Issue 29 - 2011
Photo © Walter Menegazzi
• From Caterpillars to Butterflies (Part 2) Joe Vella Bonnici • Be an Idiot. Richard Clarke
• •
International Standards: Tools for your Competitiveness Francis Farrugia Procurement Best Practices David Dingli
• And the Value of Your Brand is... Neville Cutajar
• The Cooperative Model Ray Cassar
• •
• Mission Statements and Readability Albert Caruana
• Career Strategic Profiling: The Concept and some Evidence Vincent Cassar
• Economic Problems: Understanding the Marginalised Areas Marc Causon
Good Governance is not Different in a Family Office Setting. Mario Duca Beyond the Profit Line Gordon Vassallo
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Editor’s Letter
W
Issue No. 29 - 2011
hether it be news, documentaries, or good ‘ole entertainment, the BBC is truly master of what it does. Its ‘Creative Future’ document is an absolute strategic masterpiece, depicting “what the world may be like in 2012, what audiences may need and want” (a matter which the journal too has delved into for the local market). Perhaps the
“Dr Who” series is its most famous work, having survived eleven regenerations of the trusty traveller. We like to think of the journal as being vastly similar to the quasi-epic series, as it too has been acclaimed by its field experts, and has received lots of recognition for the means of presenting its engrossing content. The series is also the longest-running show in the world of its category, and that’s a lot of stuff to look up to. It seems that the journal is plodding onwards to getting there, locally speaking, of course. Then there’s “the Tardis” - a singular contraption that seems to be bigger on the inside than the outside, which is what could well be happening with the journal. As we have strived to be a monthly product, some of the increased issues could be physically less corpulent. A quirky sign of growth, we believe. And growth invariably happens in a multi-verse fashion. The key players’ personal growth facilitates that of the firm, which in turn lends strength to the country, to the community within which it resides too. The issue has gathered contributions focusing on this matter, amongst others. Jason Attard
We wish you a pleasant read.
editor@the-executive.biz 03. From Caterpillars to Butterflies (Part 2) 05. Joe Vella Bonnici 09. Be an Idiot. 09. Richard Clarke 11. And the Value of Your Brand is... 11. Neville Cutajar
joe vella bonniCi
RiChaRD ClaRke
neville CutajaR
19. Mission Statements and Readability 19. Albert Caruana 25. International Standards: Tools for your Competitiveness 25. Francis Farrugia 29. Procurement Best Practices 29. David Dingli 35. The Cooperative Model 37. Ray Cassar
albeRt CaRuana
FRanCis FaRRugia
DaviD Dingli
Ray CassaR
39. Career Strategic Profiling: The Concept and some Evidence 41. Vincent Cassar 42. Good Governance is not Different in a Family Office Setting. 44. Mario Duca 46. Beyond the Profit Line 46. Gordon Vassallo
vinCent CassaR
MaRio DuCa
goRDon vassallo
MaRC Causon
48. Economic Problems - Understanding the Marginalised Areas 48. Marc Causon
Villa Arrigo
Our Collaborators:
Publisher & Editor Jason Attard Print Progress Press
Technical Editor Joe Vella Bonnici Photography Foto-ish the Studio
Design & Layout Effective Marketing Ltd.
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International Business
Issue No. 29 - 2011
From Caterpillars to Butterflies (Part 2)
• Superior
performance
monopolistic
rents
is
due
resulting
to from
privileged market positions.
Joe Vella Bonnici
I
n the first part of the article, it was argued that although today most states can be considered to be small, for historical and other reasons, academic studies still look at small as being weak and ‘sub-optimal’ and reduced versions of the larger states which dominate the international political and economic order. Moreover, there have been relatively few studies to assess and determine the sources for the competitive advantage of some small states. If we look at the enterprise level, we realise that there exist two main schools of thought that try to explain ‘superior performance’. The first of these schools builds on the Competitive or market power paradigm. This school is primarily represented by the work of Michael Porter through his ‘Five-forces model’ and his ‘Diamond of National Competitiveness’. Cockburn (2000) says that Porter transformed the study of ‘imperfect competition’ into the analysis of ‘competitive advantage’. In the process, Porter shifted “the focus of strategy research outward, towards the analysis of the firm’s microeconomic environment” (p 1126). www.the-executive.biz
• Firms (also) achieve superior performance A successful firm enhances its ‘market power’, raises prices and creates higher ‘entry’ barriers into the industry. This market power can, and does, shift over time. According to this school of thought, superior performance is due to monopolistic rents resulting from privileged market positions. It is obvious that such a paradigm has limited value to understand the realities facing small states. A second school of thought which tries to explain ‘superior performance’ is known as The Resource Base View (RBV). This ‘efficiency’ paradigm has been extensively used in marketing, management, economics and business studies. Enterprises are seen as consisting of portfolios, or bundles, of distinctive and difficult-to-trade assets (‘resources’) which persist over time. Firms achieve superior performance by developing and leveraging resources that are valuable, rare, inimitable and non-substitutable (VRIN). The dynamic capability (DC) approach is another branch of RBV and seeks to incorporate dynamic and temporal elements (Teece et al., 1997). The emphasis
by developing and leveraging resources that are valuable, rare, inimitable and non-substitutable (VRIN). • In a rapidly changing environment firms need to balance stability and integration... with flexibility and differentiation. • Value creation in contemporary thinking is not seen as arising from within single enterprises but rather as the outcome of a ‘value chain’ which brings together a number or a network of enterprises. is on developing and exploiting distinctive competences or capabilities not products or sectors. DC then supports growth and diversification that builds upon or extends existing capabilities. Dynamic capabilities can be disaggregated into the capacity to: 1. sense and shape opportunities and threats, 2. seize opportunities, and The Executive 03
From Caterpillars to Butterflies (Part 2)
organisations must embrace change as an inevitable and essential part of an organisation’s growth” (4).
The enterprise as seen from an RBV perspective. Adapted from Rouse and Daellenbach (2002)
3. maintain competitiveness through enhancing, combining, protecting and reconfiguring the business enterprise’s intangible and tangible assets. In a rapidly changing environment firms need to balance stability and integration (which are key to achieving efficiency) with flexibility and differentiation (which are key for adaptation and transformation). Operational effectiveness demands continuity, whereas dynamic capabilities emphasise ‘adaptation’ and ‘innovation’. The strategic alternatives (paths) available to the firm are determined by its existing sociotechnical processes (routines) and are shaped by its resource and capability position. Teece et al (1997) state that “what the firm can do and where it can go are thus rather constrained by its positions and paths” (524). An enterprise differs from others because it possesses unique resources and enjoys specific socio-technical processes which arise from its set of competencies and capabilities. It is this combination of elements that help the enterprise to create ‘value’ to customers and is the basis for its competitive advantage.
resource and the environmental perspective are complementary in many important respects” (1127). Barney (1991) points out that since the 1960s “the SWOT (strengths, weaknesses, opportunities and threats) framework has been used to consider both external and internal phenomena in determining competitive advantage” (100). Within the dynamic capabilities framework ‘small states’ can be seen as ‘open units’. However, value creation in contemporary thinking is not seen as arising from within single enterprises but rather as the outcome of a ‘value chain’ which brings together a number or a network of enterprises. Moreover, it is contended that that the value chain or network can draw upon resources and competencies arising out of its immediate environment be it a cluster, an economic sector or a region.
Eisenhardt and Martin (2000) argue that the strategic logic of dynamic capabilities has to be a combination of the leverage logic (enhancing existing resource configurations in the pursuit of long-term competitive advantage) with the opportunity logic (formulating new resource configurations in the pursuit of temporary advantages).
Although these ‘external’ resources may also be available to local competitors it is how these resources are combined with ‘internal’ ones that generates ‘uniqueness’. Following the same reasoning, it then follows that the cluster/sector/region can also draw from resources/competencies arising out of the ‘national’ context. At this point competitiveness at the various levels is not seen in isolation but rather as part of a system. Domestic competition and international competitiveness are but facets of the same, dynamic process. We argue that such an approach can help our understanding of the dynamics of competitiveness within small states at the macro, meso and micro levels.
The efficiency and market power paradigms are often presented as being opposite to one another. Cockburn et al (2000) challenge this perspective and argue that it “reflects a significant misconception, since the
Flexibility is a critical feature for the survival of open systems (such as small states). Ashby (1970) termed this the ‘‘law of requisite variety”. Jacobs (2005) holds that “To achieve strategic flexibility,
04 The Executive
The concepts of flexibility and strategic flexibility appeared in management literature in the 1950s. Johnson et al (2003) state that “since then studies on flexibility make a distinction between operational, tactical and strategic flexibility” (75). Developing the ‘right’ degree of strategic flexibility is of critical importance. Too much flexibility could jeopardise the company’s identity, competence building programme and longer term competitive advantage. Strategic flexibility is a dynamic capability in its own right as well as an outcome of other dynamic capabilities. Hulsmann and Wycisk (2008) state that “flexibility is not only to be seen as a competence of the system, but also as a mandatory condition for the system to eventually build competences” (264). ‘Strategic flexibility’ can be applied at both the micro and the macro levels. Combe and Greenley (2004) add that “for strategic flexibility to exist at the level of the firm, decision makers themselves must possess capabilities for strategic flexibility” (1458). Winter (2000) points out that it is not so much a question of whether or not decision makers possess capabilities such as strategic flexibility, but rather to what degree they possess them. The ‘strategic flexibility’ paradigm has been related to the superior performance of small states in the seminal work of Baldacchino and Bertram (2009). They build on the work of Katzenstein (1985 and 2003), Brock (1988) and Carnegie (1982 and 1987) to argue that what successful small states have in common is “flexible, strategic responsiveness to threats and opportunities in their changing environments” (144). Baldacchino and Bertram (2009) point out that “individuals, households or business units strategically spread their risks, not in spite, but because of the small economy’s overall macro-dependence on one or a few, exogenous sources of income” (145). As a leading sector faces decline, despite resistance from social parties with vested interests, a small state switches to the next winning horse. The ‘openness’ of small state economies exposes them to changes arising from global markets. It is proposed to adopt a dynamic capabilities approach because we www.the-executive.biz
From Caterpillars to Butterflies (Part 2)
believe it is the most appropriate for the conditions faced by small economies. ‘Exogenous’ environmental dynamism could well be of key importance in understanding the economic strategies (whether deliberate or emergent) adopted by small states. Having little market power, and at times being distant from core markets, makes it imperative that small states manage their interface with the outside world in a strategic and flexible way. For a small state the dynamic capabilities framework highlights organisational and strategic managerial competences that enable some of its enterprises to achieve competitive advantage at home and overseas and how they morph so as to maintain it. The strategic options available depend primarily on their resource and capability base even in those instances when an opportunistic strategic logic is followed. The strategic logic for small states should seek to combine the building and reconfiguration of resources and competencies for long-term competitiveness (the tunnel) while exploiting the opportunities that arise for short-term gain (snake). The mere expansion of an economic activity could only lead to resource wastage and even lower productivity. Alternatively a small state may decide to diversify into another activity which involves a mere ‘re-configuration’ of its resource and competence base. Such diversification may initially result in an improved performance through marginally improved productivity levels. Diversification, unless matched by new competence building, will simply, over a longer period, maintain the same level of economic activity. This while competitors may be using the time to build new competencies to move ahead. For economic development to occur, a small state needs to develop new competencies and capabilities that enable it to better exploit its existing or new resource-base. This will result in a ‘qualitative’ leap in economic activity. Baldacchino and Bertram (2009) remark that “Given the openness of small economies to events beyond their control, and the likely high impact of any such events on the domestic economy, one should not be surprised to find evidence of www.the-executive.biz
As a leading sector faces decline, a small state switches to the next winning horse. dynamism: particular economies mutate as their environments shift (152). The more dynamic the global market, the more flexible and the faster the response required of small states. And to identify the ‘right’ opportunities, one requires a strong market orientation, a clear vision and a sense of direction. Market signals need to be interpreted correctly and the right resources and competencies mobilised at the right time and at the right pace. From a RBV perspective, there should be a close link between a small state’s resources and competencies and market opportunities. It is postulated that small states have to re-define their concept or resources so as to include knowledge, strategic location, jurisdiction, creativity, natural beauty, speed and any other resource that can contribute towards achieving competitive advantage.
It can therefore be concluded that small states are different. Smallness carries certain characteristics: whether these become a source of strength or of weakness depends on the strategic orientation of the small states themselves. This orientation can be embedded in a formal planning process or in the country’s collective entrepreneurship capabilities. The knowledge economy and globalisation is changing the scenario for small states. They have to develop a culture of ‘strategic flexibility’ to exploit this change for their advantage. They need to adapt to emerging trends in their environment, seize shortterm opportunities, without losing track of their longer term vision and direction. References: available upon request Joe Vella Bonnici is a freelance management consultant and is a lecturer at the University of Malta. The Executive 05
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Photo Š Walter Menegazzi www.waltermenegazzi.org 08 The Executive
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Personal Management
Issue No. 29 - 2011
Be an Idiot. Richard Clarke
T
he recent release of Apple’s iPad 2 and the glut of copycat tablets now penetrating the market got me thinking once again about the importance of creativity. Not only its importance but also its vitality in order to prevent your business from competing on price alone. In my industry of professional education (primarily accountancy tuition) there’s a new phenomenon of bright young colleges/academies setting up in direct competition with the big players. What’s striking though is how many of these are simply replicas of the big boys they are trying to usurp. That’s a bad idea. What then happens is that these new colleges begin to realise their mistake and try to take a persona of their own . This is where things get difficult. They normally
try to win on price first. Bad idea. Students’ careers depend on their passing exams price is not their most important criteria. Then they look at online teaching. They make the mistake of trying to replicate the classroom online. Bad idea. Online is a completely different vehicle, why should it replicate the offline version? Magazines do a similar thing. They start producing online editions, with virtual page turning. But of course people don’t want to turn a virtual page. They’d probably prefer doing it for real! Another bad idea. But here’s where it gets interesting - all these bad ideas are good news. They’re all essential stepping stones. The magazine makers begin to realise that the online edition can include the actual video of the interview rather than merely the transcript. It can show interactive diagrams of what the article is trying to portray. It can include links to other resources, show live updates
and allow readers to comment right there. The world begins to open up. This is what the iPad does. It opens up more possibilities than a laptop. It is not a laptop replacement. Old tablet computers were pretty much that. Bad idea. But it lead to a good one. Scoot Adams, creator of Dilbert, agrees and takes the idea one step further: “I spent some time working in the television industry, and I learned a technique that writers use. It’s called ‘the bad version’. When you feel that a plot solution exists, but you can’t yet imagine it, you describe instead a bad version that has no purpose other than stimulating the other writers to imagine a better version. “For example, if your character is stuck on an island, the bad version of his escape might involve monkeys crafting a helicopter out of palm fronds and coconuts. That story idea is obviously bad, but it might stimulate you to think in terms of other engineering solutions, or other monkey-related solutions. The first step in thinking of an idea that will work is to stop fixating on ideas that won’t. The bad version of an idea moves your mind to a new vantage point.” So the next time someone tells you you’re an idiot and that your idea is the worst he’s ever heard, remember to thank him.
Richard Clarke was the International Director for Europe’s largest financial training company before going on to open his own successful accountancy training company with branches in Malta, Ireland and online, the Richard Clarke Academy. Having 10 years full time lecturing experience, specialising in Financial Reporting and Management Accounting, he also researched neurology and social economics and their affect on the learning process giving his lectures an extra dimension. He co-devised and ran train the trainer courses for ACCA in Europe, Africa and the Far East. Richard is writing innovative Financial training books which he hopes will break the death grip of tired, dull textbooks. www.the-executive.biz
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Marketing Management
Issue No. 29 - 2011
And the Value of Your Brand is ... Neville Cutajar
• The word brand began simply as a way to tell one person’s cattle from another by means of a hot iron stamp. And it has continued to evolve to encompass
C
EOs and ownerm a n a g e r s, particularly in SMEs are missing out on the real benefits of investing in the good name - or reputation - of their business. They all recognise that a good reputation is a good thing but are suspicious of the apparent costs of the “branding” approach as increasingly they feel that so many brands come over as slick and insincere. We all know that it’s worth investing in building the good name of our business, either through a formal “brand strategy” or just trying to enhance and maintain our reputation when we can. But how does any business decide how much time, effort and money should be spent on these intangibles? Some people may suggest that companies need make no additional effort to build their good name other than doing the entire basics well - good products, good processes, good management, and marketing that focuses on measurable sales generation.
All this is good, but it’s not enough. This article explores some of the key aspects of building a valuable reputation & brand, shows why it’s so hard to quantify but nevertheless we shall go in the valuation techniques for doing so as well as uncovers some real business benefits in the process of defining and establishing a branding strategy.
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identity... A brand is the identity of a specific product, service, or business. A brand can take many forms, including a name, sign, symbol, color combination or slogan. The word brand began simply as a way to tell one person’s cattle from another by means of a hot iron stamp. And it has continued to evolve to encompass identity - it affects the personality of a product, company or service. Careful brand management seeks to make the product or services relevant to the target audience. Brands should be seen as more than the difference between the actual cost of a product and its selling price - they represent the sum of all valuable qualities of a product to the consumer. There are many intangibles involved in business: - intangibles left wholly out of the income statement and balance sheet which determine how much business is worth. In 1988, for example, Philip Morris purchased Kraft for six times what the company was worth on paper; it was felt that what they really purchased was its brand name. When the technique of branding first started, it was meant to make identifying and differentiating a product easier. Over time, brands came to embrace a performance or benefit promise, for the product, certainly, but eventually also for the company behind the brand. Today, brand plays a much bigger role. Brands have been co-opted as powerful symbols in larger debates about economics, social issues, and politics. The power of brands to communicate a complex message quickly and with emotional impact and the ability of brands to attract media attention, make them ideal tools in pushing forward your competitive edge.
• Over time, brands came to embrace a performance or benefit promise, for the product, certainly, but eventually also for the company behind the brand. • There are many intangibles involved in business: - intangibles left wholly out of the income statement and balance sheet which determine how much business is worth. • In 1988...Philip Morris purchased Kraft for six times what the company was worth on paper; it was felt that what they really purchased was its brand name. • Particularly in depressed economic or market conditions, growth expectations are pegged back to zero, costs cut in the usual way and investment in brandbuilding the last thing on your mind. But your brand framework is going to pull you through and your reputation will continue to deliver customers in shrinking markets . • If sales stand still, your market share is growing and this is a great indicator that you have enough to attract the scarce consumer away from alternate suppliers.
Increasing
your reputation and
business brand value
Reputation is a term historically applied to the perception of a company and its management. A similar concept - brand - came from the realms of product and in many businesses still applies to products and product ranges. Today the idea of a corporate or company brand is bringing the two notions together. The Executive 11
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And the Value of Your Brand is ...
The IBM brand, the McDonald’s brand and the Disney brand are both of them companies and products. At other times the two remain distinct; for example, Unilever has a relatively undefined public perception yet they own many of the most well known household and food branded goods. But increasingly it’s the company brand which is being seen as the dominant asset; customers and stakeholder communities care increasingly about what the company (and, by implication, its management team) stands for. We often talk about the identity of a business, its reputation and its brand as if these are one and the same. As we have seen above these all have their separate scope and purpose. Consider this piece of human psychology: your personality is built from three states of mind… 1. What do you really think of yourself ? 2. What do others think of you?
For example, you have to manage these three states of mind in both your personal and professional lives. Handle them badly or carelessly in either and you can do irreparable damage to yourself or your business - you might have created a lack of trust, lack of clarity or have somehow misinformed and confused people about what you stand for, what you do, or what you’re good at.
Intangible assets? Tell that to Coke. As estimated by BrandZ, the Coca Cola Brand is valued at at a whopping €68,000,000,000.
3. How do you wish to be thought of ? Equally, these questions apply in determining the nature of your business’s personality. In a highly simplified view, what you really think of yourself is your identity; what others think of you is your reputation; and how you want to be thought of is your brand. The task of every business should be to bring these three together and understand and manage the dynamics between them. The closer to parity, the stronger is the personality. Modern corporate brand management does this with a wide portfolio of tools and techniques, but the principle is simple and is a good starting point for SMEs wanting to think a bit deeper than their logo. www.the-executive.biz
Clearly by whatever name you call it, your good name, reputation or brand is not only important but it also has a big impact on the value of your business and trust is one of the vital elements in maintaining it. Trust is a common word yet actually quite hard to really define or understand. Trust is more than just telling the truth and being open and honest. Trust is actually about consistency of behaviours and alignment with values. If you share or accept those values so much the better. So the aim of every CEO should be to get their stakeholders not just knowing their company but trusting it.
At this point, and despite the ample evidence of brand value from the corporate world, the market cynic may still need to be convinced. Growing businesses have already been advised that ongoing investment in best practice is the appropriate way to spend money. Surely that’s the scientific and proven way to build the business? Be the best with Total Quality Management, ISO and all the other benchmarks of excellence. With this approach, companies can achieve great operational resilience; but these are no more than necessary steps to take today just to survive in the longer term. Being an efficient, responsive and responsible business are certainly hallmarks deserving of a good reputation, but the truth is that competitors are all embarking on the same
journey, many using the same benchmarks. Excellence is a necessity to be a player. It’s the ante of any brand or reputation. If you are in the fast food business you must deliver quick, easy, hassle free service in order to simply meet basic customer expectations. The problem is there are a lot of good well managed companies out there. So consumers and business partners are increasingly asking instead about what you stand for, what values you hold, what does doing business with you say about them. In other words ... excellence is not enough, you have to stand for something more. It’s back to trust again; to values; to identity, reputation and brand. These are the frameworks that will help you show more, do more, be more. Competitive advantage today means going from pretty damn good to something beyond. Something that is all your own through differentiation and innovation. Standing apart, above, beyond your competitors is not easy. Particularly in depressed economic or market
Every SME CEO should keep this benefits list pinned to his wall: -
• Premium prices • Increased market share • Improved bottom line • Recruitment and retention of the best talent • Differentiation from competitors • Best in Show, Best in Class reputation • Higher maximum returns • Easier entry to new markets • Easier introduction of new products • Better ride-out of competitor pressures • More business development opportunities • The necessary ‘credit’ to survive mistakes • The ability to manage risk better • Higher rates of profit growth • Higher margins over weaker brands • A beneficial perception on performance • Greater loyalty from customers, investors, staff • Less vulnerability to competitor action • Less vulnerability to market crises • More strategic pricing flexibility • More cost effective marketing • Brand extension opportunities • Lower perceived risk of doing business with you.
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And the Value of Your Brand is ...
conditions, growth expectations are pegged back to zero, costs cut in the usual way and investment in brandbuilding the last thing on your mind. But your brand framework is going to pull you through and your reputation will continue to deliver customers in shrinking markets - if sales stand still, your market share is growing and this is a great indicator that you have enough to attract the scarce consumer away from alternate suppliers.
Placing
a value to your business
brand
It must be said straight away that there has been no philosophers’ stone to provide a foolproof or easy equation on valuation. However, it is true that substantial work has been undertaken in recent years discussing the issues of valuing the brand or reputation within a business. Whilst these studies have almost all been focussed on publicly quoted companies and have used market capitalisation - as revealed by share price - as a key component in their
Particularly so in Commodity products, Brand Equity plays a crucial role in strengthening both the value proposition as well as the company’s financials.
analysis, they fail to acknowledge that there are now tools (and expertise) available to the non-listed SME that can help develop a financial (as opposed to accounting) valuation framework around organisational know-how, market and reputational strength. So if you’re an unquoted SME with private investors, an owner manager or family business, then you can (and should!) now make the effort to understand the contribution that brand or reputation makes to the overall value of business; even though this has been problematic in the past and likely that any effort or investment in brand-building has appeared hard to justify. Almost inevitably your good name is underexploited simply because there are difficulties in valuing it separately from other aspects of the business. This is particularly so as most valuation methods depend on comparing like with like, using industry standard benchmarks and ratios yet the value of a good name comes from the distinct uniqueness and differentiation that sets the business apart from its competitors. Most likely it will show up somewhere in “goodwill”, “intangible assets” and “intellectual capital”; but a variety of elements get put into those categories and
basically they all mean what’s left when you take book value away from market capitalisation. So what is the approach that is used to value this greatest of intangibles? On the face of it, it is simple. You take market valuation of the business as a whole, subtract the value of tangible assets such as property plant, stock, machinery and the difference is the intangible assets that will include goodwill, intellectual capital and so on. Buried somewhere in there is the value of your reputation. The typical methods of valuation use techniques, either singly or in combination, such as: 1. PE ratios 2. Net Asset valuation 3. Dividend yield/dividend growth 4. Discounted Cash Flow There are many more. Each will yield a result with a range of possible values. Successful companies aim to command the premium end of that range. Anything else is to be part of the pack and to have your value, fate and efforts determined by the statistics of your peers and competitors. Brand valuations are based on estimates of future profits and, hence, depend on assumptions made about ownership, usage, and cost structure. Large quoted companies with recognised brands effectively have a constantly evaluated market value of the business which can be used to show the premium, if any, over other methods of valuation and the premium, if any, over competing brands. They have measurable strong brands and have shown they can be correlated with measures of market valuation to reveal the premium that the brand delivers. Similar but simpler methodology also drives the SME framework for financial valuation.
Conclusion
Putting all of the above in practice may seem complex but the essence of all of this is to look at how closely your products, your staff, and your processes are aligned to deliver the best possible experience to customers. www.the-executive.biz
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And the Value of Your Brand is ...
Most models for measurement deconstruct the key elements of brand building and track: 1. Salience how aware are people of the brand? 2. Perceived quality how is it is rated? 3. User satisfaction how satisfied are users with the product or service? 4. Differentiation how distinctive is the brand from its competitors? 5. Esteem how well regarded is the brand? 6. Knowledge what does the brand stand for? 7. Relevance how personally relevant is it to the consumer?
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You need to discern what it is that your people understand about what drives the business, what values underpin the enterprise, and what behaviours and competences are required from them for everyone to be successful. Along with this must come a thorough understanding on whether your customers and other stakeholders in the outside world get to see of any of this. How consistent is the message they get? What opinions have they already formed about you? Given quality thinking time and some professional support, SMEs can develop a deeper understanding of the drivers and critical success factors for their business. Using some simple steps borrowed from brand management together with an assessment of current alignment (as presented above) any smaller business can develop a sustainable reputation building strategy. Create awareness of your name with your target stakeholders. And create strong functional attributes - how you can do the job, why they should trust you, how you
perform, what’s essential, what’s negative, what’s primary. Create strong symbolic representation in the way you “package” your business – the ‘look and feel’, tone of voice, and be memorable and meaningful. Create powerful emotional attributes you’ve shown how and why you mean business, now show your customers what associating with you will say about them. And finally, create relationships that buzz! Stakeholder advocacy is your ultimate goal - this is when your brand attains its greatest worth. This contribution has been extracted from a discussion held by Mr Neville Cutajar during the Executive Event of the 18th February, 2011. Neville is 3a’s Managing Partner and Director and has extensive business experience working as an Accountant, Auditor and Consultant with a top mid-tier accountancy and audit firm. He was one of the founding members of 3a in 2008, with the vision of providing fresh, innovative and personal service to businesses both in Malta and abroad.
The Executive 17
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18 The Executive
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Marketing Management
Issue No. 29 - 2011
• For readability to be achieved it is necessary to consider both the text used and the target reader. • Much of the extensive research on readability has concluded that text that is easy to read improves comprehension, retention, reading speed, and reading persistence. • (Research) raises serious concerns as to whether management should seek to develop mission statements targeting different stakeholders.
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ission statements are fairly ubiquitous, particularly among large organisations. It is said that mission statements are an integral part of the strategic planning and implementation process that can provide direction to strategic direction choices. In addition, mission statements are also an important marketing and signalling tool. Externally, they articulate the organisation’s identity and frame its choice of activities. Internally, mission statements act to clarify the philosophy and intent of the organisation to its employees. Although opinions on mission statements are split among those in favour, those less so, and those that are cynical of them, they continue to be seen as an important element in strategy formulation. Mission statements seek a multi-stakeholder target, and not surprisingly, organisations devote considerable effort to their development and adoption. The firm hopes that the different stakeholders not only read the mission statement, but also understand what the company is trying to communicate. Understanding could have desirable consequences in terms of comprehension, interest and enhancement of the reputation and standing of the firm. At the heart of this comprehensibility of mission statements is readability: in order to be understood, a mission statement should be readable. Readability is an important cornerstone in the communication process, and its importance has been recognised in many business disciplines, including finance and accounting, public relations and marketing. If readability and comprehension are not successful among the target stakeholders, www.the-executive.biz
Mission Statements and Readability What you may have always suspected but were reluctant to question Albert Caruana then desirable outcomes cannot be achieved. Interestingly, the level of readability of mission statements has received limited research attention in the marketing literature. Given a desire for conciseness of mission statements on the one hand, and an aspiration toward inclusion of all the various themes that will meet the expectations of different stakeholders on the other, it is not surprising that many statements may not be seen to be particularly easy to comprehend in any meaningful way. Such failures naturally fuel the discounting and cynicism with which many mission statements are met both by those within the organisation, and by those outside it. Readability and understanding A key desire for any statement is that it will be readable and understandable. For this to be achieved it is necessary to consider both the text used and the target reader. The latter is particularly challenging for mission statements as these target different stakeholders with different levels of education and sophistication.
Readability is text-centred and refers to the ‘ease of reading’ that may be attributable to the quality of a document in terms of such characteristics as structure of words and sentences, as well as legibility and layout of the content. On the other hand, comprehension or understandability is very much ‘reader-centred’ and would include reader competence and reader motivation. Much of the extensive research on readability has concluded that text that is easy to read improves comprehension, retention, reading speed, and reading persistence. Most of the measures and approaches used in estimating text readability provide information in comparing appropriateness of text content in terms of both semantic and syntactic, and also its accessibility by various audiences of different education or grade levels. Easeof-reading is the result of the interaction between the text and the reader. Early work on readability focussed on children’s text while the FOG index lends itself particularly well to accessing reports and papers, As early as 1948, Rudolf The Executive 19
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Mission Statements and Readability
Flesch concerned himself specifically with devising a measure of readability of adult material. He proposed two measures: the Flesch Reading Ease Score, and the Flesch–Kincaid Grade Level Score. The former is based on the computation of an ASL, or Average Sentence Length (the number of words divided by the number of sentences) and an ANS, or Average Number of Syllables per word (the number of syllables divided by the number of words). These have weightings attached to them that provide a score on a 100-point scale, where the higher the score, the easier it is to understand the document. For most standard documents, the aim would be a score of approximately 60 to 70. Various government agencies and institutions in different countries make use of the Flesch Reading Ease Score to access the readability of their documents and forms. The Score is also often bundled with word processing software including Microsoft Office Word. The Flesch–Kincaid Grade Level Score also uses ASL and ANS but employs different weightings so that the results correspond to the U.S. school grade level. For example, a Flesch–Kincaid Grade Level Score of 8.0 means that an eighth grader can understand the document. For scores over 12, it indicates the number of years in education necessary to understand the text. The two scales correlate approximately inversely with each other.
this score would aim for a minimum score of 60, it is clear that the mission statements of the firms in the sample are abysmally low. The same can be said for the score on the
If mission statements are to be useful and understandable by all, they need to be readable. So we set out to find out and proceeded to collect mission statements from a random sample of 100 firms from the list of Fortune 500 companies. Content analysis using simple word and sentence counts of text in each mission statement was undertaken along with readability analysis using the MS Word Spelling and Grammar function that includes both the Flesch Reading Ease Score, and the Flesch–Kincaid Grade Level Score.
Anyone without an undergraduate degree is likely to have difficulty understanding what it is that these firms are trying to communicate in their mission statement. It is clear that the average employee in most companies might not be reached and probably even more so for international companies with employees in different global locations. Employees of such firms are likely to find such statements even more challenging especially if their grasp of English, in which such statements are often written, is not strong. Seeking to translate the original mission statements to the various languages where the firm operates only complicates matters further.
Findings The mean Flesch Reading Ease Score for all firms in the sample stands at 27.76 (sd = 20.42) with the lowest mean at 22.77 (sd = 18.70) for retail/distribution firms and the highest for producers at 29.35 (sd = 21.35). Given that the higher the score on the 100 –point index of the Flesch Reading Ease scale, the higher is the ease of reading, and that most organisations that make use of www.the-executive.biz
If mission statements are to be useful, they need to be readable. And the interpretation of results obtained from this study is that for the reader to understand what is typically being said requires some 15 years of schooling. F leschKincaid G r a d e Level measure where the mean for all firms in the sample is 15.06 (sd = 4.67), with the lowest mean at 14.45 (sd = 5.01) for product firms and the highest for retail/distribution companies at 16.25 (sd = 5.57). The interpretation of this is that for the reader to understand what is being said requires some 15 years of schooling.
While some caution needs to be exercised in generalising the findings reported, given the sampling methodology, it is clear that the cynicism prevalent among a good section of employees, practitioners and academics about mission statements might be warranted. It raises serious concerns
as to whether management should seek to develop mission statements targeting different stakeholders. The most useful purpose of mission statements may be primarily as an internal tool to help senior managers crystallise their thoughts in the pursuit of their strategic development process for their firm. If it also extends to communicating the purpose of the firm to all employees, (some of whom may not have completed high school), then problems might occur. Obviously, mission statements are not the only tools that organisations use to communicate with stakeholders in the marketplace – this is usually done in concert with a range of communication activities. Indeed, when messages are targeted at groups with lower reader abilities, mission statements might certainly be constructed in a way that this research would not have been able to pick up. Quite conceivably, some of the mission statements analysed in this research might have been constructed and used by senior executives who have high ability to comprehend complex written language, or targeted at stakeholders such as other senior managers, government employees or sophisticated investors. Second, we only used the mission statements of 100 of the Fortune 500 The Executive 21
Mission Statements and Readability
companies. While this is a reasonable sample, particularly in terms of the size of the text files downloaded, we have not included the other four hundred firms in the Fortune 500, or indeed the many thousands of other sizeable companies all over the world not in this ranking. Managerial implications In simple terms, the findings reported suggest that many mission statements, certainly those of the companies considered here, are not that readable. Indeed, in the case of many of the mission statements, the reader would have to be a university graduate to be able to comprehend them. If the target audience of a mission statement is broad, and includes stakeholders such as customers and lower level employees, then firms would do well to test the readability of their mission statements, and revise them where necessary, if their goal is to share their mission and use it to inspire individuals with lower reading ability. Some firms might argue that they have a narrower audience for their mission statements – for example, top management, or individuals who are well educated
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and have high reading ability. Surely, in this case, readability might not matter as much? We would argue to the contrary: There may be a subtle difference between a document being “not difficult” to read (“I can understand it”) and “easy” to read (Not only can I understand it, but I can read it easily and enjoy reading it”). So even in the case of more sophisticated audiences, readability of the mission statement is a desired property. While the audience’s prior knowledge and reading skill will determine their comprehension, it could likewise be argued that their interest in it and motivation toward it will determine the extent to which they believe in it and actually act on it. This paper describes a study of the readability of the mission statements of 100 companies in the Fortune 500 annual rankings. We sought to answer the question of whether their mission statements were “readable” or not. Our conclusion is that on average, the mission statements are not that readable, and that in the case of many of them, the mission statements assume the readings skills of a university graduate. If the target audience has lower level
reading skills, then the mission statement as a strong message will just not be getting through to them. Even where the target audience is sophisticated, a less readable mission statement will not interest them and motivate them. The most successful modern-day writers such as John Grisham and Stephen King write at a Flesch-Kincaid grade level of 7. Laws in many parts of the world require that medical and safety information be written at a Flesch-Kincaid grade level of 5. As the cultural historian Jacques Barzun has it, “Simple English is no person’s native tongue” (see http://www. the-rathouse.com/JacquesBarzun.html). Those who write mission statements would do well to remember that writing for readers who are not like oneself is difficult, and takes lots of careful thought and practice. Albert Caruana is Professor of Marketing at the University of Malta. This article is an extract from a broader paper co-authored with Leyland Pitt (Simon Fraser University, Canada) and Dianne Bevelander (Erasmus University, Netherlands).
The Executive 23
24 The Executive
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Operations Management
Issue No. 29 - 2011
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any industry sectors are increasingly facing a new business environment as end users of their products move to shift responsibilities for throughlifecycle support and maintenance to the original manufacturer. This has been happening with most large and complex products but we are also seeing it happening with many products and services. We see that the business model is changing from the traditional delivery of products and components for maintenance, to a range of levels of service up to contracting for a capability, with the supplier assuming full responsibility for ensuring that product is available for use, and only being paid if the availability targets are met. Managing
• Different business functions often require diverse aspects of the product information to be extracted from a comprehensive model. The use of product data standards such as those published by International Standards Organisation (ISO 10303:2005) offer the key to addressing these challenges and enabling industry and its customers to take full advantage of the new business models. Increasing
customer
satisfaction and competitiveness
information
through the lifecycle
This new environment open up fresh opportunities to reduce the throughlifecycle cost for operating a product and drive up quality, by eliminating or at least redefining some of the traditional information flows between customer and supply network. For example, the need to develop comprehensive information for the maintenance of a product by the end user is removed, if the supplier is undertaking all the maintenance tasks, and the end user is never going to be involved. A bigger challenge arises where the tasks are shared, and successful operation is dependent on the quality of information exchange between the end user and supply network. If both a customer and a supplier have the ability to change components on an air-conditioning system, for example, then it is critical that both customer and suppler know what the other had done, with information flowing freely in a timely manner.
Automation is one of the solutions available to industry to increase its competitiveness, whiles satisfying customers. One can see that successful companies are responding to the challenges of today’s global competitive market place by investing in industrial automation and the development of electronic exchange tools and standards. These will allow them to increase performance effectiveness through increasingly integrated and optimised processes and thus: speed up product introduction; facilitate new business alliances; improved product quality and reliability; reduce design, production and support costs; and offer new and innovative products services. As with this technology, manufacturing equipment can be deployed more flexibly, facilitating the simultaneous production of various products.
International Standards:
Tools for your Competitiveness
In practice, digital information exchanges are used to increase speed and accuracy, reduce costs and improve quality www.the-executive.biz
Francis Farrugia
by eliminating manual paper based transcription. However, there are a number of practical difficulties which need to be addressed: • Individual enterprises use different software tools to undertake their work, with the data held in different forms, leading to potential barriers in communication. • The lifecycle of complex products and services is often measured in decades, far longer than the software tools, operating systems and equipment used to create the information in the first place. This means that, unlike electronic transactions, information must be maintained in a usable form over an extended period.
A major challenge faced by businesses of all sizes is the integration and protection of information through a product’s lifecycle and, especially, when application systems and hardware evolve. To address all the above needs, ISO standards provide innovative business solutions to industrial automation technologies, including automated manufacturing equipment, control systems and supporting information systems, communication and physical The Executive 25
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International Standards: Tools for your Competitiveness
manufacturing and service operations with an enterprise is interoperability. The ability of an enterprise to meet the needs of its customers will clearly be improved when the various categories of manufacturing and service operations can be coordinated and can cooperate through critical information exchanges among applications. In turn, the interoperability of operations will lead to cost-effective performance, profitability and distinct traits of an integrated enterprise. The framework aims to:
interfaces for integration in the world of e-businesses. Therefore, reduce the cost of implementing multiple technologies in combined e-manufacturing and e-business environments. Standard interfaces facilitate changes to the configuration of system elements, while retaining the investment in individual elements. Through the integration capability of independent sub-systems, industry will be more adaptable and able to ease innovation and drive costs and timescales. SME’s will be able to interact with a multiplicity of global customers while limiting their expenses. Through the integration of processes and technologies associated with the industrial use of the internet, standardisation will support and foment a proliferation of ad hoc collaborative structures and partnership between organisation, particularly important in the complex interactions of the global supply chain. They also offer improved opportunities to integrate the supply chain and to internationally extend manufacturing through e-business. Improving productivity with interoperability One frequently reads that change is a business norm. Practically all businesses experience this reality either due to changes in production processes, or due to new customer demands, unplanned variations in product quality, or modification in equipment or process capability. In order for a company to successfully meet these changes, the operations management would greatly benefit from greater visibility of the current state, availability and capabilities of the company’s assets. With available up-to-date information www.the-executive.biz
on the status and capability of resources and assets, an operating system can be reconfigured, repaired or retrofitted to respond to the necessary changes. The integration of production and control operations with diagnostics and maintenance activities can facilitate both data collection across the company and data sharing with these inter-dependent applications. When diagnostics, capabilities assessment and maintenance applications determine that specific capabilities have or will become unavailable, the appropriate information is passed on the control applications, production execution and production scheduling activities. These applications can then adjust their schedules or change their system configurations accordingly. International standards (ISO 18435:2009) on enterprise-control system integration, provide an interoperability framework to delineate key information exchanges for coordinating target manufacturing applications. In this framework, applications are organised into activity domains, each application has an associates set of resources and assets, such as devices, software units and personnel. These are then involved in carryout out information exchanges between applications. The use of such standards enables both system providers and application owners to fully leverage the integrated nature of a manufacturing system, in order to meet customer demands, while lowering production costs and complying with regulations. Towards integrated A prerequisite
operations solutions
for
integrating
• Help delineated key information exchanges among applications associated with generic activities within the manufacturing operations management domain; • Model the transactions between business and manufacturing applications with an enterprise; and • Describe primary data objects referenced in information exchanges. As enterprises design, manufacture and sell products globally, maintaining quality standards and consistency is becoming increasingly challenging. For example, the ability of a manufacturing facility to receive the right components and build products that meet global consumer standards is often key to its competitiveness. Furthermore, it is critical that business operations comply with local, environmental, regulatory and even cultural requirements. This article showed a few examples how making good use of International Standards is a step in the right direction for smoothly achieving its long term success goals. References (abridged): • IEC 62264-1:2003, “Enterprise-control system integration -- Part 1: Models and terminology”, International Electrotechnical Commission, Geneva • ISO 10303-239:2005, “Industrial automation systems and integration - Product data representation and exchange - Part 239: Application protocol: Product life cycle support” International Organisation for Standardisation, Geneva. Ing. Francis Farrugia occupies the post of Head of the Standardisation Directorate of the Malta Standards Authority (MSA). He also lectures at the Henley Management College in Malta. The Executive 27
Risk Management
Issue No. 29 - 2011
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Operations Management
Issue No. 29 - 2011
• Companies need to have a clear idea of their cost drivers. • Best practices associated with the management of cost drivers can be implemented starting with the maintenance of supplier relationships. • Best practices include the wise use of technology and strong support from the company’s top management. • Companies should take a team-based approach to procurement. • The main benefit of adopting an e-procurement system is the ability to consolidate multiple information systems in a single place. • Another method of online procurement that works well in some industries is trade exchanges.
T
oday, procurement strategies are more a part of a business’s success than ever before. Not only has technology given companies the opportunity to truly make purchasing more efficient and inexpensive, but companies are now spending a larger percentage of their revenue on products and services than they were thirty years ago. More companies need to put in place some best practices that can guide their purchasing decisions and that can help them make their businesses a success. Before evaluating any best practices, however, companies need to have a clear idea of their cost drivers. Once they’ve identified these drivers, they can then take action to lower costs wherever possible. Unfortunately for many businesses, this information is not something they already know. Many companies simply don’t have a clear understanding of what these cost drivers are, and this cripples their ability to develop best practices right from the start. Once cost drivers have been identified, the best practices associated with the management of these drivers can be implemented starting with the maintenance of supplier relationships. In the past, these relationships were almost non-existent www.the-executive.biz
Procurement Best Practices David J. Dingli because buyers and sellers related to each other in a confrontational way. Buyers chose a supplier as needed, mainly based on costs, and moved on to a new supplier the next time round. This type of approach is often too short-sighted to be effective. Instead, another alternative is to focus on picking a number of suppliers who provide reasonable prices, quality materials, and can guarantee lead times and then forging a long-term relationship with them. In this way, businesses secure their goods and can
forgo the extra costs and delays of finding new suppliers all the time. Another best practice is the wise use of technology. Many businesses make the mistake of bringing in costly and complicated new technology, then leaving their workforce to learn how to use it and to adjust to the dramatic change. They also wrongly view the implementation of new technology as a procurement strategy when it is really a tool that enables a strategy to be successful. The Executive 29
Procurement Best Practices
The next best practice that will help companies develop a successful procurement strategy is strong support from the company’s top management. Many of these managers take a completely hands-off approach, but their involvement can be helpful. First, they need to provide adequate funding for the program. They need to hire individuals who are knowledgeable about the program being implemented and who will be able to implement a strategy. Additionally, they have to convince the lower level managers and employees that they are truly committed to the endeavour. No one wants to spend months learning new technology and adapting to a new approach to doing business if it is simply going to be changed at a moment’s notice. Companies should take a teambased approach to procurement. The purchasing department should not be solely responsible for making the company’s strategy a success. Instead, it should involve individuals from different departments. In teams, company personnel can work together in order to
30 The Executive
achieve the larger goals of the business’s designated procurement strategy. Overall, adopting a few key best practices for business’s procurement strategy can truly make the difference between success and disappointment when it comes to implementation. Signs that the purchasing function is not performing: • No reliable data Your systems cannot tell you clearly and simply how much money is being spent in which category of expenditure, how many suppliers are being used for each category, and how and why each supplier is used. • No regular review of purchasing. Purchasing just happens, month in, month out. There’s no regular benchmarking of new or existing suppliers to determine whether you are getting fair value. • Too many suppliers in the wrong areas.
The wrong areas are low value-added purchases – like office stationery - which are essential for the business to function, but confer no strategic benefit. Dealing with too many low value suppliers wastes your staff ’s time and diverts their attention from the important purchasing areas. And you’re almost certainly paying too much, because your buying power is dissipated. • Too few suppliers in the right areas. The right areas are high value-added purchases, directly linked to the core of your offer to the customer. If you are too dependent on a small number of key suppliers without up-to-date contracts and backup strategies, your business is at risk. • No clear guidelines or policies. A sure sign is when purchasing decisions are routinely referred upwards, because no clear policies and guidelines are in place. Purchasing
strategies and their
relationship to profit.
The Purchasing Strategies matrix shows the relationship between your supplier base
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Procurement Best Practices
The Purchasing Strategy Model
High
Add value
Danger Zone
Comfort Zone Use partnerships Incentives to improve Share cost savings
Impact on Profit
Low Save Money
Reduce supplier base Make purchase routine Consider buying consortium Comfort Zone
Few
Danger Zone
No. of suppliers
Many
and their importance to your profitability. Routine purchasing It shouldn’t take long to map your existing The bottom two boxes relate to your low © David J. Dingli 4 set of suppliers onto this matrix value-added purchasing: routine office supplies, for example, or utilities such as Strategic Buying power and telecoms. This is non-strategic The matrix defines the set of purchasing purchasing, of low importance to your strategies the business needs to adopt to future commercial success. Your aim here maximise the benefit of good purchasing will be to save money. But this still needs to practice. In the top two boxes we have be done properly – and doing it properly those suppliers who have a critical means better profitability. impact on your business: subcontractors, perhaps, or suppliers of raw or semi- Joining a Purchasing Consortium to finished materials. This purchasing increase purchasing power activity is strategic, and should be As a smaller business you lack the aimed at creating value for you and your negotiating power of larger players. One customers. Too often, however, too many way to secure a better deal could be to smaller firms are overly dependent on join a purchasing consortium. This works a small number of key suppliers. Their by pooling demand from many different strategic supply activity is basically in companies, thus increasing the purchasing power of all individual member companies. the top left box, the Danger Zone. And Members who join also benefit from it’s not just a case of too few suppliers. receiving improved purchasing data. They Frequently their strategic purchasing falls drive up supply chain value through their short in three other key respects: collective power in the marketplaces that are managed by the consortium. • Reliance on out of date or inadequate contracts; Until recently best practice in purchasing was largely confined to large companies. • No incentives for suppliers to improve, But there’s no reason why smaller or to share cost savings with you; businesses shouldn’t benefit as well – and in doing so build value for themselves and • No real fall-back position if a critical their customers and add to the bottom line! supplier lets you down. E-Procurement Best practice purchasing will show you how E-Procurement is more than just a system to move, over time, out of the Danger Zone for making purchases online. A properly and into the Comfort Zone, where your implemented system can connect companies business is less vulnerable in every respect. and their business processes directly with www.the-executive.biz
suppliers while managing all interactions between them. This includes management of correspondence, bids, questions and answers, previous pricing, and multiple emails sent to multiple participants. A good e-procurement system helps a firm organise its interactions with its most crucial suppliers. It provides those who use it with a set of built-in monitoring tools to help control costs and assure maximum supplier performance. It provides an organised way to keep an open line of communication with potential suppliers during a business process. The system allows managers to confirm pricing, and leverage previous agreements to assure each new price quote is more competitive than the last. Benefits of Adopting an E-Procurement System E-Procurement helps with the decisionmaking process by keeping relevant information neatly organised. Most are template-driven which makes all transactions standardised and traceable. Keeping track of all bids means leveraging your knowledge to obtain better pricing. Companies can focus on their most lucrative trading partners and contracts. Well-managed e-procurement helps reduce inventory levels. Knowing product numbers, bid prices and contact points can help businesses close a deal while other suppliers are struggling to gather their relevant data. E-Procurement systems that allow multiple access levels and permissions help managers organise administrative users by roles, groups, or tasks. Procurement managers do not need to be highly paid because such systems are standardised and easy to learn. Benefits of Adoption The main benefit of adopting an e-procurement system is the ability to consolidate multiple information systems in a single place, while establishing a standardised way to conduct purchases and interface with suppliers. Those who make the switch to e-procurement often find that they smooth out relationship glitches with preferred suppliers, often establishing a relationship which if better long-term pricing. E-procurement establishes pricing controls and buying controls, often meeting goals set by Chief Financial Officers for The Executive 31
Procurement Best Practices
establishing who can authorise purchases and spend money. E-Sourcing E-sourcing is actually a separate category of techniques that focuses primarily on the quality and price of products used in the creation of a business’s product. Since for many companies these direct materials make up a sizable chunk of their purchasing budget, it is in their best interest to implement some e-sourcing best practices. Obviously, e-sourcing can save money, but there are other equally important benefits as well. For example, e-sourcing can improve worker collaboration because these webbased applications can be accessed by all of the departments in a company. So if a Request for Proposal (RFP) is being prepared in order to purchase the direct materials needed for a new project, then all of the teams and departments involved in the project can use the applications to contribute to the RFP. The end result is a clearer, more exact explanation of what the project entails. And because everyone is 32 The Executive
involved at that level, there is less resistance to the project at later stages. To reap these benefits, however, businesses must first develop e-sourcing best practices. While software can help with all of these areas, the company itself must take the initiative on establishing these practices and following through with them. E-sourcing software can deliver many benefits for a business, such as cost and time savings, but it can never replace a solid groundwork of practices that lay the foundation for a business’s success. Procurement Trends Reverse auctions are one of the most prominent trends in procurement today. While this approach to finding suppliers simply wasn’t feasible a decade ago, today it has allowed both businesses and vendors to reap some significant benefits. In a reverse auction, the buyer creates a listing of the company’s specific project needs. For example, if the company needs to purchase spools of wire from a supplier, then the company would detail the exact specifications and quantity of the
wire they required. The buyer then posts this listing of requirements and invites potential vendors to give quotes on the cost of fulfilling those needs. Essentially, the vendors are competing against one another so lower quotes have an advantage. At the end of the auction, the buyer then chooses a winner based on several important factors, including cost, delivery time, and vendor reputation. Reverse auctions and their popularity have had a tremendous impact on both manufacturers and on suppliers. Manufacturers have been able to streamline the vendor selection process and have made it easier on themselves to select the right supplier for each project. Despite their profound impact, reverse auctions aren’t the perfect solution for every project. They do have some weaknesses, as well as a number of strengths that have caused them to become a dominant force in modern procurement. In order to determine whether reverse auctions are the best strategy for a business, both the pros and the cons need to be weighed. www.the-executive.biz
Procurement Best Practices
E-sourcing helps companies find the ideal suppliers for their materials. To reap these benefits, however, businesses must first develop e-sourcing best practices.
those processes run smoother and more efficiently. Finally, the buying organisation will need to hire, train, and restructure their workforce in order to be able to accommodate this type of supply chain management. Because the supply chain is only as strong as the relationships that bind the vendors, buyers, and other participants together, this step is crucial. Viewing these other companies and suppliers as partners in the success of the supply chain is important and should be a top priority within the buying organisation. Once all of these components are in place, the business needs to take the next step and choose the proper technology architecture to make the supply chain work well. Some large businesses opt for the full implementation of an Enterprise Resource Planning (ERP) system, which can effectively automate and coordinate many of the supply chain elements. The Internet is an important productivity tool that should also be incorporated fully into the supply chain because it streamlines many of the processes involved in procurement.
Reverse auctions do offer a number of advantages. An example is that they do open up competition. But regardless of the benefits, reverse auctions still fall short in some areas. Because reverse auctions seem to emphasise cost over other qualifications, many buyers may choose the lowest bid only to find out that the shoddy workmanship, low quality products, and slow delivery times cost them more in the long run. Reverse auctions can also be detrimental to the supplier-buyer relationship that is essential for some goods. Most businesses feel that the strengths of reverse auctions outweigh their weaknesses, hence the reason why they are so popular. Trade Exchanges Another method of online procurement that works well in some industries is trade exchanges where a number of www.the-executive.biz
separate companies in a specific industry join together to create specifications for suppliers. Large suppliers are then allowed to participate in the vendor selection process. Unlike reverse auctions, which are open to almost any size vendor, trade exchanges are usually limited to the big players in the field. Many successful trading exchanges are often set up by several large players in an industry. Supply Chain With synchronised supply chains, the overall goal is the same as with traditional supply chain management. There are three key differences, however. One is that companies work with their vendors in order to coordinate their processes and to achieve simultaneous production. Another difference is that the Internet and other types of technology are incorporated into the process to make
Effective supply chain management solves many of the problems encountered by businesses today. First, the vendors involved in the chain will actually have a clearer idea of what the buyer needs and can then adequately provide for these needs. Slow response times and delays in project start dates also become less frequent because the automated supply chain helps slice the time off of the order placement and fulfilment process. Furthermore, Internet-enabled supply chains generally result in lower costs for all parties involved because when secure relationships are established and when the supply and demand for products is in alignment, the total prices paid by organisations are generally much lower. David J. Dingli is the managing consultant of Resource Productivity Consulting Services, a management consulting firm specialising in strategic planning, operational efficiency improvements and management development & training (rpcsmalta.com). He is also an Assistant Professor with Maastricht School of Management, The Netherlands and has lectured at MBA level in 25 countries throughout Asia, Africa, South America and Europe. He may be contacted at: dingli@go.net.mt or tel: 99430196. The Executive 33
Strategy
A
lthough fathered by Robert Owen (1771 -1858) a Welsh cotton trader who believed in putting his workers in a good environment with access to education for themselves and their children, the Cooperative Movement owes its global influence to a few poor weavers from Rochdale UK who joined together to form the Rochdale Equitable Pioneers Society at the end of 1843. The ‘Rochdale Pioneers’, as they became known, set out the Rochdale Principles in 1844, which have been highly influential throughout the Cooperative Movement. Since then, the famous seven guiding principles of democracy, autonomy, right of association without discrimination, right to education, democratic control of capital, mutual help and cooperation amongst cooperative societies and social responsibility have been the code of conduct of the millions of members of cooperative societies world-wide. In this respect, therefore, the values and principles of ‘Corporate Social Responsibility’ can be said to be at the very roots of the Cooperative Model that puts the welfare of the individual and the community before all else. CSR and Globalisation In today’s globalised business scenario, the notion of ‘Corporate Social Responsibility’ has become a new and powerful buzzword and is rapidly being embraced by corporate business the world over. Although the principles underlying CSR are closely related to the guiding principles of the Cooperative Movement, their intrinsic value is being viewed by corporate business concerns as a way of making them more socially acceptable and more politically correct in the eyes of the communities which they supply with their products and services and from which they realise their profits. Faced with this changing scenario, cooperative organisations are being asked to re-examine their role and revisit their roots in order to become more socially committed than ever. This challenging scenario, where consumer expectations and concerns have taken on a dominant role that business can only ignore at their own risk, has introduced the practice of ‘Social Audits’. The European Commission defines social auditing as: “a systematic evaluation of an enterprise’s social impact having regard to certain standards and expectations.” www.the-executive.biz
Issue No. 29 - 2011
The Cooperative Model Ray M. Cassar
Gerard Leseul from Credit Mutuel, in a paper he delivered to the Maltese Cooperative Movement on the occasion of the World Coops Day on the 7th July 2007, had this to say about the EU Commission’s definition of social audits: “The fuzziness of this definition shows how difficult it is to define internationally recognised social standards. This is explained by the differences between national labour laws, stemming from the cultural diversity of relationships between individuals and work”. The notion of social audit has continued to evolve and, nowadays, businesses in both developed and developing countries are becoming more committed ( and perhaps also constrained) to pay greater attention to such issues as social impact assessments of their products and services and human rights and labour law violations by their current and potential suppliers. In this manner the notion of social audit has moved closer to CSR whereby it not only covers subcontractors but also the general organisation of the value chain and its social impact. Environmental issues have also been included into the equation. These, apart from satisfying increasing consumer demand for environmentally correct practices such as pollution control, water conservation and sustainable development are also beginning to be viewed as potential cost-savers for industry both in the light of better engineered production systems and also by avoiding potentially crippling law suits and indemnity pay outs. In countries like France, Holland and Germany, the most prominent exponents of social audits within the wider spectrum of CSR are certainly the Cooperative Banking Institutions. The Maltese Scenario The Maltese Cooperative Movement has been in existence since 1947. Over the years, it has grown into a significant organisation numbering 60 cooperatives with around 5,000 members and a turnover in excess of €60 million. Despite the difficulties and tribulations that the Movement has had to face during the 60 years of its existence, the seeds sown The Executive 35
36 The Executive
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The Cooperative Model
by the original founders have grown and flourished, and, in many cases have borne many a success story. Maltese cooperatives vary a great deal in size, characteristics and spheres of activity within the national economic spectrum. A few of these are quite large by Maltese standards both in terms of membership and turnover, others, though small and with limited resources, are forging ahead into new economic territories that have been hitherto unknown within the Movement locally. Just as size and economic activity vary, so also do their respective requirements. Fledgling cooperatives, and those contemplating a new business start-up based on the cooperative model, face the same challenges as all other Micro and Small Enterprises. Access to capital and the need for professional financial guidance feature prominently amongst the most basic needs of these businesses. Now that Malta has joined the European Union, the Movement is going through a process of reorganisation and is looking more closely than ever at its socio-economic role. The
contributions of
cooperative banking to
Economic
and
Social Cohesion
include:
• improved access to finance; • improved affordability of mortgages for fisttime home buyers and low income groups; • promotion of SME finance; • establishing microcredit; • supporting the integration of vulnerable groups; • investments in education and training; and • supporting non-profit organisations.
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In Malta’s case, the Movement is being offered a new opportunity to assert itself as the champion of the small and vulnerable, and cooperative banking could be just such a tool to achieve this objective.
• Companies need to have a clear idea of their cost drivers.
Conscious of this fact, Koperattivi Malta, the organisation of Maltese Cooperatives has established links with the European Association of Cooperative Banks with a view to learn more about this subject and to explore the avenues that could exist for the eventual establishment of such a service in Malta.
• Best practices associated with the
The process is still in its embryonic phase but the fact that such studies are being undertaken is a clear indication that the Maltese Cooperative Movement is determined to continue in its mission of being socially responsible both as a generator of economic activity and employment, and as a major contributor to the well-being of its members and the Maltese community.
technology and strong support from the
The New ILO report A new ILO report that was commissioned to the ICA shows that cooperative enterprises around the world are proving resilient to the global economic crisis. While the current financial and ensuing economic crisis has had negative impacts on the majority of enterprises worldwide, cooperative enterprises are showing resilience to the crisis. This is mainly due to the fundamental principle that the personal welfare of the members is put before profit considerations.
management
of
cost
drivers
can
be implemented starting with the maintenance of supplier relationships. • Best practices include the wise use of company’s top management. • Companies should take a team-based approach to procurement. • The main benefit of adopting an e-procurement system is the ability to consolidate multiple information systems in a single place. • Another method of online procurement that works well in some industries is trade exchanges.
For this reason, financial cooperatives remain financially sound while consumer cooperatives are reporting increased turnover. Similarly, worker cooperatives are registering growth as people choose the cooperative form of enterprise to respond to new economic realities.
I would like to conclude by quoting from the speech that Dame Pauline Green, President of the International Cooperative Alliance (ICA) delivered during the Conference on the Environment organised by Koperattivi Malta on the 22nd January 2010. In Dame Pauline Green’s words:
Why is this form of enterprise proving so resilient? The report provides historical and current empirical evidence that proves that the cooperative model of enterprise survives crisis, but more importantly that it is a sustainable form of enterprise able to withstand crisis, maintaining the livelihoods of the communities in which they operate. The ILO report further suggests ways in which the ILO can strengthen its activity in the promotion of cooperatives as a means to address the current crisis and avert future crisis.
“I believe that the cooperative model of business has a huge opportunity to demonstrate unequivocally that it is not just an alternative business model; but it is a better business model for dealing with some of the key challenges that face the 21st Century world.” Ray M. Cassar has occupied top executive posts with Maltese and foreign companies, ranging from academia to manufacturing. He is the author of several papers and publications relating to SME support and entrepreneurship. The Executive 37
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T. (+356 ) 2141 3455 - E. info@osbornecaterers.com www.the-executive.biz
People Management
Issue No. 29 - 2011
• Along with religion, values, and relationships, one’s career is probably a success benchmark of one’s lifetime.
Career Strategic Profiling The Concept and some Evidence Vincent Cassar
C
areer Strategic Profiling (CSP) is a method that places the emphasis on the person rather than on the market and it departs from local traditional career guidance practices that by and large focus on job-matching. The idea came from my experience working with a UK based consultancy firm who had developed the so-called Graduate Elevator Programme for young high flyers for Hilton International and later experimented with the concept when I was co-ordinator of the Diploma in Occupational Guidance and Career Counselling together with Professor Godfrey Baldacchino, at the University of Malta. This article aims to present the CSP concept in view of the ever increasing www.the-executive.biz
demand for knowledge workers to sustain the evolving socio-economicenvironmental agenda in Malta. I will first provide some general background about the evolution of the career field as it stands today and evaluate these trends against the new work realities. I shall then present, in summary form, one preliminary study myself and a colleague of mine conducted with local graduates that examined the external relevance of CSP for young graduates looking for firsttime real employment. Context background For most people, career is a central preoccupation. Along with religion, values, and relationships, one’s career is probably a success benchmark of
• (University) student perceptions of the labour market do not fit comfortably with the current business prescriptions . • CSP provides an innovative proactive method for graduates, but not solely for graduates, who are seeking employment. • CSP equips the employment seeker with responsibility to make a realistic and scientific judgement of his capabilities and personality. • The workforce is becoming culturally and ethnically varied.
more
• there are visible and felt changes in the job structure and other forms of work are being sought. • newer ways of construing the employment relationship have meant a change in the way we make sense of ‘careers’.
The Executive 39
Career Strategic Profiling: The Concept and some Evidence
one’s lifetime. Moreover, careers operate according to certain principles which can be understood and built into career planning and decision making. The world of work has dramatically changed over the past quarter of a century and globalisation has intensified competition amongst existing firms in export markets and among countries leaving considerable effects. Many of the commonly held assumptions about today’s world of work need to be seriously questioned. These changes affect the individual who may find him/herself in an unknown world. A sector of the population that is facing challenges due to the changing world of work is the graduate population. Graduating from University is an important milestone for many young people. However the vast majority are left to struggle with a very competitive workforce. Systems exist to try and facilitate job finding. However, it seems that the knowledge worker is treated in a very passive way. It takes more than matching profiles to information in databases. One recent study I published in the Journal of Education and Work,
40 The Executive
among a sample of University students suggested that the student perceptions of the labour market do not fit comfortably with the current business prescriptions. Moreover, the popular way of ‘finding employment’ is by sending CVs to potential employers. As many graduates know, their biggest stumbling block is when they hear the question “So, do you have work experience?”. CSP provides an innovative proactive method for graduates, but not solely for graduates, who are seeking employment. The technique provides an overall evaluation of the person in relation to the potential attributes that one has and may need to be successful in the employment market. CSP equips the employment seeker with responsibility to make a realistic and scientific judgement of his capabilities and personality by providing him/her with ‘objective’ data and developing powerful insights about one’s strengths and areas for development. Using scientifically validated (many of which are used to select and develop
critical professionals) and psychometrically sound instruments (not the Google on-line measures of course!), the candidate can acquire a sense of oneself and a window to peep into his/her potential. The resulting ‘profile’ is discussed thoroughly with a career-trained professional who is also licensed to interpret such instruments, to develop a personal strategic plan (action plan) to work on the various aspects that emerge that need improvement. Interventions could range from counselling, coaching, training, job shadowing, embarking on further programmes of study, etc. The approach also provides information to the candidate about how he can add value to an organisation and provides him with invaluable knowledge which s/he can use in an interview. Even if experience is missing, a potential employer can appreciate the added-value of such a candidate because the candidate commits himself to a personal action plan to improve and make a difference to the organisation that hires him. It reflects a sense of efficacy, drive and initiative and is a sure concrete approach
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Career Strategic Profiling: The Concept and some Evidence
The Changing
world of work
Looking at this scenario from a PEST analysis would reveal something like this: 1. At the political level, the workforce is becoming more culturally and ethnically varied. This has become more accentuated after the expansion of the European Union into 27 member states. It has hence become more paramount that policies regarding social inclusion and exclusion ensure proper justice and non-discriminatory practices in organisations. This also means that for people to survive the job-life cycle career, they must become more sensitive to multiculturalism. 2. From an economic perspective, there is a continuous growing enhancement of world economic networks and increased globalisation with the emergence of new markets. Back in 2000, the EU set out on an ambitious 10-year programme to make it the world’s most dynamic and competitive economy (obviously, little did one know of the 2009 recession!). Keeping the recession effects constant, this strategy had various aims such as preparing the transition to a knowledgebased economy and society, modernising the European social model and sustaining the healthy economic outlooks and favourable growths. 3. From the social perspective, there are visible and felt changes in the job structure and other forms of work are being sought. The increase in contingency employment has seen a significant increase and this shift has been supported through better access to integrated communication tools. Other social factors have been the increasing number of women in the workplace, the escalation of the ageing population, the changes in value orientations and work ethics and the reform of the welfare state. Hence the need to be more adaptable to changing working environments!
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The workforce is becoming more culturally and ethnically varied.
of how employers can discuss the career plan or path with such candidates. CSP typically involves assessments on a variety of aspects but the main universal indicators are: • • • •
Personality Critical reasoning Values Career interests
4. Finally, at the technological level, ICT is influencing workplace development, by, for example, recruiting through the internet; a practice which has spread into many countries. Moreover, knowledge based technology have become decisive in determining trends. The development of computer mediated communication network information has boosted the knowledge society reality.
If CSP is used within the company for succession and promotional purposes, it can be refined through a competency model development exercise. But the principle is always the same: knowledge is power. In order to conceptualise the relevance of the CSP system, one must inevitably understand the relationship between the change in the world of work and the changing organisation and how both have left an impact in the way we construe ‘careers’. Let me highlight very briefly each of these. All these factors are on average leading people to be less secure in their jobs and active job-seekers will need to take the initiative in creatively marketing their skills and the need to be open to a variety of work alternatives. Vincent Cassar is a co-founder and Managing Director of Mediterranean Cultural Encounters Ltd. Dr. Cassar lectures at the University of Malta and at Birkbeck College, University of London. The Executive 41
Family Business
Issue No. 29 - 2011
Good Governance is not Different in a Family Office Setting. Mario Duca
A
family office is the structure used to manage the business of a family. It is clear from this very practical definition that every family will have a Family Office of some sort. The challenge is to think creatively on how a Family Office can develop over time to serve the interests of different types of families. History has shown that as a result of the fact that high net worth family organisations are the ones that set up structured family offices and because the costs of setting up a SFO have made it appear that Family Offices are only suitable for families of substantial wealth, this picture ignores an important fact. Every family must have a Family Office because they must come up with a way of managing the business of their family. The challenge is how to develop the concept of the Family Office and develop the governance structures required by the family to manage the business of their family. Single Family Offices (SFO) have become widely accepted internationally in the practice of wealth management and the continuance of the family legacy through the generations for both small and large family business organisations. Due to their importance in protecting, managing and enhancing the family’s wealth, family offices need to have a sound governance structure and this is very much derived from the family’s governance procedures. The Wharton Global Family Alliance noted in a report entitled “Highlights for Benchmarking the Single Family Office: Identifying the Performance Drivers” that “….the more you invest in a governance structure for Single Family Offices, the more you communicate and interact with the family members and the more you invest in education of the next generation, the better the performance will be”. What is currently happening is that as the Family Office market opens up the term 42 The Executive
“Family Office” is being used to mean the provision of conventional private client services and investment advice. Advisers might see this as a good marketing opportunity, but putting existing services in a new wrapper does not amount to a “Family Office” service. Family Firm Governance What constitutes the essential elements of a good family office governance process? John Ward in an article entitled “Good Governance is Different For Family Firms” (Families in Business, January 2003), pointed out some key differentiating good family firm governance actions from the governance found in other types of organisations, amongst which he mentioned: 1. due to the owner’s strong influence and care, the board is just one partner in the governance system rather than a dominant player; 2. the core function of the family governance system and that of the board, is directed more at creating value than being a costly source of checks and balances; 3. the main feature to value creation is mutual trust among owners, board of directors and managers; and 4. clearly setting out the governance roles and responsibilities among owners, board of directors and management. Family Office Governance The best way of ensuring an effective family governance system is through the active, educated, responsible participation of the family being governed. As a result, governance becomes the means through which the mission and vision of the family are fulfilled and hence the most effective way of asset protection. Thus the family governance and family office governance parts work side by side with overlap and direct family involvement. www.the-executive.biz
Good Governance is not Different in a Family Office Setting.
The introduction of family offices in both small and large family businesses is a new concept in Malta. Introducing good governance in family offices is a must and these governance processes are derived from family business governance practices.
When
the
“glue�
in family businesses is
missing
When family businesses own operating businesses, the fact that the family is working together within the family business can act in itself as the factor that keeps the family together with common focus and objectives. On the other hand when the succession process is more related to the task of wealth management rather than business management, the reasons and objectives and intension why the family stays together becomes less clear and as such governance processes come more so to the fore as being of importance of maintaining the glue that keeps the family together. This implies that the intensions could be different within a family with an operating business and one which is mainly concerned with the management of wealth. In this scenario, the vision, mission and intent of family offices will need to be more frequently revisited so as to maintain the glue within the family. Conclusion The above suggests that family governance, though its mission and vision are at least as important in the family office governance as they are in the family business governance. As such this indicates that there is a requirement for a well structured approach with articulated policies, plans and ownership roles, which can accommodate the needs of the family through structured discussions between the family members. Our experience shows that these elements of governance are very often under represented in family offices. For further information please contact Mario Duca, FBS2M Family Business Solutions, email: mariod@2mmanagementconsultancy.com. www.the-executive.biz
The Executive 43
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The Executive 45
Strategy
Issue No. 29 - 2011
Beyond the Profit Line The social, moral and economic benefits of embedding spirituality in the business formula Gordon P. Vassallo
W
e all know the magnitude of the chaos caused by the disregard of sound value-based corporate cultures leading to subsequent scandals.
social responsibility, responsibility towards the environment and similar discourse. But to talk of spirituality within the business field is like trying to speak of divine matters during a cocktail party.
Financial disasters like Enron, Parmalat, Lehman Brothers, and WorldCom, just to mention a few, have led to a serious rethinking and re-configuration of how a business should operate. We are in a time of retreat. The black cloud of recession is still somewhat hovering above us. It is precisely during this time that we need to discern our way forward to make sure that our business is safeguarded from irresponsible behaviours and unbridled tactics that not only harm the business reputation but may also prove to be catastrophic in the long run.
Yet, growing research on spirituality in the workplace and in business settings clearly indicate that value based corporate cultures within any organisation have contributed significantly towards increased productivity and profitability, employee retention, customer loyalty and brand reputation. The basis of spirituality in any workplace setting is nurturing trust, mutual respect and justice, integrity and a sound moral conduct in an environment where a ‘community’ spirit is encouraged.
I should think that the first reaction of The Executive’s esteemed readers to the introduction of the subject of spirituality in the business arena is rather a reaction of shock. I am not surprised. We are used to hear much talk about ethics, corporate
• Financial disasters...have led to a serious re-thinking and re-configuration of how a business should operate. • To talk of spirituality within the business field is like trying to speak of divine matters during a cocktail party. • Spirituality is about embedding one’s value system... into one’s way of being and acting. • The vision has to create a space for active participation, sustainability and a community spirit. • The employee’s morale is boosted and he or she feels an integral part of the organisation.
46 The Executive
But
how
can
the
business
culture
embed spirituality?
Embedding spirituality in the workplace does not constitute an alternative to the way one runs a business, but re-configures it by humanizing it from within. It redefines the corporate soul. First and foremost, the platform for embedding spirituality in the workplace is for the organisation to develop a shared vision, a vision that not only caters for its organisational needs but also one that its employees are attracted to, excites them and causes them to want to put their own energy. The vision has to create a space for active participation, sustainability and a
For clarity’s sake, let’s clear the path to avoid any misconception. Spirituality goes beyond religion. Religion, obviously with full respect to all belief systems, may tend to invoke fears of dogmatism or exclusivity in the workplace. Spirituality is an individual matter; it does not rely on an external organisation. Rather, it is an experience of depth in life, it is living life with heart rather than just superficially. Spirituality is an experience that there is much more to life than just the narrow, ego-oriented view of it. Spirituality is about embedding one’s value system, whether Christian or Jew or Muslim or whatever, into one’s way of being and acting, whether in the private life or in a corporate setting. At the end of it all, we are all children of the same God and a common understanding of the common good predominates in all major acknowledged religions.
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Beyond the Profit Line
community spirit and seeks to synergise the entrepreneur’s goals with the legitimate expectations of the workforce. The vision has to be aligned with a higher purpose and deeper commitment to service both customers and the community. Within this new model of organisation, a high level of both individual and organisational integrity is maintained. Management is not there to police its employees but rather seeks to develop the skills and the holistic development of its workforce. Responses to this kind of managerial attitude can be exceptionally surprising as the employee’s morale is boosted and he or she feels an integral part of the organisation. To embed spirituality in an organisation is to create a horizontal network of communication and co-operation within all levels, to create a supportive environment for the individual and to create an organisation culture that supports personal growth. Business is often considered hard, mechanical, controlling and determined primarily by financial considerations. But business people tend to forget that if a business is run without a noble spirit of service for the common good, it becomes dull and ego-centric. Such a business fails to transcend the profit line and its vision is grossly impoverished, failing to go beyond unilateral thinking which is solely directed towards utility and the measurable. Business is run by people for people, and there would be no business if there were no people. To embed spirituality is to embed values, integrity, honesty, accountability, intuition, trustworthiness, justice, respect, service, excellence, dedication, healthy contact with the customer, and seeks not only the skills required for the job but also the personal development of the employee. Spirituality in the workplace is about empowerment of the workforce through the sustenance of individual responsibility and commitment. The spirit of creativity should not be limited to top management but extended to all levels of the corporate hierarchy. When employees are encouraged to express their creativity the result is a more fulfilled and sustained workforce. James A. Ritscher, a management accountant and active member of the www.the-executive.biz
Organisational Tr a n s f o r m a t i o n network remarks that when spirituality is embedded within the organisation, a ‘self-righting’ mechanism flourishes: when something goes wrong people have a natural tendency to bring it back on course even if it takes a little emotional risk or, in religious terms, a sense of ‘humility’. In other organisations, wherever you look things have gone wrong: people don’t keep agreements, are angry and aggressive with each other, teamwork is inadequate, managers sometimes treat their subordinates like children, policing rather than delegating responsibility – but these problems get locked in because it takes too much risk to confront and correct them due to personal ego, back-stabbing, etc. Spirituality within the organisation seeks to create constructive ways to handle conflict. Characteristic of a spiritual organisation is where the organisation has a commitment to deal and resolve such problems – a predisposition to handling them, rather than putting them under the carpet, and thus the employee has a greater self- mastery and higher selfrespect. Entrepreneurs, however, should beware of creating a superficial vision with the subtle scope of distorting spiritual practices to serve some ego-centric trait. Some define
The employee’s morale is lifted as he or she feels to be an integral part of the organisation. spirituality at work as treating co-workers and employees in a responsible and caring way. Some go even further in participating in intuitive guidance at work, character formation, counselling, spiritual guidance and meditation sessions. It comes as no surprise that Microsoft has an on-line prayer service, Pizza Hut hire chaplains from many faiths to minister to employees with problems, reducing staff turnover by half, and Apple Computer’s offices in California have a meditation room where employees are actually given some time to meditate or pray as they find it improves productivity and creativity, creativity that can emerge from a sound value based human interaction.
Gordon P Vassallo F.I.A; C.P.A; DIP (Psy) currently works as Director Finance and Administration with a Local Regulatory Authority. His past experience within a major audit firm has exposed him to a wide spectrum of business set-ups and organisations. As a freelance writer Gordon specialises in holistic development through integrating spirituality in everyday life. He is also a certified Catholic spiritual guide and Journalist. He can be contacted at gordon@atomserve.net. The Executive 47
International Business
Issue No. 29 - 2011
• The focus of actions aimed towards the generation of growth and jobs tends to disregard the long-term effects. • We must pay more attention towards the sustainable diversion of our economies. • The European Union has a number of policies and opportunities which are available to all member countries. • One tends to ignore the importance of sustainable economies which are interrelated with immerging new issues. • One aim of the EU is to identify and bring forth solutions on how to
Economic Problems: Understanding the marginalised areas Marc Causon
W
ith the economic problems plaguing most of the European countries, the focus of actions aimed towards the generation of growth and jobs tends to disregard the long-term effects on the individual, society and social trends. They tend to ignore the fact that human capital for sustainable economies should play a determining role. When considering economic activity, sustainable economies cannot be neglected or sidelined because otherwise we would be just looking at short term improvements; stop-gap solutions with no long term vision. We must pay more attention towards the sustainable diversion of our economies. In order to do so, we need to start by identifying which areas are marginalised, why this happened, and how to improve growth and job creation through the advocacy of human capital for sustainable economies. 48 The Executive
The European Union has a number of policies and opportunities which are available to all member countries but its communication in this regard has flaws and drawbacks. And sometimes one tends to ignore the importance of sustainable economies which are interrelated with immerging new issues such as global warming, the emergence of the green economies, the effective initiatives needed to develop and manage human capital for sustainable economies, and so forth. One aim of the EU is to identify and bring forth solutions on how to improve communication especially to SME’s and local authorities regarding this subject. A way of working in this scenario is to have a bigger stakeholder thinktank, wherein policies and initiatives are analysed with a core objective that goes beyond the mere creation of jobs and work opportunities, but more so with an objective to create sustainable
improve communication. societies where work is generated whilst harming neither environment nor individual. Various concepts that can be augmented to lead to better cohesion policy could also be applied in the development and management of human capital, thus further fostering the economic integration of people rather than creating jobs to be filled by people. Social entrepreneurship and a broad application of the participatory approach in sustainable economic generation should be further studied, and areas for action defined. Civic contribution is now necessary. Mark Causon has worked as coordinator and project manager on various projects in Ireland, Spain, Brussels, Germany, France, Sweden and Norway, and is also a visiting lecturer and tutor at Master’s level at several European universities. At present Mark is the manager of the Europe Direct Mosta office of the European Commission DG Communications office. He provides consultancy services on EU funding calls, project selection, application and project management. Mark may be contacted on tel. 79232635 or mark@ europedirect-mostamalta.eu. www.the-executive.biz
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Lighthouse and Ashley. 14, C. Mallia Street, San Gwann SGN 2202, Malta t: (356) 21 387 900 e: info@lighthouse.com.mt | www.lighthouse.com.mt