply for positions outside of her present work location. After applying for another position at another office located on the same Federal Installation where she worked, she was selected for a similar series position and a promotion! After nine months on the job at the new location, some of the other employees in this branch were having several exclusionary meetings. Mrs. M. was approached by one of her female co-workers that had she thought was a friend and was told that the other female employees were planning to write up a statement and take to the management in reference to the aggressive behavior of their immediate supervisor. Mrs. M., being a new employee in this Division, did not feel comfortable with writing up a statement because, up until that time, she had not experienced any bad situations with this supervisor. Mrs. M. reaped negative treatment for not being part of the group. During this time, there was a lot of tension and Mrs. M.’s supervisor was aware that high-ranking employees were involved in an inquiry. Other colleagues outside the initial group that submitted the statements to management still communicated with her and offered support while dealing with the horrible conditions in her branch. Eventually, the comments from the other co-workers turned very negative. The frightening feeling that her job could be in danger loomed over Mrs. M daily. Luckily, she had completed the three year probation time that civilians must complete to become a career employee, so losing her job was not going to be an issue as she had originally thought. With this, the group of co-workers that had submitted their statements to management continued to ridicule and intentionally make each and every day at the workplace a dreaded event. Outcome The aggressive supervisor was removed from the branch and placed into another Division on the Installation although rumors were circulating that he was to be let go from his position. The Director was also removed from the Division because he, as a leader, had done nothing visible to correct the aggressiveness of one of his subordinates. With these two men removed, other colleagues were temporarily assigned to the positions. Unfortunately, they had been part of the original complaining group. Work conditions became even worse for Mrs. M. For example, her new supervisor openly noted that he had not hired Mrs. M.; the previous supervisor had hired her. She was seen as an outsider. Consequently, she was not seen as a team player, although in reality she was very involved with teamwork and assisted others within her Division at all times.

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This was overlooked entirely. Unfortunately, unity in work units is necessary to get the work done, regardless of the cause’s validity. Subsequently, she was placed in the worst job locations within the Division and was not allowed to attend training, which the group of statement submitting employees were receiving twofold. She was not offered professional development for three years and was consistently made to feel that any work she completed was not good enough. The supervisor made Mrs. M. re-work projects, but others, who Mrs. M assisted and provided guidance to were not given a second review. They received praise and accolades instead, as told to her by her co-workers. Branch et al (2007) research on managers as the recipients of bullying by staff supports Mrs. M.’s case scenario. The authors coin this process as “upwards bullying” a relatively unexamined area of this workplace behavior. [3] The authors confirm as in Mrs. M’s case in that for “over half of those employees who discussed an experience of upwards bullying organizational changes, such as a restructure were described as occurring prior to the inappropriate behaviors and then playing a role in creating fear and uncertainty is a type of bullying” [3, pp. 276]. This matches Mrs. M.’s experience of issues of in-group behavior and the pressure presented to coalesce with the majority to complain against a superior manager in the workplace. Branch et al (2007) also expanded the perception in an examination of upwards bullying that is particularly targeted at managers and upper management. They acknowledged the need for acknowledgement for this as well as mechanisms to help leaders deal with this type of workplace bullying After two years of enduring this treatment, another leader suggested that Mrs. M. attend professional development just like her colleagues. The sense of distrust was always in the back of her mind due to the uncivil treatment that she had been subjected to when the leadership was removed from this division. Mrs. M. now has a new position and, in her transfer, she has received two promotions and is now a senior staff member. Yet the dark times that she experienced gave her the awareness never to allow this type of situation to occur again. Mrs. M. did not seek out any professional counseling, but did find that she was a bit anxious and anxiety arose from time to time. Her doctor prescribed a medication to assist with these symptoms, and she has not been having any reoccurring issues to date.

PSYCHOSOMATIC EFFECTS OF BULLYING Mrs. M made a psychological break from this situation, in some ways implementing emotional cutoff utilized by members of a family system. Yet, there were as noted lingering effects to the experience as noted in anxiety and lesson learned from the experience. MacIntosh (2005) confirmed in research that bullying affects the whole person. Often participants are left with physical and emotional symptoms as in the case of Mrs. M. [12] It does, though, make a big difference if a person is not in an environment that creates these types of problems. Djurkovic & McCormack’s (2006) research confirmed that management must prevent bullying and intervene when it occurs because of the psychosomatic effects of bullying. A continuum of behaviors can be problematic in the workplace, from mobbing, workplace aggression, and counterproductive work behaviors, to causing or threatening workplace violence. [6] These will be furthered explored from the research literature as follows. Mobbing

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Beyond bullying by one person, group forms of bullying, or mobbing, have been observed. Groeblinghoff and Becker (1996) examined two cases that were extreme in duration of a man and a woman in the same institution and exemplifies the progression of psychological diagnosis and treatment. Findings revealed that mobbing could affect individuals with a profound, exaggerated, and unrealistic anxiety. The individuals continually felt that their life was threatened and something dangerous could happen. [8] Leyman and Gustafsson (1996) described mobbing at work as “ganging up on someone”, “bullying”, or “psychological terror…. [where] the victim is subjected to a systematic stigmatization process and encroachment of his or her civil rights” [10, pp. 252]. They described the instances as being high frequency and duration ultimately resulting in the onset of considerable psychological and psychosomatic suffering. Mobbing holds implications because often the individual has few resources or little support to turn to. [10] Leyman and Gustafsson (1996) studied sixty-four patients in a clinic using a diagnostic intake process that takes two to four hours. They found that Post Traumatic Stress Disorder (PTSD) is worsened if traumatic situations last a long time and individual rights are violated. Overall this also inhibited the individual’s level of self confidence and overall psychological health. [10] Workplace Aggression As Beugre (2005) affirmed that the consequences of aggression in the workplace are damaging to the workplace, managers need to understand further the cognitive processes involved. [2] Beugre also contended that because aggression and the perception of its occurrence depends on a threshold for injustice, it would bode well for managers to understand the perceptions, ranges, and limits of this behavior. [2] Stewart (2007) posited that workplace aggressive behavior is complex, multi-determined, and stems from the interplay of individual, situational, cognitive, and affective components. By examining these components of individual differences in personality, events (stressors), and cognitions about the event as well as emotional reactions through an integrative model, one can only then begin to understand this complex and destructive workplace aggression. [15] Counterproductive Work Behaviors Lau, Tung, & Ho (2003) defines counterproductive behaviors (CPB) as “voluntary organizational behaviors that affect an individual’s job performance or undermine organizational effectiveness” [9, pp. 73]. These authors review of qualitative and quantitative studies findings revealed that integrity testing, selection and enhancing job satisfaction were all ways to inhibit CPB behaviors. What types of personal factors contribute to CPB behaviors in the workplace? Dilchert, Ones, Davis, & Rostow (2007) examined aspects of cognitive ability and counterproductive work behaviors studied applicants for police officer jobs. The authors found that high cognitive ability tended to inhibit individuals as their analytical processes tended to project possible consequence of actions. This certainly confirms aspects of screening and testing so as to identify the potential for this behavior. [5] Other studies examining individual differences experienced further valuable insight. The Roberts, Harms, Caspi and Moffitt (2007) study confirmed that individuals diagnosed with childhood and adolescent conduct disorder were more prone to commit counterproductive work

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behaviors. [14] Cohen-Charash, & Mueller’s (2007) study found that both envy and perceived unfairness had correlation to the potential for negative implications to the workplace. [4] The authors suggested that reducing these can have benefit to avoiding counterproductive work behavior (CPB). [4] Finally, Dupre and Barling (2006) found that although perceived injustice is a predictor of workplace aggression, this relationship is minimized when individuals know that there are organizational sanctions that can help prevent it. [7] All of these confirm the relevance and importance of individual differences as organizations work to mediate these issues.

FUTURE DIRECTIONS This case study presents a scenario for students and employees to consider along with possible activities for a prospective curriculum in advising or career counseling in the appendix. Issues of diversity tolerance and the multicultural workplace are not approached here yet should be considered in further case studies as they can have distinct implications to analyzing an incident. The authors suggest further cases that integrate culture, diversity issues, and workplace incidents. Further critical thinking on individual, organizational, ethical, and legal dimensions can help begin education on these prevalent occurrences. Van der Ploeg et al.’s (2003) study of critical incidents and chronic stress in the workplace confirm that these factors can either lead to psychological morbidity or personal growth. [16] Offering cases such as these for professionals to consider is critical for an organization’s effectiveness in advocating wellness for their employees. A range of human resource and training officials as well as educators in these like subjects can benefit by candid discourse of this case – and of the potentially negative individual and systemic implications.

REFERENCES [1] Adams, S. (2008). Dilbert Cartoon. Retrieved on May 10, 2008 at http://www.dilbert.com/. [2] Beugre, C. (2005). Reacting aggressively to injustice at work: A cognitive stage model. Journal of Business and Psychology, 20 (2), 291-301. [3] Branch, S., Ramsay, S., & Barker, M. (2007). Managers in the firing line: Contributing factors to workplace bullying by staff- an interview study. Journal of Management & Organization, 13, 264-281. [4] Cohen-Charash, Y., & Mueller, J. (2007). Does perceived unfairness exacerbate or mitigate interpersonal counterproductive work behaviors related to envy? Journal of Applied Psychology, 92 (3), 666-680. [5] Dilchert, S., Ones, D., Davis, R., & Rostow, C. (2007). Cognitive ability predicts objectively measured counterproductive work behaviors. Journal of Applied Psychology, 92 (3) 616-627. [6] Djurkovic, N., & McCormack, D. (2006). Neuroticism and the psychosomatic model of workplace bullying. Journal of Managerial Psychology, 21 (1/2), 73-88. [7] Dupre, K., & Barling, J. (2006). Predicting and preventing supervisory workplace aggression. Journal of Occupational Health Psychology, 11 (1), 13-26. [8] Groeblinghoff, D., & Becker, M. (1996). A case study of mobbing and the clinical Treatment of mobbing victims. European Journal of Work and Organizational Psychology, 5 (2), 277-294. [9] Lau, V., Tung A., & Ho, J. (2003). A Qualitative and Quantitative Review of Antecedents of Counterproductive behavior in organizations. Journal of Business and Psychology. 18 (1), 73-99.

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[10] Leyman, H., & Gustafsson, A. (1996). Mobbing at work and the development of post-traumatic stress disorders. European Journal of Work and Organizational Psychology, 5 (2), 251-275. [11] Lewis, J., Coursol, D., Herting, & Wahl, K. (2002). Addressing issues of workplace harassment: counseling the targets. Journal of Employment Counseling, 39, 109- 116. [12] MacIntosh, J. (2005). Experiences of workplace bullying in a rural area. Issues in Mental Health Nursing, 26, 893-910. [13] Nigam, J., Murphy, L., & Swanson, N. (2003). Are stress management programs indicators of good places to work? Results of a national survey, International Journal of Stress Management, 10 (4) 345-460. [14] Roberts, B., Harms, P., Caspi, A., & Moffitt, T. (2007). Predicting the counterproductive employee in a child-to-adult prospective study, Journal of Applied Psychology 92 (5), 1427-1436. [15] Stewart, S (2007). An integrative framework of workplace stress and aggression. The Business Review, 8 (1), 223-233. [16] Van der Ploeg, E., Dorresteijn, S., & Kleber, R. (2003). Critical incidents and chronic stressors at work: Their impact on forensic doctors. Journal of Occupational Health Psychology. 8 (2), 157-166. [17] Von Bergen, C., Zavaletta, J., & Soper, B. (2006). Legal remedies for workplace bullying: Grabbing the bully by the horns. Employee Relations Law Journal, 32(3), 14-40.

APPENDIX Application for Curriculum Integration To use this scenario in class, one could use the following questions for small group discussion or individually ask students these questions:

1. What aspects of Mrs. M.’s decision making was effective? 2. Based on the critical incidents described, which aspects these categories would you deem

as present in Mrs. M.’s workplace? 3. Do you think that these were easy to identify? 4. Why do you think that individuals persist even within uncomfortable instances such as

the one described by Mrs. M.? 5. Lewis et al (2002) suggest bibliotherapy as a resource to help individuals, such as Mrs.

M., who are targets to become involved in their empowerment and recovery from such an incident. [11] Comment further how you think reading about other’s experiences in similar workplace incidents and stressors might help her.

6. Comment further on the assets and liabilities to this approach.

Small Group Activity: A Decision- Making Process toward Individual Advocacy Develop a decision making chart that allows Mrs. M. to write down and affirm the following: (a) positive aspects of her work organization and her job and, (b) positive aspects of the work organization and how working there provides for her family, and (c) what other contributions she can make by working at the prison. For example, she may be able to influence the direction of other people’s lives as a teacher.

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Now, consider listing the negative aspects of the work organization for her and her family. For example, she might note that the stressful environment contributes to her lack of enjoyment when with her family outside of work (because she is always thinking about the unresolved issues at work and this distracts her). List as well contributions that may be limited in this work environment. After completing this decision-making process, discuss what further resources and help might have existed within the organization. List what each resource might do to advocate for change and to help reduce stress. For example, is there an employment assistance program (EAP) available or other mediation such as an Equal Employment Official (EEO) that might be used? Nigam et al (2003) affirmed that organizations that offered stress management programs also tended to have other support services to facilitate worker health and well being. [13] An individual might ask if this type of program exists prior to accepting a job offer or before working for an organization. New employees can work to foster policy changes in those organizations that lack such programs. Another consideration in this case is to identify what career development options exist. Should one seek moving up, moving out, or a lateral assignment in a different setting? Von Bergen et al (2006) confirmed that U.S. jurisdictions are considering making it unlawful to subject an employee to bullying or abuse in the workplace. [17] This certainly could leverage individual’s movement to seek out legal consultation to further address infringement of individual rights. However, as of yet, there are no federal or state bullying laws address this specific problem. One area identified is called an” intentional infliction of emotional distress (IIED) claims, although instances must be identified as extreme” [17, pp. 26].