Discussions in Management Practice

7/30/2019 Discussions in Management Practice

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Discussions in Management PracticeBy Sohailuddin Alavi

Dedicated to

my Nieces and Nephews

Dedicated to my Loving Niecesand Nephews


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Discussions in Management Practice

Sohailuddin ALAVI Page 2 5/5/13

Brief: This lesson covers definition of an organization; stakeholders theoryvs. social actiontheory; soft side of an organization purpose, vision, goals and objectives;organization performance; organization structures; and, the organization

management.

Definition:

Organization can be defined in many ways. However, a popular definition of an

organization is, A group of individuals working together to achieve shared goals. This

definition is elaborated as follows. In an organization group of individuals work together

in a coordinated manner for a shared purpose, with each one having clearly defined work

responsibilities and authorities. This definition has the following dimensions, which if

found in a group, cause an organization to emerge. Namely:

Presence of more than one person, generally Shared purpose (Please note that shared purpose could be a singular common

goal or multiple individual goals for which each individual is depending on others

performance)

Each individual has an identifiable and specific responsibility within an

organization

Each individual has identifiable and specific authority to perform his or her

responsibilities

All individuals in an organization essentially work in a synchronized manner. This

helps achieve synergy in organizational performance.

Last but not the least; a system should exist to navigate individuals actions in a

unified direction and monitor performance within the organization. This system

should essentially policy and procedures driven. However, in certain situations it

is people driven (personified). The former stable and consistent while the latter

system lacks both the characteristics.

Stakeholders vs. Social Action Theory

Two rather different explanations exist parallel with regard to the basis of

organizational emergence and continuity. The Stakeholders theory suggests that

organizations are artificial persons (entities) with explicit motives, which are rather

independent of their stakeholders. However, to sustain organizations should consider

the individual stakeholder(s) interests besides its own motives. For instance, investors

demand profit (RoE) Employees demand fair wages and work satisfaction

Customers demand good quality products and services at reasonable prices


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Regulators demand compliance and, Society demand socially responsible conduct.

The relationship between different stakeholders is evidently competitive rather than

cooperative. Usually stakeholders with stronger power to prevail, influence

organizations priorities and goals. Hence it is more of a political process that affects

organizational goals and performances in the long run.

On the contrary, Social Action Theorists suggest that organization is a virtual platform

that effectively provides opportunities to each stakeholder accomplish its respective

goals (agenda). Each knowing the interdependence of the others for continual

achievement of their respective agenda decides to perpetuate relationship with each

other, which in turn allows the organization to continue into the future. Major

deviation in this theory is that individuals do not work for the achievement of common

goal. This follows that in an organization multiple goals co-exist at any point in time.

It is the interdependence of the stakeholders representing different goals effectively

replaces the need for a common goal to keep the organization going.

The Soft Side of an Organization

The term soft side of an organization refers to the intangible dimension of an

organization the purpose; vision, goals and objectives. Although on the face of it

these seem less significant then the organizational system and structures but in

reality it is these factors that provide true sense of direction and enable the

organization move consistently and rationally towards its destination (So is true to for

an individual).

Purpose is the explicit declaration by an organization of what it intends to accomplish;

and, what value it commits to deliver. For instance a school, however commercially

managed, aims to educate young citizens and contribute towards fostering a more

socially responsible and productive society in general. Likewise a public utility service

institution, although considered a not for profit organization, aims to create public

utility services at affordable prices thus contributing towards a building a more

sustainable social and economic infrastructure.

It is important to take note of the fact that what ever the purpose may be and whether

the organization operates as a commercial or social entity profit or to be precise

resource generation remains pivotal. However, as displacement occurs, the profit /

resource generation becomes the purpose in it self while the real purpose is lost

means become the end. The dysfunctional effect of displacement quickly trickles down


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and the organizational performance becomes less effective. For instance, as

displacement occurs in public utility organizations they tend to focus on internal

efficiencies instead of social effectiveness. Similarly, displacement in commercial

organizations forces them to aim at higher profits in a less responsible manner.

Vision by definition is a cloudy statement of where does an organization intends to go

or what it endeavors to accomplish. In short a vision statement is an articulation of

organizational purpose, written to communicate the purpose of business and provide

directions across the organization. For instance, an organization might state, We

wish to be the most preferred company for our customers. A good vision statement

helps harness all employees in particular and stakeholders in general in a singular

direction.

A vision statement is usually elaborated by the mission and value statements. To be

exact, mission statement unfolds the strategy an organization might choose to pursue

its vision, while the value statement underlines business and moral principles (the

segregation between business and moral principles is only made to enhance

understanding, however, both business and moral principles are essentially the

same). We shall always provide maximum value for money to our customers by

making quality products at affordable prices. This is an exemplified mission

statement of the vision cited above. In doing so, the organization might commit to

adhere to the following principles, namely; Always putting customers first Innovation

drives qualityentrepreneurship make better employeesetc.

It is important that once an organization manifests its vision statement then it should

adhere to it in letter and spirit. However, with the passage of time and by the

emerging opportunities and challenges an organization might like to revisit its vision

statement at appropriate intervals.

Goals are specific targets organization decides to achieve in pursuit of its vision

statement. Goals must conform to the SMART criteria. In other words goals should bespecific measurable attainable relevant and time bound. For instance, I will

another degree is a vague goal. Let us now rewrite it to make it smart. I will take a

degree in technology by registering in a four year evening program to increase my

career chances in my existing field.


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Goals are terminal in nature, which are further split into mile stones called objectives.

Objectives help monitor and control goals meaningfully. Let us make objectives of the

above goal: To obtain a degree in technology is a goal. This entails following objectives

to identify the relevant program; make an application for registration; mobilize

financial resources either through own, loan or scholarship, etc. This follows that asingular goal is usually split into multiple objectives, which can be sequential or

parallel. In the above example identifying relevant program and mobilizing resources

are parallel while making application and registering are sequential to the former

objectives.

Organizational Performance

Performance of an organization is and

should be in effect the end of any

management endeavor. In simple

terms organizations perfor-mance is

a function of input and throughput

processes. Organ-ization is said to

be effective when it achieves what it

aims to achieve, while it is considered

efficient when the inputs are

minimized, however, without sacrificing the achievements. In broad terms, however,

the performance of an organization is significantly influenced by its permeable

environment [factors in the immediate external environment that have directly affect

organizations performance are referred to as permeable environment] This includes

regulations; socioeconomic and political conditions; demand for the products and

services hence the market prices; supply of resources including skilled people; etc.

The relationship between an organization and its permeable environment is complex

and abstract. It is said to be complex as multiple factors constitute the permeable

environment. It is said to be abstract because the marginal effect of an individual

factor can hardly be isolated from the combined effect. Moreover, the inter-relationship can be seen as reciprocal for organization also influences the environment

in many ways: such as, improving life style of the customers by delivering better

quality services and products.

Organization Structures

PeopleperformanceResourcesconversionCoordination andControl

Idea;Peopleskills;and,Resour-ces

ValueProductsandServices;and,Profits

Input OutputThroughput

Permeable Environment

Permeable Environment


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Structures refer to how different segments of an organization [departments and people]

are connected to each other in order to produce the desired performance [goods and

services]. Structures are built along the authority lines and job responsibilities.

Tall [administrative] structures are dominantly authority basedjuniors reporting tothe seniors. This type of organization structures had been advocated by Weber the

pioneer of bureaucratic organizations. Here authority to make decisions generally lies

at the senior most levels. Hence tasks are delegated but without authority. Even at

times, junior employees are considered to be performing their jobs not as their jobs

but as extensions of and on behalf of their seniors, hence, achievements are credited

into the seniors account. The job contents are also minimized at individual level thus

reducing the perceived and actual worth of job. These structures make organizational

process slow and less responsive to its permeable environment. Some times these

structures also serve as a tool to control people and their actions, as the emphasis in

here is on disabling people from performing outside the routine boundaries.

Resultantly, people become more focused on actions rather than results.

Flat structures are in fact hybrids of a tall structure, with the exception that job

contents are enriched and enlarged as middle layers are removed or merged with the

front layers. It also provides superficial satisfaction to the junior employees as they

find them in direct relationship with the most senior person in the organization.

Although these structures induce greater productivity in terms of work load per

employee, synergy remains a question.

Work Groups or matrix structures theoretically represent divergent thinking and

approach in organizing the work. However, in practice some elements of

administrative organizations do exist in here as well for better or for worse.

Conceptually, the emphasis in these structures is shifted from authority to roles and

responsibilities. Putting it differently, each individual can clearly distinguish himself

or herself on the basis of his or her unique role and responsibility. Hence the chances

to encourage focused performance and greater synergy are increased many a times.

Organization Management

Having discussed the organizations in rather holistic perspective, we should now

ready to unravel the scope of management in the context of organizations. The term

management refers to a process of achieving the desired results in more effective and

efficient manner. Organization management thus refers to a process of creating and


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maintaining an effective and efficient organization at the input level, throughput level

and output level. The organization management process can thus be defined as:

Planning, Organizing, Directing, Influencing, Coordinating, and Controlling.

We shall conduct a detailed discussion of these management processes or functions inthe following lessons.

Discussion Questions

1. Why organization have to different from a simple group of individuals

2. What makes organizations effective and efficient

3. Discuss the importance of organizations purpose to its performance

4. What effect do different organization structures have on the organizations

performance efficacy

5. Describe the function of organization management.


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Brief: In this unit you will learn about various theories of management, namely;Scientific Management; Management Science; Bureaucracy; HumanRelations; Neo Human Relations; and, Systems theory.

Introduction

In the previous unit the term management was introduced in the context of organization

theory, with a view to highlight linkage between the two. Here we shall discuss this term in

detail and later we shall present different schools of management thought.

In general terms management is what managers do! This definition has its limitations as

ocean wide gap exists in theory and practice. Of course, this follows the fact that many a

time individuals are designated as managers but they and sometimes their organizations

do not clearly understand or communicate their distinguished role and responsibilities,

respectively. Many a time it is seen that consequent to promotion (designation) as

managers, individuals begin to assume that now onwards they will have people working on

their behalf. In fact they fail to take cognizance of their changing role hence new

responsibilities. For instance, a newly promoted sales manager might assume that he is

now given so many sales agents who will do the sales on his or her behalf. Meaning as

manager he or she is still responsible for selling: he or she has no cognizance of his or her

changing role and new responsibility as sales manager. The result is a hitherto good sales

person becomes dormant subsequent to his or her promotion. Like wise, the term

manager manifests authority in most of the situations, which leads to a rather natural

displacement in work behaviors: designated managers become masters. This dichotomy

exists in almost any organization and is clearly visible. In view of the above, it is critical to

define management more comprehensively and in a less personified fashion: management

as a process.

Metaphorically, let us consider the role of a teacher from two divergent perspectives.

Firstly as someone who has the authority to declare the students either pass or fail.

Secondly, as a facilitator who takes the responsibility to create an enabling learningenvironment in which the students can successfully learn and qualify. The former

perspective reflects managers right to prevail over others, while the latter perspective

reflects managers role as of a facilitator for a successful performance. Now let us use the

facilitators perspective to elaborate management.


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To begin with, unlike authority to prevail over others that is often taken as a right to get

ones job done by another person, facilitation entails a process that aims to enable others

do their jobs in a befitting manner. Facilitation is a different task altogether from what

other employees do hence it causes synergy in other employees performance. This follows

that management is a facilitative process that exists in an organization in addition to andto reinforce the tasks performed by the employees. Ideally management task can neither

be taken as superior or inferior to other tasks being performed in an organization but as

different and equally critical.

To conclude this discussion at this point we can say that two streams of tasks are

necessarily performed parallel in any organization, namely the technical (job) tasks and

management (organizing) tasks. Both streams are interdependent as management task

would have no value if it fails to facilitate the technical tasks similarly technical task will

deliver no result if not managed. In the following text we shall maintain our focus of

discussion on management tasks.

Management Theory

The origin of management theory began at two locations rather simultaneously: at the

production floor in industry and at the apex level in public institutions. Initial

developments at each location were made independent of the other, which led to

recognition of two rather separate bodies of knowledge, namely; the business management

and public administration. However, at a later stage the two have been merged in a single

body of knowledge. Let us now discuss each theory rather separately to take cognizance of

its letter and spirit.

1. The Scientific Management School

2. The Management Science School

3. Bureaucracy

4. Human Relations School

5. Neo Human Relations School

6. Systems Theory


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Brief: This lesson focuses on differentiating between managing and the manager thusestablishes distinction between management as a system and a position. It will helpstudents clarify the system of management.

More than often the term management is used parallel to the act of supervision. Thus it is

always associated with managers individuals at a higher echelon. However, speaking in

letter and spirit management should be defined as an independent system, while

supervision is more of operating as a technical expert someone who knows better then

the juniors or has longer experience of doing the job. This distinction can be further

explained by considering that simultaneously two sets of activities are performed across

the work organization. One relates to executing the job (executive system) and the other

relates to managing the job (management system).

The executive system involves actions that are typically technical in nature. It also

includes supervision per se. For example, teller in a bank pays checks to and receives

deposits from bank customers. Similarly his or her manager acts as a coach and trouble

shooter, which are again typically technical roles. Some times, the technical tasks are split

between juniors and their manager on the basis of transaction value, complexity and the

risk involved. Tasks that are relatively of low value, simpler and posse little to no risk are

delegated to the juniors while the tasks that are of higher value, complex and posse higher

risk are retained and executed by the managers. Here, it is interesting to note that the

tasks handled by the juniors as well as their managers remain similar in nature. In many

situations, it is considered that juniors perform the tasks rather on behalf of their

managers. In other words they act as extensions and buffers of their managers, while

performing the tasks. Inevitably it inculcates conflict of interests hence leads to

dysfunctional competition between managers and their juniors.

As a consequence managers exist but do not perform the management function in

verbatim, and organizations lose opportunities to synergize upon their potentials for a

more sustainable future but only succeed in performing mundane jobs via fire fighting andon ad hocbasis. Sadly, many bureaucratic institutions as well as business organizations

often portray this scenario and are complacent to improve upon. The grid given below

presents an interesting analysis of various management systems prevalent in modern age

organizations:


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The Management Systems Grid

Format Orientation Risk(s)

Traditional[Controlling]

Manager delegates hisresponsibility to theemployees to do thetask essentially on hisbehalf, while keepingthe control with him orher

Ultimately s/he countsthe performance of allemployees towards hisperformance.

Limited scope ofmanagement process.

Employees fail to acceptownership of the tasksfor they can not foreseetheir individual actuali-zation, hence do notdemonstrate passionand responsibilitytowards performingtheir jobs well.

Competitive[Management byObjectives]

Both manager and theemployees see theirroles as similar

Manager considerperforming similar tasksthat the employees areexpected to perform, inaddition to assigningtargets to the employeesand controlling theiractions

Both begin to compete

internally

Limited scope ofmanagement process.

No relationship existsbetween the managerand employees.

It is likely that every onecompetes internally thusde-synergize organiza-tional productivity.

Facilitative[Enabling]

Both manager and theemployees see theirroles as complimentaryto each others role

Manager focuses oncreating enabling workenvironment whereemployees can succeed,

while employees focuson accomplishing theirtasks to benefit theorganization

Unwarranted employeedependence on themanager

Favoritism enablingfew and ignoring othersemployees

TechnicalProcess:

TaskExecution

according tostature

TechnicalProcess:

PursuingIndividual

Targets.

M

E

M

E

PseudoManagementProcess:Assigningtargets andcontrollingactions

Pseudo

ManagementProcess:Assigninglow leveltask; and,Controlling

M

E

Synergistic

Interdependence

ManagementProcess:EstablishingDirections;and Creatingenablingenvironment

TechnicalProcess:

TaskExecution

and control


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Progressive[Empowering]

Each individual hashigh degree of roleclarity; Manages andemployees know theirrespective responsibi-lities individuallywithin the givenorganization manage-ment system.

Need for a manager isvirtually eliminated, forevery one is a managerand employee within.

Lack of employees aswell as managementsystems maturity maylead to chaos in thework place.

Management System

Now let us try to explore management as a

system. To being with, the end result of

management system is to compliment the

technical system. Thus it is about

establishing an enabling environment for the

technical system to run successfully. The

enabling environment represents a set of

physical and intangible situation that

essentially encourages and enables individuals to work together to produce what any one

individually can not. Though here we are explicitly referring to management as a system

of enabling two or more people to work together, but we also need to consider the

significance of management system at each individuals level.

Variables that essentially form the management system, their inter-relationship and effect

on the technical system are portrayed in the diagram given below. The variables are split

into two levels, namely; back-end variables and front-end variables. Back-end variables

represent primary actions and include establishing directions, planning, organizing,directing, monitoring and checking, and making alterations.

Walt Disney once said, People think I amgenius and so have done the wonders in theworld of entertainment. They are wrong! Mycontribution in introducing new dimensions inentertainment was only that I brought togetherpeople who were smarter then myself andprovided them with a conducive workenvironment where they had been able to worktogether, for as long as they were separatedfrom each other they could perform nothing.

Inner

Core

Core

Outer


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Front-end variables include enabling shared culture, cross communication, vertical and

horizontal coordination, and just decision making (also problem solving). The relationship

between back-end and front end variables is portrayed as interdependent in diagram. The

assumption is that back-end variables provide the infrastructure for the front-end variable

to be carried out meaningfully, while the effectiveness of front-end variables provide

objective basis for continually adjusting the back-end variables. Together an effective

management system influences the technical system in terms of synergy, success, and

satisfaction.

Yet another interesting classification of managerial system was done by Henry Mintzberg1.

He identified ten different managerial roles, which he then clustered into three distinct but

interlinked groups, namely; informational, interpersonal, and decisional roles.

Interpersonal roles include figure head, coordinator (leader), and liaison. Informational

roles include spokes-person, monitor, and disseminator. Decisional roles include

entrepreneur, disturbance handler, negotiator, and resource allocater.

Conclusion

Management is a complementary process that should essentially aim to augment higher

effectiveness of the technical process at every level. However, it would be grossly mistakento consider the management process as superior to the technical process but both the

processes are equally critical. Following this maxim, the term management must always

be interpreted to reflect upon the process or the role-function not the status or seniority.

It is being affirmatively suggested that the practice of designating senior operations

specialist as manager to elevate his or her status while the job remains operational in

Impact onTechnical

System

3S

SynergySuccess

Satisfaction

Front-endManagement

Variables Culture

Communi-cation

Coordination

Decisionmaking

Back-endManagement

Variables

EstablishingDirections

Planning

Organizing

Directing

Monitoring &Checking

MakingAlterations

Typical Management System and its Impact on Technical System


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nature needs to be abandoned as it is widely noticed that such managers fail to perform

management function in most of the situations but act rather as operational experts and

troubleshooters, which reduces their work productivity on one side and on other side they

fail to perform management function in verbatim. Instead it is recommended that either

organizations should explicitly split technical and managerial functions at each level of theorganization (front end; middle; and, upper echelon) and accordingly develop two parallel

streams of employees as operations and management specialists to work interdependently,

without creating status incongruence at any point in the career paths of operational and

management specialists. Meaning both should have ample opportunities to grow within

their respective domains. Alternatively each job, irrespective of its location, should

essentially be split into technical and managerial dimensions and employees either located

in the inner core or outer core should be developed on both aspects of their jobs. Put it

simply, empowerment of employees both at the outer and inner cores should essentially by

ensured.

____________________________


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Intervening management processes refer to a number of essential interventions that aim to

achieve business process effectiveness and efficiency on day-in day-out as well as on longterms bases. These interventions typically include establishing communication structures;

enabling coordination; enabling smart decision making; harnessing organization culture;

and, continuous learning and development . Let us describe each of the above intervention

separately.

1. Communication Structures:

Flow of information within and outside an organization between different departments

and individuals is critical for efficient and effective business performance. It is

understandable that the information contents must be valid and reliable at all times.

The term valid refers to the usefulness and relevance of the information to the

receiver, while the term reliable refers to the accuracy and consistency of the

information.

Much of the information validity and reliability depends upon the communication

network that exists in an organization. Does the network allow free flow of

information? Does the network allow timely and correct information exchange? Do

people have trust on the network? These are few aspects that determine efficiency and

effectiveness of communication network in a work setting. Management intervention

hence should aim at fostering the above to ensure reliable and valid communication

across the work organization and within its permeable environment.

Generally speaking information flows formally as well as informally in an organization.

When any information is routed through formal structures it is said to have been

communicated formally, while information routed outside the formal structures is said

to have been communicated informally. While formal structures allow more control on

the information flow, informal information is rather speedier and has its uniqueadvantages. Hence, coexistence of formal and informal communication networks

provide a unique combination of effective and efficient communication opportunity,

respectively.

Formal communication structures are predominantly influenced by the organizations

management system. Communication structure in a tall administrative (dogmatic)


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management system is likely to be top-down and bureaucratic. Such structures are

generally characterized by red-tapism; controlled access; inefficient; less responsive;

and, are largely vulnerable to subjectivity i.e. perception differences due to respective

positions and interests and status incongruence i.e. emotional prejudice of seniors vs.

juniors. These characteristics raise doubts about the validity and reliability ofinformation communicated through administrative communication structures.

Moreover, it encourages unwarranted reliance on informal structures (grapevine) that

lead to false assumptions and distorted perceptions.

As better management systems evolved over the years, improvements in the

communication structure also followed. Consequently we witnessed emergence of

many variants with increased validity and reliability within the domain of

administrative management system. Most noteworthy are the two-way communication;

lateral communication; and, direct (flat) communication structures.

Two way communication allows down-top communication in addition to top-down

communication. Firstly, this structure allows people at the top (in the centre) get the

feed back thus make better decisions subsequently. Secondly, it encourages and

allows participation across the work organization hence builds stronger trust between

top (centre) and front (outer) segments of the work organization. However, it is

observed that the argued improvements remain pseudo in quite a few situations.

Lateral communication allows individuals to communicate (exchange information)

across the departments concerned without unnecessarily involving other individuals,

especially those on the higher echelons. While it makes communication speedier,

subjectivity and status incongruence remains a barrier. Direct (flat) communication

refers to a scenario where the middle tiers are virtually or physically by-passed as and

when the top man communicates with the front-end employees and vice versa. While

this structure promotes better relations between the two; improves morale at the front

end; and, enhances communication efficacy, it also causes some degree of chaos in the

work place by challenging the legitimate authority of middle tier employees.

Matrix organizations are rather emerging structures. For many obvious reasons the

communication system in these structures is also quite different from the conventional

variants. In order to understand the communication dynamics in here, it is important

to understand how a matrix organization structure works. It would be right to consider

a matrix structure as dynamic or fluid in nature. The positions and roles of various

individuals keep changing on task to task basis. For instance, the cricket field virtually


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plays under the directions of the bowler. As soon as the new bowler, another player

from the existing field, takes over the bowling his predecessor moves back to a field

position. To find a similar analogy in a work setting think of a project based structure.

Individuals from diverse specializations (departments) come together to work on

multiple projects. Each person will have varied stature in the organizational hierarchy.However, his or her status in each project would primarily be of a team player. In one

project he or she may work under the supervision of another team player, while in

another project he or she may have a supervisory role whereas the other individual

would now work under this persons supervision. This phenomenon of changing roles

can also be witnessed in a routine work situation as different team players might

supervise different tasks being done by the same group. Yet another example is of

committees. In any modern organizations there is more than one committee, while the

members all the more remain common, different individuals from amongst head

different committees. Consequently, a dynamic communication structure would

emerge whereby individuals will communicate with each other in multiple capacities

simultaneously. Like any other system, this system also has its peculiar limitations.

Such as, dogmatic organizational culture; status incongruence; specialists

subjectivity; etc. deters communication to a large extent.

Informal communication structures are basically outcome of inadequacy of formal

communication system. When the formal system fails to communicate, people tend to

move towards informal structure in search of truth irrespective of the fact if they find it

or not. Informal structures are made up of individuals working at randomly different

locations in an organization yet inter connected with each other on rather informal

relationship basis: colleagues, friends, members to an association, etc. Ironically no

one has the complete information but just a bit of it. By sharing with each other what

one knows enables them building a bigger picturetrue or false. While it satisfies the

natural urge for complete information it also provides strong basis for developing

shared assumptions and understanding. Sometimes the shared assumptions and

understanding can be much close to the realities, however, most of the times these are

mere wishful beliefs that allow individual to sustain consonance in their perceptionsand the work situation.

Informal communication structures are largely seen as supportive of formal

communication system unless the organization is extremely dogmatic. The underlying

reasons for this supportive nature of informal communication structures are very

simple: information travels much faster in here as compared to formal communication


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system; individuals tend to have more confidence on informal communication

structure as it is primarily built on personal relationships; individuals tend to be more

candor in expressing their feelings and facts through informal structure; etc. It is

therefore organizations consider it as complimentary to the formal communication

system, especially in seeking candid feed back.

2. Coordination

Organizations business processes or functions are split into numerous departments

such as warehouse; production; marketing & sales; finance & accounting; research &

development; and, human resources and administration; etc which means each

department performs a different role. However, it is imperative for each department to

synchronize its activities with other departments in order to optimize business process

efficacy. Thus the second most important management intervention is to encourage

and enable coordination across the organization for optimal efficacy.

Coordination as clearly demonstrated above refers to synchronizing the activities of

two or more departments and/or processes. It can be thought of either horizontal or

vertical in nature. A horizontal coordination refers to lateral coordination while vertical

coordination refers to upwards coordination. The need for horizontal and lateral

coordination exists for both at intra-department and inter-department levels. An

interesting way to achieve inter-department coordination is by identifying and

emphasizing internal customer and supplier relationship between two or more

departments based on their process interdependencies. For instance, Purchase

department is a virtual (internal) supplier of materials either to the warehouse or

production department while the latter department is the virtual (internal) customer of

the former. The recognition of this type of relationships enables each process

(department) to focus on their virtual customers and synchronize their activities in

accordance with them. It is interesting to note that a particular department can be a

virtual customer in one situation and a virtual supplier in another situation. Just like

the production department in the above example is the internal customer to the

purchase department for raw materials, simultaneously it is an internal supplier offinished goods to the sales department.

Intra-department coordination is enabled through job design and direct supervision. A

complex job design i.e. a job that allows individuals more control over the outcome and

also empowers the individual to make job related decisions provides more

independence hence entails lesser need for coordination. Whereas, a simpler job which


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where s/he begins to make rational decisions from a holistic perspective. This typically

requires diverse work exposure and mentoring in the organization along with

encouragement to out of box thinking. Here a typical management intervention would

be to provide a policy environment where all this is recognized and enabled in letter

and spirit.

In organizations four major variants of decision making structures are found, namely;

centralized, consultative, participative, and delegated. Centralized decision making

entails that all decisions are made by a single person who is usually Head of the

organization or department rather independently. Consultative decision making is a bit

different from the centralized decision making. It encourages the decision maker to

consult and ponder upon the issues with other members of the organization before

making the decision. Participative decision making is a step further. Here other

members not only participate in considering the issue or its solutions but also are part

of the decision making. Meaning decisions are made on the basis of consensus

between amongst the select group of individuals and where the consensus is difficult

or not possible then on the basis of majority. Delegated decision making is the

opposite of centralized decision making. Here each individual is delegated authority to

make decisions within his or her domain /specialization. For instance, people

decisions are made by the HR specialist; production decisions are made by the

production specialists, so on and so forth.

Centralized decision making by default is constrained by the bounded rationality of an

individual. However, it is quicker and requires lesser coordination efforts. Consultative

decision making effectively overcomes the bounded rationality by the involvement of

individuals, especially when they come from diverse backgrounds. Such as marketing,

finance, production, etc. Simultaneously, it also has the advantage of lesser

coordination requirement as the decision is finally made by the individual.

(Interestingly, it is this consultative decision making that is prescribed in the Noble

Quran). Participative decision making is vulnerable to dilution and displacement of the

issues and unnecessary delays. Moreover, usually in process of gaining consensusinevitably compromises are made on subject matter of the decision. Likewise in case of

decisions by the majority, it is much likely that certain interest groups will dominate to

influence the decision in their favor as it is very common in our political society.

Delegated decisions provide for specialized and focused decision making but at the

same time it is likely to lead to subjectivity (narrow horizon) and require a lot much

coordination efforts.


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4. Organization Culture

Culture is defined as set of shared beliefs, values and norms. Organization culture

thus refers to set of shared beliefs, values and norms of individuals working together

in a particular organization. The significance of organizational culture is that itprovides a strong basis for discipline, cooperation, and performance, hence it merits

harnessing for higher business efficacy.

Beliefs are deep rooted assumptions that help us perceive about events, situations,

opportunities and even people. A valid belief would obviously cause valid perception

and vice versa. Values are the principles that enable us distinguish between good and

bad, right and wrong, etc. Values are largely influenced by our beliefs and reinforced

by our immediate environment. Norms refer to our (automatic) standard responses to

particular event, situation, opportunity or people.

Here a typical management intervention would be to encourage positive (constructive)

culture and at the same time to discourage dysfunctional culture. It is clearly evident

that as an organization embarks upon a Change Management program, altering the

culture usually precedes change in any other direction, for without cultural change

business practices and processes can not be changed. This is because of the fact that

behind every business process and practice is a human mind that either accepts the

change or rejects it. To initiate the cultural change organizations need to identify so

called Dos and Donts of work behavior in the form of organizational values;

communicate or disseminate the same to the outer most boundaries of the

organization, and finally introduce rewards and punishment system to encourage

adherence and to prevent ignorance of the values, respectively.

5. Learning and Development

Prophet Mohammad SAAW said, Whostoday is no better than yesterday is doomed.

According to an article published in an international magazine, organizations grow to

doom. This phenomenon is explained by Daniel Goleman in his famous research onEmotional Intelligence. Accordingly, as world class summers stopped improving their

performances their subsequent performance deteriorated, this was validated in a

structured experiment conducted by Goleman. Organizations are no exceptions.


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6.

Bryan Joiner in his book titled, Fourth

Generation Management articulated

this concept by comparing two

organizations with varied pace oflearning and change. He concluded that

the organization, which was learning

and changing faster than its

counterpart organization comes out as

winner especially in the long run. See

figure 5.1

Surely the locus of learning and change should be the business processes. Attempts

should be made continually to improve upon the efficacy of business processes as a

basis for increasing organization performance. But creating a policy and physical

environment conducive for learning and innovation is a function inside the purview of

management process. Integration of technology into business processes, such as ERP

solution is a good example of creating an enabling environment. Besides, providing

appropriate inducements to encourage innovation at each point is also critical. For

example, Cummins UK explicitly encourages its employees by saying that, We have

hired you to improve, if you maintain status quo we will fire you. Likewise, KAIZEN,

TQM and Six Sigma are also good examples of inducing learning and change.

Alpha

Beta

PaceofChange/Performance

Time HorizonFig. 5.1


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Introduction:

In managing the profits on rather longer time horizon, organizations need a strategic

direction for operating and competing in the industry. Basically, it has two dimensions;

namely; corporate [conglomerate level], and business [SBU] level.

Corporate strategic plan relates to integrated management of all the SBUs together to

enhance group [synergy] profitability or its control in the industry. On the other side,

Business strategic plan deals with managing profit within a single business unit.

In essence, the focus is upon managing the profits of the organization by maximizing the

value creators and minimizing or eliminating the value destroyers.

Strategic planning, in essence, is determining:

Where is the organization today -

What is the value of the organization, and which units of it are creating value and

which are destroying value?

Where is the organization going -

What opportunities for adding value exist, and which one should the organization

pursue. And what (value destroying) business should the organization sell or discard

?

How is the organization going to get there -

How can the options identified in the previous step be exercised such that maximum

value is added to the organization?

Corporate [conglomerate] level planning:

A typical conglomerate can be seen as a cluster of SBUs along the value chain. For

instance, a fabric weaving mill adds on a spinning mill and a garments manufacturing

unit. The former is referred to as backward integration and the latter is referred to as

forward integration. Alternatively, a fabric weaving mill can add yet another fabric

weaving mill, which would be considered as vertical integration. Furthermore, a fabric

weaving mill can add on diversified businesses such as a floor mill or a commercial bank,

etc. This type of integration is referred to as diversified integration.

The rationale for forward and backward integration is generally to gain more control over

the supply chain of a particular product thus to reduce cost and increase market [price]


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control. Many textile enterprises engaged in fabric weaving now have garment

manufacturing and some times spinning factories to improve their production efficiencies

and market control. A vertical integration also aims to increase the presence and influence

in a particular industry by way of increasing the overall capacity of doing business. A good

example is Unilever acquired Polka and Igloo ice cream companies to become the sole icecream vendors in the industry thus improving upon their monopolistic advantages. A

diversified conglomerate is a good tool to buffer the groups profitability from cyclical down

turns of a particular industry. For instance, if there is a downturn in the textile industry,

profits generated from a commercial bank or floor mill can conveniently compensate lower

profits in the former unit. Thus a stable profit stream can be projected over a longer

period. Besides, a diversified conglomerate enhances the ability to continue operating a

less profitable SBU even in sluggish periods.

Business [SBU] level planning:

Long term management of profits at the SBU level is equally critical. Here the decisions

concern increasing the profit margin of a particular business. Two routes are generally

considered in this regard, namely; Cost leadership and Market differentiation. Cost

leadership aims to continually reducing the cost of producing the product thereby increase

the profit percentage. This route is generally efficiency driven achieved either through

economies of scale, improved business processes, and even reduced product quality and

quantity. It is mostly advisable in the highly competitive commodities markets where

neither higher price can be charged nor can product differentiation be effectively achieved.

Market differentiation on the other hand essentially aims at converting a commodity into a

differentiated [separately identifiable] product. This involves product positioning and

branding, which actually means affecting the perceptual value of a commodity relative to

its parallel commodities. This allows charging premium prices in the market, thus

without improving or even despite increasing cost of production higher profit margins can

be achieved. Generally Cost leadership requires producing standardized basic products to

cater to the broader market base hence achieve economies of scale. However, sometimes

cost of a product can be reduced by developing more customized products by eliminating

extra frills to offer in a niche [narrower] market segment. Product differentiation isgenerally based on niche market. However, differentiation in a standard product scenario

can be done at the service level thus increasing the turnover of a particular product. In

nut shell market differentiation can be done in the broad markets for increasing

economies of scale by a particular supplier. For instance, Shell Pakistan and PSO

although vending a commodity to a broad market, yet maintain differentiation to sustain

an increasing demand for their respective commodities.


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Strategic Process:

Planning managers and executives need to do the Situation Audit to answer Where the

organization is ?before they can decide Where to go and how to get there? In doing so, they

conduct SWOT analysis to determine internal strengths as well as weaknesses andexternal opportunities as well as threats. Internal analysis emphasizes financial and

market performance. While external analysis focus upon market situation, customer

satisfaction, regulatory environment, economic system, etc. In addition, managers must

know their stake holders - customers; owners; depositors; borrowers; management,

supervisors, and other employees.

Once the managers know where their firm is and what it is worth, they can rightly decide

where it should be going. Such a decision usually has a five year time horizon. However,

strategic plans should always remain subject to annual review and adjustments.

In establishing the future position of the firm, an articulated Corporate Vision is essential.

the vision should be brief, broad, and some what vague sense of the future direction. It

should broadly identify target customer segment and products/services representing

organizations priorities, and how it wishes to position it self in the high priority markets.

Given the organizations Vision, the elements of SWOT analysis assist managers in

identifying alternative strategies and in their evaluation towards exploiting their unique

SWOT condition in order to decide how to get there ?. At this stage, managers need to do

What-if-analysis; scenario-planning; computer-simulations etc.

Once an overall plan and specific strategy have been developed, these must be

implemented and monitored.

Conclusion:

Survival for a firm is fundamental reason for undertaking the process of strategic

planning. However, since most managers want to do more than just to survive,even higher reasons for strategic efforts exist for them.


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The term Corporate Performance relates to the overall efficacy (effectiveness and

efficiency) of a business firm in particular and any other firm in general. It needsto be looked upon and analyzed from the external and internal perspectives. Refer

to the diagram:

External Perspective

Conventionally profit (earning per share) was the only measure of corporate

performance. However, in the modern times corporate entities are expected to

demonstrate rather holistic performance, which includes regulatory compliance;

ethical compliance; social compliance; etc. in addition to their profit targets. In

short, contemporary corporate must act responsibly towards attaining its

commercial objectives by adhering to social, regulatory, and ethical norms of the

land.

Hence, corporate performance which was hitherto driven by profits alone now

encompasses a complex system leading to multiple and some times conflicting

corporate goals. For instance, a successful modern corporate aims to accomplish

in the following directions:

a. Profit growth

b.Total regulatory compliance

c. Ethical business conduct

d. Environmental safety (external and internal)

e. Win-win transactions (relationship) with the permeable society

Obviously seeking profit as a reward for investing money, human capital, and time

is a legitimate goal for any commercial or other firm. Furthermore, profits in the

Corporate Performance Framework

EXTERNAL PERSPECTIVE:

Responsible business conduct

From profit alone to multiple goals:Commercial, ethical, regulatory, social,

and environmental.

INTERNAL PERSPECTIVE:

Synergistic performance

From short term profit centric to longterm competitive advantage orientation

Diversity; Roles; Precession; Fasterlearning and change


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long term also provide basis for the sustainability. However, the debate is now

focused on making just profits rather than maximum or minimum profit. Just

profit is defined as one that is made in a responsible manner without violating

own or any one elses rights be it customers, employees, owners, society, etc.

Regulatory compliance generally aims to protect the rights of the stakeholders inparticular and society in general. It defines boundaries, norms, and the work

environment that is beneficial for all. Besides, it gives legal share to the

government in the profits of an entity in consideration of the services it provides.

Ethical business conduct refers to voluntary adherence to ones own and others

rights, manifested in the business processes, product quality, and transactions.

Besides, protecting and maintaining safe and healthy psychological and physical

environment is yet another major aspect of corporate performance. It demands

conducting business in a manner that does not destroy the physical or

psychological environment. Such as, destruction and pollution of physical

environment; harassment and violation of psychological environment; etc.

Proactively fostering mutually complimenting relationship with the permeable

society is but another important dimension of modern corporate performance. It

demands from the corporate to respect the social norms and values; protect native

culture; and last but not the least, not just to ensure equal rights and opportunity

to all without bias but to go a mile extra in improving upon the social standards

and quality of life of the permeable society at large.

Internal Perspective

Firms corporate performance from the internal perspective can be analyzed on a

performance continuum. The performance along the continuum will be from

salvaging (aggregate) through mundane (average) to synergistic (constantly

improving). See diagram below.

Salvaged performance portrays scenario of below average overall efficacy and

sometimes even continued losses. These firms generally lack holistic approach

function from the conventional perspective. Moreover, these firms fail to manage

Synergistic

SalvagedMundane

Corporate Performance Continuum


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their process efficiencies and service/product quality, which hampers their long

term profits. Public sector firms are a good example of such salvaged performance.

Furthermore, these firms quite often have had invested in directions that neither

were nor are feasible from any angle. Such as, big successful companies when

diversify their businesses they usually over look the fact whether they have thecore competencies to operate in the new markets. Or they simply make decisions

on increased projected revenues while keeping their eyes closed on the

corresponding projected increase in cost. Consequently, while the revenues

multiply but the cost hikes by a greater percentage pushing the profits even below

current levels1. As they usually say, Companies grow to doom. The recent

consumer financing tragedy of Pakistani commercial banks is a good example in

this regard.

Mundane performance refers to the scenario where a firm typically attains low

average performance with minimal growth rate on the long term horizon. This is

because the firm may attain higher performance in a particular year but fail to

sustain it on a long term horizon for one reason or the other. At many instances

much of these firms performance depends upon their external situation. For

instance, performance of investment portfolio of an individual largely depends

upon the equity market sentiments. Another example is sugar producers and

retailers who are currently booking humongous profits. Ironically this growth in

their profits is purely a result of the particular market situation rather than their

affirmative strategies and interventions to improve upon their productivity, hence

the growth can never be sustained.

Synergistic performance refers to a

sustainable advantage that comes from

constant change and improvement in

the processes and products of the firm,

which help maintains the firms

growth rate above others. JapaneseKaizen environment, Total Quality Management system, and the Emergent

Leadership practices are good examples of synergistic performance culture. The

basis of this is surely internal to the firms management process. Synergistic firms

distinguish themselves on the following dimensions, namely; profit vs.

sustainability, status vs. roles, authority vs. empowerment, horizontal vs.

Comparison of Core Dimensions

Conventional Firm Synergistic Firm

Short term profit centric Long term sustainability

Status driven positions Roles driven positions

Delegated authority Empowerment

Horizontal diversity ofskills

Vertical and horizontaldiversity of skills

Status quo Constant improvement


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unidirectional diversity, and last but not the least status quo vs. constant

improvement.

Business Process and Corporate Performance

It is important to analyze the business processes that are instrumental inattaining a particular level of corporate performance salvaged; mundane; and,

synergistic. For the sake of analysis and comparison these business processes

can be identified as Control; Manage; and, Lead. To begin with, let us establish

the relationship between level of corporate performance and type of business

processes. Control orientation in

business processes by and large cause

the corporate performance to remain at

salvage level, while managing oriented

business processes improve

performance to the next level i.e.

mundane. To improve corporate

performance to synergistic level the

business process orientation must

change to lead type.

Control orientation is typically a short sighted mindset that instills reactive

practices such as quality control instead of quality assurance. In a typical control

oriented firm administrative discipline prevails over the rationality of behaviors;

legacies are blindly looked upon positively; follower-ship dominates across the

firm; decision making and execution remain detached from each other; functional

subjectivity prevails over holistic reasoning; etc. All this cumulatively inhabit

learning, innovation and change hence fail to prevent performance lapses but to

salvage it only. In brief, firms operating from control orientation remain focused

on fire fighting to salvage short term performance hence lose sight of long term

opportunitiesas in the UK theysay, Penny wise pound foolish, and as in the

Noble Quran ALLAH Al Mighty describes those people who desire (follow their lustin this) world and they will have no reward in the hereafter [ALLAH Al Mighty

knows better].

Mundane orientation is a step forward. It fosters preventive practices per se. In

here, quality assurance supplements quality control, thus allowing the firm to

attain quality performance within bearable limits. Put it differently, by quality

Control

Manage

Lead

Salvaged Mundane Synergistic

Performance

Growth Index


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assurance process the firm ensures strict adherence to given performance

parameters that in effect prevent the performance lapses to a greater extent.

Quality control remains in force to check quality lapses, however, reduced these

may become. Doing so performance is enhanced to a higher level but not beyond

the given parameters par excellence. This is because long term advantagesremain secondary to the short term profits. Subsequently, out-of -box thinking

would still not be there to move out of the short term perspective hence the need

for learning, innovation and change would also remain confined to meetings and

seminars, if at all. Typical firms that consider ISO quality system [certification] as

an end in itself are good representatives of mundane performance. As they say,

like father like son. Bryan Joiner in his book The Fourth Generation

Management, contemplated that firms, which learn and change faster are bound

to supersede others who do not change or do so at a nominal rate.

Synergistic or par-excellence performance is defined as one that constantly raise

firms performance level. There is this saying of the last prophet Muhammad

SAAW in this context, The one whose today is not better than yesterday and

tomorrow is not better than today is doomed. The Lackson Group, a Pakistani

conglomerate, affirmatively inculcates this culture; they say, We raise our bars

every day. Walt Disney said, People think I had made wonders, they were

wrong. When I got together with other people of diverse skills, each better than

the other [better than my self] in his or her respective field we together created

wonders. This follows that synergy essentially entails diversity, interaction and

interdependence. To attain synergistic performance culture the firm essentially

needs to switch to long term perspective; empower by inculcating leadership-

mindset2 across the people without regard to their status and location; instill

unidirectional diversify of skill set at all levels; focus on unique value that each

individual should contribute based on his or her role function; integrate

departmental performances along shared corporate directions; and last but not

the least, transform hierarchies into work groups.

Conclusion:

In the contemporary fast changing extravaganza of global businesses it is

extremely important and urgent for a firm to envisage beyond profit and to

encompass ethical, regulatory, and social dimensions as integral constituents of

external corporate performance. Likewise, attaining synergy in the internal

corporate performance is equally critical to remain eligible and sustain


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competitive position in the global economic village. Any compromise on the

external or internal performance fronts will render the firm in-competitive and

virtually defunct.

____________________________________________________________________________References:

1. Book titled Focus. With apology, name of the author is not known

2. Sohailuddin Alavi, The Emergent Leadership Skills [See exhibit a]


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Exhibit A

The Emergent Leadership Skills

1. Power to Lead: It focuses on individuals readiness to conduct him- or herself from theleadership perspective. A true leadership perspective is characterized by rationalindependent thinking and actions, based on sound socio-moral cognizance, thatcontinually challenge status quo and reform for a better future. Conventionally, however,majority of the people perform from the follower-perspective that essentially hibernatestheir individual cognition, values and perception thus hijacking (altering) their individualthinking. Put it differently, these people begin to live and conduct themselves from analien perspective hence lose sight of their own identity and directions. More so blindlysticking to the past practices, work methods and not challenging the rituals is also but areflection of follower-perspective.

The former perspective inculcates affective energy to take on opportunities and facechallenges innovatively, thus makes the performance meaningful, consistent, and just.

The latter perspective, however, inhabits innovative outlook thus leads to ritualisticbehaviors and mundane performance. As visible above, it is more of self-behavior insteadof interpersonal-behavior. Power-to-Lead entails higher degree of conviction; harnessed

motivation; and, stronger moral integrity in whatever and wherever an individual(employee) performs.

2. EmpowermentEmpowerment provides to the individuals independence and rationalityin their conduct - seeking opportunities, facing challenges, making decisions, executingand shooting problems - in unified direction. Thus at the individual level it improvesconsistency and objectivity in performance, while reducing need for others directions andcontrol. In precise terms, it refers to individuals maturity on the job to the extent thatthey are independently able to conduct on the job hence manage their performances ontheir own. Having said this, empowerment as a skill-set helps individuals perform ratherindependently yet synergistically. Empowerment has following dimensions, namely;discipline, responsibility, and emotional power.

3. Horizon It focuses on the individuals ability to see opportunities and challengesbeyond the present and beyond the obvious. In other words it is an ability to understandthe relationship between discrete present and cloudy future. It is defined as,Insightfulness and ability to clarify directions. Here the term horizon refers to a visionaryperspective with a strong focus on present and a sense of direction that gives meaning tothe vision and focus. Thus it provides a compass to distinguish between productive andunproductive performance based on the end in mind. Horizon can be developed[acquired] through a set of specific characteristics. Such as, being generalist, learning toarticulate, and knowing oneself and his or her environment, dreaming, attention to detailsand insightfulness. Horizon has following dimensions, namely; vision, focus, and sense ofdirection. Let us now discuss each in rather detailed manner.

4. SocialThis has focus on the individuals ability to work and interact with other people.

It is defined as, The interdependence and ability to collaborate and reinforce performanceand relationships. It has the following dimensions, namely; team-player, role-model;moderator.

5. Managementfocuses on the individuals ability to control the business activity and/orprocess in an efficient and effective fashion. It is defined as, Independence and the abilityto make decisions rationally. It has following dimensions, namely; attention to details,systems thinking, and managing change.


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In the previous unit we introduced the corporate performance framework. In this unit we

will discuss the corporate performance planning, both as a system and a process, with theaim to equip you with the knowledge and skills that are required to develop the corporate

plans.

The term knowledge refers to ones understanding of the significance, underlying

rationales and the uses. In this case the knowledge refers to your understanding of the

significance, rationales and the uses of a corporate plan. This knowledge will help you do

the planning in a more informed manner hence more meaningfully. Skills refer to ones

understanding of the process or steps involved in doing a particular task. In this case the

skills refer to your understanding of, as well as the ability to perform the process or steps

involved in developing a corporate plan.

Corporate Planning

The corporate performance plan is considered as a system for it consists of a holistic

(organization wide) corporate plan; and, a set of inter-related secondary plans of individual

units of an organization, which are directly derived from the holistic plan. The chart below

portrays a typical corporate planning system:

Corporate planning entails a systematic process. Many variants of the planning process

suffice for a successful and comprehensive corporate planning though. Here we suggest

the following typical process as one alternate. It consists of the following steps:

Corporate Plan

Human Resources PlanMarketing Plan Production Plan

Action Plan / BudgetsAction Plan / Budgets Action Plan / Budgets


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1. Clarifying business directions

2. Strategic analysis

3. Developing strategic corporate plans

4. Developing derivative plans

Significance

Corporate planning per se is an effective instrument of directing an enterprise

meaningfully and realistically. Its significance is quite obvious, for it provides rationality to

business decisions; consistency of actions and systems orientation in managing corporate

performance. Furthermore, it also provides a useful benchmark to monitor and evaluate

corporate performance on a continual basis.

Many will argue that corporate planning is too much of unnecessary articulation to

conclude an action plan, when we already know what needs to be done. The counter

argument in this case is even if we accept that the manager knows, but all others dont

know. Hence they will be forced to depend on their guess work when given the action plan,

which is more likely to distort their knowledge. Consequently, there will be no

empowerment and secondly there will be distrust and lack of commitment especially when

the knowledge is distorted. There was this incident of a factory; every time the orders were

to be delivered on urgent basis extra production shifts were planned and employees were

compelled to work overtime, they were equitably compensated for the overtime though. As

a general practice, absenteeism used to increase during that period. Frustrated with this

attitude of the employees the management invited a psychiatrist to investigate into this

attitude of the employees. The psychiatrist concluded that primarily there is a mistrust

amongst employees, which is because of the fact that they were never explained the under

lying reasons for the overtime - instead they were simply compelled to work over time and

were left on their own to assume the reasons. On the recommendation of the psychiatrist

the management started sharing the entire information with the employees. The results

were dramatically encouragingabsenteeism reduced to a considerable level, which was a

clear indication of empowerment and commitment amongst the employees.

1 Clarifying Business Directions

Clarifying business directions is the first step. It mainly focuses on developing consensus

of stakeholders on the ultimate and transient values an enterprise is expected to create,

which provides the basis for articulating corporate vision and values


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Two schools of thoughts seem to exist. One considers profit as the ultimate value while

market competitiveness; productivity; human factor efficacy etc. are transient values. The

limitation of this school of thought is that it ignores in totality the need for a win-win

relationship of the enterprise with all the stakeholders those who provide money

[investors]; those who input performance [employees], those who buy or consume theservices or products [customers]; those who make available the materials [suppliers];

those who live and operate in the surroundings [community; etc.

The advocates of second school consider the ultimate value in a much holistic perspective.

They deem necessary that ultimately together everyone [stakeholders] should achieve

more. This leads to the concept of Responsible Business Conduct, which means the

enterprise should conduct its business transaction in the manner that protects theirs as

well as everyone elses rights. In other words, it is to conduct business in a socially and

morally disciplined manner. Here the right to earn profit is not denied but it is demanded

that profit should always be earned in exchange of equitable value to other stakeholders

be it customers, suppliers, employees, government, or the community. This is grossly

contrary to the ritualistic orientation of corporate social responsibility in the former

scenario.

The recommended process of clarifying business directions consist of two levels. In the

first level it entails answering a few questions pertaining to the enterprises business to

uncover the following facts:

What is the enterprise business / value it provides to it customers in particular?

What are the enterprises life line /critical survival factors?

What is the enterprises socio moral obligation?

What is the enterprises legal obligation?

In the second level, business vision and values are articulated in the context of above

uncovered facts. A typical business vision is an expression of futuristic performance. In

other words it describes the anticipated commercial, socio-moral and regulatory aspects of

your business performance obligation. Values are statements of commitment that an

enterprise declares vis--vis its stakeholders. In other words it outlines the code of

business conduct.


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Exhibit 1: Clarifying Business Directions Contemporary Food Outlet

a) What business are we in? [Value we provide to our customers]Our customers visit us for a host of reasons, namely; business meetings andnetworking, leisure, friends and family reunion, celebrate special occasions, etc. We

provide convenient and comfortable environment to do business, leisure and

celebrate

b) What is our life line? [Maximization of profit or something else]Good service, privacy, serene environment, cleanliness, and quality food atcompetitive prices are a few critical factors for doing business profitably. Quality

at competitive prices

c) What is our socio moral obligation? [Just and fair practices, etc.]We are part of the society and are equally responsible to adhere to the socio moralvalues in the letter and spirit. To demonstrate fair business practices and

proactively encourage responsible behaviors, decency, modesty, etc.

d) What is our legal obligation? [Respect and comply with regulations, etc.]Abiding the laws and regulations is reflection of discipline and honesty. To makeall possible efforts not to violate laws and regulations and let not others do

so, even if it costs to the business.

Vision

To keep our diverse customers satisfied by meeting their uniquerequirements and exceeding their expectations within the ambiance of socio-

moral values and legal environment in a commercially viable manner.

ValuesInvestors have put in their monies and have their legitimate right to earn competitivereturn. We must practice financial discipline and commercial diligence in every thing

we do. Do Business Responsibly

Customers provide basis for doing business and for its continuity, however, they arenot responsible for our portability. Customers Value for Money

Employees performance is what businesses sell. Equal opportunity, Justcompensation, and Fair treatment are but their legitimate rights. Empowerment

for All.

Suppliers are partners in business. Just relationship and fair practices are but theirlegitimate rights. All One Team.

Competitors are equally entitled to do their business. Fair Competitive

Practices.

Government and regulators provide good business environment and have theresponsibility to protect interest of the society at large and of the businesses too. DoBusiness the Legitimate Way.

Community and society at large are the owners of environment and resourcestherein. Businesses must operate and consume resources in an environment in the


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best interest of the community and society. Social justice, Respect and

Tolerance, and Equal opportunities for all.

2. Strategic Analysis

Strategic analysis aims to unravel and analyze the business trends opportunities and

challenges in the permeable external environment with reference to the strengths and

weaknesses of an enterprise. This analysis primarily provides basis for setting boundaries

within which an enterprise can successfully operate and accomplish its value creation

function. It also, however, provides clues as to what an enterprise needs to improve upon

to augment its existing value creation function. It is typically a four tiered analysis:

External trends analysis,

Internal analysis,

Financial analysis, and

Summary analysis.

External Trends Analysis

It primarily focuses on identifying opportunities and challenges in the present and

emerging external scenarios. For instance, the type of competition the extent and basis

of rivalries amongst the competitors, socio political scenarios and their likely impact on

the performance of the enterprise; the direct and indirect impact of the regulations on an

enterprise; dependence of and access to technology in efficiently managing an enterprise;

and, last but not the least macro economic prospects.

Internal Analysis

Internal analysis as the title suggests focuses on taking cognizance of [recognizing]

internal strengths and weaknesses of an enterprise in relation to the present and emerging

external scenarios. Strengths are the characteristics of an enterprise that help it cease

opportunities and face challenges in the external world. For instance, strong equity base;

loyal customer base; extended market outreach; technology; patents; innovations; etc.

Weaknesses per seare the opposite of strengths, however, one characteristic may be an

opportunity in one scenario it may turn into a weakness in another scenario. For instance,

humongous equity base can be strength during booming period but may become

detrimental in recession as reduced profit margins will lead to greater reduction in return

on equity. Similar is the case with huge installed capacity. This analysis on one side

provides objective basis for making SMART2 business decisions and on the other side

enables planning and initiating organization development to better position it in relation to

the external scenario.


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Financial Analysis

Financial analysis is done to reflect the probable effect of external trends in the back drop

of internal strengths and weaknesses on the enterprise earning potentials. For instance, it

considers the opportunities for economies of scale; stability of prices of and demand forthe products; operating efficiencies; etc.

Summary Analysis

Summary analysis is a combined reflective statement of previous analyses. In here the

analyst integrates the external, internal and financial analyses in an attempt to arrive at a

conclusion, which can then be an objective basis for developing a consolidated strategic

performance plan.

Exhibit 2: Exemplified strategic analysis in diagrammatic form:

Financial Analysis

Potentially lowering margins and relatively higherfixed cost structures are likely to shrinkprofitability hence competitiveness, unlessinstitutions increase their business volumes,reduce cost of doing business; and, improveemployee productivity at group and individuallevels

External Analysis

Opportunities: Financial services sector inPakistan particularly and in the neighboringcountries will continue to grow in terms of itsproducts, customer outreach, market size, etc.

Threats: Continuing growth in the sector is likelyto increase cost of attracting and retainingcustomers; bring down the average rates offina

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