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Indian Institute of Management
Performance through MotivationIn Organizations And Learnings in Indian Context
byAnuroop Vinayak Gaonkar – 2005011
Arijit Chatterji – 2005012Arindam Ray – 2005013Divyesh Dixit – 2005022
Krishnamurthy Hegade - 2005030Srinivas Makala – 2005031
Sai Anil Kumar Veedururu – 20050Vishwanath Belur – 20050
ofPGSEM, Batch of 2005, Sec A, Group 3
TowardsManaging People and Performance in Organizations
Taught byR. Ravi Kumar Ph. D.
Professor, IIM - Bangalore
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Performance & Motivation – An Introduction........................5What is Performance................................................................................................5What is Motivation....................................................................................................6
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Key Theories On Motivation..................................................................................6Hierarchy of Needs Theory (Maslow).............................................................6Theory X and Theory Y (Douglas McGregor)..............................................7Two-Factor Theory (Frederick Herzberg).....................................................7ERG Theory (Clayton Alderfer).........................................................................8David McClelland’s Theory of Needs.............................................................8Cognitive Evaluation Theory...........................................................................10Goal-Setting Theory (Edwin Locke)..............................................................10Reinforcement Theory.......................................................................................10Job Design Theory...............................................................................................10Social Information Processing (SIP) Model................................................11Equity Theory........................................................................................................12Expectancy Theory (Victor Vroom)..............................................................12
Applying Theories in Organizations.................................................................13
The Indian Context.........................................................................................14Meaning & Application of performance and Motivation Theories.........15Learning from Application....................................................................................16Future Direction and some Suggestions........................................................18
References.............................................................................................................20
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Performance & Motivation – An Introduction
The success of any firm is dependent on its ability to perform the desired
functions to achieve its goals most efficiently.
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Peak Performance hence becomes a goal of highest importance. In today’s world as
the visionary thinker of management science Peter Druker says, “The most valuable
asset of 21st century institution will be its knowledge workers and their productivity” -
by which we can infer that that the performance in current day organizations will be
mostly based on the people it has.
Even if a manager in today’s predominantly knowledge based society is unaware of
the above maxim, he/she is acutely aware of the fact that the performance of
individual knowledge worker is determining the success or failure of the organization.
Therefore the search for the silver bullets, which can help one to enhance
performance of knowledge workers, has been relentless in the recent years. One of
the ingredients that impacts performance that can be controlled is motivation. So, in
the succeeding pages we shall see the theories that try to decipher impact of various
entities on motivation and hence its resultant impact on performance.
What is Performance
Performance of an organization is the success it attains it achieving its goals. The
organization has to strive at achieving these goals with minimum of resources. As
there is perennial need to improve performance an organization needs to understand
how it can control and improve the performance.
The essence of controlling anything lies in understanding what it is and what entities
impact its perceived value. In today’s organizations whose growth is propelled by
innovation and technology; the people have become the key ingredient for creating
the growth as they innovate and create the new products and the new technologies
using their knowledge. Hence the performance of these individual is of paramount
importance to the new age organizations. The performance of people in a particular
situation or in a job can expressed as the product of their ability, opportunity and
support provided by the organization, and their motivation.
What is Motivation
Motivation in the work and organizational context is defined as the processes that
accounts for an individuals’s intensity, direction and persistence of effort toward
attaining an organizational goal. Intensity is concerned with how hard a person tries.
The intensity should be channeled in a direction that benefits the organization.
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PERFORMANCE = Ability * Opportunity and Support * MOTIVATION
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Persistence is a measure of how long a person can maintain their effort. Motivated
individuals stay with a task long enough to achieve a goal. Motivation is not an
individual trait as majority of the managers think. Level of motivation varies between
individuals and within individuals at different timesi.
Other way of looking at motivation is as the process of creating organizational
conditions that will impel employees to strive to attain company goalsii. One more
view of motivation is that it is the process of arousing and sustaining goal
directed behavior.
The motivation has become the eye grabber in the performance equation because it
probably the easiest to manage out of the 3 ingredients that impact the performance.
Other than this, in light of today’s business condition, motivating people to be at their
best has become more crucial than ever due to various factors like thinning profit
margin due to ever stiffening competition, Economic uncertainty. Only through
motivation can managers help their employees generate the excellent performance
that enables companies to boost profitability and survive-even thrive during tough
times.
Key Theories On Motivation
The key theories on motivation can broadly be categorized in to
Hierarchy of Needs Theory (Maslow)
There is a hierarchy of five needs—physiological, safety, social, esteem, and self-
actualization; as each need is substantially satisfied, the next need becomes
dominant. Self-Actualization is the drive to become what one is capable of becoming.
The five needs are separated into higher and lower order needs. Physiological, safety
and social needs are categorized as lower order whereas esteem and self-
actualization are described as higher order needs. The differentiation between the
two orders is on the premise that higher order needs are satisfied internally within
the person whereas lower order needs are predominantly satisfied externally by
things such as pay, tenure, contracts etc.
i Stephen Robbins, 11th Edition, pp 170ii Hodgetts, Richard M., Introduction to Business, Addison-Wesley, p. 168 (references i)
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Figure1.
Theory X and Theory Y (Douglas McGregor)Theory XAssumes that employees dislike work, lack ambition, avoid responsibility, and must
be directed and coerced to perform.
Theory YAssumes that employees like work, seek responsibility, are capable of making
decisions, and exercise self-direction and self-control when committed to a goal.
Two-Factor Theory (Frederick Herzberg)Intrinsic factors are related to job satisfaction, while extrinsic factors are associated
with dissatisfaction.
Hygiene FactorsFactors, such as, company policy and administration, supervision, and salary—that,
when adequate in a job, placate workers. When factors are adequate, people will not
be dissatisfied.
Content FactorsFactors— work condition related to the satisfaction of the need for psychological
growth and job enrichment. These lead to superior performance and enlist greater
effort.
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Figure 2.
ERG Theory (Clayton Alderfer)The theory categorizes the needs in to 3 categories viz; Existence, Relatedness and
Growth
Existence: provision of basic material requirements.
Relatedness: desire for relationships.
Growth: desire for personal development.
According to the theory more than one need can be operative at the same time, if a
higher-level need cannot be fulfilled, the desire to satisfy a lower-level need
increases.
David McClelland’s Theory of Needs
Need for Achievement: The drive to excel, to achieve in relation to a set of standards, to strive to succeed.
Need for Affiliation: The desire for friendly and close personal relationships.
Need for Power: The need to make others behave in a way that they would not have behaved otherwise.
The theories of Maslow, Alderfer and McClelland can be summarized as below
Figure 3.
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In summary one of most prominent works on defining the process and dynamics of
motivation has been by Frederick Herzbergiii.
The Hygiene Factors are those that are extrinsic to the job and use the 'KITA' (Kick-
In-The-Ass) iv methods to drive people. These factors essentially threaten a KITA if
employees are not compliant and thus use the fear of KITA as a driving force. The
management using such hygiene factors only to govern people essentially subscribe
to McGregor's 'Theory X' v.
On the contrary, the Motivation Factors used to drive people assume that people
basically want to be productive and just need to be given the right conditions and
tools to focus their efforts fruitfully. This is the derivative of McGregor's 'Theory Y'.
Herzberg goes forward to define the two scales of 'Satisfaction' & 'Dissatisfaction'
where he argues that satisfaction & dissatisfaction are not the opposite ends of the
same scale. This is because; in an organization there may be a many situations,
some of which cause satisfaction, while others cause satisfaction, thus creating a
combination of such factors. The 'Hygiene' factors usually define the dissatisfaction
level of employees while the 'Motivators' define the satisfaction levels. The objective
of any organization should be to minimize the dissatisfaction levels and maximize the
satisfaction levels by having an optimal number of Hygiene and Motivator factors
driving the employees.
The various factors within an organization which can be grouped as Hygiene and
Motivators are listed in the table below:-
Hygiene Motivators
Company Policy and Administration Achievement
Supervision Recognition
Interpersonal Relations Growth / Advancement
Working Conditions Responsibility for task
Salary,Status & Security Nature of Work
When deciding the factors used to motivate employees one of the primary challenges
arises from the fact that different people have different factors, that motivate them.
This was articulated by Vroom, Lawler & Porter in the 'Expectancy/Valence' model vi.
This model defined that every person would have a set of personal expectations and
the thus a certain preference or 'valence' for the set of outcomes promised as an
iii http://en.wikipedia.org/wiki/Frederick_Herzbergiv Manage People, Not Personnel – Motivation and Performance Appraisal, HBR, Chap -4, p-49 'One
More Time: How Do You Motivate Employees?' , Frederick Herzberg.v The Human Side of Enterprise, Douglas McGregor
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incentive. The Hygiene and Motivators for employees should be decided based on
their valence.
Cognitive Evaluation TheoryProviding an extrinsic reward for behavior that had been previously only intrinsically
rewarding tends to decrease the overall level of motivation. The theory may only be
relevant to jobs that are neither extremely dull nor extremely interesting.
Goal-Setting Theory (Edwin Locke)The theory conjectures that specific and difficult goals, with feedback, lead to higher
performance.
Factors influencing the goals–performance relationship: Goal commitment,
adequate self-efficacy, task characteristics, and national culture.
Self-Efficacy: The individual’s belief that he or she is capable of performing a task.
Reinforcement TheoryThis theory assumes that behavior is a function of its consequences. The
environment causes the behavior. Behavior can be modified (reinforced) by providing
(controlling) feedback. Reinforced behavior tends to be repeated.
Job Design Theory
Job Characteristics Model: This model identifies five job characteristics and their
relationship to personal and work outcomes. These are Skill variety, Task identity,
Task significance Autonomy and Feedback. Jobs with skill variety, task identity, task
significance, autonomy, and for which feedback of results is given, directly affect
three psychological states of employees:
Knowledge of results
Meaningfulness of work
Personal feelings of responsibility for results
Increases in these psychological states result in increased motivation, performance,
and job satisfaction.
Skill Variety: The degree to which a job requires a variety of different activities.
Task Identity: The degree to which the job requires completion of a whole and
identifiable piece of work.
Task Significance: The degree to which the job has a substantial impact on the
lives or work of other people.
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Autonomy: The degree to which the job provides substantial freedom and discretion
to the individual in scheduling the work and in determining the procedures to be used
in carrying it out.
Feedback: The degree to which carrying out the work activities required by a job
results in the individual obtaining direct and clear information about the effectiveness
of his or her performance.
People who work on jobs with high core dimensions are generally more motivated,
satisfied, and productive. Job dimensions operate through the psychological states in
influencing personal and work outcome variables rather than influencing them
directly.
Social Information Processing (SIP) ModelIt is the fact that people respond to their jobs, as they perceive them; rather than to
the real jobs. Employee attitudes and behaviors are responses to social cues by
others. Employees adopt attitudes and behaviors in response to the social cues
provided by others (e.g., coworkers) with whom they have contact. Employees’
perception of the characteristics of their jobs is as important as the actual
characteristics of their jobs.
Equity Theory
Individuals compare their job inputs and outcomes with those of others and then
respond to eliminate any inequities. Self-inside, Self-outside, Other-inside, Other-
outside are the comparisons individuals make.
Choices for dealing with inequity:
Change inputs (slack off)
Change outcomes (increase output)
Distort/change perceptions of self
Distort/change perceptions of others
Choose a different referent person
Leave the field (quit the job)
Propositions relating to inequitable pay:
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Over rewarded hourly employees produce more than equitably rewarded
employees.
Over rewarded piecework employees produce less, but do higher quality
piecework.
Under rewarded hourly employees produce lower quality work.
Under rewarded employees produce larger quantities of lower-quality piece work
than equitably rewarded employees
Distributive Justice: The Perceived fairness of the amount and allocation of
rewards among individuals.
Procedural Justice: The perceived fairness of the process to determine the
distribution of rewards.
Expectancy Theory (Victor Vroom)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.
Expectancy Theory RelationshipsEffort–Performance Relationship: The probability that exerting a given amount of
effort will lead to performance.
Performance–Reward Relationship: The belief that performing at a particular level will
lead to the attainment of a desired outcome.
Rewards–Personal Goals Relationship: The degree to which organizational rewards
satisfy an individual’s goals or needs and the attractiveness of potential rewards for
the individual.
Applying Theories in Organizations
According to Sarah Halliforde and Steve Whiddett, the motivation theories can be
applied in the organizational context in the following ways:
Organizational Level:
Designing new jobs and designing jobs around individuals
How and what an organization communicates
Design and delivery of Reward Systems
Career development and succession planning
Organizational change (preparing for change and managing the change).
Group and Team Level: Managing permanent, temporary and virtual groups and
teams.
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Individual Level:
Objective setting (annual and short term objectives)
Maintaining effective performance
Managing under-performers.
Traditionally companies have made very naïve and simplistic methods to try and
motivate their employees, which are essentially based on “Greed or Fear”. To list a
few :-
Carrot & Stick Approach: This method simply tries to alternate between a 'pull'
and 'push' mechanism to drive employees. A threat of dire consequences (a stick) is
used to push employees to perform, while incentives are used to pull people (carrot)
towards the performance objectives. The fallacy of this approach lies in the fact that
the 'carrot' and the 'stick' become the objectives themselves rather than the
motivation thus creating an incongruous performance management atmosphere.
Pay Based Motivation: Many large corporations all over the world believe salary is
the prime motivation for all employees. This is evident in the pay structures where a
component of salary is made dependent on the extent to which company objectives
are achieved (e.g. bonus programs, variable pay components, etc.). Though pay is
important for employees, not all find it to be the primary motivation especially if
money is not a basic constraint. Use of monetary rewards could cause some people
to demand more and more pay which may not be commensurate with the increase in
value they deliver to the company, or, others who do not value money as much
would simply become indifferent. This concept draws from the Valence theory
proposed by Vroom.
Reducing Time at Work: Many companies consider providing off-hour recreational
activities as a valid motivation factor for work. Herzberg considers this to be
ineffective and superfluous based on his researchvii.
Soft Skills Training: Again, Herzberg's research shows that training employees in
Sensitivity, Communications, Human Relations, etc work more as a hygiene factor
which facilitates tasks within a limited scope but largely does not motivate the
employees.
vii Manage People, Not Personnel – Motivation and Performance Appraisal, HBR, Chap -4, p-52 'One More Time: How Do You Motivate Employees?' , Frederick Herzberg.
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The Indian Context
The context of application of all the theories is of highest importance as the cultural
and societal environments have large impact on how the theories are perceived and
implemented. In many of the oriental part of the world saying anything against the
boss’ decision even in the interest of the company may tantamount to blasphemy
and the individual doing so may loose all collegial acceptance. Hence such person’s
performance can’t obviously be analyzed with the set of theories that have their
moorings in the occidental world.
The Indian business is in transition; it is moving from its socialistic structure to more
capitalistic structure and adopting the westernized model of business at a fast pace
at least in the knowledge industry. Hence even though the words and practices that
Indian businesses talk and follow are similar to the Western world their meanings and
goals may be different.
Meaning & Application of performance and Motivation TheoriesThe performance and motivation in Indian context till the entry of American multi
national organizations was rooted in socialistic mode of thinking. Even though in the
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days before the 90’s decades individual good was pursued, it was done covertly. The
“chalta hai” attitude as described in the paper on motivation and performance in
developing economies by Kanungo et. Al. describes the conditions that prevailed. The
circle of control was considered minimal with fatalistic attitude of the industry circles.
This slowly started changing with the opening up of the economies in the 90’s and
the introduction of competition where the performance or perish became the word to
run businesses by. Hence the attention shifted on the performance and its driver the
motivation. The Indian companies have slowly moved from “Theory X and Theory Y”
to “Two Factor Theory” to “Social Information processing Model” and are currently
experimenting with “Equity theories” and “Job Design Theory” to gain the desired
results.
Most of these companies used similar mechanisms to motivate employees thus pre-
empting the possibility of employees jumping from one company to another. The
mechanisms used to drive performance in such companies are:-
(a) Variable Pay: based on Individual performance and Company Performance
(b) Stock Options: This was an attempt to bring about a sense of ownership towards
the company thus eliciting better performance.
(c) High Salaries: The average salaries in the IT industry in India are way above the
salaries in other industries.
(d) Involvement: Knowledge Industry companies make a concerted effort at
information dissemination. Information about how the efforts of a particular team
affects the business of the company or of the customer is fed back to the team to
make their work seem more meaningful. This was an attempt at Job Enrichment
for the Knowledge Workers by feeding back the appreciation and complaints of
the customers in order to make the employees' feel the tangible results of their
efforts.
(e) Performance Appraisals: Many companies believe in only highlighting the
positives of the employee and downplaying the faults. This type of an appraisal
was used due to two reasons – the first was to reduce the possibility of the
employee getting dissatisfied and leaving an the second was a belief that the
positive feedback would motivate the employee such that eventually he would
overcome the faults anyway.
(f) Company Wide Recognition: Usually individuals are recognized for
extraordinary performance in a way, which is visible to the entire organization.
Not only does it increase the motivation of the person being recognized but also
motivates peers to strive for similar recognition.
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(g) Fringe Benefits: IT companies in India usually offer good fringe benefits such as
Medical Insurance, Company Cars, nice offices, foreign travel opportunities etc.
Learning from Application
The mechanisms used by Indian Companies to motivate knowledge workers have had
mixed results in achieving their goals. Some have been very effective while others
have become a burden for the company. To list some of the learnings:-
Stock Options: The explosion in the number of employees and the modification
of certain accounting rules in the US have made stock options inviable for most
companies. Many employees who have been granted stock options ostensibly
because it increases the commitment of the company towards the employee feel
that the psychological contract between the employee and the company has
weakened.
High Pay: The relatively high salaries in the Indian IT industry was earlier
possible because of a huge difference in pay levels between the developed
countries and India. With the IT industry slowing down and a salary growth rate
faster than in western countries, the Indian cost advantage is now reduced. The
rate and quantum of pay in the Indian IT industry seems to have reached a state
where, if it is kept stagnant the employees would get discontented and de-
motivated, while if it is increased, the competitive advantage of Indian companies
is endangered.
Fringe Benefits: Government regulations have identified the Fringe Benefits as
a healthy source of taxation. This has reduced the relevance and attractiveness of
the fringe benefits.
Involvement: This has been a sustainable & successful motivation factor in the
Indian IT industry. Previously employees would work on small bits of a project
without seeing where it fit into the 'big picture'. This not only caused the work to
seem academic and theoretical but also made the engineers & researchers make
wrong assumptions about the customer scenarios thereby reducing the relevance
of their work that resulted in a feeling of ambivalence towards the job. With
better information flow between engineering teams, research teams and the
customers the employees feel that they actually make a difference and also make
better judgments about customer scenarios. Ultimately it results in employee
motivation leading to better solutions for the customers.
Company Wide Recognition: Since most knowledge workers feel a need to be
recognized for their cognitive abilities, such recognition programs which improve
their prestige among a peer group has an effect of establishing a goal which
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prompts both the person getting recognized as well as others in the group who
strive for the recognition.
Apart from these the companies have also come to realize that high salaries certainly
act as a mental barrier against switching the job. During the initial years it acts as a
motivator too; however, after a couple of years, it loses its motivating value. The
intrinsic motivation works better with people who have good emotional quotient. It
does not work with people who are insensitive and disinterested people. The intrinsic
motivation instills a healthy level of competition among the employees that leads to
superior performance. The employees are somewhat averse to the extrinsic
motivation techniques. They feel that it creates a suffocating environment in the
organization, since they feel constantly being evaluated. But from the management’s
perspective extrinsic reward system helps standardize the employee behavior and
fosters good performance.
Communication is the key: However much the organization tries to create a
motivating environment, if the employees do not perceive the same, all is waste.
Hence, the organizations must spend effort in aligning the perceptions of the
employees with that of the organization.
Future Direction and some SuggestionsThe Indian cultural and social context is made up of varied hues. The peoples of
“Indian subcontinent” are followers of different faiths, have varied value system,
speak different languages and perceive things differently. The common trait across
these peoples may be strong ties to family, large but declining emphasis on the
acceptance by society. Hence as it is said “different strokes for different folks” the
key to having successful motivational and performance processes in Indian
“knowledge worker” context is to
1. make concerted efforts towards understanding each employee’s preference of
motivators. This would require higher effort from the Human Resource (HR)
departments initially but would result in ensuring that organization provides the
right kind opportunity for every employee thus making employee perform better
and stay with the company even if he was offered a higher monetary pay
elsewhere – which at least at present has become the hygiene factor rather than
the main motivator for many of the experience hires.
2. stop treating people as tradable capital as in the days of industrial era
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3. make organizational processes like performance appraisal and promotion
processes transparent to keep pace with changing times
4. Walk the talk rather than talking the talk and to understand that it is imperative
for the system to function by rules than by exceptions as we see in most of the
day to day life
5. provide long term vision for the sustainable growth and learning for the employee
rather than work for the next day so that the employee doesn’t feel insecure each
and every day
The above are not big challenges as long as the company is small in size. The
cultivation of strong interpersonal relationship with the employees can help motivate
them. But as the organization grows, one cannot count on these good intentions
alone. Hence, in addition, the organization must design reliable and comprehensive
systems in the workplace to help motivate employees. For example, establish
compensation systems, employee performance systems, organizational policies and
procedures, etc., to support employee motivation. Also, establishing various systems
and structures helps ensure clear understanding and fair treatment of employees.
It is important that the people who are in the roles of motivating others are
supremely motivated before he can expect his subordinates to be. Because in many
cases, the “boss” is the organization for the employees and hence, they look up to
him as a role model.
Nothing substitutes spending time with the employees at work. Managers must
frequently review the employees’ work and provide constructive feedback and
appreciation. This makes the employee feel that he is doing something worthwhile.
The fresh graduates joining the IT companies are practically neglected. The
managers do not provide enough attention to them. This is an unfortunate
phenomenon, since it might instill a wrong perception in the young minds that will
stay through the rest of their career, as suggested in the article, “Pygmalion in
Management” by Prof. Ravi Kumar.
The job performance is a function of the employee’s ability and motivation. Our
observation is, in the Indian IT industry, the ability of the employees is generally not
a problem at all. The job attitude makes all the difference. Hence, the role of
motivation in the IT industry is very relevant and pronounced.
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Also, in the Indian Context, given the high salaries drawn by the IT sector employees
compared to that of the other sectors, money is predominantly a hygiene factor and
not a motivator. Hence, organizations must spend more time and effort on motivating
through work content and culture.
References
Managing in the next society – Peter DruckerManaging in the 21st Century – Peter DruckerManaging the Organization – Peter Drucker
http://www.accel-team.com/motivation/index.htmlManagement of personnel in Indian enterprises by Prof N.N. ChattarjeeRole of motivation in performance, HBR Press
vi http://www.ifm.eng.cam.ac.uk/dstools/paradigm/vroom.html
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