Transformative Organizations

Transformative

Organizations

GLOBE stands for the Global Leadership and Organizational Behavior Effectiveness Program, led by Professor Robert House, at the Wharton School. GLOBE is now a network of about 200 investigators in more than 70 nations. In Phase I and Phase II of the GLOBE program, over 15,000 middle managers from 1,000 firms in 62 societies completed the GLOBE survey examining how societal and organizational cultures affect the acceptance and effectiveness of leadership practices. In Phase III of the GLOBE program, funded generously by the National Science Foundation of the US, about 2,000 CEOs have been interviewed and about 15,000 top managers have been surveyed assessing how values-based and entrepreneurial leadership practices influence management of change, organizational climate, and societal performance. In India, Phase III of the GLOBE program is being undertaken in all the 28 states and 2 of the Union Territories, with a target sample of more than 1,000 professionally run as well as family-based companies. Dr. Vipin Gupta is coordinating the India project through GLOBE India Development Center, situated at the EMPI Business School, Delhi, India. This book was written with the help and support of the following members of GLOBE India Development Center. Associate Editors J. Rajasekar

Neelu Rohmetra

Pankaj Saran

Associate Reviewers Girish K. Agrawal Ashok Aima Kanika T. Bhal Subhash Chandra Nimit Chowdhary Sukhendu Debbarma Rosemary R. Dzuvichu Mathai B. Fenn Sridhar Guda Lokanandha Reddy Irala Mohamed Basheer Khan Seema Mahajan Mary Matthew Kumkum Mukherjee

Renu Nagar N. Natarajan A K Pani Guru Prakash Prabhakar Roma Puri Sarika Raghav Neeti Rana Dinesh Sharma Mrinalini Shrivastava Niti Singh Ancheri Sreekumar ES Srinivas Gita S. Surie Fr. Vattathara M. Thomas

Transformative

Organizations A Global Perspective

Editor

Vipin Gupta

Response Books

A division of Sage Publications New Delhi l Thousand Oaks l London

Copyright © Vipin Gupta, 2004 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2004 by

Response Books A division of Sage Publications India Pvt Ltd B–42, Panchsheel Enclave New Delhi 110 017 Sage Publications Inc. 2455 Teller Road Thousand Oaks, California 91320

Sage Publications Ltd 1 Oliver’s Yard, 55 City Road, London EC1Y 1SP

Published by Tejeshwar Singh for Response Books, typeset in 10/12 points Garamond by Innovative Processors, New Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Transformative Organizations: A Global Perspective/[edited by] Vipin Gupta. p. cm. Includes bibliographical references and index. 1. Organizational Change, 2. Strategic Planning, 3. Organizational Learning, 4. Organizational Behaviour, 5. Industrial Management. I. Gupta, Vipin, 1968— HG58.8.T698 658.4¢06—dc22 2004 2003017028 ISBN: 0–7619–9820–9 (US-HB)

81–7829–331–5 (India-HB)

Production Team: Gargi Dasgupta, R.A.M. Brown, Ritu Singh and Santosh Rawat

Contents Preface

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1. An Introduction to Transformative Organizations Vipin Gupta

1

Part I: Asian Context Concepts and Case Studies in the Indian Context 2. The Transformative Organization The Coates of India Story Vipin Gupta l Kumkum Mukherjee

l

Roma Puri

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3. A Model of the Transformative Organization Learning from the Wesman Group of India Vipin Gupta l Kumkum Mukherjee l Roma Puri

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4. Roles of Principal Players during Restructuring The Orissa State Electricity Board Thillai Rajan A. l V. Anand Ram

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5. Metamorphosis at India Post The ePost Initiative Srikumar K. l Ananda Sarkar l Bharat Kumar L. l Rajni Ravindran l Ramkumar Ganesan l Shubhosree Dasgupta l R. Srinivasan

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Functional Strategies in the Indian Context 6. Knowledge Management and Change Processes Lessons from Kabir Vipin Gupta l Deepak Kaul l Mrinalini Shrivastava

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7. Innovative Compensation Practices for Organizations in India Atul Mitra

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8. Internationalization of Small Scale Enterprise Networks A Study of Exporters from Aligarh David Watkins l Nitin Jain

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9. Transformative Brand and Organizational Communication Vipin Gupta l S. Ramesh Kumar l J. Rajasekar

161

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CONTENTS

Geographical Strategies in the Confucian Context 10. Performance Drivers of Corporate Restructuring in Korea Seungwha (Andy) Chung l Gyeong Mook Kim

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11. Globalization of Market-driven State Enterprise CHN-CHN Ceramics (C&C), China Jifu Wang l William R. Boulton

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12. Development of Chinese Managerial Behavior A 7-P Model based on the Forces of History and Culture Kai Cheng Yu l Ping Ping Fu

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13. An Integrated Theory of Management Geography Japanese Hybrid Factories in the Three Major Regions Tetsuo Abo

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Part II: Trans-Asian Context The Northern European Context 14. Acculturation of Cross-border Acquisitions Cowboys in Germany Thomas Steger 15. Employees as ‘Co-Intrapreneurs’ An Evolving Perspective for Managing Change in the Germanic Context Rolf Wunderer 16. Functional Flexibility in the Norwegian Context Strategic Adaptation vs Competence Orientation Paul N. Gooderham l Bente R. Løwendahl l Odd Nordhaug

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The Anglo Cultures Context 17. Transformational Forces in the American Corporate System Managing Changes in the Production Methods and Workforce Organization Tetsuji Kawamura 18. Internationalizing the American Franchise System The Value of Resources, Agency Capabilities and Strategic Intent Ilan Alon 19. The Positive Psychology of the Transformative Organization A Fresh Perspective and Evidence from the Anglo Context Paul T.P. Wong l Vipin Gupta

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The Latin Cultures Context 20. Sense-making in Change Interventions Lessons from Argentina Carlos Altschul

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CONTENTS

21. Cultural Symbols as Change Agents International Joint Ventures in Mexico Anabella Davila l Edmundo Garcia 22. Managing Change Designing Organizations using the Evolutionary Perspective Luca Solari

VII

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The Diverse Global Context 23. Multinational Ethical Capability A Source of Competitive Advantage Paul F. Buller l Glenn M. McEvoy

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24. Behavior of Firms during Economic Liberalization Conceptual Propositions and an Integrative Model Sougata Ray

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25. Organizational Design Under Post-modernization What can we Learn from the World Values Surveys? Vipin Gupta l Mathai B. Fenn l Ancheri Sreekumar

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26. Concluding Comments on Transformative Organizations Vipin Gupta 27. Epilogue An Overview of the GLOBE Research Program Robert J. House

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Notes on Contributors

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Index

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Preface This book may be regarded as a step towards the study of comparative organizational metaphysics—broadly and heuristically explicating the nature of organizations in different regions of the world, the meaning their existence carries, the cultural sources of this meaning, how leaders can and do bring this meaningful value to the world by creating and transforming organizations, and how such organizational transformations may be sustained to offer unique value in both emerging and industrialized market contexts. I hope this book is able to highlight a need for further paradigm development in the study of organizations and their strategic management. The analysis and conclusions are the results of my research on the culture, leadership, organizational behavior, performance, technological growth, Japanese management, and emerging markets, at both doctoral and post-doctoral levels at the Wharton School of the University of Pennsylvania. During my doctoral research, I was fortunate to be affiliated jointly with the Wharton School and the University of Tokyo. At the University of Tokyo, I was in close touch with two major research projects—the Japanese Multinational Enterprise Study Group under Professor Tetsuo Abo, and the Japan cell of Massachusetts Institute of Technology’s (MIT) International Motor Vehicle Program under Professor Takahiro Fujimoto, that offered path-breaking insights into Japanese culture and the difficulties that Japanese firms face in coming to terms with the development of China and increasing protectionism in the West. At the Wharton School, I was exposed to strategic and macro-economic issues by several leading international authorities, including Professor Harbir Singh; Professor Jeff Dyer; Professor Jitendra Singh; Professor John Kimberly; Professor Masaru Yoshitomi; Late Professor Ned Bowman; Professor Dan Levinthal; Professor Connie Helfat; Professor Marshall Meyer; Professor Bruce Kogut; Professor Guido Krickx; Professor Ian Macmillan; and Professor Max Boisot; with all of whom I was engaged in one or more research projects during the course of my doctoral work and subsequently. Since 1997, I have had the privilege of working as a junior colleague with Professor Robert (Bob) House, the founder and initiator of the 62-society GLOBE research project on culture, leadership and organizational behavior effectiveness, at the Wharton School. The final chapter of the book contains an overview of the GLOBE research program by Bob House, adapted from the proposal submitted to the US National Science Foundation in 2000 for funding GLOBE’s CEO study. In terms of this book,

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GLOBE is truly a transformative undertaking as it has discovered new meanings and provided new connections among the scholars around the world. As a member of the GLOBE program, I have enjoyed substantial lively interactions with cross-cultural scholars in several national and international forums, including in Latin America, North America, Europe and Asia, and online through the exchange of emails, working closely with Paul Hanges, Mansour Javidan, Peter Dorfman, and Mary Sully—the core members of GLOBE integrative team. I am especially grateful to the members of the GLOBE India Investigator Network, who are helping to collect interview and survey data on CEOs and top managers in different states of India, for a comparative analysis with GLOBE’s new ongoing study of value-based leadership in around 35 nations. In addition to the funding offered by Globe Research and Educational Foundation through the US National Science Foundation, general financial support for the study has also come from the Indian Institute of Management (IIM), Indore. The Xavier Labour Relations Institute (XLRI), Jamshedpur has helped in extending the network to the rather inaccessible eastern states of India, with Don Bosco Youth Mission & Educational Services, Guwahati taking responsibility for data collection in Northeast India, and being the first at the all-India level to actually deliver the data! The idea for this book originated and the work developed through interactions with the members of the GLOBE India Investigator Network, and I am very grateful to them for sharing with me their ideas and insights from the key concerns of the CEOs interviewed by them. In particular, I must acknowledge J. Rajasekar (Principal Co-Investigator, GLOBE India project, at IIM Indore), Neelu Rohmetra (State Co-Investigator— Jammu & Kashmir, GLOBE India project, at Jammu University), and Pankaj Saran (Vice President, EMPI University, New Delhi), for their critical inputs at various stages of the making of this book. Rajasekar reviewed several chapters and helped abridge some of them for crisper reading. Neelu invited several scholars to submit contributions to this book, and urged me to initiate this project. I am also grateful to the two anonymous reviewers, and Leela Gupta (Consulting Editor, Response Books, Sage, New Delhi), who provided constructive feedback, and helped substantially improve the manuscript. I would like to make a special mention of the assistance of the following students at management institutes of Indore (Devi Ahilya University, Institute of Management Studies, and Prestige Institute) in transcribing the interviews of Indian CEOs: Saunak Ghosh, Warsi Syed, Vishnu Mishra, Trishla Jain, Swati Yadav, Sumit Harkauli, Shilpi Sinha, Shikha Sharad, Shashank Shukla, Puneet Kotha, Preetish Gupta, Preeti Arora, Preeti Kshirsagar, Nivrati Grover, Gaurav Shrivastava, Arpita Gupta, Amrita Burman, Ambuj Dixit, Abhishek Mehrotra, Abhinay Saxena, Peeyush Sharma, Anubhav Kansal, Huzefa Malak, Nidhi Mehrotra, Shalini Saboo, Somesh Surana and Javed. Ms. Mrinalini Shrivastava and Ms. Renu Nagar helped coordinate the efforts of these students.

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I hope that this book, based on the contributions of scholars from around the world, would serve to strengthen the bridges among different communities and organizations across the globe. The support of my family members, in particular my wife Bhakti, her parents Virendra Jain and Madhur Jain, and my parents Surender Nath and Manju Gupta, and love of my nephew and nieces, Navya, Shanaya, Smrit, and Ritvik, and of my siblings, uncles, aunts, friends, and colleagues, also deserves a special mention for inspiring the accomplishment of this work. I remain indebted to my Guru Param Siddh Kartar Singh Yadavji for His spiritual and divine blessings. Vipin Gupta February 24, 2003 Philadelphia

AN INTRODUCTION TO TRANSFORMATIVE ORGANIZATIONS

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1

An Introduction to Transformative Organizations Vipin Gupta

India and the other new economies in Asia and around the world are going through a period of unprecedented crisis. In the aftermath of 9/11, high-profile corporate scandals, and a global slowdown, growth of the new global economy has languished, and unemployment has risen with many educated workers losing their jobs and recruitment drying up for the new graduates. Many corporations have gone out of business, and others have abandoned or postponed their investment plans. Even the Information Technology sector—the driver of the dreams in the new economy—has reeled under conditions that have influenced virtually every sector including automobiles, consumer electronics, consumer durables and steel. Tourism, particularly air travel and the hotel industry, is severely affected with an unusually low number of international tourists, significantly hindering initiatives for international integration. The micro-economic crisis has created problems of massive proportions on the macro-economic front. In India, for instance, the combined central and state government fiscal deficit is almost 10 per cent of the national income, far exceeding the international norms of financial stability that require it to be below 3 per cent. Consequently, the government as well as the private sector has been unable to commit $30–$40 billion annually into the infrastructure that India needs to emerge out of poverty on a sustainable basis. The need of the hour is ‘a better understanding of the micro workforce climate of the organization and formulation of the practices and policies that generate, promote, sustain and reward performance oriented behaviors’ (Pattanayak and Gupta, 2003). McKinsey reports that India’s labor productivity is just 8 per cent of US levels— ranging from 1 per cent in electricity distribution to 44 per cent in even software. Even in a dozen ‘modern’ sectors, labor productivity is 15 per cent of the American rate. In general, there is a tendency to seek government action to manage crisis. Such tendencies are particularly stronger in nations with a substantial reliance on the new economy, as government support is seen as a way to protect initial investments and to ensure that firms in the nation survive and remain competitive when the global slowdown reverses itself. Government support is important, but more important is to transform a situation of crisis into a window of opportunity. As Ian Macmillan (Pattanayak

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and Gupta, 2002) observes, the challenges of entrepreneurial leadership are best met ‘in recognition of the appropriate context if a performing organization has to be created’. More generally, Pattanayak and Gupta (2002) explicate that with the onset of economic reforms, liberalization and globalization, Indian and other new economy corporations are witnessing a modern-day Darwinian phenomena of the survival of the fittest, where only those companies can exist that are able to understand and rapidly adapt to change. Even in the US, history shows that only a select few of the fittest survive the changing context. Of the US companies that made it to the 1955 Fortune 500 list in terms of the highest sales revenues, about 75 per cent are now out of business; of those in the 1980 Fortune 500 list, only about 50 per cent still exist as corporate entities. With the emergence of the new economy, the average life span of the companies at the top is rapidly declining. The need of the hour lies in an entrepreneurial leadership focused on the transformative organization—an organization that has a capacity and capability for continuing change and learning, based on a systematic and strategic priority on meaningful cross-cultural exchanges. The transformative organization is capable of discovering opportunities and patterns in the volatile global context, based on an insightful appreciation of the models and perspectives from different cultures of the world. This book highlights the link between the diversity of cultures and corporate strategy (strategic alliances, supply chain management, customer relationship management, and mergers and acquisitions), and showcases how diversity can be leveraged as a vehicle for learning and cross-cultural value accrual. Modern corporations have done well to share their own values with communities and groups around the world, and in selectively conducting business only with those who subscribed to and endorsed these values. However, they have failed to capitalize on the opportunities offered by the post-modern milieu, where all people have the right and freedom to determine their own favored values in a democratic fashion. Entrepreneurial leaders must develop a transformative perspective, so that they are not stopped from accepting and respecting people from different parts of the world for the specific set of values they have. The transformative perspective calls leaders to engage in a fruitful dialogue and conversation about the foundations and relevance of the values of different people. It focuses on appropriate enrichment and development of a portfolio of values that can be used by people around the world to deal with specific situations and challenges.

Transformative Organization in New York City To understand the challenges for managing crisis situations, in April 2002, we interviewed senior managers and entrepreneurs of New York City, with the help of business students at Fordham University. Most of the respondents were from the services sector, since New York City is largely a service economy, but some manufacturers with their offices in the city were also included. Nearly all the 30-odd respondents indicated that the events of 9/11 had heightened the

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responsive elements. In general, the respondents characterized the culture of New York city businesses as either ‘predatory’—with a material focus on acquiring wealth and, if there is a hurdle, to resolve it by hook or by crook; or ‘pragmatic’—a technocratic focus on innovation, quality, efficiency, and service initiatives. However, in the aftermath of 9/11, the respondents indicated a transformative shift towards the responsive culture founded on three levels: (a) asympathetic attitude (inter-personal level); (b) social consciousness (collective level); and (c) resolve (personal level).

S YMPATHETIC A TTITUDE A very strong common perception was that 9/11 events changed people’s interactions and respect towards one another, and changed employers’ minds, eyes, and hearts and increased their sympathy to workforce problems and concerns. It gave people a chance to step back and to realize that there are far more important things in this world than greed and the bottom line. The most noticeable impact was immediate in that people were more humane toward others; there was increased camaraderie, more honesty, and greater enjoyment and happiness in everyday business because one never knows what tomorrow may bring. On a more sustainable basis, knowing that the clients and the companies one conducts business with are reputable and can be trusted became critically significant.

S OCIAL C ONSCIOUSNESS A general perception was that 9/11 transformed the collective business culture into one in which rebuilding New York City’s economy was of utmost importance. One respondent noted that, relationships with clients became more personal as firms made an increased effort to be respectful of people’s fears, moods, and feelings. Another observed that people have come to understand the value of human life and the resolution of social problems. Many have and will continue to follow in the footsteps of the Red Cross, showing compassion for human life and taking a genuine interest in society. People were proud of making real contributions to the society. Businesses publicly supported socially conscious organizations to increase their emotional appeal to the public, especially current and potential customers.

R ESOLVE The final theme with 9/11, was that business has not changed, just the way we do it has. Some felt that the events changed a lot of the ideals of corporate America; that the companies now put more focus on the importance of the individual. However, the business has remained the same, because like anything in life, in order to be successful you must be able to ‘roll with the punches’. Others observed that it was important to maintain strong values and ideals in order for businesses to get back on their feet. Ideals must be strengthened, not changed to keep a sort of normalcy within a company.

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On the whole, the 9/11 events shaped stronger connections of business culture with the people and society around and thus forged a stronger, empathic sense of responsiveness. The general consensus was that the successful rebuilding of New York City as a global center calls for a responsive-pragmatic entrepreneurial leadership, and this can hardly happen using a materialistic culture typical of the city.

IMPLICATIONS FOR MANAGING CHANGE The study of response to the 9/11 crises in New York City has interesting implications for understanding the sources of crisis while managing in a culturally diverse milieu. Most transnational corporations find the costs of managing the business model across borders to be exorbitant. For instance, Japanese firms have experienced substantial costs and dilemmas while seeking to transfer their organizing principles, management models, learning techniques, and technological solutions across borders (Abo, 1994). The barriers have been both cultural as well as work-cultural in nature. Culturally, the norms for managing contracts and relationships, for problem solving, rewards, and compensations, and for responding to change and competition, differ considerably across borders. Even where there were no major cultural differences, the variations in work conditions—deriving from factors such as differing institutions, histories, government policies, cost of capital, supplier capabilities, workforce skills, consumer awareness, and economic development—have been frequently huge. The limitations of the cross-border organization have become a major source of continued recession in the Japanese economy since the late 1980s (Gupta, 1998). The early solutions to the management of cross-border diversity were either mental or structural in nature. Perlmutter (1969), for instance, highlighted the need for a geocentric mind-set that would allow international managers to work out a business model that transcends the logic of both the enthnocentric home nation and the polycentric host nations. On the other hand, Stopford and Wells (1972) uncovered shifts in the structures of American multinationals from a simple structure or a structure with an international division into more sophisticated worldwide product and worldwide geographical structures. These sophisticated structures worked on the basis of a cohesive product or a regional strategy depending on whether product-technology or market-responsiveness dominated business effectiveness. The ideal of developing global managers, whose careers would give them experiences in different cultures around the world, remained a distant reality in most corporations. With the growth of self-managing work teams, where many management roles are bestowed on the grassroots level, the possibility of relying on geocentric managers became even more remote. The shortcomings of the two structural solutions became evident in the 1970s itself when firms began experimenting with alternatives such as the Matrix form to manage both product-technology as well as market-responsiveness demands, though without much success.

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The transnational solution of Bartlett and Ghoshal (2001), has sought to resolve product efficiency, market responsiveness, as well as technological learning challenges of contemporary global corporations. The key to the transnational solution is its emphasis on ‘shared values’—the highly visible and clearly identifiable set of core corporate values, which are publicly endorsed and communicated by top managers and which are used to select, socialize, reward, and promote employees at all levels of organization. The mantra of ‘shared values’ became so popular during the 1990s that several corporations used it to screen their suppliers around the world, and to build their distinctive cultural identity through brands and corporate reputation. However, recent research on cross-border cultures suggests that the contemporary corporate focus on ‘shared values’ is severely inadequate. The values of people in different nations are significantly different, even when one considers very basic and universal value concepts such as honesty (Schwartz, 1994). Therefore ‘shared values’ can demoralize and alienate the vast majority of people in several, if not most, nations. These people may believe, and with some substantive historical, experiential, and cultural basis, in their own value perspectives. When the corporation shuts off all possible learning conversations and dialogues on values by emphasizing its own set of shared values, it may develop into a self-centric entity isolated from the dominant values in the multifaceted global milieu where it is operating. The failure of Enron, which took deep pride in its values—the values that encouraged free risk-taking and entrepreneurship and where the top managers let everyone perform on their own and honestly believed that this has and would further the corporate fundamentals—is instructive. Enron’s failure was not just because of its isolation from the values around the world, but also quite ironically because of its isolation from the values within the US, its home base. The concept of ‘shared values’ that uniquely define the identity and reputation of a corporation can thus push firms into deep black holes, where they are blinded from the limitations of these shared values. The concept of shared values is fundamentally antithetical to the thrust on organizational learning. A learning-oriented organization encourages people to seek collaborative learning and to be responsive to the demands of the market. Such an organization is designed to be transformative in nature—where mutual learning helps the firm as well as its stakeholders, the broader community, and where external groups discover and develop new perspectives. In contrast, ‘shared values’ call for the specification of a selective set of values identified by the top managers, either on their own or in consultation with their employees, clients, and other stakeholders. These values are then thrust upon those who either did not participate in the consultation process or did not share the consensus constructed by the organization to derive the identified values. In other words, the concept of shared values inculcates the dependency of people with diverse ideologies on the organization, by making them believe that the best and only course of action available is to accept what the organization tells them to value. Even the people who initially participated in and endorsed them are dissuaded from keeping an open mind, and from re-evaluating their assessments on the

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basis of any subsequent experiences or introspection that they may have. The whole process becomes particularly problematic in light of the cultural research findings that values are associated with one specific generation at a point in time, and that with generation shifts, the endorsed values also change substantially around the world (Inglehart, 1997). The concept of shared values thus seriously limits the ability of the organizations to be in-sync with the emergent values, and degenerates them into a stereotypical older person who is concerned about core values that nobody respects and follows any longer. We suggest that it is time to move on and to embrace the emergent, dynamic world reality that the organizations are currently living in, and are expected to continue living in, in the new millennium. Rather than spending millions of dollars on just identifying and then propagating their own shared values (which are known not to be shared by most people, as else there is no need to perpetually expend vast resources on them), firms should put a top priority on connecting with the tacit or explicit value capital of their stakeholders, the broader community, and external groups. As an illustration, the Indian software sector has been at the center of new economy revolution, and has shown a great resilience to the global economic downturn in the aftermath of the Internet meltdown, 9/11 and corporate scandals. India’s advantage stems from the lower cost of skilled labor and programmers, which has enabled Indian firms to secure software programming and business process outsourcing projects from firms in the US and other industrialized nations. However, Chinese firms are rapidly emerging as strong contenders in the global software market, notwithstanding their limitations in the English language. It is critical for Indian firms to adopt a transformative perspective so that they can perpetuate their value creation. Indian firms could approach transformation by considering the new set of values that would be critical for servicing customers when lower labor costs no longer remain the unique source of competitive advantage. Around the world, organizations are able to accrue increasing returns by focusing on value-added customer solutions, based on the knowledge about the needs and the systems of customers. A skilled higher cost labor is in fact an asset, not a liability, when organizations have such solutionfocused values. Towards this end, Indian firms may seek to develop strategic networks of relationships with firms in yet-to-emerge markets such as those in Africa, and thereby understand the issues involved in dealing with suppliers from nations with less than comparable infrastructure, technological, and financial resources. Such an organizational learning would allow the Indian firms to better appreciate the perspectives of customers in industrial markets, and help develop systems that strengthen the linkages with clients that have world-class quality service expectations for generating increasing and sustainable returns. Guided by the above insights, this book first presents the rich diversity of perspectives for change management initiatives in the Asian context based on 12 contributions. A mix of case-based and conceptual/empirical analysis is conducted, covering the domestic private sector, public sector, small-scale, and multinational enterprises in India. Thereafter, techniques and frameworks for change management used in the Confucian Asian societies of South Korea,

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China, and Japan are explicated, using four different research methodologies: empirical analysis, case-based analysis, conceptual/historical analysis, and comparative analysis. Second, the book highlights the value roadmaps that guide the transformative initiatives in a trans-Asian context—transcending the boundaries of the Asian region—using an additional set of 12 chapters. Merry Wiesner (2002) identifies the trans-Asian contacts as the basis for the historical world system, where forging cross-cultural interactions by reaching out facilitated the transformation of the old world into a new one. In this spirit of understanding the transformations necessary for the new economies to gain parity in competencies and competitiveness with the world in the chosen organizational domains, three of the chapters are based on the Northern European contexts, three on the Anglo contexts, three on the Latin American/Latin European contexts, and three on the global context. Finally, in the concluding part, the book presents a dynamic model for pursuing and perpetuating a transformative organization that is founded on the discovery and development of the opportunities for cross-cultural exchange, and generates value by offering services that enrich the productive and participative cultures of its local and global community groups. This book also presents some preliminary findings and case studies using the value-based leadership project of GLOBE in India. GLOBE—which stands for the Global Leadership and Organizational Behavior Effectiveness program— is a network of more than 200 investigators in over 70 societies worldwide. GLOBE has surveyed more than 15,000 middle managers on issues related to societal and organizational culture, and effective leadership behaviors. The findings of the GLOBE program’s study of culture and leadership behaviors are available in House, Hanges, Javidan, Dorfman, and Gupta, 2003. Currently, GLOBE is working on a follow-up project involving interviews of Chief Executive Officers (CEOs), and surveys of top management teams, in more than 30 nations. The project intends to compare the value-based leadership in professionally managed and entrepreneurial organizations. In India, we have forged collaborations with the management institutions in all the 28 states of India, plus Delhi and Pondicherry. The project in India is co-funded by the IIM, Indore and EMPI Business School, New Delhi, along with the Globe Research and Educational Foundation. XLRI, Jamshedpur is a co-coordinator of the project. In each state, we have interviewed up to 40 CEOs and have surveyed up to nine members of the top management team. The firms covered include both professionally managed and family-based firms, and encompass a variety of forms: domestic and multinational; private and public; old economy and new economy; small scale and large scale, and manufacturing and service. Rich insights into the effects of liberalization and globalization on change management initiatives, and the attempts to forge a transformative organization that bridges and connects local with global, East with West, and old with new are emerging from the preliminary analysis of this data (see Gupta, Surie, Javidan and Chhokar, 2002 for findings related to India in a Southern Asian context using the earlier phase of GLOBE data).

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In this chapter, we present key highlights of the contributions in the book and why they were selected as critically insightful for meeting the transformative challenge in new economies—the economies that are emerging from an era of poverty, and embracing globalization, growth, and gainful dynamism in technological and cultural endowments. The first part of the book deals with the Asian context. The first four chapters introduce the key concepts for the transformative organizational theory, and illustrate them using case studies from the Indian context. The next four chapters focus on the functional strategies of the transformative organization: organizational behavior, human resource management, international management, and marketing management, all illustrated based on research related to the Indian context. The final four chapters highlight the geographical strategies for the management of change—an essential aspect for implementing the transformative organization, based on the studies in South Korea, Chinese, and Japanese contexts. Taken together, the first part draws on the practices in Asia to investigate the strategy formulation aspects of a transformative organization, the functional management aspects, and the implementation tactics associated with the unique history and culture of a geographical context. In Chapter 2, Vipin Gupta, Kumkum Mukherjee, and Roma Puri, use a life cycle perspective to explicate The Transformative Organization: The Coates of India Story. The authors review recent developments in the transformative perspective, with special reference to the concepts of change, leadership, and learning. They emphasize that a transformative organizational learning shapes not just what the firm does, but also the meaning the firm associates with its mission. The authors highlight four alternative sets of strategic cultures, and demonstrate these ideal cultural types using the story of the Coates of India—a member of the Japan-based Dainippon Inks and Chemicals (DIC) Group. The same authors extend their analysis using another case study in Chapter 3, A Model of the Transformative Organization: Learning from the Wesman Group of India. Their perspective seeks to resolve three major problems defining the contemporary organizational theory: the formative problem of who has the ownership of the firm; the normative problem of how to integrate local vs global and internal vs external stakeholders; and the fulfillment problem of the boundaries of the firm. The authors explicate the techniques of formative, normative and summative evaluation to improve, integrate, and transform the organizational initiatives over a series of lifecycles. The Kolkata-based Wesman Group has been India’s foremost name and the dominant manufacturer for foundry equipment, combustion equipment, and industrial furnaces. Based on this case study, the authors illustrate how organizations can become effective democratic citizens by applying transformative methodologies. In Chapter 4, Thillai Rajan and Anand Ram provide yet another life-cycle analysis of the Roles of Principal Players during Restructuring: The Orissa State Electricity Board. They select the electricity supply industry as the context for their study because it is undergoing worldwide restructuring, and offer insights into the complex transformative aspects of the privatization process. Using a case study of Orissa State Electricity Board, three phases are identified in the

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restructuring process, namely, Impetus phase, Reorganization phase, and Consolidation phase. The authors highlight how the role of various actors changes in the different phases of the restructuring process in an emerging market context. Srikumar, Srinivasan, and a group of recent MBA graduates from IIM, Lucknow, discuss the perplexing Metamorphosis at India Post: The ePost Initiative in Chapter 5. Their thrust is on showcasing how a public service organization can be transformed, under conditions where privatization may not be a politically and socially viable alternative. Specifically, the authors analyze how the Indian Postal Department is capitalizing on its strengths—its vast distribution network, existing infrastructure, reliability and trust among the populace, and the government support it enjoys on account of its being a stateowned organization—to tap these opportunities. Interestingly, there does not appear to be anything special about its web-based ePost service: the timing is not the first, the technology used is not cutting edge, partnerships formed are not necessarily the best-in-their-class, the pricing is not the least in the market, the organization structure is not the most flexible, and the customer response time is not the best in the industry. Yet, ePost has carved its own niche in the marketplace, enthused the workforce, given a new contemporary touch to its postal channels, and offered its customers—many from interior rural areas not reached by the alternative organizations—a novel way to connect to the new economy. Vipin Gupta, Deepak Kaul, and Mrinalini Shrivastava, seek to connect the old with the new in Chapter 6, by investigating Knowledge Management and Change Processes: Lessons from Kabir. Based on medieval Indian literature, represented by the work of the scholar and saint, Kabir, and contemporary research on organizational behavior, the authors identify a three-step sequential learning model for managing transformative organizations. The model is contrasted with Lewin’s (1945) change management model, which also emphasizes three stages: unfreezing, changing, and refreezing. The model derived here is in better alignment with the emerging market contexts, where the landscape is more turbulent, change is more drastic and continuous, and the freezing approach is non-viable and costly. The three steps for sequential learning are: Learning to Discover, Learning to Develop, and Learning to Correct. Specific implementation issues related to these three steps are highlighted. Taking a complementary human resources perspective for knowledge management, Atul Mitra discusses Innovative Compensation Practices for Organizations in India in Chapter 7. Interestingly, after the liberalization that started in 1991, many Indian organizations have shown remarkable capabilities to offer high quality services at competitive prices in several knowledge-driven service sectors. Compensation and rewards systems must be transformed in congruence with the strategic intent of these new knowledge-driven organizations. Based on an empirical study, this chapter offers propositions for Indian compensation professionals to design and deliver compensation and rewards systems to help their organizations develop dynamic capabilities. In Chapter 8, David Watkins and Nitin Jain illustrate how in some cases a collaborative approach can help accelerate or bypass the time and resource

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consuming sequential approach to developing the knowledge for globalization work in their Internationalization of Small Scale Enterprise Networks: A Study of Exporters from Aligarh. The authors underscore that a critical factor in the ability to carry the globalization initiative is the possession of appropriate knowledge. This includes knowledge about foreign markets, techniques of foreign operation, the ways of doing business, and about key people in buyers’ organizations. Much of this is not easily acquired ‘off the shelf”; it is developed through the actual experience of foreign operations. Based on the survey data from 26 small Indian brass builder hardware exporters based in Aligarh, the authors found that 84 per cent of small firms first became active abroad through direct exports. Though the older firms first gained experience in the domestic market before going global, the newer firms were established specifically for the global markets. A common element was the reliance on personal contacts like the social community, friends and relatives. Vipin Gupta, Ramesh Kumar, and J. Rajasekar’s concern in Chapter 9 is to clarify approaches that can be used by the emerging market firms to compete with the better endowed multinational enterprises, through Transformative Brand and Organizational Communication. The authors observe that multinational firms have highly recognized brand equities, which are reinforced through heavy advertising and sponsoring of major events such as sports and entertainment that are core to the psyche of the local culture. Further, their operational and technological costs are spread over their entire worldwide networks, making them unusually competitive in quality and innovation investments. The emerging market firms can not compete on the basis of just simple brand building or investments in Research and Development (R&D). Instead, they should seek to integrate functional value with the intrinsic symbolic value that their brand carries by virtue of their better awareness of the aspirations and meanings desired by local stakeholders. They show, using a case study of Larsen and Toubro India, how functional excellence can be achieved and communicated through the enactment of entrepreneurial leadership within the organization. In Chapter 10, Andy Chung and Gyeong Mook Kim try to build understanding about the Performance Drivers of Corporate Restructuring in Korea. The authors recommend an integrative process view combining various performance drivers such as financial, strategic, and organizational initiatives. Using an analysis of 103 publicly traded Korean companies in the machinery industry, they find support for their proposition that retrenchment-oriented restructuring initiatives will improve only the short-term financial performance. For long-term corporate performance, companies combining both business portfolio restructuring with organizational system changes in a concomitant or sequential manner will benefit most. Without this long-term perspective for corporate revitalization, the recent wave of restructuring in South Korea in the aftermath of the East Asian Crisis would end up as another sort of herd behavior like the unrelated diversification of Korean chaebols in the past. An illustration of the transformative process of crafting a long-term perspective for restructuring, and the resulting benefits is offered by Jifu Wang

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and William R. Boulton in Chapter 11, Globalization of Market-driven State Enterprise: CHN-CHN Ceramics (C&C), China. Most state enterprises in China struggle to make their products competitive in a global marketplace, and lack structural flexibility, competitive technologies, or operational efficiencies. C&C— a leading state-owned Ceramic enterprise in China—used the funds obtained from the government to forge a joint venture with a Hong Kong-based firm. It imported the world’s most automated ceramic plant from Germany, and purchased a formula developed by the Germany Ceramic Research Center to use Chinese raw materials that met the standards of German five-star hotels as well as related German ceramic designs. The employees were hired from the best ceramics town in China and the managers from the first market-oriented town in China. An integrated computer system technology was adopted. The firm aggressively pushed for contracts to manufacture ceramics for firms around the world in their own brand names, while founding a ceramics technical center for award-winning process innovations. As a result, the firm became the leading seller of ceramics in China by 1998, and made rapid strides towards regional and global leadership, as the percentage of international sales jumped from 5 per cent in 1998 to 70 per cent in 2000. In Chapter 12, Kai Cheng Yu and Ping Ping Fu suggest constructing a longterm perspective by combining national history and cultural variables to understand the Development of Chinese Managerial Behavior: A 7-P Model based on the Forces of History and Culture. Chinese managers are commonly recognized as showing concern for relationships. Consequently, they are reluctant to take risks necessary for undertaking change that might jeopardize the prior relationships, and appear to be less assertive in communicating the need and the direction for change compared with their Western counterparts. At negotiation tables, they are seen to be very persistent but diplomatic. Though such a characterization might suggest that Chinese organizations are difficult to transform, the reality is otherwise. For gaining an appreciation of this complex reality, the authors underscore the profound influence of modern history on the behavior of Chinese managers. Drawing on extensive Chinese writings and some empirical studies, the authors construct a 7-P model to offer a holistic characterization of Chinese managerial behaviors. The 7-Ps include Paternalism, Principles primacy, Political orientation, Patience and Perseverance, Politeness, Particularism, and Patriotism. The characteristics such as the emphasis on primal principles and morality can and are used effectively by Chinese leaders to guide appropriate type and pace of change—both evolutionary and gradual as well as revolutionary and dramatic. Finally, Tetsuo Abo presents the findings of the 15-year long Japanese Multinational Enterprise Study Group in Chapter 13, An Integrated Theory of Management Geography: Japanese Hybrid Factories in the Three Major Regions. Tetsuo Abo and his colleagues have conducted field observations and surveys of Japanese factories in more than 20 nations, covering Confucian Asia, Southern Asia, Anglo, Germanic Europe, Latin Europe, and Latin America cultural regions. Based on the findings of this extensive research, the author discusses the need to integrate locational and historical factors into an integrated theory of management

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geography. Both locational distances and historical developments influence the socio-cultural frameworks, and thence the business model practices in different regions. The author explicates these relationships using evidence related to the application of the Japanese management and production systems in three regions: Anglo, Continental Europe, and Confucian Asia. The chapter highlights the nature of challenges faced by the managers while extending into other historical and cultural contexts, and how change management initiatives that allow for diversity in values are better positioned to cope with these challenges. The second part of the book investigates the Trans-Asian context, transcending the boundaries of Asia where most of the new economies are situated. It reaches out into different parts of the world, in search of additional insights that would be useful for transformative organizations to survive, compete and generate value in the emerging global landscape. The intent is to gain an appreciation of the alternative cultural approaches, so that the firms may apply the same to address specific concerns for which the solutions within their cultures remain latent, undiscovered, undeveloped, and unauthenticated. It is hoped that the recognition, application, re-formulation, and integration of these cultural approaches would aid the managers in the new economies to develop their own culturally distinct methodologies for a unique competitive advantage. Only then can the organizations in new economies smartly complement the transformative initiatives of the established firms from the older economies, without engaging into politically, socially and economically degenerative copycat imitations. In this part, the first three chapters focus on the Northern European context—emphasizing the need for offering opportunities for competence development and entrepreneurial initiatives to the workforce. The following three chapters focus on the Anglo context—where the strategic role of leadership as the driver of transformational initiatives in hyper-competitive and distressed environments is explicated. Thereafter, three chapters with a special focus on the Latin American/Latin European context are included—which highlight the need for creating spaces for recovering and discovering lost meanings that inhibit the workforce from accepting both empowerment as well as leadership initiatives of the managers seen as self-serving power-holders. The final three chapters pertain to a diverse global context. In Chapter 14, Thomas Steger pursues the issue of learning from the transnational contexts by analyzing Acculturation of Cross-border Acquisitions: Cowboys in Germany. In a cross-border acquisition, the firms involved differ not just in strategic orientations but also cultural competencies, which the author illustrates using a case study of a mid-sized East German firm acquired by a US firm. The chapter demonstrates that cycles of trust and distrust play an important role in the interactions and influence the organizational climate, over and above the effects of strategic and cultural congruence. The resulting enacted fit between the two partners—or what the author terms as cooperative congruence—is the deciding factor in keeping the acculturative stress to a manageable level. Some degree of cultural and strategic differentials create more challenges for the workforce and allow their competencies to develop and the organization to

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make transformations necessary to deal with the variety in the changing environments. Rolf Wunderer discusses how in a context where the workforce is professionally qualified and has field training through apprenticeship programs, it is gainful to distribute the responsibility for continuous improvement and reengineering in Chapter 15, Employees as ‘Co-Intrapreneurs’: An Evolving Perspective for Managing Change in the Germanic Context. Based on the insights drawn using the surveys of German and Swiss companies, the author develops a systemic framework of ‘Co-Intrapreneurship’—investing as large a number of employees as possible at all hierarchies and functional areas with a high degree of self-initiative and sense of responsibility. In the new economies that are facing drastic and turbulent change, there is often a tendency to institutionalize hierarchical control to keep the organization on its path. The findings of this chapter suggest that this hierarchical power is best exercised to develop a social network of competent workforce, willing and able to take responsible initiatives. Organizations would need to perform culturally and contextually appropriate transformations of the Germanic approach illustrated in this chapter to make this happen. The value of workforce competencies in developing a flexible orientation for a volatile and rapidly changing environment gets further endorsement from Paul Gooderham, Bente Løwendahl, and Odd Nordhaug in Chapter 16, Functional Flexibility in the Norwegian Context: Strategic Adaptation vs Competence Orientation. The authors compare the influence of competence orientation and strategic adaptation on the firms’ intentions to develop functional flexibility among core employees, using a representative sample of Norwegian manufacturing companies with 50 or more employees. The results reject the strategic adaptation approach—functional flexibility is not found to be a product of variations in external competitive forces currently faced by firms, nor a result of variations in their discrete strategic decision making. Instead, employee competencies are a key prerequisite and determinant of functional flexibility. Increasingly, the authors propose, it is becoming correct to say that, ‘strategy matters but that learning decides’. While the implementation of more organic management modes has been a product of low uncertainty avoidance in the Norwegian context, the organizations in the new economies can also effectively absorb the uncertainty in their process and service performance through a strategic support for learning—not just of the organization but also of the employees. Transformational Forces in the American Corporate System: Managing Changes in the Production Methods and Workforce Organization is the theme of interest for Tetsuji Kawamura in Chapter 17. Within a pro-technology policy environment, application of information technology by the companies has helped improve productivity, and has led economic growth in the US since the 1990s, even as the Japanese and European economies have stalled. During the late 1970s and early 1980s, the US economy was facing deep problems, including unprecedented huge trade deficits, a declining share of the world export market, slackening productivity growth, lower profitability, and decreased real wages.

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During the late 1980s, the American firms used mergers, acquisitions, and divestments to streamline their operations and dissolve conglomerate structures. Second, encouraged by the flexible factory model of Japan, they introduced radical changes to their mass production methods and took strong initiatives to change their labor management and work rules. Thus they were able to reap gains from the microelectronics automation revolution that called for a flexibly skilled workforce, and leapfrog their competitors. In conclusion, this chapter highlights that strategic adaptation is an important force in competence development, particularly under conditions of hyper-competition and intense pressure for cost reduction and revenue generation. Ilan Alon gives another twist to the issue of strategic leadership in Chapter 18 while looking at the drivers of Internationalizing the American Franchise System: The Value of Resources, Agency Capabilities and Strategic Intent. For international expansion, the need for resources is pronounced because environmental differences and cultural and lingual dissimilarities often require modifications in product/service and the ability to adapt quickly and effectively to change. This has gained significance as American franchisors have been entering emerging countries with different economic, political and cultural structures. An analysis of 158 American franchisors over 1990–1997 confirms that more resources, as in bigger and faster growing firms, and more domestically dispersed operations allow them to expand overseas. However, the author also finds that in order to compete and gain economies of scale, brand name recognition and market penetration, younger franchisors are increasingly internationalizing early in their life cycle. Thus, this chapter suggests that through invoking of strategic intent, new organizations can offset the limitations of resource and agency capabilities. In Chapter 19, Paul Wong and Vipin Gupta underline the significance of mission-critical meaning in The Positive Psychology of Transformative Organization: A Fresh Perspective and Evidence from the Anglo Context. They highlight the challenge of creating a healthy culture and a positive work climate on a daily basis even in areas that are not regulated by shared core values. A culture-climate competency requires reclaiming the vibrant and dynamic ethos of community and responding to the physical, emotional and spiritual potential of employees and other stakeholders. On the other hand, there is little benefit of enforcing shared values on people who are psychologically healthy, and positive in their own right. Using interviews of New York City based managers, they show how a climate of control and oppression, secrecy and suspicion, division and disrespect, and politics should and could be transformed into one of healthy empowerment, support, openness, unified consciousness, respect and professionalism. In many new economies, as in Argentina, the workforce lacks confidence in the strategic initiatives for leadership or competency development because it perceives the managers to be relying on the positional power to enact changes in a rather authoritarian way. To rebuild confidence, Carlos Altschul underscores the significance of Sense-making in Change Interventions: Lessons from the

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Argentine Context in Chapter 20. On account of a lack of confidence in managerial intentions and intervention methodologies, new organizing principles, deriving from the Confucian, Northern European and Anglo models, have shown only limited success in the Argentine context. Inferring from the illustrations of change programs in Argentine organizations, the author suggests that for a change intervention to succeed, key actors should leverage the creation of new spaces for reflection. The loose time frames allow the membership to recover and add new meanings within an experimental space around their work. This chapter highlights the special role of expatriates and facilitators in effective mentoring and sense-making, and in enabling the workforce to lead change by accepting the value of change. Anabella Davila and Edmundo Garcia further examine the process of preserving and enriching the personal meanings using transformative opportunities in Chapter 21, Cultural Symbols as Change Agents: International Joint Ventures in Mexico. Using extensive observations and archival analyses of a Mexico-based joint venture between Mexico and the US that competes in the auto-parts industry, the authors trace the genesis and evolution of cultural symbols, and their influence in the construction of new meaning and change in organizational culture. Findings reveal that daily operations of the joint venture create and re-create a series of symbols that conform to a system of meanings to which organizational members react. Members of the joint venture exhibited a sense of self-criticism, a sense of order, a sense of business value, a sense of urgency, and a sense of unity. Thus, the operation of this international joint venture is dominated by non-traditional Mexican management practices, which have been developed through cultural symbols. The regenerative process of recovering and discovering lost and new meanings does not happen in a snapshot. Rather, it involves a systematic and a not so systematic development. Elaborating on the nature of this development, in Chapter 22, Luca Solari presents Managing Change: Designing Organizations Using the Evolutionary Perspective. The author rejects the traditional paradigm, which originated mainly from Anglo-Saxon, low-context cultures, where organizations institutionalize solutions to problems and, thereby, increase human ability to cope with problems at large through reduced discretion, and thus variety, in behaviors. The goals are the goals of the designer and the structure does not incorporate conflicting interests. The author instead emphasizes the value of the evolutionary perspective, based on variation-selection-retention, where the role of design is to let as many behaviors emerge and select some of them to become new practices within the organization. Such perspective is particularly in high-context cultures, as frequently observed in the Latin European context, for instance, where institutionalization of formal practices is limited by stronger social habits, and formalization such as by qualifications plays a lesser role. Potential regenerative opportunities may not always lie within the context, but would need to be created before they can be selected and retained. In Chapter 23, Paul Buller and Glenn McEvoy elucidate the process of developing

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Multinational Ethical Capability: A Source of Competitive Advantage. In the context of multinational corporations (MNCs), ethical awareness includes an understanding of the various ethical frameworks (e.g., utilitarianism, rights-based, justice) as well as sensitivity to the differences among ethical perspectives across cultures. The authors suggest that MNCs can enhance their competitive advantage to the extent that they can develop the capability to perceive, deliberate on and respond effectively to ethical issues across cultures. The chapter identifies ‘shared mindsets’ (i.e., assumptions, values, and beliefs) to be at the heart of ethical capability, and suggests that these core values and beliefs must be created and reinforced by the various management practices that govern employees’ behaviors in the organization. Sougata Ray’s Chapter 24, Behavior of Firms During Economic Liberalization: Conceptual Propositions and an Integrative Model provides some interesting insights into the design of ‘shared practices and policies’, as firms in the emerging markets seek to align their organizational strategies with the fast-changing environment. In the deterministic schools of strategy, the focus of managerial decision making is not on choice but on gathering correct information about changes in the environment and examining the consequences of alternative responses. However, in the more recent strategic schools, organizations can construct, eliminate or redefine the objective features of their environment. Based on this, the author suggests that the managers need to develop a perception of environmental munificence and efficiency and seek to foster youthful organizational contexts, rather than just focus on deploying their business-specific, entrepreneurial, and general management capability. A perspective that views the environment as constructive and resourceful, and that encourages unorthodox interventions and meanings within the organization, should facilitate sustained transformations in a changing emerging market. Under trans-Asian conditions, thus, some societies rely on strategic leadership, others on workforce competencies, and still others on fostering meaningful spaces, and selective retention of contextual diversity within the organization. Instead of investing in costly socialization for external members, the organizations should rather focus on the creation of new mindsets cultivated and matured further by the opportunities for cross-cultural dialogue, and on the discovery and exploitation of environmental endowments. Over the recent years, post-modern discourse has revived the value of human development through self-expression and well-being, which recognizes the need for tolerating diversity of strategic, organizational, and cultural approaches, and pursuing transformations that allow preserving, sustaining and exploiting this diversity. World Values Surveys, led by Ronald Inglehart, is a landmark study of the worldwide shifts towards post-modern values over the last 20–25 years. Vipin Gupta, Mathai B. Fenn, and Ancheri Sreekumar with GLOBE India associates draw relevant insights in Chapter 25, Organizational Design Under Post-Modernization: What can We Learn from the World Values Surveys? A fundamental element in post-modernity is an appreciation of the present and the future in terms of the history. The future carries with it a legacy of its past,

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and the current age is interpreted in terms of what lies behind us, and how it relates to what lies ahead of us. However, much of the discourse on postmodernism has focused on either deterministic or evolutionary processes, and there is little understanding of the strategic implications for the organizations. Using a re-analysis of data on 73 societies of World Values Surveys, the authors show that post-modernism is usually associated with adoption of secular authority and gender attainment, with a job-defined focus, but it does not preclude an emphasis on religion as a source of meaning. Further, with post-modernism, societies may put a greater confidence in democracies, or alternatively could view democracies defined as the rule of majority with a critical sense because of their enhanced concern with minorities. In summary, discovering perspectives that allow one to appreciate the relevance of the different values, beliefs and practices under different contexts and developing an understanding of how to apply these alternative values, beliefs and practices within an integrative context is a major challenge for creating and perpetuating a transformative organization that is meaningful and relevant for pursuing initiatives and a network of partnerships across the trans-Asian region. An important issue of recent interest has been the versatility and diversity of cultures. Specifically, several scholars have identified diversity as one of the key elements of emerging global values (Inglehart, 1997). Many of these scholars take a post-modernist perspective, wherein the emphasis is on tolerance and appreciation of diversity. However, prior modernization is not necessary for a versatile culture where multiple values and practices flourish. Several nations of the world, particularly those in Africa and Asia, support highly diverse values and practices of different sub-groups. Thus, there is a need to recognize the universal value of a climate which fosters exchange among the diverse values and practices, and a mental orientation that actively recognizes, seeks and is open to learning from the diversity of knowledge and perspectives all around. If organizational cultures support single trajectories of the dominant values and practices, then the variances are eliminated through several vehicles, such as the ‘one best way’ based competition, training, learning, performance assessment, rewards, and recognition. Organizations with such cultures must be very careful in selecting other nations for their investments and collaborations because it is difficult for them to deal with the differences in values and practices. The preference is to seek cultures with similar values and practices, so that minimum adaptation is needed in other nations and to maintain cross-national integration and coordination. If investments and collaborations are sought outside cultures with similar values and practices, then such initiatives must be strategically assessed. However, some investments may seek to tap the learning potential from alternative values and practices. For instance, firms from individualist cultures may invest in collectivist cultures, so that they can better learn the mechanisms supporting teamwork, which could then be implemented in their home culture. Alternatively, firms from collectivist cultures could invest into individualist cultures, with a view to learning about systems underlying the performance-based incentives and then adopt these in the home culture.

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When the organizational and societal culture emphasizes a single set of cultural trajectories, a cross-cultural learning strategy is subject to considerable risks—especially if it is not institutionally accepted as the desired direction for cultural change. Therefore, firms need to complement their cross-cultural learning strategies with network-building strategies to gain institutional legitimacy. Institutional strategies may also be required to induce acceptance by media, researchers, government, families, and educational institutions, so that the firm maintains a high degree of institutional fit and reliability in a culture where one single trajectory of the cultural development is favored. Increasingly all cultures are becoming versatile; they support a large variance in the values, beliefs, norms, and practices; and they allow the diverse sub-groups to prosper and enjoy equal opportunities. In these cultures, the MNCs can also learn to operate without substantial costs of the adaptation of their knowledge, organizational, and marketing models. Cross-national integration and coordination involving business units in these cultures is easier. Firms from versatile cultures enjoy a home-based advantage on how to efficiently work with groups having alternative values and practices, and can effectively collaborate with firms around the world. These versatile cultures are wonderful research labs and marketing test centers for generating and synthesizing new ideas, and for assessing their receptivity internationally. An appreciation and cultivation of the versatile cultures, where diversity in values and practices support diverse cultural models, is critical for developing an effective transformative organization for perpetuating value-adding change initiatives.

References Abo, T. (ed.) (1994). Hybrid Factory: The Japanese Production System in The United States, UK: Oxford University Press. Bartlett, C.A. & S. Ghoshal (2001). Managing Across Borders: The Transnational Solution, MA: HBS Publishing. Gupta, V. (1998). A Dynamic Model of Technological Growth: Diffusion of Japanese Investment Networks Overseas, Ph.D. Dissertation, The Wharton School of the University of Pennsylvania. Gupta, V., G. Surie, M. Javidan & J. Chhokar (2002). ‘Southern Asia cluster: where the old meets the new?’. Journal of World Business, 37(1): 16–27. House, R., P. Hanges, M. Javidan, P. Dorfman & V. Gupta (eds.) (2003). Leadership, Cultures, and Organizations: The GLOBE Study of 62 Societies, CA: Sage Publications. Inglehart, R. (1997). Modernization and Post-Modernization. NJ: Princeton University Press. Lewin, K. (1945). The research center for group dynamics at Massachussetts Institute of Technology, Sociometry, 8, 126–136.

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Pattanayak, B. & V. Gupta (eds.) (2002). Creating Performing Organizations: International Perspectives for Indian Management, New Delhi: Sage Publications. Perlmutter, H.V. (1969). ‘The tortuous evolution of the multinational corporation’. Columbia Journal of World Business, 4: 9–18. Schwartz, S.H. (1994). ‘Beyond individualism/collectivism: New cultural dimensions of values’. In U. Kim, H.C. Triandis, C. Kagitcibasi, S.C. Choi, & G. Yoon (eds.), Individualism and Collectivism: Theory, Method and Applications, pp. 85–119, Thousand Oaks, CA: Sage. Stopford, J.M. & T.L. Wells (1972). Managing the Multinational Enterprise, NY: Basic Books. Wiesner, M. (2002). Discovering the Global Past: A Look at the Evidence, volume 1 to 1650. 2nd ed. Boston: Houghton Mifflin, 2002.

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Asian Context

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Concepts and Case Studies in the Indian Context

2

The Transformative Organization

The Coates of India Story1

Vipin Gupta

l

Kumkum Mukherjee

l

Roma Puri

In recent years, the transformative perspective has gained popularity among social scientists which is indicated by the rash of new concepts such as transformative change (Lichtenstein, 2000); transformative leadership (Astin and Astin, 2001; Bass, 1985; Bemis and Nanus, 1985); transformative mediation (Bush and Folger, 1994); transformative justice (Morris, 1994); transformative learning (Mezirow, 1991); transformative knowledge (Vargas, 1987); and transformative technology (Brent, 1991). Here, we review the core insights of the transformative perspective with respect to change, leadership and learning. Then, we highlight the importance of four domains—investor, competence, post-competence, and spiritual—in the transformative decision making of organizations. We propose that a transformative perspective emphasizes how organizational learning encompasses not just what the firm does, but also the meaning the firm associates with what it has been doing and its mission in the future. Organizational learning is facilitated by a comparative understanding of the behaviors and values generated through processes such as perspective taking (Parker and Axtell, 2001) and relational capability (Dyer and Singh, 1998), which allows firms to identify common patterns in apparently divergent behaviors. The result is a change in the very system of organization that enables the firm to identify how devaluing some domains in the past limited its overall performance and to pursue development initiatives where the norms for the targeted domain may be fulfilled. We identify the firms that demonstrate a focus on transformative perspective as ‘transformative organizations’. In other words, the transformative perspective helps firms to transcend the paradox of performance, identified by Meyer and Gupta (1994), that an emphasis on some measures of performance makes the

1

We are thankful to the US National Science Foundation, Globe Research and Educational Foundation, IIM Indore, and EMPI Business School for funding the study as part of worldwide cross-cultural CEO research initiated by Professor Robert House. XLRI Jamshedpur and Eastern Institute for Integrated Learning offered additional help for this particular chapter.

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organizations simultaneously effective on those measures, and ineffective on other measures and thus vulnerable to failure. The failure of Enron, whose policies were very effective in the investor domain, but not other domains, is a case in point. Next, we review the literature on transformative perspectives and present a theoretical model of strategic cultures of transformative organizations. Then, we explicate the theoretical model using the story of Coates of India. The story is based on the CEO interview and survey of the top management team conducted in 2001 as part of an international cross-cultural study.

Review of the Transformative Perspective TRANSFORMATIVE PERSPECTIVE AND CHANGE We propose that a transformative perspective fundamentally involves a transition in the forming process; from one focused on incremental change to a catalyst oriented towards quantum change. In general, change happens when there is some variance, either in what the firm does and what it is expected to do (practices and norms to be met), or in what it does and what it expects to do (practices and values to be fulfilled). Once the change is ‘formed’, the firm seeks to benefit from its learning by institutionalizing the change intervention in all relevant aspects of its functioning. It may also diffuse the change among its external constituencies and seek financial or non-financial benefits from such knowledge spillovers. This institutionalization and diffusion reflects ‘norming’ of the change. As the norms mature, including through reverse learning from the outcomes of other internal applications and of the use by the external constituencies, the change initiative is fulfilled and the changed behavior becomes routinized for effortless enactment. However, the outcome of the changed behavior may not be the same in all cases. When shortcomings are diagnosed and validated, the firm seeks to develop corrective interventions, and again goes through the forming, norming, and fulfilling phases as shown in Figure 2.1.

Fig. 2.1: The Process of Transformative Change

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Thus, typically, organizations go through a sequential process of change. In this process, they: (a) may deny the need for change (change by denial); (b) may become aware of the need for change only after it has already happened gradually (change by experience); (c) may mandate an instant change as soon as they recognize and validate the need for change (change by mandate); or (d) may reinterpret the pre-changed behavior in a way that the need as well as direction for change becomes self-evident (change by reinterpretation). In our view, the transformative change reflects a continuous openness to change by reinterpretation, and a systematic approach to change by mandate and change by experience, so that the need for change is not denied. The four processes of change may be related to Ferguson’s (1980) types of change. These types include: 1. Change by exception: the firms allow exceptions to their beliefs but do not change these beliefs; 2. Incremental change: a collection of small changes eventually alters, rather unconsciously, the mental model of the firm; 3. Pendulum change: an extreme point of view is exchanged for its opposite and the past is completely discredited as irrelevant or mistaken; 4. Paradigm change: the firm steps out of the box for a more fundamental rethinking of premises, based on the integration of available information. In short, from a change perspective, transformative organizations recognize not only the reality of the changing world and of the accelerating pace of change, but also of the changing nature of change. Consequently, they do not seek to be effective in only some parts of a system, but seek proficiency in managing the multifaceted dimensions of their operation.

TRANSFORMATIVE PERSPECTIVE AND LEADERSHIP The transformational theory of leadership focuses on the ability of leaders to motivate others to do more than they originally expected to do (Bass, 1985). The thrust is on creating institutions that motivate employees to recognize the community of their needs and to empower them to satisfy these collective needs (Bemis and Nanus, 1985). The transformative perspective further integrates the collective organizational needs with an enhanced understanding of the potentiality of each member and a wholesome conception of self in personal, relational, societal, and communal domains. By recognizing that each employee is more than just an individual or a member of the organization and has societal and communal identities also, transformative leaders facilitate more of what each employee truly wants to accomplish without necessarily sacrificing the realization of collective needs. Employees also discover that their life in the organization need not be disjointed from their lives in the society and the community, and that the former can be lived in a way which serves their purpose and enhances their prestige in the society and the community also. As a result, transformative

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leadership becomes a reciprocal process whereby both leaders and followers raise one another to higher levels of motivation and morality. In this sense, transformative leadership builds on the value-based approach to transformational leadership (Kuczmarski and Kuczmarski, 1995; Goeglein and Indvik, 2000). Further, Gandhi’s concept of trusteeship—which recognizes service as the purpose of leadership; moral principles as the basis of goals, decisions, and strategies; and employing a single standard of conduct in both public and private life—is crucial to transformative leadership (Gupta, Rajasekar, and Srinivas, 2002). In contrast to transformational leadership, which focuses on enhancing efficiency and effectiveness through first-order quantitative change in motivation, the transformative leadership emphasizes a higher-order qualitative integration of motivation over multiple domains. Consequently, transformative leadership generates change in basic assumptions and goals of life so that accomplishments in each domain are reinterpreted as being related to other domains, and thus serves a higher-order purpose of life. Despite some similarities, transformative leadership can also be distinguished from the transactional, and value-based transformational models of leadership. In the transactional model, the roles of each individual are clearly defined and the responsibilities and expectations are limited and predictable. In contrast to the view of a transactional leader who must get things done, whether by focusing on the task or on the person, the transformational leader emphasizes the purpose, mission, and spirit of the action so that the quantum nature of its benefits becomes self-evident to all. Both these approaches could result in unjust outcomes as they may exclude members who do not find the values of the leader as fulfilling. The transformative model, on the other hand, generates a new interpretation of the reality, where the previously marginalized members are also able to engage themselves in the task of learning, and where meaningful linkages can be constructed between these members and the dominant organizational values and social and communal institutions. This is made possible because of the common learning on the part of both the organization as well as the members that they are an important part of each others’ life. In summary, from a leadership perspective, transformative organizations recognize not just the reality of changing roles and of the need to empower participants to effectively and rapidly perform these roles, but also the changing nature of the roles that the leadership should be focusing on if the participants’ lives as well as the organizational mission are to be fulfilled.

TRANSFORMATIVE PERSPECTIVE AND LEARNING Transormative approaches to learning focus on how learners construe, validate, and reformulate the meaning of their experience. Mezirow (1991) has developed one of the most popular models of transformative learning. According to Mezirow (1991:167), transformative learning involves ‘perspective transformation’, which ‘is the process of becoming critically aware of how and why our assumptions have come to constrain the way we perceive, understand, and feel

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about our world; changing these structures of habitual expectation to make possible a more inclusive, discriminating, and integrating perspective; and, finally, making choices or otherwise acting upon these new understandings’. Mezirow distinguishes between meaning structures, which are frames of reference based on the totality of individuals’ cultural and contextual experiences that influence how they behave and interpret events, and meaning schemes (specific beliefs, attitudes, and emotional reactions), that make up these meaning structures. The usual learning process, as an individual adds to and integrates ideas within an existing scheme, contributes to a routine change in meaning structures. However, transformative learning, involving change in meaning structures, results from an accumulation of transformations in meaning schemes over a period of time, or more often from a ‘disorientating dilemma’ triggered by a life crises or major life transition. In general, Mezirow identifies experience, critical reflection, and rational discourse as the three major catalysts of transformative learning. Boyd and Myers (1988) offer an alternative approach, which recognizes transformative learning to be more of an intuitive, creative, emotional process. They use the term transformative education to connote a fundamental change in one’s personality involving both the resolution of a personal dilemma as well as the expansion of consciousness resulting in greater personality integration. Transformative education draws on the ‘realm of interior experience, one constituent being the rational expressed through insights, judgments, and decision; the other being the extrarational expressed through symbols, images, and feelings’ (Boyd and Myers, 1988:275). It builds on the process of discernment, i.e., creating a personal vision or meaning of being a human. The discernment involves receptivity, recognition, and grieving. Bush and Folger (1994) apply the transformative perspective to Alternative Dispute Resolution (ADR). They suggest a shift from a problem solving or settlement-oriented mediation that focuses on finding a mutually agreeable settlement of an immediate dispute, to ‘transformative mediation’ that seeks to transform the disputing parties by empowering them to understand their own situation and needs as well as enabling them to recognize the situation and needs of their opponents. At the organizational level, transformative mediation may transform the representatives, but could leave out the constituencies, and engender a ‘scale up problem’ (Burgess and Burgess, 1996). Lederach (1989) emphasizes a more inclusive concept of ‘conflict transformation’ which entails development of not just empowerment and mutual recognition, but also interdependence, justice, forgiveness, and reconciliation. The thrust is on creating a dialogue in which people are empowered to express their needs and explore their differences so that inclusion and participation is encouraged. Similarly, Montville (1993) underlines how dialogue helps people confirm each others’ humanity and recognize beliefs and values of the other person and the importance of historical analysis, including sharing of grievances and their recognition by the opponents, for encouraging transformation in the parties’ relationships. In essence, from a learning perspective, transformative organizations recognize not only the differences in perspectives and the need to empower

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participants to advocate their unique perspectives, but also the need to transform each individual’s meaning associated with these perspectives so that a more inclusive perspective is developed.

SUMMARY There are significant similarities in the transformative approaches used in change, leadership, and learning domains. Each emphasizes the importance of recognizing differences and the need for change, empowering participants to share these differences and to bring about change; and finally developing an integrative perspective relating these differences and changes to the very purpose of human and organizational life across multiple domains. As a result, the differences and changes are not seen as threatening or exceptions, and are instead sought to improve multiple dimensions of organizational and participant life. Consequently, the target of transformative approaches is not the actions of the organization, but the very culture of the organization. The emic aspect of culture—the meaning the participant attach to the actions, is as relevant for transformative approaches, as the etic aspect—the cross-culturally comparable actions and behaviors.

Theoretical Model Using a transformative lens, we develop a theoretical model of the importance placed by the firms on alternative strategic values. The four strategic culture types are: 1. Investor Orientation. It reflects paramount importance of cost control, sales volume, product quality and firm profitability in strategic decision-making. Investor culture is typical of the Western Hemisphere and Anglo societies where the foremost responsibility of the business is towards its owners. 2. Competence Orientation. It signifies a decision-making value where most emphasis is put on long-term competitive ability of the organization, along with the relational issues with those directly involved in the business operations. Competence culture is typical of the Asia-Pacific societies, where the relationships and long-term competitive ability are most critical. Such cultures support collaborative organizational learning, but limit the flexibility of the firms in seeking new knowhow. This is so because the benefits of knowhow generally are diffused quite quickly throughout the relational network. On the other hand, firms incur the costs of knowhow discovery and its codification on their own, and thereby seek to stand out from the rest and be recognized for their pioneering contributions. 3. Post-competence Orientation. It signifies a strategic perspective that puts most priority on societal welfare, including environmental concerns, welfare of local community, nation’s economic welfare, minority employees, and employee gender. Post-competence culture is typical of the European societies. The primary

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responsibility of the firms is not to their investors or their business partners, but to respect collective interest of the members of the community in ecology and welfare issues. The post-competence oriented firms are most willing to assume the costs of social charter, and to believe that the social charter is not necessarily at odds with the investor and business relationship concerns. 4. Spiritual Orientation. It reflects a strategic preference for ethical considerations, and being devoted to the supernatural forces, such as auspicious days, forecasts by soothsayers, and pleasing, respecting, and not offending a divine being. Spiritual culture is typical of firms in Africa. Glock and Stark (1965) have identified five manifestations of spiritual orientation. These include: (a) an experiential manifestation, capturing normative religious experiences; (b) a belief manifestation, capturing normative religious beliefs; (c) a ritual manifestation, capturing normative religious practices; (d) an intellectual manifestation, capturing knowledge about these religious norms; and (e) a devotional manifestation, capturing enacted religious practices and attitudes. Spiritually oriented firms are highly concerned about the kind of people they deal with. To them, the key organizing principle is ‘ubuntu’ or that a person is a person through others. Ubuntu refers to ‘humaneness’—a pervasive spirit of caring and community, harmony and hospitality, respect and responsiveness—that individuals and groups display for one another’ (Mangaliso, 2001:24). The cultural orientation of firms can be ordered in a salience space indicating the significance of each particular cultural type in their strategic values. The salience space has an influence on not just the firm’s behavior, but also of the behavior of the members. At the individual level, salience indicates ‘the degree to which the person’s relationships to specified set of others depends on his or her being a particular kind of person, i.e. occupying a particular position in an organized structure of relationships and playing a particular role’ (Stryker and Serpe, 1982:207). At any level, cultural salience can be measured using comparative scores on the four types of strategic cultures. Next, we discuss the research methodology used to test the relevance of the theoretical model, for validating the force of cultural salience, and for investigating the development of a transformative organization that recognizes the integrative importance of the four domains.

RESEARCH METHODOLOGY For our study, we chose to study an Indian firm, whose ownership has transferred from a British parent, to first a French parent, and then to a Dutch/Japanese parent, over the last 10 years. The firm was studied using the CEO interview guide and top management team survey of the GLOBE program. The GLOBE program developed these research instruments for the study of CEOs and top management teams in more than 30 nations of the world, under the overall coordination of Professor Robert House at the Wharton School. In India, the study is being conducted in each of the 28 states and two of the Union Territories, with a sample of 40 firms in each state, under the overall coordination of the

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first author. The top management team surveys included questions relating to the leadership of the CEO. In addition, there were 17 questions intended to learn about the strategic values, where the respondents were asked how much importance ‘should be’ assigned to each factor when making critical management decisions. These 17 value items were used to construct four types of strategic culture scales. The item composition of the four scales is given in Table 2.1. A scale validation analysis of 212 firms from seven states in northeast India showed that the four scales were internally consistent (Cronbach alpha>0.70), both at the firm level as well as the top management level. Table 2.1: Item Composition of Strategic Culture Scales Investor Orientation Competence Orientation

Post-Competence Orientation Spiritual Orientation

Cost control; firm profitability; product quality; sales volume Long-term competitive ability of the organization; effect on relationships with other organizations with which you do serious business; employee professional growth and development; employee relations issues; customer satisfaction Contribution to the economic welfare of the nation; welfare of the local community; environment; minority employees; female employees Ethical considerations; supernatural forces, such as auspicious days and forecasts by soothsayers; pleasing, respecting, and not offending a divine being

Note: All items evaluate how much importance should be assigned when making critical management decisions, with response alternatives ranging from 1 (none) to 4 (moderate) to 7 (most important).

The interview guide asked the CEOs about their background, leadership goals, management philosophy, and personal strengths and weaknesses. These items were supplemented with questions about the industrial relations climate in the main plant of the firm in India, located in the same city where the firm had its domestic headquarters. More details about the firm (Coates of India) are given in the next section to set the research context.

RESEARCH CONTEXT Coates of India (COI) was set up in 1947 as a wholly-owned subsidiary of Coates Brothers PLC, UK in Calcutta in the state of West Bengal, to manufacture and market printing inks and allied products used in the process of printing. The parent firm diluted its stake in COI to 66.2 per cent in 1962. In 1991, the French group TotalFina, a leading player in global crude and petroleum industry, took over the parent firm, and acquired a 51 per cent stake in COI. In 1999, TotalFina sold its printing inks business worldwide to Sun Chemical group of the Netherlands, which is a wholly-owned subsidiary of $10-billion Dainippon Inks and Chemicals (DIC) Group of Japan. Besides being a global leader in graphic

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arts products, the DIC group has a significant presence in printers’ supplies, machinery, pigments and reprographic products. As part of the deal, the resins and industrial adhesives business of COI were spun off to TotalFina, and the ownership of COI was transferred to DIC. DIC had been operating in India through marketing agents and saw COI as a valuable opportunity for expanding further into India. It immediately sought to use the entire marketing network of COI and increased its equity stake in COI to 59.4 per cent. The COI board was restructured to bring in four Japanese directors to oversee the strategic growth. On December 31, 1997, COI transferred its packaging coatings business to a separate 100 per cent subsidiary, Coates Coatings India Limited (CCIL). The goal was to bring in Valspar Corporation of the US as a joint venture partner for the packaging coatings business and to divest that business in a phased manner to Valspar as the business developed through capital infusion and new technology from the latter. In the meantime, there was a shift in the packaging concept from metal containers to plastic poly-tubes in India, which led Valspar—whose interests lay principally in the can packaging coatings market—to back out of the joint venture deal in 2001. In June 2001, COI/CCIL initiated an alternative agreement with the new group parent company DIC, for the perpetual transfer of printing inks technology. The printing ink industry essentially consists of pigments, resins, additives and solvents. Pigment is the main raw material for manufacturing inks, resins give special properties to the inks while additives are necessary for maintaining the flow. The principal users of printing inks are packaging, printing and publishing industries. In India, the packaging market for the fast moving consumer goods (FMCG) sector is a key segment, accounting for a share of 40 per cent. In addition, in November 2001, a new $1.3 million plant was inaugurated at Ahmedabad in the state of Gujarat for the manufacture of newspaper blank with the technology support from DIC. DIC is currently looking to upgrade the product mix of COI, which has a battery of seven manufacturing plants in India at Kolkata, Mumbai, Ahmedabad, Delhi, Chennai, Bangalore and Noida (satellite township of New Delhi), and seven sales offices located in various metropolitan cities, deemed a key advantage in the applications-oriented printing ink industry. Globally, the US, Japan, and Germany account for two-thirds of the $15 billion sales of the printing ink industry. The US accounts for about 30 per cent of the global market. Two firms hold a total of 80 per cent market share in the US: Sun Chemicals and Flint Ink. These two firms have transformed the industry into a highly concentrated structure through a series of acquisitions of smaller ink manufacturers in the US and overseas. With diminished opportunities for growth through acquisitions, the DIC is now looking for organic growth opportunities for its subsidiary. India represents a key emerging market for such organic growth. The Indian domestic ink market is valued at $125 million (Rs 6 billion), with a production volume of 50,000 tons. It has seen 12–15 per cent growth over the past few years and is expected to sustain this growth rate in the near

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future. The market is divided equally between a concentrated organized sector, with a few medium-to-large scale firms, and a fragmented unorganized sector, with over 200 small-scale ink manufacturers. At the top are the two firms: COI and its principal competitor, Hindustan Inks and Resins Ltd (HRIL). HRIL, set up in 1991, has been steadily gaining market share from COI, principally because of a 15-year sales tax exemption for its core plant at Daman that has allowed it to become the first Indian firm to successfully backward integrate manufacture of two core ingredients of printing inks viz. resins and flushed pigments, and to set up new units including a wholly-owned subsidiary in Austria to facilitate exports. In response, COI has increasingly focused on the premium segment, realizing a greater price per kg of ink as compared to other players in the market. The strategy of COI is based on its strong brand equity, regional manufacturing plants and sales offices to cater to the specific needs of different markets, and now on the technological and marketing support from the DIC group. Its products are perceived to be of high quality, backed by continuous research and development expenditures, and its technology state-of-the-art. It has been modernizing its plants through extensive capital investment, raising its installed capacities by 10–15 per cent every year, and revamping the computer system and other balancing equipment at its factories to meet the higher demand for products, and has seen profitable growth despite a recent slowdown in the global and Indian packaging coatings market. In summary, COI has been historically influenced by the culture of the Anglo parent, and later of the European parent, and more recently by the Japanese parent. Further, its presence in West Bengal—which is known to have leftist/ socialist leanings—should also influence COI’s strategic culture. It has a strong brand and technological base that has enabled it to realize profitable growth, but does not necessarily have a significant competitive edge in costs over the new entrants. On the whole, the formative Anglo influences appear to support its investor orientation, while the recent Japanese influences appear to be dominant in a focus on competence orientation. The French influences appear to be relatively weak on COI’s strategic culture particularly because the core business of the ex-French parent was quite different from that of COI. Also, the Dutch influences are possibly dwarfed by the proactive role taken by the Japanese global parent company with respect to the Indian subsidiary. Still, the presence in the socialist state of West Bengal should have strengthened its post-competence orientation. Finally, since the firm is based in India, where the culture is relatively spiritual in nature, one would expect non-trivial significance of spiritual orientation in the firm’s strategic culture. Next, we confirm these expectations using the top management questionnaire survey.

FINDINGS: TOP MANAGEMENT QUESTIONNAIRE SURVEY Table 2.2 gives the scores of the firm on the four strategic culture scales, both at the individual top management level as well as the aggregated firm level.

Table 2.2: Strategic Culture Scores for Coates of India Respondent 2

Respondent 3

Respondent 4

Respondent 5

Respondent 6

Firm’s Average

7.00

5.50

7.00

5.00

6.50

6.75

6.29

6.40

5.80

6.60

4.80

6.20

6.40

6.03

5.20

4.80

4.40

4.40

4.40

6.20

4.90

3.33

3.00

3.33

2.00

2.00

5.00

3.11

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Investor Orientation Competence Orientation Post-Competence Orientation Spiritual Orientation

Respondent 1

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As can be seen, on a scale of 1–7, the firm scored 6.29 on Investor Orientation and 6.03 on Competence Orientation. The difference between these two types of strategic culture was not significant (difference = 0.26; df = 5; p > 0.05). Thus, the top management of the firm puts ‘very high’ importance on both investor orientation and competence orientation. The Spearman’s rank correlation between the scores of top management on these two was 0.96 (p < 0.01). Thus, top managers who focused more on investor orientation emphasized more of competence orientation also. However, there was a greater variation in the individual top manager values for investor orientation (from 5.00 to 7.00), than for competence orientation (from 4.80 to 6.40). The firm’s score on post-competence orientation was 4.90, which was significantly different from its scores on investor orientation (difference = 1.39; df = 5; p < 0.05) and on competence orientation (difference = 1.13; df = 5; p < 0.01). Further, the Spearman’s rank correlation of the top manager scores on Post-competence orientation was not significant with either competence orientation or investor orientation. Thus, emphasis on post-competence orientation was independent of the focus on competence and investor orientation. Finally, the firm scored 3.11 on spiritual orientation, which was significantly different from its scores on investor orientation (difference = 3.18; df = 5; p < 0.01); competence orientation (difference = 2.92; df = 5; p < 0.01); and postcompetence orientation (difference = 1.79; df = 5; p < 0.01). However, the Spearman’s rank correlation was not significant for the top manager scores on spiritual orientation and any of the other three scales. On the whole, the firm put only ‘some’ emphasis on spiritual orientation, ‘high’ emphasis on post-competence orientation, and ‘very high’ importance on competence and investor orientation. There was an indication that the firm’s top managers took an integrated and stronger view of the investor and competence orientation, while taking an independent but positive view of post-competence orientation without being overwhelmed by the socialist forces in West Bengal. Finally, the top managers gave a non-trivial priority to the spiritual orientation in their strategic decision making, consistent with its significance in Indian culture. On the whole, the firm appears to operate according to the transformative perspective. Next, we present the findings of the CEO interview to show how this transformative perspective must be created, and cannot be taken for granted.

WORKING TOWARDS THE TRANSFORMATIVE PERSPECTIVE Of COI’s seven manufacturing units, the plant in Kolkata with a workforce of 620 is the largest. The plant experienced a rapid growth in production volumes and values during 1990–1995, realizing an enormous growth in productivity, profitability, and value realizations, as shown in Table 2.3 and Table 2.4. The increase in production took place with a largely stable number of workers; there was a continued rise in wage incomes for these workers, profitability for the firm, and product quality for the consumers, with diminishing costs as the ratio of wage costs to both units produced/production

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value showed a significant reduction. The growth was a result of a new business vision, pursuant to the liberalization of Indian economy in the early 1990s and a concomitant change in the parent group from Coates Brothers of UK to Totalfina of France. Table 2.3: Production Growth at Kolkata Plant of COI during early 1990s Departments Liquid Inks Liquid Inks Blending Liquid Inks Varnish Paste Inks Weighing Paste Inks Varnish Chips

Production before 1990s

Production during 1994–1995

Increase in Percentage

2000 7 jobs 1200 2000 4 tons 3 tons

3600 10 jobs 2600 4000 7 tons 7.7 tons

80 43 117 100 75 157

The new vision emphasized substantial modernization of the plant with sustained increase in the production capacity, and introduction of automated machines and application of latest technologies, in ways that would be labor and skill enabling, rather than labor and skill displacing. Table 2.5 provides data on the investments made by the firm in computers and plant and machinery at Kolkata plant. The success with modernization in the Kolkata plant, home to one of the most left-leaning workforce, unions and the government in India, instilled the company with confidence to persist with further investments in computerization and technology improvement in other plants of COI, in the second half of the 1990s. West Bengal has been notorious for its perpetual strikes, politicallysanctioned labor agitation and industrial unrest and sense of animosity between the managers and the workers, which were at their peak during 1960–1990. Despite such a historically dismal socio-political context of the workplace, COI led the transformation in the industrial atmosphere of West Bengal during the 1990s. The thrust of COI’s vision was not on incentives—in fact, no incentive schemes were operational in the Kolkata unit. Rather, there was a new sense of collaboration among managers, workforce and the unions, which helped contain the average absenteeism levels to single-digit levels of 7–10 per cent, avoid overtime costs with mutual consent, and enhance the productivity and standards of living for the benefit of the workforce, consumers and the investors at the same time. COI’s new model for managing the ‘living assets’ was founded on mutual respect and trust. It recognized the shift in workforce ranks to the fourth generation workers, who were extremely loyal to the firm and were looking at a better future than their predecessors as part of COI. It was built on the confidence that the firm had not experienced any strike or lockout throughout its history, in a socio-political context where these incidents were quite a common part of industrial life. The firm had since its inception resolved all the issues with the workers and the unions through continuous discussions, formalized into annual agreements signed by both union and the management. This allowed the firm to

Production Value (Rs million) Production units (in million tons) Value Added (Rs million) Wages (Rs million) Number of Workmen Productivity (Rs Value Added/worker) Profitability (Rs Valueadded – Wages)/worker Units produced (in million tons) per workman Production Value (Rs per worker) Wage Cost in Rs/unit produced in million tons Wage Cost/Production Value Unit Realization (Rs/ton) 205.73 1802.15 65.41 12.75 237 276,000 222,000 7.60 868,000 7076 6.2 0.11

1605.13 44.88 11.87 240

187,000

138,000 6.69

618,000 7394 8 0.09

1991–1992

148.32

1990–1991

5.78 0.13

7527

1,086,000

8.33

278,000

341,000

14.74 235

80.14

1958.65

255.17

1992–1993

5.79 0.13

7456

1,184,000

9.19

341,000

409,000

16.03 234

95.71

2150.58

277.02

1993–1994

Table 2.4: Growth in Kolkata Plant Productivity over the early 1990s

4.74 0.14

6855

1,591,000

11.00

438,000

513,000

17.12 227

116.45

2497.93

361.25

1994–1995

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Table 2.5: Modernization Investments in Kolkata Plant of COI (Rs million) Year

Computers

Plant and Machinery

1994 1995 1996 1997

– – 11.851 10.347

52.257 51.049 24.388 30.715

keep its industrial relations free from political intervention. Now, the new governance environment, both at the corporate level as well as at the national and state level, encouraged the management to bring the two rival unions together, and to seek a collaborative approach for enhanced productivity at the firm and welfare of the workers, within a framework of modernization, technological advancement, and organizational learning.

THE OLD AND THE NEW In the past, especially during the 1980s, the rivalry between the two unions in a bid to establish supremacy over the workforce and have their say in the discussions with the management disrupted the organizational climate. Both the unions had about an equal number of members, and each struggled hard to prove their majority. There were always several opportunist members who made the most of this by switching unions on a regular basis and threatening to leave one particular union whenever they were denied a coveted status within the union. Their movement back and forth was a sheer nightmare for most loyalists in the two unions and they tried every trick in the book to win back the lost members. Once it went to the extent of one union coercing members of the other union to join their union by going to their respective houses and making them sign the membership-related documents. Consequently, the other union made a big hue and cry over this issue. The unions had so many complaints against one another that the management had to employ select individuals in management positions especially to listen to their problems and negotiate issues separately with each of the unions. The amount of time spent by these people with each of the unions was so great that eventually the persons concerned were jokingly referred to as owning that particular union. Under these conditions, the management had to sit with the two unions separately and it was almost impossible to arrive at any consensus at any given point of time. Any agreement with one of the unions automatically meant opposition from the other. It was more of a vicious circle with no end in sight, in so much that some members of the management thought that the classic divide and rule policy would be the best course of action. A new managerial philosophy emerged at COI in the 1990s when the British parent company was mulling over the stake sale to TotalFina and new economic policies were being introduced in India. The change agent was Dr. P.K. Dutt, who had joined COI in 1970 as a management trainee after obtaining a Ph.D. in polymer science and working for over a decade as a faculty member at the

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University of Arizona from 1960 to 1970. Dutt rose rapidly to become the first non-British Chief Technical Manager of COI over the next few years. After a two year strategy stint at the British head office, he came back as a general manager for COI and West African operations of the parent company in 1982. Soon thereafter, he was appointed to the Board of COI in 1984, given charge as assistant managing director in 1986, and eventually made managing director (equivalent to CEO) of COI in 1991. Regarding this period, Dutt commented in our interview: I had no intention of coming back to India when I was posted in UK, but I was called here as the company was going through some difficulty. In this context, therefore, I had a very clear mandate: (1) to modernise the company, and (2) to take it forward. Though one should not boast, the subsequent results, however, proved that after I came back the turnover more than doubled and profits rose four times during the period 1988– 1989. With his appointment as managing director, Dr. Dutt and his management team charted out a fresh approach to break the long-standing union impasse. The previous management had worked on the assumption that it was better to deal with two weak rival unions instead of one strong union. The belief of the new management was that if they could appeal to the good sense of the workers, they would understand the importance of collaboration and unity. No employee, whichever union s/he belonged to, was interested in petty squabbles and union fights on a daily basis. They were coming to work to earn their daily bread and had enough sense to understand what was good for them in the long run. In other words, the new model was to approach the workforce as ‘loving’ and ‘living’ assets—who loved their firm and who would prefer to live in a healthy and vibrant work environment. In the words of Dr. Dutt, the model was guided by the changing worldview of competition and strategy: Till the mid-eighties we had to become competitive against local smallscale companies which had a lot of fiscal advantage and the product did not require any sophisticated technology. Being a British company, on the other hand, we had a very high overhead cost. During that time we could, however, manage to improve our efficiency and survive. From midnineties and afterwards, due to liberalisation, our competitors are not the local companies anymore. We have to now compete with anybody, anywhere across the globe and remain really ‘world-class’. It was not easy for the company to become world-class which was functioning in a country closed for nearly forty years. Taking the opportunity of upcoming annual agreements with the unions, the management put to test the hypothesis of treating the workforce as ‘loving and living assets’. In response to the two separate charters of demand from the two unions, the management placed a unique and hitherto unheard of proposal.

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They intended to recognize both the unions as one representing the interests of the entire workforce. They announced that the management would only entertain a joint charter of demands and the process of negotiation and final settlement would only be done with representatives from both the unions attending the meeting. There was an immediate resistance from all the quarters, including members of the management who felt that the new model was doomed to fail. However, the management took a firm stand and adopted the strategy of communicating to workers on the shop floor the benefits of such a collaboration. They explained to the workers that the strength in numbers in deciding majority/ minority did not make much of a difference to them as the management was committed to treating both the unions at par. The management would always follow a policy of non-discrimination, recognizing both the unions as representing the interests of the workers. The union leaders resisted this move strongly, fearing a loss of power. However, the communication exercise of the management was beginning to have a profound effect on the general workers. Dr. Dutt observed: ...my major strength is my total openness. I don’t hesitate to say the truth straight and value transparency. It might be seen as my weakness as well but I do honestly perceive it as my strength. I could be blunt, if required. I believe that after all the CEO is the leader and if anything is not right the leader has to say it. To tell the truth in the Indian situation, speaking the truth may be, often perceived as weakness. Culturally, we are always looking for sympathy. Sympathy for the right reason or the right cause is humane. But sympathy for somebody’s failure does not exist in my book. I believe that everybody should show a sense of responsibility. I also have a very high expectation from people as I believe that performance is truly limitless. Though I at times sound rather blunt, people know that what I tell them is nothing personal based on my liking/disliking. I am always perceived as fair. The rank and file members recognized that the new model was fundamentally designed for their own benefit and, at the same time, for enhancement of organizational effectiveness. The union leaders soon gave in to the popular grassroots sentiments and called a joint meeting to resolve mutual differences on their own without managerial intervention. Finally, they decided to accept practically all the pre-conditions of the new model, i.e., they agreed to sit in a joint negotiation meeting with the management with equal representatives from both the unions. They also decided to have an equal number of representatives on the Works Committee and the Canteen Committee where the number of union representatives required was even. But the Provident Fund Committee seemed to pose a problem, as the number of representatives required was three. This was resolved through a management suggestion to have two representatives from one union and one from the other in the first year and reverse the ratio in the next. In addition, workers were barred from switching between unions. Any new recruit would be given a choice to join any union but would have to remain with that union for life. Though the union leaders vehemently opposed

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the idea of submitting a single memorandum, they eventually landed up submitting a virtually identical Charter of Demands on their union letterheads. As part of the new code of conduct, no labor-related issue was to be discussed from then on, unless representatives from both unions were present even when discussing issues pertaining to one union only. Further, to contain costs and ensure dedicated work during normal hours, all overtime hours were eliminated with mutual consent. Looking back in 2001, Dr. Dutt noted: Here, the unions have different political affiliations. But we always talk to them together. I don’t even know who belongs to which union and people often laugh at me for that, but it really does not matter. There are only some token symbols ( like union flags ) but no real politics goes on inside the company. Long back, in mid-eighties I had told them it is their choice whether they want to be a part of a sick company or a healthy business organisation. If they want politicking and unionism they would surely dig their own grave.

TOWARDS A SHARED FUTURE Today, after almost a decade, the workplace environment has been so transformed that the union members hardly differentiate between the unions. More often than not, they invite the opposite union’s leader to solve intra-union problems in the belief that the presence of any one leader would be enough to handle any situation. If one union leader is absent, it is taken for granted that the other leader will intervene. The two union leaders, who used to avoid being seen together in public, now share a very good rapport, and an equal status from members of both the unions. The management is seen as a true friend, philosopher and guide, with umpteen instances where workers, after having been promoted to managerial positions, still retaining their union memberships. In this regard, Dr. Dutt observed: I do not believe in any management-union division, which is very artificial in nature. I know almost all the workers personally go, meet and talk to them and they can also talk to me freely. I tell them, “Look, what you are doing is not right” and they listen to me since they know I don’t talk rubbish. I am working in this company for so many years and whenever in Calcutta I go to the factory, at least three-four times a day. I never restrict myself in the office because I don’t believe in running a company from an office. The success of the ‘loving and living asset’ model has allowed COI to move ahead with several innovative work practices to face the new era of globalization and competition. As part of the annual agreement signed on January 2, 2000, to celebrate the new millennium, the management and unions decided to introduce a new night shift, to relocate existing manpower and support further growth in productivity through multi-skilling and flexible learning. Already, there is an

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increased thrust on training workers to run several machines, instead of limiting them to just one. To capitalize on the opportunity for enhanced learning, the number of holidays has been reduced to 12 instead of 16, without any extra compensation for these days, which has allowed the company to commit to enhanced training despite growing competition. The boundary of the jobs has now become flexible to ensure that work never suffers even if there is a shortage of manpower. Further, the workers have been entrusted with tasks such as quality control, previously entrusted to management staff only. In addition, housekeeping is now a part of everybody’s job. On the other hand, peripheral jobs like security have been contracted with an outside agency to allow the firm to focus on jobs where it can contribute to the skill enhancement of the workers. All the workers are now paid by cheque and are eligible to draw money using an ATM card from zero-balance accounts with a bank. These developments have taken a fresh meaning with the changeover to the Japanese parent. According to him, ‘being a part of DIC, a very large group of companies, COI has access to the very best technology in the world. We are training the people all the time and like any other company the focus is now on cost, we are now much more cost-conscious than we were before.’ In summary, the management belief in treating human assets with dignity and believing in their inherent goodness has been the key to the development of COI. While the firm has done well in preserving and fostering its human and technical competencies, and responding to the post-competence challenges, it is looking forward to a renewed integration of these with Investor Orientation. As shown in Table 2.6, the profits of the firm took a beating in 2000 as compared with the earlier years on account of increased depreciation and material costs. Table 2.6: Recent Performance of Kolkata Plant of COI Year

Sales Figures (in Million Rupees)

Profit After Tax (in Million Rupees)

Production Units (in Tons)

1998 1999 2000

1448 1642 1844

85 101 90*

2531 2657 3051

*There was a significant increase in material costs and depreciation leading to reduction in the amount of profits.

The spiritually-guided attitude of Dr. Dutt, reflected in the following quote, may prove as decisive in the transformative organization without any discontinuity: I don’t see or need any major change, which can only happen when there is no proper planning. I believe the changes should be focused on the business process. I do not believe in drastic downsizing because I understand that in this country without any social security system people are really helpless without a job. I firmly believe that in every sick company it is the

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failure on the part of the management rather than the fault of the workers. I attribute 75 per cent weight to the change of business process and reducing wastage and 25 per cent reducing the number of people. In a country with a tremendous growth potential, in fact, we need people. I welcome the process of automation but I will also like to calculate the real costeffectiveness. We reduce numbers through a really soft Voluntary Retirement Scheme (VRS) program which basically emphasizes the concept of natural attrition and job-freezing. Already, COI’s positive climate has become an exemplar in West Bengal, which is now shedding its past image of leftist unionism and trying to foster a more positive and meaningful relationship between the workforce and the management.

Conclusions In this chapter, we reviewed the transformative perspective in change, leadership, and learning domains. In its essence, the transformative perspective allows an organization to develop a higher-order integrative insight into the differentiated features of various domains so that a new meaning of change, leadership, and learning is created, which enables the organization to live a fulfilling life in each of those domains. The participants in the organization are also thereby able to share their differences and develop a shared sense of reality, and construct bridges between the different realms of their life. The transformative organizations go to the very purpose of human and organizational life, which pervades all the domains of human and organizational behavior. Thus, the transformative approaches influence the heart or culture of the organization and help generate a new integrative emic meaning of each behavior. We developed a theory of strategic cultures of organizations, identifying four types of strategic cultures: Investor Orientation, Competence Orientation, Post-competence Orientation, and Spiritual Orientation. We propose that globalization necessitates an integrative culture, and the transformative perspective can help firms put appropriate proportionate priorities on each of these strategic domains without sacrificing any one of them. We tested the transformative organization proposition using the case analysis of COI, where management control passed from a British parent to French parent, and then to a Dutch/Japanese parent over the past 10 years. Using survey data from the top management team, we found that the firm gives top priority to an Investor and Competence oriented culture, strong priority to Postcompetence culture, and moderate priority to a Spiritual culture. The CEO interview further indicated that the firm has enjoyed greatest gains in Competence oriented culture over the recent years as manifested in a complete transformation of the industrial relations climate. It has also built up Post-competence orientation involving the positive effect of this transformation on the local state. The Investor oriented culture has taken a beating recently, but is likely to improve as the firm

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looks at its role in transformative terms, covering co-development of employees, community, and the nation. In summary, our case study demonstrates how organizations can achieve excellence in multiple cultural domains and, thus, be attuned to the demands and values of different kinds of stakeholders. By adopting a transformative perspective, firms can be more meaningful on diverse criteria for a broad constituency and they can be at home in diverse cultures. There is a further need to investigate the process through which a transformative organization may be forged. In particular, the firms may first cultivate a work climate focused on empathy and exchange of perspectives in a global environment. Conventionally, firms have sought to form alliances with only those partners who share their value sets. As a result, there has been a growing institutionalization of a narrow set of goals. During the early 1990s, nearly all the S&P 500 companies in the US emphasized a narrow set of management tools such as core competency, reengineering and total quality management, thereby reducing their labor costs, and enhancing profit margins. Consequently, from 1992 to 1997, their profits rose by a total of 135 per cent, while sales grew only a fourth as fast (Carr, 1999). In the latter half of the 1990s, there were hardly any new ideas left to reduce costs and there was a mass shift towards another set of narrow themes: mission and vision statements oriented to motivate employees using a variety of buzz slogans about what the organization stood for. It was felt that the prices and volumes could not be increased in domestic markets and, therefore, growth would have to come from the emerging markets. However, the crises in many emerging markets made it difficult to realize the expected revenue growth targets. With a growing maturity of the old economy operations, the growth in the new economy sector also could not be sustained, eventually leading to a meltdown. Through a further understanding of the transformative perspective, firms will be able to forge learning conversations about alternative values with their alliance partners, and adopt practices that will be in tune with the diversity of values in this world. They can thus sustain their transformations without the need to forget their prior learning as they take up new challenges.

References Astin, A. and H. Astin. (2001). ‘Principles of Transformative Leadership’. AAHE Bulletin, January, Washington, D.C.: American Association for Higher Education. Bass, B. M. (1985). Leadership and Performance Beyond Expectations. New York: Free Press. Bemis, W. & B. Nanus. (1985). Leaders: The Strategies for taking Charge. New York: Harper & Row. Boyd, R.D. & J.G. Myers (1988). ‘Transformative Education’. International Journal of Lifelong Education, 7(4): 261–284.

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Brent, D. (1991). ‘Oral Knowledge, Typographic Knowledge, Electronic Knowledge: Reflections on the History of Ownership’. Ejournal, 1(3), Albany, New York: University of Albany. Burgess, H. & G. Burgess (1996). ‘Constructive confrontation: A transformative approach to intractable conflicts’. Mediation Quarterly, 13(4): 305–322. Bush, R.A.B. & J.P. Folger (1994). The Promise of Mediation: Responding to Conflict through Empowerment and Recognition, San Francisco: Jossey-Bass. Carr, E. (1999). ‘Indecent Exposure’. The World in 1999, pp. 84–86, London: The Economist. Dyer, J.J. & H. Singh (1998). ‘The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage’. Academy of Management Review, 23(4): 660–679. Glock, C.Y. & R. Stark (1965). Religion and Society in Tension, Chicago: Rand McNally. Goeglein, A. & J. Indvik, J. (2000). ‘Values-Based Transformational Leadership: An Integration of Leadership and Moral Development Models’. Proceedings of the Academy of Strategic and Organizational Leadership, 5(2): 12–16. Gupta, V., J. Rajasekar and E.S. Srinivas (2002). “Managing Performing Workforce: The Case of India—Challenges and Legacies”. In B. Pattanayak & V. Gupta (eds.), Creating Performing Organizations: International Perspectives for Indian Management, India: Sage Publications. Kuczmarski, S.S. & T.D. Kuczmarski (1995). Values-based Leadership. Englewood Cliffs, N.J.: Prentice-Hall. Lederach, J.P. (1989). ‘Director’s Circle’. Conciliation Quarterly, 8(3): 12–14. Lichtenstein, B.M.B. (2000). ‘Self-organized Transitions: A Pattern Amidst the Chaos of Transformative Change’. The Academy of Management Executive, (4): 128–141. Mangaliso, M.P. (2001). ‘Building Competitive Advantage from Ubuntu: Management Lessons from South Africa’. The Academy of Management Executive, 15(3): 23–33. Meyer, M.W. & V. Gupta (1994). ‘The Performance Paradox’. In B.M. Staw & L. Cummings (eds.), Research in Organizational Behavior, Greenwich, Connecticut: JAI Press, 16: 309–369. Mezirow, J. (1991). Transformative Dimensions of Adult Learning. San Francisco: Jossey-Bass Inc. Montville, J.V. (1993). ‘The Healing Function in Political Conflict Resolution’. In Conflict Resolution Theory and Practice: Integration and Application, edited by Dennis J. Sandole and Hugo van der Merwe, 112–127. New York: St. Martin’s Press. Morris, R. (1994). A Practical Path to Transformative Justice, Toronto: Rittenhouse. Ferguson, M. (1980). The Acquarian Conspiracy: Personal and Social Transformations in the 1980s, Los Angeles: J.P. Tarcher.

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Parker, S.K. & C.M. Axtell (2001). ‘Seeing another viewpoint: Antecedents and outcomes of employee perspective taking’. Academy of Management Journal, 44(6): 1085–1101. Stryker, S. & R.T. Serpe (1982). ‘Commitment, identity salience, and role behavior: Theory and research example’. In W. Ickes & E.S. Knowles (eds.), Personality, Roles and Social Behavior, 199–218. New York: Springer-Verlag. Vargas, R. (1987). ‘Transformative Knowledge: A Chicano Perspective’. In Context, 17: 48–50, Langley, WA: Context Institute.

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A Model of the Transformative Organization

Learning from the Wesman Group1 of India  Vipin Gupta

l

Kumkum Mukherjee

l

Roma Puri

Organization theory is facing serious challenges at the dawn of the 21st century. These challenges are of three types. First, the formative challenge: the debate between those who emphasize that the organizations exist to serve the interests of their owners and stockholders alone (Freeman, 1984), and those who assert a multiple-constituency stakeholder logic for organizational functioning (Drucker, 1999; Blair, 1995; Donaldson and Preston, 1995) has reached new levels of urgency. The owner-stockholder camp builds on the private property rights logic and holds that by focusing on their main job—to be profitable—the organizations can generate greatest value and allow society to enjoy the highest welfare and people to have the maximum resources to satisfy their needs. In contrast, the multi-constituency stakeholder camp builds on the social capital logic and asserts that each stakeholder constituency is essential to the success (ontological view), that the organization will be more effective by recognizing the emotional ‘ownership’ of these constituencies (epistemological view), and that the contributions of those constituencies constitute moral entitlements to shared ownership (axiological view). Second, the normative challenge: the conversation between those who assert the paramount significance of the local institutions, and a need for the organizations to accept and adapt to the local institutional norms for legitimacy, preferential resource access, and buffered contingencies, and those who emphasize the freedom of the organization and a need to apply more general and universal criteria for strategic decision-making, has gained central place in international management literature. This conversation has grown into an emic versus etic debate in comparative management; localization versus globalization debate in 1

We are thankful to the US National Science Foundation, Globe Research and Educational Foundation, IIM Indore, and EMPI Business School for funding the study as part of worldwide cross-cultural CEO research initiated by Professor Robert House. XLRI Jamshedpur and Eastern Institute for Integrated Learning offered additional help for this chapter.

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multinational management; relativism versus universalism in business ethics; and modernization versus post-modernization debate in development theory. Bartlett and Ghoshal’s (1991) transnational solution for this normative challenge has received much attention, but its emphasis on the shared vision to manage ‘local responsiveness and flexibility’ and ‘global efficiency and competitiveness’ simultaneously for ‘worldwide innovation and learning’ begets the unresolved issue of whose vision must be shared within the organization. In a transnational organization, the units with multiple perspectives and capabilities, dispersed assets and resources, and differentiated roles and responsibilities are believed to prosper in a globally efficient manner because of two techniques—shared worldwide vision and the mission of the organization reinforced through visible behavior and public actions of senior management, and the shared corporate values underlying the organizational psychology shaped through corporate personnel policies (Bartlett and Ghoshal, 1991:204). Third, the fulfillment challenge: another classic debate relates to the domain and boundary that would enable fulfillment of the fundamental organizational purpose. The domain includes arena issues about scope of products, geographies, customers, core technologies, and functional processes and activities, as well as the vehicle issues about ownership, alliances, and open outsourcing. The literature encompasses a range of guiding factors including transaction costs (Williamson, 1975), coordination costs (Richardson, 1972), agency costs (Jensen and Meckling, 1976), core competence (Prahalad and Hamel, 1990), and learning benefits (Kogut, 1983). In each case, the organization has stronger commitment to some domains in which it has direct and fullest ownership, moderate commitment to the other complementary domains where it has shared ownership, weak commitment to the supplementary outsourced domains directly relevant to its business model, and least commitment to the broader community and external groups. This radius of commitment approach is problematic because it precludes effective participation of the broader community and external groups through their influences on manpower quality and market purchasing power. On the whole, the organizational theory is struggling with the issues of for whom (the formative ownership problem), by whom (the normative integration problem), and of whom (the boundary fulfillment problem). We suggest that these three problems should be seen together within the context of an overarching democratic challenge since they are fundamental to the democratic working of modern society. Put differently, the organization must seek to balance the needs of the stockholders and the diverse stakeholders, the demands of the institutions and the efficiency of coordination, and the costs of governance and the power of the masses. We exemplify this balance-oriented approach to servicing by referring to the ‘transformative organization.’ In this chapter, we develop a model of transformative organization using evolutionary perspective as a point of departure. We also present a case study of the Wesman Group in India, illustrating how the transformative organization can be evaluated and developed.

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A Model of Transformative Organization THE EVOLUTIONARY PERSPECTIVE The evolutionary perspective highlights the fact that the development of an organization occurs through VSR—Variation, Selection, and Retention (Weick, 1969). Variation is considered a fact of life; evolution is deemed to occur through a persistent process of Selection from the generated Variation; and Retention springs from more adaptive forms of structures through replication and reinforcement. We propose that an understanding of the formative forces in Variation—its Why and How—is necessary to resolve any problems with the retained structures, and to facilitate the process of organizational restructuring, both on a continuous as well as a punctuated basis. Variation is typically associated with the emerging stage of the organization. This is a period when several organizational forms can co-exist, but where certain events force the selection of one dominant form. In the evolutionary perspective, these causative events are viewed as exogenous to the organizational development and are identified as ‘shocks’ for the system. The organizations or the actors within these organizations, do not have any control over these shocks and their behavioral response can at best be ‘adaptive’. However, one needs to develop a deeper understanding of the formative forces that make constructive mutations in an organization or a population possible. Next, we discuss how the formative forces may be cultivated to enhance Variation, and then support richer Selection and Retention over the course of the organizational lifecycle.

F ORMATIVE FORCE

AND

TRANSFORMATIVE O RGANIZATION

Formative means ‘capable of giving form or shape’ and ‘capable of alteration by growth and development’. The viability and development of an organization is a product of the formative power—the mission and vision of the people who lead that organization (‘the entrepreneurial leaders’). Depending on the scenario being enacted by the entrepreneurial leaders through their mission and vision, and commitment of the cast, the organization can continue to fulfill the needs of a wide group of people in its original or modified form over several time periods. Gupta, MacMillan, and Surie (2003) observe that ‘scenario’ enactment and ‘cast’ enactment are two critical roles underlying effective entrepreneurial leadership in all cultures. The formative power of the organization is a function of the quality of exploration, the scope of variation, the depth of research and development, the maturity of knowledge codification, the fundamentals of architecture, the excellence in technical skills, and the craft used to develop technological, manpower, material, and marketing capabilities. A high organizational slack— endowing access to adequate resources, and a loosely coupled network—offers opportunities that can be linked to the broader community and external groups and may support discovery-oriented formative power.

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The formative phase generates diverse combinations and recombination of the technological inputs and affirms the cast’s capability to deliver relevant, potentially valuable, services in the market place. The ability of these services to acquire an incremental value, over and above the cost incurred by the entrepreneurial leaders for the purposes of scenario and cast enactment, depends on whether those services offer normative utility to the broader community and external groups. Normative means being related to, determining, derived from, conforming to, or prescribing, the norms. The norms represent a working standard of development or achievement, measured by the central tendency of the broader community and external groups with respect to the criteria of action that guide and regulate appropriate behavior. Any deviation from the central tendency may still offer some normative utility to the community in proportion to the significance of the minority criteria compared with the central norms. The greatest normative utility is realized by carrying a meaningful relationship to the established central norms, or by prescribing how the services offered are more appropriate compared with the established norm for fulfilling the central needs of the broader community and external groups. The motivations of the different constituencies and groups vary. It is rather difficult to fulfil these varying motivations through one standardized norm. However, the entrepreneurial leaders may successfully discover and establish mechanisms to fulfil the needs of a diverse group of constituencies, and external groups, for instance, through flexible manufacturing. Table 3.1 summarizes the key characteristics of the formative, normative, and fulfillment phases of the transformative organization. Next, we discuss how to empirically identify and develop this transformative organization.

T RANSFORMATIVE ORGANIZATION

AND

P ERFORMING

A transformative organization can be identified on the basis of its approach to performance and the techniques it uses to measure, appraise and enhance performance. During the formative phase, a transformative organization focuses on a few criteria to allow for a broader range of commitments during the normative development, and is aware of the implications that the criteria will have on future organizational performance. Such ‘formative evaluation’ enhances the successful fulfillment of the mission and vision of any program (Breen and Candlin, 1980:106; Williams and Burden, 1994:22). The criteria used in the formative evaluation help to assess the worth of a resource during the formative phase of a program (Bhola, 1990). The perspective is essentially prospective, oriented towards improving the quality of resources, understanding the strengths in order to amplify them, and isolating the weaknesses to rectify. It is done before the resource’s service is formalized so that the conditions can be adapted to enhance the quality of the resource and the value of its potential service. Formative evaluation is typically conducted as a learning conversation with a cast of characters that share the same mission and vision, so that full commitment

Table 3.1: Characteristic Phases of the Transformative Organization Formative Phase

Normative Phase

Fulfillment Phase

Reference

1.

Economies

Scale

Competitive advantage Enactment process Value chain management Knowledge management Organization design Managerial skills Organization coupling Organization slack Products

Constructing position Selection

Scope (focus; purpose) Constructing exchange Retention

Chandler (1990)

2.

Learning (discovery) Constructing capability Variation

Gupta (1998)

3. 4. 5. 6. 7. 8. 9. 10.

Weick (1969)

Research and Development Codification

Manufacturing

Marketing

Porter (1985)

Diffusion

Abstraction

Boisot (1998)

Architecture

Routines

Culture

Technical

Interpersonal

Conceptual

Saloner, Shepard & Podolny (2001) Katz (1974)

Loose (open) High

Tight (efficient) Low

Craft

Standardized

Meaningful (empowering) Appropriate (flexible) Customized

Perrow (1984) Cyert & March (1955) Pine (1993)

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of the cast may be mobilized for the intended purpose. The formative evaluation uses multiple techniques, including internal dialogue, external review, and field test, which enhances the utility of the identified service and minimizes the costly and time consuming shocks and reformative services. The formative evaluation criteria help validate that the relevant incremental value is being accrued and to improve the performing, as necessary, by means of identification and immediate remediation of impediments (Weston, McAlpine, and Bordonaro, 1995). The normative evaluation covers a broad range of criteria, each of which is consistent with the firm’s formative mission and vision, and the derivative service commitments of the cast of characters. It highlights how the market’s need fulfillment, and the value accrued by the organization through its services, compares to the fulfillment of needs and the values accrued by the other organizations with similar constituencies, broader communities, and external groups. The normative evaluation is not intended as a measure of the effectiveness of the servicing program. It uses very simplistic criteria, such as comparison on market share, profits, or stock valuation, which capture at best a limited component of the efficacy of servicing program. The criteria used in the normative evaluation are those believed to be important for organizational performance, they represent the alternative outcomes that ought to be evaluated. In addition, normative evaluation assesses the beliefs of various constituencies, such as of stockholders, customers, and employees about how well the organization is performing (Weiss and Greene, 1992). These beliefs are based on the outcomes that these constituencies expect from the organization. The real test of the servicing effectiveness is if an organization performs better than its competitors who have access to a similar scale and quality of resources, by quickly delivering its services to its diverse constituencies, broader community and the external groups, retaining these networks for successive services, and growing faster than its competitors. Such ‘summative evaluation’ requires the servicing program to develop fully, and takes time to conduct because it encompasses the totality of the organization. Summative evaluation highlights whether the program has been fulfilling, but does not explicate the why or how sources of fulfillment (Williams and Burden, 1994:22; Chambers, Wedel and Rodwell, 1992:8; Stake, 1983). Its purpose is to document and disseminate overall results to various constituencies that are interested in the well being of the organization. It can also be used to evaluate the overall performance of the personnel and to assess overall value generated from the resources.

SUMMARY In essence, we suggest that an organization is the sum total of formative effects, which become normalized, but may not necessarily contribute to a 100 per cent fulfillment of the organizational purpose. Transformative organization seeks to evaluate the formative effects so that the value of its norms becomes explicit, and those norms may be used purposefully to discover ‘how’ of the organizational performing. Consequently, the priorities could shift from the norms that are

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inconsistent and inconsequential for accruing incremental value, to those of greater significance. Better alignment of the norms with the value accrual process helps in fulfilling the mission and vision of the organization, and allows additional, higher order, set of values to inform the subsequent formative and normative evaluation of the organization. Next we present a study of an illustrative transformative organization using the case of Wesman Group—the market leader in heat treatment products in India. The study identifies the summative evaluation of Wesman, the normative implications of the fulfilling summative performance, and the formative foundations of the effective norms.

WESMAN GROUP—A CASE STUDY OF TRANSFORMATIVE ORGANIZATION SUMMATIVE EVALUATION—IS WESMAN

A

FULFILLING EXPERIENCE?

The Wesman Group began with the founding of its flagship privately-held arm, Wesman Engineering Company Ltd in 1951 under the entrepreneur-owner Vaswani (Sr.) at the city of Calcutta (now Kolkata) in the state of West Bengal in eastern India. Since then, the Wesman Group has grown to 10 companies and more than 500 employees with manufacturing plants and offices throughout India. Wesman has been India’s dominant manufacturer of foundry equipment, combustion equipment, and industrial furnaces. Twenty per cent of the group’s sales come from foundry equipment, 30 per cent from combustion equipment, and the remaining 50 per cent from industrial furnaces. The flagship company was certified as ISO 9001:1994 in 1998. Wesman’s corporate and head offices are located in Kolkata, with regional offices at six major industrial centers—New Delhi, Ahmedabad, Mumbai, Pune, Bangalore, and Chennai—covering all of India. Since its inception, Wesman adopted a pioneering approach to design, manufacture and application of the foundry, combustion, and industrial furnace equipment for the modernization of Indian industries. It gained reputation for its quality and reliability; its products built over 25 years ago still provide reliable performance all over India. In recent years, to support further growth in the foundry business, it has entered the niche foundry markets where the customers are looking at reducing rejections. In 1977, Wesman entered into a long-term collaboration to secure designs and technology for liquid and gaseous combustion equipment from North American Manufacturing Company, US. With the support of a team of dynamic engineers and technologists, it offered value and built-in flexibility to its customers. Its combustion systems gained popularity not only in the steel, aluminum, foundry, forging and heat treatment industries but also in tea processing at all the major tea gardens in Assam and Darjeeling; its baking ovens are widely used by biscuit manufacturers. Recognized as a pioneer in the furnace industry since the 1950s, Wesman was the first to build many specific furnace designs in India. Subsequently,

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Wesman formed joint ventures with two German sister companies—Ipsen International and LOI Thermprocess GmbH—which allowed fuel fired and electric industrial furnaces to become its fastest growing business. Ipsen’s R&D program, which is focused on new furnace designs tailored to meet customer and market requirements, has been made available to all the joint ventures including Wesman. The first joint venture, Wesman Ipsen Furnaces Private Ltd, formed in 1993, counts among its clients almost all the major domestic and multinational automobile makers in India including their ancillaries for heat treatment requirements. It has nurtured long-term customer relationships through its deep involvement at all project stages, from equipment selection and sizing to installation process standardization and after-sales support during the lifetime of the equipment. The other joint venture caters to several players in the steel and aluminum sectors. In 2000, Wesman entered into a technology licensing agreement with Furnace Construction Company Ltd of the UK to manufacture oil and gas-fired cremators. The technology was seen as a natural extension of the industrial furnace business. Says CEO Vaswani Jr., ‘As far as we are concerned, it is manufacturing just another furnace. The equipment manufactured by us will conform to standards applicable in the UK. No fresh capital investment is entailed as the equipment would be manufactured with the existing machinery’ (Business Line, 2000). The company has been seeking to educate the customers on the need to move away from the use of wood for cremation purposes and switch over to more environment friendly oil and gas cremators. With the liberalization of the Indian economy, Wesman set up a separate export-dedicated company, and targeted the rapidly growing industrial markets in Asia-Pacific, Middle East and Africa. In addition, it became the marketing agent in India of several leading international foundry equipment manufacturers. This allowed it access to system components from the best international manufacturers, enabling it to deliver turnkey solutions to its national and international customers. By 2001, Wesman had forged several international tieups with German, US, British, Italian, and Canadian companies in the form of joint ventures. It also secured technical licenses from many international companies. Supported with its technical expertise, R&D facilities and international collaborations, it offered products of quality and price that were very competitive against international suppliers from Europe, Japan and the US. It sent its employees to client locations overseas for on-site erection supervision and commissioning services, and offered hands-on training to the customers’ operators. In short, Wesman’s global outlook has helped it achieve its mission of being the number one choice for its customers. Further, it has been successful in turning its employees into high-performers. In our interview conducted in 2002, Wesman’s CEO, Mr Rajan Vaswani Jr., observed: ‘A unique aspect in the organization is that whoever joined Wesman has remained with the organization till retirement. But that is again like a double-edged knife. People with limited capability cannot be trained to perform beyond a particular level. But to deal with the situation, the harsh approach was never taken. What we did instead was to become gradually more demanding and identifying more scope for

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individual development. I take pride in telling you that applying a combination of soft and hard approaches, we could really transform a number of nonperformers into high performers.’

N ORMATIVE EVALUATION—HOW EFFECTIVE IS W ESMAN’ S O RGANIZATION ? We use two criteria for evaluating Wesman’s organizational effectiveness: Top Management Optimism and Top Management Commitment. The two criteria were measured using the top management team survey of the Global Leadership and Organizational Behavior Effectiveness (GLOBE) program which has designed a survey of CEOs and top management teams in more than 30 nations of the world, under the overall coordination of Professor Robert House at the Wharton School. In India, the study is being conducted in 30 states with a sample of 40 firms in each state, under the overall coordination of the first author. The top management team surveys included questions relating to the leadership of the CEO. In addition, there were 11 questions intended to learn about the commitment, effectiveness, and satisfaction (CES) of the top management team. Of these, six CES items were used to construct the two scales. These two scales were found to be internally consistent (Cronbach alpha > 0.70) at both the firm level as well as the top management level. The Top Management Optimism scale is measured on the basis of the optimism of the top managers about their future with the organization, their agreement with the CEO’s vision, and their expectation for an excellent future for the organization. The Top Management Commitment scale is measured on the basis of top managers contributing 100 per cent of their ability to the organization, their willingness to make serious personal sacrifices to contribute to the organization, and their ability to work well together. As shown in Table 3.2, Wesman scored 5.72 on a 7-point scale for both top management optimism as well as top management commitment, indicating that its top managers have a positive, but moderate, degree of optimism and commitment to the organization. The range was similar for both, varying from 4.67 to 7.00 for optimism, and from 4.33 to 6.67 for commitment. The Pearson’s rank correlation between top manager scores of optimism and commitment was 0.51 (p > 0.10; N = 6), though not significant. Thus, Wesman’s top managers have some degree of optimism and commitment to the organization, though their optimism is not strongly related to their commitment. Their commitment is not necessarily rooted in their optimism about the future of the organization, and their optimism does not necessarily spring from their own commitment. There appears to be some additional forces that influence both commitment as well as optimism of the top management team of the Wesman Group. Next, we investigate the formative forces that account for the positive, albeit moderate, levels of top management commitment and optimism at Wesman.

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Respondent

Respondent

Respondent

Respondent

1

2

3

4

5

6

5.33 6.00

6.33 5.67

5.67 5.67

4.67 4.33

7.00 6.67

5.33 6.00

Firm’s Average

Respondent

Optimism Commitment

Respondent

Table 3.2: Top Management Optimism and Commitment at Wesman Group

5.72 5.72

F ORMATIVE EVALUATION—WESMAN’S 25-YEAR T RANSFORMATIVE J OURNEY Under the patriarchal leadership of founder-owner Vaswani (Sr.), Wesman Engineering Company gained reputation as a technological pioneer and its products became known for their quality and reliability. A major change in the group strategy emerged in the early 1970s with a shift in the corporate leadership. In 1970, Mr Rajan Vaswani, the present CEO, graduated as a metallurgical engineer with specialization in industrial furnaces and combustion engines. After working in the Wesman plant in Calcutta as a trainee for one year, he went abroad and lived in the US, Switzerland and the UK, working with the Wesman clients for about two years. He returned to India and joined the company on a full-time basis in 1973 at the age of about 25 years. A few years later, Vaswani (Sr.) entrusted the entire responsibility of running the business to Rajan and his younger brother, and permanently migrated to the US to help develop the group’s international business. Although Rajan felt quite unprepared for this daunting task, his father was fully confident about the abilities of his son. In 2001, Rajan reminisced about the challenges he saw at the time: ‘I was not really ready for it at such a young age and with no previous management experience. I had only one thing in my favor. From the age of 14, my father used to send me to the various factories and plants of Wesman during my school holidays. This gave me an opportunity to learn various skills. Engineering drawing is one such skill that I learnt during this time. I could make drawings independently. Someone at my age would never have the depth of knowledge that I had. It was that grounding that helped me immensely in my role as the person-in-charge of the organization. I was very confident in all areas pertaining to engineering. But management skills came from common sense only.’ Rajan found total support from a group of old loyalists who had worked under his father. This helped him take charge, but he now faced the problem of learning how to run the business in his own way in a manner that the old loyalists did not become a hindrance. Rajan knew that he had to discover his own solution. For a while, Vaswani (Sr.) had promised to fly down whenever Junior faced any critical problem, but it was only to be used as a ‘fire-brigade’ option.

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Says Rajan, ‘Regarding my father’s decision to hand over the company to me at such a young age, I don’t have the full answer to it. I am still trying to figure out why he did it. I guess he took the gamble which he figured could be taken because should the ship start sinking, nothing would prevent him from flying back. In the first year after he left, he came four times, second year three times, third year twice and fourth year only once. From the fifth year onwards he stopped coming. Thus, in a way, he took a step by step approach over a period of around three years and then decided that he could stay away.’ When he took the helm, Rajan found that the old-timers were happy in their own way, and even seemed complacent about the newcomer. The task of changing their outlook and the way of functioning appeared quite daunting. Most of them had seen Rajan from his childhood days and were loving in their own way. They saw themselves as a member of the patriarchal organization and were fiercely loyal to Vaswani (Sr.) and emotionally attached to all the rules and regulations of the older days. The key was to transform the love and emotional bonding of the old guard so as to make them supportive of the young Rajan’s entrepreneurial vision. Rajan recalled that he had three major goals at that time: (a) To identify strong well-known international partners and become one of the most highly respected companies. We should be among the top three players in our business domain; (b) To keep growing; and (c) To be the first choice of the customers even if the company’s products became an expensive choice. Rajan decided to bring about an incremental change rather than to author harsh and abrupt change in the organization. He respected people’s seniority and involvement, and showed a keen sense of learning about the managerial and operating issues from their experience. As he initiated the change process gradually, the changes were transformative in nature and became embedded in the very fabric of organizational life. More importantly, from Rajan’s perspective, it was a bloodless battle that he won, in which mutual love and respect had been reinforced and enhanced in the organization, making it truly a joyful place to be. He later recounted: ‘The company had many senior people in the organization. Therefore, it was a little delicate for a younger person forced into a chair for which he was not yet ready, but nevertheless, required to provide the leadership. So, my strategy was to learn from the senior people by giving them due respect that they deserved for their experience and knowledge. So they did not see me as someone who had come to make the river flow the other way. Once the personal balance was achieved, it became teamwork. The whole thing was some sort of step by step process. It took almost five years before they would start coming to me for decisions and expecting me to play the leadership/decision-making role. This process continued all the way through the rest of the cycle of my taking over the charge of the company. In fact, there was not a single resistance at any point. Generally, I have noticed that whenever the process of succession takes

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place in an organization, at least some senior people always tend to pack their bags and leave. This is a very common occurrence. We were fortunate that it never happened here.’ While he gained love and genuine respect from his people, Rajan found growing pressures from the competitors, and realized that something more had to be done to transform the organization in a way that would sustain its market position. ‘During this period the competitors must have been watching Wesman minutely and thought that it would definitely decline because of this abrupt change in leadership. In this situation, my pace of learning the ropes of the trade had to be accelerated,’ he said. When the Government of India liberalized the market and opened it to global competition in 1991, Rajan sought to harness the confidence of his people in his abilities as a leader to achieve his ambition of turning the organization into number one in its market. A key element of the leadership strategy was to develop the core areas of foundry, combustion, and industrial furnaces where the organization has already gained market reputation and technical expertise, and to enhance the human and technical capabilities of the organization. To make his vision work, Rajan hired an external consultant in 1991 to develop the organizational leadership for the emerging and exciting times. ‘During the tenure of my father’s leadership everything was done according to his diktat which was a potentially dangerous situation from the organization’s point of view. I myself was making the same mistakes earlier in my career. But fortunately, there was an opportunity to have an excellent external consultant who made me realize that I have to let go. I had to give others the space and freedom to do their work. Today nobody comes to bother me with little details. They do their job and I am there to provide back up support whenever they need. The external consultant made us relook and re-define ourselves and our objectives. On the basis of the oneto-one feedback from the consultant, I have now made my position in such a way that I don’t interfere in the day to day functioning of the organization and make myself available as and when necessary,’ said Rajan. The need of the hour was to shift from a continuous direct involvement of the owner/managers in all the areas to a more professional leadership style where the CEO was at best a virtual fire brigade. As Wesman charged its managers with greater freedom, new growth became feasible and new business partners were added. Rajan observed: ‘There was always a need to develop new product lines and identify new international business partners, in which we were continuously engaged in. The other business partners came on their own because of the company’s growing reputation. The entire thing was based on mutual trust. All our relationships with our business partners are strong and on a long-term basis.’

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LEARNING

TO

59

MAKE HIGH-PERFORMERS

With the new leadership conception, it was realized that the simple structure had failed to empower the people to live their own creative lives, and had only reinforced the dependency on the patriarchal style of leadership. To reach a new height of excellence, routine involvement of the CEO and his top management team had to give way to a more strategic role. The solution was to restructure the organization using the M-form (multidivisional form), by creating autonomous Strategic Business Units (SBUs), each with its own divisional head. The division heads now took the responsibility for operational issues. For a while, there was a general feeling that things were not going in the right direction and the transition was running into hurdles. The informal feedback from employees suggested that the involvement of the line managers did not meet their expectations and they longed for the previous style that offered them an opportunity to directly interact with the owner managers. The perception was that the line managers lacked charisma and personal touch as well as the instant decision-making power that the employees had loved in the owner-CEO. To deflect this dependence on the authority, Rajan sought to instill greater personal accountability among the employees for their roles, but progress appeared to be slow. In 1996, Rajan brought in an external consultant to obtain extensive confidential feedback from the employees across the organization, and identified Performance Appraisal System as the most critical aspect of the required transformation. The employees perceived the existing performance appraisal to be rather biased and arbitrary. The need was to design a performance appraisal system that linked employee performance with not only the organizational reward system, but also with the personal growth and development of the individual employee. To enhance the communication and to allow the employees a better access to the top management, a three-tier assessment system was introduced. Instead of the previous system where the immediate superior was the sole rater, employees were now rated by (a) their immediate superior, (b) the superior’s boss, and (c) by themselves, with self-appraisal covering own achievements, key performance areas, perceived value addition and future development plans in terms of training needs. Special feedback sessions on past performance and planning for future goals were added involving the three, which were also attended by one human resource person who played the role of a mediator and facilitator. As shown in Table 3.3, key performance areas were grouped into three categories: task, skill, and personality related attributes for the staff (S) and executive (E) levels, and business results, management style, and personality related attributes for management (M) and managerial executive (ME) levels. A special section was added about the employee’s health, reflecting the organization’s genuine concern for their employees’ wellbeing. Each attribute was evaluated on a 5-point scale, and different weighting was given to various factors according to the level of the employee. For instance, a key aspect of managerial personality attributes was the degree to which their actions reflected corporate values.

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Table 3.3: Areas for Measuring Performance at Wesman Engineering Staff Level

Manager Level

Task related areas l output of work l quality of work l customer orientation l quality orientation Skill related areas l conceptual skills l human skills l functional skills Personality attributes

Business results l achievement of results l quality orientation l systems orientation l customer orientation Management style l conceptual skills l human skills l functional skills Personality attributes

The core values of the organization were identified as something with which the entire performance appraisal system must be related and aligned. To discover the true organization-wide values to which the employees felt involved and committed, inputs were sought from the employees across all levels, and five core values were identified: (a) Personal integrity, (b) Decency and fair play, (c) Caring for customers, (d) Caring for employees and (e) Openness and team spirit. The CEO encapsulated these values in the company’s Vision statement, and highlighted the operational meaning of each based on the employee inputs. For instance, rather than assuming that loyalty means the same to everyone, an effort was made to clarify what loyalty meant for the employees working at Wesman, so that loyalty took a special and unique meaning related to the identity and life values of those part of the Wesman Group. The effects of the new performance appraisal system, introduced in 2000, are evident in Table 3.4. As can be seen from the table, there was a clear improvement in performance at the management level, modest deterioration at the managerial executive level (in particular due to an enhanced emphasis on value-related actions, not previously evaluated at this level), stable performance at executive level, and noticeably improved performance at the staff level. On the whole, there was a steady improvement, with managers aligning their behaviors more explicitly to the need for values-based leadership, and staff employees finding a more adaptive and values-based response from their executive and managerial executive bosses. The CEO, Rajan, expressed that the key to the success of the new initiative was Wesman’s reputation of being an organization that ‘listens to its people’ and its commitment to take serious actions to make the employees happy and committed to the organization’s vision and objectives. When asked about the specific factors that underlined the transformative culture of Wesman, Rajan identified four areas: (a) Transparency and trust (both with the outside agencies as well as insiders), (b) Bonding and positively discouraging politicking, (c) Supporting each other, and (d) Sharing the common pool of resources including the knowledge and skills.

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Table 3.4: Effects of New Performance Appraisal System on Employee Performance at Wesman Engineering Level Management Management executive Staff Overall

Year 2000–2001 1999–2000 2000–2001 1999–2000 2000–2001 1999–2000 2000–2001 1999–2000

P

A

4%

1%

A+

C 13% 8%

4% 1% 10% 1% 13% 8% 1% 10%

C+

G

G+

E

57% 43 55% 32% 40% 48% 52% 46% 54% 46% 54%

44% 42% 1% 33% 45% 35%

Note: P=Poor; A=Average; A+= Better than Average; C=Satisfactory; C+= Better than Satisfactory; G= Good; G+= Better than Good; E= Excellent

At the beginning of the 21st century, Wesman is sharply focused on further improving and upgrading each individual’s level of performance, by giving opportunities to people and giving scope for value addition. In tune with the times, the thrust is on creating and developing the internal processes using information technology to obliterate repetitive work, eliminate waste, better utilize time, and thereby enhance overall internal capability. Its vision is clear: become a respected company, through trust and openness and improving creativity in people on the one hand, and by being the customer’s first choice, help customers to be more profitable and improve customer retention, on the other. However, in the process, the normative values it has put in place are not necessarily strongly reflected at the middle management (ME) level, which could explain why the commitment of the top management is not strongly related to their optimism about the future and vision of the organization. Thus, the transformative journey of Wesman is likely to continue, and Rajan is well aware of this: ‘Today, the organization is ready to enter into the third generation of succession. Just like my father, who took an early retirement, I mean, he did not take retirement from work, but used to do some other type of work and did not get involved in the day-to-day operations, I am also planning to do the same. Today younger people like to have more freedom. I was forcibly given the freedom without my asking for it. Today the people expect it to come much earlier.’ As the Wesman group grants more freedom and space to its leaders and people, its big challenge is the role that the middle managers should perform so that the top management can effectively commit its best contributions for the future of the organization.

Conclusions We began by identifying three fundamental challenges being faced by the contemporary organizational scholars. These included deciding for whom does

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the organization exist (the ownership problem; the formative challenge), by whom should the organization be defined in terms of vision and values (the integration problem; the normative challenge), and of whom the organization would assume responsibility (the boundary problem; the fulfillment challenge). These challenges are best understood in the context of the organization as a democratic citizen, seeking to sustain and further the democratic spirit of the international society. By focusing on supporting exchange among the stockholders and other stakeholders, multiple local institutions, and diverse contributors to the organizational functioning, the transformative organization can better fulfill its formative and normative roles, without necessarily favoring one constituency over the other, and one institutional system over the other. We showed how the evolutionary perspective invokes the concept of mutation as a God-given gift in order to explain the formative force in effective organizational design. We underlined that this God-given gift can be cultivated through learning conversations about the mission and vision of the organization within the pioneering group, and then enhanced through normative development that brings the organization into the mainstream. The final test of the organizational effectiveness is highlighted by the summative evaluation, which captures the milestones achieved by the organization. Our case analysis of the Wesman Group in the State of West Bengal in India showed that the firm has reached tremendous milestones in terms of its market position and respect by the international partners. However, from a normative perspective, the commitment of its top management was not strongly related to the optimism about the organization’s future, though both were moderately and equally positive. Though neither top management commitment nor top management optimism were part of the firm’s formative vision, the current CEO had become increasingly aware over time about the need to give space and freedom to the employees, and the role of the top management in this respect. To ensure effective performance, the firm identified common values and their shared meaning through conversations at various levels of the organization. These initiatives were inspired primarily by the feedback from the grassroots level, and thus resulted in strongest performance enhancement at that level. The middle management, which was the source of disenchantment at the grassroots levels, actually saw some deterioration in its performance. While the core values reflected the top management vision, and their operational meaning was identified using the grassroots conversations, no explicit effort existed as yet to discover and integrate the middle managerial values. In general, the role of the middle managers has come under increasing scrutiny around the world with the rise of the downsizing and the horizontal organizations during the 1990s. With empowerment and multi-skilling at the grassroots level, and the spread of information technology at the mass level, the control and information transfer role of the middle managers has lost much of its relevance. Yet, middle managers represent a valuable resource for the organizations, since their distinctive expertise is to codify and balance the more abstract knowledge and values of the top management, and the highly diffused knowledge and values at the grassroots. Such an expertise is uniquely appropriate to the role of

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promoting exchange in knowledge and values, not only across different levels in the organization, but also across different radii of commitment outside the organization, multiple stakeholders of the corporation, and the varying local and national institutions. It is only by re-discovering the relevance of each resource, including middle managers, that the organizations can become truly transformative and perform most effectively. That is the essential challenge for the organizations in the 21st century democratic societies.

References Bartlett, C.A. & S. Ghoshal (1991). Managing Across Borders: The Transnational Solution. Boston: Harvard Business Publishing. Bhola, H.S. (1990). ‘Evaluating “Literacy for development” projects, programs and campaigns: Evaluation planning, design and implementation, and utilization of evaluation results’. Hamburg, Germany: UNESCO Institute for Education. Blair, M.M. (1995). ‘Ownership and Control: Rethinking Corporate Governance for the Twenty-first Century’. Washington, DC: Brookings Institution. Boisot, M. (1998). Knowledge assets: Securing competitive advantage in the information economy, New York: Oxford University Press. Breen, M.P. & C.N. Candlin (1980). ‘The essentials of a communicative curriculum’. Applied Linguistics, 1(2): 89–111. Business Line (2000). ‘Wesman to make oil, gas-fired cremators’, October 10, Calcutta, India: The Hindu Group of Publications. Chambers, D.E., K.R. Wedel & M.K. Rodwell (1992). Evaluating Social Programs. Boston: Allyn and Bacon. Chandler, A.D. (1990). ‘Scale and Scope: The Dynamics of Industrial Capitalism’. Cambridge, MA: Harvard University Press. Cyert, R.M. & J.G. March (1955). ‘Organizational Structure and Pricing Behavior in an Oligopolistic Market’. The American Economic Review, 45(1): 129– 139. Donaldson, T. & L.E. Preston (1995). ‘The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications’, Academy of Management Review, 20(1): 65–91. Drucker, P.F. (1999). Management Challenges for the 21st Century, New York: HarperBusiness. Freeman, R.E. (1984). Strategic Management: A Stakeholder Perspective, Boston: Pitman. Gupta, V. (1998). ‘A Dynamic Model of Technological Growth: Diffusion of Japanese Investment Networks Overseas’. Unpublished Ph.D. Dissertation, The Wharton School of the University of Pennsylvania. Gupta, V., I.C. Macmillan and G. Surie (2003). ‘Entrepreneurial Leadership: Developing and Measuring a Cross-cultural Construct’. In press, Journal of Business Venturing.

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Jensen, M.C. & W.H. Meckling (1976). ‘Theory of the firm: managerial behavior, agency costs and ownership structure’. Journal of Financial Economics, 3: 305–360. Katz, R.L. (1974). ‘Skills of an Effective Administrator’. Harvard Business Review, 51(5): 90–101. Kogut, B. (1983). ‘Foreign Direct Investment as a Sequential Process’. In The Multinational Corporation in the 1980s, C.P. Kindleberger and D. Audretsch, (eds.), MA: MIT Press. Perrow, C. (1984). ‘Normal Accidents: Living with High Risk Technologies’. New York: Basic Books. Pine, B.J. (1993). ‘Mass Customization: The New Frontier in Business Competition’. Boston: Harvard Business School Press. Porter, M.E. (1985). ‘Competitive Advantage: Creating and sustaining superior performance’. NY: Free Press. Prahalad, C. and G. Hamel (1990). ‘The core competence of the organization’. Harvard Business Review, 68(3): 79–91. Richardson, G.B. (1972). ‘The Organization of Industry’. Economic Journal, 82: 883–896. Saloner, G., A. Shepard & J. Podolny, J. (2001). ‘Strategic Management’. New York: John Wiley & Sons. Stake, R.E. (1983). ‘Program evaluation, particularly responsive evaluation’. In George F. Madaus et al. (eds.), Evaluation Models: Viewpoints on Educational and Human Services Evaluation. Boston: Kluwer-Nijhoff Pub., 287–310. Weick, K. (1969). The Social Psychology of Organizing. Reading, MA: AddisonWesley. Weiss, H.B. & J.C. Greene (1992). ‘An empowerment partnership for family support and education programs and evaluations’. Family Science Review, 5(1&2): 131–148. Weston, C., L. McAlpine & T. Bordonaro (1995). ‘A model for understanding formative evaluation in instructional design’. Educational Technology Research and Development, 43(3): 29–46. Williams, M. & R.L. Burden (1994). ‘The role of evaluation in ELT project design’. In English Language Teaching Journal, 48(1): 22–27. Williamson, O.E. (1975). Markets and Hierarchies: Analysis and Antitrust Implications. New York: The Free Press.

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Roles of Principal Players during Restructuring

The Orissa State Electricity Board Thillai Rajan A.

l

V. Anand Ram

The provision of electricity has become synonymous with economic development and social progress today. The Electricity Supply Industry (ESI) is one of the largest industries and it occupies an important position in the world economy. Over the past decade, several countries worldwide have taken steps to implement reforms in the ESI (Joskow 1998; Berg, 1997; Munasinghe, 1997; and Bates, 1997). Most studies of these reforms have not focused on the transformative process within an organization (Rajan Thillai, 2000a; Pollitt, 1997). In this chapter, we study the role of principal players during restructuring using a process framework that looks at the sequences of events, actions and activities (Rajan Thillai and Anandram, 2001).

Literature Review: Privatization Restructuring Any privatization results in a new environment for the firm which is characterised by changes in the markets (capital and product markets according to their relevance), introduction of new threats (competition and regulation), and reduction in politically imposed constraints. Prominent changes expected in the external environment after privatization are: 1. Budget Constraint: Public ownership is based on the notion of a soft budget constraint (Rowthorn and Chang, 1993). The losses incurred by a corporation were made up by the government, either by way of subsidies or direct grants. After privatization, the firm will not be able to depend on this kind of comfort from the government. 2. Political Intervention: Under state ownership, public corporations are subject to direct political control (Ferner and Colling, 1993). This political control gives ministers more diffuse means of exerting informal pressure on the management either through ‘arm twisting’ methods or direct intervention in management decision-making over a range of issues. But after privatization, the corporation

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is more subject to market forces (competition or regulation as the case may be) and less influenced by political or administrative control (Ramanadham, 1988). 3. Capital Market and Consumer Discipline: Privatization would expose the firm to the discipline of the capital market as it needs to address the concerns of the new shareholders for future resource mobilization. The privatized firms would also need to be more customer conscious as they are required to respond to market demands rather than political constraints (Clarke, 1993). To function effectively in the new environment, appropriate changes are required in the internal mechanisms of the organization (Parker, 1993; Woodward, 1988). Literature indicates several changes in the internal environment of the organization following privatization. Hammer et al., (1989) say a firm under transition from a public sector to the private sector would require a change in their corporate culture. Salama (1995) says that for the firms to function effectively in the new circumstances following privatization, the firm must possess appropriate skills to manage in a market economy. She also says the introduction of entrepreneurial behaviour is required to provide ex-state enterprises with the dynamism needed for the expected transformation in the firm’s efficiency. After privatization, a firm is forced to function differently from the state government enterprise. Wallis (1995) describes these changes in PowerGen, which was privatized from the Central Electricity Generating Board of the UK. He states, ‘The extent of change needed was enormous. Whereas the Central Electricity Generating Board had been risk averse, PowerGen needed to be innovative. Whereas the Central Electricity Generating Board had been engineering-led, PowerGen needed to be commercially driven. Whereas the Central Electricity Generating Board had no concept of the customer, the customer needed to be PowerGen’s main focus. And whereas the Central Electricity Generating Board had been slow moving and bureaucratic, PowerGen needed to be flexible and responsive.’ In their study on the privatization of British utilities, Ferner and Colling (1993) note that the management of privatized companies strive to adapt an organization culture to a more market-driven environment, by making it more responsive to customer demands and more innovative and flexible in the face of competitive pressures. Simnett (1997) also indicates that several measures were taken by National Power, the privatized generation entity of the UK ‘to overcome the legacy of a nationalised industry workforce and inefficient plant’. Some of the measures taken were reduction in the workforce, increased employee training, performancerelated incentives for employees, and improved IT systems. Parker (1993) attempts to identify various changes in the internal environment of the organization following privatization by studying 10 organizations

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in the United Kingdom that underwent privatization. He says that the organization structure changed from a rule bound bureaucratic one to one that was less hierarchical, less centralised and less rule bound. Salama (1995) studied the effects of privatization on culture change in five companies that had been privatized in the UK and Brazil. Her results indicate that it is not just ownership that triggers a culture change. The top management’s perceptions about the changes in the business environment were the conditions for the process of change in the firms investigated. New CEOs were appointed to prepare the organizations for the new environment; they modified the core mission (bringing in profit orientation) and organization structure (decentralisation) in the organizations. The need for change was communicated to the employees at all levels in the organization. During the process of culture change, all companies under investigation modified their personnel practices regarding managerial careers. The study also found that after privatization, the managers started to learn and embrace new ways of doing things. Davidson (1994), while studying the developments in two privatized utilities in the UK, found that after privatization, the organizations move towards contract labor from direct employment. There was a separation of various activities into independently accountable profit centers, which must buy and sell services from and to other departments or profit centers within the organization. She also notes that these organizations adopted new accounting practices and performance-related pay for its executives. Nelson and Dowling (1998) have studied the commercialization of Tasmania Electricity using the contextual method developed by Pettigrew (1987) and Dawson (1994). They conclude that though the environmental forces do have an impact on organizational plans for change, the difficult thing for management is to control the unfolding events, as much as possible, as change progresses. Some studies suggest that the performance improvements that occur after privatization can be traced to changes in the organization following privatization. Newbery and Pollitt (1997), for instance, note that the productivity increases that occurred following the privatization of the British electricity sector are not just derived from plant closures, reduction in employees and fuel switches, but also as a response to a different management style.

Research Design Case study is an appropriate strategy when there is no control over behavioral events and the research focuses on contemporary events (Yin, 1984). The restructuring of the Orissa State Electricity Board (OSEB) in India has been used as a case in this research study. The restructuring of OSEB was a part of the larger reform program that was implemented in the Orissa power sector. Restructuring of OSEB was chosen for the study because: 1. OSEB was the first utility in India and South Asia to undertake reform and restructuring.

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2. The restructuring program had the active involvement of multilateral lending agencies like World Bank, DFID, Asian Development Bank, and several leading management consultants. 3. Several other utilities in India and elsewhere were planning to restructure more or less on the lines of OSEB. Therefore the experience of Orissa would be important to other states, in policy or practical terms.

ORISSA POWER SECTOR REFORM PROGRAM: A BRIEF OVERVIEW Orissa was the first state in India and also in South Asia to implement a comprehensive power sector reform program. Prior to reform, the responsibility for power sector management and development in Orissa was vested in the following organizations: l l l

Department of energy, Government of Orissa; Orissa Power Generation Corporation; and Orissa State Electricity Board (OSEB)

OSEB obtained the required power for distribution either from its own generating stations, generating stations owned by the department of energy, or from other power generators. By using its transmission and distribution network, it supplied power to the end consumers. The process of power sector reform started in November 1993 when the Orissa government had discussions with the World Bank to improve the operational and financial performance of OSEB to enable Orissa to attract private investment for power development. These discussions resulted in an agreement between the Orissa government and the World Bank to implement power sector reform to secure funding for the sector. The reform program was subsequently reviewed and approved by the chief minister and council of ministers of Orissa.1  The Orissa power sector reform program comprised the following components (World Bank, 1996): l

l

l l

l

1

Restructuring of OSEB by corporatization and commercialization: Unbundling and structural separation of generation, transmission and distribution into separate services to be provided by separate companies. Privatization: Private sector participation in hydro generation and grid corporation, and privatization of thermal generation and distribution. Competition: Procurement of new generation through competitive bidding. Separate Regulation: Development of an autonomous power sector regulatory commission. Tariff Reform: Reforming of electricity tariffs at the bulk power, transmission and retail levels. Circular No. 7786/E, Department of Energy, Government of Orissa, Bhubaneswar, dated April 20, 1995.

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OSEB was vertically unbundled into separate companies for generation, transmission and distribution. All the hydro power generating plants were vested with Orissa Hydro Power Corporation. The transmission assets were vested with Grid Corporation of Orissa. Though the Orissa government initially owned Grid Corporation and Orissa Hydro Power Corporation, they were gradually expected to attract private participation. New legislation was enacted to govern the power sector of Orissa after reform. An autonomous regulatory commission, called the Orissa Electricity Regulatory Commission, was constituted to ensure operational, managerial, and financial autonomy of the new utilities and to promote transparency, efficiency, and economy. To ensure autonomy of the regulatory commission, the commission members were chosen on the basis of their ability, integrity, knowledge, and experience in dealing with various problems relating to the power sector. After the regulatory commission was constituted, the role of the Orissa government was restricted only to policy making and planning for the sector. Four zones were created for power distribution in Orissa. As a first step towards privatizing distribution, Grid Corporation of Orissa entered into a management contract called the Distribution Operations Agreement, with Bombay Suburban Electricity Supply Company, a private sector utility, to take over the power distribution in one of the zones on October 1, 1996. Under this arrangement, the private utility was responsible for distribution of energy, maintenance of the distribution system, and collection of electricity dues in the Central zone. Though the initial distribution agreement was for three years from October 1996, Grid Corporation of Orissa cancelled the agreement in April due to drawbacks in certain contractual provisions in the Distribution Operations Agreement. After the failure of the Distribution Operations Agreement, the Orissa government decided to privatize distribution forming the four zones as separate distribution companies. The four companies were incorporated as subsidiaries of Grid Corporation in November 1997 and four new managing directors were appointed for these companies in March 1998.2  Privatization was introduced in distribution by offering 51 per cent of the equity in these companies to private investors. The investors were selected through international competitive bidding on the basis of their financial and technical capability, track record and commitment to the improvement of the electricity distribution system. Though the investors were to be given full managerial autonomy, they were required to honor the terms and conditions of employment of employees of the distribution companies. After privatization, Grid Corporation held 39 per cent of the equity in the distribution companies, while 10 per cent of the shares was held by the employees trust. The privatization process for the distribution companies was completed in the first half of 1999. There was an unfortunate setback to the process of reforms when Orissa was ravaged by two devastating cyclones in quick succession following the 2

The GRIDCO Newsletter, March 1998.

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privatization of distribution. The damage caused to the transmission lines and sub-stations in the state had been estimated at Rs 3000 million ($ 65 million). However, there have been some indications of improvement in the quality of service and revenue collections3 .

D ATA C OLLECTION

AND

A NALYSIS

The data collection methods for the study included documentation, field observations, and from in-depth interviews. Such multiple sources of evidence helped in developing converging lines of inquiry. Any finding or conclusion in a case study is likely to be much more convincing and accurate if it is based on several different sources of information, as this leads to a “within-method” triangulation (Denzin, 1978:301). Documentary evidence was collected from various sources such as: l l

l

l

letters, memoranda, and other communiqués; agendas, announcements and minutes of meetings, and other written reports of events; administrative documents—proposals, progress reports and other internal documents; newspaper clippings and other articles that appeared in the media.

These documentary sources helped to construct the chronology of events in the reform program, and also provided information about various decisions taken during the period and the rationale behind those decisions. The gaps after the study of documentary evidence also provided further insights that were probed in greater detail during the interviews. As indicated by McCutcheon et al., (1993), observations made during field visits serve as another important source of evidence in a case study. The main form of data collection for this study was through in-depth interviews with key people involved during different stages in the restructuring process. The participants for the interviews were chosen based on their involvement and contribution to the implementation and planning of the Orissa power sector reform program. The interviews were semi structured where the broad area of information needed from each respondent was determined before the interview was taken. On an average each interview lasted between 90–120 minutes.

F RAMEWORK

FOR

ANALYSIS

A processual framework developed based on the various events that took place has led to an emergence of three conceptual phases in the restructuring process, with each phase being characterized by different sets of activities and tasks (Rajan Thillai and Anand Ram, 2001). 3

Anecdotal evidence on this is given in the various Grid Corporation of Orissa newsletters between the period May–December 2000.

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The three conceptual phases and their definitions are as follows: 1. Impetus Phase. It is defined as that period during which the momentum for change originated and got strengthened, thereby providing a definite thrust for reforms. An analysis of the causal factors of Orissa power sector reform program has been published elsewhere (Rajan Thillai, 2000b). 2. Reorganization Phase. It is defined as that phase of the reform program that was characterised by structural changes in the power sector, resulting in a new industry structure. 3. Consolidation Phase. It is defined as that phase during which the new organizations created by restructuring were strengthened to make them financially and commercially viable companies. A description of the different strengthening measures undertaken has also been published earlier (Rajan Thillai, 2000c). Impetus phase, Reorganization phase, and Consolidation phase incorporates the temporal element of the restructuring process. It starts with a phase during which the momentum for change originates, and ends with a phase during which the new organizations are strengthened to make them financially and commercially viable organizations (Rajan Thillai, 2000a).

PRINCIPAL PLAYERS IN UTILITY RESTRUCTURING The principal players in the restructuring process are the government, top management of the utility, the lending agencies, and the consultants. The reasons for identifying them as the principal players are as follows: Since the government has a statutory role in overseeing the power sector, therefore, any change in the sector will, ipso facto, involve it. The restructuring of the ESI and its subsequent privatization will require several changes in the internal environment of the organization. The top management will play an important role in implementing these changes. The poor financial position of the utility and the inability of the state government to support the sector results in the utility seeking external assistance. In such conditions, the lending agencies will stipulate reforms before providing assistance to the power sector. Consultants will assist the host utility during the restructuring process. They would also coordinate with the host utility in implementing the restructuring process. The following paragraphs summarise the role played by the principal players in the three phases identified in the restructuring process.

IMPETUS PHASE R OLE

OF THE

GOVERNMENT

The power sector of Orissa accounted for a significant and increasing share of the state government’s resources, both in terms of planned investment and subsidies. Such large spending on investments and subsidies in the power sector had contributed to the fiscal deficit of the state and had also affected the

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government’s spending in social sectors like health and education. To reverse this situation, the government had taken a number of initiatives and policy changes since 19914 . The leading role played by the Conservative Thatcher government in 1979 during UK privatization and the government of Konrad Adenauer in Federal Republic of Germany during the privatization in 1961 in West Germany are two well known instances of the government playing a prominent role in implementing privatization (Megginson et al., 1996). The Orissa government had demonstrated similar commitment to implement the power sector reforms. The commitment expressed by the chief minister towards power sector reforms in Orissa was so strong that the World Bank did not demand any further assurances on the government’s commitment to reform and interest in obtaining World Bank assistance to implement its reform program5 . The commitment to the reform program had also been demonstrated by the government by implementing difficult and unpopular measures, like tariff increases, which is a prominent feature of power sector reform programs in developing countries (Joskow, 1998). The Orissa government made a series of tariff adjustments, which raised average tariff revenue by about 67 per cent from April 1992. As a policy measure, the government adopted a policy of annual tariff adjustments of 15 per cent. The series of tariff adjustments prevented abrupt tariff increases following reform, which could have made the implementation of the reform program politically impossible. The steering committee was chaired by the chief secretary to the government of Orissa and had as its members, the secretaries of finance, law and energy. The task force was chaired by the energy secretary and had representatives from the finance and law department. Such high level representation ensured adequate government monitoring and support for the program.

ROLE

OF

LENDING AGENCIES

The World Bank has been actively engaged in power sector development in the developing countries both as a financier and advisor. (Haugland et al., 1997). It is the single largest source of capital for power projects in these countries. It sets trends in private sector lending and through its economic advice and loan conditions shapes energy policy in many developing countries (Strickland and Sturm, 1998). In recent years, the World Bank had played a leading role in implementing power sector reform in developing countries (Nelson, 1996). For example, in the four-year period between 1992–1996, the World Bank made $9.5 billion in loans to 61 power projects with a total cost of almost $40 billion. Virtually all the 61 power sector projects required reforms by the borrowing country. Most 4 5

World Bank Aide Memoire, dated November 28, 1993. This had been indicated in the World Bank Aide Memoire, dated November 28, 1993.

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required the restructuring of the concerned electric utility in some form and 48 of them required the borrowing country to raise or rationalise electricity prices (Strickland and Sturm, 1998). In 1993, the World Bank formulated new policies for power sector lending (World Bank, 1993). According to this policy, the World Bank provided loans only to those utilities, which functioned on commercial lines, or which were committed to improving the performance of the power sector through reform. It had been previously noted that, such policy conditions attached to multilateral and bilateral assistance had played an important triggering role in initiating and implementing reform in many developing countries (Commander and Killick, 1988). The World Bank’s view was that the situation in India was fully consistent with the worldwide trend. Therefore, conforming with the 1993 World Bank policies, even in India, the World Bank had put forth power sector reforms as a necessary condition for future assistance to the power sector. These policy changes and conditionalities of the World Bank were one of the motive factors for implementing the power sector reform program in Orissa. The Orissa power sector reform program was also designed with the aim to secure private sector participation in the power sector.

R OLE

OF

TOP MANAGEMENT

The importance of the chief executive being a good leader for initiating the change process has been well-recognized (Kotter, 1995; Nutt and Backoff, 1997a; Nutt and Backoff, 1997b). The OSEB chairman played an important role in initiating the reform process. Though the initial efforts were not quite similar to the final version of the reform program, they nevertheless represented the first steps taken towards the more comprehensive reform program planned during the subsequent months. Two prominent initiatives were in investment practices and tariffs. To remedy the situation, the chairman made efforts to increase the investment in transmission and strengthening the distribution network. Another initiative taken by the OSEB chairman was in regular revision of electricity tariffs, to improve the financial performance of OSEB. Previously, the tariffs of OSEB were not increased to reflect the increases in costs. The study of tariff increases of OSEB in the past indicates that tariffs were not usually revised for three–four years, followed by a sudden revision of about 30 per cent. Apart from being a poor commercial practice, it had become difficult to forecast the price of power. Power being an important component in many manufacturing processes, accounting for such ad hoc increases was getting difficult for business houses. So, the chairman ensured that the tariffs were revised at the rate of five– seven per cent at yearly intervals so as to keep the tariff increases in manageable limits. The chairman persuaded the government about the necessity of such regular tariff increases to improve OSEB’s financial performance. Such tariff reforms later became an integral component of the reform program.

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REORGANIZATION PHASE R OLE

OF

STATE GOVERNMENT

The reorganization phase witnessed a lot of political activity in Orissa. The Orissa power sector reform program was initially approved by the council of ministers during April 1994. The state went into elections subsequently, which resulted in a new party assuming power following the elections in 1995. However, the newly elected party (Congress-I) as indicated in its election manifesto not only continued to support the implementation of power sector reforms but also announced its intention to accelerate the process. The new government issued a formal statement of its power policy in April 1995 indicating its commitment to continue the reform program. As the OSEB chairman remarked, ‘Orissa was fortunate to have two governments which did not reverse the policy decisions of the earlier Government.’ During the reorganization phase the Orissa government supported the reform program in all its critical moments. This included for example, defending the reform bill at the center to obtain the assent of the President, in its own assembly, in implementing the Act, in funding the regulator, and in transfer of personnel. Apart from the general support of the government, the chief ministers of both governments provided an especially strong support to the reform program. The chief ministers created conditions that ensured that the implementation of the reform program progressed as planned. First, through the appointment of a suitable chairman of OSEB during the reorganization phase. M.Y. Rao, who was appointed as OSEB chairman during this phase of the power sector reform program, was widely known as a non-political person with strong administrative capabilities. Second, the chief ministers ensured that the chairman of OSEB [the chairman of OSEB during restructuring later continued as chairman of GRIDCO] and other key personnel involved in implementing the reform program were not transferred or replaced during the crucial period of implementation. Thus stability was ensured during the reorganization. Further, for a period during the reorganization phase, the chief minister had the energy portfolio. This arrangement resulted in obtaining faster decisions as the reform program had the direct attention of the chief minister. As a measure to improve the financial viability of GRIDCO, the government took the first step of being a good consumer of power. It decided to pay its outstanding power bills and settle its other financial obligations to GRIDCO.

R OLE

OF

TOP MANAGEMENT

The OSEB chairman and subsequently the chairman and managing director of GRIDCO, Mr. M.Y. Rao, provided strong support and direction to the program. Though there were several people who had played a key role in the reform program, almost all the respondents during the interview acknowledged the key role played by M.Y. Rao.

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The chairman organized various meetings to explain the importance of reform and restructuring to the field offices. During the reorganization phase, a lot of information was required from the divisions and field units. But the data were not forthcoming from the field units. He issued a letter to the field units, instructing them to provide the necessary data. And when some of the divisions did not adhere to the request, the chairman intervened directly to expedite submission of the required information.

R OLE

OF

C ONSULTANTS

The consultants played a key role in the restructuring process. The main objectives for hiring consultants were two fold: First, the consultants brought the experience of having done it before. Second, they brought dedicated resources for the project. For example, OSEB had to undertake its routine functions of generating and selling power to the consumers. It was not able to allocate dedicated staff for the project, as there was a shortage of qualified staff. The consultants assisted in formulating of a reform plan, creating separate entities, developing a financial model for the new corporations, valuation of the assets of OSEB and the Orissa government, drafting the Orissa electricity reform act, and transfer of personnel to different corporations. To aid in the strategic exercise, the consultants initially obtained valid and relevant information from the organization starting from the field units. Multifaceted technical and managerial data were collected including the number of employees, number of consumers, distribution of various consumers, revenue data, and generation station data. These data were used to process the reform plan subsequently. Most of the consultants involved in the reform program were foreign consultants. There was no Indian firm experienced in utility restructuring, as Orissa power sector reform was the first instance of such an exercise in India. By hiring foreign consultants, the Orissa reform program gained from the experience of those who had actually worked in the reforms in other countries. However, while formulating the reform plan, the consultants worked closely with reform project management group. Though the consultants had experience in international utility restructuring, they lacked knowledge about the Indian power sector. A senior general manager explained how the Indian power sector differs significantly from the power sector in developed countries. ‘In the west, for example in cities like London there are very low outages, may be about 8–10 hours a year. But here we have about 8–10 days a year. In India, there have been cases where there was no power supply for 24 hours. In London, if there is no supply for 24 hours then the company has to pay a compensation to the consumer. If a complaint is not answered within one hour, then the company has to pay a fine. These things we cannot adapt here easily. There the growth rate is very low, as already

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most of the consumers have got electricity connection. But our growth rate is high, as significant electricity connections are yet to be made.’ Consultants had to take these factors into consideration while formulating the reform plan. Moreover development of reform act and reform bill needed knowledge of local laws and customs. During this phase, apart from formulating the reform plan, the consultants also exposed the managers of OSEB to international practices and trends in the electricity industry.

ROLE

OF THE

LENDING AGENCIES

The World Bank was the largest lending agency assisting the reform program. The role of the lending agency during this phase was to ensure that there was no reversal of the initiatives taken towards power sector reform in Orissa. To ensure the Orissa government’s commitment to the reform program, the World Bank insisted that the government took certain irreversible decisions before finalising the loan agreement. Box 1 lists the conditions that needed to be met before availing the assistance for power sector reforms. Box 4.1: World Bank Conditions to be Met Before Availing Loan l

l

l l

l

l

The Orissa government had to issue a formal statement on its power sector policy to the World Bank. The Orissa government to implement power sector reform program as specified in its power policy statement. Registration and transfer of assets made to OHPC and GRIDCO. The state government had to formally approve the reform legislation and submit its final draft bill to the Government of India for clearance. The Orissa government had to put in place a management contract acceptable to the bank that transferred at least one of OSEB’s distribution circles to private management. The regulator formally established and its regulatory procedures acceptable to the bank, adopted and published.

The task leader of the World Bank team responded, ‘This is the first time that a program of this nature has been attempted in India. We insisted on these conditionalities before availing the loan because our experience in the past has not been very good. The governments used to make a lot of promises, but finally would not do anything. Therefore, we needed to start with something instead of just promises.’

CONSOLIDATION PHASE R OLE

OF THE

STATE GOVERNMENT

The Orissa government was completely supportive of the reform program. First, it ensured that the key people who were entrusted with the responsibility for implementing the reform program actually supported it.

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Second, the government fully backed the GRIDCO chairman for implementing the reform program even for many contentious issues. Previously, the OSEB chairman derived his powers from a resolution of the OSEB board which was also backed by a government order. This meant that the government decided the SEB chairman’s powers. For important decisions, he had to get the approval of the state government. But after corporatisation of GRIDCO, the Companies Act and Articles of Association of the company gave the broad parameters of the chairman’s powers. In keeping with the spirit of the reform program the Orissa government stopped the subsidies to GRIDCO. Usually, the SEBs are supported by their respective state governments. The state governments provided subsidies to the SEBs to enable them to achieve the mandatory 3 per cent return on net assets as stipulated by the Electricity Supply Act. The SEBs did not face any constraint in achieving the mandated return as the state governments bridged the revenue shortfall. After restructuring, Orissa imposed a hard budget constraint on GRIDCO by stopping the practice of providing subsidies to it. The hard budget constraint 6  has been one of the widely used measures in state enterprise reform (World Bank, 1995). This indirectly forced GRIDCO to concentrate on improving its performance. The state government continued to support GRIDCO in other ways. As it was owned by the state government, the loans raised by it had a state government guarantee for repayment. This guarantee helped GRIDCO to raise funds at lower rates of interest. The state supported GRIDCO’s efforts to advance the privatization of the distribution business, after the failure of the initial Distribution Operations Agreement. According to the initial reform plan, the distribution zones of Orissa were supposed to be privatized only by December 2000, which was later advanced to April 1999 following the failure of the Distribution Operation Agreement. The main reason behind this being that GRIDCO was incurring large losses in distribution and was not in a position to absorb these losses in the absence of assistance from the state government. Therefore, GRIDCO proposed to the government that distribution be privatized sooner than envisaged, which was supported and announced by the chief minister.

R OLE

OF

C ONSULTANTS

The role of consultants during this phase was to prepare GRIDCO for privatization. As one of the respondents said, ‘Privatization of GRIDCO might attract the interest of global or other national players. The role of consultants has been to prepare the offers of GRIDCO to the practices followed in these organizations.’ 6

A state enterprise is said to have a hard budget when, 1. It gets no subsidies, transfers, or special privileges, such as tax exemptions. 2. Its access to credit is decided by independent banks on the basis of commercial principles, without government guarantee and on market determined terms. 3. Its prices are set by the market, or if the enterprise is a monopoly, through regulation.

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Broadly the consultants had two objectives during the consolidation phase. First, to ensure that the various change measures that were planned actually get implemented. Second, to sustain the changes in the organization even after the consultants leave. The various measures taken by the consultants in achieving both the objectives are discussed below. To ensure that the various change measures get implemented in GRIDCO, the consultants worked very closely with the employees. Several consultants were sent on secondment exercises to GRIDCO, where they worked as employees to facilitate the change process. The consultants were seconded at various levels in the organization. For example, in the finance department in each of the four distribution companies, senior consultants were deputed to GRIDCO to act as zonal finance managers. They remained with the distribution company for the last 18 months. Under the zonal finance managers, there were assistant general managers. In the corporate office, a senior consultant was seconded to function as assistant director of finance. As a part of the revenue improvement activity, each divisional engineer and sub-divisional officer also had a consultant counterpart. Another measure to ensure the implementation of the change efforts was to design the initiatives appropriate to the context and needs of GRIDCO. In most of the cases, the consultants took the existing practices of GRIDCO and tried to improve upon them rather than bring in totally new practices. They hired local consultants to understand the local context. They ensured the involvement and participation of GRIDCO in the entire process. The consultants also took 30 of the top managers of GRIDCO on professional development tours abroad to observe some of the companies where electricity sector reforms were undertaken. These tours sensitized the top management to the best practices for managing the reforms in Orissa, leading to their support. The second objective of the consultants was to ensure that the change processes are sustained by adequate transfer of skills to the employees of GRIDCO. The secondment exercise to a certain extent facilitated this process. By this way of working closely with the consultants, which one of the consultants recounted as ‘a hand holding exercise’, the GRIDCO employees learnt the new processes when the consultants were around. Once the consultants left after completing the project, it was not difficult for the employees to continue the processes. Another activity was to produce manuals that documented step by step procedures of the new processes. As a consultant remarked, ‘The basic idea of this was that, even a person who has been trained when he is not sure of something, can refer to the manuals and when new people are recruited it would help them to learn the effective procedures.’

R OLE

OF

TOP MANAGEMENT

There was new recruitment of professionals to top management posts (chief general managers and directors of departments) following restructuring. The main purpose of recruiting professionals at the top was to provide necessary

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direction and guidelines for their respective departments. As the chief general manager of HRD remarked, ‘There was no new recruitment made in the middle or lower management. We were working with the same people. Our role was to provide a shot in the arm for the department.’ The top management’s commitment ensured that the rank and file also supported the reforms. The GRIDCO chairman recounted the nature of the various activities performed by him during the reform program: ‘ During the period when the working groups were functioning, my role was more of that of a facilitator. Half of the time I was functioning as the chairman of OSEB and the remaining as a chief executive who was heading an organization in transition. There was a theoretical concept of reform that was put forth by the World Bank and consultants and then there were the ground level realities of reforming the organization. I acted as a link between them. This went on practically up to 1996. But after restructuring most of my activity was concentrated on the nitty gritties. I was engaged in realising the electricity dues, metering the connections so that we can get money into the system. I had spent about 70 per cent of the time on the operational issues.’

R OLE

OF

WORLD BANK

A significant change in the stand of the World Bank could be noted during this phase. Before the loan agreement was signed the World Bank stipulated several compliances before the award of the loan. But after the loan was signed, the World Bank was more encouraging about the progress of the project. As the Orissa power sector reform was the first such program to be implemented in India, the World Bank wanted the program to become successful. Failure of the Orissa reform program might have had an adverse effect on the reform initiatives in other states. The World Bank, through its mission teams, monitored the project regularly and was keen to make it successful to set an example for other states. There was continuity in various World Bank missions. This developed mutual trust between GRIDCO and the World Bank. During this phase, they discussed various problems and their solution in detail with the GRIDCO people. The World Bank task force leader explained the objective behind the World Bank monitoring as, ‘Our objective in continuous monitoring of the project was to ensure that the project succeeds. Though we are not bothered about the repayment of the loan, as we make the loan directly to the Government of India, we did not want to make loans that burdened the nation. Our objective through these missions was to ensure that the reforms yielded a positive net flow to the state government.’

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Conclusions This study indicates that the government, the lending agencies, the top management of the utility, and the consultants play a key role in the implementation of restructuring and change process of the public sector organizations in emerging markets such as India. As the process moves from one phase to the other, the role of the principal players undergoes significant qualitative changes. Figure 4.1 indicates the character of these changes among the key actors.

Fig. 4.1: Role Transformations of Principal Players during the Restructuring Process During the impetus phase, the government played a major role by recognizing the need for undertaking reform. After realizing that it cannot continue to meet the demands of the power sector, the government sought to actively involve the private sector in the power sector development. During the reorganization phase, the government took concrete steps to implement

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restructuring. It constituted special-purpose committees and groups to look after the implementation process, and vested them with sufficient authority to take decisions on matters relating to reform. It also appointed a visionary leader as the chief executive of the organization, and fully supported this leader during the implementation. A cornerstone of the reform and restructuring process was the withdrawal of the government from directly governing the power sector to an arms length relationship. During the consolidation phase, the responsibility for implementing the necessary internal changes within the new entities rested within the organization. The government assumed a posture of non-interference in the working of the utilities. On the whole, the essence of restructuring lay in a high-level political commitment, similar to the findings of Grosse and Yanes (1998), and Rondinelli and Iacono (1986). Behind the political commitment, however, lay the initial idea of reforms built by the top management. In the impetus phase, the top management actively lobbied with the government for starting the reform program. In the reorganization phase, they played an interfacing role integrating the organization, government, lending agencies, and consultants. They also involved themselves in communicating about restructuring and generating support from the employees of the organization. In the consolidation phase, they created appropriate enabling conditions to facilitate the adoption of new practices and observe its performance, to help operationalize the change process. They actively communicated with and sought to involve the employees of the organization. The top management was assisted by the lending agencies in the impetus phase in convincing and negotiating with the government. The lending agencies felt that reform is necessary for overall sector improvement. After securing the governments’ assurance to undertake reform, in the reorganization phase, the lending agencies sought commitment on the reform policy. Specifically, they oversaw that the government took certain actions that were not easily reversible to ensure that the utilities did not revert to the earlier situation. Once the implementation had begun, in the consolidation phase, the lending agencies continuously monitored the progress, and provided all possible support to ensure successful implementation. It needs to be emphasized that successful implementation of reform became critical for other states planning to embark on similar power sector reforms. Importantly, the decision to restructure came from within the organization, enabling more successful implementation, compared to situations where the recommendation for change originates from external sources like consultants or lending agencies. The consultants played an active role only from the reorganization phase, when the decision to restructure had already been taken. By virtue of their experience with similar exercises in other countries, they made the government and the utility aware of the various options that were available for restructuring. In the reorganization phase, the consultants assisted in establishing the new entities, helping in drafting the reform legislation, and transfer of assets to the new entities. Further, in the consolidation phase, the consultants helped design measures to strengthen the new entities. While doing this, the consultants

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took steps to ensure appropriate transfer of expertise to the host utility, so that the employees of the new entities could adopt and continue with the change process initiated even after the consultants completed their assignment.

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Nelson, L. & P.J. Dowling (1998). ‘Electricity industry reform: A case analysis in Australia’. Journal of Organizational Change Management, 11(6): 481–495. Newbery, D.M.G. & M.G. Pollitt (1997). ‘The Restructuring and privatization of Britain’s Central Electricity Generating Board—Was it Worth it?’. Journal of Industrial Economics, 45 (3): 269–303. Nutt, P.C. & R.W. Backoff (1997a). ‘Facilitating transformational change’, Journal of Applied Behavioral Science, 33(4): 490–508. Nutt, P.C. & R.W. Backoff (1997b). ‘Organizational transformation’. Journal of Management Inquiry, 6(3): 235–253. Parker, D. (1993). ‘Ownership, organizational changes and performance’. In T. Clarke & C. Pitelis (eds.), The Political Economy of Privatization, Routledge: New York: 31–53. Pettigrew, A.M. (1987). ‘Context and action in the transformation of the firm’, Journal of Management Studies, 24(6): 649–670. Pollitt, M.G. (1997). ‘The impact of liberalization on the performance of the electricity supply industry: An international survey’. The Journal of Energy Literature, 3 (2): 3–31. Rajan Thillai, A. (2000a). Restructuring of a Vertically Integrated Electric Utility—A Process Study. Unpublished doctoral dissertation. Bangalore, India: Indian Institute of Management. (2000b). ‘Power sector reform in Orissa: An ex-post analysis of the causal factors’. Energy Policy, 28: 657–669. (2000c). ‘Reforms, restructuring, and infrastructure sector: A study of initiatives in Orissa power sector’. Vikalpa. 25(4): 11–25. Ramanadham, V.V. (1988). ‘The concept and rationale of privatization’, In V.V. Ramanadham (ed.), Privatization in the UK, London: Routledge. Rondinelli, D. & M. Iacono (1986). Policies and Institutions for Managing Privatization, Geneva: International Labour Office. Rowthorn, B. & H. Chang (1993). ‘Public Ownership and the Theory of the State’, In T. Clarke & C. Pitelis (eds.), The Political Economy of Privatization, 60, New York: Routledge. Salama, A. (1995). Privatization: Implications for Corporate Culture Change, Aldershot: Avebury. Simnett, E. (1997). National Power and the Privatization of the British Power Generation Industry, Harvard Business School, Management Case, 9-796066. Strickland, C. & R. Sturm (1998). Energy efficiency in World Bank power sector policy and lending: New opportunities’. Energy Policy, 26(11): 873–883. Wallis, E.A. (1995). ‘Managing privatization at PowerGen’, Long Range Planning, 28 (6): 10–18. Woodward, N. (1988). ‘“Managing” cultural change on privatization’. In V.V. Ramanadham (ed.), Privatization in the UK, London: Routledge, 85–101. World Bank (1993). The World Bank’s Role in the Electric Power Sector—A World Bank Policy Paper. Yin, R.K. (1984). Case Study Research: Design and Methods, Beverly Hills, CA: Sage.

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Metamorphosis at India Post The ePost Initiative*

Srikumar K. l Ananda Sarkar l Bharat Kumar L. l Rajni Ravindran l Ramkumar Ganesan l Shubhosree Dasgupta l R. Srinivasan ‘No media has destroyed another, particularly the Post. The Post has defied the electronic age from dit-dit to dot-com. It has overcome the telegraph, the telephone and fax. Each time, everyone has written off the post office. And now in the age of e-mail, the Post is still growing at 6 per cent a year in my country. Rather than be reactive to the world of change, the post office will play a proactive role and lead the way.’ –B N Som, secretary, Department of Posts, India**  India is a country of contrasts: it boasts of the second largest population in the world but a mere 4.5 persons per thousand have PCs and only 5.5 persons per thousand have access to the Internet3 (Figures 5.1, 5.2, and 5.3). However, even this low PC and Internet penetration has been turned into an advantage and an opportunity to be exploited by the Department of Posts of India (India Post). ePost, an e-mail to snail mail service, is one of the latest services launched by India Post to bridge the digital divide (launched in April 2001). Recently, the Indian postal department, in a bid to modernize, launched its website Indiapost.org along with websites for some select circles such as Aurangabad, Pune, Goa and Kerala. Through the websites, the department provides information and a variety of services. Amongst the various e-initiatives is ePost whose primary purpose is to connect the e-haves and e-have-nots, i.e., those who have access to the Internet and e-mail and those who don’t. The  *

**

Fellow student Srikumar K. and postgraduate students Ananda Sarkar, Bharat Kumar L., Rajni Ravindran, Ramkumar Ganesan and Shubhosree Dasgupta prepared this case under the guidance of Prof. R. Srinivasan. “Snail mail to email: The postman goes virtual, India Post: Where do you want to go tomorrow?”, http://www.zdnetindia.com/news/features/stories/21112.html, Jan 22, 2002.

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Fig. 5.1: Main Telephone Lines per 100 Inhabitants † in Selected Asian Countries  †

Eddie Cheung, Asia’s Telecommunication Infrastructure: An Overview, http:/ www.emarketer.com/analysis/easia/20010522_asia.html, Jan 10, 2002.

department has tried to capitalize on its strengths—its vast distribution network, existing infrastructure, reliability and trust among the populace, and the government support it enjoys on account of it being a state-owned organization. However, ePost is a late entrant in this service category and does not command the first mover advantage. It is therefore imperative that the postal department takes sufficient measures to establish the brand—the ePost service. India Post is grappling with several organizational issues: (a) How to acquire new customers given that many competitors are offering similar services within India as well as throughout the world; (b) What new avenues can help foster organizational growth; and (c) What capabilities should be built/acquired to make new services viable and cost effective for customers.

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Fig. 5.2: PCs per 100 Inhabitants in Selected Asian Countries The poor financial status and the bureaucratic organizational structure pose significant challenges for the department in its new initiatives. However, forays into new technology, with the associated options for collaborations and networking, are generating opportunities for new transformations. The department is shedding its traditional conservative approach while sharpening its focus on serving both the Internet haves and have-nots. Its new services are moderately priced. Yet, these service opportunities are providing real options for leveraging its vast distribution channel better and connecting this channel with the new means of communication. As a result of the transformative learning from the ePost, E-BillPost is another service recently launched by India Post that offers customers a single point payment of bills of all types in a queue-less and hasslefree environment. The ePost is also planning a new service on e-shopping (B2C e-commerce). In this chapter, the organizational context of the Indian Postal Service is described and the distinguishing elements of the business model for ePost highlighted. Interestingly, there does not appear to be anything special about

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India—Growth of Internet

India—Growth of Internet (Projections)

Fig. 5.3: Growth of Internet in India *

*

“Internet Survey”, http://www.nasscom.org/it_industry/int_survey.asp, Jan 11, 2002.

the ePost service from a conventional perspective: the timing is not the first, the technology used is not cutting-edge, partnerships formed are not necessarily the best-in-their-class, the pricing is not the least in the market, the organization structure is not the most flexible, and the customer response time is not the best in the industry. Yet, ePost has carved its own niche in the marketplace, enthused the workforce, given a new contemporary touch to its postal channels, and offered its customers a new way to connect to the economy. On the whole, it is adding positive and incremental value. A sustained effort towards recognition of the global technologies and organizational principles should allow the department to offer competitive value-added services.

Organization of Indian Postal Department The Indian Postal Department was established in 1854. At the time of Independence (1947), there were 23,344 post offices in the country.

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The whole country has now been divided into 22 postal circles. These circles manage the day-to-day functioning of the various head post offices, sub-post offices and branch post offices, through their regional and divisional level arrangements. A chief postmaster general heads each of these circles. Each circle is further divided into regions comprising field units, called divisions (postal/ RMS divisions). A postmaster general, who is the postal manager of the area, heads each region. Besides these 22 circles, there is another circle, called base circle, to cater to the postal communication needs of the Armed Forces. An additional director general, in the rank of a major general, Army Postal Service, heads the Base Circle.1  Each post office offers some basic services—mail in the form of post cards, inland letters, overseas airmail, book-post, parcel services, money order and registered post. A person who wishes to send a letter writes it on a pre-printed postcard or inland letter form or purchases stamps for the envelope. He/she then posts the letter in the post box. The mail is collected by postmen and sorted by pin code at the post office and subsequently, all out-station mail is dispatched to the General Post Office (GPO), which is a kind of a head post office for each circle. At the GPO, the letters are sorted by state and dispatched to the respective GPOs by mail train. The mail for locations within the same circle is dispatched to the main post offices in that city or town. These post offices further sort the mail by pin code and ship them to the ultimate post office. From there, postmen then deliver them by hand at the receiver’s location. Frequently, in rural areas, when the recipient is illiterate, the postman also reads these letters out to the recipient and takes down his/her reply, In addition to these basic services, some post offices offer services like Speed Post (express mail), Postal Life Insurance, and creation and maintenance of small savings accounts. Greeting Post is a new service offered by India Post which comprises a card with envelope with pre-printed postage stamp on the envelope. The envelope contains a multi coloured embossed stamp (which is a miniature replica of the design that appears on the card). These eye-catching cards are designed for a variety of occasions. The Indian Postal Department is the largest in the world having a humongous network with 150,000 post offices throughout the country with over 90 per cent of these in the rural sector. Almost every village with a population of over 500 has a post office. On an average, a post office serves an area of 21.32 sq. km. and a population of 5477. As on March 31, 1999, the department had 292,672 full-time regular employees and 309,915 part-time extra-departmental agents, employed in rural branch post offices.2  At the end of 1998–1999, the Department of Posts owned 5189 offices and about 1900 vacant plots of land. The thrust of the department since the early 1950s has been to replace rented buildings by owned buildings. Also, since the post office was a symbol of imperial presence, it occupied the center point in all  1 2

India Post website, http://www.indiapost.org/, Jan 22, 2002. Expenditure Reforms Commission Fifth Report 7 March, 2001, http://expenditurereforms.nic.in/ vsexpenditurereforms/fifthrep.pdf, Jan 22, 2002.

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metro and mini-metro cities. And a lot of these are being used not merely for the retail purpose but also for the administrative and accounting functions. While the retailing activity must continue in the urban business hubs, the accounting and administrative functions can be performed as efficiently away from the business district. There is an apparent under-utilization of these fixed assets. Hence effective utilization of these very high-sunk costs becomes imperative for the department to function profitably and not rely on heavy budget subsidies. The Department of Post continues to own and operate a large number of ancillary logistic services even though outsourcing these might be a cheaper alternative. The Department of Posts, because of its wide reach and large number of points of presence, is utilized by other departments of the central government and state governments to perform several functions on their behalf. l

l

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The Post Office Savings Bank (POSB) is the most important of such agency functions performed by the Department of Posts on behalf of the Ministry of Finance. The POSB operates 113.8 million accounts under various saving schemes. The cumulative outstanding balance in all forms of national savings as on March 31, 1999 was Rs 1552.95 billion ($ 36,600 million). The annual mobilization of savings in the POSB is about Rs 250 billion ($ 5,892 million).3  Postal Life Insurance (PLI), operated by the Department of Posts, is one of the oldest welfare schemes for the government employees and the general populace in the rural areas. The Department of Posts also performs other functions like payment of military pensions, coal miners’ pension, EPF and family pension and railway pension, for which it gets mutually agreed remuneration from the respective principals.

‘Our modernization process began in the early 1990s as a sequel to changing customer needs, efficiency requirements, technology revolution and financial constraints generated from the need to be self sufficient,’ says Mr BN Som, director general-India Post and Chairman of the Postal Services Board.4  Many modernization efforts have been undertaken since the early 1990s whereby the postal department has set up a 139-earth stations strong VSAT network. The plan is to target the linkage between the post and mail offices on a countrywide scale, to give shape to a vast Wide Area Network (WAN). The department plans to install 247 VSAT stations, mothering 2700 extended stations with Internet access, for backing up the virtual private networks by 2002.5   During 1999–2000, the department installed 1,250 multi-purpose counter machines and modernized 139 post offices. By 2001, there were 6,257 computer 3  4 5

At an exchange rate of Rs 42.43 to a US $. Department of Post mordernizes services via VSAT technology, http://www.hughes-escorts.com/ mediaroom/CIOL.htm, Jan 22, 2002. Annual report of Department of Posts, India, 2000–2001.

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based machines installed in 1,560 post offices aimed at providing efficient services through a single window. The department has also embarked upon computerization projects of other segments of postal operations like mail processing, savings bank and materials management. As part of mechanization and modernization of mail processing, 56 registration sorting centers, 20 transit mail offices have been computerized up to March 31, 2000. During 1999–2000, six head record offices were computerized and during 2000–2001 another seven were being computerized. Around 142 mail offices have been modernized up to March 31, 2000.

Metamorphosis at Indian Postal Department As a result of its modernization efforts, the department is launching many new technology enabled services. These include Speed Post Track and Trace, and the International Money Transfer Service. Speed Post Track-and-Trace enables customers to track Speed Post articles/ Express Parcels on the Internet. Currently only the delivery status is available but soon stage by stage tracking will also be available. Intimation of the Speed Post article delivery can be received as e-mail by the sender. Corporate customers can also upload data of Speed Post articles to be booked by the Speed Post centre through a floppy.6  The International money transfer service, is a service launched by the Department of Posts, in collaboration with the Government of India and the Western Union Financial Services, US. It enables instantaneous remittance of money from 185 countries to India. The recipients can in fact collect the money in cash (in Indian rupees) minutes after the sender has made the remittance. This service is targeted at fulfilling the needs for immediate cash of NRI dependent families in India, visiting international tourists and foreign students studying in India. It is enabled by the VSAT network.7  In addition to these services, India Post has also developed several softwares to enable its back-end processes. Some examples are: l

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Meghdhoot—integrates front office functions with the back office in a networked, fire walled and online environment with in-built connectivity features for data transmission with several modules like point of sale, accounts and sub accounts, treasury, delivery, registered delivery, money order payments, etc. Sanchay Post—takes care of all types of banking transactions handled by the postal authorities like savings, recurring deposits, term deposits, national savings certificates, etc. Sankalp—for counter and back office operations in the Philately Bureau covering all operations of the bureau, the most important being

http://www.indiapost.org/News and Events.html#speednett, Jan 22, 2002. http://www.indiapost.org/International Money.html, Jan 22, 2002.

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l

maintenance and nurturing of philately deposit accounts, receipts, sales, dispatches and accounting. Suvidha—a customer care application package with customised reports with bilingual support (Hindi/English), telebooking of complaints and export of data to remote offices through a modem.

E-MAIL TO POST IN INDIA Due to the dismally low Internet penetration in India, there is a huge digital divide among the masses. However, this can be translated into a potential business opportunity—connecting the Internet and e-mail users to non-Internet users. Several dot com companies are offering e-mail to snail mail services. They usually promise delivery of messages within three days, while conventional post, can take one or two weeks in remote locations. Bharatmail.com, Hotmailindia.com are some of the prominent players. Most of them target Non Resident Indians (NRIs). Some of these players even offer services free of charges. The number of players entering into this market is increasing by the day. For instance, ePost service started in April, US-India messaging (a joint venture between Indiatimes.com and Overnite Express) in October and Hotmailindia.com in November 2001. Currently, there are more than 10 players operating in India. So, the e-mail to post market in India is becoming highly competitive.

ePOST BACKGROUND The aim of ePost is to provide services which combine the speed of e-mail with the reliability of a postman even at far-flung corners of the country. It is a feebased service in which the user signs up and is assigned a user id, as in conventional e-mail services. The department targets primarily NRIs and urban dwellers who wish to contact their relatives in rural and semi-urban India where the PC penetration is abysmal. The department is also considering the introduction of the service in regional languages.8  The future of the department depends upon its ability to adopt new technology. Technology has totally changed the way business is conducted especially in the communication sector. Physical exchange of data and message is fast being replaced by electronic exchange over the Internet. The constraints of physical transportation by surface or air are fast disappearing. This has the tremendous potential of relieving an end-service provider like the Department of Posts of its reliance on physical carriers like railways and airlines. So, India Post has to complement its snail-mail services with e–mail, if it has to survive competition. Moreover, the postal department’s objective of serving the remote areas through its widespread network can be more effectively and efficiently achieved through a combination of e-mail and snail-mail service. Several private 8

India Plans E-Mail Delivery to the Doorstep, http://www.newsbytes.com/cgi-bin/udt/im.display.printable?client.id=newsbytes&story.id=168307, Nov 16, 2001.

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organizations like ‘Bharatmail’ have taken this initiative much earlier and hence it has become imperative for the Indian postal service to wake up to this paradigm. EPOST

SERVICES

In this service, the sender writes an e-mail that is directly sent to a delivery post office where it is printed and delivered to the recipient.9  A vast number of people with access to e-mail wish to communicate quicker with their friends, relatives and associates who do not have access to e-mail. This service targets not only Indians abroad but also migrants to cities who want to reach their relatives in towns and remote villages. The post offices already have the infrastructure needed to provide this service. The VSAT network used to connect the post-offices directly can cut down mail transmission time drastically. The necessary software and hardware have also been put in place during the recent modernization efforts. EPOST

WEBSITE

ePost can be accessed through links on the India Post website (http:// www.indiapost.org/) or at its site—http://www.indianpostoffice.net/. The site is designed in the distinctive red and white colours of India Post. It is extremely easy on the eye and easy to navigate. As with most e-commerce and mail sites, the log-in is clearly demarcated and present on the home page and new users will find a clear set of links to the explanations, demos, FAQs, privacy policy and terms of use. The home page also displays the security certification from Entrust. The creation of a new user ID is a very simple process and requires very few details. However there is a secret question, to validate users if the password is lost, as there is no requirement of any other e-mail ID. Adding credit to the account as well as sending a mail are very easy tasks too. For potential advertisers, there are large banners on the home page indicating where ads would be displayed and with inbuilt links inviting the advertisers to click on to contact ePost. See Figure 5.4 and Figure 5.5 for snapshots of the ePost site.

BUSINESS MODEL The salient features of the business model are10: l

9 10

The user sender, has to open an account with ePost. This is done by registering on-line through the website http://www.indianpostoffice.net/. A minimum payment of Rs 250 has to be made by the user. Credit card payment is accepted but with a surcharge of six per cent. The other alternative is to buy a prepaid card from any of the district headquarter’s head post offices in any of the

What is ePost?, www.indianpostoffice.net/whatisepost.html, Jan 22, 2002. FAQS, www.indianpostoffice.net/faqs.html, Jan 22, 2002.

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Fig. 5.4: Screen Shot of ePost Homepage

Fig. 5.5: Screen Shot of Terms and Use and Privacy Policy

METAMORPHOSIS AT INDIA POST

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states in which test marketing is being done or GPOs across the country. The user can then execute the instructions given on the card and on the website. The cards are available in denominations of Rs 250, Rs 500, Rs 2000, Rs 5000 and Rs 10,000 (Rs 45~$1). The sender fills in the recipient’s address and types the message in a form on the website. The message is then transmitted to a designated e-mail address based on the pin code of the recipient’s geographical location. It actually represents the email ID of the post office (ePost centre to be precise) nearest to the recipient’s location, e.g., Mumbai GPO, 400001 would be [email protected]. There would be a network of such ePost centers. As soon as the mail is sent, it is routed to the corresponding ePost center. The center receives the e-mail, prints it out and delivers it as a regular letter. India Post has a tie-up with Nettlinx Ltd to take care of the Internetrelated services. Nettlinx also maintains the user account through a software package and it has made it hassle-free. The end-user simply queries the service to inquire about the number of messages sent, amount utilized, amount in balance and other relevant information. The account is recharged either by credit card or prepaid card. ePost has tied-up with Ecomenable, the exclusive Indian affiliates of Entrust.net, that helps conduct secure e-commerce transactions. ePost uses Entrust.net’s 128-bit SSL web server certificate and ensures secure credit card transactions to the user. Refer Figure 5.6 for Business and Revenue Models.

BUSINESS PLAN The Department of Posts business plan for ePost is centered around the following: l

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Bridging the digital divide by complementing the snail-mail services with its new ePost services. To tap the large market of NRI community by enabling them to communicate with their friends, relatives, business associates back home. Providing greater value to the customer by leveraging its huge distribution network. Extend its ePost services throughout the country. Currently, as a pilotproject the service is offered only in five states (Andhra Pradesh, Goa, Gujarat, Kerala, and Maharashtra). To provide value added services like eShop, and e-BillPost.

BUSINESS STRATEGIES The business strategies adopted by ePost to achieve its business plan are set out below: l

ePost provides a free e-mail service to the user. However, to discourage users from signing up and using only the free e-mail service and not

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Fig. 5.6: Business and Revenue Models of ePost

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11

using the paid service, ePost has configured the mail account to expire if the user does not pay for the use of ePost service within 30 days from the date of registration. The sender is charged at the rate of Rs 10 per message of A4 sheet length. In view of some other competitors charging up to Rs 35 for similar services, and when we keep in mind the target population, this fee seems reasonable. However, some other competitors provide a similar service free of charge. So, ePost is considering the option of going for other value added and complementary services to lock in the customer. In addition, since the credibility of the service provider, Indian Postal Department, is very high, the reasonable price charged should not prove to be a significant deterrent. ePost has tied-up with Nettlinx to provide Internet-related service in which India Post doesn’t have any expertise. ePost tries to leverage its distribution network with the expertise of Nettlinx in Internet-related activities. The department has clearly spelt out privacy and security policies. ePost promises to respect and protect the sanctity of all information that is provided by the user during registration. It refrains from selling the information as mailing lists to interested organizations. This is of prime importance in order to enable the user to realize greater value out of the ePost’s service offerings.11 

Security, www.indianpostoffice.net/security.html, Jan 22, 2002.

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ePost tries to provide greater value to its customers by employing direct mailing techniques such as periodic member letters to announce important service changes, new features, technical issue updates and news about other products and services. ePost also provides additional value by supplying mail tracking info to the user. The user can inquire about the status of the delivery, e.g., whether his/her mail has been downloaded at the ePost Center or not, whether it has been already sent out for delivery or delivered to the addressee. All these would be available in the user’s message box. To realise economies of scope, ePost is launching a service named “eShop”. This is in effect, e-distribution of consumer goods (webshopping). The eShop site will be maintained by Nettlinx Ltd and the delivery will be the responsibility of the postal network. The advantage to a customer would be the vast network of delivery post offices in India. The DoP also promises cost-effective delivery service. Payment can be made through credit/debit card and benefits of comparisonshopping will also be available. Once the purchase is over, the products will be shipped for delivery from the nearest logistic centre to the destination.12  ePost is in the process of setting into action its plan of scaling its operations from its existing five states throughout the country.

S ECURITY

AND

PRIVACY

Payments are through credit cards or pre-paid cards. ePost uses Entrust.net’s 128-bit SSL encryption web server certificate 13  to ensure greater security for users. Security is a major concern in India and by partnering with Entrust.net, ePost hopes to allay the fears of most of its potential customers. In keeping with the best practices of all good websites, ePost also clearly outlines its privacy policy. According to ePost, all information provided by the users at the time of registration will be held in strict confidence and any information used will be for demographic statistical analysis and for internal use only. ePost assures users that it will not send any unsolicited information, including e-mail, except for a welcome letter to new users explaining the features provided by the service and periodic member letters to announce important service changes, features, technical issue updates and news about other products and services. They may also contact users to conduct research about users’ opinion of current

12 13

Coming Soon… The Shop of your Dreams – eShop, www.indianpostoffice.net/comingsoon.html, Jan 22, 2002. A web server certificate enables secure, confidential communication between a browser and a server. The Secure Socket Layer (SSL) technology ensures that data is passed on securely over the web and it reaches unaltered at the appropriate destination that it is meant for, thus ensuring that none the transmitted information is lost or misused. This high level of encryption and security ensures that customers’ credit card information cannot be stolen over the web.

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and prospective services via e-mail surveys or on behalf of their external business partners, about a particular new offering/service that may be of interest to the user. However ePost will not share users’ e-mail addresses with their business partners without the individual user’s approval.14 

C OMPETITION ePost offered by Indiapost.org is not the first e-mail to snail-mail service in operation. In fact, it is one of the late entrants in this field. India Post started this service only in April 2001. Several other players have been in operation for quite some time. The competitors for ePost can be categorized into three classes. The first category, say Class A, comprises those offering worldwide service like Arrowpost.com, Letterpost.com, and Remailemail.com. The second category of service providers, say Class B, are those specifically targeting NRIs and whose distribution covers the entire country like Hotmailindia.com, Bharatmail.com. And the third category, say Class C, of competitors include those who are targeting the NRIs but only serve niche Indian markets. Since India Post’s current offering is restricted to five states, including Gujarat, Maharashtra, and Andhra Pradesh, competitors in Class C would be Gujaratpatra.com, Web-ellora.com in Maharashtra region, Kakinadaonline.com in the Andhra region. Currently, ePost offering could be categorized into Class C and the direct competitors would be Class C companies. However as ePost services will be extended to all regions in India, we prefer to classify it as a class B company with other Class B companies as its competitors. Distinctive features of service offerings of each of the players in the three classes are outlined in Figure 5.7. Figure 5.8 and Figure 5.9 give screen shots of some competing offerings.

E-SHOPPING SCENARIO

IN

INDIA

In the recent past, E-malls had been growing significantly and there are over 70 sites offering on-line shopping facilities in India. E-malls offer a plethora of products ranging from books, music, garments to kitchen appliances, groceries, and furniture. Many of the E-malls provide multiple payment options like credit card, cash on delivery, Internet banking, cheques, demand drafts. K. Vaitheeswaran, vice president (marketing), Fabmart, says, ‘Non credit card payment options have certainly added a fresh set of consumers. But credit cards remain the most popular payment method at Fabmart (around 60 per cent of orders at Fabmart are paid through credit cards. We recently added cash on delivery for the grocery store, which has helped a lot since many housewives use this option to buy groceries.’15  The main concern of the Indian consumer is the security of on-line transactions. Although, standards like SSL, SET have emerged to address the security concerns, it still remains to be seen whether 14 15

Terms of Use of This Service, www.indianpostoffice.net/terms_epost.html, Jan 22, 2002. “Is e-shopping happening in India”, http://www.zdnetindia.com/news/features/stories/ 11403.html, Jan 3, 2002.

Class C

Class B

Arrowpost, a  letterpost ,

Class A

web-ellora , kakinadaonline,

e 

Bharatmail , d  hotmailindia , India Post

c 

remailemail

b 

Dot Com Companies

Class of Competitor

Business Model

Languages Value proposition

Delivery

Cost/ mail sent

Business Model

Cost/mail sent Delivery Languages Value proposition

Business Model

Parameter

(Contd.)

Register on the site, compose the message and send it across. The message will be processed and sent to the appropriate mail centre, which is its own area of operation, and printout is taken and delivered.

Register on the site, pay for the card in the case of Hotmailindia, compose the message and send it. The site scans or takes print out of the message and delivers the message through post. Free in the case of Bharatmail. Hotmailindia charges Rs 35 for every 160 words of message. Through the Indian postal or courier service. Since the mails are delivered to the nearest mail centre, the delivery time is much lesser compared to the snail mail. Multi-lingual support is offered in Bharatmail. Convenience, security, cost-effectiveness. India Post has a very clearly spelt out privacy and security policies.

Buy stamp, compose the message and send it. $1.4 to $9.9 based on the type of mail and the company. Sites claim that the mail gets processed within 24 hours. Many sites support English like characters. Convenience, reliability, cost-effectiveness. “Snail mail for the Internet age” (letterpost.com)

Characteristics

METAMORPHOSIS AT INDIA POST

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h

g

f

e

d

c

b

a

 

Free in the case of Kakinadaonline. However, other sites charge the sender. Punjablinks charges $ 0.33 to $ 2.45 per mail based on the delivery time desired (24 hours or 2–3 days). Ranges from 1–3 days As it is a niche segment, local language translation services are provided by many of the sites. Convenience, customization, cost-effectiveness. Some of the sites explicitly mention that if you desire more secure message transfer, go for some other secure communication system (chandigarhcity). So privacy issues are given least attention by these sites.

Characteristics

Fig. 5.7: Comparison of Services of Various Players Offering email to snail-mail

Value proposition

Delivery Languages

Cost/mail sent

punjablinks , g  chandigarhcity , h Alacrity FreEmail

f 

Parameter

Dot Com Companies

http://www.letterpost.com/index.html, Jan 10, 2002 http://www.remailemail.com, Jan 11, 2002. http://www.bharatmail.com, Jan 11, 2002. http://www.hotmailindia.com, Jan 10, 2002. http://www.web-ellora.com, Nov 25, 2001. http://www.punjablinks.com, Nov 27, 2001. http://www.chandigarhcity.com, Jan 03, 2002. http://fremail.alacrityhomes.com/, Jan 22, 2002.

Class of Competitor

Fig. 5.7: (Contd.)

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METAMORPHOSIS AT INDIA POST

Fig. 5.8: Screen shot of email service of Bharatmail (Class B)

Fig. 5.9: Screen shot of Letterpost.com (Class A)

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Indian consumers feel comfortable with revealing their credit-card information on the net. ePost’s eShop certainly can alleviate fears of credit card information misuse by allowing the user a variety of payment options including cash on delivery. eShop also promises comparison shopping—where a search result offers instant product comparison based on price, availability and merchant information, i.e., it helps shoppers find the best value on products, saving them time and money. However, the prime attraction is the promise of delivery anywhere in India, unlike other competitors who have geographic limits.

MOVES TOWARDS OTHER VALUE-ADDED SERVICES16 As the Indian Postal Department has positioned its organization to tap the new technologies, further opportunities for value-adding services are being discovered. E-BillPost is a promising example. It is designed to be an electronic collection and consolidation service for payment to the service provider wherein bills are collected in different locations, instruments processed and the accounts settled at one point as per the convenience of the service provider. The post office will perform the role of a consolidator and act on behalf of billing agencies such as electricity and water agencies, mobile phone companies and municipal corporations and so on. For the customer the facility is single point payment of bills of all types in a queue less and hassle free environment as the consolidator, the post office, will not only accept all kinds of bills for payment, but also in the event of the customer not having received a bill, access the service provider database for procuring a copy of the bill online. Depending on the location, availability of infrastructure in cities and towns with service providers, the collection could be on-line or off-line. Besides the two most common modes of payment, namely cash and cheque, depending on the agreement with service provider India Post may also go in for payment through credit cards with facilities for on-line authentication.

IMMEDIATE CONCERNS FOR THE DEPARTMENT The future holds a lot of promise for ePost, now that India Post has woken up to the challenge and the changing realities. At the outset, the chapter noted that India is a country of contrasts. The same holds true for the strategy being followed by the Indian Postal Department. The two strategies India Post is following appear to be based on contradictory assumptions of the future. While the success of ePost will depend on the continued low Internet penetration, eShop and E-BillPost can only succeed if the situation is just reverse. These contradictions may resolve themselves in an evolutionary manner, which could result in either differentiated offer of the two services to different client groups, or could result in divestment of these services to an external provider, or could be the basis for eventual privatization of the Indian Postal Service. However, at the present 16

http://www.indiapost.org/News and Events.html#e-billpost, Jan 22, 2002.

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time, these contradictions continue to challenge the Indian Postal Department. As Nitin Jaswal, a customer of the rival Bharatmail, says ‘Good that at least now Indian Postal Dept has woken up. There were a dozen players emulating the postal services in India during the dotcom boom...As of now Bharatmail is the only site which is providing the same free services are good and cannot be compared with Indian post. As a user of Bharatmail for the past four years—I tried a few links in the Indian Post and I found 1. the site is pathetically slow 2. none of the links are working 3. I had sent a mail asking for help—no reply until now Do u think Indian post can succeed ?’17  Yes, indeed, this seems to be the question on everyone’s mind—Can ePost succeed? Is the Indian market mature enough for eShop and E-BillPost? What transformative dynamism can be cultivated in the organization using the platforms created by these new services? How can the new capability and competencies feedback on the traditional postal services? Can the Indian Postal Department leverage the free services being offered by the private sector to further its social and economic mission?

17

“ZDNet Talk Back, Too Late….”, http://www.zdnetindia.com/talkback/viewcomment.html?iArticleId = 21105&tbkId=11182&itbksourceid=1&redirectURL=, Jan 22, 2002.

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Functional Strategies in the Indian Context

6

Knowledge Management and Change Processes Lessons from Kabir

Vipin Gupta

l

Deepak Kaul

l

Mrinalini Shrivastava

In this chapter, we investigate a key formative, historical influence on the Indian work culture. This influence is represented by medieval Indian literature, which represents fusion of the pre-medieval philosophy and turbulent medieval times. We focus on the works of the medieval saint and scholar, Kabir, and derive general implications and insights for the transformative organization in light of the current Indian context and international research. Kabir (1440–1518) was one of the greatest exponents of reforms in medieval India and a key figure in the medieval knowledge school. In this chapter, we draw from his work to highlight the process of discovering the diverse tacit knowledge bundles, developing them into productive organization-wide learning, and correcting the learning to sustain competitive advantage–the steps of knowledge management that we identify as integral to the transformative organizations. Kabir, born to a Hindu widow and abandoned at birth, was brought up in the house of a Muslim weaver in a village in Uttar Pradesh. His life was marked by spiritual happiness and contentment. He possessed a straightforward nature and challenged the dogmas of the powerful sections of society. His principal work, Kabir Granthavali, contains a distinct form of presentation using devotional couplets, whose dominant motif is the inter-relationship between social capital and spiritual capital. Kabir spread his message through examples for the managers and the masses alike, and his works are widely taught and referred to in modern India. Through his works, Kabir preached love and devotion which could be followed by the masses and thus unite all sections of society. He was opposed to all kinds of discrimination, whether on the basis of caste, religion, race, family or wealth. His sympathies were decidedly with the poor with whom he identified himself. Instead of focusing on social reformation, he addressed the issue of transforming the individual and the guiding power of true leaders or gurus, and thus contributed to a transformative and long-lasting change in social practices. It is this focus on the transformation of individual motivation to that of devotion and love for pursuing the path of knowledge, and realization of one’s mission,

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that makes Kabir relevant for both knowledge as well as values management in the modern organizations. Several models for the analysis of change are available, the most prominent being one by Lewin (1945) that specifies three steps of ‘unfreezing-changingrefreezing'. Unfreezing refers to creating need for change and reducing resistance to change. A crucial limitation of Lewin’s model is an assumption that change is something that is rare and occasional, rather than something that is continuous and discovery-driven. Another assumption is that change always represents positive learning and there cannot be an error of judgment in change decisions. However, if the change agent unfreezes a productive behavior and refreezes an unproductive one, then the costs of changing back become very high, and such reversal may not even be possible if the change was marketed and frozen very strongly. In turbulent times, the freezing of substituted change could actually be counter-productive because the change may have only short-term relevance as a stand-alone behavior. In contrast to Lewin’s change model, Kabir’s change management approach calls for an appreciation that the diverse practices are relevant and have the potential to contribute to the same mission. Therefore, change does not necessarily require discarding the old, though it does require gaining an awareness and appreciation of how and when the old is indeed gold. The change, in Kabir’s approach, is as much leadership oriented as it is individual-specific. Leadership plays an important role in carrying conviction that the beliefs, practices, and knowledge of other religions and groups have some value for accomplishing one’s mission, and in highlighting certain limitations of the beliefs, practices and knowledge of one’s own religion and group. The individual is challenged to go beyond the current beliefs, practices and knowledge, so that the mission could be accomplished effectively and on a sustained basis. By highlighting that those specific beliefs, practices and knowledge that are (and are not) productive for the fundamental goals of love and devotion, Kabir rather forcefully strove for an essential and positive transformation in the mindset of people—free from any dogma. Thus, Kabir sought to encourage people to discover their own true motivations and then to manage knowledge and values in a way that supports inter-personal and inter-community love, and that helps the development of the individual, the group, and the nation. To highlight the relevance of Kabir for transformative knowledge and values management, we use Lewin’s model as a basis and show how Kabir offers an alternative view of the three phases included in Lewin’s model. The relevant couplets of Kabir are reproduced in their original Hindi form followed by their transliteration in Roman, and then English translation and analysis of the same.

STEP I: Learning to Discover According to Lewin, the first stage in change management is to unlearn what has been learnt earlier. Such an approach has several limitations. First, there is limited evidence to support that human beings are like computers with memory storage space constraints. Second, human learning is not like a cloth that can be

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discarded at will. Human learning influences the fundamental attitudes of people and has a formative effect on their skills and behavior. Third, the new learning opportunity does not imply that the prior learning is of little use. Indeed, if everyone just forgets prior learning and becomes an expert in only new learning, then there would be very little diversity of knowledge among different people, and the value added by each person would lack uniqueness and be very limited. Fourth, the cost and effort devoted to obliterate the earlier learning can be better invested for further enriching the new knowledge and promoting the use and acceptance among people of diverse approaches. Fifth, no change ever requires a 180 degrees shift in one’s values, practices, and behaviors, but instead all changes can draw synergies from and build upon the prior values, practices, and behaviors. Therefore, instead of unlearning, the focus of the first phase of change management must shift towards ‘learning to discover’.

HUMILITY AND LEARNING TO DISCOVER Ego is a major impediment for learning new things. Once ego is shed, a person will discover immense opportunities for learning. It is critical to realize this opportunity for discovery and learning, because life has a limited span for accomplishing all this learning. Therefore, a person should recognize the knowledge potential of the world and seek to continuously improve learning. People following dogmatic rituals show egoism, which actually removes them from their goal. Kabir sought to encourage people to pursue the right practice through mutual love, respect, trust, and learning. Thus, Kabir notes:

;k nqfu;k esa vkbZ ds] NkfM nbZ rw ,SaB | ysuk gS lks ysb ys] mBh tkr gS iSaB ||1|| – – . Ya– duniya– me a–i ke, cha–di di tu– aimth | – . – – Lena hai so lei le, uthi jat hai paimth ||1||

Having come to this world, you should shed your egos, and quickly pick up all good things (good thoughts, actions and words) from the market of your life, as the market will soon close. In the organizational context, if the employees have to grow, then they must be prepared to learn continuously. One would be able to learn by being ready to accept new approaches and not just having blind and frozen bonds with one’s own prior learning. But if ego was attached to prior learning, it would contribute to a status quo and rejection of diverse knowledge, and allow others to take a lead and move ahead. The ego bound behavior, particularly in decision-making, learning and training, should be given up as it makes a person resistant to learning and exchange-led change. In order to improve continuously, it is imperative for both the individual team member and the leader to identify areas where egoistic tendencies hamper the development of the members. Poor performance is one potent indicator of

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this egoistic tendency. By identifying and highlighting the domains of poor performance and ineffectiveness, the firms can encourage people and groups to broaden their zone of acceptance, discovery and learning. Kabir highlights that to extract most from the market of one’s life, it is critical to first suspend the boundaries between self and the others, so that the knowledge of others is not viewed with suspicion, but is granted due recognition as an option for discovery and learning. At the same time, the suspended boundaries offer an opportunity to discover the fullest value of one’s own prior learning by exchanging it with the others for use in their respective goals. Kabir notes:

eSa rsjh rw tkfu djkS] esjh ewy fcuklh | esjh ix dk iSxMk] esjh xj dh Qk¡lh ||2|| – – – . Maim meri tu– ja–ni karau, meri mu–l bina–si | – – – . – meri pag ka– paigda–, meri gar ki pha–msi ||2||

You should come out of the labyrinth of ‘I’ and ‘mine’ as it is the root cause of selfdestruction; it is a shackle on the feet and a noose around the neck. This couplet has relevance for enhancing perspective taking, interconnectedness, social and spiritual capital, mutual trust and respect, and brotherly attitude, for it makes the futility of a selfish attitude very explicit. If one discriminates and distances oneself from the others, then the opportunity for discovery as well as exchange is lost and a two-fold destruction happens. First, the person fails to benefit from the knowledge of the others and is thus left unmoved as if there are shackles on the feet. Second, the person loses the option of gains from exchange and is just like a person with a noose around the neck, who must remain (un)satisfied with what s/he has and fails to realize dreams and goals. Self-growth should be the aim of the individual, but self-growth can’t occur if others are not invited to participate in the process. In an organization, if the employees or the management adopts the attitude of ‘us versus them’, then each would avoid entering into a dialogue and exchanging suggestions and ideas, and instead would try to impose one’s own views on the other. Thus, while each party would try to win at the cost of the other, the organization would end up being a loser in terms of value addition and no party would be able to realize its goals and true accomplishments.

EXCHANGE AND LEARNING TO DISCOVER According to Argyris, learning is a process of reaching maturity from the infant stage and comprises seven components. These are: (a) From infant passivity towards adult activity; (b) From dependence towards relative independence; (c) From limited behaviors to many different behaviors; (d) From erratic, shallow, brief interest to more stable, deeper interests; (e) From short-time perspective to

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longer time perspective; (f) From a subordinate social position to an equal or super-ordinate social position and (g) From lack of awareness to self-awareness and self-control. While these seven components reflect maturity of learning, they may also impede further learning. An infant is in a constant state of discovery, and this discovery is sustained and fueled by a passive, dependent, limited, brief, short-term, subordinate, and awareness-free curiosity about the surrounding environment, which allows the infant to rapidly learn from a variety of people about different things. Adults with mature learning can enjoy the learning advantages of an infant through a similar open-mindedness about discovery. Kabir illustrates the behavior of the infants, using a simile, where he compares human life with the life of a flower, adults with flowers in bloom, infants with buds, God with the gardener, and garden with the earth. He says that when the bloomed flowers (i.e., adults) are picked up by the gardener (i.e., God) to serve their purpose by going beyond the garden (i.e., earth), the buds (i.e., infants) gain awareness and look forward to take the initiative and be picked up next. Thus, as the adults conduct their spiritual and social roles, going beyond their own physical needs, the infants become aware of the immense possibilities that each adult represents, and gain confidence that God has granted them the same potential to accomplish those diverse functions. Infants reach out to actualize their potential to be as outstanding as, if not more, than the adults they hold as their models. Thus, Kabir proposes:

ekyh vkor ns[k dS] dfy;u dgS iqdkfj | Qwyh Qwyh pqu ybZ] dy gekjh ckfj ||3|| –

–

Ma–li a–vat dekh kai, kaliyan kahe pukari | – phu–li phu–li cun lai, kal hama–ri ba–ri ||3|| On seeing the gardener entering the garden, the buds state aloud that all the bloomed flowers have been picked up and soon it would be their turn. Here Kabir portrays the realizations of others as a basis for detachment from one’s current state, and to recognize those realizations as indicators of one’s infancy thereby encouraging learning to discover. If the adults remain attached to their worldly associations and believe their learning to be at an endstate, then it would be difficult for them to move towards their goals. In the organizational context if the employees want to grow, then they would have to constantly set new role models, and discover new possibilities for channeling their thought, perception and attitude; else they are liable to prove the Peter Principle of Incompetence as true. For example, workers can model the behaviors and values of a manager they find as successful, and having discovered valuable learning opportunities, seek to learn from their co-workers as well as from their juniors about relevant skills and behaviors. Only then would they develop their fitness and capability to be promoted to the level of the manager, and beyond for an extra impact in tune with the more competitive times.

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Kabir suggests that role models must be identified based on their evident relevance rather than on the basis of ideal dogmas and unsubstantiated notions. He asserts that the opportunities for discovering relevant learning are pervasive, but people overlook them because of the misguided influence of dysfunctional rituals. As a result, they are unable to appreciate their own true potential, and are unable to develop their capabilities. He posits:

gS eu bruk ckojk] ikFkj iwtu tk; | ?kj dh pkdh dksbZ u iwts] tkdk ihlk [kk; ||4|| Hai man itna– ba–vara–, pa–thar pu–jan ja–y | – – – – Ghar ki ca–ki koi na pu–je, ja–ka– pi sa– kha–y ||4|| It is the madness of the mind that it worships the stone-idol of God, but not the grinding stone of the house, which is so useful. People usually put greater emphasis on things they understand little and seek to model roles on those who are not visible to them. As a result, umpteen roles around them, that are possibly too easy to understand, are never really understood. However, it is discovering Newtonian Gravity based on the natural falling of an apple from the tree that represents true learning.

DETACHMENT AND LEARNING TO DISCOVER Kabir’s work suggests that the organization as well as the individuals within the organization must not blindly adopt the dysfunctional practices and hope that the external resources would solve their troubles. Instead, they must concentrate on developing full functional relevance and value of their internal capabilities. He retorts:

dslksa dgk fcxfM;k] tks e¡qMs lkS ckj | eu dks dkgs u e¡wfM;s] theS fo"k; fodkj ||5|| . . Kesom kaha– bigadiya–, jo mumde sau ba–r | . Man ko ka–he na mu–mdeye, jime visaya vika–r ||5|| What wrong has the hair done that it has to be shaved off so many times; why not clean the mind that (nurtures) the ill thoughts. In India, tonsuring of hair is a ritual that signifies a very big sacrifice done to gain divine blessings. Kabir questions the need for ritualistically repeating this sacrifice, when there is no assurance of a reward. In the organization too, several policies, procedures and rules are taken for granted and become routine, for they are believed and expected to return positive outcomes with little and superficial efforts. Such superficial routines only generate

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superficial outcomes, rather than economizing on the memory of people and organizations. They make people more and more dependent on the context and history, and limit their capability to discovering possibilities around them on a continuous basis. Routine procedures and rules impede learning, generate red tape, inefficiency and provide a free hand for corruption. Normally firms find that systems and procedures if not changed with time, lose their relevance and eventually they attempt unfreezing of those old systems and procedures for survival. Such a reactive approach must give way to a transformative approach, where the people learn about why specific systems and procedures are believed to be functional, and are free to discover if alternative systems and procedures could help improve this functionality.

STEP II: Learning to Develop Learning to discover detaches people and organizations, and removes their bonds and their shackles to prior knowledge. It revives the memory about why the practices and systems were first adopted in the organization. Once people discover the true meaning and value of the prior knowledge, then they are in a position to move quickly to develop the knowledge further by adopting alternative practices. The alternative practices need not necessarily be ‘better’ or ‘worse’— the selection criteria instead must be if those practices could generate an incremental value if used in complement with prior knowledge. The requisite discovery is not just about the alternative practices, but also about the value of prior and alternative practices for different realizations.

SELF-FRUCTIFICATION WITH LEARNING TO DEVELOP Kabir emphasizes the self-related elements of learning to develop using personal exemplification. For learning to develop, the person gains awareness of how various elements of knowledge can be put together to generate higher value in regular as well as once-in-a-lifetime domains. This learning can’t be taught as clearly as the learning to discover, because development is perfected only through constant and rigorous efforts and practices. Learning to develop has to be reinforced through proper evaluation of the self, whereby all negative thoughts generated on account of inadequacy of prior knowledge are obliterated from the mind.

dchj eu fueZy Hk;k] tSlk xaxk uhj | rc ikaNh yx gfj fQjS] dgr dchj dchj ||1|| – – . Kabii r man nirmal bhaya–, jaisa– gamga– ni r | – – . Tab pa–mchi lag hari phirai, kahat kabi r kabi r ||1||

Kabir suggests that if my heart becomes pure like the water of River Ganges, then instead of me searching for God, it would be Him who would follow me.

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The purification in an organizational context calls for gaining an understanding of the relevance of each diverse practice, so that these practices can be used effectively. Profitability, productivity, service, trust, loyalty, and competitive advantage would happen automatically, and the firm need not make any extra effort (such as tension, stress, conflict, incentives, downsizing and restructuring) to solve the problems. In the process of developing transparent working in the organization, the unique values that each employee brings to the organization becomes evident, so that there is little to gain by losing this asset. As Kabir notes,

izHkqrk dks lc dksbZ HktS] izHkq dks HktS u dksbZ | dg dchj tks izHkq dks HktS] rks izHkqrk psjh gks; ||2|| –

–

Prabhuta– ko sab koi bhajai, prabhu ko bhajai na koi | – – Kah kabi r jo prabhu ko bhajai, to prabhuta ceri hoy ||2|| Everyone desires for supremacy, but does not remember the supreme authority (i.e. God). Those who devote themselves to God, have supremacy becoming a slave to them. As people learn to develop, they are often inclined to develop degenerative desires for gaining acceptance as supreme. In the organizational context, an indiscriminate use of positional authority, in an attempt to prove one’s supremacy, results in the loss of face, reputation, and confidence sooner or later. On the other hand relentless efforts to share the learning that brought one to the current position and its exchange with the learning that helped others develop, generate continuous improvement in one’s knowledge and endow the power of knowledge. Promotion and rewards result automatically, as the value is added effortlessly. To drive home this perspective, Kabir observes:

dchj gfj ds ukolwa] izhfr djS bd rkj | rkS eq[k rS eksrh >MS+] ghjs var u ikj ||3|| – . Kabir hari ke na–vsum, pri ti karai ek ta–r | – Tau mukh tai moti jhadai na pa–r ||3||

Kabir says that when a person who has undivided devotion to God speaks, his/her speech is very soothing and valuable (being rare) as if he/she was spending out pearls and diamonds. Few people are totally dedicated to the cause of developmental activities, and when these people interact with others, they bring tremendous constructive, positive and meaningful energy to the fore. Kabir refers to it as precious wealth, which is infinite and possessed for an indefinite period by the employees who

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share their developmental energy. While motivation through financial incentive proves costly for the organization, and the managers must always be circumspect in trying to motivate too much (for it might cost a lot), the learning to develop itself motivates joint value creation.

SELF-GENERATION OF LEARNING TO DEVELOP Undivided devotion for learning to develop is something that must be selfgenerated for fullest realization of the potential and success in work and life. Similarly, the link between the personal learning to develop, and the exchange of this learning for collective development cannot be bought using incentives or brought from the market. As the learning to develop becomes self-fructifying, the employees realize the value of further development, and discover vast opportunities for developmental growth through inter-personal exchange. Once they understand that coordination is a must to achieve further development of learning (as only by specialization and cooperation can people realize incremental value for the organization), they would strive to perform as a team. Kabir explicates the in-dwelling precept very eloquently in several couplets as below:

rsjk lkag rq> esa] T;wa iqgqiu esa ckl | dLrwjh dk e`x T;kas] fQj fQj <w<s ?kkl ||4|| . . . Tera– sa–h tu–jh mem, jyu–m puhupan mem ba–s | . . – – – – Kasturi ka mrag jyom, phir phir dhudhe ghams ||4|| Just as there is fragrance in the flower, your God resides within you; but the confused mind like a deer traces the grass, without realizing that the sweet smell of musk is coming from its own body.

iqgqi ekWfg T;w ckl clr gS] eqdqV ekWfg tl Nkb | rSls gh gfj clS] fujarj esjs ?kV ekWfg ||5|| . – . Puhup ma–mhi jyu– ba–s basat hai, mukut ma–mhi jas cha–i | – . . Taise hi hari basai, niramtar mere ghat ma–mhi ||5|| Just as there is fragrance in the flower and shimmer (of jewels) in the crown, there is God residing continuously within my body.

T;ksa uSuks esa iwryh] R;ksa ekfyd ?kV ekWgh | ewj[k yksx u tkfugs] ckgj <wwB cjkcj iki | tkds fgjns lkWp gS] rkds fgjns vki ||8|| – . sa–mc bara–bar tap nahi , jhu–th bara–bar pa–p | . Ja–ke hirde sa–mc hai, take hirede aa–p ||8||

There is no penance harder than speaking the truth and no sin worse than telling a lie, for God stays in the heart of the truthful.

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The organizations can enjoy spiritual satisfaction and build a spiritual capital by developing their discriminating faculties, and encouraging their employees to uncover the true capabilities and powers of various people and organizations around them. The organizational mistakes and waste, responsible for thwarting its sustainable growth and competitive advantage, can be obliterated, and the penance achieved, if the employees are aware of the immense spiritual and social capital that exists in everybody. Such transformative organizations can enhance the entrepreneurial leadership of each employee, and further their productivity, commitment, satisfaction, and achievements.

SELF-DESTRUCTION WITHOUT LEARNING TO DEVELOP In the absence of developmental learning, the wasteful and counter-productive routines proliferate. Kabir specifically cautions:

dfcjk ?kkl u fufn;s] tks ikoks rfy gks; | mfM iMs tc vk[k esa] [kkjk nqgsyk gks; ||9|| Kabira– gha–s na nidiye, jo pa–vo tali hoy | . udi pade jab a–kh mem, kha–ra– duhela– hoy ||9|| Kabir says don’t trample the grass beneath your feet, because if it happens to get into your eyes, it can harm them. Even a small grass stick can be a major irritant if it enters the eyes. The organizations must not behave like the dominant monopolies, as if they are more capable than everybody else around them. Even a small opening can allow the other organizations to develop substantial destructive power. Therefore, the discriminating potential and knowledge of different organizations, even if they have limited power and presence in the market, must not be undermined or underestimated. The assembly of the firm’s networks should not be confined only to the most powerful, because it is the weakest entrepreneurs who bring about the downfall of the powerful and reach beyond the accomplishments of the powerful. Kabir elaborates this further as follows:

djrk Fkk lks D;ksa fd;k] vc dkgs ifprk;s | cksvk isM+ ccwy dk] vke dgk¡ ls [kk; ||10|| . Karata– tha– so kyom kiya–, ab ka–he pachita–y | . boa– ped babu–l ka–, a–m kaha–m se kha–y ||10|| There is no point in repenting for your wrong deeds, why did you do it in the first place. If you sow a thorny tree of acacia, you cannot expect it to bear sweet fruits of mango.

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This couplet brings out multiple insights for the transformative organizations. First, if the organization oriented towards establishing its own supremacy, then it can not be expected to discover the unique powers of other organizations, and to transform itself into a dynamic, new generation player. Second, instead of wasting resources in trying to fix the prior oversights and mistakes, the organization would do well to review its practices. If the organization seeks to punish the individuals for the failure, then the individuals would only become self-protective and reluctant to make their own discoveries for developmental learning. Finally, Kabir also observes:

thor le>S thor cw>S] thor gh djks vkl | thor dje dh Qkal u dkVh] eq;s eqfDr dh vkl ||11|| –

–

–

–

Ji vat samajhai ji vat bu–jhe, ji vat hi karo a–s | – – – . Jivat karam ki phams na ka–ti , muye mukti ki a–s ||11|| People spend their entire lives in understanding, exploring and expecting things without ‘detached’ right action, and still they expect salvation after death. People who search for the supremacy by living a life attached to the supremacy cannot expect to develop. Similarly, organizations that seek leadership by confining their benchmarks and relationships to only the cream of the market can never really understand what it takes to make the cream. Only through networking with the emerging and underdog organizations, that make efforts to realize the cream, can the firms gain knowledge of the developmental learning, and not by remaining attached to the organizations that already have the cream. The detached approach allows the people to visualize the true meaning of their life, see life as a journey that offers an opportunity to enjoy the multidimensional, vibrant colors of nature. If the people get emotionally or egoistically attached to any one color of life, then they are unable to develop the fuller potential of their life. Similarly, by being attached to the dominant positions, the organizations ignore the possibilities of the emergent new positions, and therefore are victimized by the gales of ‘creative destruction’. Therefore, even after making so many investments and with so many resources, the organizations are unable to generate and sustain their competitive advantage.

STEP III: Learning to Correct Once the organizations have learnt to discover and develop their knowledge, they must seek to further learn to correct their knowledge. Only corrected knowledge is applicable to new domains and higher-order missions of life, because the prior knowledge has a context-dependent element that would be degenerative if applied to alternative contexts. Each culture, for instance, has a unique emic, as well as universal, etic, dimension. Further, the cultures vary considerably on

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the etic dimensions, with some falling at one end, others at the other extreme, and still others somewhere in the middle. If the organizational practices and values are not corrected for this cultural knowledge, then they lose some of their meaning and relevance. In Lewin’s model, once the organizational learning has been unfrozen and changed, the third step is to refreeze the changed organizational learning. Moreover, the firms may become quite fearful and skeptical of their success in alternative cultural contexts, and apply substantial risk and uncertainty discounts when seeking investments in those contexts. If the new organizational learning is integrated into the knowledge repertoire of the workforce, then the organization can develop a more discriminating faculty about the relevance of the alternative knowledge bundles for the different contexts, and gain confidence about accomplishing corrective learning for newly emergent contexts. Thus, the organizations can integrate new domains within their current domains, and effectively service both of them without disruptive restructuring. Kabir’s couplets indicate the sequencing of the priorities for accomplishing the learning to correct. The first step (couplets 1 and 2) entails experiential learning, so that the organizations can gain awareness of the distinctive features of the context, and develop adaptive knowledge for these distinctive features. The second step (couple 3) involves referential learning, so that the organizations can compare their adaptations with those of the others, and develop a degree of sophistication and perfection. The third step (couplet 4) is oriented towards institutional learning, wherein the organization exchanges and diffuses its knowledge to the others, so that they can also correct their behaviors and generate incremental value in the market. Learning to correct is not a ‘be-all and end-all’ of the organizational learning and change process. A transformative organization must invest the compensation and benefits it receives from its knowledge exchange and diffusion process, and begin an enriched grassroots level first-order learning to discover all over again. With a broader cultural learning, it would discover new meanings in its everyday working, and can interpret its historical routines in a new light for further development and correction. Towards this end, the fourth step (couplet 5) aims at creating a transformative organization for dynamic, sustainable learning and competitive advantage.

EXPERIENTIAL LEARNING AND CORRECTIONS Experience is person-specific and is difficult for others to observe. To develop experiential learning, it is critical to focus on its true foundations—the prior process of discovery and development that allowed the tacit, experiential learning to evolve. Therefore, Kabir posits:

tkfr u iwNks lk/kq dh] iwN fyth, Kku | eksy djks ryokj dk] iMh jgu nks E;ku ||1||

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Ja–ti na pu–cho sa–dhu ki , pu–ch liji ai jñan | – mol karo talwa–r ka–, padi rahan do mya–n ||1|| Don’t ask the caste of the spiritual discoverers, instead ask how much knowledge they have, for you should value the sword and discard the scabbard. The reputation of an organization is of little value. Only the meaningful knowledge the organization has about accomplishments in a given context is relevant. If the organization is unable to realize and sustain its competitive advantage, then it is yet to learn the experiences relevant for fruitful actions. When the organizations reward is on the basis of learning of the prior knowledge, then they accomplish just that—i.e., learning of the prior knowledge, which is hardly relevant in the new context. When people are dedicated to learning the old, they hardly have any time and resources to learn the corrections to the old, and are not able to experience the uniqueness of the cultural milieu in which they are working. Old discoveries and developments are a part of the organization, and are accessible as and when the need emerges, and therefore there is little sense in devoting most of one’s time in learning about them. Instead, the organizations should have some dedicated resources and facilitators who are incharge of codifying the old discoveries and of recognizing the experts who further develop these discoveries. Then, these can be used as a ready reference and resource by people all around the organization, as well as for value-added servicing of the external constituencies. McKinsey, for instance, keeps a directory of knowledge experts, as well as knowledge documents, that can be searched and networked by anybody around the world, and can be consulted for quality, timely, and value-added servicing of any client. In addition to the prior discoveries and developments, experiential learning also builds upon the formative evaluation. In this regard, Kabir states the following:

iksFkh if