Feb 24, 2007

Aspects of Culture

Culture is the patterns of behaviour and thinking that people living in social groups learn, create, and share, where culture distinguishes one human group from others. The people's culture includes their beliefs, rules of behaviour, language, art, technology, styles of dress, ways of producing and cooking food, religion, and political and economic systems. In the following I will highlight the main aspects of culture:

Material culture
It represents all physical which are made and it is useful guide to the society’s standard of living.

Educations
The level of education in a new market has a large implication on the promotional campaigns.

Religion
The religions differences must be respect on both marketing and business practice. The sensitivity of such differences could cause the company a big fail to enter such market.

Social organization
The suitable product on a developed country sometimes it is not the same on a less developed country.

Language
Yes, English is international language but there many other language around the world. On the advertising, If the translation is not conducted by a native speaker you business could be negatively affected.

Aesthetics
The standard of public taste is different from country to anther. Many advertising for medical products on the Middle East was not accepted for this reason.

Ethics and mores
Ethics and mores are generally driven by religion and many examples could be observed about that.

Political system
The political systems in the host country need very careful examinations where the marketing strategy involves the setting-up of revenue-earning assets overseas.

Economic systems
These are usually the out come of the political stances of one kind or anther.

Legal system
Many of the third world countries have become more attractive for investors when they reduced the entry barriers.

McDonald’s has been highly successful in markets outside the United States, partly because it has been adept in altering its menu of offering to cater to local tastes. Why? The answer will be the local culture. This objective framework (Leaping) has a negative aspect, which culture incompatibility. By ignoring this risk you could lose. Therefore, companies should take in consideration the culture differences before they start with international marketing activities. Understanding of culture is pivotal to effective international marketing and it has a critical impact on the international marketing strategy.

Feb 21, 2007

The world is rapidly shrinking

The world is rapidly shrinking with the advent of faster communication, transportation, and financial flows. Products developed in one country—Gucci purses, Mont Blanc pens, McDonald’s hamburgers, Japanese sushi, Chanel suits, German BMWs—are finding enthusiastic acceptance in other countries[1]. Thomas Middelhoff of Germany’s Bertelsmann AG, which purchased U.S. publisher Random House, put it this way: “There are no German and American companies. There are only successful and unsuccessful companies[2].” Companies that choose to supply globally need to be aware of the particular opportunities and threats that globalization presents to them. International corporation include popular names like: Citicorp, Coca Cola, IBM and Exxon receive more than 50% of their annual profit from oversees operations. Andrew S. Grove, chairman of Intel Corporation, “You have no choice but to operate in a world shaped by globalization and the information revolution. There are two options: Adapt or Die”. Globalization of the world economy is a market condition that demands bold offensive strategies to protect positions previously won. In other words, companies should adapt the globalization or it will not be able to compete in the era. Since 1969, the number of multinational corporations in the world’s 14 richest countries has more than tripled, from 7,000 to 24,000. In fact, these companies today control one-third of all private-sector assets and enjoy worldwide sales of $6 trillion. International trade now accounts for a quarter of U.S. GDP, up from 11 percent in 1970[3].Many companies have conducted international marketing for decades such us NestlĂ©, Hallmark, Coca-Cola, Procter & Gamble’s and many others but do the result of their international marketing activities are the same? The answer is no. The assumption of one approach works everywhere fails to consider differences that exist between countries and cultures.

[1] Kotler, Marketing Management, The Eleventh Edition p383, Prentice Hall Publications
[2] Joseph B White, “There Are No German or U.S. Companies, Only Successful Once.” The Wall Street Journal ( May 7, 1998), A1
[3] John Alden,” What in the World Drives UPS?” International Business (April 1998):6-71.

Feb 18, 2007

Seven identifiable strategies that can be used in developing an organization

There are seven strategies that could by used to develop an organization (1):
1.Forward integration defined as gaining ownership or increased control over distributors or retailer.
2.Backward integration defined as seeking ownership or increased control of a firm’s suppliers.
3.Horizontal integration defined as selling ownership or increased control over competitors.
4.Vertical integration defined as either backward or forward integration (or both together).
5.Concentric diversification defined as adding new, but related, products or services.
6.Conglomerate diversification defined as adding new, but unrelated, products or services.
7.Horizontal diversification defined as adding new, unrelated products or services for present customers.
As we can see from these definitions, the developing strategy could be either Integration or Diversification.

In theory, the integration can be total from the raw ore to the distribution of the final products to consumers but diversification is adding something new. Vertical integration is the joiner of two or more successive stages of production. Efficiencies, avoiding government restrictions and to take advantage of monopoly-related conditions are the three categories of reasons why firms adopt vertical integration. Vertical integration is favoured by companies that desire a high level of control over their channels. For example, Sears obtains over 50 percent of the goods it sells from companies that it partly or wholly owns; Sherwin-Williams make paint but also own and operate 2,000 retail outlets (2). Often a business’s sales and profits can be increased through backward integration (acquiring a supplier), forward integration (acquiring a distributor), or horizontal integration (acquiring a competitor).

The aim of integration in this case for expanding firm is to capture these profit but we said previously often. In some cases, the more threat of integration may lead suppliers to reduce their prices for components, or customers to offer more attractive terms. We should understand that if one’s suppliers appear to be earning excessive profits, there is no guarantee that a firm integrate backward will be able to achieve such returns. Control over suppliers “may” reduce costs but over integration can cause the opposite effect (3). One of the most known examples of that is Nissan, before it has been taken over by Renault; backward integration caused the opposite effect to them. The integration by existing suppliers will increase the capital requirement of entry into a market and will put potential entrants at a cost disadvantage. Mergers, acquisitions and joint ventures can be methods used to allow companies to achieve company diversification strategies.

Acquisitions and Mergers are the quickest way for a company to diversify. Growth through diversification can be achieved in two ways, either by internal expansion or externally by acquiring, consolidating with, or merging other firms. A purchase of another business is an acquisition. A sales contract is executed under, which the buyer assumes all or some of the seller's assets and assumes all, some, or none of the seller's liabilities. The sale of the RCA computer division to Sperry-Univac in 1971 was through acquisition. A merger is absorption of one company by another company, including all its assets and liabilities. In 1937, Nash Motors absorbed the Kelvinator Corporation, and changed its name to Nash-Kelvinator Corp. Then, in 1954 , the Nash-Kelvinator Corp., changed its name to American Motors, and merged with the Hudson Motor Car Company (4).

The 1990s witnessed record levels of mergers and acquisitions not only in the U.S. but worldwide. In 1998, there were approximately 9,200 mergers and acquisitions involving U.S. companies. These activities had a value of about 1.3 trillion dollars, representing a 13 percent average annual increase in the number of such individual transactions over the last three years. Joint ventures have become a key method utilized by companies to expand or strategically increase a segment of their business. As a part of this, some companies may want to grow fast and move quickly through mergers, acquisitions and joint ventures, sometimes failing to look at what they are buying or joining into. Records were set both in numbers and in the size of the combinations, such as the Daimler-Chrysler and Exxon-Mobil combinations, and the previous example Nissan- Renault. Despite the popularity of such efforts, varieties of retrospective studies have shown that mergers and acquisitions create shareholder value only in a surprisingly small proportion of the cases (5). HP and Compaq is will know example of these unsuccessful mergers.

As we mentioned before, the integration can be total from the raw ore to the distribution of the final products to consumers but diversification is adding something new. The aim of integration is to capture more profit but control over suppliers or distributors “may” reduce costs but over integration can cause the opposite effect. Yes, Acquisitions and Mergers are the quickest way for a company to diversify but there are some limitations to that. The internal growth will reduce equity position to investor's and it will take the organization time to build additional market share and profit. On the other hand, the external growth as it requires stockholder’s consent it may also require added funds to accommodate acquisition to needs and the integrating acquires firm into operations can be a problem. However, another leading strategist, Igor Ansoff, argued that a company should first ask whether a new product had a “common thread” with its existing products. He defined the common thread as a firm’s “mission” or its commitment to exploit an existing need in the market as a whole. Ansoff noted, “Sometimes the customer is erroneously identified as the common thread of a firm’s business (6). As a result, we should be aware about these type of problems associated with the strategies that could be used for organizational development before we make our development decisions.

Feb 17, 2007

The three theories of leadership

What is a leader? Industrial/Organizational psychologists do not seem to be able to agree on a definition. One way to understand leadership, however, is through the differences between a leader and an authority. Authorities are those who hold formal positions that give them the power to direct the behaviour of their subordinates. Managers, supervisors, and bosses are authorities. They may or may not also be leaders, depending on whether they rely solely on their official positions when applying influence on others. A true leader does not use force and coercion to direct his or her followers toward a common goal. There are many leadership theories and I will discuss some them in my answer to the question.

The Traits Theory

The Theory

The Traits theory premise that leaders are born and not made encouraged researchers to look for the key traits or characteristics demonstrated by leaders. They did this by, in the first instance, by comparing the traits of those people who were leaders with the traits of those people who were followers. Secondly, they tried to differentiate the characteristics of those leaders deemed to be effective from those of leaders deemed to be ineffective (1).Early research on leadership was based on the psychological focus of the day, which was of people having inherited characteristics or traits. Attention was thus put on discovering these traits, often by studying successful leaders, but with the underlying assumption that if other people could be found with these traits, then they, too, could also become great leaders (2). The personality traits helped Ralph Szygenda transforming General Motors into the first totally weird car company (3). The trait approach is one of the only leadership theories that focus exclusively on the leader. However, is it only traits that will make a leader?

Evaluation

Pioneer leadership researchers were confident that personality traits essential for leadership effectiveness could be identified through research. Because the trait approach focused exclusively on the leader, however, and not on the followers or the situation, researchers failed to discover any traits that would guarantee leadership success. If we take a look to leaders like Mother Theresa, Bill Gates, and Nelson Mandela, we will find that we cannot find common traits between them. Therefore, we should ask ourselves is the leader or the follower or even the situation. It is nearly impossible to develop an inclusive list of leader traits, and no conclusion can be made regarding the connection between a particular trait and leadership effectiveness. Although a connection between personality traits and leadership effectiveness was discovered, cause and effect were not addressed (4). Early trait theorists failed to acknowledge that being in a leadership role might facilitate the development of leadership traits. In addition, the theory neglected to account for why some individuals might be effective leaders in certain circumstances yet not in others. The trait approach is not particularly useful for the business in the twenty first century because it presumes that personality traits are relatively stable across time, which cannot be happen. It consequently fails to offer a guideline for leadership development. In other words, you should accept what you have because there is no way that you could develop. How we could relay on today business on theory that has not been proved. Traits do not help us to train future leaders because we are accepting the belief that ability is bestowed upon some at birth and therefore cannot be learned. With the complexity of today business, we cannot focus only on the leader but we need to take also in consideration the follower. The traits theory cannot offer us what we need in today business.

The Behavioural Theory

The Theory

The behavioural theory based on that leaders can be made, rather than are born. Successful leadership is based in definable, learnable behaviour. The behavioural perspective of leadership holds that anybody who demonstrates the appropriate behaviours can be an effective leader. The underlying premise here is that it is behaviour and not traits that determines the effectiveness of a leader. Leaders can be made (by learning the appropriate behaviours) and are not necessarily born (1). There are important research programs on leadership behaviour were conducted at Ohio State University, the University of Michigan, and the University of Texas (5). Researcher at Ohio State University surveyed leaders to hundreds of dimensions of leader behaviour. They identified two major behaviours, called consideration and initiating structure. At the same time, University of Michigan took a different approach by comparing the behaviour of effective and ineffective supervisors. Blake and Mouton of the University if Texas proposed a two-dimensional leadership theory called leadership grid that builds on the work of the Ohio state and Michigan studies. The "Managerial Grid" has its advantages and disadvantages. It focuses on observable actions of the leader in order to determine if the leader's main concern is for production or for people. This provides a more reliable method for studying leadership than the trait approach. The Managerial Grid, however, adopted the universal approach. It aims at identifying the most effective leadership style for all situations, which is not supported by evidence in real organizations

Evaluation

Behavioural is a big leap from Trait Theory, in that it assumes that leadership capability can be learned, rather than being inherent. This opens big gates to leadership development. However, Can we relay on this theory to determine leadership effectiveness. Is it possible that the same style would work as well in a gang or group of friends, and in a hospital emergency room? The styles that leaders can adopt are far more affected by those they are working with, and the environment they are operating within, than had been originally thought. By looking to the business today, it is difficult to relay on the behavioural theory for the leadership development for the business in the twenty first century. The behavioural theory did not define a clear relationship between style and performance outcomes. Therefore, two different leaders in same organization adopting the same style their performance outcome is not essentially the same. The behavioural theory has failed to find a universal style suitable for all situations. I could say that this theory along or companied with the traits theory failed to determine leadership effectiveness. Therefore, it may be suggested that we should relay on them because of the uncertainty. Just imagine a big organization like ChevronTexaco is relaying on a theory like for their leadership development plan. Uncertainty is something unacceptable for today business.
Contingency theory

The Theory

The leader's ability to lead is contingent upon various situational factors, including the leader's preferred style, the capabilities and behaviours of followers and various other situational factors. The style selected by a leader in any given situation will depend upon two variables, the personal characteristics of the leader, and how confident that leader is in his or her own abilities. Contingency theories are a class of behavioural theory that contends that there is no one best way of leading and that a leadership style that is effective in some situations may not be successful in others. There are six contingency theories: the LPC Contingency model, Hersey and Blanchard’s situational leadership model, the path-goal theory of leadership, the multiple linkage model of leadership, leadership substitute theory, and Vroom and Yetton’s normative decision model.

Fiedler’s contingency model ‘least preferred coworkers’ is on of these models, which divides the leadership situation into three variables which is leader-member relationship, task structure, and position power. These may be either advantageous or disadvantageous to the leader depending upon the style of leadership chosen. The following table explains how it could be either advantageous or disadvantageous (6).


Evaluation

Contingency theory does not explain why individuals are more effective in some situations than others; also, contingency theory does not explain what to do if there is a mismatch between the leader and the situation he or she faces. Effective leaders could be promoted or moved to new roles that do not fit them on the strength of performance in a role they did. Therefore, with the complexity of today business the contingency theory is not useful up to a certain limit. It stills a step ahead in the way of leadership development. We still are asking for more specially with the tremendous development in the business today. Researchers often find that Fiedler's contingency model falls short on flexibility. However, Fiedler's contingency model is an important model because it established a brand new perspective for the study of leadership. Nevertheless, is this what we need for the business in the twenty first century? I could say that the contingency theory is useful as it gives us a direction to the leadership development but still more researches needs to be done in order to increase the usefulness of it.
Conclusion
Leadership studies can be classified as trait, behavioural, contingency, and transformational. Earliest theories assumed that the primary source of leadership effectiveness lay in the personal traits of the leaders themselves. Yet, traits alone cannot explain leadership effectiveness, which I did explain in my evaluation to the traits theory. Thus, later research focused on what the leader actually did when dealing with employees and it was the first step toward understanding the relation between the leader and the follower. The behavioural theory of leadership sought to explain the relationship between what the leaders did and how the employees reacted, both emotionally and behaviourally. However, as a result of my evaluation I found out that we cannot always account for leadership in different situations. Thus, contingency theories of leadership studied leadership style in different environments. However, contingency cannot account for the inspiration and innovation that leaders need to compete in today's global marketplace.

Feb 14, 2007

Ahmad Deedat

Born in the Surat district of India in 1918, Ahmed Hoosen Deedat had no recollection of his father until 1926. His father a tailor by profession had emigrated to South Africa shortly after the birth of Ahmed Deedat.
With no formal education and fighting off the extreme pangs of poverty, he went to South Africa in 1927 to be with his father. His farewell to his mother in India in 1927 was the last time he saw her alive for she passed away a few months later.
In a foreign land, a boy of nine with no formal schooling and command of the English language began preparing for the role he was to play decades later without realizing it.
Applying himself with diligence to his studies, the little boy not only was able to overcome the language barrier but excelled in school. His avid passion for reading helped him gain promotions until he completed standard 6. Lack of finance interrupted his schooling and at the early age of about 16 he took on the first of many jobs in retailing.
The most significant of these was in 1936 where he worked at a Muslim owned store near a Christian seminary on the Natal South Coast. The incessant insults of the trainee missionaries hurled against Islam during their brief visits to the store infused a stubborn flame of desire within the young man to counteract their false propaganda.
As fate would have it, Ahmed Deedat discovered by pure chance a book entitled Izhar-ul-Haq, meaning The Truth Revealed. This book recorded the techniques and enormous success of the efforts of Muslims in India in turning the tables against Christian missionary harassment during the British subjugation and rule of India. In particular the idea of holding debates had a profound effect on Ahmed Deedat.
Armed with this new found zeal, Ahmed Deedat purchased his first Bible and began holding debates and discussions with the trainee missionaries. When they beat a hasty retreat in the face of his incisive counter arguments, he personally called on their teachers and even priests in the surrounding areas.
These successes spurred Ahmed Deedat in the direction of Da'wah. Not even his marriage, birth of children and a 3 year sojourn to Pakistan after its independence dampened his enthusiasm or dulled his desire to defend Islam from the deceitful distortions of the Christian missionaries.
With missionary zeal to project the Truth and beauty of Islam, Ahmed Deedat immersed himself into a host of activities over the next three decades. He conducted classes on Bible studies and gave numerous lectures. He established the As-Salaam, an institute to train propagators of Islam. He together with his family, almost single-handedly erected the buildings including the masjid whih is still a landmark today.

Born in the Surat district of India in 1918, Ahmed Hoosen Deedat had no recollection of his father until 1926. His father a tailor by profession had emigrated to South Africa shortly after the birth of Ahmed Deedat.
With no formal education and fighting off the extreme pangs of poverty, he went to South Africa in 1927 to be with his father. His farewell to his mother in India in 1927 was the last time he saw her alive for she passed away a few months later.
In a foreign land, a boy of nine with no formal schooling and command of the English language began preparing for the role he was to play decades later without realizing it.
Applying himself with diligence to his studies, the little boy not only was able to overcome the language barrier but excelled in school. His avid passion for reading helped him gain promotions until he completed standard 6. Lack of finance interrupted his schooling and at the early age of about 16 he took on the first of many jobs in retailing.
The most significant of these was in 1936 where he worked at a Muslim owned store near a Christian seminary on the Natal South Coast. The incessant insults of the trainee missionaries hurled against Islam during their brief visits to the store infused a stubborn flame of desire within the young man to counteract their false propaganda.
As fate would have it, Ahmed Deedat discovered by pure chance a book entitled Izhar-ul-Haq, meaning The Truth Revealed. This book recorded the techniques and enormous success of the efforts of Muslims in India in turning the tables against Christian missionary harassment during the British subjugation and rule of India. In particular the idea of holding debates had a profound effect on Ahmed Deedat.
Armed with this new found zeal, Ahmed Deedat purchased his first Bible and began holding debates and discussions with the trainee missionaries. When they beat a hasty retreat in the face of his incisive counter arguments, he personally called on their teachers and even priests in the surrounding areas.
These successes spurred Ahmed Deedat in the direction of Da'wah. Not even his marriage, birth of children and a 3 year sojourn to Pakistan after its independence dampened his enthusiasm or dulled his desire to defend Islam from the deceitful distortions of the Christian missionaries.
With missionary zeal to project the Truth and beauty of Islam, Ahmed Deedat immersed himself into a host of activities over the next three decades. He conducted classes on Bible studies and gave numerous lectures. He established the As-Salaam, an institute to train propagators of Islam. He together with his family, almost single-handedly erected the buildings including the masjid whih is still a landmark today.
He was a founder member of the Islamic Propagation Centre International (IPCI) and became its President, a position he stills hold today. He has published over 20 books and distributed millions of copies free of charge. He has delivered thousands of lectures all over the world and successfully engaged Christian Evangelists in public debates. Several thousand people have come into the fold of Islam as a result of these efforts.
In a fitting tribute to this monumental achievement, he was awarded the King Faisal International award in 1986, a prestigious recognition of enormous value in the world of Islam.
No number of awards and honours can truly capture the man's essence and zeal for Islam.
May Allah (SWT) bless him for all his efforts for Islam, Insh'Allah!
www.islamicinvitationcentre.com/ speakers/Ahmad_Dedat.html

Feb 13, 2007

Decision Making


Before I proceed writhe the models of decision-making, we need to understand the definition of it. Decision-making is weighing up the relative attractiveness of each alternative (2). There are two types of decisions, programmed and non-programmed. The programmed are made frequently, the non-programmed are made infrequently. There are different models of decision-making but some of them are based upon highly structured idealisations about how rational decisions should made. Rational refers to the idea of consistency. In other words, if the same amount of information is presented to two different decision makers in two different places and both of them act rationally, their decisions would be the same. However, we must take into consideration that what is rational with one decision maker could be irrational with another. Essentially, decision models are classified as:

Rational model

The rational model is the model that gives the decision makers clear steps to choose the best choice.

Bounded rational model

This model is based on the decision maker accepting a solution which is good enough rather that the best.

Evolutionary model

Henry Mintzberg observed the way in which decisions are actually made. He concluded that there are many feedback loops within the rational decision making process. Decisions evolve from a complex pattern of feedback loops.
Political model

This approach acknowledges that an organization made up of many different interests. For example, the stakeholders do not necessarily share the same goals of the organization.

Garbage can model

This was first proposed by Cohen, March and Olsen in 1972. This approach views an organization as a collection of problems and solutions. Problems flow through organizations; solutions exist within organizations.


Decisions and Systems Thinking


A system is an inter-related set of elements. One executive has expressed the systems thinking this way, ‘When you trace back the stories, you will find out that all the changes came from hundreds of little things that individuals were doing differently’ (2). Effective systems thinkers do not act as individuals. We have to know that there are two types of systems, closed and open systems. We live in a very complex world and the organization should be a learning organization. Modelling is an important management activity. Modelling helps the decision makers to structure problems and enable them to reflect upon possible consequences of their decisions before taking action. Modelling can be quantitative or qualitative, but we should keep it simple and avoid mega models. The Bounded rational model would solve the limited cognitive capabilities of individuals but there are other psychological considerations that need to be taken into account. Each individual will have his or her own particular view and interpretation of reality. Therefore, different individuals will bring different perceptions to the organization.

Strategic Decision Making


The strategy is the unifying theme that gives coherence and direction to the actions and decisions of an organization. When formatting a strategy the strategic decision maker has to make an assessment for the situation using subjective and imperfect information. There are three levels of strategy: corporate, business, and functional (3). Peter Drucker argues that a company that thinks strategically is one which produces satisfied and loyal customers. Peter Drucker describes the sequence of steps involved in the decision making process (4):

1. Classifying the problem

2. Defining the problem

3. Specifying the answer to the problem

4. Deciding what is right, rather than what is acceptable, in order to meet the boundary conditions

5. Building into the decision the action to carry it out

6. Testing the validity and effectiveness of the decision against the actual course of events

The nature of the decision making process that result in strategies is explained by Henry Mintzberg. After a very helpful survey on this, he suggested that 10 schools of thought about the strategy process could be identified (2).
3.4 Prescriptive Schools (Mintzberg)


I shall attempt to give a brief about each school of thought:

The design school

Strategies are the result of conscious creative thinking based on conceptual modelling. In the design school, strategy is ‘grand strategy’. The CEO is the architect of the strategy and controls the strategy making process.

The planning school

Strategies are the result of the formal planning process led by the senior management team. Strategic decisions are an integral part of the planning process. Mintzberg’s critique this approach because it assumes that the future can be predicted, the strategic planning can be separated from operational management, and hard data analysis and techniques can produce novel strategies.

The positioning school

Strategies emerge from an analytical process that produces knowledge about the trends in the particular industry and than respond to those trends by establishing an appropriate strategy. Mintzberg’s critique is that this approach is too deterministic and the analytical frameworks constrain creative thought.

The entrepreneurial school

Strategies are the products of visionary, strong entrepreneurial leaders. As a result, the process of strategy making is a mystery.

The cognitive school

Decisions are the outcomes of semi-conscious cognitive processes. They are not as conscious and deliberate as the rational prescriptive approach suggests. Mintzberg emphasised the need to understand better, how experience informs strategic thinking.

The learning school

When strategies are implemented, the decision maker learns what works well and what does not. Strategies are adapted in the light of learning. Learning is a process of finding out what works, understanding why it works, and than developing this new knowledge into action and behaviour. This is Mintzberg’s preferred approach.



The political school

Strategies emerge from the power-plays within an organization. The dominant strategy that emerges is that aligned with the preferences of the most powerful group within the organization.

The culture school

The culture school sees strategy emerging from a collective decision-making process in which all members of the organization share a common set of values and beliefs. In this case, organizational life is idyllic and free from power politics and strife.

The environmental school

Changes in the external environment determine strategic decisions. Strategy is a passive process that responds to changes in the external environment.

The configurational school

This is a collage of many of the other schools. Any particular strategy depends upon a number of factors.

Mintzberg contrives these schools of thought and they are analytical and artificial. Their purpose is to focus thinking upon the strategic making process. Mintzberg has found that there is a great discrepancy between what they actually do and what management theory says they should do (5).

Feb 11, 2007

The strengths and weaknesses of the accounting concepts and conventions of the regulatory framework (SSAPs and FRSs)

Accounting is a purposeful activity and is directed towards the specific end of producing financial reports, which contain information which is used by specific individuals such as investors. Investors provide financial resources to the organization. In order for the investor to invest in a specific company he needs information and this information must be true and fair by reflecting the actual financial position of the company. Limited companies are required by law (the Companies Act 1985 or CA 1985) to prepare and publish accounts annually. Many figures in financial statements are derived from the application of judgement in putting those concepts into practice. As a result of that, every one exercising his own judgement on the same facts often comes up with his own conclusions.

Accounting practice has developed gradually over centuries. There are many concepts which are taken for granted in preparing accounts. Accounting concepts and conventions as used in accountancy are the rules and guidelines by which the accountant is guided. All formal accounting statements should be created, preserved and presented according to the concepts and conventions that follow. There are many accounting concepts. In the United Kingdom, the following accounting concepts are laid down in the Statement of Standard Accounting Practice number 2 (SSAP2):
The Going Concern Concept implies that the business will continue in operational existence for the foreseeable future, and that there is no intention to put the company into liquidation or to make drastic cutbacks to the scale of operations. Without this concept, accounts would have to be drawn up on the 'winding up' basis. That is, on what the business is likely to be worth if it is sold piecemeal at the date of the accounts. The winding up value would almost certainly be different from the going concern value .
The Accruals Concept or Matching Concept The purpose of this concept is to make sure that all revenues and costs are recorded in the appropriate statements at the appropriate time.
The Consistency Concept states that with all similar items, similar accounting treatments must be used.
The Prudence Concept states if there are different procedures or different ways of valuations that can be used we must chose the most cautions ones.

There are also The Entity, The Money Measurement, The materiality and The Historical Cost concepts.

From 1970 to 1990, the Accounting Standards Committee (ASC) developed accounting standards with the aim of narrowing the areas of differences and variety in accounting practices. The ASC published 25 statements of standard accounting practice (SSAPs).The SSAPs (Old Regime) applied in particular to the accounts of limited companies in order to give a true and fair view of an enterprise’s results and financial position .

In 1990 a new system came into being for producing standards, following the recommendations of the Dearing Reports, produced for the Consultative Committee of Accountancy Bodies (CCAB) in 1988.This proposed that a two-tier system should be established. The Accounting Standards Board (ASB) is much better staffed and financed than the ASC. New standards issued will no longer be called SSAPs but Financial Reporting Standards (FRSs) in the new regime. In time, all standards will be replaced by or converted to FRSs.

Generally Accepted Accounting Practice (GAAP) is a term that has sprung up in recent years and it covers all the rules, from whatever source, which govern accounting. Most countries have their own GAAP. GAAP is in fact a dynamic concept. This idea that GAAP is constantly changing is recognised by the ASB in its Statement of Aims where it states that it expects to issue new standards and amend old ones in response to ‘evolving business practices, new economic development and deficiencies identified in current practice ’.

The strengths of the regulatory framework:

(a) They reduce or eliminate confusing variations in the methods used to prepare account.

If we take, for example, a company that purchases a new building, we can see many different methods of recording it in the financial reports and the way it records depends on the judgements of the accountant. This could be confusing for everybody. If we take two identical companies and both of them purchased new buildings with the same value we could well see two different financial statements. The regulatory framework did solve this problem which was causing a lot of confusion.

(b) They provide a focal point for debate and discussions about accounting practices.

In this information age, accounting has become more important than ever. For this reason, accounting practices need a focal point for debate and discussions and this problem is being solved by the regulatory framework.

(c) They oblige companies to disclose the accounting policies used in the preparation of accounts.

In accounting there are different methods of recording inventory and also how to record a newly purchased property. The regulatory framework has solved this problem by obliging companies to disclose the accounting policies used in the preparation of accounts. The way that this information will be recorded will affect the bottom line of financial statements of the organization.

(d) They are a less rigid alternative to enforcing conformity by means of legislation.

There were rigid legislations before the regulatory framework. The pressures that the companies faced from those rigid legislations were huge. The regulatory framework has solved this by less rigid alternatives.

(e) They have obliged companies to disclose more accounting information than they would otherwise have done if accounting standards did not exist.

There were very few companies before the regulatory framework who chose to report the cost of sales in their accounts. Such useful information was needed by the investors but many companies did not disclose it before the regulatory framework. This problem, after introducing the regulatory framework, no longer exists.

The weaknesses of the regulatory framework:

(a) A set of rules which give backing to one method of preparing accounts might be inappropriate in some circumstances.

This is a major weakness in the regulatory framework. An example of the inappropriate circumstances is when a company purchases investment properties. In this case applying depreciation is not acceptable.

(b) Standards may be subject to lobbying or government pressure.

The government and the lobbying from some industries did put pressure on formulating the standards. This pressure did cause some standards to be suspended like what happened in USA with FAS 19 as a result of the powerful lobbying by huge oil companies to serve their interests.

(c) They are not currently based on a conceptual framework of accounting.

The regulatory framework is changing constantly as circumstances alter through new legislation, standards and practice. The conceptual framework of accounting is no longer the base for the regulatory framework due to new economic developments and deficiencies identified in current practices.The emphasis has shifted from ‘principles’ to ‘practice’.

(d) There may be a trend towards rigidity, and away from flexibility in applying the rules.

The reliance on judgements in technical accounting matters seems to have gone. Every thing in technical accounting now is relying on the regulations produced by the regulatory framework.

Q. Do the criticisms of the concepts and the regulatory framework mean that published financial statements do not provide investors with useful information?

A. No, they do not.
Much useful information is provided in published financial statements as a result of the regulatory framework. The regulatory framework obliges companies to disclose the accounting policies used in the preparation of accounts. Before the regulatory framework investors were facing difficulties to get full information about the company they wanted to invest in. Much critical information was needed by the investors but the companies did not disclose this before the regulatory framework. Cost of sales data is very important for investors but many companies chose not to disclose that cost before the regulatory framework. More disclosure of non-financial information, more forward-looking information and more information about intangible assets was a result of the regulatory framework. For sure, the investors are still asking for more information. The regulatory framework has helped the investors by obliging the companies to disclose more information than before. Regulatory framework is reviewed regularly for development.
Members of the Financial Accounting Standards Board (FASB) and its staff have been active participants in several efforts to improve the quality of business reporting, which encompasses the broad spectrum of information that a company provides to investors and creditors. The most recent effort was the FASB Business Reporting Research Project. The Steering Committee directing that project published three reports during 2000 and 2001, including Improving Business Reporting: Insights into Enhancing Voluntary Disclosures. This Special Report is another step in that process .
By the information now published in the financial statements, investors now can analyze the company they want to invest in a much better manner.

If we take a look at Enron Corporation and what happened to it, we will find that they published financial statements but with wrong information to look good in front of the investors.

A survey by McKinsey & Company of over 200 institutional investors in 31countries found that over 90% of them want a single unified set of global accounting standards. Out of this study we can find that the investors believe in the regulatory framework. The study also found that ‘accounting disclosure’ is the single most significant factor affecting their investment decisions. If we take a deep a look to the result of this study we understand up to what extent the investors depend on the accounting disclosures in their investment decisions.

As a result, the criticism of the concepts and the regulatory framework does not mean that published financial statements do not provide investors with useful information but it helps the investors more than ever. We can’t say that what happened to some companies like Enron that was caused by the regulatory framework. Investors had gained a lot of benefits from the regulatory framework and they are still asking for more. The development of the regulatory framework is trying to supply investors with what they need.

Feb 10, 2007

Team Motivation by Peter Grazier

Motivation. We hear the term often. Generally we associate the word with human behavior,
meaning, a state of mind that moves us to action. And even though few of us have had formal
training in it, it’s one of those characteristics of life that seems to fit the old adage, “I know it
when I see it.”
For most of my years working in the field of workplace collaboration, this word has held a place
of stature and importance, because it has been, perhaps, the most significant outcome of
worker involvement. As the collaboration trend, and more specifically, the use of employee
teams continues to grow, one question that is taking on greater importance is how to keep the
team motivated over the long haul.
What are the ingredients or characteristics of teams that seem to sustain high levels of
motivation?
I posed this question to a group of people recently and found that it tapped into some deeply
held beliefs about what makes us do what we do. So for those of you working with teams, here
are some thoughts that might help:
What Makes Us Do Anything?
Probably the first question to be answered in a discussion of motivation is “What makes us do
anything?” Why am I writing this article? Why are you reading it? Why did you get out of bed
today and go to work? Why did you join that volunteer organization last month? Why did you
drop out of the other one?
Each day brings with it an endless list of decisions to be made. The process of making those
decisions is driven, in large part, by the hope of a benefit or the fear of a consequence.
For example, I truly enjoy coffee and donuts from Dunkin’ Donuts. I pay them money for the
benefit of enjoying the taste and filling a void in my stomach. However, I limit my intake of
these donuts for fear of the consequences of too much sugar and fat in my diet.
Literally, every decision we make is filtered through this process. The industrial psychologists
have taken this further by defining these consequences as needs. Our needs for
sustenance, safety, security, belonging, recognition, and a sense of growth and
achievement become strong drivers (motivators) of behavior.
The subject of motivation is, at once, simple and complex. Simple, in that it explains much of
what we see happening in human behavior, yet complex when it poses contradictions.
For example, the need to nourish ourselves is strong, and hunger will drive us to extreme
actions, particularly in the case of extreme hunger. However, how does one explain a hunger
strike? How can you explain the actions of someone who has died because they chose not to
eat? The psychologists will say that a higher level need took over....perhaps the need to make
a point about an issue that, to the person, was larger than life itself.
So as we attempt to understand motivation, we need to appreciate the subtleties that exist in
human behavior, and focus our attention on general principles of motivation that have wider
application. At least if we can understand some of these principles, we might be better
prepared to lead or facilitate a long-term, highly motivating team experience.
Why Be Part Of A Team?
You’ve been asked to participate on a team to accomplish some task. Immediately your
decision-making process begins.
l What is the purpose of the team?
l Is it a topic that interests me?
l Who will be on the team with me?
l What kind of authority will we have?
l Is it important to management?
l What is the reward for participating?
l What is the risk (perceived as punishment) for not participating?
l How long will it run?
l Will I be better off as a result of my participation?
These are some of the questions we ask ourselves when faced with an invitation to participate
in some kind of team. Are they typical questions?...of course. Do they relate to our motivation
to participate?... certainly.
Sometimes, however, we are not given the opportunity to refuse participation on a team: for
example, a work group or an organization that has restructured itself into self-directed work
teams. In these cases, by default, we are part of the group or team.
Nevertheless, in either case, motivation can rise or fall depending on a myriad of factors. Let’s
look at some of them.
Factors That Influence Team Motivation
I. Purpose
I have asked people for years to describe the characteristics of their most successful and
rewarding team experiences. At the top of almost everyone’s list is a clear purpose, focus, or
mission. But further, for long-term motivation, it must be a purpose or mission that they find
aligns with their personal wants and needs.
One can be asked to participate on a temporary task force. If the mission is clear, he might be
able to sustain motivation for the duration if he feels it is important. However, if it is a topic that
is not in line with his wants and needs, his motivation to continue may diminish.
Many years ago on a construction project, I had assembled a group of electricians to
streamline the process of making cable terminations. Since they were all electricians, I thought
there would be great interest in working on a process that was frustrating people the way it
was designed.
About a month into the group’s work, they were having great difficulty maintaining momentum
and focus. When I asked them why, they said that some of the electricians were conduit
specialists and some were cable tray specialists, and that those not working directly with the
cable terminations simply couldn’t get interested in the subject. What a lesson for me!
Motivation in this case was lacking because the team’s purpose was not in line with
some of the members’ wants and needs.
So one strategy with a lethargic team might be to stop the process, re-visit the team’s purpose
or mission, and see if there’s alignment on it. Even with a team that seems well-motivated, it
still is a good strategy to recheck once in a while.
II. Challenge
Another term that I hear frequently when I ask about team motivation is challenge. The human
species, as with most animals, has been given a survival mechanism called fight or flight
syndrome. When presented with a challenge, our defenses are alerted to move us to action....
to run away from danger or address it directly.
Many people will say that their most rewarding team experiences resulted from some sort of
challenge. I’ve heard the stories often of mediocre groups that responded to a challenge with
heroic success. The challenge itself was the motivator.
In the workplace, these challenges occur infrequently. Teams are not presented with
stimulating challenges every day. So the question becomes how to provide challenges to the
team at more frequent intervals.
An additional criteria for a challenge is the level of difficulty. If a challenge is too difficult,
perhaps perceived as impossible, then team members may give up before they start.
However, the same result may occur if the members perceive the challenge as too easy. Little
energy is required to accomplish something so easily obtained.
So for ongoing teams, periodic stimulation in the form of a worthy challenge is another method
of maintaining motivation.
In 1983, I was managing a work group for a large construction organization. It was a long-term
project (10 years), and senior management had discussed conducting an open house for the
workforce. Management, however, had always nixed the idea--fearing the difficulty of
coordinating an event that would encompass seven thousand workers and their families.
My work group heard about the idea, however, and asked to take on this assignment. There
was enormous interest in conducting this event within the workforce, so with much support, my
group planned and successfully coordinated an open house that ultimately attracted over
10,000 people.
The challenge for my group was enormous....but achievable. The challenge created high
levels of motivation while planning the event; and the sense of accomplishment after the event
sustained motivation even longer.
I don’t suggest by this example, that every work group take on such a formidable task, but
simply think about the implications of taking on a new challenge periodically.
III. Camaraderie
Seldom, if ever, in our MBA programs (which purport to be leadership development programs)
have we seen courses of study in team development and motivation. That is changing now
and will continue to change in the future.
If one studies highly effective groups, one finds that the most successful groups over the long
haul tend to address both the technical needs and human needs. These groups are at the
same time competent in the work they perform and highly functional in their interpersonal
relationships. The group is well balanced in both technical and human skills.
Another factor that emerges from my queries about successful teams is camaraderie, meaning
comradeship, fellowship, and loyalty. The people on these teams genuinely like each other
and work hard to develop and maintain their relationships.
Although they are probably not aware that research supports this behavior, they just seem to
understand that it’s a lot easier to support your team member when you have a good
relationship. The fallout from this kind of relationship building is open and direct
communication, frequent praising of each others’ contributions, and mutual support.
So, you will say, that is all well and good for teams whose members like each other, but what
if they don’t like each other?
Much of the time we like or dislike someone, it relates more to how well we understand them.
And since our formal training has not addressed this, most of us enter adulthood ill-equipped
to deal with the myriad of personalities, temperaments, cultures, values, beliefs, ideologies,
religions, and idiosyncratic behaviors of those we meet.
One way to break down these barriers is to expand one’s understanding of his own
species. Training is available to address most of the topics above, and exercises can be
beneficial if they move us to another level of understanding.
But don’t overlook the simple solutions. Designing an off-site activity for the team, sometimes
just to play together, is a powerful way of building camaraderie. For more thoughts on this,
see our article "Celebrations and Events to Build the Team".
IV. Responsibility
In general, people and teams are stimulated by being given responsibility. Having ownership of
an identifiable block of work is a long-held tenet of motivation in groups.
Responsibility can be tricky, however. Implied in this concept is the understanding that the
responsibility comes along with authority to make the necessary changes. Teams that have
both the responsibility and authority tend to maintain motivation over longer periods of time.
Responsibility can be demotivating if the consequences of error or failure are too great.
If the organization, for example, has a history of punishing mistakes, then the giving of
responsibility is viewed more as a negative. The short-term performance may be good
(remember fear is a motivator), but long-term motivation will suffer. It is difficult to sustain high
performance when energy is being sapped by fear.
V. Growth
Finally, personal and team growth can provide another basis for sustained motivation. When
people feel they are moving forward, learning new concepts, adding to their skill base,
and stretching their minds, motivation tends to remain high. Personal growth adds value to
the individual, enhancing self-esteem and self-worth.
Accordingly, team members and team leaders should look for opportunities that help add
knowledge and skills. A good technique is to simply ask members what they would like to get
from their association with the team, then listen for areas of possible growth.
VI. Leadership
A good leader can be a catalyst for motivation in the short term, but the best leaders create the
conditions for the team to motivate itself.
We have all seen examples of how leaders inspired teams to accomplish some phenomenal
task. History books and Hollywood are full of these stories, and we come to honor these
leaders.
But the charismatic leader that can be so effective in the short term, cannot necessarily sustain
motivation indefinitely. Motivation is inherently intrinsic, residing within oneself. Therefore, if
one depends continually on another for their source of motivation, eventually it ends.
Great leaders have a knack for helping others see the best in themselves, providing the
stimulus for self-actualizing behaviors.
But great leaders also understand the importance of team purpose, challenge,
camaraderie, responsibility, and growth, and focus much of their time on creating the
conditions for these to exist.
Great leaders understand that their team members have needs, and that for motivation to
grow and continue, the activities of the team must help in some way to meet these needs.
Summary
A team whose members are aligned with its purpose, feel a challenge in their task, have a
strong sense of camaraderie, feel responsibility for the outcome, and experience growth as a
team and in their personal lives, will tend to sustain motivation over the long haul.
This is not to say that they will not have difficulties at times, or that members’ wants and needs
won’t change over time. In these cases, sometimes changes will have to be made. A member
who no longer feels the team is meeting his or her needs may have to leave the team to
continue on their own path.
But, in as much as it is possible to sustain motivation indefinitely, the factors above will tend to
create the best possible environment for it.
(originally appeared in EI Network January, 1998)

Organizational Culture

The interest in the organizational culture was initially driven by a desire to understand its impact on organizational performance. The economic success of Japanese companies in the 1980s, at a time when western firms were seen as inefficient bureaucracies, also gave impetus to the culture literature. Japanese companies seemed to have particular methods of employment management that created committed employees capable of producing high quality goods (1). Culture can be defined as the set of the key values, beliefs, understandings, and norms shared by members of an organization (2). The idea of culture has a much longer history. Jaques (1952) was perhaps the first to use to term within a work context in his The Changing Culture of a Factory, which analyzed participatory management in a metal company. Subsequently psychologists like Argyris (1964) noted the effects of the organizational values on individual psychological health. Writers like Pascale and Athos (1980), Peters and Waterman (1982) and Deal and Kennedy (1982) argued for the replacement of the old fashioned values with strong cultures. The message was that in order to be successful, companies had to change their core values. The strong use of culture therefore links the management of culture to organizational success. This approach has been most clearly found in the work of Peters and Waterman (1982), Deal and Kennedy (1982) and Kanter (3).

Feb 7, 2007

Can we change our life?

This question came to my mind when I was thinking about the first post.

Have you asked yourself this question?

What you need to do to make this change happen?

Did you try?

Are you happy with the result?