ORGANIZACJA I ZARZĄDZANIE

ORGANIZACJA I ZARZĄDZANIE KWARTALNIK NAUKOWY Nr 4(8) WYDAWNICTWO POLITECHNIKI ŚLĄSKIEJ GLIWICE 2009

SPIS TREŚCI 1. Witold BIAŁY, Grzegorz BOBKOWSKI Wykorzystanie systemów komputerowych do wspomagania gospodarki remontowej zakładów górniczych... 5 2. Dominic S. DEPERSIS, Alfred LEWIS System emerytalny w Stanach Zjednoczonych ocena dysfunkcji systemowych oraz konsekwencji globalnych... 21 3. Agnieszka GRZESIOK Prawo zaliczenia wartości mienia zabużańskiego... 35 4. Jo Ann HO, Ee Yin LIEW Percepcja motywacyjna przełożonych i podwładnych przypadek Malezji... 55 5. Dan KIPLEY, Alfred LEWIS Paradygmat sukcesu strategicznego Ansoffa dowód empiryczny potwierdzający sukces przedsiębiorstw konkurujących w burzliwym otoczeniu. Dlaczego brak tej koncepcji w podręcznikach zarządzania strategicznego?... 71 6. Mariusz KRUCZEK Podejście procesowe w analizie struktury łańcucha dostaw. 89 7. Tony LINGHAM Teoria motywacji oparta na potrzebach uczenia klasyfikacja potrzeb ze względu na style uczenia się i ich odniesienia do motywacji pracy... 103 8. Bonnie A. RICHLEY Zrównoważony rozwój systemowa perspektywa całościowa. 117 9. Radha R. SHARMA Outsourcing jako strategia wyzwania dla zasobów ludzkich w świecie globalnego rozproszenia pracy... 131 10. Marco TAVANTI Zarządzanie poprzez wartości w kierunku rozwoju organizacji... 153

Ladies and Gentleman, We are pleased to give to your hands, special english-language edition of our research quarterly entitled Organization and Management, presenting research achievements of authors from around the world. I would like to thank you Professor Agata Stachowicz-Stanusch without which there would be no such publication. The research cooperation of Mrs. Professor with domestic and foreign institutes has resulted in this unique publication, which we hope will be a good practice and will be published periodically. On the pages of our quarterly showing since 2008, we share with you the outcomes of research investigations. At the same time we make every effort to meet the highest substantive and cognitive standards of our quarterly. The quarterly became a place where we present the intellectual achievements both the researchers of the Silesian University of Technology and researchers representing other domestic and foreign universities. The theme of our scientific quarterly covers wider issues of management understood from the perspective of economics, logistics, sociology or technical sciences. We believe that this multidimensionality makes our quarterly valuable source of knowledge. The Chief Editor, Rector of The Silesian University of Technology, Prof. PhD. Eng. Andrzej Karbownik

Witold BIAŁY Silesian University of Technology Faculty of Management and Organization Institute of Production Engineering Grzegorz BOBKOWSKI Silesian University of Technology Faculty of Mining and Geology Institute of Mining Mechanisation APPLICATION OF COMPUTER SYSTEMS IN SUPPORTING MAINTENANCE POLICY IN MINING INDUSTRY Summary. Continuous production maintenance in mining industry (coal mines) results in high production costs. Well-known computer systems supporting machine and appliances exploitation as well as traffic control in factories have been currently broadly applied in a variety of industry branches. Therefore introduction of these systems in mining industry operations seems inevitable. CMMs class system introduction in mining industry should provide continuous operation of machines and appliances and result in decrease of variable costs of the company due to extended operating time of the devices. In terms of a coal mine, this time savings will result in loss cuts as a result of machine delays. Applications of computer systems supporting the maintenance policy in mining industry have been presented. Keywords: computer systems, maintenance policy, mining plant WYKORZYSTANIE SYSTEMÓW KOMPUTEROWYCH DO WSPOMAGANIA GOSPODARKI REMONTOWEJ ZAKŁADÓW GÓRNICZYCH Streszczenie. Zapewnienie ciągłości ruchu w zakładach górniczych (kopalniach węgla kamiennego) generuje wysokie koszty produkcji. Komputerowe systemy wspomagające zarządzanie eksploatacją maszyn i urządzeń oraz utrzymaniem ruchu w przedsiębiorstwach na dzień dzisiejszy znalazły szerokie zastosowanie w wielu gałęziach przemysłu. Dlatego też nieuchronne wydaje się wprowadzenie tych

6 W. Biały, G. Bobkowski systemów do obsługi zakładów górniczych. Wprowadzenie systemu klasy CMMs w zakładach górniczych powinno zapewnić ciągłość pracy eksploatowanych maszyn/urządzeń, a tym samym obniżyć koszty zmienne przedsiębiorstwa w wyniku wydłużenia czasu pracy tych maszyn/urządzeń. W przypadku zakładu górniczego pozytywnym skutkiem tej oszczędności czasowej będzie ograniczenie strat spowodowanych przestojem maszyn. Przedstawione zostały możliwości zastosowania narzędzi komputerowych do wspomagania gospodarki remontowej zakładów górniczych. Słowa kluczowe: komputerowe systemy, gospodarka remontowa, zakład górniczy Introduction The technological breakthrough of recent years has caused a significant concentration of coal production. At the moment the only technology of coal mining in Poland is the longwall system. The number of longwalls has been reduced significantly (by 40%, i.e. by over 400 longwalls in 1995 alone) and the ones with the highest yield have been left in operation. Longwalls with a 3000-5000 t/day and more have appeared in Polish coal mining industry. The following factors made it possible: the introduction of a new organizational structure of coal mines, which significantly improved work organization, increased efficiency of technological processes due to machines and devices of new generation used in the output production and haulage. Mining technical systems are very complex, are used over large areas and their work area is restricted by the size of underground headings. The introduction of coal mining concentration led to an increase in the power of longwall tumble coal miners the ranges of power used in these machines are often between 800 and 1000 kw or more. The key purpose of operation management is to ensure uninterrupted operation of the machines and devices used. Disruptions (e.g. due to a breakdown of a machine) cause enormous financial losses. Consequently, funds should be allocated for the purpose of improving this aspect of an enterprise s operation.

Application of computer systems 7 Machines/devices which are elements of technical systems used in the production process are subject to gradual wear and tear. An early assessment of the condition and the amount of wear and tear of a machine/device prevents breakdowns and necessary repairs. The use of the stock of machines/devices to its full capacity (working in several shifts) requires modern production organization, using the employees work more efficiently, motivating them appropriately etc, but also proper maintenance should be provided i.e. preventive measures and repairs to ensure the operation of the devices. Using the machines/devices according to their intended use and within the limits of their technical parameters and an appropriate repair management mean that the wear and tear processes and the necessary repairs can occur at regular intervals. These processes when repeated constitute the maintenance cycle, which is the basis for maintenance work planning. Maintenance management aims to restore the operability of a given machine/device through planning repairs of different types and extent. The repairs can be divided into routine and emergency ones. A repair can be done by replacing a part or a subassembly using a standard or periodic post-inspection method. 1. Maintenance management in coal mines At the moment there is no system in place in Polish coal mines to standardize the mining machine operation management system 1 either in terms of the machine/device operation processes or in terms of repairs. Specialist services are responsible for managing the operation of mining machines. These can be both own and outsourced services. The companies working on the outsourcing basis are usually the manufacturers of the given machine/device. All the machines/devices in coal mines, which are subject to periodic maintenance and repair works, can be found on the repair structure block diagram (fig. 1) 2 1 Biały W., Bobkowski G.: Awaryjność górniczych systemów technicznych. Zeszyty Naukowe Politechniki Śląskiej, seria: Organizacja i Zarządzanie, z. 22, Wydawnictwo Politechniki Śląskiej, Gliwice 2004; Biały W., Bobkowski G.: Możliwości wykorzystania narzędzi komputerowych w gospodarce remontowej kopalń węgla kamiennego. Mechanizacja i Automatyzacja Górnictwa 2005, nr 4 (411); Helebrant F., Jurman J., Fries J.: Maintenance of machines from the point of view of modern functional operation. Ekonomika i Organizacja Przedsiębiorstwa 2005, nr 7; Konderla J., Biały W., Bobkowski G.: Computer maintenance managing systems (CMMs) in mining machinery and equipment exploitation entrance strategy. Mine Planning & Equipment Selection 2006, Turyn. 2 Biały W., Bobkowski G.: Awaryjność górniczych systemów technicznych. Zeszyty Naukowe Politechniki Śląskiej, seria: Organizacja i Zarządzanie, z. 22, Wydawnictwo Politechniki Śląskiej, Gliwice 2004.

8 W. Biały, G. Bobkowski Fig. 1. Service structure flow chart Rys. 1. Schemat blokowy struktury napraw Source: Biały W., Bobkowski G.: Awaryjność górniczych systemów technicznych. Zeszyty Naukowe Politechniki Śląskiej, seria: Organizacja i Zarządzanie, z. 22, Wydawnictwo Politechniki Śląskiej. Gliwice 2004. 2. Managing planned repairs of machines/devices The main purposes of managing the activities connected with preventive maintenance by means of specifying the methodology and responsibility are the following: to guarantee that the planned preventive maintenance works will be completed, to record the results in the form of reports, archiving. The procedures describe the stages of preparing and carrying out the operation management plan and end with completing the works and presenting an account for them. The works can be carried out by the departments of coal mines or outsourced companies (fig. 2).The following is a sample description of the activities used: instructions for the planned inspections, updated with the data from the previous ones must be available for each machine/device. They are prepared on the basis of the technical documentation provided for the machine/device. the operation management services feed inspection cards specifying the frequency and methodology of the inspections into the computer system (CMMs), the operation management services divide the works among individual departments (e.g. electrical, mechanical, outsourcing, etc.) the works are carried out to meet the needs of the users of the machines/devices and after consultation with the operation management services and/or outside companies,

Application of computer systems 9 the works are carried out by the employees of the coal mine s operation management services or by outsourced companies in accordance with the recommendations specified on the inspection cards, the inspection cards are used to prepare the reports from the works, when works which were not listed in the inspection schedule must be carried out, the entity responsible for carrying them out requests that further works are performed, which initiates other procedures for repairs, if an outside company becomes involved, the operation maintenance services perform a check to ensure the inspection was carried out properly, if the data obtained after the works are completed indicate a need to change the frequency and/or the extent of a scheduled inspection, the operation maintenance services update the card, the operation maintenance services register the completion of the works and if an outside company was involved they issue a service completion confirmation note.

10 W. Biały, G. Bobkowski Fig. 2. Machine service management diagram Rys. 2. Schemat zarządzania przeglądami maszyn/urządzeń

Application of computer systems 11 3. Unscheduled repairs and major repairs of machines/devices The following are the principles of managing unscheduled repairs/major repairs of machines/devices: the completion of the repairs/major repairs is guaranteed, the results are recorded. The procedure describes the sequence of activities necessary to manage repair/major repair works when the 'user' or one of the operation management departments has issued a request for them. The procedure finishes with the completion of the works and the recording of the data and sending them to the archive. The works can be carried out by own operation management services (fig.3) or outside companies (fig. 4). The following is the description of the works carried out by the operation management services in a coal mine: the users of the machines/devices report a need for an unscheduled repair/major repair if there is a failure or breakdown. Also the operation maintenance services can demand the repairs if faults were detected during routine inspections, if the works are urgent the time when the works are to be carried out is arranged according to the 'user's' needs, if the works cannot be carried out by the services from the coal mine, outside companies must be contacted, the works are carried out by the operation maintenance service workers, who use the relevant operation cards and instructions, an operation management service worker hands over the machine/device to the user and sends the completed card to the archive, the completion of the work and its duration is recorded, minor works are outsourced by the operation management services, the operation management services check whether the works provided by an outside company are complete and effective, if a heavy repair/major repair is necessary, a standard purchase process should be used, which is initiated by appropriate procedures, the confirmation note stating that the service has been completed is issued by the operation management services after the works have been completed and their effectiveness has been checked.

12 W. Biały, G. Bobkowski Fig. 3. Traffic maintenance crew operation diagram in case of unexpected maintenance and service of machinery Rys. 3. Schemat postępowania służb utrzymania ruchu w przypadku nieplanowanych napraw/remontów maszyn/urządzeń

Application of computer systems 13 Fig. 4. External contractor operation diagram in case of unexpected maintenance and service of machinery Rys. 4. Schemat postępowania firm zewnętrznych w przypadku nieplanowanych napraw/remontów maszyn/urządzeń

14 W. Biały, G. Bobkowski 4. Using CMMs class systems in maintenance management in coal mines Optimizing maintenance processes and modernizing complex systems, such as power engineering and mechanical systems, need an effective tool to provide a comprehensive support for large projects usually carried out under the conditions of full mining operation. A tool to improve the functioning of the operation management services in a coal mine can be a solution consisting in the implementation of a CMMs-class system, which will cover a full scope of operation management activities. CMMs-class systems provide support for operation processes such as means and operation system maintenance through technical, organizational and economic activities. These systems signal the need to perform preventive maintenance and repair activities, ensure a timely provision of the desired quantity of operational resources (tools, spare parts, consumables, specialist equipment) for the maintenance and repair activities. Also, it is possible to pass messages quickly and by the same token to undertake prompt action in emergency situations, which as a result contributes to the following: optimizing and minimizing the time necessary for maintenance, managing the documentation of the tasks being carried out. When implementing a CMMs system in a coal mine, apart from making a technical assessment of individual systems, the following measures must be taken: the information technology means available in the company such as computer networks, software and databases, computer hardware and operation systems with the technical parameters suitable for CMM systems must be checked, the possibility of integrating the new CMM system with the information technology systems already present in the company (e.g. accountancy, pay, personnel, warehouse management systems etc.) must be considered, the structure of technical information flow in a coal mine at the level of the mine operation management services and their connections with the superior (and external) structures must be determined. Implementing CMM systems in a coal mine should begin with a detailed analysis of the interconnections between the already existing technical facilities directly involved in the mining process and a possibility of a their subsequent adaptation to the entire technical structure of the mine. At the moment the most advanced systems can be used in many branches of the same company often situated in different parts of the world (globally, locally), in several time, language and currency zones etc. Such installations optimize asset management within the whole organization. Regardless of the size of an organization (company) the availability and operation of the income generating assets can be improved. Using management support

Application of computer systems 15 systems can reduce the time and cost of maintenance, guarantee access to the necessary parts and at the same time reduce stocks and improve the deliveries and the organization of outside contracts. IT systems can therefore be used in just one company or in a number of entities, which are for example part of a larger structure such as a group/holding/company. CMM systems can be implemented locally (mining and haulage facilities in a single mine) and globally (managing scattered organizations). This convenient function allows one to centralize or decentralize the place of storing and processing information (data) according to the strategy of the company within one created database. The way how the CMMs tool can be used by means of carrying out uniform works for all the dependent organizations making up one entity (group/holding/company) is shown in fig. 5. The system can be used to define any number of organizations and/or companies and to choose a separate management method at the level of the company, organization or branch for organization and economic issues (account systems, base currency, financial reports) and operational data (subcontractors, taxes, works commissions etc.). Such a solution makes the management of spare parts, human resources and equipment which is part of the company's movable property more efficient. Fig. 5. Global and local strategy of CMMs systems introduction Rys. 5. Globalna i miejscowa strategia wdrażania systemu CMMs

16 W. Biały, G. Bobkowski 5. Directions in the development of CMMs-class computer systems Computer systems supporting the management of machine and device operation and company operation management have changed significantly in recent years (fig. 6). This is the result of the users growing demands and the development of computer technologies both in terms of the efficiency of the hardware but also in terms of the capabilities of operation systems and new working platforms. Both these factors are inseparable and in some sense complementary. The demands of the users present IT technologies with challenges and at the same time new aims can be achieved as these technologies are being developed. The development of IT technologies creates new needs in the users and makes it possible to satisfy those needs. Functionally, the systems supporting technical facilities operation management have developed from simple Computerized Maintenance Management system programs (CMMs) used to put in order the maintenance management in a manufacturing company to complex systems supporting enterprise asset management (EAM) and systems used for strategic asset management (SAM). 3 SAM EAM CMMs Department Coal mine Enterprise Fig. 6. Evolution of systems supporting machinery utilization management and traffic maintenance Rys. 6. Rozwój systemów wspomagających zarządzanie eksploatacją maszyn i urządzeń oraz utrzymaniem ruchu Source: MRO Software Inc, Strategic Asset Management Executive White Paper, 2003 They can be used not only in applications strictly connected with manufacturing. Its functions have been extended to such areas as the following:

Application of computer systems 17 Facility Management, IT infrastructure management, internal and external transport management, supply of parts and materials necessary for maintenance management, outsourcing contracts, etc. At the moment the most advanced systems can be used in many branches of the same company often situated in different parts of the world (multi-site, multi-organization), in several time, language and currency zones etc. The time and cost of maintenance can be reduced by e.g. guaranteeing access to the necessary parts, reducing stocks, improving the deliveries and the organization of outsourcing contracts. The pool of information available in the system, including historical and current data as well as future plans, helps in the asset management during the entire life cycle. The fact that the key equipment elements and exact information regarding what parts and at what time will be necessary can be determined will make it possible to assess the actual cost of maintaining the assets and to find ways of reducing them. Asset management can even be started before the machine/device appears in the organization and before it is used. Thanks to the creation of a virtual catalog of the company's assets (e.g. MAXIMO Illustrated Parts Catalog) according to the description standards adopted in the whole organization (e.g. StruxureTM and Standard Modifier DictionaryTM) the system allows the employees to move around the structure of the assets complete with detailed drawings/diagrams of its elements and to find a particular site, determine the necessary items in need of repair and to find them in the supply chain. Throughout the entire life cycle of the assets in the organization, modern systems to support operation management facilitate the activities connected with planning and scheduling management. The development of the systems is closely connected with the rapid developments in IT. This refers among others to communication techniques and data transmission. Having become common, more functional, reliable and safer in terms of data transmission, network systems (the internet, intranet) not only extended the application of management support systems to the entire organizations but they also allowed for connections between organizations to be created, which can be used to carry out a range of activities such as supply of parts and materials, service contracting etc. The Automatic delivery generates significant savings. Based on the analyses of the Boston Consulting Group, AMR Research estimates that among the largest global companies the reduction of delivery cost may reach as much as 60%. 4 3 MRO Software Inc, Strategic Asset Management Executive White Paper, 2003. 4 Ibidem.

18 W. Biały, G. Bobkowski The development of mobile computers also has a great impact on EAM systems. Instead of a (very often large) collection of paper documents, an employee receives a device which has access to all the tasks he was given and all the necessary information he/she may need to carry them out. The activities are also reported by means of the same device as the works progress, which provides an ongoing supervision of how much of a given task has been completed (progress supervision). Appropriate devices can be chosen from among a wide variety of portable computers for the purpose of achieving the goals. Data transmission to and from a portable device can be carried out in several ways depending on its functional connection with the main system (a docking cradle, an on line connection via a cordless network, a connection via mobile telephone networks, a dial-up connection, an IRDA connection). The development of computer systems used to support the operation management of technical facilities could not be independent of the specific requirements on the side of the users. At first, with a limited functional possibilities of the early systems (usually consisting in merely ordering the maintenance management ), they could be adapted to the needs of the users by making minor modifications. As they developed, the systems had to be specialized. Versions dedicated for the following started to appear: the manufacturing, the technical infrastructure, transport, the IT infrastructure etc. The systems can be used for a wider range of applications thanks to new modules being added to them. The variety of industries, products and requirements made the development of the systems dedicated for the manufacturing sector develop also in various directions. That is why systems for the manufacturing, oil, power engineering (especially nuclear power), pharmaceutical companies, the food industry etc. started to appear. The reason behind all this is to meet the technical and formal requirements characteristic of the particular industry. 6. Summary The constant development of technology makes machines/devices ever more reliable. There are still situations, however, when machines/devices must be repaired. A failure of a machine and a long time one has to wait until it is repaired frequently causes great losses for the user. This is particularly true for enterprises which base their activity on using machines, which are very time-consuming or impossible to replace in the

Application of computer systems 19 event of a failure due to the absence of a 'spare' machine/device. Such a situation is often encountered with many machines/devices used in coal mines. A quick repair requires a close co-operation between the user and manufacturer of the machines/devices. Quick access to complete and up-to-date information and the possibility of exchanging them is of essence. In the mining industry the replacement is made more difficult by the fact that there is a geographical distance between the manufacturer and the user of a machine/device. Another factor influencing efficient repairs is an appropriate management of material and human resources on the side of the manufacturer and the possibility of fulfilling the formal requirements (transfer of the necessary information, circulation of the relevant documents). Taking the above into consideration, the use of a system which is both a data collection and a communication platform for efficient information and document exchange and one which supports the management of the resources necessary to carry out the repairs proves all the more desirable. As the management support computer systems develop all the time, the introduction of systems which support strategic asset management also in the case of machine/device manufacturers is inevitable. Computer systems supporting machine/device operation and company operation management have so far been widely used in many industries. Consequently, it seems inevitable that such systems have to be implemented in coal mines. The implementation of a CMMs-class system in coal mines should ensure uninterrupted operation of machines/devices, help reduce the costs thanks to a longer operation time and consequently - prolong their life. The manufacturer of mining machines/devices operates on a large geographical area, in many countries and on different continents. In a situation of a difficult market (which is true for the mining machines/devices market), computer systems have become a significant factor necessary to rationalize activities connected with asset management and bring easily measurable savings. 5 Bibliography 1. Biały W., Bobkowski G.: Awaryjność górniczych systemów technicznych. Zeszyty Naukowe Politechniki Śląskiej, seria: Organizacja i Zarządzanie, z. 22, Wydawnictwo Politechniki Śląskiej. Gliwice 2004. 5 Ibidem.

20 W. Biały, G. Bobkowski 2. Biały W., Bobkowski G.: Możliwości wykorzystania narzędzi komputerowych w gospodarce remontowej kopalń węgla kamiennego. Mechanizacja i Automatyzacja Górnictwa 2005, nr 4 (411). 3. Helebrant F., Jurman J., Fries J.: Maintenance of machines from the point of view of modern functional operation. Ekonomika i Organizacja Przedsiębiorstwa 2005, nr 7. 4. Konderla J., Biały W., Bobkowski G.: Computer maintenance managing systems (CMMs) in mining machinery and equipment exploitation entrance strategy. Mine Planning & Equipment Selection 2006, Turyn. 5. MRO Software Inc, Strategic Asset Management Executive White Paper, 2003. Reviewers: Prof. dr hab. inż. Józef Bendkowski Prof. dr. hab. Jerzy Mika

Dominic S. DEPERSIS Broome Community College State University of New York Alfred LEWIS Alliant International University University of California, San Diego THE RETIREMENT SYSTEM IN THE UNITED STATES AN EXAMINATION OF THE SYSTEMIC DYSFUNCTION AND MACRO CONSEQUENCES Summary. Retirement signifies the transition from a position of active employment to a non-employee status usually triggered by age or other significant life event. The underlying principle of retirement continues to be a necessary event to sustain the American economy. In the post-depression era, the idea of retirement and more recently the idea of encouraging individuals to retire became a popular notion. Benefits from retirement include job openings for younger workers who graduate from college or university or are ready to start a trade or other employment. Recently government and private workers have been enticed into retirement with a myriad of buy-out arrangements. Even when Americans make a good faith effort to save for retirement, it is possible to end up with inadequate resources due to corrupt business practices and investment decisions that do not generate adequate returns. Keywords: Investments, Pension, Private Sector, Retirement SYSTEM EMERYTALNY W STANACH ZJEDNOCZONYCH OCENA DYSFUNKCJI SYSTEMOWYCH ORAZ KONSEKWENCJI GLOBALNYCH Streszczenie. Emerytura oznacza przejście z pozycji aktywnego zatrudnienia do statusu osoby niepracującej zwykle z powodu wieku lub inych istotnych wydarzeń życiowych. Podstawowe zasady przechodzenia na emeryturę w dalszym ciągu są niezbędne dla utrzymania amerykańskiej gospodarki. W okresie pokryzysowym, zachęcanie osób do przejścia na emeryturę stało się popularnym zjawiskiem. Korzyści

22 D.S. DePersis, A. Lewis z przejścia w status emerytalny osób uwzględniają otwarcie rynku pracy dla młodszych pracowników kończących szkoły i uczelnie lub gotowych do podjęcia działalności handlowej lub innego zatrudnienia. W ostatnim czasie pracownicy sektora administracyjnego i prywatnego zachęcani byli do przejścia na emeryturę za pomocą licznych ofert wykupu. Nawet jeśli Amerykanie w dobrej wierze oszczędzają na emerytury, istnieje możliwość, że pozostaną z niewystarczającymi środkami za sprawą praktyk korupcyjnych w biznesie i decyzji inwestycyjnych, które nie przynoszą odpowiednich zwrotów. Słowa kluczowe: inwestycje, wypłata emerytalna, sektor prywatny, przejście na emeryturę 1. Incentives to retire 1 young In 2002 New York State Governor George Pataki signed into law an Early Retirement Incentive Program (ERI) at the urging of the AFL-CIO Pension Task Force. Chapter 69 of the Laws of 2002 allowed eligible members to take advantage of ERIs. The ERI provided New York State employees who were age 55 or more with a minimum of 25 years of service the opportunity to retire with an extra three years of employment credited to the calculation of their pension. 2 For example, an employee with 26 years would have their pension benefits calculated as if they had 29 years of service to the State. The type of ERI offered to state employees was a targeted incentive for employees with seniority to retire. This ERI provided several opportunities such as allowing New York State to reduce its workforce, trim its payroll, and hire new junior level employees where appropriate. Senior employees typically make the most money because of State incremental increases in pay designed to reward longevity. The program also worked well for employees/retirees who chose to partake as well as workers looking for employment, the State Government, and ultimately the taxpayers. These ERI programs have become commonplace in state government and even private sector employment. From a positive perspective, they provide some workers a desired opportunity to retire at a comparatively young age. These workers can embark on another career or entrepreneurial venture or to completely withdraw from the labor market. Public sector ERIs are generally viewed positively in that they cannot usually be forced as a result of due process rights to their position unlike in the private sector where employment is at will. Thus, in some circumstances, usually private enterprise employment, early retirement can be forced, feared, and are often viewed as a threat to a workers livelihood, ability to care for family, assist children with college expenses, etc. 1 www.freedictionary.org/index.php, last verified March 23, 2006.

The retirement system 23 Recently workers at General Motors (GM) are mulling over their options due to the financially stressful times at the manufacturing giant. One news story, states, After 34 years at General Motors Corp. and Delphi Corp., the endgame of Tim Krzeszewski's working life and future retirement comes down to this: Where will he place his bets? Ever since a union steward stopped the sheet metal worker at his Saginaw, Mich., plant this week to deliver details of a sweeping buyout offer, Krzeszewski has been mulling the decision before him, trying to divine its many unknowns. To me, it's like a gambling issue. Are you going to keep the hands that were dealt to you... or throw the cards in and ask for a re-deal and hope you get a better hand, says Krzeszewski, who is 52 and leaning heavily toward taking early retirement. Then you could lose it all. 3 Similar to Mr. Krzeszewski's internal debate, many employees are faced with the question of whether to retire younger than they had planned. The question is important in that many American workers are aware that they have not saved enough for retirement. Majority started saving very late in life and need time to secure a nest egg of retirement funds for their nonworking years. This is why the U.S. Internal Revenue Service (IRS) allows an additional $5000 retirement contribution for those aged 50 years and older. It is estimated that the average net worth of the typical American household is less than $15,000 excluding home equity. A non equity position is reached if automobiles and other possessions are factored out. Additionally less than 25 percent own any stocks, bonds or even a money market account and most are unable to cover monthly operating expenses without a paycheck. Furthermore about fifty percent of the elderly over 65 would live in poverty without their meager Social Security payments. 4 It is estimated by American Consumer Credit Counseling that the total U.S. credit card debt in the first quarter of 2002 was approximately $60 billion. The average credit card interest rate at about 18.9% on the average. 5 Estimates show that approximately half of all credit card holders only pay the minimum each month with a total of 1.2 billion credit and retail cards in North America. 6 Similar to GM workers described earlier, many workers, blue collar or otherwise face a real dilemma. The employers claim they can no longer afford to keep them although the employee has done the same job (developed a skill) over their entire career and in many cases, lack the time, stamina, and/or ability to retrain for or start a new career. There is the additional defacto age barrier of entry for a new profession. Workers at GM and similar firms often earned a substantial income due to longevity and a strong union. These salaries 2 www.nysut.org/legislation/2002earlyretirement.html, last verified March 24, 2006. 3 http://news.moneycentral.msn.com/ticker/article.asp?symbol=us:gm&feed=ap&date=20060324& ID=5595889, last verified March 24, 2006. 4 www.freerepublic.com/forum/a38356912243a.htm, last verified March 20, 2006. 5 http://ask.yahoo.com/20040209.html, last verified March 25, 2006.

24 D.S. DePersis, A. Lewis cannot be replaced by other work which they are qualified to perform. Krzeszewski for example earned yearly wages averaging close to $90,000 including substantial overtime pay. 7 One of the biggest fears of these employees is that they may no longer have health insurance after retirement. We should also not be misled by the syntax chosen. Although programs are often referred to as buyout offer or early retirement incentive they very often do not provide the employee much choice. As Krzeszewski stated, If he stays, Delphi may well try to terminate its pension plan and turn it over to the federal government, resulting in the capping of retirement benefits. The company could in addition eliminate health insurance and has already signaled its intention to sharply reduce hourly wages of workers for those who do not opt for the buyout offer. 8 From a global perspective a recent BBC article reported that the Church of England is also concerned about its employees ability to have enough funds for retirement. 9 2. A new societal problem The generation dubbed Babyboomer those born between 1940 and early 1960s are the first to face this problem on large scale unlike previous generations. Historically, companies provided pension plans for their employees that paid retired employees a percentage of their working income. In other words, companies were obligated to pay a certain pension, regardless of how the stock market performed. These types of plans were sometimes referred to as pension or defined benefit plans. The covenant between corporations and employees is undergoing a fundamental overhaul regarding pensions. Industry Leaders historically would not have considered the option of canceling pension plans due to the notion of corporate responsibility. There was a covenant so to speak between the employer and employee that was bonded by mutual loyalty. Pension and defined benefit plans still exist today, but many are now closed to new employees. Additionally, when finances get tight or it seems a better corporate decision in the minds of current management, many companies feel no sense of loyalty or obligation to deliver what they had for years promised their employees would be available at retirement. 6 Ibidem. 7 http://news.moneycentral.msn.com/ticker/article.asp?symbol=us:gm&feed=ap&date=20060324& ID=5595889, last verified March 24, 2006. 8 Ibidem. 9 http://news.billinge.com/1/hi/business/1310604.stm, last verified March 24, 2006.

The retirement system 25 3. The employer breaks their end of the bargain The headline reads, US Air To Axe Pensions. 10 Feds clear bankrupt airline's proposal to create a new, cheaper pension plan for its pilots. Bankrupt US Airways Group Inc. cleared its last big hurdle in restructuring when the government said it had approved the carrier's proposal to terminate its pilots' pension plan and replace it with a cheaper one. The action by Pension Benefit Guaranty Corp., a federal corporation, clears the way for the No. 7 U.S. airline to receive final bankruptcy court approval. 11 In the late 1990s, a number of business enterprises decided to adopt defined contribution pension plans in order to reduce the expense and the risk of paying set-amount pensions. Granted, the expense and risk for employers has increased dramatically as people have been living longer and the cost of health benefits, especially for retirees because they are older have risen quickly and exponentially. However, there has been other market as well as psychological factors at work. 4. Scandal Enron As the scandal unfolded, Enron's employees lost their jobs and their pensions. Its stockholders lost their shirts. Its accounting firm lost its credibility and its ability to operate as an auditor. About the only ones to walk away from Enron's fall intact were a number of executives who pocketed millions of dollars in compensation despite the company's collapse. 12 The rise of corporate scandals over the past two years, which caused a significant drop in stock prices, also cost New York State's economy $2.9 billion, cut State tax revenues by $1 billion and decreased the State pension fund value by $9 billion according to a report issued today by State Comptroller Alan G. Hevesi. The report noted that corporate scandals cost New York City approximately $260 million in tax revenues, and cost the New York City pension fund almost $7 billion in value. 13 Consider the Corporate Scandal Sheet. 10 www.webprowire.com/summaries/446274.html, last verified March 24, 2006. 11 Ibidem. 12 http://levin.senate.gov/newsroom/release.cfm?id=210071, last verified March 24, 2006. 13 www.osc.state.ny.us/press/releases/aug03/082003.htm, last verified March 24, 2006.

26 D.S. DePersis, A. Lewis 5. The Corporate Scandal Sheet Penelope Patsuris, 08.26.02, 5:30 PM ET NEW YORK With the avalanche of corporate accounting scandals that have rocked the markets recently, it's getting hard to keep track of them all but our Corporate Scandal Sheet does the job. Here we'll follow accounting imbroglios only avoiding insider-trading allegations like those plaguing ImClone, since chronicling every corporate transgression would be impractical and our timeline starts with the Enron debacle. Company Adelphia Communications (otc: ADELA - news - people ) AOL Time Warner (nyse: AOL - news - people ) When Scandal Went Public April 2002 July 2002 Arthur Andersen November 2001 Allegations Founding Rigas family collected $3.1 billion in offbalance-sheet loans backed by Adelphia; overstated results by inflating capital expenses and hiding debt. As the ad market faltered and AOL's purchase of Time Warner loomed, AOL inflated sales by booking barter deals and ads it sold on behalf of others as revenue to keep its growth rate up and seal the deal. AOL also boosted sales via "round-trip" deals with advertisers and suppliers. Investigating Agencies SEC; Pennsylvania and New York federal grand juries SEC; DOJ Shredding documents related to audit client SEC; DOJ Enron after the SEC launched an inquiry into Enron Latest Developments Three Rigas family members and two other ex-executives have been arrested for fraud. The company is suing the entire Rigas family for $1 billion for breach of fiduciary duties, among other things. Company Comment Table 1 Did not return repeated calls for comment. Fears about the inquiry intensified when the DOJ ordered the company to preserve its documents. AOL said it may have overstated revenue by $49 million. New No comment. concerns are afoot that the company may take another goodwill writedown, after it took a $54 billion charge in April. Andersen was convicted of obstruction of justice in June and will cease auditing public firms by Aug. 31. Andersen lost hundreds of clients and has seen massive employee defections. Did not return repeated calls for comment.

The retirement system 27 Bristol-Myers Squibb (nyse: BMY - news - people ) July 2002 CMS Energy (nyse: CMS - news May 2002 - people ) Duke Energy (nyse: DUK - news July 2002 - people ) Dynegy (nyse: DYN - news - people ) May 2002 Inflated its 2001 revenue by $1.5 billion by "channel stuffing," or forcing wholesalers to SEC accept more inventory than they can sell to get it off the manufacturer's books Executing "roundtrip" trades to artificially boost energy trading volume Engaged in 23 "round-trip" trades to boost trading volumes and revenue. Executing "roundtrip" trades to artificially boost energy trading volume and cash flow SEC; CFTC; Houston U.S. attorney's office; U.S. Attorney's Office for the Southern District of New York SEC; CFTC; Houston U.S. attorney's office; Federal Energy Regulatory Commission SEC; CFTC; Houston U.S. attorney's office Efforts to get inventory back to acceptable size will reduce earnings by 61 cents per share through 2003. Appointed Thomas J. Webb, a former Kellogg's CFO, as its new chief financial officer, effective in August. The company says an internal investigation concluded that its roundtrip trades had "no material impact on current or prior" financial periods. con. tab. 1 Bristol will continue to cooperate fully with the SEC. We believe that the accounting treatment of the domestic wholesaler inventory buildup has been completely appropriate. No comment. Although the effect [of these trades] on the company's financial statements was immaterial, we consider improper trades in conflict with the company's policies. To address this we have made changes to our organization, personnel and procedures. Dynegy believes Currently conducting a that it has not re-audit. Standard & executed any Poor's cut its credit rating simultaneous to "junk," and the buy-and-sell company said it expects trades for the to fall as much as $400 purpose of million short of the $1 artificially billion in cash flow it increasing its originally projected for trading volume 2002. or revenue.

28 El Paso (nyse: EP - news - people ) Enron (otc: ENRNQ - news - people ) Global Crossing (otc: GBLXQ - news - people ) May 2002 October 2001 February 2002 Executing "roundtrip" trades to artificially boost energy trading volume Boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships; manipulated the Texas power market; bribed foreign governments to win contracts abroad; manipulated California energy market Engaged in network capacity "swaps" with other carriers to inflate revenue; shredded documents related to accounting practices SEC; Houston U.S. attorney's office Oscar Wyatt, a major shareholder and renowned wildcatter, may be engineering a management shakeup. Ex-Enron executive Michael Kopper pled guilty to two felony DOJ; SEC; charges; acting CEO FERC; various Stephen Cooper said congressional Enron may face $100 committees; billion in claims and Public Utility liabilities; company filed Commission Chapter 11; its auditor of Texas Andersen was convicted of obstruction of justice for destroying Enron documents. DOJ; SEC; various congressional committees Company filed Chapter 11; Hutchison Telecommunications Limited and Singapore Technologies Telemedia will pay $250 million for a 61.5% majority interest in the firm when it emerges from bankruptcy; Congress is examining the role that company's accounting firms played in its bankruptcy. D.S. DePersis, A. Lewis con. tab. 1 There have been no allegations or accusations, only requests for information. The company has confirmed in multiple affidavits that it did not engage in "round-trip" trades to artificially inflate volume or revenue. No comment. No comment.

The retirement system 29 Halliburton (nyse: HAL - news - people ) May 2002 Improperly booked $100 million in annual construction cost overruns before customers agreed to pay for them. SEC Legal watchdog group Judicial Watch filed an accounting fraud lawsuit against Halliburton and its former CEO, Vice President Dick Cheney, among others. con. tab. 1 Halliburton follows the guidelines set by experts, including GAAP (generally accepted accounting principles). Homestore.com (nasdaq: HOMS - news - people ) Kmart (nyse: KM - news - people ) Merck (nyse: MRK - news - people ) Mirant (nyse: MIR - news - people ) January 2002 January 2002 July 2002 July 2002 Inflating sales by booking barter transactions as revenue. Anonymous letters from people claiming to be Kmart employees allege that the company's accounting practices intended to mislead investors about its financial health. Recorded $12.4 billion in consumer-topharmacy copayments that Merck never collected. The company said it may have overstated various assets and liabilities. SEC SEC; House Energy and Commerce Committee; U.S. Attorney for the Eastern District of Michigan None SEC The California State Teachers' Retirement pension fund, which lost $9 million on a Homestore investment, has filed suit against the company. The company, which is in bankruptcy, said the "stewardship review" it promised to complete by Labor Day won't be done until the end of the year. The SEC approved Medco's IPO registration, including its sales accounting. The company has since withdrawn the registration for the IPO, which was expected to raise $1 billion. An internal review revealed errors that may have inflated revenue by $1.1 billion. No comment. Did not return repeated calls for comment. Our accounting practices accurately reflect the results of Medco's business and are in accordance with GAAP. Recognizing retail copayments has no impact on Merck's net income or earnings per share. This is an informal inquiry, and we will cooperate fully with this request for information.

30 D.S. DePersis, A. Lewis Nicor Energy, LLC, a joint venture between Nicor (nyse: GAS - news - people ) and Dynegy (nyse: DYN - news - people ) Peregrine Systems (nasdaq: PRGNE - news - people ) Qwest Communications International (nyse: Q - news - people ) July 2002 May 2002 February 2002 Reliant Energy (nyse: REI - news - May 2002 people ) Independent audit uncovered accounting problems that boosted revenue and underestimated expenses. Overstated $100 million in sales by improperly recognizing revenue from third-party resellers Inflated revenue using network capacity "swaps" and improper accounting for long-term deals. Engaging in "round-trip" trades to boost trading volumes and revenue. None SEC; various congressional committees DOJ; SEC; FBI; Denver U.S. attorney's office SEC; CFTC Nicor restated results to reflect proper accounting in the first half of this year. Said it will restate results dating back to 2000; slashed nearly 50% of its workforce to cut costs; is on its third auditor in three months and has yet to file its 2001 10-K and so, consequently, is in danger of being delisted from the Nasdaq. Qwest admitted that an internal review found that it incorrectly accounted for $1.16 billion in sales. It will restate results for 2000, 2001 and 2002. To raise funds, Qwest says it is selling its phonedirectory unit for $7.05 billion. Recently replaced Chief Financial Officer Steve Naeve with Mark M. Jacobs, a managing director of Goldman Sachs and a Reliant adviser. con. tab. 1 Our focus now is to stabilize this venture and put some certainty to its financial results. The company is evaluating its continued involvement in this venture. We have been and will continue to cooperate with the SEC and the Congressional committee. We are continuing to cooperate fully with the investigations. We're cooperating with the investigations.

The retirement system 31 Tyco (nyse: TYC - news - people ) WorldCom (nasdaq: WCOEQ - news - people ) Xerox (nyse: XRX - news - people ) May 2002 March 2002 June 2000 Ex-CEO L. Dennis Kozlowski indicted for tax evasion. SEC investigating whether the company was Manhattan aware of his district actions, possible attorney; SEC improper use of company funds and related-party transactions, as well as improper merger accounting practices. Overstated cash flow by booking $3.8 billion in operating expenses as capital expenses; gave founder Bernard Ebbers $400 million in off-the-books loans. Falsifying financial results for five years, boosting income by $1.5 billion DOJ; SEC; U.S. Attorney's Office for the Southern District of New York; various congressional committees SEC Said it will not certify its financial results until after an internal investigation is completed. The Bermuda-based company is not required to meet the SEC's Aug. 14 deadline. Investors looking to unseat all board members who served under Kozlowski may launch a proxy fight to do so. con. tab. 1 The company is conducting an internal investigation and we cannot comment on its specifics, but we will file an 8-K on the initial results around Sept. 15. The company stunned the Street when it found another $3.3 billion in improperly booked funds, which will bring its total restatement up to $7.2 billion, and that it WorldCom is may have to take a continuing to goodwill charge of $50 cooperate with billion. Former CFO all ongoing Scott Sullivan and excontroller David Myers investigations. have been arrested and criminally charged, while rumors of Bernie Ebbers' impending indictment persist. Xerox agreed to pay a $10 million and to restate its financials dating back to 1997. We chose to settle with the SEC in April so we can put the matter behind us. We have restated our financials and certified our financials for the new SEC requirements. Editor's Note: The Corporate Scandal Sheet ceased being updated as of September 2002. 14 SEC: Securities and Exchange Commission. CFTC: Commodity Futures Trading Commission. DOJ: U.S. Department of Justice The Scandal Sheet raises a number of important questions. One, such a list has not existed in prior times and secondly, the transgressions are bold, intentional, and calculated. It is hardly believable that there is a lack of accountability amongst a mass of employers, 14 www.forbes.com/2002/07/25/accountingtracker.html, last verified March 24, 2006.

32 D.S. DePersis, A. Lewis managers, and executives. It is also noteworthy that members of Board of Directors operate in such a state of ignorance or incompetence that they allow such gross mismanagement and conduct to take place. It is of course recognized that not all business enterprises are poorly managed. 6. A few spoil it for the rest Of all of the business enterprises in operation in the United States of America the above list represents a small number. But the above small group controlled, influenced and made a huge mark on the economy. Most business enterprises are probably making a good faith effort to serve their customers, employees, and stockholders. The result of the outrageous behavior uncovered in the large scandals and the resulting long-term negative ramification on Americans pensions and the market in general triggered new regulations. New government regulation and oversight is a common response mechanism to an injustice followed by mass public outcry. Compliance with government regulation can be time consuming, onerous, and costly. The Sarbanes-Oxley Act of 2002 was signed into law by President George W. Bush on July 30, 2002. 15 There are two sections of the Act that require CEO/CFO certification of periodic reports filed with the SEC. Pursuant to Section 302 of the Act, the SEC has recently promulgated rules under which CEOs and CFOs must certify annual and quarterly reports filed with the SEC. Section 906 of the Act is self-executing and provides that a company s CEO and CFO must certify that each periodic report containing financial statements filed with the SEC "fully complies" with the reporting requirements of the Securities Exchange Act of 1934 and that the information contained in the periodic report "fairly presents, in all material respects, the financial condition and results of the operations" of the company. Any CEO or CFO who files a certification knowing that the report did not comply or was false is subject to criminal fines and imprisonment. 16 7. Conclusion Given that employees are now aware of the potential danger of relying on the employer in their retirement years, or indeed relying on having their respective job until retirement, the burden has shifted from employer to employee. Some may argue that the market is at work 15 U.S.C.A. 7263. 16 http://ceb.com/newsletterv4/business_law1.htm, last verified March 24, 2006.

The retirement system 33 whereas we live and work in a capitalist society and it is the responsibility of the individual to shoulder the responsibility for the retirement years. Workers certainly should be saving and managing their own alternative retirement accounts in addition to employer pension and the government social security. Numerous investment vehicles such as traditional IRA accounts, ROTH IRA accounts, private banking accounts, bonds, real estate, or commodities are readily available. The problem with the recommendation above is that most employees have no idea about investments or retirement planning; do not even know who to ask or what questions to ask. Other employees are so busy that they do not make time to monitor their pension fund or to learn how to read a financial statement. Further, after recent headline stories about business corruption, can the financial statements be trusted for accuracy and completeness by those who can understand them? Bibliography 1. www.freedictionary.org/index.php, last verified March 23, 2006 2. www.nysut.org/legislation/2002earlyretirement.html, last verified March 24, 2006 3. http://news.moneycentral.msn.com/ticker/article.asp?symbol=us:gm&feed=ap&date =20060324&ID=5595889, last verified March 24, 2006 4. www.freerepublic.com/forum/a38356912243a.htm, last verified March 20, 2006 5. http://ask.yahoo.com/20040209.html, last verified March 25, 2006 6. http://news.moneycentral.msn.com/ticker/article.asp?symbol=us:gm&feed=ap&date =20060324&ID=5595889, last verified March 24, 2006 7. http://news.billinge.com/1/hi/business/1310604.stm, last verified March 24, 2006 8. www.webprowire.com/summaries/446274.html, last verified March 24, 2006 9. http://levin.senate.gov/newsroom/release.cfm?id=210071, last verified March 24, 2006 10. www.osc.state.ny.us/press/releases/aug03/082003.htm, last verified March 24, 2006 11. www.forbes.com/2002/07/25/accountingtracker.html, last verified March 24, 2006 12. U.S.C.A. 7263 13. http://ceb.com/newsletterv4/business_law1.htm, last verified March 24, 2006 Reviewers: Prof. dr hab. inż. Jan Stachowicz Prof. dr hab. Wojciech Dyduch

Agnieszka GRZESIOK Technical University of Silesia Faculty of Organization and Management Institute of Management and Administration THE RIGHT OF OFFSET OF THE VALUE OF PROPERTY LEFT BEYOND THE PRESENT POLISH BORDERS Summary. This article describes one form of the right to compensation for property left beyond the present borders of the Polish State. The issue of compensation for property left by Polish citizens in the territories annexed to the USSR, was intended to be regulated in domestic law, according to a series of socalled republican agreements. The Polish State took upon itself the obligation to compensate persons who were repatriated from the territories beyond the Bug River and had to abandon their property there. On 8 July 2005 the Sejm passed the Act on the realisation of the right to compensation for property left beyond the present borders of the Republic of Poland, which entered into force on 7 October 2005. The right to compensation shall be realized in one of the following forms: offsetting of the value of the property left beyond the present borders of the Polish State against: the sale price of property or the right of perpetual usufruct owned by the State Treasury; the fees for perpetual usufruct of land owned by the State and the sale price of buildings and other premises or dwellings situated thereon; or the fee for transformation of the right of perpetual usufruct into the right of ownership of property, a pecuniary benefit to be paid from the resources of the Compensation Fund. Keywords: Repatriate property, right to compensation, real estate of the State Treasury, right of offset PRAWO ZALICZENIA WARTOŚCI MIENIA ZABUŻAŃSKIEGO Streszczenie. Niniejszy artykuł omawia wybrane aspekty zarządzania nieruchomościami Skarbu Państwa w odniesieniu do osób, które realizują uprawnienie do rekompensaty z tytułu pozostawienia mienia poza obecnymi granicami Państwa Polskiego. Postanowienia umów republikańskich dotyczyły ewakuacji zabużan oraz zasad opisu mienia pozostawionego przez nich poza granicami Polski, nie zawierały jednak szczegółowych postanowień w zakresie

36 A. Grzesiok rekompensat za pozostawione mienie. Prawo to zostało skonkretyzowane w ustawodawstwie krajowym, począwszy od lat czterdziestych po chwilę obecną. Sposób kompensowania był oparty, co do zasady, na jednolitej koncepcji normatywnej możliwości zaliczenia wartości pozostawionego mienia na poczet ceny kupna nieruchomości lub opłat z tytułu dzierżawy, lub użytkowania wieczystego nieruchomości państwowych. Zatem przedmiotem rozważań będą: tzw. prawo zaliczenia, wybrane aspekty wyceny nieruchomości zabużańskich, dokonywanie zbycia tychże nieruchomości oraz charakter prawny prawa zaliczenia. Słowa kluczowe: mienie zabużańskie, prawo do rekompensaty, nieruchomości Skarbu Państwa, prawo zaliczenia 1. Introductory remarks Migrations of the polish population were a result of WWII and the establishment of a new political map of Europe. The conclusion of the War brought about modifications of the territory of the Polish State 1. On 27 July 1944 the Polish Committee of National Liberation (PKWN) signed an agreement with the government of the USSR concerning the Polish- Soviet border, according to which the Curzon line was to become a base line of the frontier with a couple of corrections in favor of Poland. Settlements concerning the population of Polish, Ukrainian, Belarusian, Lithuanian and Jewish nationalities were also a consequence of the new shape of the border 2. From the moment of delimitating the eastern frontier of Poland along the river Bug, the main stream of which was the base the Curzon Line, the former Borderlands understood as the eastern territories of prewar Poland were referred to as areas beyond Bug. As a result, the term property left beyond Bug refers to immovable assets left by repatriates on the 1 Provisions of the August 1939 Ribbentrop Molotov Pact enabled the seizure of Eastern Polish territories by the Red Army, initiated on 17 September 1939. Territories of Western Belarus and Ukraine were incorporated to USSR. C.f. J. Żołyński, Włączenie polskich ziem wschodnich do ZSRR (1939-1940). Problemy ustrojowe i prawne, Acta Universitatis Wratislaviensis Prawo 1994, No CCXXXIII, p. 88 ff.; W. Czapliński, Wybrane problemy prawne związane z paktem Hitler-Stalin, Przegląd Zachodni 1991, No 3, p.73 ff.; P. Łaski, Refleksje na temat żądań odszkodowawczej zabużan z tytułu utraty mienia na Kresach Wschodnich w świetle prawa międzynarodowego i prawa polskiego, Ruch Prawniczy, Ekonomiczny i Socjologiczny 2002, v. 2, p. 41. 2 These were settlements from 9 September 1944 r. between PKWN and the government of BSSR (Belarussian Soviet Republic) concerning evacuation of Polish citizens from the territory of B.S.S.R. and Belarussian population from the territory of Poland, and the government of USSR (Ukrainian Soviet Republic) concerning evacuation of Polish citizens from U.S.S.R. and the Ukrainian population from the territory of Poland; as well as the settlement from 22 September 1944 with the government of LSSR (Lithuanian Soviet Republic), concerning the evacuation of Polish citizens from L.S.S.R. and the Lithuanian population from the territory of Poland, and the agreements from 6 July 1945 between TRJN (Polish Temporary Government of National Unity) and the government of USSR on the right to change Soviet citizenship of persons of Polish and Jewish nationality resident in WSSR into Polish and their evacuation to Poland, and on the right to change Polish citizenship into Soviet of persons of Russian, Belarussian, Ukrainian and Lithuanian nationalities resident in Poland and their evacuation to the USSR.

The right of offset of the value 37 territory of the Belarusian SSR, Lithuanian SSR and Ukrainian SSR after WWII as a result of the modification of borders of the Republic of Poland 3. The invoked republican agreements obliged the Polish state to create a mechanism of compensation for persons displaced to the territory of Poland within its new borders. The compensations provided for in the agreements were justified by the necessity to enable relatively normal existence to the displaced Polish citizens together with their families, once these people declared their attachment to the Polish nation, which decision was expressed in the willingness to move onto the territory of the Polish State. The value of the compensation was to be determined by the insurance value of immovable assets left behind the new border, calculated in Polish Zlotys (PLN) for the period before 1 September 1939. Initially questions concerning the offset rights were regulated incidentally, while enacting on other issues, such as awarding farming properties or managing municipal and settlement areas, later they were included in laws concerning the administration of immovable property. The authorities strived to organize a new place of residence and job vacancies for the repatriates, possibly similar to the ones left behind. As a consequence peasants were assigned to developed agricultural properties, while city dwellers received property in the form of a flat. Then, the promised compensation took the shape of settlement of the sale price for the property or fees for perpetual usufruct. An offset took place according to the size of the acquired property, whether farming or not, as a part of sales transaction of particular assets. 4 Both the Act of 12 December 2003 on setting off the value of the property left beyond the present borders of the Polish State against the sale price of property or the right of perpetual usufruct held by the State Treasury, 5 as well as the currently binding Act of 8 July 2005 r. on the realization of the right to compensation for property left beyond the present borders of the Republic of Poland 6 provide a complete regulation of the question of compensations. This is a consequence of heavy criticism prompted by the previous fragmented enactments, and the 3 Under the impact of the USSR from the Teheran Conference (28 November - 1 December 1943) the allies concordance grew when it comes to acceptance of Polish territorial expansion in the west of the country as compensation for Polish eastern territories annexed by the USSR. The line of the eastern border was later confirmed in Yalta (4-11 February 1945). C.f. S. Ciesielski, Przesiedlenia ludności polskiej z Kresów Wschodnich do Polski 1944-1947, Warszawa 1999, p.14. 4 C.f. R. Trzaskowski (in:) Sadomski J., Trzaskowski R., Zaradkiewicz K.: Mienie zabużańskie jako otwarta kwestia majątkowa w prawie polskim, Warszawa 2002, p. 60; G. Bieniek, Mienie zabużańskie (in:) Nieruchomości. Problematyka prawna (ed.) G. Bieniek, S. Rudnicki, Warszawa 2006, p.150 ff.; A. Grzesiok, Rekompensaty za mienie zabużańskie, część I. Nieruchomość, 2006, v.2, p.15 ff., G. Bieniek (in:) Komentarz do ustawy o gospodarce nieruchomościami, Zielona Góra 2000, p. 375; J. Szachułowicz (in:) Gospodarka nieruchomościami, Warszawa 2005, p. 513; J. Siegień, Ustawa o gospodarce nieruchomościami. Komentarz. Jaktorów 1999, p. 352; M. Wolanin, Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 1998, p. 361; S. Kolanowski, A. Kolarski, Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 1998, p. 294 ff.; J. Wołasiewicz, Analiza prawnohistoryczna uprawnień zabużańskich, Biuletyn Biura Informacji Rady Europy 2002, v.3, p.28. 5 DzU (Journal of Acts) 2004, No. 6, pos. 39. 6 DzU 2005, No. 169, pos. 1418 later amended.

38 A. Grzesiok will to satisfy definitely the claims of persons who left immovable assets behind the contemporary state borders, reducing at the same time the value of the compensation. The 2003 Act introduced for the first time an arbitrary reduction of the equivalent value to 15% of the abandoned property. The currently binding 2005 Act provides for a compensation which amounts to 20% of the value of immovable assets left behind the border. The compensation may assume the form of either a payment of money or the right of offset the latter being the subject of this paper. According to the Act, also people who evaded evacuation or displacement, and as a result did not undergo the evacuation procedure, are entitled to receive the compensation. Moreover, the Act of 8 September 2006 amending the Act on the realization of the right to compensation for property left beyond the present borders of the Republic of Poland and certain other Acts 7 broadened the scope of the entitled persons, granting the right of compensation to people who left property behind the contemporary border of the Republic of Poland in accordance with the agreement between the Republic of Poland and the Union of Soviet Socialist Republics on the modification of the border between the two states from 15 February 1951. 8 The requirements that a person entitled to compensation for the property left abroad has to meet are: Polish citizenship on the starting date of the War, residence in the Borderland and the fact of abandoning these areas as a result of War, as well as current Polish citizenship 9. The data of the Ministry of Treasury show that presently there are over 100,000 of persons entitled to compensation, and the average value of compensation amounts to PLN 42,000. 2. Realisation of the right of offset As far as the offset right is concerned the Act currently in force provides for the possibility to set off the value of the abandoned real property against the sale price of a property owned by the State Treasury, or against the price for acquiring the right of perpetual usufruct of immovable assets owned by the State Treasury, as well as against the initial and 7 DzU No. 195, pos. 1437. 8 C.f. H. Kaśnikowska, Opinia do ustawy z dnia 8 września 2006 r. o zmianie ustawy o realizacji prawa do rekompensaty z tytułu pozostawienia nieruchomości poza obecnymi granicami Rzeczypospolitej Polskiej oraz niektórych innych ustaw, Biuro Legislacyjne Kancelarii Senatu (Legislative Office of Senate Chancellary); K. Zaradkiewicz (in:) Mienie zabużańskie.., p. 16. 9 C.f. R. Sztyk, Realizacja prawa do rekompensaty za nieruchomości pozostawione poza obecnymi granicami Rzeczypospolitej Polskiej, Rejent 2006, No. 3, p. 49; M. Wolanin, Mienie zabużańskie nowe regulacje prawne, Nieruchomości. C.H. Beck, 2006, No. 4, p. 6; S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, p. 34; G. Bieniek, Mienie zabużańskie, op. cit., p. 179.

The right of offset of the value 39 subsequent fees for the right of perpetual usufruct of a land property and the sale price of buildings and other constructions or premises situated on this land. Most basically, the law in question provides that repatriates are entitled to the setoff of the value of the real estate left behind the border against various types of liabilities that these persons owe to the State Treasury. The liabilities may be the fees for the right of perpetual usufruct or the sale price of building land, as well as the sale price for buildings located on the acquired property, construction or other premises, and the sale price of farming properties owned by the State Treasury. Provisions of the Act award to repatriates the compensation for immovable assets left abroad. The compensation may be expressed in the form of ownership or the right of perpetual usufruct, as well as in the entitlement to acquire these rights. 10 Another way of the realization of the right of offset is the possibility to transform the right of perpetual usufruct already held of a property owned by the State Treasury into ownership of that property without the necessity to pay additional fees arising from the transformation of the title (from the right of perpetual usufruct of the property belonging to the State Treasury into its ownership). This procedure seems justified by the willingness to achieve a comprehensive regulation of the questions concerning property left abroad by repatriates. As opposed to the Act of 4 September 1997 on the transformation of the right of perpetual usufruct held by natural persons into the right of ownership, the entitlement awarded by 2005 Act does not assume the shape of gratuitous transformation 11. The scope of possible realization of the right of offset was additionally broadened by the amendment of the Act of 30 August 1996 on commercialization and privatization. The amendment added art. 53 paragraph 4. Pursuant to the new provision the entitled persons may set off 20% of the value of the abandoned property ascertained by an administrative decision or certificate against a part of the sale price of an enterprise corresponding to the value of rights to immovable property owned by the enterprise specified in the enactments on the 10 C.f. A. Grzesiok, Realizacja uprawnień zabużańskich w aktualnym stanie prawnym, Zeszyty Prawnicze Wyższej Szkoły Ekonomii i Administracji w Bytomiu, v. 2, Bytom 2006, p. 51 ff., S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, op. cit., p. 36; M. Wolanin, Mienie zabużańskie - nowe regulacje prawne, Nieruchomości. C.H. Beck, 2006, No. 4, p. 9 ff.; R. Sztyk, Realizacja prawa do rekompensaty za nieruchomości pozostawione poza obecnymi granicami Rzeczypospolitej Polskiej, Rejent 2006, No. 3, p. 51 ff. 11 Such a gratuitous entitlement is owed only to persons who were awarded the right of perpetual usufruct of a property in exchange for expropriation in favor of the State Treasury before 5 December 1990, as well as persons expropriated pursuant to the decree on Warsaw land. C.f. A. Cisek, J. Kremis, Ustawa o przekształceniu prawa użytkowania wieczystego, op. cit., p. 48 ff.; A. Cisek (in:) System Prawa Prywatnego, Prawo rzeczowe, Vol. 4, ed. E. Gniewek, 2004, p. 182 ff.; B. Burian, Pierwszeństwo nabycia nieruchomości, Zakamycze, 2004, p. 44; S. Jarosz-Żukowska, Konstytucyjna zasada ochrony własności, Zakamycze, 2003, p. 154; M. Wolanin, Przekształcenie prawa użytkowania wieczystego we własność, Zielona Góra 2001, p. 97; G. Bieniek (in:) Bieniek G., Hopfer A., Marmaj Z., Mzyk E., Źróbek R.: Komentarz do ustawy o gospodarce nieruchomościami, Zielona Góra 2000, p. 374.

40 A. Grzesiok realization of the right to compensation for property left beyond the present borders of the Republic of Poland. The confirmed value of compensation may also be set off against a part of the sale price or fees for perpetual usufruct of immovable assets sold as property which does not constitute a component of the enterprise, taken over by the State Treasury after the expiry or termination of a contract for awarding the property to the enterprise for nongratuitous use. The value of immovable property left beyond the contemporary borders of Poland is set off against the price to the amount of 20% of the value of the real estate after a valorization; the setoff takes place in the procedure of acquisition of the property by entitled persons. 12 The alienation of the assets is administered by authorities and entities entrusted with the task of exercising ownership rights in relation to immovable assets of the State Treasury. Among these we may enumerate the Military Housing Agency, Military Property Agency and Agricultural Property Agency, as well as starosts and mayors of cities of the poviat status. Entities administering the assets of the State Treasury in the course of their sales must not refuse to accept the payment of price of the sold property as the realization of the right to compensation in the form of offset of the value of the property left beyond the contemporary borders of the Republic of Poland against the sale price 13. As accepted in practice of tender organization, the tender announcement includes additionally information concerning the possibilities of participation in the proceedings of persons entitled pursuant to the 2005 Act. The note informs such offerors about exemption from the obligation of submitting vadium to the amount which does not exceed the value of the ascertained right to compensation. The amount should be determined in a decision of a Voivode issued in compliance with the Act or in a proper note of the Voivode made in the decision or certificate issued in compliance with separate enactments. 14 12 C.f. M. Wolanin, Mienie zabużańskie, op. cit., p. 10; R. Sztyk, Realizacja prawa do rekompensaty, op. cit., p. 51; S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, op. cit., p. 36; G. Bieniek, Mienie zabużańskie, op. cit., p. 181 i nast. 13 C.f. M. Wolanin, Mienie zabużańskie, op. cit., p. 10; S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, op. cit., p. 37; R. Sztyk, Realizacja prawa do rekompensaty, op. cit., p. 47. 14 The offset rights were provided in: art. 16 of the decree of 6 September 1944 on agricultural reform, art. 18 1 pt. 4 of the decree of 6 September 1946 on organization of agriculture and settlement on Western Territories and the former Free City of Gdańsk, art. 9 of the decree of 6 December 1946 on the transfer by the State of non-agricultural immovable property on Western Territories and the former Free City of Gdańsk art. 14 of the decree of 10 December 1952 on the cession on the part of the State of non-agricultural immovable property for housing purposes and individual construction of detached houses, art. 8 of the Act of 28 May 1957 on the sale by the state of housing premises and building land, art. 21 of the Act of 12 March 1958 on the sale of state owned agricultural immovable property and settlement of certain matters connected with agricultural reform and agricultural settlement of persons, art. 17 of the Act of 14 July 1961 on the administration of terrain in cities and settlements, art. 88 (81) of the Act of 29 April 1985 on the management of land and immovable property expropriation, art. 212 of the Act of 21 August 1997 on the administration of real estate.

The right of offset of the value 41 As regards persons who have already realized their entitlement in part after the date when the decision was issued the exemption from the obligation to submit vadium concerns only the remaining value of the setoff right, the remaining part of the compensation limit stated in the decision. The exemption is connected with the necessity to submit to the president of the tender commission a written declaration to pay an amount equal to the value of the vadium (which would be submitted otherwise) should the offeror abstain from entering into the contract. The declaration should be submitted along with the original decision or certificate ascertaining the right to compensation in the form of offset of the value of the abandoned property against the sale price. In the case of accession to the tendering by legal heirs it is necessary to present a court decision ascertaining the acquisition of inheritance or dividing the inheritance. Where the entitled person is exempted from the duty to submit vadium up to the value corresponding to the worth of property left beyond the border, he shall be admitted as a participant if he pays the remaining part on general terms. As far as acquisition of immovable property is concerned the provisions of the Act on the administration of real estate 15 concerning the determination of ways and periods of use and development of land properties are not applied. Similarly non-applicable are the provisions regarding rebates of the determined sale price of immovable assets and the obligation of their return in case of a further sale, as well as norms concerning the municipality s right of preemption in case of such sale. 16 The amount of compensation assuming the shape of the sum corresponding to the value of the immovable property left beyond the borders of the Republic of Poland possible to set off against the sale price is calculated in the process of multiplication of the valorized value of the abandoned property by 0,2. The situation should be considered where the sale price of a property owned by the State Treasury is lower than the determined value of compensation. In such cases the realization of the right of offset would not be possible in a single transaction. As a result, the total sale price is going to be settled by means of exercising the offset right, and the remaining part of the compensation due may only be availed of while purchasing another immovable property of the State Treasury. In the light of currently binding enactments it does not seem acceptable to set off only a part of compensation against the sale price of a particular property owned by the State Treasury, leaving at the same time the rest of the awarded entitlement for further setoff. 15 Act of 21 August 1997 on the administration of real estate (Dz. U. 2004, No 261, pos. 2603 later amended). 16 C.f. M. Wolanin, Mienie zabużańskie..., op. cit., p. 10; R. Sztyk, Realizacja prawa do rekompensaty, op. cit., p. 48; S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, op. cit., p. 36; G. Bieniek, Mienie zabużańskie, op. cit., p. 182.

42 A. Grzesiok An notation concerning the consumption of the total or a part of the right to compensation prevents the possibility of the use of the same document for a couple of times. The notation is made on the original certificate or decision concerning the selected form of the right to compensation. The note includes the date, name, surname of the public notary and the reference symbol of the notarial deed of sale of the property or granting the property as perpetual usufruct, where such a form of realization of the offset right was chosen, and the amount corresponding to the realized right to compensation and its percentage in relation to the value of immovable property left beyond the present borders of the Republic of Poland. In case of doubt concerning the content of the notation included in the certificate or decision the entity responsible for the sale of the particular immovable property may call the entitled person to submit documents ascertaining the value of the acquired assets. 17 In practice it may happen that a couple of private persons tender for a single immovable property of the State Treasury as one offeror, willing to acquire the property as co-owners. In order to exempt such an offeror from the duty to submit vadium up to the value of the confirmed right to compensation, taking into account the lowest of amounts specified in the submitted documents, it is necessary that all the persons intending to acquire the property should be entitled to compensation. A contrario, one may conclude that the offeror is obliged to submit the full sum of vadium in order to be admitted to tender proceedings should one of such jointly acting persons not be entitled to compensation. Similarly there are no restrictions concerning the sale of the property to a number of private persons as co-owners, where the transaction of sale is a single realization of the entitlements of a number of vendees within the frames provided by the Act, that is up to 20% of the value of the abandoned property. Hypothetically a situation may occur in which the person applying for the realization of the offset right happens to be the heir of the owner of the property, specified in the decision along with other person as entitled to compensation. It shall be possible to realize the entitlement only jointly, in relation to all specified persons. It is necessary that they join the tender personally or through agents and submit originals of the decisions or certificates ascertaining their rights of compensation for the immovable property left beyond the borders. Heirs may be exempted from the duty to submit vadium only if they can evidence their Polish citizenship and submit the decision confirming the acquisition of inheritance or its division, as well as the declaration of the remaining heirs in the form of a deed with signatures affirmed by a notary or public authority, possibly a Polish Consulate, appointing the heir as the person entitled to the right of offset. For obvious reason this requirement does 17 C.f. R. Sztyk, Realizacja prawa do rekompensaty, op. cit., p. 52; M. Wolanin, Mienie zabużańskie, op. cit., p. 10; S. Kolanowski, Kresy Wschodnie, op. cit., p. 36.

The right of offset of the value 43 not need to be met in the situation where the person joining the tender is the sole heir of the person specified in the decision or certificate ascertaining the right to compensation. The Act provides for the possibility to apply for the ascertainment and implementation of the offset right also to those entitled persons who have already realized partly or in whole in accordance with previously binding provisions their right to an equivalent, the so called complementary setoff. The realization may amount up to 20% of the value of property left beyond the present Polish borders, in compliance with the general rule specified in the Act. This solution is a continuation of the interpretation found in a body of jurisdiction concerning the complementary offset provided in art. 88 of the Act, which norm has been later expressed in art. 212 paragraph 2 of the Act on the administration of immovable property. 18 As a result of previous consumption of the right to compensation by acquisition of a property or the right of its perpetual usufruct, the sum possible to set off against the value of the abandoned property becomes diminished by the value of the acquired ownership or the right of perpetual usufruct of the land property and buildings situated on that property and other installations or premises by entitled persons as well as their legal predecessors. 19 In this situation the entity selling the property of the previously set off property is going to determine by himself the amount of compensation valid on the date of the realization of the right, which day is always the date specified in the notarial deed of the contract of sale of the property on the basis of information regarding the value of abandoned properties included in the decision of a Voivode. When it comes to decisions or certificates in which the Voivode only specifies the information regarding the value of compensation determined for the date of making the notation it is going to be necessary, after the tender proceedings and before the conclusion of contract, for the entity alienating property to apply to the Voivode so that the latter could appoint the valorized values for the date of notation which may serve as a base for determining the due amount of compensation. The value of compensation remaining for further realization is determined by multiplying the valorized value of the abandoned immovable property by 0.2, and diminishing the result by the valorized value of the rights acquired before the date of issuing the decision and after that day. Proper notation should be placed on the ascertainment or decision on the day of the realization of the right to compensation. One of the assumptions of the majority of laws concerning the right of offset was the necessary activeness of the interested repatriates and their rightful legal successors, manifest in their participation in tenders in which properties owned by the State Treasury were sold. The size of this paper does not allow to point to instances of exclusion of the possibility to set 18 G. Bieniek, Komentarz do ustawy o gospodarce nieruchomościami.., op. cit., p. 374; J. Szachułowicz, Gospodarka nieruchomościami, op. cit., p. 512 i nast.; J. Siegień, Gospodarka nieruchomościami, op. cit., p. 348; S. Kolanowski, A. Kolarski, Ustawa o gospodarce nieruchomościami, op. cit., p. 293.

44 A. Grzesiok off the value of property left beyond the borders of the Republic of Poland against the sale price of a property or fees arising from perpetual usufruct. Such examples could show that the legal construction expressed in the provisions of substantive law may be negated by defectively framed rules which implement substantive entitlements. However, it should be added in this place that the restrictions excluding considerable parts of assets from the compensatory procedure have paralyzed the possibility of the beneficiaries of repatriate entitlements to obtain financial support 20. Moreover, the Agency of Agricultural Property often refused to conclude contracts with entitled repatriates, which entails legal actions aimed at obliging the Agency to make a proper declaration of will regarding the transfer of ownership of an agricultural property where the value of immovable assets left beyond the borders of the Polish State was set off against the sale price. 21 The Supreme Court has pointed in its judgments that it is not in a position to deny repatriates the right to set off the value of the property left beyond the post-war borders of Poland against the value of the assets acquired in public tenders, stating at the same time that binding provisions of law were violated by the Agency and ordering the Agency to conclude contracts of sale with the exercise of the offset right of the immovable properties left beyond Polish borders. The construction contained in the provisions specified above demonstrates that the contractor is obliged to accept the declaration of the entitled person concerning the right of setoff of the abandoned property, correlated with the claim of the entitled person. Should the duty not be fulfilled by entities managing the assets of the State Treasury, the entitled person may sue the particular unit of the Treasury for the implementation of the obligation with the results provided in arts. 64 CC and 1047 of the Code of Civil Procedure. As a result the Agency has to make the declaration of will expressing consent to amortize the price or accept payment by setting off the value of the abandoned property. 22 19 C.f. R. Sztyk, Realizacja prawa, op. cit., s. 51; M. Wolanin, Mienie zabużańskie, op. cit., p. 10. 20 E.g. The amendment of the Act on the administration of agricultural immovable properties of the State Treasury from 29 December 1993, art. 89 of the Act on the accommodation of the Armed Forces of the Republic of Poland, Acts on the management of certain components of the assets of the State Treasury and on the Military Property Agency. As regards the so called factual expropriation c.f. S. Jarosz-Żukowska, Konstytucyjna ochrona, ; eadem, Spory wokół pojęcia wywłaszczenia, Państwo i Prawo 2001, v. 1, p. 18; B. Załęska-Świątkiewicz, Mienie zabużańskie - rekompensaty w aktualnym stanie prawnym, Rejent 1998, No. 6, p. 176; R. Trzaskowski (w:) Mienie zabużańskie, p. 93; J. Szachułowicz, Zasady i organizacja reprywatyzacji, op. cit., p. 33; R. Pessel, Rekompensowanie skutków naruszeń prawa własności, Warszawa 2003, p. 72; M. Masternak-Kubiak, Glosa do wyroku z 19 grudnia 2002 r., K 33/02, Państwo i Prawo 2003, v. 6, p. 119 ff.; 21 C.f. the judgement of the Court of Appeal in Białystok, 18 March 2004, ref. I Ca 89/04, Orzecznictwo Sądów Apelacyjnych 2005, No. 1, p. 41 ff. 22 Resolution of the Supreme Court dated 20 April 2006 (III CZP 25/06, Orzecznictwo Sądu Najwyższego Izba Cywilna 2007, No 2, pos.26) concerned the obligation to make a declaration of will of sale of an agricultural property with the exercise of the right to set off the value of property left Beyond the borders of contemporary Poland against the sale price, tha case was brought against the Agency of Agricultural Property by a person applying for the acquisition of the agricultural property who won the tender when art. 212 of the

The right of offset of the value 45 It is also worth mentioning at this point that the sale of immovable property performed as realization of the right to compensation has been exempted from the tax on civil law transactions up to the amount corresponding to the value of the realized entitlement. 23 With the view to assuring clarity of the regulation concerning compensations for the property left beyond the contemporary borders of Poland, a number of de lege ferenda remarks may be formulated. The currently binding Act should contain clear references to laws regulating the stages of the implementation of the right to compensation. This could allow already from the normative perspective to legibly point to the ways in which the realization of the right to set of the value of property left beyond the borders takes place. From the theoretical point of view, it might seem advisable to transfer all rules governing the right of offset to a single statute. However, the analysis of such a radical resolution demonstrates that the proposed solution could evoke unnecessary confusion. In the light of the above, it seems more appropriate to aim for the complementation of the currently binding laws in the suggested way. 3. Legal status of the right of offset A fully uniform concept of the legal character of repatriate rights has not been elaborated. The material and hereditable character of the right of offset is undisputed. So is the conviction that the content of the entitlements of the repatriates is neither the possibility to claim directly adequate compensation from the State Treasury nor the demand to conclude the contract of sale of a property or award it for perpetual usufruct. There is, however, certain dispute concerning the character of the right and claim of setoff and the resulting receivable. The question is whether these are private or public law entitlements. 24 The right of offset was also an object of interest of the European Court of Human Rights. In the case Broniowski v Poland representatives of the government tried to prove that no civil law obligation arises until the decision is issued by a proper authority concerning the setoff of the value of repatriates assets. Only decisions of this type award the entitlement to repatriates and determines the content of this entitlement. In this view, the right is not correlated with the corresponding duty of the state authority to sell a property owned by the Act on the administration of real estate was binding in the shape achieved as a result of the judgment of the Constitutional Tribunal from 19 December 2002. 23 This happened by the inclusion of pt. 15 in art. 9 of the Act of 9 September 2000 on the tax on civil law transactions (DzU 2005, No. 41, pos. 399 later amended). 24 C.f. R. Trzaskowski, Mienie zabużańskie, op. cit.,, s. 77, tegoż, Charakter prawny możliwości zaliczenia wartości pozostawionego mienia zabużańskiego (art. 212 ustawy o gospodarce nieruchomościami), Przegląd Sądowy 2003, z. 11-12, s. 12.

46 A. Grzesiok State Treasury. On the other hand, the complainant contended that the possibility of offset itself creates expectative rights to acquire the ownership right without a pecuniary payment, which accounts for the civil right status of the claim. 25 In the relevant judgment from 22 June 2004 the Court decided as to the effects of the right of offset, not its character. In the light of the provisions of the 2005 Act the right to set off the value of the abandoned immovable property is classified as a public material right which carries out a special function of remitting specific pecuniary obligations. Such a qualification entails the necessity to cover the right with further guarantees, e.g. art. 1 of the Additional Protocol 1 to the 1950 Convention for the Protection of Human Rights and Fundamental and the protection provided in art. 64 paragraph 2 of the Constitution. 26 Opinions found in scholarly sources concerning the legal character of repatriate rights are relatively rare but also diversified. 27 The size of this paper does not allow for broader investigations concerning the legal status of the right of offset. Before I present my own views in this respect, it should be signaled that in the light of the currently binding enactments governing the realization of the setoff right the construction may give rise to various readings. The right of setoff itself seems to be a civil law right, entitlement to establish a legal relationship. As a result of the declaration of will of the entitled person a part of the price is remitted. However this is not a remittal realized in the same way as in the civil law construction of set-off in the strict sense, because the remitted amount is the pecuniary receivable analyzed together with the right to compensation. In the classic sense of the term, set-off may be applied where the receivables are of the same kind. Another difference is the lack of exemptions, e.g. concerning garnished receivables in the case of set-off. By the very declaration of exercising the right of offset analyzed from the civil law perspective the entitled person causes a remittal of a part of the price. The application of this construction seems more favorable from the point of view of the repatriate s material interests. In the case of refusal to realize the right of offset the entitled party may sue state authorities for payment. One can also treat the right of offset as a claim, a right to demand that the value of the abandoned immovable property be calculated as a part 25 Z. Cichoń, W. Hermeliński, Sprawa mienia zabużańskiego przed Europejskim Trybunałem Praw Człowieka w Strasburgu..., op. cit., p. 132 ff.; K. Drzewicki, Traktatowe podstawy roszczeń zabużańskich.., op. cit., p. 129; P. Filipek, Sprawa mienia zabużańskiego przed Europejskim Trybunałem Praw Człowieka, Problemy Współczesnego Prawa Międzynarodowego, Europejskiego i Porównawczego, vol. I, A.D.MM III, p. 162 ff. 26 C.f. the Supreme Court resolution from 20 April 2006 (III CZP 25/06) Orzecznictwo Sądu Najwyższego Izba Cywilna 2007, v. 2, pos. 26. 27 C.f. J. Mojak, Gloss to the S.C. resolution from 22 June 1989, III CZP 32/89, Państwo i Prawo 1991, No. 1, p. 118 ff.; J. Wołąsiewicz, Analiza prawnohistoryczna uprawnień zabużańskich, Biuletyn Biura Informacji Rady Europy 2002, v. 3, p. 17 ff.; J. Szachułowicz (in:) Gospodarka nieruchomościami. p. 513; Zalety i wady ustawy o gospodarce nieruchomościami, by the same author, Przegląd Sądowy 1999, v. 3, p. 7; idem, Regulacja rekompensat za mienie pozostawione na terenach nie wchodzących w skład terytorium Polski (in:) Zasady i organizacja reprywatyzacji, op. cit., p. 33 ff.; G. Bieniek, Mienie zabużańskie, op. cit., p. 158 ff.

The right of offset of the value 47 of the sale price or fees for the right of perpetual usufruct. In such a situation the judgment of a court substitutes the declaration of will of the public entity obliged to realize the offset right. 4. Valuation of the abandoned property The assessment of value of the immovable properties left in the East is a difficult task, because it is impossible to inspect the real estate on the date of valuation, namely the date of displacement of departure from the old territories of the Republic of Poland. The value of the assets is assessed according to current market prices, shaped under completely different social and economical circumstances. Based on experiences concerning the application of earlier laws, and for the sake of assuring the comprehensive character of regulation concerning the assessment of abandoned property, the principles of drafting the valuation survey, thus far contained in delegated legislation, were moved to the 2005 Act. The norm of art. 11 of the Act of 8 July 2005 on the realization of the right to compensation for property left beyond the present borders of the Republic of Poland provides an explicit way of assessing the market value of immovable properties left beyond the current borders of Poland. The value of the lost assets is assessed according on the factual and legal condition of the real property on the date of the loss of property, understood as the condition on the day of departure, and prices from the day of the entry into force of the 2005 Act. Since the scope of compensation for the property left beyond the eastern borders was confined to real property only, other assets not classified as immovable do not undergo valuation. Such other assets may be: livestock and dead stock, agricultural machines, reserves, housing equipment or collected building materials. The National Board of the Polish Federation of Valuers Associations passed on 13 April 2007 the National Valuation Standard Specialist 1.1. (KSWS 1.1). The document Valuation of immovable property left beyond current borders of the Republic of Poland for the purpose of realization of the right to compensation was grouped among Standards of valuation for public purposes which replaced the former Standard IV.3 Valuation of immovable property abandoned in the areas not included in the current territory of the Polish state. In the period until 1 March 2008 the newly passed standard was consulted and recommended as a pattern for interpretation. On the aforementioned date KSWS 1.1 gained the status of a binding professional standard. The methods of valuation are defined separately for each of constituent or functional parts of the valuated property. After the calculation of the value of particular components of the property, a table depicting those values should be placed in the valuation survey, and the their

48 A. Grzesiok sum should be multiplied by the repatriate coefficient proper for the particular Voivodeship. The assessment takes into account average prices in at-arm s-length transactions obtained for similar properties, situated in localities of approximately the same number if residents, comparable degree of urbanization and administrative character, as compared to the locality where the property in question is situated. 28 The final value is rounded off to the nearest tens or hundreds of PLN. 29 For the lack of at-arm s-length transaction prices the replacement value of buildings is assessed. The value of immovable assets covered with forest or plantations of perennial plants is assessed as the summed value of the land and standing timber or perennial plants. For of assessing the value of land the method of land evaluation ratings is applied, and for the valuation of trees, fruit and decorative bushes in parks and gardens the applied ones are the methods proper for expropriation, estimating the cost of planting and fostering plants. In the case of fruit plants the value of lost profits until the lapse of harvest period is taken into consideration. Should any problems occur connected with the establishment of similarity, it is necessary to Take into consideration the lapse of time, changes in the building craft and techniques. One element which should be omitted in the valuation process, as far as the catalogue of factors determining similarity is concerned, is the role of social relations before WWII, e.g. prestige. The valuer concentrates on rational and measurable technical and economical criteria. 30 If it is impossible to apply the above methods, the 2005 Act additionally allows for assessment with undefined methods. The society of valuers postulate to apply the method of correcting the average price, or comparison in pairs. At this place the reader may be referred to abundant literature sources in this respect. 31 I shall agree with those who acknowledge the specific character of valuation of former repatriates property. The methods of assessment are characteristic for this type, among other reasons taking into account that the valuated 28 The Voivodeships Lwowskie and Podkarpackie are considered comparable with the use of coefficient 1,00; Tarnopolskie is comparable with Małopolskie (coefficient 0,67) and Podkarpackie (coefficient 0,76); Stanisławowskie Voivodeship with Małopolskie (coefficient 0,74) and Podkarpackie (coefficient 0, 84); Wołyńskie Voivodeship with Lubelskie (coefficient 0,84) and Świętokrzyskie (coefficient 1,02); Poleskie Voivodeship with Podlaskie (coefficient 0, 71); Wileńskie Voivodeship with Podlaskie (coefficient 0,64) and Mazowieckie (coefficient 0,41); Nowogródzkie Voivodeship with Podlaskie (coefficient 0, 80) and Mazowieckie (coefficient 0, 52) Białostockie Voivodeship with Podlaskie (coefficient 1,00); the city of Lvov is comparable with Cracow, (coefficient 1,00) as well as Vilnus with Lublin (coefficient 1,00). 29 C.f. S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, cz. VIII - operat szacunkowy nieruchomości zabużańskiej, Nieruchomości C.H. Beck, 2007, No. 4, p. 32; J. Konowalczuk, Wycena nieruchomości zabużańskich, Nieruchomość 2006, v. 1, p. 12. 30 C.f. S. Kalus (in:) Bieniek G., Kalus S., Marmaj Z., Mzyk E.: Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 2005, p. 463 ff. 31 M. Prystupa, Metody wyceny nieruchomości (in:) E. Mączyńska, M. Prystupa, K. Rygiel, Ile jest warta nieruchomość, Warszawa 2009, p. 137 ff.; the same author, Ile jest warta nieruchomość? Metodologia wycen nieruchomości (in:) M. Prystupa, K. Rygiel, Nieruchomości. Definicje, funkcje i zasady wyceny, Warszawa 2003, p. 113 i ff.

The right of offset of the value 49 property is not subject to market transactions and is supposed to determine a base value for estimating the compensation. What is more, particular parts of the immovable property constituent and functional ones are assessed according to diversified methodic principles. 32 Except the abandoned buildings, the assessed elements are: wells, fences, pond constructions, silos, containers, cellars, cold rooms, as well as trees and bushes in orchards and gardens, unharvested crops and plants on farming land. Hypothetically, the situation should be considered where the abandoned assets encompass a couple of immovable properties situated in various localities. In relation to properties located within one Voivodeship it is assumed that they may be assessed in a single valuation survey. Where the assets are located in two Voivodeships, they should be valuated within two separate surveys. Scholarly writings suggest that it is possible to draft one valuation survey in such a situation, separating at the same time the procedures of assessment applied for particular properties and multiplying the values by different repatriate coefficients. Such a solution seems more favorable for persons applying for compensation, because they do not need to cover the cost of two valuation surveys. 33 The applied method of valuation of the abandoned property is also influenced by the fact that the currently binding 2005 Act provides for the possibility of complementary setoff. As a result the value of the due compensation is diminished by the value of previously consumer rights, understood as the setoff value of immovable properties acquired previously from the State Treasury. In relation to properties acquired before 1 January 1998 the assessment should be performed according to the condition on the day of acquisition and prices or replacement costs on the day of drafting the valuation survey. Where immovable property was acquired after that date, the price becomes valorized. Valuation of the acquired property consists in the assessment of market value or replacement costs, and concerns the right of ownership of a land property, perpetual usufruct of land property, ownership of buildings and other constituent parts of the acquired immovable property and ownership of flats. 34 The modification introduced with the Act of 8 September 2006 on the amendment of the Act on the realization of the right to compensation for property left beyond the present 32 More information In: S. Kolanowski, Kilka uwag na temat stosowania przepisów prawa w wycenie nieruchomości, Nieruchomości C.H. Beck, 2009, No. 1, p. 36 ff. 33 Scholars invoke the analogy to including two different properties in a single land and mortgage register if the properties belong to the same owner and remain functionally connected. C.f. S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, cz. VII Kresy Wschodnie i mienie zabużańskie, cz. VII przystąpienie do wyceny mienia zabużańskiego uwagi praktyczne, Nieruchomości C.H. Beck, 2007, No. 3, p. 33. 34 C.f. S. Kolanowski, Kresy Wschodnie i mienie zabużańskie, cz. VI- zasady określania wartości nieruchomości, Nieruchomości C.H. Beck, 2007, No. 2, p. 37; J. Konowalczuk, Wycena nieruchomości zabużańskich, op. cit., p. 13.

50 A. Grzesiok borders of the Republic of Poland and certain other Acts 35 should be evaluated positively. The amendment concerns the validity of valuation surveys confirming the value of the abandoned properties drafted at the expense of the applicants. As far as the periods of deciding repatriate cases are generally longer, one year period of validity of the valuation surveys considerably impeded the possibilities to apply for compensation for immovable assets left beyond the borders of Poland. 5. Summary The aim of the above investigations was to present selected questions concerning the compensation for assets left beyond the contemporary eastern border of Poland. While assessing the management of immovable properties from the point of view of the so called right of offset it should be emphasized that it is a well consolidated form of realization of the repatriate entitlement. In the first place we should evaluate positively the provision banning entities which administer immovable property owned by the State Treasury from refusing to alienate those immovable assets with the exercise of the offset right of the value of the properties abandoned abroad, under the sanction of invalidity. One may speak of continuity of legislation in that matter. Also the facilitation of the compensation possibilities by means of broadening the set of immovable properties owned by the State Treasury accessible to former repatriates. Another essential facilitation of the possibility to acquire a property owned by the State Treasury in tender proceedings is the exemption of the persons entitled to compensation from the duty to submit vadium up to the value of the compensation right ascertained in a valid administrative decision or certificate. The clarity of the procedures of awarding the compensation for immovable properties left beyond contemporary borders of the Republic of Poland achieved due to a precise separation of the administrative part, regarding the confirmation of the due right to compensation from the civil law part concerning the realization of the right to compensation for immovable property left abroad. A disadvantage of the regulation is the fact that repatriate claims may still be satisfied only from the assets of the State Treasury. Such a solution is a result of the assumption that the statutory measures implemented by the Republic of Poland concerning the compensation 35 H. Kaśnikowska, Opinia do ustawy z dnia 8 września 2006 r. o zmianie ustawy o realizacji prawa do rekompensaty z tytułu pozostawienia nieruchomości poza obecnymi granicami Rzeczypospolitej Polskiej oraz niektórych innych ustaw, Biuro Legislacyjne Kancelarii Senatu (Legislative Office of Senate Chancellary).

The right of offset of the value 51 for the results of the loss of abandoned property should be realized only at the expense of the State Treasury. At this place there is a difference as compared to the processes of reprivatization, where plans are drafted to impose on the units of territorial self-government the duty of partial several-percent participation in the financing of compensations from the Reprivatization Fund, which proposal seems justified for a number of reasons 36. Firstly, the former national property was acquired free of charge by municipalities on special terms provided in the Act of 10 May1990 Provisions introducing the Act on territorial self-government and the Act on self-governmental employees, pursuant to which relevant right and duties were transferred to communal entities. The aforementioned thesis was confirmed by the Supreme Court, 37 which contends that the rights and obligations of the hitherto entities administering state property transferred to municipalities are likewise subject to transfer to relevant municipalities. As a consequence, it should be accepted that the same applied to the duty to compensate for damages inflicted as a result of nationalization. As far as the possibility to avail of communal property for the purpose of re-privatization is concerned, the Constitutional Tribunal consistently allows such measures. 38 The Tribunal justified the necessity of participation of municipalities with the character of rights held by the units of territorial self-government, which enables intervention of the legislator in a broader range than it is the case with entities from outside the scope of public administration. Moreover, municipalities deriving their legal existence from a set of self-government Acts should accept the possibility of restricting material rights vested in them wherever such restrictions are necessary for the sake of ordering the legacy left by the People s Republic of Poland under new constitutional circumstances. The Tribunal argued as well that the general part of municipality assets, especially immovable property comes from the communalization of assets of the State Treasury performed by the legislator s will, and that in consequence communal property is to serve public Policy and realization of public goals. In summary, it should be stated that although provisions of law are far from perfect as far as the compensations for property left beyond the present borders of Poland are concerned, the solutions implemented by the legislator, and consequently the management of real property owned by the State Treasury in this respect, may on the whole be evaluated positively. 36 There are also scholarly papers devoted to the possibility to impose on the units of self-government the duty to participate in financing compensations. C.f. R. Pessel, Rekompensowanie, op.cit., p. 98 ff. The opposite approach is represented by S. Jarosz-Żukowska, Konstytucyjna zasada ochrony, op.cit., p. 288; eadem, Spory wokół pojęcia wywłaszczenia, op. cit., p. 140 ff. 37 C.f. resolution of the Civil Chamber of the Supreme Court dated 8 January 1991, III CZP 70/90,OSNC 1991, v. 7, pos. 81. 38 Decision dated 17 October 1995, K 10/95, OTK 1995, v. 2, pos. 10, datek 9 January 1996; K 18/95, OTK 1996, v. 1, pos. 1; dated 20 November 1996, K 27/95, OTK 1996, v. 6, pos. 50.

52 A. Grzesiok Bibliography 1. Bieniek G. [w:] Bieniek G., Hopfer A., Marmaj Z., Mzyk E., Źróbek R.: Komentarz do ustawy o gospodarce nieruchomościami. Zielona Góra 2000. 2. Bieniek G.: Mienie zabużańskie [w:] Bieniek G., Rudnicki S. (red.): Nieruchomości. Problematyka prawna. Warszawa 2006. 3. Burian B.: Pierwszeństwo nabycia nieruchomości. Zakamycze, Kraków 2004. 4. Ciesielski S.: Przesiedlenia ludności polskiej z Kresów Wschodnich do Polski 1944-1947. Neriton, Warszawa 1999. 5. Cisek A. [w:] Gniewek E.: System Prawa Prywatnego. Prawo rzeczowe. Tom 4, 2004. 6. Czapliński W.: Wybrane problemy prawne związane z paktem Hitler Stalin. Przegląd Zachodni 1991, nr 3. 7. DzU 2004, Nr 6, poz. 39. 8. DzU 2005, Nr 169, poz. 1418 ze zm. 9. DzU 2005, Nr 41, poz. 399 z późn. zm. 10. DzU, Nr 195, poz. 1437. 11. Filipek P.: Sprawa mienia zabużańskiego przed Europejskim Trybunałem Praw Człowieka, Problemy Współczesnego Prawa Międzynarodowego, Europejskiego i Porównawczego. Vol. I, 2003. 12. Grzesiok A.: Realizacja uprawnień zabużańskich w aktualnym stanie prawnym. Zeszyty Prawnicze Wyższej Szkoły Ekonomii i Administracji w Bytomiu, z. 2, Bytom 2006. 13. Grzesiok A.: Rekompensaty za mienie zabużańskie, część I. Nieruchomość 2006, z. 2. 14. Jarosz-Żukowska S.: Konstytucyjna zasada ochrony własności. Zakamycze, Kraków 2003. 15. K 18/95, OTK 1996, z. 1, poz. 1; z dnia 20 listopada 1996 r., K 27/95, OTK 1996, z. 6, poz. 50. 16. Kalus S.: [w:] Bieniek G., Kalus S., Marmaj Z., Mzyk E.: Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 2005. 17. Kaśnikowska H.: Opinia do ustawy z dnia 8 września 2006 r. o zmianie ustawy o realizacji prawa do rekompensaty z tytułu pozostawienia nieruchomości poza obecnymi granicami Rzeczypospolitej Polskiej oraz niektórych innych ustaw, Biuro Legislacyjne Kancelarii Senatu. 18. Kolanowski S., Kolarski A.: Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 1998. 19. Kolanowski S.: Kilka uwag na temat stosowania przepisów prawa w wycenie nieruchomości. Nieruchomości. C.H. Beck, 2009, nr 1.

The right of offset of the value 53 20. Kolanowski S.: Kresy Wschodnie i mienie zabużańskie. Cz. VI zasady określania wartości nieruchomości. Nieruchomości. C.H. Beck, 2007 nr 2. 21. Kolanowski S.: Kresy Wschodnie i mienie zabużańskie. Cz. VII Kresy Wschodnie i mienie zabużańskie, cz. VII przystąpienie do wyceny mienia zabużańskiego uwagi praktyczne. Nieruchomości. C.H. Beck, 2007. 22. Kolanowski S.: Kresy Wschodnie i mienie zabużańskie. Cz. VIII operat szacunkowy nieruchomości zabużańskiej. Nieruchomości. C.H. Beck, 2007, nr 4. 23. Konowalczuk J.: Wycena nieruchomości zabużańskich. Nieruchomość 2006, z. 1. 24. Łaski P.: Refleksje na temat żądań odszkodowawczych zabużan z tytułu utraty mienia na Kresach Wschodnich w świetle prawa międzynarodowego i prawa polskiego. Ruch Prawniczy, Ekonomiczny i Socjologiczny 2002, z. 2. 25. Masternak-Kubiak M.: Glosa do wyroku z 19 grudnia 2002 r., K 33/02. Państwo i Prawo 2003. 26. Mojak J.: Glosa do uchwały SN z 22 czerwca 1989 r., III CZP 32/89. Państwo i Prawo 1991, nr 1, 27. Orzeczenie z dnia 17 października 1995 r., K 10/95, OTK 1995, z. 2, poz. 10, z dnia 9 stycznia 1996 r. 28. Pessel R.: Rekompensowanie skutków naruszeń prawa własności. Warszawa 2003. 29. Prystupa M.: Ile jest warta nieruchomość? Metodologia wycen nieruchomości [w:] Prystupa M., Rygiel K.: Nieruchomości. Definicje, funkcje i zasady wyceny. Warszawa 2003. 30. Prystupa M.: Metody wyceny nieruchomości [w:] Mączyńska E., Prystupa M., Rygiel K.: Ile jest warta nieruchomość? Warszawa 2009. 31. Siegień J.: Ustawa o gospodarce nieruchomościami. Komentarz. Jaktorów 1999. 32. Szachułowicz J. [w:] Gospodarka nieruchomościami. Warszawa 2005. 33. Szachułowicz J. Zalety i wady ustawy o gospodarce nieruchomościami. Przegląd Sądowy 1999, z. 3. 34. Sztyk R.: Realizacja prawa do rekompensaty za nieruchomości pozostawione poza obecnymi granicami Rzeczypospolitej Polskiej. Rejent 2006, nr 3. 35. Trzaskowski R. [w:] Sadomski J., Trzaskowski R., Zaradkiewicz K.: Mienie zabużańskie jako otwarta kwestia majątkowa w prawie polskim, Warszawa 2002. 36. Trzaskowski R.: Charakter prawny możliwości zaliczenia wartości pozostawionego mienia zabużańskiego (art. 212 ustawy o gospodarce nieruchomościami). Przegląd Sądowy 2003, z. 11-12. 37. Uchwała Izby Cywilnej z dnia 8 stycznia 1991 r., III CZP 70/90,OSNC 1991, z. 7, poz. 81.

54 A. Grzesiok 38. Uchwała Sądu Najwyższego z dnia 20 kwietnia 2006 r. (III CZP 25/06, Orzecznictwo Sądu Najwyższego Izba Cywilna 2007, nr 2, poz. 26). 39. Uchwała z 20 kwietnia 2006 r. (III CZP 25/06) Orzecznictwo Sądu Najwyższego Izba Cywilna 2007, z. 2, poz. 26. 40. Ustawa z 21 sierpnia 1997 r. o gospodarce nieruchomościami (DzU z 2004 r., Nr 261, poz. 2603 z późn. zm.). 41. Wolanin M.: Mienie zabużańskie nowe regulacje prawne. Nieruchomości. C.H. Beck, 2006, nr 4. 42. Wolanin M.: Przekształcenie prawa użytkowania wieczystego we własność. Zielona Góra 2001. 43. Wolanin M.: Ustawa o gospodarce nieruchomościami. Komentarz. Warszawa 1998. 44. Wołąsiewicz J.: Analiza prawnohistoryczna uprawnień zabużańskich. Biuletyn Biura Informacji Rady Europy 2002, z. 3. 45. Wyrok Sądu Apelacyjnego w Białymstoku z dnia 18 marca 2004 r., sygn. I Ca 89/04, Orzecznictwo Sądów Apelacyjnych 2005, nr 1. 46. Załęska-Świątkiewicz B.: Mienie zabużańskie rekompensaty w aktualnym stanie prawnym. Rejent 1998, nr 6. 47. Żołyński J.: Włączenie polskich ziem wschodnich do ZSRR (1939-1940). Problemy ustrojowe i prawne, Acta Universitatis Wratislaviensis Prawo 1994, nr CCXXXIII Reviewers: Dr hab. Piotr Stec Dr hab. inż. Anna Michna, Prof. nzw. w Pol. Śl.

Jo Ann HO Ee Yin LIEW Universiti Putra Malaysia Graduate School of Management MOTIVATIONAL PERCEPTION OF SUPERIORS AND SUBORDINATES THE CASE OF MALAYSIA Summary. Human resources have become increasingly important as they can determine the success or failure of a company. As such, managers need to pay attention to the motivation of their employees. The purpose of this paper is to determine the motivational perceptions between the Malaysian managers and their employees. The study was conducted on 104 Malaysian managers and employees from 40 companies in the manufacturing and financial service industry. The results of the study indicated there were significant differences between the perceptions of the managers and their employees on what motivated the employees. The study also found that employees were more motivated by intrinsic rather than extrinsic motivators. The theoretical and managerial implications of the results are also discussed. Keywords: motivation, motivational perception, intrinsic motivators, extrinsic motivators, Malaysia PERCEPCJA MOTYWACYJNA PRZEŁOŻONYCH I PODWŁADNYCH PRZYPADEK MALEZJI Streszczenie. Zasoby ludzkie stają się coraz bardziej znaczące, ponieważ decydują o sukcesie lub porażce przedsiębiorstwa. Dlatego też menadżerowie coraz większą uwagę zwracają na kwestię motywacji swoich pracowników. Celem niniejszego artykułu jest określenie percepcji motywacyjnych malezyjskich menadżerów i ich podwładnych. Badanie zostało przeprowadzone w Malezji na 104 menadżerach i pracownikach 40 firm działających w sektorze produkcyjnym i usług finansowych. Wyniki badań wskazują na istotne różnice w postrzeganiu przez kierowników i ich podwładnych, tego, co ich motywuje. Badania wskazały również, że pracownicy byli w większym stopniu motywowani przez czynniki o charakterze wewnętrznym niż

56 J.A. Ho, E.Y. Liew zewnętrzne motywatory. Ponadto, w opracowaniu poddano dyskusji implikacje teoretyczne i zarządcze. Słowa kluczowe: motywacja, percepcja motywacyjna, wewnętrzne motywatory, zewnętrzne motywatory, Malezja 1. Introduction In the past, employees were considered just another input to the production of goods and services. 1 However, organizations have come to realize that in order to remain competitive, they need to pay attention to their human resources as technology and natural resources can be copied or bought by their competitors. According to the resource based view of the firm which has been gaining popularity for explaining why firms differ in performance, 2 the internal resources of the firms (such as skills, financial resources, human resources and physical resources) are responsible for an organization s competitive advantage and are the source of sustained competitive advantage. 3 Human resources are the most likely source of a sustainable competitive advantage because human resources are more likely than other resources to be inimitable and nonsubstitutable, as well as valuable and rare. 4 McWilliams et al. 5 further add that human resources can create a competitive advantage for the firm because of the knowledge, skills and abilities that are inherent in the individuals who make up the organization, which are required to put into action the organization s objectives and strategies. However, for human resources to be a source of competitive advantage for the organization, they must be motivated. Employee motivation is important if the organizations were to achieve high corporate performance. 6 Unmotivated employees are unlikely to expand efforts in their jobs, exit the organization if given the opportunity and produce low quality 1 Lindner J.R.: Understanding employee motivation. Available at: www.joe.org/joe/1998june/rb3.html, [Accessed: 18 October 2009]. 2 Wernerfelt B.: The resource based view of the firm: Ten years after. Strategic Management Journal 1995, no 16, p. 171-174. 3 Amit R., Schoemaker P.J.H.: Strategic assets and organizational rent. Strategic Management Journal 1993, no 14, p. 33-46. 4 McWilliams A., Van Fleet D.D., Wright P.M.: Strategic management of human resources for global competitive advantage. 2001. Available at: www.entrepreneur.com/tradejournals/article/print/75372918.html [Accessed: 17 October 2009]. 5 Ibidem. 6 Usugami J., Park K.-Y.: Similarities and differences in employee motivation viewed by Korean and Japanese executives: Empirical study on employee motivation management of Japanese affiliated companies in Korea. Journal of Human Resource Management 2006, no 17(2 (February)), p. 280-294.

Motivational perception 57 work. 7 On the other hand, motivated employees are likely to be persistent, creative and productive, turning out high quality work that they willingly take. 8 As such, a motivated workforce is critical to an organization. Hence, the key to a motivated workforce is to know what motivates them and then designing a motivation program based on those needs. 9 To be effective and efficient, organizations, especially their managers need to know and understand what motivates their employees within the context of the roles they perform. Management must have an understanding of human nature, the basic needs, wants and abilities of people. 10 This study seeks to gain a better understanding of employees motivation for improved performance and their effectiveness for work. Specifically, the purpose of this study is to determine what motivates employees. This understanding is important for a number of reasons. Firstly, a motivated workforce would lead to higher job satisfaction and ultimately to a more productive workforce. 11 If the company knows what motivates an employee, then such a company would have a decided competitive advantage over competitors suffering from absenteeism, costly re-training programs and production slowdowns. Secondly, as there seems to be a relationship between motivation and job satisfaction, 12 an organization that understands what motivates their workers should then eliminate job dissatisfaction as these companies would be able to implement the most effective motivational strategy. Finally, a study examining the importance of certain motivating factors will have direct and positive implications for both employee well-being and organizational effectiveness. A poorly devised motivation strategy has the real risk of actually reducing overall motivation, leading to behavior that can decrease productivity. 13 By understanding motivational issues behind employees, managers can systematically develop strategies to deal with motivational problems and improving performance at the workplace. 7 Amabile T.M.: Motivational synergy: Toward conceptualizations of intrinsic and extrinsic motivation in the workplace. Human Resource Management Review 1993, no. 3(3), p. 185-201. 8 Ibidem. 9 Lindner J.R.: op.cit. 10 Rad A.M.M., Yarmohammadian M.H. A study of relationship between manager s leadership style and employees job satisfaction. Leadership in Health Services 2006, no. 19(2), p. xi-xxviii. 11 Lindner J.R.: op.cit. 12 Mak B.L., Sockel H.Y.: A confirmatory factor analysis of is employee motivation and satisfaction. Information and Management 1999, no. 30, p. 265-276. 13 Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: Evolving perceptions of Japanese workplace motivation: An employee-manager comparison. International Journal of Cross Cultural Management 2005, no. 5(1), p. 87-104.

58 J.A. Ho, E.Y. Liew 2. Research hypotheses Motivation originates from the word move and therefore can be seen as an internal drive necessary to guide people s action and behavior toward achievement of some goals. 14 When an individual is motivated, he is moved to do something. 15 Analoui 16 suggests that motivation drives individuals to satisfy their needs since motivation is often orientated towards the satisfaction of certain needs and expectations. 17 According to Brislin et al., 18 motivation deals with the basic needs that explain why people work and what makes people work harder. Several studies have examined the perception of managers and subordinates toward motivation and job satisfaction. 19 Kovach 20 in his study of 1000 managers and 1000 employees found that managers and their subordinates had a different perception toward motivation. Similar results were also found by Rad and Yarmohammadian. 21 In the study by Rad et al., 22 the authors collected questionnaires from 814 employees, first line, middle and senior managers at Iran. Their study showed that the senior management ranked motivators such as good pay, recognition and promotion/growth as most important to the employees. On the other hand, the employees listed loyalty to employees and job security as the most important motivating factor while good pay was only ranked as the third most important motivator factor. According to the authors, while the management thought good pay was the number one desire of the employees, this factor was not the most important to the employees. Hence the authors concluded that the perceptions of managers with regards to the importance of motivators for employees varied considerably from how employees viewed what motivated them. 23 Kovach 24 provide three reasons for these differences in motivational perception. The first reason is that managers believe that employees find an interest in money and basic needs socially undesirable and therefore may 14 Analoui F.: What motivates senior manager? The case of Romania. Journal of Managerial Psychology 1999, no. 4(15), p. 324-340. 15 Ryan R.M., Deci E.L.: Intrinsic and extrinsic motivations: Classic definitions and new directions. Contemporary Educational Psychology 2000, no. 25, p. 54-67. 16 Analoui F.: op.cit. 17 Luthans F.: Organizational behaviour (5th ed.). McGraw-Hill, New York 1989. 18 Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: op.cit. 19 Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: op.cit., Huddleston P., Good L.K.: Job motivators in Russian and Polish retail firms. International Journal of Retail and Distribution Management 1999, no. 27(9), p. 383-392; Kovach K.A.: What motivates employees? Workers and supervisor give different answers. Business Horizons 1987, Sept-Oct, p. 58-65; Rad A.M.M., Yarmohammadian M.H. A study of relationship between manager s leadership style and employees job satisfaction. Leadership in Health Services 2006, no. 19(2), p. xi-xxviii. 20 Kovach K.A.: op.cit. 21 Rad A.M.M., Yarmohammadian M.H.: op.cit. 22 Ibidem. 23 Ibidem.

Motivational perception 59 pay lip service to more socially acceptable factors such as interesting work or full appreciation of work done. The second reason is that it is possible that employees were better witnesses to their own feelings than were their managers. And the final reason for the disparity in motivational perception according to Kovach 25 is that managers may probably chose rewards for which they were less responsible. Pay raises, for example, were usually determined by formalized organizational policies, not by the personal relationships between managers and employees. Thus, managers could pass the buck when it was time to assign blame for poor levels of employee motivation. 26 Based on the above studies, the first hypothesis postulated for this study is: Hypothesis 1: Superiors and subordinates do not have the same motivational perception. This study also examined whether intrinsic motivating factors were more important than extrinsic motivating factors to the employees. As Ryan and Deci 27 defines intrinsic motivation as the doing of an activity for its inherent satisfactions rather than for some separable consequence. According to them, an intrinsically motivated person is moved to act for the fun or challenge entailed rather than for the external prods, pressures, or rewards. On the other hand, extrinsic motivation pertains whenever an activity is done for the instrumental value of the activities. 28 The instrumental value could be the rewards or sanctions that come with the activity. Herzberg s motivation-hygiene theory explained that intrinsic factors are related to job satisfaction and motivation while extrinsic factors are linked to job dissatisfaction. 29 Brislin et al. 30 conducted a study to examine perceptions of workplace motivation in Japan between employees and managers. Their study found that intrinsic motivators have a higher motivational value for Japanese workers than extrinsic motivators. The results provide some support for Herzberg s two-factor model where intrinsic motivators can create high levels of motivation. In another study conducted by Analoiu 31 on 23 Romanian organizations, all the senior manager in the public sector reported facing difficulties such as low pay, inferior working condition, long hours, too much responsibility without power or authority and an awareness of their worth (hygiene factors). The study showed that motivators such as responsibility, nature of the job, job appreciation, recognition, and the need for achievement (psychological) were the main driving forces behind senior managers attitudes towards increased effectiveness. This study concluded that the senior managers were 24 Kovach K.A.: op.cit. 25 Ibidem. 26 Ibidem. 27 Ryan R.M., Deci E.L.: op.cit., p. 56. 28 Ibidem. 29 Herzberg F., Mausner B., Snyderman B.: The motivation to work. Wiley, New York 1959. 30 Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: op.cit. 31 Analoui F.: op.cit.

60 J.A. Ho, E.Y. Liew more intrinsically motivated. 32 While there have been various studies concluding that intrinsic motivators lead to increased motivation, managers consistently perceived that employees place a greater importance on extrinsic job characteristics such as good wages. 33 Hence, the second hypothesis would be: Hypothesis 2: Employees are more motivated by intrinsic motivators than extrinsic motivators 3. Methodology Participants and Data Collection The questionnaire was sent out to 104 respondents, with 52 of them belonging to the managerial level and the remaining 52 were employees. The respondents in the managerial level consisted of general managers, functional managers and senior staffs from all functional areas in manufacturing and financial services companies located in Johore Bahru and the Klang Valley in Malaysia. Johore Bahru and the Klang Valley were chosen for this study as these locations are one of the biggest industrial areas in Malaysia. A total of 40 companies participated in the survey. The respondents consisted of Malay, Chinese and Indians managers and their employees. The respondents received and answered the questionnaires at their work place. Data were collected for approximately 2 weeks. Participation was voluntary. The same sets of questionnaires were distributed to the managers and their subordinates. However, there were separate columns for the managers and their subordinates to state their responses. The subordinates were requested to assess the impact of the identified items on their level of motivation and there instructions detailing where they should fill their responses. Similarly, the managers were also asked to assess the items according to what they thought would affect their subordinate s motivation. Again, instructions were available in the questionnaire to guide the managers where their responses should be stated. The cover letter briefly explained the purpose of the study. Respondents were also assured of their confidentiality. Follow up calls were made to the managers again two weeks after the mailing of the questionnaires to remind them to complete and return the questionnaires. 32 Ibidem. 33 Huddleston P., Good L.K.: op.cit.

Motivational perception 61 Development of Questionnaire The questionnaire consisted of two parts. Section A contained items to measure extrinsic and intrinsic motivating items that motivated employees. The items were obtained from the questionnaire used in the study conducted by Brislin et al. 34 Brislin et al. 35 constructed the questionnaire based on Herzberg s two-factor motivation theory. The items identified in the questionnaire consisted of 13 items to measure intrinsic motivation and extrinsic motivation. The items identified in the questionnaire consisted of 13 items to measure intrinsic motivation and extrinsic motivation. The intrinsic motivation factors included job advancement, amount of responsibility, challenging work, sense of achievement, work/job recognition and self-growth. The extrinsic motivation factors included interpersonal relationships, quality of supervision and leadership, company policy, company administration, job security, salary and working conditions. Employees were asked to assess the impact of the identified items on their level of motivation on a 6-point Likert scale where 1 = Not at all, 2 = Low, 3 = Indifferent/neutral, 4 = Medium, 5 = High, and 6 = Extremely high. Section B consisted of questions to determine the participants pertinent demographic information which included age, gender, level of education, position in company (manager and non-manager) and ethnicity. 4. Results and discussion All the questionnaires that were sent out were eturnem to the respondents. Of the 104 questionnaires received, 52 of the respondents were from the managers and the remaining 52 were from their subordinates. Table 1 summarizes the characteristics of the 104 respondents. Demographics of Respondents (Managers and Employees) Table 1 Employees Managers Number % Number % Age 15 28.80 Below 25 1 1.90 32 61.50 26-35 15 28.80 5 9.60 36-45 23 44.20 0 0.00 45 and above 13 25.00 34 Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: op.cit. 35 Ibidem.

62 J.A. Ho, E.Y. Liew

Motivational perception 63 con. tab. 1 Gender 19 36.50 Male 36 69.20 33 63.50 Female 16 30.80 Education Level 2 3.80 Primary 0 0.00 16 30.80 O & A level 1 1.90 11 21.20 Certificate/ Diploma 15 28.80 22 42.30 Bachelor Degree 31 59.60 1 1.90 Master or PhD 5 9.60 Ethnic Group 11 21.20 Malay 11 21.20 28 53.80 Chinese 32 61.50 13 25.00 Indian 9 17.30 The reliability scores for the questionnaire items are shown in table 2. The Cronbach Alpha s test of reliability for the items measuring intrinsic and extrinsic motivation exceeded 0,60, demonstrating an acceptable level of reliability. 36 Cronbach Alpha of Intrinsic and Extrinsic Motivational Items Table 2 Items Cronbach Alpha Intrinsic Motivation 0.758 Extrinsic Motivation 0.676 Perception of Superiors and Subordinates Toward Motivation The first research hypothesis states that superiors and their subordinates do not have the same motivational perception. Table 3 shows that the perceptions of managers varied considerably from how employees viewed what motivated them. The total motivation mean rated by the employees was 4,41 while the total motivation mean rated by managers was 4,61. There was a significant difference between the Total Motivation Mean scores 36 Nunnally J.: Psychometric methods. McGraw - Hill Book Co., New York 1967; Sekaran U.: Research methods for business: A skill-building approach. John Wiley and Sons, New York 1992.

64 J.A. Ho, E.Y. Liew between the employees and the managers at the p<0.05 level, thus supporting the hypothesis that the managers and their subordinates were different in their motivational perception. Table 3 Test for differences between Managers and Employees on Their Total Motivation Mean Respondent Group Total Mean SD Significant Value Employees 4.41 0.44 p = 0.022* Manager 4.61 0.42 * Significant at the p < 0.05 level Table 4 shows the mean ratings and importance scores for the managers and their subordinates. The subordinates ranked self-growth (mean = 4,67), amount of responsibility (mean = 4,65), work/job recognition (mean = 4,65), working conditions (mean = 4,62) and job security (mean = 4,52) as the five most important motivating factors. The managers on the other hand ranked salary (mean = 4,98), work/job recognition (mean = 4,88), amount of responsibility (mean = 4,83), sense of achievement (mean = 4,79) and self-growth (mean = 4,77) as their subordinates top five employees motivating items. The results from the managers who were attempting to predict the most important motivating factor for their employees fell away from their employees ratings. Based on the results in Table 4, the managers thought that salary was the number one desire of the employees. However, this factor was actually ranked fifth by the employees. The difference between the mean salary rating for the managers and non-managers was also significant at the p < 0,05 level. This finding was consistent with the study conducted by Wong, Siu, & Tsang 37 who also found that the ranking of salary items by managers and non-managerial employees were different. The most important motivating factor for the employees in this study was self growth. However, this motivating factor was only ranked 5 th by the managers. The employees ranked working conditions third while the managers ranked this factor sixth. The employees ranked sense of achievement fourth, job security fifth, interpersonal relationship and salary sixth respectively. The results of this study may provide support that people do necessarily have to fulfill lower level needs before fulfilling higher level needs. The contention by Maslow that higher order needs must be fulfilled before fulfilling higher level needs does not seem to hold for the respondents in this study. 37 Wong S., Siu V., Tsang N.: The impact of demographic factors on Hong Kong hotel employees choice of job-related motivator. International Journal of Contemporary Hospitality Management 1999, no. 11(5), p. 230-241.

Motivational perception 65 Means and Rankings for Motivating Items for Managers and Non-Managers Mean rating and rank Motivators Employees Managers Table 4 Mean Rank Mean Rank IM1 Job Advancement 4.06 9 4.56 9 IM2 Amount of Responsibility 4.65 2 4.83 3 IM3 Challenging Work 4.40 8 4.63 7 IM4 Sense of Achievement 4.60 4 4.79 4 IM5 Work/Job Recognition 4.65 2 4.88 2 IM6 Self-Growth 4.67 1 4.77 5 EM1 Interpersonal Relationship 4.48 6 4.52 10 EM2 Quality of Supervision and Leadership 4.44 7 4.62 8 EM3 Company Policy 3.85 10 4.12 11 EM4 Company Administration 3.85 10 3.90 12 EM5 Job Security 4.52 5 4.52 10 EM6 Salary 4.48 6 4.98 1 EM7 Working Conditions 4.62 3 4.69 6 * Bold numbers indicate significant differences at a.05 level of significance using an independent sample t-test. ** IM indicates Intrinsic Factors. EM indicates Extrinsic Factors. Intrinsic and Extrinsic Motivators The second hypothesis of this study was to determine whether employees were more motivated by intrinsic motivators or extrinsic motivators. Based on the results presented in Table 5, we can see that the employees were more motivated by intrinsic motivators rather than extrinsic motivators as indicated by the higher mean score for the intrinsic factors. Hence, hypothesis 2 was supported at the p < 0,05 level. There was also a significant difference in the mean scores between the intrinsic factors and the extrinsic factors at the p < 0,05 level indicating that intrinsic and extrinsic factors significantly influence the employee s motivation.

66 J.A. Ho, E.Y. Liew Test for Intrinsic and Extrinsic Motivating Items Table 5 Motivators Mean SD Significant Value Intrinsic 4.63 0.54 p = 0.000* Extrinsic 4.40 0.51 * Significant at the p < 0,05 level Based on the results in Table 4, four of the top five employee motivating items were intrinsic factors, while three of the lowest five came from extrinsic factors. The top five employee motivating items were self-growth, work/job recognition, amount of responsibility, working conditions and sense of achievement. The lowest five nonmanagers motivating items were company policy, company administration, job advancement, challenging work and quality of supervision and leadership. Three of the five non-managers motivating items were extrinsic factors which included factors such as company policy, company administration and quality of supervision and leadership. It is also clear based in the results presented in Table V that some extrinsic motivators such as working conditions, interpersonal relationship, quality of supervision, job security and salary were ranked higher than intrinsic motivators. While intrinsic motivators were clearly perceived by the employees as important by the Malaysian employees, some are evidently less so than others. Based on the results in Table 5, extrinsic motivators are also important in the organization s worker motivation efforts. 5. Research implications The findings of this study indicate that there were significant differences in the motivational perception between the managers and their subordinates. The study also showed some evidence that supports Herzberg s two-factor theory which states that intrinsic factors are more related to motivation than extrinsic factors. The results of this study seem to indicate that managers do not really know the motivating factors of their subordinates. The results of this study suggest that organizations might be able to increase the motivation of their employees by increasing satisfaction in the employee s personal development, improving working conditions, recognizing and acknowledging the employee s efforts and increasing employee responsibilities at work. One of the ways organizations could increase the employee s personnel development is by implementing promotion-from-within policies and supporting employee s career development and career planning efforts. Changes in the

Motivational perception 67 organizational benefits and employment input in determining work schedules and procedures to be to complete the work could be made in an effort to increase employee s job satisfaction. Another practical implication is that management should take note of the importance placed in self growth. This factor was ranked as the most important motivating factor by the employees. The desire to for personal development while in the company seems to be highly valued by the Malaysian employees. Providing employee development seminars, establishing skills and competency development programs that provide lifetime employability training, communicating career paths and providing training and development opportunities to the employees are possible ways to develop the employee. The results of this study may help dispel the notion held by managers that their employees are only motivated by high wages. The findings of this study also add to the findings of practically every study for over 40 years 38 that wages are not the most important motivating factor. This may be good news for organizations especially small organizations that may not be able to pay high salaries as compared to their larger counterparts. Organizations should also ensure that employees are recognized for their contributions and staff promotions could be linked to employee evaluations. The results of this study could be disseminated to managers so that these managers would have first-hand information on what really motivates their employees. Such information can serve as a guideline to managers regarding the perception and expectation of employees. If management understands what motivates their employees (motivators) as well as the elements that can reduce job dissatisfaction (extrinsic factors), organizations can develop and implement a balance to benefit from better worker productivity, increased morale and improved quality of life. 39 6. Limitations and directions for future research This study only examined the motivator factors between the managers and employees. However, motivation is a psychological process resulting from the interaction between the individual and the environment 40 and it would be interesting to examine the influence of cultural values, leadership behaviours and job characteristics on motivation. Previous studies have shown that there are three components to a job: complexity, the social environment and 38 Kovach K.A.: op.cit. 39 Aycan Z.: Whatever happened to individual-level studies of work motivation? Cross-Cultural Psychological Bulletin 2001, no. 35(2), p. 7-13; Wiley C.: What motivates employees according to over 40 years of motivation surveys. International Journal of Manpower 1997, no. 18(2), p. 263-280. 40 Latham G.P., Pinder C.C.: Work motivation theory and research at the dawn of the twenty-first century. Annual Review of Psychology 2005, no. 56, p. 485-516.

68 J.A. Ho, E.Y. Liew the physical demands. 41 It is suggested that future studies be conducted to examine the influence of the social environment and the physical demands on motivation since both these components have relatively been ignored. 42 The current study was limited to only two types of industry: manufacturing and financial service industry companies located in the Klang Valley and Johor Bahru, Malaysia. What is now needed is the inclusion of more industries to enable a comparison of motivating factors among the employees in these industries. Such information will be useful for organizations as they would be able to use this list as a benchmark for their benefits programs and to improve the working conditions. More information on the motivating factors of employees would help us to establish a greater degree of accuracy on this matter. The main methodology used in this study was the questionnaire. Future studies may consider using a mixed-methodology of interviews and questionnaire. The reviews of Oppermann 43 and Scandura and Williams 44 suggested that the primary reasons for triangulation or mixed methodology are to (1) reduce researcher or data-set bias which can be introduced by using only one research method (2) add robustness and generalisability to a set of findings (higher external validity) (3) ensure that possibly important categories not detected by one method will not be excluded resulting in preconceived categories (4) mutually validate the findings of approaches by combining a range of data sources, methods or observers. Furthermore, research based on multiple methods lead to more meaningful results than that which is dependent on a single method. 45 A mixed methodology might for example uncover the reasons for the rankings of the motivating factors from the perspectives of the employees and the managers. 41 Morgeson F.P., Campion M.A.: Minimizing tradeoffs when redesigning work: Evidence from a longitudinal quasi-experiment. Personality Psychology 2002, no. 55, p. 589-612. 42 Latham G.P., Pinder C.C.: op.cit. 43 Oppermann M.: Triangulation a methodological discussion. The International Journal of Tourism Research 2000, no. 2, p. 141-146. 44 Scandura T.A., Williams E.A.: Research methodology in management: Current practices, trends, and implications for future research. Academy of Management Journal 2000, no. 43(6), p. 1248-1264. 45 Samiee S., Athanassiou N.: International strategy research: Cross-cultural methodology implications. Journal of Business Research 1998, no. 43, p. 79-96.

Motivational perception 69 Bibliography 1. Amabile T.M.: Motivational synergy: Toward conceptualizations of intrinsic and extrinsic motivation in the workplace. Human Resource Management Review 1993, no. 3(3), p. 185-201. 2. Amit R., Schoemaker P.J.H.: Strategic assets and organizational rent. Strategic Management Journal 1993, no. 14, p. 33-46. 3. Analoui F.: What motivates senior manager? The case of Romania. Journal of Managerial Psychology 1999, no. 4(15), p. 324-340. 4. Aycan Z.: Whatever happened to individual-level studies of work motivation? Cross- Cultural Psychological Bulletin 2001, no. 35(2), p. 7-13. 5. Brislin R.W., MacNab B., Worthley R., Kabigting F.J., Zukis B.: Evolving perceptions of Japanese workplace motivation: An employee-manager comparison. International Journal of Cross Cultural Management 2005, no. 5(1), p. 87-104. 6. Herzberg F., Mausner B., Snyderman B.: The motivation to work. Wiley, New York 1959. 7. Huddleston P., Good L.K.: Job motivators in Russian and Polish retail firms. International Journal of Retail and Distribution Management 1999, no. 27(9), p. 383-392. 8. Kovach K.A.: What motivates employees? Workers and supervisor give different answers. Business Horizons 1987, Sept-Oct, p. 58-65. 9. Latham G.P., Pinder C.C.: Work motivation theory and research at the dawn of the twenty-first century. Annual Review of Psychology 2005, no. 56, p. 485-516. 10. Lindner J.R.: Understanding employee motivation. Available at: www.joe.org/joe/ 1998june/rb3.html, [Accessed: 18 October 2009]. 11. Luthans F.: Organizational behaviour (5th ed.). McGraw-Hill, New York 1989. 12. Mak B.L., Sockel H.Y.: A confirmatory factor analysis of is employee motivation and satisfaction. Information and Management 1999, no. 30, p. 265-276. 13. McWilliams A., Van Fleet D.D., Wright P.M.: Strategic management of human resources for global competitive advantage. 2001. Available at: www.entrepreneur.com/ tradejournals/article/print/75372918.html [Accessed: 17 October 2009]. 14. Morgeson F.P., Campion M.A.: Minimizing tradeoffs when redesigning work: Evidence from a longitudinal quasi-experiment. Personality Psychology 2002, no. 55, p. 589-612. 15. Nunnally J.: Psychometric methods. McGraw - Hill Book Co., New York 1967. 16. Oppermann M.: Triangulation a methodological discussion. The International Journal of Tourism Research 2000, no. 2, p. 141-146.

70 J.A. Ho, E.Y. Liew 17. Rad A.M.M., Yarmohammadian M.H. A study of relationship between manager s leadership style and employees job satisfaction. Leadership in Health Services 2006, no. 19(2), p. xi-xxviii. 18. Ryan R.M., Deci E.L.: Intrinsic and extrinsic motivations: Classic definitions and new directions. Contemporary Educational Psychology 2000, no. 25, p. 54-67. 19. Samiee S., Athanassiou N.: International strategy research: Cross-cultural methodology implications. Journal of Business Research 1998, no. 43, p. 79-96. 20. Scandura T.A., Williams E.A.: Research methodology in management: Current practices, trends, and implications for future research. Academy of Management Journal 2000, no. 43(6), p. 1248-1264. 21. Sekaran U.: Research methods for business: A skill-building approach. John Wiley and Sons, New York 1992. 22. Usugami J., Park K.-Y.: Similarities and differences in employee motivation viewed by Korean and Japanese executives: Empirical study on employee motivation management of Japanese affiliated companies in Korea. Journal of Human Resource Management 2006, no. 17(2 (February)), p. 280-294. 23. Wernerfelt B.: The resource based view of the firm: Ten years after. Strategic Management Journal 1995, no. 16, p. 171-174. 24. Wiley C.: What motivates employees according to over 40 years of motivation surveys. International Journal of Manpower 1997, no. 18(2), p. 263-280. 25. Wong S., Siu V., Tsang N.: The impact of demographic factors on Hong Kong hotel employees choice of job-related motivator. International Journal of Contemporary Hospitality Management 1999, no. 11(5), p. 230-241. Reviewers: Dr hab. Agata Stachowicz-Stanusch, Prof. nzw. w Pol. Śl. Prof. dr hab. Wojciech Dyduch

Dan KIPLEY Azusa Pacific University School of Business and Management Alfred LEWIS Alliant International University M. Goldsmith School of Management ANSOFF S STRATEGIC SUCCESS PARADIGM EMPIRICAL EVIDENCE SUPPORTS ITS SUCCESS WITH FIRMS COMPETING IN A TURBULENT ENVIRONMENT. WHY THEN IS IT ABSENT FROM ACADEMIC STRATEGIC MANAGEMENT TEXTBOOKS? Summary. The purpose of this paper is twofold; first, a typology examining the multiple dimensions of H. Igor Ansoff s Strategic Success Paradigm and the frequency of use of each of the paradigm s components relative to the formulation of corporate level strategy in for- profit and not-for-profit organizations. Based on evidence from industry journals, there is both an implicit and explicit acknowledgement of its acumen and it s efficacy as a whole or in part with multinational, multi-business firms faced with volatile, discontinuous, novel and environmental dynamism. The strategic success paradigm is empirically validated and supported by industry evidence that provides results of a firm s increased financial performance. However, there is a noticeable lack of visibility of Ansoff s Strategic Success Paradigm within the traditional academic strategic management textbooks. Therefore, the second focus of this paper will attempt to determine through a pragmatic perspective, why this dichotomy exists with respect to the Strategic Success Paradigm s acceptance in industry and its noticeable absence from academic texts. Keywords: strategic management, paradigm, academic education

72 D. Kipley, A. Lewis PARADYGMAT SUKCESU STRATEGICZNEGO ANSOFFA DOWÓD EMPIRYCZNY POTWIERDZAJĄCY SUKCES PRZEDSIĘBIORSTW KONKURUJĄCYCH W BURZLIWYM OTOCZENIU. DLACZEGO BRAK TEJ KONCEPCJI W PODRĘCZNIKACH ZARZĄDZANIA STRATEGICZNEGO? Streszczenie. Cel niniejszego artykułu jest dwojaki: po pierwsze, typologia rozpatrywana w wielu wymiarach Strategicznego Paradygmatu Sukcesu Ansoffa oraz częstotliwość wykorzystania poszczególnych komponentów paradygmatu w odniesieniu do strategii formułowanej na poziomie korporacji w organizacjach profit i non profit. Na podstawie dowodów pochodzących z publikacji branżowych istnieją zarówno pośrednie, jak i bezpośrednie potwierdzenia wnikliwości i skuteczności tej koncepcji jako całości lub w części odnoszącej się do międzynarodowych, wielobranżowych firm o zmiennej, nieciągłej i uzależnionej od środowiska dynamice. Paradygmat sukcesu strategicznego został empirycznie potwierdzony i poparty dowodami z branży, które wskazują na polepszenie wyników finansowych przedsiębiorstw. Jednakże, zauważalny jest brak widoczności Paradygmatu Sukcesu Strategicznego Ansoffa w podstawowych podręcznikach akademickich zarządzania strategicznego. Dlatego drugim celem tej pracy jest próba określenia z perspektywy pragmatycznej przyczyn istnienia tej dychotomii w odniesieniu do przyjęcia Paradygmatu Sukcesu Strategicznego w praktyce przedsiębiorstw oraz jego zauważalnego braku w publikacjach akademickich. Słowa kluczowe: zarządzanie strategiczne, paradygmat, szkolnictwo wyższe 1. Introduction In the last half century there has been a widespread agreement among academics and practitioners that business environments are becoming increasingly multidisciplinary and complex and that a major escalation of environmental turbulence has taken place. This has meant a change in the traditional methods of marketing and production as well as changes in consumer attitudes, societal demands, global competition and the speed and magnitude of change in technology. Technological innovations are both creative and disruptive; an innovation can make an established product obsolete overnight, but also make a multitude of new products possible. The advent of microprocessors destroyed the market for transistors just as transistors destroyed the market for the vacuum tube, but at the same time created opportunities for industries connected to the microprocessors such as CD players, MP3 players, and personal

Ansoff s strategic success paradigm 73 computers. 1 This turbulence, unleashed in part by technology, has made it critical for firms to stay focused on their strategic formulation and implementation. 2. Environmental serving organizations Historically, firms were seen distinctly either as for-profit (FP) or not-for-profit (NFP); the FP firms were viewed as internally efficient, externally entrepreneurial and aggressive, and having a single-mindedness of maximizing corporate profit. Conversely, NFP organizations were viewed as internally bureaucratic, economically inefficient, and lacking inspiration; whose sole purpose was to provide some nebulous form of public service with no intent of maximizing profit or drive to increase effectiveness. Paradoxically, the division today between the two has become increasingly difficult to distinguish. As the national budget deficit grows, NFP organizations are required to be more accountable; demands are made to be more efficient and aggressive like their counterparts in the private sector. Thus, non-profit organizations are now becoming increasingly entrepreneurial, a trait that until recently was only attributed to FP organizations. The private sector also is under pressure to restrain from its prime directive of profitseeking and to now conform to such social concerns as greenhouse gas emissions, pollution, and global warming; areas that previously were of little concern to the traditional profitseeking organizations. Consequently, the differences and the functions between the two organizations are no longer distinct. As such, for the purpose of this paper, we shall refer to both FP and NFP firms as Environmental Serving Organizations (ESOs), defined by Ansoff as organizations whose primary function is to supply goods and/or services to society. 2 ESOs have seen marked increases in environmental pressures in part due to globalization by firm s either becoming global or are now competing against global firms. The rapidity of information and also the increased volume of this information, via the ubiquitous Blackberry or Window Mobile devices, affect today s managers and their business decisions. This increased pressure coupled with the rapidity of new technological advancements driven by high technology products and information technology, is creating a 1 D Aveni R.: Hyper Competition, Managing the Dynamics of Strategic Maneuvering. Free Press, New York 1994; Day G.S., Reibstein D.J.: Wharton on dynamic competitive strategy. John Wiley & Sons, New York 1997; Eisenhardt K., Brown S.: Competing on the Edge: Strategy as Structured Chaos. Harvard Business School Press, Cambridge 1998; Galbraith J.: Designing Organizations, An Executive Guide to Strategy, Structure, and Process. Jossey Bass, San Francisco 2002; Normann R.: Reframing Business. When the Map Changes the landscape. John Wiley and Sons, Chichester 2001. 2 Ansoff H.I., Sullivan P.: Managerial Theory of Strategic Behavior of Environmental Serving Organizations. The Macmillan Press LTD, London 1993.

74 D. Kipley, A. Lewis dynamic disequilibrium in which the traditional method of strategic formulation based on extrapolation of historical success for the firm s future planning becomes inadequate. Adding to this complexity, firms are faced with such discontinuities as legal shifts (i.e. patent protection in biotechnology or trade/regulatory barriers in pharmaceuticals), regulatory reform, substitute product technologies, demographic shifts, product life-cycle shifts, and societal demands in the form of more powerful consumer activists groups. Consequently, organizations are finding it a challenge to formulate and implement the successful corporate strategy under these complex dynamic conditions and are seeking a solution to address the issue of long-term corporate strategic planning and profitability. This paper discusses the empirical evidence which depict superior financial performance of ESOs using Ansoff s Strategic Success Paradigm, the implicit and explicit certainties of its components in the literature and industry specific journals. The paper further investigates why Ansoff s Strategic Success Paradigm is not readily presented in academic textbooks along with offerings by Porter, Mintzberg and Drucker. 3. History of the strategic success paradigm During the 1960 s and 1970 s, advancements into the study of strategic management ensued with identification of several key success variables that support Ansoff s Strategic Success Paradigm structural components. The foundation of the paradigm components begins with taxonomy of observable environments which are discrete and different from one another. This was first identified in a paper published in a volume of the Human Relations by F.E. Emery and E.L. Trist in 1965. 3 This early observation and typography of environmental discontinuities provide support for Ansoff s first rule of the strategic success paradigm; The aggressiveness of the firm s strategic behavior must match the turbulence of its environment. Management s capabilities and their significance in formulating and implementing strategy, was discussed by Alfred D. Chandler in a book titled Strategy and Structure, 4 in which he presents finding identifying commonalities in strategic adaptation to environmental discontinuities and the need for management to adapt strategy which will be most effective with each identified environmental discontinuity. Research conducted by Lyles & Salk, 5 on the role of firm s internal capabilities and knowledge found that, the development of capabilities and competencies in firms has been 3 Ashby W.R.: An Introduction to Cybernetics. Chapman and Hall, London 1956. 4 Andrews K.: The concept of Corporate Strategy. Irwin, Burr Ridge, IL 1971. 5 Chandler A.D.: Strategy and Structure. MIT Press, Cambridge, MA 1972.

Ansoff s strategic success paradigm 75 shown to have a positive effect upon various facets of performance. Another study confirming the concept of corporate strategy and the significance of managerial support was presented by Andrews in 1971 as the pattern of decisions that determined a company s goal, produced the principle policies for achieving these goals, and defined the range of businesses the company was to pursue. 6 Chandler s, Lyles & Salk and Andrew s research provide validation for Ansoff s second rule in the paradigm; The responsiveness of the firm s capabilities must match the aggressiveness of its strategy. Ansoff s identification of the success variables was confirmed by empirical research conducted by Leonidou, Katsikeas & Samiee 7, supporting both the existence and the importance for firms to address the variables in the formulation of the firm s strategies as a determinant of performance and success factors. Miller and Freisen 8 recognize that the nexus of the variables constitute a complex range of independent variables; it is these variables that must remain coupled in a state of dynamic equilibrium, regardless of environmental turbulence. Miller and Freisen s research validates Ansoff s third component of the strategic success paradigm; The components of the firm s capabilities must be supportive of one another. Using the foundational research developed from Chandler, Andrews, and Emery, et al., Ansoff identifies the three requisite variables for a firm s optimal financial success and from these variables, formed the conventions for the Strategic Success Paradigm. 4. Variables forming the strategic success paradigm 1. The aggressiveness of the firm s strategic behavior must match the turbulence of its environment. 6 Ansoff H.I., Declerck H.: From Strategic Planning to Strategic Management. John Wiley, New York 1976; Ansoff H.I.: Critique of Henry Mintzberg s The Design School: Reconsidering the basic premises of Strategic Management. Strategic Management Journal 1991, Vol. 12, p. 449-461; Ansoff H.I., Antoniou P., Lewis A.O.: Strategic management: Introduction to the Ansoffian Approach. Xanedu Press, Michigan 2004; Ansoff H.I., McDonnell E.: Implanting Strategic Management. Prentice Hall, New York 1990; Ansoff H.I., Sullivan P.: Competitiveness through strategic response, [in:] Gilman R. (ed.): Making Organizations More Competitive: Constantly Improving Everything Inside and Outside the Organization. Jossey-Bass, San Francisco1990; Ansoff H.I., Sullivan P.: Managerial Theory of Strategic Behavior of Environmental Serving Organizations. The Macmillan Press LTD, London 1993; Caldart A.A., Ricart J.E.: A Formal Evaluation of the Performance of Different Corporate Styles in Stable and Turbulent Environments. Working Paper, University of Nawarra 2006. 7 Chabane H.: Restructuring and performance in Algerian state-owned enterprises: A strategic management study. Unpublished D.B.A. dissertation. United States International University, San Diego 1987. 8 Miller D.C., Freisen P.H.: Organisations: A Quantum View. Englewood Cliffs, Prentice Hall, New Jersey 1984.

76 D. Kipley, A. Lewis 2. The responsiveness of the firm s capabilities must match the aggressiveness of its strategy. 3. The components of the firm s capabilities must be supportive of one another. As previously mentioned, the research conducted by Emery and Trist into discrete and different environments led Ansoff to develop a typology of 5 distinct identifiable levels of environmental turbulence. These five distinct environmental turbulence levels are based on the complexity of the environment, the speed of change relative to the possible speed of response, the visibility of the future and the predictability of the future. 9 Zahra 10 supports Ansoff s typology when similarly describing the dimensions of environmental turbulence by including the following in their description of the environment; heterogeneity (diversity of markets), dynamism (rate and unpredictability of change) and hostility (unfavorable business climate, high level of competitive intensity and uncertainty) Zahra & Bogner 11 and Zahra et al. 12 5. Environmental turbulence defined Ansoff defines turbulence as a combined measure of the changeability and predictability of the firm s environment. The dimensions of changeability and predictability are further defined by four characteristics. Changeability: 1. Complexity of the firm s environment. 2. Relative novelty of the successive challenges which the firm encounters in the environment. Predictability: 3. Rapidity of change. This is the ratio of the speed with which challenges evolve in the environment and the speed of the firm s response. 9 Chandler A.D.: Strategy and Structure. MIT Press, Cambridge, MA 1972; Cyert R., March J.: A Behavioral Theory of the Firm. Prentice Hall, New Jersey 1963. 10 Zahra S.A., Newbaum D.O., Huse M.: The effect of the environment on export performance among telecommunications new ventures. Entrepreneurship Theory and Practice 1997, no. 22(1), p. 25-46. 11 D Aveni R.: Hyper Competition, Managing the Dynamics of Strategic Maneuvering. Free Press, New York 1994; Day G.S., Reibstein D.J.: Wharton on dynamic competitive strategy. John Wiley & Sons, New York 1997; Eisenhardt K., Brown S.: Competing on the Edge: Strategy as Structured Chaos. Harvard Business School Press, Cambridge 1998; Emery E., Trist E.L.: The causal texture of organizational environment. Human Relations 1965, Vol. 10; Galbraith J.: Designing Organizations, An Executive Guide to Strategy, Structure, and Process. Jossey Bass, San Francisco 2002; Hambrick D.C., Mason P.A.: Upper echelons: The organization as a reflection of its top managers Academy of Management Review 1984, no. 9(21), p. 193-206. 12 Zahra S.A., Newbaum D.O., Huse M.: op.cit.

Ansoff s strategic success paradigm 77 4. Visibility of the future which assesses the adequacy and the timeliness of information about the future. 13 In a recent working paper by Caldart and Ricart, 14 turbulence is recognized as a determining factor of an organization s success and defined as Environmental dynamism in which firms compete in an environmental turbulence level that is divided into four dimensions; complexity and dynamism define the conditions of the environment, low (stable) and high (complex) as the range limiters. Within each dimension, a firm must utilize the appropriate level of strategy, delineated by three methods; 1. Strategic planning Corporate level, centralized decisions making. 2. Strategic control Centralized decisions are made by bottom-up initiatives. 3. Financial control Decisions are decentralized at the business level to achieve maximum strategic performance. The results of their research confirm that firms which utilize the proper strategy to match the environmental turbulence level will achieve positive results. The relevance of Caldart and Ricart s working paper is that it confirms Ansoff s methodologies used in formulating the Strategic Success Paradigm in which both the environmental turbulence levels and the strategies are acknowledged as critical components of strategic success and must match the turbulence levels in order to achieve optimum performance. 6. Typology of environmental turbulence levels As previously noted, determining the environmental turbulence level in which organizations compete and the strategy used for each turbulence level is a critical component in the strategic success of the firm. Hence, Ansoff developed a topology of the levels of turbulence to assist managers in defining the turbulence level in which they compete. Ansoff categorized the environment in which firms compete into five distinct and definable turbulence levels (Fig. 1) beginning with Level 1, defined as stable ; within this level the environment has no change and tomorrow will be similar to the present, hence, planning at level 1 is extrapolative. Level 2 is expanding ; change is slow and incremental, visible, and predictable, planning at level 2 is also extrapolative. Level 3 is changing ; although change is fast, it is still incremental and fully visible. The first three levels of 13 Ansoff H.I., McDonnell E.: Implanting Strategic Management. Prentice Hall, New York 1990. 14 Caldart A.A., Ricart J.E.: A Formal Evaluation of the Performance of Different Corporate Styles in Stable and Turbulent Environments. Working Paper, University of Nawarra 2006.

78 D. Kipley, A. Lewis environmental turbulence are sub-classified by Ansoff as history driven in that the future is a logical extension of the historical past and present. Levels 4 & 5 are defined as discontinuous & surpriseful by Ansoff; the future is very different from the historical past and past successes do not guarantee future success. Level 4, a major departure from the extrapolative environment, is defined as discontinuous. In order to be successful a firm must abandon its historical attachment to particular customers, technologies, and/or products that it was accustomed to in level 3 and formulate its strategy with a new set of rules. The challenges that face a firm in level 4 include limited visibility, partial predictability, rapid change and inability for the firm to react to that change within the time required. Ansoff s final level, Level 5 is described as surpriseful ; change at this level occurs without notice, without visibility, unpredictable, and extremely rapid. In order for firms to become successful at this level they must be open and flexible to create products and services with advanced innovative technological ideas. Firms whose Strategic Business Areas (SBA) compete globally most likely align within the description of turbulence level 5. An extension of the definition of a Level 3 environment was provided by Ansoff 15 to include the pace of change, planned and unplanned product obsolescence coupled with the discontinuous rate of change. This increased intensity changes the existing paradigm of firms focusing solely on industry competitors, and creates a new paradigm which includes threats from unrelated industries. A scale of environmental turbulence is depicted below, as indicated by Ansoff and McDonnell. 16 Research conducted by Eisenhardt 17, notes that high-velocity (i.e. turbulent) environments are particularly challenging because information is poor, mistakes are costly, and recovery from missed opportunities is difficult. 15 Ansoff H.I., Antoniou P., Lewis A.O.: Strategic management: Introduction to the Ansoffian Approach. Xanedu Press, Michigan 2004. 16 Ansoff H.I., McDonnell E.: op.cit. 17 Hambrick D.C.: The top management team: Key to strategic success, California Management Review 1987, p. 88-108; Hatziantoniou P.: The relationship of environmental turbulence, corporate strategic profile, and company performance. Unpublished D.B.A. dissertation, United States International University, San Diego 1986; Jaja R.M.: Technology and banking: The implications of technology myopia on banking financial performance, A strategic management analysis. Unpublished D.B.A. dissertation, United States International University, San Diego 1990; Leoidou L.C., Katsikeas C.S., Samiee S.: Marketing strategy determinants of export performance: A metaanalysis. Journal of Business Research 2002, no. 55(1), p. 51-67.

Ansoff s strategic success paradigm 79 Fig. 1. Scale of Environmental Turbulence Rys. 1. Skala burzliwości otoczenia 7. Strategic success paradigm A common theme thus far in this paper is to provide validated support for Ansoff s Strategic Success Paradigm and its three variables from case studies and journal articles. Empirical evidence supporting the Paradigms success will be covered in a following section. Ansoff s Success model (Fig. 2) is explicit in its prescription for strategic success, it consists of three variables; the firm s environmental turbulence level, the firm s level of strategic aggressiveness, and managerial responsiveness capabilities. Ansoff s Strategic Success Hypothesis states, the optimal financial performance of a firm will be realized when the firms strategic aggressiveness, and the general management capability responsiveness are aligned with the environmental turbulence. 18 The concept that Ansoff uses as the foundation of his hypothesis is based on W.R. Ashby, 19 requisite variety theorem of organizational-environment matching. Ashby s theorem states, For a successful response to the environment, the complexity and the speed of the firm's response must match the complexity and speed of environmental challenges. 18 Ansoff H.I., Declerck H.: From Strategic Planning to Strategic Management. John Wiley, New York 1976. 19 Ashby W.R.: An Introduction to Cybernetics. Chapman and Hall, London 1956.

80 D. Kipley, A. Lewis Organizational Responsiveness Optimal Financial Performance Environmental Turbulence Strategic Aggressiveness Fig. 2. Optimal Financial Performance Rys. 2. Optymalny wynik finansowy In order to compete successfully, the firm s Strategic Aggressiveness (planned strategy) must at least align with the competitive environmental turbulence level or current market conditions in which a firm operates. To have an advantage over the competition, a firm must anticipate future market conditions and position itself to operate more effectively than the competition. The dynamics of Ansoff s success components of strategy, environment, and capabilities are identified in numerous studies utilizing similar variables to that of Ansoff s Strategic Success Paradigm. In research conducted by Miller and Freisen, 20 they identify Ansoff s success components as a Nexus, a connection of a linked group (Fig. 3). Their research confirms Ansoff strategic success paradigm in that the organizational competitiveness is based on the interaction among the components rather than their consideration in isolation which fundamentally explains performance, i.e. the whole is greater than the sum of its parts. 20 Miller D.C., Freisen P.H.: Organisations: A Quantum View. Englewood Cliffs, Prentice Hall, New Jersey 1984.

Ansoff s strategic success paradigm 81 Environment Fit Fit Strategy Fit Organizatio n Fig. 3. The environment-strategy-organization nexus Rys. 3. Związek otoczenie-strategia-organizacja The organization must create, and maintain the fit along each axis of the nexus in order to ensure organizational success. Miller and Freisen s environment- organization- strategy nexus directly corroborates Ansoff s strategic success paradigm. Based on the similar dimensions of Miller and Freisen s nexus, it would be fair to deduce that Ansoff s Strategic Success Paradigm was the inspirational model used when formulating the conclusion of their nexus. 8. Illustrative example of paradigm As an illustrative example of the interdependencies of the paradigm s components on strategic effectiveness, consider a firm in the bio-tech industry whose environmental turbulence level is discontinuous coupled with rapid change, surpriseful, and novel (Ansoff level 5). The bio-tech firm would be ill-advised to formulate the same strategy for growth as would be used by a firm whose strategy is appropriate for a low turbulent environment, such as cement manufacturing (Ansoff level 1-2). The capabilities that is most suitable for a high level of turbulence will be expensive and inefficient for firms operating in levels of low turbulence. Capabilities that are adequate in a low turbulence environment will leave a firm in a poor competitive position in a high turbulence environment. Although this is a cursory example of Ansoff s paradigm, it helps to illustrate the absurdity of mismatching a strategy to the prevailing level of environmental turbulence. Thus, the aggressiveness of the strategy must match the turbulence level of its environment in order for the firm to achieve optimal financial success.

82 D. Kipley, A. Lewis Ansoff addresses the importance of the firms management capabilities, such as the climate, competency, and capacity and emphasizes that they must also match the environmental turbulence level. For example, management whose multivariate capabilities are solely based on experiential wisdom accumulated from and whose decision-making is based on a low degree of information coupling within other functional areas would be lesslikely to achieve optimum success in a highly unpredictable, discontinuous environmentally turbulent industry. A disparity between current and required management competence capabilities produces an identifiable gap caused by the disparity in the environmental turbulence levels in which the firm competes. This gap in cognitive interpretation of the strategic issues, value judgments, and information processing would exceed, with any reliable degree of integrity, the low environmental turbulence level managerial skills set. Numerous studies support the significance of managerial competencies as it pertains to the firm s strategy-making and strategic performance. The firm s organizational performance is ultimately influenced and guided by the differences in top manager s skills levels and creative talents. Hambrick and Mason, 21 Hambrick, 22 and Norburn and Birley. 23 Actors (management) are assumed to be intelligent, but their intelligence is local to their position on the landscape (environment). 24 To illustrate his strategic success paradigm, Ansoff constructed a matrix that aligns the turbulence levels with the three key components of the success paradigm; environmental turbulence, strategic aggressiveness, and organizational response. This matrix, (Fig. 4) The Matching Environment Aggressiveness Responses Triplets, also known as the matching triplets, provides an easy reference for managers to assist them in identifying their current turbulence level, the aggressiveness of their current strategy, and finally, what is the level of their organizational responsiveness to the current environmental turbulence level. A narrative is provided for each turbulence level and matching success component which clearly references for managers, their firms position and management styles. 21 Hambrick D.C., Mason P.A.: Upper echelons: The organization as a reflection of its top managers Academy of Management Review 1984, no. 9(21), p. 193-206. 22 Hambrick D.C.: The top management team: Key to strategic success, California Management Review 1987, p. 88-108. 23 Norburn D., Birley S.: The top management team and corporate performance. Strategic Management Journal 1988, no. 9(3), p. 225-238. 24 March J., Simon H.: Organizations. John Wiley & Sons, New York 1958; Cyert R., March J.: A Behavioral Theory of the Firm. Prentice Hall, New Jersey 1963.

Ansoff s strategic success paradigm 83 An additional benefit from this matrix is that managers can see what strategic posture their organization must move toward to compete at a higher turbulence level and to increase the likelihood of higher financial returns. Matching Environment Aggressiveness Responses Triplets Fig. 4. Matching Environment Aggressiveness Responses Triplets Rys. 4. Powiązania Otoczenie Agresywność Reakcja

84 D. Kipley, A. Lewis 9. Empirical evidence supporting Ansoff s paradigm Ansoff s strategic success paradigm has been empirically tested, documented, and validated for over 25 years by strategic management doctoral students at Alliant International University in San Diego. The population database is gathered from over 1056 firms in industries that range from manufacturing, retail, service, banking, and state-owned businesses from the United States, United Arab Emirates, Korea, Japan, Jordan, Algeria, Indonesia, and Ethiopia. Testing data to date has concluded a validity of results of 99.95> supporting the paradigms effectiveness. 25 A challenge to the validity and reliability of Ansoff s strategic success hypothesis has been raised by some in academia based on the verity that dissertation research is not subject to the exactitude of peer review. In response, one must not only recognize the statistical significance of the test results, but also the practical significance of 1056 firms, all indicating positive results using the strategic success hypothesis. Thus, one can deduce that due to the significance of the population, the methodologies used for analysis, and the conclusive results; the sweeping assertions of the need of peer review for each individual dissertation, would not alter the results. 25 Hatziantoniou P.: The relationship of environmental turbulence, corporate strategic profile, and company performance. Unpublished D.B.A. dissertation, United States International University, San Diego 1986; Salameh T.T.: Analysis and financial performance of the banking industry in United Arab Emirates: A strategic management study. Unpublished D.B.A. dissertation, United States International University, San Diego 1987; Sullivan P.A.: The relationship between proportion of income derived from subsidy and strategic performance of a federal agency under the Commercial Activities Program. Unpublished D.B.A. dissertation. United States International University, San Diego 1987; Chabane H.: Restructuring and performance in Algerian state-owned enterprises: A strategic management study. Unpublished D.B.A. dissertation. United States International University, San Diego 1987; Lewis A.: Strategic posture and financial performance of the banking industry in California: A Strategic management study. Unpublished D.B.A. dissertation, United States International University, San Diego 1989; Jaja R.M.: Technology and banking: The implications of technology myopia on banking financial performance, A strategic management analysis. Unpublished D.B.A. dissertation, United States International University, San Diego 1990; Ansoff H.I., McDonnell E.: Implanting Strategic Management. Prentice Hall, New York 1990; Ansoff H.I., Sullivan P.: Competitiveness through strategic response, [in:] Gilman R. (ed.): Making Organizations More Competitive: Constantly Improving Everything Inside and Outside the Organization. Jossey-Bass, San Francisco1990.

Ansoff s strategic success paradigm 85 10. A perspective on the absence of the strategic success paradigm This study has shown that substantial empirical evidence exists to support Ansoff s Strategic Success Paradigm relative to successful financial performance. Ansoff commented that his work has received only a modicum of acceptance by practicing managers, 26 validation is provided through journal articles confirming its components in use when formulating and implementing strategy, either in part or in their aggregate throughout industry. The question remains, Why is the Strategic Success Paradigm absent from Strategic Management textbooks? It seems only logical that if a given formula has been proven to enhance performance and is currently used (either in a basic form or expanded definition), the Strategic Success Hypothesis has been validated and should be juxtaposed with other contributions such as Michael Porter s view of generic strategies and Five forces, Henry Mintzberg s emergent strategy, as well as strategy tools such as the SWOT, GE/McKinsey, BCG matrix, et al. In an effort to determine the raison d être of its absence from print, two possible explanations surfaced which are now addressed for plausibility. Supposition One Ansoff s Strategic Management theories are too difficult to explain effectively in undergraduate textbooks. This viewpoint is affirmed in correspondence received from publishing house McGraw- Hill s Senior Marketing manager/higher education Anke Braun, he states,[the] problem is, from my view, his background is EE and there are a lot of complicated feedback loops, diagrams, etc. that is really hard to condense in a short space to be relevant clear. Mr. Braun s unambiguous statement is only accurate when viewing Ansoff holistically. However, the Strategic Success Paradigm is but a single element of Ansoff s extensive contribution, and its only prerequisite is a basic level of cognition to comprehend and relate its value to a firm. Supposition Two Since Ansoff s death, his theories have become absent from Strategic Management journals resulting in the consequential decline of their importance. This possibility is plausible and is supported by correspondence from Strategic Management textbook authors; Arthur A. Thompson and Gregory G. Dess, in which both state that the topic of Ansoff s Strategic Success Paradigm isn t mainstream enough to be covered in a general strategy textbook. 26 Ansoff H.I.: Critique of Henry Mintzberg s The Design School: Reconsidering the basic premises of Strategic Management. Strategic Management Journal 1991, Vol. 12, p. 449-461.

86 D. Kipley, A. Lewis Unfortunately, this may hold more truth than originally first considered. In discussions with fellow Strategic Management educators, with few exceptions, Ansoff s Strategies are not normally included in the undergraduate course curriculum. 11. Recommendation for future study Rather than allowing an integral strategic management tool to die a slow death, this study is an attempt to revitalize its principles. Therefore, future research might focus on investigations utilizing Ansoff s theories. Such studies should make a positive contribution to the study of Strategic Management by offering quantifiable data to support the inclusion of Ansoff s Strategic Success Paradigm s in Strategic management journals and textbooks. Bibliography 1. Ashby W.R.: An Introduction to Cybernetics. Chapman and Hall, London 1956. 2. Andrews K.: The concept of Corporate Strategy. Irwin, Burr Ridge, IL 1971. 3. Ansoff H.I., Declerck H.: From Strategic Planning to Strategic Management. John Wiley, New York 1976. 4. Ansoff H.I.: Critique of Henry Mintzberg s The Design School: Reconsidering the basic premises of Strategic Management. Strategic Management Journal 1991, Vol. 12, p. 449-461. 5. Ansoff H.I., Antoniou P., Lewis A.O.: Strategic management: Introduction to the Ansoffian Approach. Xanedu Press, Michigan 2004. 6. Ansoff H.I., McDonnell E.: Implanting Strategic Management. Prentice Hall, New York 1990. 7. Ansoff H.I., Sullivan P.: Competitiveness through strategic response, [in:] Gilman R. (ed.): Making Organizations More Competitive: Constantly Improving Everything Inside and Outside the Organization. Jossey-Bass, San Francisco1990. 8. Ansoff H.I., Sullivan P.: Managerial Theory of Strategic Behavior of Environmental Serving Organizations. The Macmillan Press LTD, London 1993. 9. Caldart A.A., Ricart J.E.: A Formal Evaluation of the Performance of Different Corporate Styles in Stable and Turbulent Environments. Working Paper, University of Nawarra 2006.

Ansoff s strategic success paradigm 87 10. Chabane H.: Restructuring and performance in Algerian state-owned enterprises: A strategic management study. Unpublished D.B.A. dissertation. United States International University, San Diego 1987. 11. Chandler A.D.: Strategy and Structure. MIT Press, Cambridge, MA 1972. 12. Cyert R., March J.: A Behavioral Theory of the Firm. Prentice Hall, New Jersey 1963. 13. D Aveni R.: Hyper Competition, Managing the Dynamics of Strategic Maneuvering. Free Press, New York 1994. 14. Day G.S., Reibstein D.J.: Wharton on dynamic competitive strategy. John Wiley & Sons, New York 1997. 15. Eisenhardt K., Brown S.: Competing on the Edge: Strategy as Structured Chaos. Harvard Business School Press, Cambridge 1998. 16. Emery E., Trist E.L.: The causal texture of organizational environment. Human Relations 1965, Vol. 10. 17. Galbraith J.: Designing Organizations, An Executive Guide to Strategy, Structure, and Process. Jossey Bass, San Francisco 2002. 18. Hambrick D.C., Mason P.A.: Upper echelons: The organization as a reflection of its top managers Academy of Management Review 1984, no. 9(21), p. 193-206. 19. Hambrick D.C.: The top management team: Key to strategic success, California Management Review 1987, p. 88-108. 20. Hatziantoniou P.: The relationship of environmental turbulence, corporate strategic profile, and company performance. Unpublished D.B.A. dissertation, United States International University, San Diego 1986. 21. Jaja R.M.: Technology and banking: The implications of technology myopia on banking financial performance, A strategic management analysis. Unpublished D.B.A. dissertation, United States International University, San Diego 1990. 22. Leoidou L.C., Katsikeas C.S., Samiee S.: Marketing strategy determinants of export performance: A metaanalysis. Journal of Business Research 2002, no. 55(1), p. 51-67. 23. Lewis A.: Strategic posture and financial performance of the banking industry in California: A Strategic management study. Unpublished D.B.A. dissertation, United States International University, San Diego 1989. 24. March J., Simon H.: Organizations. John Wiley & Sons, New York 1958. 25. Norburn D., Birley S.: The top management team and corporate performance. Strategic Management Journal 1988, no. 9(3), p. 225-238. 26. Miller D.C., Freisen P.H.: Organisations: A Quantum View. Englewood Cliffs, Prentice Hall, New Jersey 1984. 27. Normann R.: Reframing Business. When the Map Changes the landscape. John Wiley and Sons, Chichester 2001.

88 D. Kipley, A. Lewis 28. Salameh T.T.: Analysis and financial performance of the banking industry in United Arab Emirates: A strategic management study. Unpublished D.B.A. dissertation, United States International University, San Diego 1987. 29. Sullivan P.A.: The relationship between proportion of income derived from subsidy and strategic performance of a federal agency under the Commercial Activities Program. Unpublished D.B.A. dissertation. United States International University, San Diego 1987. 30. Zahra S.A., Bogner W.C.: Technology strategy and software new ventures performance: Exploring the moderating effect of the competitive environment. Journal of Business Venturing 1999, no. 5(2), p. 135-173. 31. Zahra S.A., Newbaum D.O., Huse M.: The effect of the environment on export performance among telecommunications new ventures. Entrepreneurship Theory and Practice 1997, no. 22(1), p. 25-46. Reviewers: Dr hab. Agata Stachowicz-Stanusch, Prof. nzw. w Pol. Śl. Prof. zw. dr hab. Mariusz Bratnicki

Mariusz KRUCZEK Silesian University of Technology Department of Organization and Management Institute of Management and Administration PROCESS APPROACH IN SUPPLY CHAIN STRUCTURE ANALYSIS Summary. The aim of the article is the presentation of process approach in supply chain structure analysis. The structure of supply chain, especially the its forming is important possibility for relationship construction between supplier and recipient. Correct process implementation decide about efficiency of cooperation and added value growth for costumers. The article is completed with process maps for supply chain of clothing branch. Keywords: supply chain, process, added value, process map PODEJŚCIE PROCESOWE W ANALIZIE STRUKTURY ŁAŃCUCHA DOSTAW Streszczenie. Celem artykułu jest przedstawienie podejścia procesowego do analizy struktury łańcuchów dostaw. Struktura łańcucha dostaw, a zwłaszcza możliwość jej kształtowania stanowią ważny aspekt budowania relacji między dostawcami i odbiorcami. Właściwie realizowane procesy decydują o efektywności współpracy i wzroście wartości dodanej dla klientów. Artykuł uzupełniają mapy procesów realizowane dla łańcucha dostaw wyrobów odzieżowych. Słowa kluczowe: łańcuch dostaw, proces, wartość dodana, mapa procesu

90 M. Kruczek 1. Introduction Logistics and effective management of the supply chain are important tools of the market game. Appearance of supply chains has led to changes in relations between companies which now are based on common interest, trust and partnership 1. The driving force of the changes that are taking place in the supply chain are needs and requirements of the customers. Their choices influence the processes of the supply chain associated with design of the goods, quality of their manufacture and commencement of their orders. Needs and requirements of the customers necessitate flexibility and prompt supply time. Subduing to the needs of the customer associates with improvements in functioning of businesses which are particular links in the supply chain, as well as with increased benefits for the customers. Therefore, it has become necessary to identify the processes which output is of high value and those which value is low and thus can be outsourced to other companies. Research on the supply chain structure and its assessment conducted in such a way as to look for methods of improvement, which is nowadays one of crucial issues of management. Changes in the supply chain structure undermine functioning of each its link and, consequently, of the whole chain structure. In Polish reality, the problem mainly affects those corporations which did not develop properly formed supply chains after the economic changes period. They found themselves on the edge of bankruptcy due to numerous reasons, such as the breakdown of the Eastern markets, lack of adequately formulated national market strategy, cheap goods flooding the market from outside and increased competitiveness caused by low entry costs for the newcomers in the business. The clothes manufacturing branch of industry was one of those which were affected by the above described factors. The article presents the essential issues of the process approach to the analysis of the supply chain structure. Moreover, it can be extended and supplemented by visualization based on a process map to show the dependencies that take place in the supply chain. 2. Supply chain structure analysis First of all, the analysis of the supply chain is conducted at the formal structure level. For that type of focus, it is recommended to conduct field research comprising e.g. surveillance method, survey study and analysis of the source materials. Information gathered in such way is then supplemented with opinions of experts in a given field who point out factors that 1 Wiliamson L. R., Esper T. L., Ozmet J.: The electronic supply chain. Its impact on current and future structure of strategic alliances, partnerships and logistical leadership. International Journal of Physical Distribution and Logistical Management, Vol. 32, No. 8, 2002.

Process approach in supply chain structure analysis 91 influence creation of supply chains among various companies. That stage of the analysis leads to identifying the companies that become particular links of the supply chain. Such analysis is necessary as once a simple supplier receiver relationship has evolved with many additional indirect links. Moreover, the number and scope of activities those middlemen companies perform constantly changes and such a structure is very difficult to identify and, even more, to be managed. Identified participants of the supply chain are interconnected with various relations. Such relations can be described from the formal point of view, in which it is possible to assess the position of the company as a chain link in the whole structure. Such assessment allows for further establishment of dependencies between the particular links and strength of their mutual influence and dependence on other links. Establishment of the formal structure is a starting point for further research of flow structure of the supply chain. Processes executed in companies are usually parts of one, bigger process which stretches over the whole supply chain. The analysis of processes present in the supply chain and their relations to the process of creation of the added value is presented further in this article. Figure 1 shows the research procedure for the formal and flow structures of the supply chain. In order to design a supply chain model, it is essential to put the chain links in a clear structure with explicitly assigned functions for each company. That can be achieved with use of a chain model described with M. Porter's value or with use of the morphological approach 2 analysis. The supply chain structure described with use of the M. Porter's approach, should reflect the real structure of the supply chain and should allow to identify the processes which create the added value. M. Porter's value chain comprises strategically important processes connected with creation of the added value, simultaneously pointing out the essential ones, which create the added value in a direct way. At the same time, the method classifies supplementary processes, which support creation of the added value. The result of the supply chain analysis performed with use of the value chain model is preliminary elimination of intermediary companies that do not create the added value. That, in turn, saves a lot of work on analysis of processes and activities performed in supply chains. The identification procedure comprises the following actions 3 : 1. Isolation of action sequences subdued to services provided for a particular type of receivers. The purpose of this stage is identification of internal value chains in a given organization. 2 more in Kruczek M.: Identyfikacja struktury łańcucha dostaw, [w:] Matuszek J.: Metody i techniki zarządzania. Wydawnictwo ATH, Bielsko Biała 2006. 3 Czakon W.: Łańcuch wartości w teorii zarządzania przedsiębiorstwem. Wydawnictwo AE Katowice, Katowice 2004.

92 M. Kruczek 2. Creation of a chronological list of all activities performed to provide services for a given type of customers. A chronological order ensures that no activity is omitted. 3. Grouping of activities in actions different as far as the technological and economic scope of performance is concerned for a given company. 4. Establishment of relations and vectors between separated activities, which leads to identification of connections. 5. Designing a graphics model in order to verify and assess validity of the created representation of the activities system in a given company. Morphological analysis Observation Observation Porter s value chain Expert s opinion Map of processes Value stream analysis ANALYSIS OF SUPPLY CHAIN SUBIECTIVE STRUCTURE ANALYSIS OF SUPPLY CHAIN FLOW STRUCTURE Companies selection for research Identification of processes in supply chain Interactions between company and other suppliers Identification of adjusted supply chain structure Time flow estimation in supply chain Identification of value adding processes Flows in supply chain Processes in supply chain (map of processes) Adjusted supply chain structure (map of relations) Fig. 1. The procedure of object and flow supply chain structure analysis Rys. 1. Procedura badania struktury podmiotowej i przepływowej łańcucha dostaw Source: Own study. Morphological analysis can be of slightly different importance in the process of establishing the supply chain model, as it allows for simultaneous design of numerous supply chain models. Among those models, there exists one which reflects the existing supply chain

Process approach in supply chain structure analysis 93 and many others, which may reflect supply chains present in other companies. Moreover, research conducted with use of the morphological analysis approach allows for creation of models of supply chain structures which do not have any real counterparts, yet may be found useful in future as a starting point of a supply network reconfiguration procedure or to build bases for new development strategies of supply chain management. Models created in such a process can be then verified and evaluated with use of a group of experts assessment method. The morphological analysis method allows for identification of the formal structure of the supply chain because it requires unique configuration of company structure for every branch of industry. Yet, in each case, identification of elements can prove to show some variations in each case, particularly due to differences in the subject of the flow sequence, i.e. different goods. Research of the supply chains structure allows to obtain a clear mutual relationship map of the supply chain. Such designed map of relations comprises the most important relations between particular links of the chain and its environment, as well as between the central link of the chain and other links. Due to the fact that the relationship map depicts feeds and results of flow actions between particular links and branches, it subsequently presents what happens in the white space, that is between the rectangles of a classic company organization diagram. Relationship maps are mainly used for understanding the real conduct of works in researched areas and to identify crucial problems that occur in the places where particular links and branches interconnect. It helps to reveal irrelevant connections, wrongly directed feeds or results. The relationship map is a starting point for a more detailed analysis conducted in the supply chain and for each link of the process. 3. Supply chain as a group of processes In order to deepen the analysis of the supply chain it is necessary to identify and examine the processes and activities executed in a given chain. That stage of research results from necessity of identifying places in which waste of time and resources due to worthless actions occurs. For the purpose of that stage, the following elements can be used: process maps, reference models and other tools of business process analysis 4. Most of all, use of tools which visualize processes executed in the supply chain allows for better management of those processes. It especially helps to find solutions for the issue of sub-optimization in traditional hierarchical structures. From the point of view of executed processes, the analysis of the supply chain is customer-oriented and aims at elimination of boundaries that exist between functions played by particular links and in the chain as entirety. The essence of changes that

94 M. Kruczek occur in the supply chain and particular links is to treat them as a set of processes. The process approach, initially used at the operational level to optimize actions executed at each work post separately, becomes a way of identification for actions which aim at achieving advantage over the competition and creating the added value from points of view of various enquirers, and the customer in particular. The available literature 5 proves the process analysis to be particularly effective, as that approach allows for fast and radical re-design and improvement of strategically-important processes, i.e. those that are directly connected with creation of the added value in the company itself. The process approach to management of a company allows for execution of research in the organization, assuming continuous improvement and adjustment to the needs of customers, which becomes a starting point for the analysis of needs and improvements in subsequent stages of the processes. Advantages of the process approach are as follows 6 : better understanding of dependencies which occur and should occur between the organization and the customer, the employees understand and notice their role and influence of their participation on the results of the company activities, reduced number of errors which can occur during execution of a process owing to elimination of delays and unnecessary delegation of actions from one employee to another, easier assignment of authorities and responsibilities for the executed tasks, limitation of detailed supervision over the executed tasks in favour of supervision over the whole process, possible detection of discontinuity of executed processes, detection of processes which exceed boundaries between functional activities, untroubled co-existence with the present organizational structure, as: the process approach does not change the direction of the actions performed by the organization, does not require changes in dependency-subordination relationships in the structure, does not change the scope of authority and responsibility in the organization, allows for rational use of resources present in the organization. The process approach to the research of the supply chain starts with identification and analysis of the key processes. Knowledge of the mechanisms of functioning that exist in the 4 Kasprzak T. (red): Modele referencyjne w zarządzaniu procesami biznesu. Difin, Warszawa 2005. 5 Durlik I.: Restrukturyzacja procesów gospodarczych reengineering teoria i praktyka. Placet, Warszawa 1998

Process approach in supply chain structure analysis 95 whole supply chain and in each link is dispersed and must be integrated through gathering and confronting data. There are ready solutions which can help to identify processes, their principle of work is decomposition of actions on the basis of a general chain model of the added value. In such way, a universal scheme of process classification is created, which allows for distinguishing of seven basic and six supplementary processes at the corporate level (Fig. 2). Subsequently, the identified processes undergo a more detailed analysis and then are classified according to previously assumed criteria. Classification of the processes is simple as various criteria can be assumed to distinguish between them. In general, those can be summed up as two trends 7 : related to the whole process (continuity sequence), related to a fragment of the whole process (chosen activities). Human resources development and management Financial and physical resources management Clients and market research Information management Vision and strategy creation Product project Ecological environment management programs Connections management with environment Change management Marketing and Sale Product production and distribution Product production and distribution Fracturing and service Fig. 2. Process orientated enterprise Rys. 2. Przedsiębiorstwo zorganizowane procesowo Source: Brillman J.:, Nowoczesne koncepcje i metody zarządzania. PWE, Warszawa 2002. Among most frequently used criteria for classification of the processes are: process hierarchy, type and subject of the flow and its relationship with creation of the added value. The hierarchical criterion shows processes that occur in the company at various levels of aggregation. In such system, complex processes can be transcribed into more simple ones, down to the level of single activities and elementary actions. The level of detail in presentation depends on the needs of a particular analysis. Division of processes according to the subject and type of flow differentiates between the processes of various object and type of 6 Brillman J.: Nowoczesne koncepcje i metody zarządzania. PWE, Warszawa 2002. 7 Blaik P.: Logistyka. PWE, Warszawa 2001.

96 M. Kruczek activity, which, in turn, allows for assessment of properties and structure of activities and processes. From the point of view of the analysis of supply chains, the most important is division of processes due to their relation with the added value. The processes that occur in the company can have influence on the added value or can have no relation with it whatsoever. The latter kind of processes should be eliminated whenever possible. Relationship between the processes and increase of the added value lays at the basis of effectiveness assessment for those processes and the organization as a whole. While verifying efficiency of a given organization as a whole or a chosen part of it, choosing a specific method of description for the ongoing processes is a crucial step. Creation of value is in the available logistics literature treated as the proper transformation process 8. Its essential aim is to achieve positive market value. The creation chain for the added value joins its links or phases of the transformation process, during which the product is executed from the starting point and until it reaches the end user. In such case, the chain of value creation is purposed at distinguishing those processes of the supply chain which influence creation of the added value and is based on the value chain model. Taking that into assumption, P. Schuderer categorizes the value creation processes taking into focus their relationship with the customer. He distinguishes between the following types of processes 9 : primary, directly connected with the customer and thus directly creating the added value, secondary, indirectly connected with customers and indirectly creating the added value, third-rate, with general and relative connection with the customer and creation of the added value, with no connection with the customer or no positive influence on increase of the added value. Furthermore, primary processes can be divided into main and supplementary types. Main processes are executed in close relationship with the customer, require direct contact with him and their result in the customer receiving a product of higher value than the products of the competition. Such processes include: design and creation of new products, minimization of costs in the supply chain, execution of orders, product shipment, etc. Supplementary processes which also create primary processes are derivatives of main processes and are triggered by them. Those include: assembly, preparation for production, activities related to flow of production materials, etc. Secondary processes support the primary processes and 8 Blaik P.: op. cit. 9 Schulderer P.: Prozessorientierte Analyse und Rekonstruktion logistischer Systeme. Konzeption Methoden Werkzeuge. Galber Verlag, Deutscher Universitäts Verlag, Wiesbaden 1996.

Process approach in supply chain structure analysis 97 indirectly positively influence creation of value. Those processes can be: quality control of purchase, predictions, staff development, etc. Third-rate processes are those with no direct connection to the primary processes, however playing some role in the process of value creation. Their importance for the process of creation does not manifest during their course of action but only after some time, due to their position in the hierarchy. Among those can be named such processes as: research and development, public relations, improvements in health and safety of work, etc. The last group includes processes which do not add any value, that is having no connection with the customer. Those include such processes as: processing complaints, repetition of some activities, stoppages, etc. Those processes result in waste of resources of the organization and do not increase the value of the product. Efforts aimed at their identification are the basic principles of improvement both the company and its supply chain. Distinguishing between processes which create and do not create the added value and their analysis in co-relation to the customer allows for better knowledge of needs and expectations of the customer. Such division is a foundation for strategic decisions and introduction of changes in the whole supply chain and stretches over the whole chain of classified processes. Therefore, integration of the supply chain around the process of creation and delivery of value can be observed in such case. One of the most universal tools used for description of processes that occur in an organization is a process map, that is a graphical representation of operations executed as parts of that process. Such map is used for analysis of complex processes in various functional areas of corporations 10. Creation of a process map begins with identification of all subjects-participants of the process. Identified elements of the process are depicted in a column chart. In such way, a general scheme of the structure of a researched object and its level of organization is created. Then, taking the organization structure as a starting point, an analysis of tasks and activities executed in the organization is conducted, which results in a process scheme. Decomposition of executed activities into particular elements of the organization structure allows to create a description of the process conduct for transformation of chosen flows (feeds) in particular activities executed by those elements of the structure, up to the point where a final result of the process is achieved. Therefore, the map shows involvement of each element of the structure in execution of a given task or action, thus allowing for assessment of that involvement both in terms of the end result (process exit) and in terms of required feed (process entry) and involvement of own resources. The author has attempted to map processes of more than one organization in order to show creation of the 10 Witkowski J., Zarządzaniem łańcuchem dostaw. PWE, Warszawa 2003.

98 M. Kruczek added value in relation to the supply chain. General course of flow for such process between different organizations can be then shown as in the figure 3. A B C P M F P M F P M F Realizacja Order zamówienia realization Zamówienia złożone Customer przez order klienta Fig. 3. Process realization in many enterprises. Rys. 3. Przebieg procesu przez kilka organizacji Source: Own study based on Manganelli R., Klein M.: Reengineering. PWE, Warszawa 1998. 4. Analysis of supply chain in the clothes manufacturing industry For the purpose of research conducted on the supply chain in the clothes manufacturing industry, the following division of its structure was assumed, which allows to detect the most important processes that occur there and, at the same time, to preserve relations between particular links of the supply chain. General level describes relations at the highest aggregation level of the supply chain. The supply chain structure has been shown as a scheme with connections between particular links. It can serve as a starting point for presentation of flow vectors and main purposes of the processes (Figure 4 map of relations). Real process level shows connections between the flow of information and authorities and management levels in each company of the process. The chosen process shows resources used in its execution, the conduct in particular areas of the chain and influence of particular links on the overall performance (Figure 5 map of processes).

Process approach in supply chain structure analysis 99 Single process level (for work posts) is the lowest level at which the analysis of processes should be conducted. The processes executed at that level are the most basic activities that can be performed. Fig. 4. Relations map in supply chain of clothes manufacturing industry Rys. 4. Mapa relacji łańcucha dostaw branży odzieżowej Source: Kruczek M.: Metody szacowania wartości dodanej w łańcuchach dostaw przemysłu odzieżowego, Rozprawa doktorska, Zabrze 2007.

100 M. Kruczek Mapa procesu łańcucha dostaw Marketing Marketing Sfera Sfera dystrybucji dystrybucji Klient Klient Pośrednik Pośrednik transport transport Zagraniczni Zagraniczni kontrahenci kontrahenci 1G Prognozy sprzedaży Przygotowanie kampanii reklamowej dla nowej kolekcji Udział w akcjach promujących nowe kolekcje Informacje o akcjach promocyjnych Wybór kontrahenta do realizacji kontraktu przerobowego Prospekty informujące o akcjach promocyjnych materiały reklamowe Wypełnianie ankiet i informacja o oczekiwaniach i preferencjach Udział w akcjach promujących nowe kolekcje Złożenie zamówienia przerobowego Udziały w pokazach mody organizacja własnych pokazów Informacja o oczekiwaniach i preferencjach Ogłoszenia w mediach Zbieranie danych o oczekiwaniach rynku i doskonalenie planu marketingowego Opracowanie planu wycofania kolekcji z ubiegłych sezonów 11 Zaopatrzenie Produkcja Produkcja Finanse Finanse Eksport Eksport Sprzedaż/ Sprzedaż/ Logistyka Logistyka P P 3 1C Ustalenie planu sprzedaży na rynek krajowy Przyjęcie informacji o planach sprzedaży Plan sprzedaży eksportowej Opracowanie planu produkcji 1F 3A Analiza wiarygodności finansowej kontrahenta i ustalenie warunków płatności Przekazanie informacji o zapotrzebowaniu na materiały do produkcji Przyjęcie informacji o zapotrzebowaniu na materiały OPRACOWANIE ZAMÓWIENIA ZAGRANICZNEGO Kontrola stanów magazynowych Plan obciążenia dysponowanych mocy produkcyjnych Plan zapotrzebowania materiałowego Moce wystarczające NIE 5 6 TAK 8 Fig. 5. Relations map in supply chain of clothes manufacturing industry Rys. 5. Fragment mapy procesów dla łańcucha dostaw branży odzieżowej Source: Kruczek M.: Metody szacowania wartości dodanej w łańcuchach dostaw przemysłu odzieżowego, Rozprawa doktorska, Zabrze 2007.

Process approach in supply chain structure analysis 101 The presented process map for the supply chain in the clothes manufacturing industry focuses around a leader company which is responsible for preparation of the commercial offer, execution of the manufacturing process and distribution of the products among the customers. The conducted analysis of the processes executed in the supply chain allows for assessment of those which do not create any value for the end receiver and thus can be eliminated. Improvement of processes from the point of view of the whole supply chain is complex, as changes in one link influence other links and therefore such subsequent changes should also be taken into account. As it often occurs, improvements which purpose was to introduce positive changes, can output as negative consequences for the whole process and can worsen the relationship between the suppliers and the receivers. 5. Summary Analysis of processes in the supply chain allows for designing such model of its functioning that can be subsequently used for identification of strategies and actions aimed at creation of the added value in the company and can help in describing resources, their place in the chain and their involvement in the execution of processes. Therefore, the process analysis of the supply chain structure is the first step in understanding the possibilities which can improve effectiveness of its functioning. An important concept which exemplifies such possibilities is the idea of time adding value and time not adding value. Even though some activities do not add any value, they are sometimes necessary to perform due to the design and flow of the analyzed process. However, they still incur costs and should be eliminated if possible. Gathering information on activities performed in the company should result in designing such a map of processes executed there as to achieve their integration and increase efficiency of functions performed by the organization. In order to achieve such results, particular techniques can be used, those including: creation of the process model enables graphical representation of the process, the related sub-processes and consecutive actions ordered chronologically. That allows to find all resources fed to the process, its products and basic factors that influence its possible success, a map of the organization used for analysis and recording of relationships between the present functional structure, executed tasks, responsibilities and the process itself, analysis of the added value created by the process allows to put the processes in an orderly sequence, according to their potential influence on realization of the aims in the organization.

102 M. Kruczek Bibliography 1. Bendkowski J., Pacut M.: Logistyka stosowana. Wydawnictwo Politechniki Śląskiej, Gliwice 2006. 2. Blaik P.: Logistyka. PWE, Warszawa 2001. 3. Branche A., Rummler G.: Podnoszenie efektywności organizacji. Jak zarządzać białymi plamami w strukturze organizacyjnej. PWE, Warszawa 2000. 4. Brillman J.: Nowoczesne koncepcje i metody zarządzania. PWE, Warszawa 2002. 5. Czakon W.: Łańcuch wartości w teorii zarządzania przedsiębiorstwem. Wydawnictwo AE Katowice, Katowice 2004. 6. Durlik I.: Restrukturyzacja procesów gospodarczych reengineering teoria i praktyka. Placet, Warszawa 1998 7. Kasprzak T. (red.): Modele referencyjne w zarządzaniu procesami biznesu. Difin, Warszawa 2005. 8. Kisperska Moroń D. (red.): Pomiar funkcjonowania łańcuchów dostaw. Wydawnictwo AE Katowice, Katowice 2006. 9. Kruczek M.: Identyfikacja struktury łańcucha dostaw, [w:] Matuszek J.: Metody i techniki zarządzania. Wydawnictwo ATH, Bielsko-Biała 2006. 10. Kruczek M.: Metody szacowania wartości dodanej w łańcuchach dostaw przemysłu odzieżowego, Praca doktorska, Zabrze 2007. 11. Nowicka Skowron M.: Efektywność systemów logistycznych. PWE, Warszawa 2000. 12. Porter M.: Porter o konkurencji. PWE, Warszawa 2001. 13. Schulderer P.: Prozessorientierte Analyse und Rekonstruktion logistischer Systeme. Konzeption Methoden Werkzeuge. Galber Verlag, Deutscher Universitäts Verlag, Wiesbaden 1996. 14. Wiliamson L. R., Esper T. L., Ozmet J.: The electronic supply chain. Its impact on current and future structure of strategic alliances, partnerships and logistical leadership. International Journal of Physical Distribution and Logistical Management, Vol. 32, No. 8, 2002. 15. Witkowski J.: Zarządzaniem łańcuchem dostaw. PWE, Warszawa 2003. Reviewers: Prof. dr hab. inż. Józef Bendkowski Prof. dr hab. inż. Włodzimierz Sitko

Tony LINGHAM Case Western Reserve University, Cleveland Weatherhead School of Management Department of Organizational Behavior A LEARNING NEEDS THEORY OF MOTIVATION: HIGHLIGHTING UNDERLYING NEEDS FROM LEARNING STYLES AND THEIR RELATION TO WORK MOTIVATION Summary. Learning styles are tendencies or preferences in terms of grasping and transforming knowledge. However, having worked with Experiential Learning Theory and learning styles for more than a decade, we observed that individuals highlight consistent underlying needs associated with each of the four learning styles that have been mislabeled as personality problems. In this paper, we propose a Learning Needs Theory of Motivation based on these underlying needs and their relation to the emergent research on work motivation. We also present simple but powerful exercises in organizational and educational settings to facilitate discussions that raise awareness and deepen understanding of learning needs. We believe that reframing tendencies and preferences in each of the learning styles into underlying needs that have to be met corresponds to the definition of work motivation as a phenomenon involving intrapersonal and interpersonal (and group) dynamics, cognitive and affective processes, and needs. Keywords: experiential learning, work motivation, learning styles, teams, needs TEORIA MOTYWACJI OPARTA NA POTRZEBACH UCZENIA: KLASYFIKACJA POTRZEB ZE WZGLĘDU NA STYLE UCZENIA SIĘ I ICH ODNIESIENIA DO MOTYWACJI PRACY Streszczenie. Style uczenia się są skłonnościami lub preferencjami w kontekście pozyskiwania i przekształcania wiedzy. Jednakże, pracując przez ponad dekadę nad Teorią Eksperymentalnego Uczenia i stylami uczenia się, Autor zaobserwował, iż jednostki wyróżniają spójne potrzeby związane z każdym z czterech styli uczenia się, które niesłusznie określano jako problemy osobowościowe. W niniejszym artykule zaproponowano Teorię Motywacji Opartą na Potrzebach Uczenia się, której podstawę

104 T. Lingham stanowią te wyróżnione potrzeby i ich relacja w stosunku do wyłaniających się badań nad motywacją pracy. Zaprezentowano również proste, lecz skuteczne, ćwiczenia w warunkach organizacyjnych i edukacyjnych, służące ułatwieniu dyskusji, która podnosi świadomość i pogłębia rozumienie potrzeb uczenia się. Autor artykułu wierzy, że ponowne ujęcie skłonności i preferencji w każdym ze stylów uczenia się podkreślające potrzeby, które mogą korespondować ze zdefiniowaną motywacją pracy, jest zjawiskiem uwzględniającym intra- i interpersonalne (oraz grupowe) zmiany, poznawcze i afektywne procesy oraz potrzeby. Słowa kluczowe: teoria motywacji, style uczenia się, motywacja pracy 1. Introduction Organizations and educational institutions have used learning styles to help leaders, managers and students develop self awareness in terms of their preferences in grasping and transforming knowledge. Although Experiential Learning Theory or ELT 1 and the Learning Style Inventory or LSI 2 have been used in such settings and established as one of the more influential theories that is used in managerial and leadership development programs, 3 our work involving ELT and using the LSI over the past decade as faculty, researchers and educators/trainers in executive education surfaced a simple yet profound consistency of underlying needs associated with the four learning styles that have not been explored and linked to work motivation. In this paper, we propose that understanding the underlying needs for each of the learning styles can be very useful when working in teams or when working with others. More explicitly, we argue that learning styles and work motivation are intrinsically tied. The structure of this paper begins with a brief overview of motivation theories highlighting the emergent stream of work motivation and the necessity to include learning needs. We then briefly discuss ELT and learning styles (see Lingham 4 for a more detailed description that includes integrative development). Finally we present the needs associated with each of the learning styles and propose how understanding this can help us motivate others in organizational and educational settings. 1 Kolb D.A.: Experiential learning: Experience as a source of learning and development. Englewood Cliffs, Prentice-Hall Inc., New Jersey 1984. 2 Kolb D.A.: The Kolb learning style inventory. TRG Hay/McBer, Boston 1999. 3 Vince R.: Behind and beyond Kolb s learning cycle. Journal of Management Education 1998, no. 22(3), p. 304-319. 4 Lingham T.: Experiential learning theory, [in:] Clegg S., Bailey J.R. (eds.): International Encyclopedia of Organization Studies. Sage Publications, Thousand Oaks, CA 2008.

A learning needs theory of motivation 105 2. Motivation Theories and Work Motivation Victor Vroom 5 defines motivation as a process controlled by the individual in making behavioral choices that lead to desired results. In a more recent definition, Latham and Pinder 6 define motivation as a psychological process resulting from the interaction between the individual and the environment. Underlying these definitions are two fundamental components of motivation: what motivates people and why people behave the way they do. Although numerous motivation theories exist, they can be categorized into these two fundamental components: content theories (i.e., what motivates people) and process theories (why people behave the way they do) 7 Dolan and Lingham 8 assert that content theories stem from the understanding of motivation that is based on the attempts to satisfy unmet needs. Examples of content theories are Maslow s Hierarchy of Needs, 9 Alderfer s ERG Theory 10 ; McClelland s Socially Acquired Needs Theory 11 and Herzberg s Motivator-Hygiene Theory. 12 Process theories, they argue, are concerned with explaining the behavioral and thought processes through which individuals attempt to satisfy their needs. Examples of process theories include Expectancy Theory, 13 Goal Setting Theory, 14 and Equity Theory. 15 Drawing from these foundational works on motivation, researchers have recently identified work motivation as an area relevant to management and organizational behavior research. 16 Identified as one of the key issues in organizational behavior research, 17 work 5 Vroom V.: Work and Motivation. John Wiley & Sons, New York 1964. 6 Latham G.P., Pinder C.C.: Work motivation theory and research at the dawn of the twenty-first century. Annual Review of Psychology 2005, no. 56, p. 485-516. 7 Dolan S., Lingham T.: Fundamentals of international organizational behavior. Chandos Publishing (Oxford) and New Delhi, India: Sara Books Pvt. Ltd, Oxford, UK 2008. 8 Ibidem, p. 56. 9 Maslow A.H.: A theory of human motivation. Psychological Review 1943, no. 50, p. 370-396. 10 Alderfer C.P.: Human needs in organizational settings. Free Press, New York 1972. 11 McClelland D.C.: Achievement motivation can be learned. Harvard Business Review 1965, no. 43, p. 6-24. 12 Herzberg F.: Work and the nature of man. World Publishing Company, Cleveland 1966. 13 Vroom V.: op.cit. 14 Locke E.A., Latham G.P.: Theory of goal setting and task performance. Prentice-Hall, Englewood Cliffs, New Jersey 1991. 15 Adams J.S.: Toward an understanding of inequity. Journal of Abnormal and Social Psychology 1963, no. 67, p. 422-436. 16 Pinder C.C.: Work motivation in organizational behavior. Prentice Hall, Upper Saddle River, New Jersey 1998; Van Knippenberg D.: Work motivation and performance: A social identity perspective. Applied Psychology: An International Review 2000, no. 49(3), p. 357-371; Eccles J.S., Wigfield A.: Motivational beliefs, values and goals. Annual Review of Psychology 2002, no. 53, p. 109-132; Latham G.P., Pinder C.C.: Work motivation theory and research at the dawn of the twenty-first century. Annual Review of Psychology 2005, no. 56, p. 485-516; Curral L., Marques-Quniteiro P.: Self-leadership and work role innovation: Testing a mediation model with goal orientation and work motivation. Revista de Psicologia del Trabajo y de las Organizaciones 2009, no. 25(2), p. 165-176. 17 Van Knippenberg D.: op.cit.

106 T. Lingham motivation has been defined as a phenomenon that involves both intrapersonal and interpersonal dynamics; 18 involving both cognitive and affective processes; 19 and as a function of needs, values and beliefs 20 and goals with action. 21 In this paper, we propose that this emergent stream of research should include a Learning Needs Theory as learning styles do affect intrapersonal and interpersonal (and group) dynamics; involve cognitive and affective modes of learning; and also involve consistent underlying needs associated with each style. 3. Experiential Learning Theory Experiential Learning Theory or ELT is a learning process involving the combination of grasping and transforming knowledge through experience. 22 The theory presents two ways in which we grasp knowledge: Apprehension and Comprehension (presented as the vertical axis); and two ways in which we transform knowledge: Intension and Extension (presented as the horizontal axis). Grasping knowledge. Apprehension and comprehension are two key aspects central to the theory of Experiential Learning and represent the dialectically related ways in which we grasp knowledge. The Apprehension-Comprehension dialectic is derived from dual knowledge theory, which states that there are two, yet inseparable ways, of knowing: Concrete and Abstract. This dialectic can be stated as the emotional-conceptual dialectic 23. We grasp experience by either being involved through Apprehension using the concrete experience (or CE) learning mode or Comprehension using the abstract conceptualization (or AC) learning mode. The CE mode is one where we interact with our environment through immersion, experiencing it with our senses, 24 feelings and emotions. 25 On the other hand one can also grasp knowledge through the AC mode by exercising one's cognitive capacities instead of senses and/or emotions. We can think about, analyze and theorize to gain 18 Pinder C.C.: op.cit. 19 Curral L., Marques-Quniteiro P.: op.cit. 20 Latham G.P., Pinder C.C.: op.cit. 21 Eccles J.S., Wigfield A.: op.cit. 22 Kolb D.A.: Experiential, op.cit. 23 This emotional-conceptual dialectic corresponds to the affective and cognitive process inherent in work motivation (Curral & Marques-Quinteiro, 2009). 24 Ittelson W.H., Cantril H.: Perception: A transactional approach. Garden City, Doubleday & Company, Inc., New York 1954; Donceel J.F.: Philosophical psychology. Sheed and Ward, Inc., USA 1963. 25 Dalgleish T., Power M.: Handbook of cognition and emotion. John Wiley & Sons Ltd., England 1999; Ekman P., Davidson R.J.: The nature of emotion: Fundamental questions. Oxford University Press, New York 1994.

A learning needs theory of motivation 107 knowledge without being immersed in the environment. Comprehension is defined as Abstract Knowing, which is experienced as the linguistic, conceptual, interpretive process based in the newer left cerebral cortex of the brain. 26 Transforming knowledge. Apart from how knowledge is grasped, Kolb 27 articulates that the transforming of knowledge is also central to the theory of Experiential Learning. Simple perception of experience alone is not sufficient for learning; something must be done with what we have taken in, or grasped. Intension is the act of reflecting on or observing some state or experience whereas extension is the actual action deliberate or experimental that will generate new states and experiences. This dialectic involves the praxis of action and reflection 28. We transform knowledge by either being involved through the reflective observation (or RO) learning mode or the active experimentation (or AE) learning mode. The RO mode is one where we incorporate diverse perspectives from the knowledge we gained through reflection or observation. The dialectical related AE mode is one where the focus is to do something about the knowledge we gained. 4. Learning styles The combination of preferred modes for grasping and transforming knowledge is highlighted as an individual s preferred learning style. Such a combination creates four learning styles. Kolb 29 asserts that learning is maximized when an individual goes through all four modes of learning beginning at a mode that is reflective of that individual s learning style. It is when we interact with others that we may notice they also have such learning tendencies. As we progress into adulthood, we develop certain predispositions or preferences for how we grasp and transform knowledge. This tendency to choose certain learning modes is indicative of a preferred learning style. A brief description of each style is discussed. Diverging. An individual with a diverging learning style tends to choose the CE mode in grasping information and the RO mode in transforming knowledge. Such individuals tend to be personally involved in any situation or event and are sensitive to feelings and people. Individuals with a diverging learning style also tend to view issues from many and/or different perspectives, look for the meaning of things and also carefully observe a situation 26 De Bono E.: The mechanism of mind. Simon and Schuster, New York 1969; Gazzaniga M.: The social brain: Discovering the networks of the mind. Basic Books, New York 1985. 27 Kolb D.A.: Experiential, op.cit. 28 This dialectic of action and reflection corresponds to the goals with action aspect inherent in Eccles and Wigfield s (2002) review of motivation. 29 Kolb D.A.: Experiential, op.cit.

108 T. Lingham before making any judgments. Their interest in knowledge and idea generation is the reason for such a style to be labeled as diverging. As such, they tend to do well and even thrive in situations that involve the bringing together of diverse perspectives such as brainstorming. Their passion for gathering information is ideal for tasks or work involving creativity or the arts, entertainment and service. Such people also tend to be imaginative, have the ability to listen with an open mind, and to function as excellent team players. In a classroom setting, discussion forums work well for individuals having diverging learning styles. Assimilating. Individuals with an assimilating learning style tend to use the AC mode to grasp knowledge and the RO mode for transforming knowledge. People with this preferred style tend to look at diverse perspectives but with a specific intention to understand and to distill information to seek clarity and precision. They tend to logically analyze ideas, and to plan systematically. People with this learning style have a tendency to remove themselves emotionally and instead seek to understand situations intellectually. Their focus on achieving clarity make them thrive in tasks or work areas involving theories, and ideas that promote precision such as the sciences, research and development and most academic environments. They tend to work well on their own and have very high standards in their work. In a classroom setting, assigned readings, listening to lectures and developing conceptual models work well for individuals with this preferred style. Converging. Sharing the preference for the AC mode in grasping knowledge with the assimilating learning style, people with a converging learning style tend to also prefer the AE mode in transforming knowledge. Individuals with this learning style have an interest in not just understanding a situation or event but they also want to be able to take action using this knowledge. Unlike individuals that focuses on the soundness of a theory (those with assimilating learning styles), an individual with a converging learning style focuses on the practicality of theoretical models. Their propensity to use ideas to solve problems makes them ideal for careers in technology, engineering, and design. As such, they prefer to work with technical tasks than to deal with social problems or interpersonal issues. Individuals with converging learning styles thrive when they are given tasks with clear parameters or boundaries. In a classroom setting, using case studies, simulations and laboratory assignments work well for people with converging learning styles. Educational environments that focus on examinations and tests also align with the converging learning style. Accommodating. Individuals with an accommodating learning style tend to prefer immersing themselves in the CE mode to grasp knowledge and the AE mode to transform knowledge. Similar to individuals with diverging learning styles, those with accommodating learning styles tend to be sensitive to feelings and people as they are concerned about relating to others. However, people with this learning style are also very focused on being able to get

A learning needs theory of motivation 109 things done, taking risks and influencing people through action. They tend to accommodate (or adapt) to the environment they are immersed in. Such individuals focus on having handson experience as their primary mode of interacting with their environment, tending to act on their gut rather than using logical analysis. They also do well in tasks or jobs related to sales, marketing and management due to the emphasis on action or getting things done. As with the diverging learning style, those with an accommodating learning style also like to work in teams but with the focus on getting things done, completing a project or doing field work. In a classroom setting, completing assignments, fulfilling tangible tasks and doing presentations work well for individuals with this preferred style. 5. A Learning Needs Theory of Motivation As Experiential Learning Theory 30 is considered one of the more influential theories used or referenced to in leadership and managerial development programs, 31 proposing a Learning Needs Theory of motivation as a perspective to understand work motivation would be necessary, critical and perhaps also contribute to our understanding of how to effectively work in teams. We present the four learning styles to showcase the different underlying needs for each. People with balanced or centered learning styles would be able to work with what the situation or task requires (i.e., having flexibility or comfort to work with what is best for the situation) and do not get stuck with getting frustrated if underlying needs are not met. Another point to understand is that ELT is a dynamic theory suggesting that people can develop learning flexibility and this is largely possible by understanding how to motivate others with different learning styles or to work in environments that emphasizes particular learning styles (for example, engineers and designers tend to function in a converging environment as they work with parameters or clients needs and researchers tend to function in an assimilating environment). Based on the combination of learning modes (one from grasping knowledge and the other from transforming knowledge), we revisit the four learning styles highlighting their unique underlying needs: Diverging. Individuals who prefer diverging learning style are motivated by information. In a work environment, such people tend to throw out information to ensure that different perspectives, thoughts or ideas are considered. Such individuals, however, are not wedded to their ideas. The need to ensure that as much information as possible is considered important to individuals with diverging learning styles. They would ask questions such as Have we 30 Kolb D.A.: Experiential, op.cit.

110 T. Lingham considered this idea?, or What about looking at this from another angle? In short, people with diverging learning styles have an underlying need to work with, uncover or entertain information. Assimilating. Individuals with this preference need to seek clarity and precision in what they do. In a work environment, such people tend to focus on why they are doing a task. They need to have a clear idea of the purpose or rationale concerning the task, product, or deliverable. Even goals or objectives need to be made clear to them or they will ask questions to achieve clarity. They tend to ask questions like Why are we doing this?, or Can you help us understand this objective?, or How does this align with the overall goal of the organization? In short, people with assimilating learning styles have an underlying need for clarity and understanding the purpose of any task given to them. Converging. Individuals with this learning style function well when they are given parameters, guidance or expectations along with the task. Such individuals need to work around knowing what is expected of them or what their clients/customers need. They will ask expectation related questions such as How long do we have to complete this task?, or Can you let us know what is it that you are expecting from us?, or I need to know what the clients really wants so that we can give them what they want. Without some sense of parameters, guidance or expectations, they would feel lost and even frustrated. In short, people with converging learning styles have an underlying need for parameters when embarking on any task assigned to them. Accommodating. Individuals with this preference tend to push for action and need to have a sense that they are doing things to accomplish a task. Such individuals love to work fast and come across as dynamic and quick in what they do. They react adversely to having to deal with questions or clarifications as they feel like these behaviors stall or hinder the momentum of action. They will ask questions like Can we move along?, or Do we need to have such lengthy discussions? We need to push on and start working on the project/task., or they may make statements like Don t worry about details. We will work it out as we progress through the task. Such individuals love to work fast and as such are not concerned about being mired in clarity or details. In short, people with accommodating learning styles have an underlying need for action. 31 Vince R.: op.cit.

Learning Styles a Diverging Assimilating Converging Accommodating Underlying Needs of Different Learning Styles, Related Work Foci and Developmental Suggestions Underlying Need Information: Work with, uncover or entertain information. Gathering information from diverse sources Clarity/purpose: Understanding purposes behind tasks and knowing why suggestions or objectives are important Parameters: Requirements, guidelines or expectations related to tasks. Action: Working fast and being efficient. Examples of Tasks that Align with Learning Styles Market research; Bench marking; Brainstorming; Managing teams and dealing with multiple opinions; Creating lively discussions; and Working with cross-functional task/projects. Clearly defined projects; Setting clear goals and objectives; Refining work; work requiring high standards; and Editing reports. Working with clients who have high expectations; Deriving parameters (scoping); problem solving; and Client management. Projects with short deadlines; Task oriented projects (list of things to do); and Networking or working in teams to get work done. Preferred Engagement Mode Teams Individual Individual and teams or clients Teams (Individual if scope is manageable) Table 1 How to Frame Tasks/Projects and guide development Present projects as needing information or gathering information bounded by structures or limitations. Give them some freedom. Gently guide them not to stray too far. Present projects as getting a better understanding and coming up with clear recommendations. Give them time. Gently guide them to work faster. Present projects as guided by specific guidelines or parameters. Give them specific guidelines. Gently guide them to be creative. Present projects as urgent and requiring actions that need to be carried out or done. Give them trust. Gently guide them to be more precise. a Only the four learning styles are presented. Individuals with balanced learning styles are able to flex based on the needs of the situation A learning needs theory of motivationt 111T

112 T. Lingham Table 1 shows the underlying needs for each learning style and its relevance to work motivation. We have also included information on how to develop or guide individuals with the different preferred learning styles. 6. Raising Awareness of Learning Needs in Organizational and Educational Settings In this section, we present how we help organizational members and students understand, appreciate and become aware of the underlying needs inherent in individuals with different learning styles. Organizational Setting. When we teach learning styles in executive education or corporate programs, we use an exercise to help participants understand the different styles. After completing the LSI and determining their learning styles, we form them in four groups according to their learning styles and have them plan a vacation for the whole group. Almost all the time, we notice the accommodating group having very lively discussions, laughing and coming up with the plan very quickly; the assimilating group working quietly and thoughtfully (usually with a scribe jotting down notes); the converging group figuring out what criteria should be identified so that they can work through the process; and finally the diverging group being very engaging and on occasion sending out scouts to hear what other groups are saying or discussing. After about 10 to 15 minutes, we get them to report out their plan (outcome) and how they came up with the plan (process). On most occasions we hear plans that are ambitious and somewhat vague coming from the accommodating group and when asked for more detail, they usually respond in ways that imply don t worry about that, we will work it out. The diverging group highlights the need to incorporate interests from everyone and come up with options or one where many possible activities are possible to cater to individuals in the group. The converging group tends to highlight their process and showcase how decisions were made or the voting process involved once they established some parameters to complete the task. They usually mention that they found it easy to work in their groups. When asked what would happen if the different learning styles are put into a group to complete the same exercise, people start reacting to the difficulties that would emerge. Once we present the underlying needs for each of the learning styles, the entire discussion becomes lively and engaging using concrete examples they have encountered in their work environment realizing that they often mistake learning needs as personality problems or issues. Participants immediately acknowledge that approaching interactions at work from a

A learning needs theory of motivation 113 learning needs perspective is not only powerful but provides them with new skills to work with teams, manage their bosses and/or clients, and facilitates a deeper understanding of how to motivate others. Educational Setting. As part of our MBA curriculum design, we create learning teams of six to ten students that include all four learning styles. One of their first experiences in teams is to engage in a Group Decision Making Exercise (GDME) which is a simulation where the teams function as a top management team of a consulting firm task to fire three of its six employees. The teams are video recorded as they work in separate rooms for 40 minutes to complete the decision making process. Without fail, when we sit in their teams or watch the DVDs with them, members in the team with converging learning styles immediately start asking for or identifying parameters (even developing formulae or matrices) to work through the decision making process. Students with assimilating styles tend to stop this process and begin by asking any questions that they feel are not clear and need to be addressed before moving on. Members in the team with preferred accommodating styles are immediately interested in knowing the individual decisions and begin a voting process to start moving the decision making process forward. Finally, we notice individuals with diverging learning styles asking questions from individuals to bring opinions or thoughts to the table so as to ensure that they have heard from everyone. The confluence of these activities based on the needs from the different learning styles invariable creates tension and conflict in the team with some members feeling absolutely frustrated after the conclusion of the exercise. In our debrief as a class after completing the exercise, we highlight how the frustrations or tensions experienced are a function of unmet underlying learning needs related to the different learning styles in the teams. We then discuss how we can address learning needs by paying attention to the questions members ask raising awareness that learning styles are figural in the exercise and some teams work through these frustrations that surface from the different needs while others struggle with it. We have the teams watch the exercise again with the intent to identify their own learning needs and that of others and discuss how managing and meeting these needs can create healthy and successful teamwork. 7. Conclusion In this paper we present that a Learning Needs Theory of Motivation can contribute to the emerging research in work motivation. We discuss how understanding the underlying needs related to the different learning styles can positively affect intrapersonal and interpersonal

114 T. Lingham (and group) dynamics and that such a perspective further takes into account cognitive and affective processes related to work motivation. Since Experiential Learning Theory has been widely used and robust across diverse nations and cultures, our Learning Needs Theory of Motivation that focuses on the underlying needs in each of the four learning styles can be equally influential. Having worked on learning needs with organizations with offices in the US, Europe, Asia and Africa and educational institutions in Europe and the US, we are confident that such an approach is applicable to our increasingly complex global work environment. Using simple and powerful exercises to understand the underlying needs for each learning style can indeed help: 1. Managers and leaders manage upward by understanding their managers learning style; manage clients and customers; and motivate (and develop) their employees in the work environment; and 2. Students develop the understanding and the skill to prepare them to work effectively in teams upon graduation. We put forward that a Learning Needs Theory of Motivation can be an effective applied perspective to help leaders, managers and educators due to its intrinsic link work motivation. Bibliography 1. Adams J.S.: Toward an understanding of inequity. Journal of Abnormal and Social Psychology 1963, no. 67, p. 422-436. 2. Alderfer C.P.: Human needs in organizational settings. Free Press, New York 1972. 3. Curral L., Marques-Quniteiro P.: Self-leadership and work role innovation: Testing a mediation model with goal orientation and work motivation. Revista de Psicologia del Trabajo y de las Organizaciones 2009, no. 25(2), p. 165-176. 4. Dalgleish T., Power M.: Handbook of cognition and emotion. John Wiley & Sons Ltd., England 1999. 5. De Bono E.: The mechanism of mind. Simon and Schuster, New York 1969. 6. Dolan S., Lingham T.: Fundamentals of international organizational behavior. Chandos Publishing (Oxford) and New Delhi, India: Sara Books Pvt. Ltd, Oxford, UK 2008. 7. Donceel J.F.: Philosophical psychology. Sheed and Ward, Inc., USA 1963. 8. Eccles J.S., Wigfield A.: Motivational beliefs, values and goals. Annual Review of Psychology 2002, no. 53, p. 109-132. 9. Ekman P., Davidson R.J.: The nature of emotion: Fundamental questions. Oxford University Press, New York 1994.

A learning needs theory of motivation 115 10. Gazzaniga M.: The social brain: Discovering the networks of the mind. Basic Books, New York 1985. 11. Golde C.M.: Should I stay or should I go? Student descriptions of the doctoral attrition process. The Review of Higher Education 2000, no. 23(2), p. 199-227. 12. Herzberg F.: Work and the nature of man. World Publishing Company, Cleveland 1966. 13. Ittelson W.H., Cantril H.: Perception: A transactional approach. Garden City, Doubleday & Company, Inc., New York 1954. 14. Kolb D.A.: Experiential learning: Experience as a source of learning and development. Englewood Cliffs, Prentice-Hall Inc., New Jersey 1984. 15. Kolb D.A.: The Kolb learning style inventory. TRG Hay/McBer, Boston 1999. 16. Latham G.P., Pinder C.C.: Work motivation theory and research at the dawn of the twentyfirst century. Annual Review of Psychology 2005, no. 56, p. 485-516. 17. Lingham T.: Experiential learning theory, [in:] Clegg S., Bailey J.R. (eds.): International Encyclopedia of Organization Studies. Sage Publications, Thousand Oaks, CA 2008. 18. Latham G.: Work motivation: History, theory, research and practice. Sage, London, UK 2007. 19. Locke E.A., Latham G.P.: Theory of goal setting and task performance. Prentice-Hall, Englewood Cliffs, New Jersey 1991. 20. Maslow A.H.: A theory of human motivation. Psychological Review 1943, no. 50, p. 370-396. 21. McClelland D.C.: Achievement motivation can be learned. Harvard Business Review 1965, no. 43, p. 6-24. 22. Pinder C.C.: Work motivation in organizational behavior. Prentice Hall, Upper Saddle River, New Jersey 1998. 23. Van Knippenberg D.: Work motivation and performance: A social identity perspective. Applied Psychology: An International Review 2000, no. 49(3), p. 357-371. 24. Vince R.: Behind and beyond Kolb s learning cycle. Journal of Management Education 1998, no. 22(3), p. 304-319. 25. Vroom V.: Work and Motivation. John Wiley & Sons, New York 1964. Reviewers: Dr hab. Agata Stachowicz-Stanusch, Prof. nzw. w Pol. Śl. Prof. dr hab. Wojciech Dyduch

Bonnie A. RICHLEY Case Western Reserve University, Cleveland Weatherhead School of Management Department of Organizational Behavior SUSTAINABILITY A WHOLE SYSTEM PERSPECTIVE Summary. This study highlights an organization widely recognized as the most successful cooperative in history, Mondragón Corporación Cooperativa (MCC) located in Basque Country. Using MCC as the primary case this research focuses on three central concerns: 1) MCC as representative of an innovative model of work organization hallmarked by democracy both in principle and practice and one that also simultaneously enjoins business and social good, specifically what I have named a socio-business innovation (SBI); 2) seven characteristics that define a SBI and 3) understanding how organizing at the intersection of business and society is actualized to create a new way of work and to developing communities; one with high adaptive potential. This research offers the concept of an SBI as a way to challenge existing frameworks for how we think about and enact business and social good through an alternative paradigm for work organization co-constructed and embedded in community. Keywords: Sustainability, Innovation, Mondragón, Cooperatives, Workplace democracy ZRÓWNOWAŻONY ROZWÓJ SYSTEMOWA PERSPEKTYWA CAŁOŚCIOWA Streszczenie. Niniejszy artykuł dotyczy organizacji powszechnie uważanej za najbardziej skuteczną w kwestii współpracy w historii, Mondragón Corporación Cooperativa (MCC) położonej w Kraju Basków. Wykorzystując MCC jako pierwszorzędny przypadek, autorka skupia się na trzech głównych kwestiach: 1) MCC jako przykładzie innowacyjnego modelu organizacji pracy charakteryzującego się demokracją zarówno w teorii, jak i w praktyce oraz łączącego jednocześnie biznes i społeczne dobro, co nazwano w niniejszym opracowaniu innowacją społecznobiznesową (SBI); 2) siedmiu cechach charakterystycznych, które określają SBI oraz

118 B.A. Richley 3) rozumieniu tego, w jaki sposób organizowanie na styku biznesu i społeczeństwa jest aktualizowane, by kreować nowe sposoby pracy i rozwoju społeczności wykorzystując potencjał adaptacyjny. Zaprezentowane badania proponują SBI jako drogę, mogącą stanowić wyzwanie dla istniejących ram dzisiejszego rozumienia biznesu i społecznego dobra przez alternatywny paradygmat dla organizacji pracy współtworzonej i zakorzenionej w społeczności. Słowa kluczowe: zrównoważony rozwój, innowacja, Mondragón, spółdzielnie, demokracja miejsca pracy We think that management should be a noble profession, that it should have some higher aspiration. In law, the value aspiration is justice. In medicine, it is the absence of disease. In management, it is to help enlarge humanity s cooperative capacity. David Cooperrider, Founder, Center for Business as an Agent of World Benefit 1. Introduction A world-level view recognizes economic disparity as perhaps the greatest epidemic threatening human life in the 21 st century to both industrialized and non-industrialized countries. The remedy to this disease however, will not be found by actualizing novel ways to generate more money through lending practices that entrap impoverished countries in cycles of debt, or even by focusing on increasing educational efforts. What is needed is the discovery of innovations that will level the playing field by creating work systems that are democratic in principle and practice and that focus on a dual mission of simultaneously generating both social and business good. Failure to disregard the need for such practices would be perilous as reflected in the UNMD Report 2005: Focusing exclusively on economic growth and income generation as a development strategy is ineffective, as it leads to the accumulation of wealth by a few and deepens the poverty of many a broader approach to poverty reduction includes social, economic and political dimensions although economic growth is necessary, it is not a sufficient condition to reduce poverty. Reforms are required in a number of different areas to increase the opportunities

Sustainability a whole system perspective 119 for and capabilities of the poor and other marginalized groups in order to spur inclusive growth and development and thereby reduce inequality. 1 As class distinctions, poverty, and joblessness continue to rise, our attention turns to an increasing sense of injustice at a global level. At this juncture in time we need new ways to help us to foster democratic systems to obviate the competing and ever growing drive for unbounded economic growth for a privileged few. In response to this call scholars and practitioners around the world are joining together to solve the world s greatest economic and social problems. From this global movement a critical view is emerging; an ever-sharpening focus that has honed in on the relevancy of context or specifically, community. We know that what works for one locale may not work in another. The challenge is, however, not simply to reject what has failed but to push our collective imaginations further to take our rigid forms of how work and social good is manifested and kneed them until they are pliable; shape them into emergent forms that give way to multiple purposes. Management studies offers a vantage point to from which we can reconsider organizational models that are less conventional than traditional capitalistic forms including those that may even be regarded as idealistic or obsolete. One such model is cooperatives or worker-owned organizations. Cooperatives are widely regarded as having both a business and social mission with an emphasis on the human side of enterprise. Rarely, however, are they considered to be representative of an efficient and savvy business model. Contrary to these assumptions, Mondragon Corporacion Cooperativa (MCC) represents the positive possibilities at the intersection of business and society by demonstrating how a for-profit business can generate both financial and social good through a cooperative structure. MCC is a principle-based, worker-owned and managed cooperative organization. It promotes broad participation in management while distributing decision-making power throughout the organization. Mondragón is a unique example of an integrated economic and social system that has thrived in profitability and accelerated growth. 2 Since its inception MCC has functioned as a for-profit business guided by its unique social vision based on social and economic justice, the dignity of human persons and their work and solidarity, values derived from Catholic Social Thought (CST). 3 This study turns the spotlight on co-ops and their capacity to promote work-place democracy and economic justice while simultaneously rebuilding communities and 1 United Nations Millennium Declaration, UNMD. Retrieved on January 5, 2009, www.unmillenniumproject.org/ documents/mainreportchapter1-lowres.pdf, p. 1-2. 2 Herrera D.: Mondragón: A for-profit organization that embodies Catholic social thought. Review of Business 2004, no. 25(1), p. 56.

120 B.A. Richley illuminates a new sort of innovation at the intersection of business and social good. In the Kuhnian sense the cooperative model is a very real alternative that can be paradigm breaking. William Greider contends that the possibility of merging economic and social good is not a utopian society here on earth but the conviction that the arrangements within capitalism can be changed, little by little, to make more space for life, through innovations that eventually become common practice [people can then] move to confront the centers of power only after the ideas have passed the reality test and won broader followings. 4 2. Mondragon Cooperacion Cooperativa (MCC) The Mondragon case is a great confirmation for those who believe that the only rational goal for business and technology is worker as well as community improvement. Father Gregory MacLeod In From Mondragon to America: Experiments in Community Economic Development (1997) MCC, located in the local Basque country of Spain is a for-profit organization created in 1956 with a dual imperative to be economically competitive and socially responsive. 5 MCC was born out of a need to rebuild and to restore the Basque country left devastated by the Spanish civil war. Job creation was a way to ensure economic solvency and to address unemployment. What began as an experiment with only a handful of people is today an international corporation; Spain s seventh largest, with a total workforce of 83,601 6. MCC is comprised of 264 enterprises including MCC Worldwide with 6 corporate offices and 65 plants and reflected a profit of 677m for 2006. 7 The corporation is comprised of three major business groups: Financial, Industrial and Distribution. All groups function autonomously but within a shared strategic plan. The Financial Group consists of two businesses: 1) Caja Laboral the bank; and Lagun Aro the Social Assurance Institution. The Industrial Group encompasses goods and services, the Distribution Group includes 3 Ibidem, p. 57. 4 Greider W.: The soul of capitalism: Opening paths to a moral economy. Simon & Schuster, New York 2003, p. 47. 5 Taylor P.L.: Qualitative cowboy or qualitative dude: An impasse of validity, politic, and ethics? Sociological Inquiry 1999, no. 69(1), p. 21. 6 80% of members are worker-owners with 41.9% of worker-owners being women (MCC 2006 Annual Report). 7 Mondragón Corporación Cooperativa. Annual Report 2006, www.mcc.es: 44.

Sustainability a whole system perspective 121 various commercial distribution and agricultural-food enterprises [and] there are also a number of Research, Vocational Training and Teaching centres, including a University. 8 Since 1986 MCC s total employment has increased by 63, 932 and is distributed across three major sectors and various corporate activities (i.e., industrial, financial, and distribution groups). MCC was ranked in 2003 by the magazine Fortune one of the ten best firms to work for in Europe, based on aspects such as equality, personal decision-making capacity, the absence of a hierarchical atmosphere, participation in profits, honesty, time flexibility, professional opportunities within the firm, working conditions, commitment to quality and internationalization. 9 Education is a central tenet of MCC s cooperative practices and in 2006 it is reported that 90% of the total workforce carried out some kind of training activity. 10 In 2006 the University of Mondragón s total number of students enrolled on degree courses for academic year 2006/07 was 3,339, whereas post-graduate enrolments totalled 428. 11 During 2006 10.8 m from Caja Laboral s Education and Promotion Fund were mainly earmarked for co-operative training and promotion, research, and cultural and welfare activities. 12 The university is funded and operated by MCC but is a community resource for everyone. Substantiating this point, Inaki Dorronsoro, Presidente and Manager of Technological Development in the Quality Department and Research Center explains that, Our responsibility is to open the doors of our university to everybody and for that reason we put money from our cooperatives [into] the university. In 1999 Mondragón formed the Mundukide Foundation. Mundukide s mission is to demonstrate solidarity with international co-operation initiatives. The foundation focuses on two principal areas: 1) Comprehensive Regional Development; and 2) Inter-Cooperation with Popular Economy Co-operatives. 13 Mundukide s work manifests as actual onsite assistance, manuals about how to enact co-operative principles in practice, setting up cooperatives, training, and providing continuous sharing of information to support their development. Mondragón seeks to demonstrate solidarity with others seeking to learn or to enhance co-operative efforts in alignment with democratic principles and practices and selfmanagement. While this work is also done through Otalora the education center at Mondragón, Mundukide s work is carried out with academics and businesses in developing countries while linking directly with others immediately involved with the co-operatives in 8 Ibidem. 9 Forcadell F.J.: Democracy, cooperation and business success: The case of Mondragon Corporacion Cooperativa. Journal of Business Ethics 2005, no. 56, p. 256. 10 Mondragón Corporación Cooperativa. Annual Report 2006, www.mcc.es 11 Ibidem. 12 Ibidem. 13 Ibidem.

122 B.A. Richley situ to pave the way for endogenous, sustainable and fair development. 14 It s not just about people giving money, but building on local knowledge helping them flourish Inaki Dorronsoro 15. MCC s management model is founded on Catholic Social Thought (CST) specifically social justice, economic justice, and the dignity of human persons and their work and solidarity. 16 The philosophy and ideology of CST is expressed through MCC s business structure comprised of its corporate mission, values and its 10 Basic Principles as follows: 1) Open Admission 2) Democratic Organization 3) Sovereignty of Employee s Work Over Capital 4) Subordinate Character of Capital 5) Participatory Management 6) Payment Solidarity 7) Intercooperation 8) Social Transformation 9) Universal Nature 10) Education Together these key elements form the foundation that balance[s] individual, organizational and community needs 17 through a socio-business approach to the MCC s organization and its governance 18. MCC s adherence to its core values and principles cannot be overstated. All work is enacted and coordinated to be in alignment with their guiding philosophy. MCC is structured on a participative and democratic basis with the majority of ownership held by worker-owners. The management model consists of three dominant areas: Enablers, Strategy and Results. The Enablers represent the guiding forces for management practices, the Strategy determines what is essential to reach MCC s targets, and the Results indicate measures for success toward established goals including that a balance is achieved in each key area: Customer Satisfaction, Profitability, Internationalization, Development, Social Involvement and Innovation. 19 The goal of cooperative entrepreneurship is not simply economic success but social success as expressed through a shared distribution of power among worker-members (i.e., 14 Ibidem. 15 Personal interview. 16 Herrera D.: op.cit., p. 57. 17 Ibidem. 18 Mondragón Corporación Cooperativa, 2003 Annual Report, MCC, www.mcc.es 19 www.mondragon.mcc.es.

Sustainability a whole system perspective 123 owners of the company). 20 The principle of payment solidarity further ensures economic justice. The Wage Policy provides for salary scales that avoid a major disparity between higher and lower salaries, with remuneration on a par with salaries paid to those employed within the sectors and regions in which the co-operatives operate. 21 Ratios vary among the cooperatives but it is worker-owners within that cooperative who decide through a democratic vote what these ratios should be. 22 As the cooperative structure grew in scope and number it was incorporated with the intent to leverage synergies among the members. The corporation does not own the cooperatives but provides a management structure (see Figure 1) to serve and enable the functioning among the various cooperatives 23 while adhering to the guiding ideology. Both critics and supporters of MCC seem to agree on one thing: the actual structure and internal processes of the cooperative is one of its most unique features and seems to be a fluid dynamic involving a paradox of stability and change, tradition and innovation. The unusual nature, and subsequent success, of the system are what many refer to as the mystery of Mondragón. 3. Defining a Socio-business Innovation I was inspired to define an SBI after encountering MCC firsthand. I used MCC as a framework to build the definition of an SBI by holding their model as an exemplar while broadening the concept by integrating and adopting related knowledge from the field of management studies. The result is a working definition of an SBI that guides this research. I define an SBI as having seven characteristics: 1. A hybrid form of work organization focused on social and business good and designed to simultaneously build human and financial capacity; 2. Actualizes tangible and intangible benefits to the individual, organization and greater society; 3. A shared value system that is democratic in principle and practice; 4. Places people, not capital, at its core and does not place a primacy on economic gain as the driver of value. 20 Morrison R.: We build the road as we travel. New Society Publishers, Philadelphia, PA 1991, p. 135. 21 Mondragón Corporación Cooperativa. Annual Report 2006, www.mcc.es. 22 Herrera D.: op.cit., p. 62. 23 Mondragón Corporacion Cooperativa, The History of an Experience, www.mondragón.mcc.es/.

124 B.A. Richley 5. Adopts the central principle of agency according to Polanyi 24 whereas individuals are agents of social change; they are not passive actors constrained by their institutional settings. 25 6. Advocates a pluralistic philosophy of life whereby the actualization and determination of social and economic good is best defined and developed within the embedded culture of each community. 7. Serves as a point of reference, a source of information and inspires others through their innovations to enable future work at the intersection of business and society. The concept of an SBI challenges the dominant construct for how we think about and simultaneously enact business and social good by presenting an alternative paradigm for work organization. The emerging notion of an SBI is important because it demonstrates how individuals can work together toward a collective good with a minimal level of hierarchy and a more fair distribution of financial gain through a cooperative structure. In a cooperative, employees become worker-owners empowered through democratic work practices designed to ensure maximum participation while fostering social good at the community level. Unlike most technical innovations that rely on a high level of replication, SBIs are extremely mutable toward meeting the needs of a specific context thus ensuring a positive fit within the locale. A focus on communities provides a compelling argument against the standard notion that globalization is an unstoppable force. 4. Adapting the MCC Model This study lifts up MCC an organizational role model for those wanting to learn how to enjoin social and economic good, or specifically an SBI. Most research suggests however that the MCC model is not replicable for the very reason it is successful, because of the unique solidarity among the Basque culture. Yet data exists that challenges this notion. To highlight the extent of MCC s influence, In 2003, over 1,200 people (globally) visited MCC s education and training center, Otalora, to find out about the Mondragon Co-operative movement in situ. 26 A good question arises from even this quick bit of data, what are people around the world learning from a unique organizational model with a distinct business structure and social vision? 24 Polanyi K., Pearson H. (ed.): The livelihood of man. Academic Press, New York 1977. 25 Mendell M.: Polanyian perspectives on instituted economic processes, development and transformation, ESRC, Center for Research on Innovation and Competition Conference, University of Manchester, October 23-25, 2003, p. 2.

Sustainability a whole system perspective 125 This research suggests two important findings: 1) the MCC model is highly adaptable and has been successfully transferred to a wide variety of contexts and 2) SBIs are not merely adopted in their entirety but may more likely be adapted to fit within a specific context and to meet particular needs. This adaptation process is the key factor in creating innovations that are sustainable because they are grounded in the resources and in the needs of each environment. Studying the impact of MCC as an SBI reveals that it has inspired and served as a change impetus for those wanting to enjoin business and social good. Three cases are offered to demonstrate the actualization of an SBI in different locales beyond Basque country. Each adaptation reflects a shared mission of creating economic wealth and social good through democratic principles within an organizational context but designed to benefit the individual and localities where these entities reside. Adaptation one: Organizational transformation. South Mountain Company (SMC) is a privately-held architectural firm located in West Tisbury, MA, North America. SMC was transformed from a sole-ownership structure into a cooperative model where today more than half of the 30 members are worker owners. South Mountain s story captured my attention because it is unique in that the change it experienced came about for no other reason than the sole proprietor at the time, John Abrams, wanted to make it a better place for all of the people who worked at SMC, not just for him. Around 1986 SMC began to grow in a significant way which created a shift in the culture of the company, No longer did the company have the feeling of a small extended family; it had grown too much. No longer could it run solely on intuition and gut; it had become too complex. We needed a system that would allow existing cherished qualities to be maintained in a new and different context. 27 As a result of their search for an alternative way to run the company Abrams was introduced to MCC through the Industrial Cooperative Association (ICA). Abrams recalled his reaction to learning about MCC, It was very compelling, it grabbed our attention. We said, there it is, there is the model. It was the first idea that I had come across that had structure and yet was fully democratic, participatory, and had been tremendously successful. So it had all those pieces and I had not come across another such model. He succinctly describes his process of adaptation, So that was the exposure [MCC] and we thought, well, a lot of that seems to work but some of that doesn t seem like it 26 Mondragon Corporacion Cooperativa. Annual Report 2003, www.mcc.es. 27 South Mountain Company: who we are ownership. Retrieved on January 5, 2009, from www.somoco.com/ who/sub3/ownership.html#structure.

126 B.A. Richley works for us. We went through the exploration of what are the parts that work for us and where do we have to invent our own way and before it was too long we had a set of bylaws and a set of actions that we needed to take to create this real organization. Beyond designing and building beautiful homes, and creating an economically successful company, their approach to work is one that is also socially and environmentally integrated. The organization is actively involved in development at the community level. SMC has been recognized for its commitment to affordable housing and its approach to building which uses salvaged lumber also known as reclaimed wood as one way to ensure both top quality material and reduce the waste of trees. Adaptation two: Community transformation. The second adaptation demonstrates the utility of the MCC model in community development through the experience of Jim Robertson, a faculty member at the University of Northumbria at Newcastle, Northumbria, United Kingdom, European Union where he is a Senior Lecturer in Community Work and Social Work Studies. He is also involved in the North East Employment Forum (NEEF), an organization dedicated to regional employment issues. Jim s broad efforts include community work in education and training. He is also an industrial chaplain representing church community work interests. His work has taken him throughout the UK as well as the Scandinavian counties. He is very familiar with Mondragon and published and an article in the Scottish Left Review suggesting that the MCC model is ideal for replication in Scotland 28 and the UK. Jim s life began in Glasgow which served to inspire his life s work in community development and he explains that while Glasgow continues to be a fascinating and interesting city (it) has some of the worst poverty and some of the worst profiles of ill health even today as it had say 50 years ago. He makes an important point, that Glasgow is representative of what is happening around the world: And what we see where I live now in Glasgow is the rich getting richer and the poor getting poorer. And as the knowledge-based society builds up and globalization has its impact then these systems are actually getting worse. It is exactly the same thing that is happening in America as I understand it. In his twenties Jim became familiar with cooperatives as an alternative to existing forms of organizing. During the eighties he was introduced to Mondragon and he recalls that: 28 Robertson J.: Thinking beyond the private sector. Scottish Left Review 2001, Issue 7, November/December, p. 8-9. Retrieved on January 5, 2009, from www.caledonia.org.uk/papers/mondragon_coop.doc; Churches Community Work Alliance, www.ccwa.org.uk/v2/downloads/cms/1118967648.pdf.

Sustainability a whole system perspective 127 Many of the things I was hearing was that (Mondragon) was at least one example of an alternative way to see things and to do things that seemed to work the important thing is that the ownership of the company has remained (with) people who live in disadvantaged areas themselves. That is absolutely clear and that to me is really very, very important in terms of how the model can lead to empowerment of people who might normally find themselves marginalized or excluded. Over the years Jim continued his interest in Mondragon and cooperatives as an alternative to remedy social and economic injustices. He explains that we have always been trying to make the case for cooperatives and different ways of doing things through lectures and teaching and broadly just kind of being a minor evangelist for the ideas. He eventually traveled to Mondragon to continue to learn from them directly and returned home and organized an event to raise people s awareness of Mondragon and what it might do. As Jim explains, We put on three of these events in the northeast here, and a little bit later, some of the members from the Chamber of Commerce in Newcastle went to Mondragon just to see what it was about. That happened about three years ago and [since then] there has been an expansion of cooperatives here. Adaptation three: Regional transformation. ACEnet, the Appalachian Center for Economic Networks, is located in Athens, Ohio, North America. In 1985 ACEnet was founded as a non-profit economic development and business support organization located in rural southeastern Ohio and a part of the Appalachian farmland geographic region. ACEnet has, as its sole purpose, a mission of replacing isolation with inclusion and alleviating poverty through entrepreneurship. It was conceived by a small group of community members committed to building a healthy regional economy through the growth of locally owned businesses especially those operated by lower income residents. 29 The history of ACEnet proper is one that began as a conscious effort to import the Mondragon model of worker-owned businesses from Spain to Appalachian Ohio its small staff worked one-on-one with workers at businesses in danger of closing, helping them negotiate and establish worker owned businesses to take control of the business and keep it healthy. 30 ACEnet is an innovative model of regional entrepreneurship and is a prime example of the adaptability of the MCC model in a non-profit structure. While the organization both 29 ACEnet: History. Retrieved on January 5, 2009, www.acenetworks.org/about/history/ 30 ACEnet, http://grass-roots.org/usa/acenet.shtml.

128 B.A. Richley provides and receives grants 31 and accepts donations, it has developed a new comprehensive approach to asset development for low-income communities focus(ed) primarily on asset building that encourages the development and expansion of enterprises. The approach builds on a dense network of strong ties among the geographic region. ACEnet provides powerful testimony to the success of their approach: Each year, the ACEnet kitchen incubator produces over 250,000 unique units, generating approximately $700,000 in entrepreneurial sales. ACEnet's development of an e-commerce web site will offer regional entrepreneurs a world-wide vehicle through which to show case and sell their locally crafted products. Over 200 entrepreneurs, youth and adult, receive business entrepreneurship training annually through ACEnet training activities. Approximately 350 gallons and 445 pounds of fresh produce were preserved and distributed to five regional food pantries over the last two years by Appalachia Harvest, a volunteer group coordinated and lead by ACEnet. 32 5. Conclusion This article serves three purposes: 1) highlights MCC as an innovative organizational structure enjoining business and social good (i.e., a socio-business innovation); 2) defines the characteristics of an SBI; and 3) demonstrates how MCC has been adapted in other locales to simultaneously enact a new way of work and community development. These adaptations demonstrate the transferability of the MCC model and its viability to aid in transformations designed to support workplace democracy (i.e., cooperative structure), employment, community development and wealth creation. An SBI is a significant concept in management and in practice because it both challenges existing frameworks for how we think about and enact business and social and provides an alternative paradigm for work organization co-constructed and embedded in community. The examples offered here reflect the advantage of transporting the MCC model as a way to generate employment through democratic methods in the workplace. Additionally, community level-employment encourages people to live where they work, fosters belonging 31 In 2007 ACEnet distributed over $30,000 in technology grants through the ebay Foundation Techquity Program. 32 ACEnet, http://www.acenetworks.org/about/ourimpact/.

Sustainability a whole system perspective 129 and encourages redevelopment to enhance the area. In the same way that MCC was created to rebuild the Basque country it now offers the same potential to others around the world. Fig. 1. MCC s Organizational Structure 2006 Rys. 1. Struktura organizacyjna MCC w 2006 roku Bibliography 1. ACEnet: Asset building for health communities: A concept paper. Retrieved on February 21, 2006, http://acenetworks.org/frames/ace_publications.htm 2. ACEnet: History. Retrieved on January 5, 2009, www.acenetworks.org/about/history/ 3. Forcadell F.J.: Democracy, cooperation and business success: The case of Mondragon Corporacion Cooperativa. Journal of Business Ethics 2005, no. 56, p. 255-274. 4. Greider W.: The soul of capitalism: Opening paths to a moral economy. Simon & Schuster, New York 2003. 5. Herrera D.: Mondragón: A for-profit organization that embodies Catholic social thought. Review of Business 2004, no. 25(1), p. 56-68.

130 B.A. Richley 6. Mendell M.: Polanyian perspectives on instituted economic processes, development and transformation, ESRC, Center for Research on Innovation and Competition Conference, University of Manchester, October 23-25, 2003. 7. Mondragon Corporacion Cooperativa. Annual Report 2003, www.mcc.es. 8. Mondragón Corporación Cooperativa. Annual Report 2006, www.mcc.es: 44. 9. Morrison R.: We build the road as we travel. New Society Publishers, Philadelphia, PA 1991. 10. Polanyi K., Pearson H. (ed.): The livelihood of man. Academic Press, New York 1977. 11. South Mountain Company: who we are ownership. Retrieved on January 5, 2009, from www.somoco.com/who/sub3/ownership.html#structure. 12. Taylor P.L.: Qualitative cowboy or qualitative dude: An impasse of validity, politic, and ethics? Sociological Inquiry 1999, no. 69(1), p. 1-32. 13. United Nations Millennium Declaration, UNMD. Retrieved on January 5, 2009, from www.unmillenniumproject.org/documents/mainreportchapter1-lowres.pdf. 14. Robertson J.: Thinking beyond the private sector. Scottish Left Review 2001, Issue 7, November/December, p. 8-9. Retrieved on January 5, 2009, from www.caledonia.org.uk/papers/mondragon_coop.doc. Reviewers: Dr hab. Agata Stachowicz-Stanusch, Prof. nzw. w Pol. Śl. Prof. zw. dr hab. Mariusz Bratnicki

Radha R. SHARMA Management Development Institute, Sukhrali, India OUTSOURCING AS A STRATEGY HR CHALLENGES IN GLOBALLY DISTRIBUTED WORK Summary. Outsourcing of non core activities has been adopted as a strategic tool by global firms which has resulted in globally distributed work. Several macro and micro HR issues have surfaced in organizations engaged in globally distributed work which impact not only the work and organizational productivity but also the people delivering that work. These need to be addressed adequately for the benefit of all the stakeholders. Paucity of empirical work in this emerging field has provided impetus to undertake this research which includes study of motivational factors in these organizations. Keywords: Outsourcing, HR issues in BPOs/KPOs, Cross cultural issues, Organizational factors and stress OUTSOURCING JAKO STRATEGIA WYZWANIA DLA ZASOBÓW LUDZKICH W ŚWIECIE GLOBALNEGO ROZPROSZENIA PRACY Streszczenie. Outsourcing pobocznej działalności został przyjęty jako strategiczne narzędzie przez globalne firmy, co zaowocowało globalnym rozproszeniem pracy. Kilka makro- i mikroczynników dotyczących zasobów ludzkich wyłoniło się w organizacjach zaangażowanych w globalnie rozproszoną pracę, co wpłynęło nie tylko na wydajność pracy i wydajność organizacyjną, ale również na ludzi świadczących tę pracę. Wymaga ona odpowiedniego ukierunkowania dla dobra wszystkich interesariuszy. Niedostatek prac empirycznych w tym kształtujacym się obszarze stał się przyczyną przeprowadzenia badań, które uwzględniają analizę czynników motywacyjnych w tych organizacjach. Słowa kluczowe: outsourcing, zasoby ludzkie w BPO (Business Process Outsourcing outsourcing procesu biznesowego)/kpo (Knowledge Process Outsourcing outsourcing procesu wiedzy), kwestie międzykulturowe, czynniki organizacyjne a stres

132 R.R. Sharma Outsourcing, a management tool is adopted by firms which are either faced with personnel shortage or have increased customer demands or have launched new products or services. In the present globally competitive environment outsourcing has emerged as a feasible option through which in-house operations/business processes are contracted to an outside agency. It is also a method to reduce operational costs and get access to superior technologies or more efficient personnel at reduced cost. Exercising this option a global company provides added value to its customers without taking the focus off its core business. By outsourcing non core activities the companies are able to concentrate on core competencies and thereby increase productivity and enhance job satisfaction of the employees. In case of off shore outsourcing the work is distributed by the company to one or many vendor companies in the same country or in many countries. During 1970s outsourcing in the US was done to get the payroll processed outside and it extended to billing, accounting services and word processing. Whereas business process outsourcing (BPO) is more about volume and report; knowledge process outsourcing is driven by knowledge, skills and experience. However, during the past couple of years the outsourcing has extended from low end operations to high end knowledge work. A number of challenges are encountered which have been explained below. If the nature of work is mechanical and the requirements have been spelt out, the challenges are few but if the work requires greater people involvement then a number of challenges are faced by all concerned. India provides platform for outsourcing to many global companies particularly in the IT sector. The IT enabled services (ITES)-BPO segment contributes to 30% of the total ITES exports from India. HCL Technology BPO Services, IBM Daksh, WNS, Wipro BPO, EXLServices, Mphasis BPO (formerly m Source), Intelenet Global, ICICI One source, GTL, Progen, Datamatics Technologies, Hinduja TMT, Transworks, Tracmail are prominent Indian BPO companies based on revenue for the year 2004-05. The BPO industry in India is expected to touch 37% annual growth rate in the next five years according to National Association of Software and Service Companies. 1 The challenges have been discussed below. 1. Meeting customer Expectation through Call Centres One of the forms of globally distributed work is telemarketing through highly sophisticated call centers established across countries. Call centres are one of the capital intensive Business Process Outsourcing (BPO), at the same time, are one of the most critical marketing and sales elements for an accomplished business. These have dedicated or shared

Outsourcing as a strategy 133 staff who are engaged in customer relationship management, acquisition of new customers, interactive voice response, data collection, lead generation and customer analysis. Offshore telemarketing solutions include lead generation, debt collecting services, product promotion, customer satisfaction, research surveys and polling, appointment scheduling, telephone and web based business development etc.. Global companies that outsource telemarketing to India benefit from significantly lower costs, proven process quality, access to trained, computer literate persons with good communication and presentation skills. The call centres have gained considerable importance for a firm as a marketing and customer retention platform. India is an important destination for telemarketing outsourcing having the largest English speaking population. Off-shore call centres which offer telemarketing services convert the potential clients into customers and the existing customers into long term customers. Media reports that call centre professionals in India are well taken care of, get good salaries, promotions, shift changes and other incentives. The delegation from the US which visited call centres and firms in cities like Chennai, Mumbai, Bangalore and Hyderabad in 2005 remarked, We are very much impressed by the welfare measures for the workers here. Though the telemarketing agents are trained professionals who have good communication, sales and presentation skills, the challenge before the manager of call centre is to meet the customers expectations from across the globe through the staff that have neither visited these countries nor are familiar with the work ethics there. 2. High Attrition/Low Motivation in Knowledge Process Outsourcing (KPO)Centres The success of business process outsourcing has encouraged firms to outsource their high end knowledge work. It involves highly value added processes which are dependent on advanced knowledge, technical skills and relevant experience. It comprises software solution, E-business integration; IT enabled services, web solutions, customer relationship management, ERP and data warehousing, financial services, biotechnology, technology research, computer aided simulations, engineering design, business research and legal services. KPO has become an industry and India is one of the important destinations apart from Philippines, China and Eastern Europe in offshore outsourcing. India and China are already the leading destinations for off-shoring said Daniel Franklin, Editorial Director of the Economist Intelligence Unit. 1 NASSCOM : www.outsource2india.com/services/callcenter_services.asp.

134 R.R. Sharma Since the outsourcing is done from countries which have world class systems and quality and are talent rich; it helps the companies in these countries reduce cost of infrastructure and of hiring employees and focus on optimum use of competitive resources available across the globe. The disadvantage of the outsourcing is that the employees of the outsourcer company may feel insecure. But so far as the outsourcer company is concerned it gets the benefit of flexibility, technological agility and cost and competitive advantage. Due to high volume, repetitive nature of work, high quality work within time deadlines, working for different time zones, employees at the outsourced company feel overstretched and quit jobs frequently. High attrition, continuous recruitment and development of employees due to high attrition are the major challenges faced by KPOs. There is dearth of published studies on this emerging phenomenon. But if media reports and web postings are to be relied on, it is due to young and ambitious people, joining these jobs to get global market exposure, who do not see career growth in the organization and develop dissatisfaction due to expectation mismatch. Sharma et.al. 2 attempted to collect data from employees of five KPOs in India regarding hygiene factors and motivators to explore the application of Motivation Hygiene Model in the KPO centres. The sample consisted of 250 employees from junior to middle level of management, 50 each from 4 KPOs. As knowledge employees remain very busy, they were approached online and the response rate ranged from 40 to 84 percent employees from each KPO. The results have been analyzed and summarized in table 1. Type of company KPO 1 Table 1 Hygiene Factors and Motivators in KPOs Dissatisfiers Satisfiers Motivators Expectation of employees Indiscriminate recruitment Appraisal process Organizational politics Organisational communication Workplace ambience Salary package Employee stock option plan Work life balance programmes Sports Reward and recognition Mentoring Training Counseling Healthy competition among coworkers Brand of the company Flexi-timings to plan work - More employee engagement - Better mentoring - Onsite opportunities - Better reward & recognition - More attention to junior employees 2 Sharma R.R., Purohit, Bajwa, Saxena, Shankar R., Sharma, Pathak et.al.: Application of OB in IT Industry. Management Development Institute, 2006.

Outsourcing as a strategy 135 KPO2 Long working hours Monotony Frequent changes in role description Pressure on constant learning Sedentary lifestyle Unavailable supplies Non-functioning equipment Workforce diversity Equal opportunity Open door policy Strong Culture Ethics KPO 3 Volume of work Company Policy Job security Work culture GrievanceRedressal System KPO 4 KPO 5 Less opportunities for learning Repetitive nature of work Long working hours High stress levels Structure of team Late night working Lack of coordination with the country of outsourcing Working over weekends Good salary and perks Mediclaim, gratuity retirement and other employee benefits Informal work culture High satisfaction Work-life balance Recreational activities/forums Salary & perks Flexible benefit plan Flexi-timings Recreation activities Clubs & Sports On the job learning Enriched training - Family focused prgms. - Personal development programs. - Opportunities for competency development - Self development policy (upgrading qualification) - Mentoring by technical experts - Counseling - CSR work - Quarterly performance bonus - Involvement in team formation Goal oriented efforts - Mentoring - Recognition and rewards - Product development training - Career counseling con. tab. 1 Appraisal biannual instead of annual Project Manager and mentor should be the same person Frequent team events HR to play a dominant role Ethics counselor Professional advancement Challenging work Opportunities for learning & growth - Challenging work - Even distribution of work - Discourage working over weekends - Restructuring of indigenous management

136 R.R. Sharma A perusal of table 1 yields that employees in KPOs were satisfied with salary, perks, work culture, interpersonal relations which are hygiene factors. The dis-satisfiers were also environment centred eg. long working hours, high volume of work, company policies of recruitment etc. which too are hygiene factors. On the other hand the motivators are workcentred eg. recognition and reward, enriched training, mentoring, opportunities for professional development etc. It is interesting to note that each KPO differed with regard to dis-satisfiers. In KPO1 employees were dissatisfied due to organizational politics, recruitment and appraisal processes; whereas in KPO 2 the reasons for dissatisfaction included long working hours, monotony, pressure on constant learning and sedentary life style. In KPO 4 the dis-satisfiers are lack of learning opportunities and repetitive work; whereas KPO 5 employees are dissatisfied with lack of coordination with the country of outsourcing, late night working and working over weekends. Similarly the 5 KPOs also differed with regard to satisfiers involving equal opportunity, open door policy, ambience, salary package, stock option package, job security, work culture, flexi-timings, flexible benefit plans and the like. It is interesting to note that all the KPOs provide a lot of motivators like learning opportunities, enriched training, counseling and mentoring, self development and family focused programs. Thus the Motivation Hygiene model finds validation with regard to hygiene and motivation needs of the KPO employees by the results of this study. Despite satisfaction of most of the hygiene and motivation needs and incentives being provided, employees still have unmet expectations and attrition rate is around 18-19 per cent in some KPOs which is above the industry average. 3. Cross Cultural Issues In the globally distributed work environment understanding cross cultural perspective is of prime importance. Countries differ in their culture; even a simple practices of greeting people, addressing them, exchanging business cards and communication patterns. Hofstede (1980) in his study of culture in forty countries, which was later extended to sixty countries, found significant cultural differences in work related attitudes. The study revealed significant differences in attitudes and behavior of the workforce and managerial staff belonging to different countries and these differences had persisted over a period of time. Organizational culture is a cluster of meanings related to norms, roles, plans, ideals, and ideas that are created within the organization and are used by members to make a coherent sense of their organizational experiences. 3 Stress can arise both in the initials stages when the employee is a new recruit and is in the process of being socialized into the organizational

Outsourcing as a strategy 137 culture, and also when there are organizational changes which inevitably affect the culture and climate. The organizational culture determines the attitudes of the employee towards his organization, work and coworkers. Though the culture of an organization is influenced by the social and national culture within which it is embedded, its immediate determinant is the organizational structure. Hall 4 has highlighted differences between high-context and low-context cultures. People belonging to high-context cultures depend heavily on the external situation and environment, and use non verbal clues for exchanging and interpreting communications. He has cited examples of languages such as Arabic, Japanese and Chinese in this regard where indirect style of communication is valued. However, in low-context cultures, external environment has low importance, explicit, direct and blunt communication is valued and non verbal clues are ignored. Hofstede 5 has identified the following four primary dimensions on which employees and managers differed. Individualism Individualism (IDV) is marked by focus of people on themselves and to some extent, on their families. Collectivism distinguishes between in-group (comprising relatives, caste, and organisation) and other groups. There are nations like the United States with individualistic culture and Japan where will of the group determines members beliefs and behaviours. A comparison of India and US on this dimension reveals a marked difference between the two cultures. This implies that Indian culture reinforces taking responsibility for extended family and fellow members of their group. This could be one of the reasons for effective team work in GDW. Power Distance Orientation This dimension refers to degree of inequality or equality among people and superiorsubordinate relationship. In high Power Distance (PDI) societies the superior is inclined to increase the inequality of power between himself and his subordinates and the subordinate s endeavours to decrease that power distance. High power distance countries found by Hofstede are Philippines, Venezuela and India. The power distance dimension for India has a ranking of 77 compared to world average of 56.5. These scores indicate greater level of inequality in power in India. The work in a team is generally leader driven than driven by self management teams. Therefore, team leader plays an important role in GDW in India. Schein 3 Feldman S.P.: How organizational culture can affect innovation? Organizational Dynamics 1988, no 17, p. 57-68. 4 Hall D.T.: Careers in Organizations. Goodyear, Santa Monica 1976. 5 Hofstede G.: Motivation, leadership and organizations: do American theories apply abroad? Organisational Dynamics 1980, p. 42-63.

138 R.R. Sharma (1987) based on his work remarks Organizational cultures are created by leaders, and one of the most decisive functions of leadership may well be the creation, the management and if and when that becomes necessary-destruction of the culture. However, India s Long Term Orientation (LTO) has a rank of 61as compared to world average of 48 which indicates that the culture of India has a high degree of perseverance and parsimony. 6 Uncertainty Avoidance Different cultures have varying levels of tolerance for uncertainty and ambiguity. A high ranking on this dimension indicates that the country is more rule- oriented and has low tolerance for uncertainty and ambiguity and vice versa. Based on his study he has classified countries having high uncertainty avoidance such as Japan, Greece and low uncertainty avoidance viz., United States, Canada and New Zealand etc. India has a ranking of 40 as against the world average of 65. 7 Thus India is a more adaptable and tolerant country, probably that could be one of the reasons for India s success in GDW. Masculinity Masculinity (MAS) has been defined as the extent to which the dominant values in society emphasize relationships among people, concern for others and overall quality of life. It also deals with gender differentiation in the form of degree of reinforcement by the society for traditional masculine role models of male achievement and power and control. Japan and Australia were found to be highly masculine, the Scandinavian countries to be highly faminine and the United States as slightly masculine. India has a ranking of 56 on this Hofstede dimension as compared to world average of 51. 8 This indicates that India has some gap between values of males and females. However, Indian IT sector has high representation of female employees. To conclude, Hofstede has likened culture to a collective programming of the minds of one group, which distinguishes it from other groups. Trompenaar (1996) based on his research on 8841 informants from business organizations in 43 countries has confirmed two dimensions viz., individualism/collectivism and power distance identified by Hofstede. 4. Firm Size and Organizational Effectiveness A number of studies have been done to study the relationship between firm size and organizational effectiveness and culture. Large firms promote inertia and complacency 9 and 6 Hofstede G.: www.greet-hfstede.com/hofstede_dimension.php, 2006. 7 Ibidem. 8 Ibidem.

Outsourcing as a strategy 139 resistance to adaptation and aversion to risk. 10 Studies conducted to look at the role of organizational size in generating stress have not come up with conclusive and consistent evidence of the link between the two, though the assumption has been that greater formalization and bureaucratization in larger organizations would lead to greater stress. 11 Sutton and D Aunno 12 suggest that it is the reduction in organizational size that is perceived as a source of threat and generates anxiety. Connell 13 studied the influence of firm size on organizational culture and employee morale in six Australian workplaces and found that organization size affected a number of variables. Small firms were found to have positive culture and high employee morale and consultative management style and organizational effectiveness. Many Indian knowledge corporations have set up separate units as BPO/KPO for efficient functioning in response to GDW. These vendor companies continuously invest finance, time and, efforts in culture sensitization, cultural mentoring; however, it is a challenge considering the large number of employees, employee turnover and availability of competent trainers. Impact of Organizational Structure and Climate on Employee Stress Organizational structure influences organizational culture, which in turn determines the work climate and this, decides what is experienced as stress by the employee and how he copes with it. Being in the organization implies that the employee would have to adapt to and adopt the norms, goals and operating rules of the organization. The values implicit in the organizational structures and processes shape the emotional and cognitive relationship of employees with their work and workplace. 14 Any major mismatch between the objectives and values of the individual and the organization would lead to a sense of not belonging and is a source of stress and burnout. In a study conducted across eight organizations 15 to study the causative factors in the mass occurrence of stress symptoms showed the relatively much greater significance and consistency of the relationship between organizational factors and symptoms. The repetitive and hierarchical aspects of the machine bureaucracy promote obsessive-compulsive tendencies which might provoke burnout, whereas, the ill-defined open 9 Hannand M.T., Freeman J.: Structural inertia and organisational change. American Sociological Review 1984, no. 49, p. 149-164. 10 Hitt M.A., Hoskisson R.E., Ireland R.D.: Mergers and acquisitions and managerial commitment to innovation in M-Forms. Strategic Management Journal 1990, no. 11, p. 29-47. 11 Kahn R.L., Byosiere P., [in:] Dunnette M.D., Hough L.M.: (eds.): Handbook of Industrial and Organizational Psychology 1992, Vol. 3, p. 571-650. Mumbai: Jaico. 12 Sutton R.I., D Aunno T.: Decreasing organizational size: untangling the effects of people and money. Academy of Management Review 1989, no. 14, p. 194-212. 13 Connell J.: Influence of Firm size on organisational culture and employee morale. Journal of Management Research 2001, no. 4(1), p. 220-232. 14 Maslach C., Schaufeli W.B., Leiter M.P.: Job Burnout. Annual Review of Psychology 2001, Vol. 52, p. 397-422. 15 Schmitt N., Colligan M.J., Fitzerald M.:Unexplained physical symptoms in eight organizations: Individual and organizational analysis. Journal of Occupational Psychology 1980, no. 53/4, p. 305-317.

140 R.R. Sharma structure of a professional bureaucracy promotes neurotic tendencies which might lead to burnout. 16 The professional bureaucracy typical of white collar managerial work leads to burnout because of stresses arising from the boundary spanning functions and resultant role problems and interpersonal conflicts. Physical Work Environment The GDW is not limited to telemarketing and software solutions but also extends to manufacturing. India is one of the major exporters of auto components to the US, Europe and Asia. The physical work environment comprising factors such as noise, lighting, vibration, temperature and ventilation, hygiene and physical hazards can be source of stress, and it is the subjective reactivity to these factors that is more important than the objective measures leading some to comment that stress is in the eye of the beholder. 17 Every occupation has its own set of physical work environment stressors that heighten arousal, and the main psychosocial impact of these factors is that the accumulated physical frustration and tension lead to poor interpersonal relationships, 18 affect motivation levels, and ultimately increase the susceptibility of the employees to other stressors. 19 The harmful influences are mediated by the personality characteristics and cause higher levels of anxiety, irritability, hostility and aggression leading to negative behavioral outcomes, and even cause non-auditory diseases such as cardiovascular disorders. Similarly, vibrations due to machines in factories, ventilation systems, and even in the living quarters as in offshore rigs, can be a source of psychological imbalance even if the employees assert that they get used to it. 20 The prevalence of this stressor is evident from the 1996 survey report of the European Foundation for the Improvement of Living and Working Conditions that 11 percent of workers are permanently exposed to vibration and 24 percent a quarter of time on their jobs. Another physical factor that has drawn attention is poor lighting, the flicker of fluorescent lights, and the glare of bright lights which could lead to visual fatigue, tension and frustration. Even attempts by architects to solve this problem by creating windowless environment with artificial illumination has led to 90 percent employees expressing dissatisfaction with the absence of windows. Other potential sources of stressors are 16 Winnubst J.: Organizational structure, social support, and burnout, [in:] Schaufeli W.B., Maslach C., Marek T. (eds.): Professional burnout: Recent developments in theory and research. Taylor & Francis, New York 1993, p. 151-162. 17 Sutherland V.J., Cooper C.L.: Strategic stress management: An organizational approach. Macmillan Press Ltd., London 2000. 18 Keenan V., Kerr W.: Psychological climate and accidents in an automotive plant. Journal of Applied Psychology 1951, no. 35/2, p. 108-111. 19 Smith M.J., Cohen H.H.: Cleveland R., Cohen A.: Characteristics of successful safety programs. Journal of Safety Research 1978, no. 10, p. 5-15. 20 Sutherland V.J., Cooper C.L.:

Outsourcing as a strategy 141 uncomfortable temperatures and humidity, and unclean and disorderly workplaces and restrooms. Even physical hazards and psychological trauma due to the dangers inherent in the job, and aggressive and violent clients in customer services can be sources of stress and fatigue that need to be addressed. 21 Appraisal and Reward Systems The relative importance of performance and extraneous factors is implied in the formal appraisal and reward systems instituted within an organization and how they are perceived by the employees. Performance appraisals are also instruments of employee control as they are used to determine individual merit and to reward or punish, thus providing direction to workplace activities. Organizations supplement the appraisal process with 360 degree feedback which is used as a development tool. 22 The appraisal and reward system is a key determinant of the employee s attitude towards his organization and his work. The systems should be seen as incorporating procedural justice (appraisal systems should be transparent and fair) and distributive justice (appropriate, adequate and fair differentials in rewards). Gabris & Ihrke 23 found in their study of professional county government employees that if employees feel that there is lack of procedural and distributive justice in the appraisal and reward systems, there is a higher level of burnout. This negative correlation between procedural and distributive justice perceived in the appraisal and reward systems and emotional exhaustion was confirmed in a study conducted in an Australian public sector research organization. Burnout is also associated with the extent to which performance and rewards/punishments are linked in an organization; there is a higher possibility of burnout when contingent rewards are absent and noncontingent punishment is present. 24 In the Indian IT industry many young executives feel demotivated and under-rewarded. Project allocation sometimes is based on availability of an employee rather than the skill set or competencies. Due to huge scale recruitment.. some of the new employees are not at par with the usual standards which the older employees have set. This has led to general discontent in the employees who have developed the notion that they are being made to work with people who are not upto their caliber. 25 21 Ibidem. 22 Sharma R.R.: 360 Degree Feedback, Competency Mapping and Assessment Centres, Tata McGraw-Hill, 2004. 23 Gabris G.T., Ihrke D.M.: Does performance appraisal contribute to heightened levels of employee burnout? Public Personnel Management 2001, no. 30/2, p. 157-172. 24 Cordes C.L., Dougherty T.W.: A review and an integration of research on job burnout. Academy of Management Review 1993, no. 18/4, p. 621-656. 25 Sharma R.R., Purohit, Bajwa, Saxena, Shankar R., Sharma, Pathak et.al.: Application of OB in IT Industry. Management Development Institute, 2006.

142 R.R. Sharma 5. Effect of Workload, Autonomy and Control The GDW has a lot of impact on employees workload, autonomy and control as they are expected to adhere to standards agreed with the outsourcing organization. The researches on these have been presented below. The power that an employee has to influence his own work activities, either in terms of timing or in terms of methods or both, so as to fulfill the superordinate objectives of the organization is referred to as control at work. 26 Lack of control of one s situation is both a causative and aggravating factor in burnout. The causal role of control was shown in an experimental study where it was found that the same level of noise caused more stress when there was no option of switching it off than when there was a choice to do so, even if that choice was not made use of and the noise not turned down. 27 Several studies have established the association between lack of control or autonomy and cardiovascular diseases, anxiety, depression and emotional exhaustion. 28 Though there is paucity of researches on BPO/KPO industry several studies have explored the relation between job control and burnout and have found an association between the two, but these findings show some variations which are of practical significance. Rafferty et al. 29 in their review of these studies point out though there is a consensus that job demands or workload is a stronger predictor of burnout than control is, and that the effect of job demands on burnout cannot be moderated through higher control, the findings about the association between control and the dimensions of burnout differ according to the way control has been defined. There have been varied conceptualizations of control it has been seen as decision authority referring to the power the employees have to make decisions about their work, or as skill discretion referring to the ability and freedom of the worker to use a range of skills to perform his task, or as decision latitude which includes both decision authority and skill discretion. When control is defined as decision latitude, higher control is significantly associated with emotional exhaustion and lower control is associated with depersonalization and reduced accomplishment dimensions of burnout. The findings were 26 Frese M.: Theoretical models of control and health, [in:] Sauter S.L., Hurrell J.J. Jr., Cooper C.L. (eds.): Job control and worker health. Wiley & Sons, Chichester 1989, p. 107-128); Jackson P.R., Wall T.D., Martin R., Davids K.: New measures of job control, cognitive demand, and production responsibility. Journal of Applied Psychology 1993, no. 78, p. 753-762. 27 Glass D.C., Reim B., Singer J.E.: Behavioral consequences of adaptation to controllable and uncontrollable noise. Journal of Experimental Psychology 1971, no. 7, p. 244-257. 28 Ellis B., Miller K.I.: The role of assertiveness, personal control, and participation in the prediction of nurse burnout. Journal of Applied Communication Research 1993, no. 21/4, p. 327-342; Schaufeli W.B., Buunk B.P.: Professional burnout, [in:] Schabracq M.J., Winnust J.A.M., Cooper C.L. (eds.): Handbook of work and health psychology. Wiley, New York 1996, p. 311-346. 29 Rafferty Y., Friend R., Landsbergis P.A.: The association between job skill discretion, decision authority and burnout. Work & Stress 2001, no. 15/1, p. 73-85.

Outsourcing as a strategy 143 inconsistent when control referred to just decision authority or skill discretion. The study 30 that recognized the presence of these different aspects of control reported that skill discretion is more strongly related to burnout than is decision authority. There is greater emotional exhaustion and depersonalization among employees with lower skill discretion than those with lower decision authority, whereas reduced personal accomplishment is reported with both low skill discretion and low decision authority. Workload There is an optimal level of workload that brings out the best in an employee, and both under load and overload, either quantitative or qualitative, when out of the control of the employee, can be stressful. Both work under-load and overload can result in negative emotions depending upon the discrepancy between the workload and the abilities and aspirations of the employee. 31 While qualitative under-load and qualitative overload both result in job dissatisfaction, the former is also associated with depression, irritation and psychosomatic symptoms and the latter with tension and low self-esteem. 32 Too little work or under-load can lead to apathy, boredom and low morale, or what has been termed rust out, which is a significant predictor of dissatisfaction, anxiety and depression. 33 Although Maslach 34 considers the view that under load and monotonous work can lead to burnout to be erroneous. She believes emotional exhaustion presupposes overload and high arousal. Using the existential perspective posits that even under load would lead to burnout when a person enters the job with high expectations as in the case of new recruits. Keenan and Newton 35 in their study reported that engineers regarded the feeling of one s efforts having gone waste as the most stressful; and qualitative under load as the third-most stressful condition. Sharma 36 in a study of antecedents of burnout among executives found role overload and self-role distance to be critical determinants of burnout among Indian executives. 30 Ibidem. 31 Schaufeli W.B., Buunk B.P.: op.cit. 32 ILO: Manpower planning and development in the petroleum industry. Report No. III. ILO Petroleum Committee, Tenth Session. Geneva 1996. 33 Cooper C.L., Kelly M.: Stress among crane operators. Journal of Occupational Medicine 1984, no. 26/8, p. 575-578. 34 Maslach C., Schaufeli W.B.: Historical and conceptual development of burnout, [in:] Schaufeli W.B., Maslach C., Marek T. (eds.): Professional burnout: Recent developments in theory and research. Taylor & Francis, New York 1993, p. 1-16. 35 Keenan A., Newton T.J.: Stressful events, stressors, and psychological strains in young professional engineers. Journal of Occupational Behavior 1985, no. 6, p. 151-156. 36 Sharma R.R.: Executive burnout: Contribution of role related factors. Indian Journal of Industrial Research 2002, no. 38/1, p. 81-95.

144 R.R. Sharma Qualitative workload is a stressor particularly faced by managers. 37 The review of burnout literature shows that emotional exhaustion dimension of burnout is strongly related to workload 38 and this was further supported by a study of two samples of 245 bank employees and 362 teachers which showed that emotional exhaustion is primarily predicted by workload. 39 Research from service organization, in an industrial setting with self-managed work teams, reported that so long as there is adequate time to complete the task, increased workload does not lead to burnout; instead, increased workload has a negative relationship with emotional exhaustion and depersonalization resulting in diminished burnout. This difference in findings could be because the work in industrial settings is impersonal and the positive factors associated with healthy teams may have modified the impact of increased workload by making it challenging and invigorating. 40 Work Hours and Time pressure Several studies indicate deadlines and time pressures to be major factors leading to burnout (Schaufeli and Enzmann. 41 Research suggests that the optimal working time for executives is between 35 and 45 hours per week. 42 The psychological problems are further exacerbated in employees engaged in shift work. Though qualitative overload results from the employee s feeling that he does not have the ability to perform the assigned task and quantitative overload arises from the feeling that the task cannot be completed in the allotted time, 43 managers, especially those with certain personality traits may react to any overload by working longer hours. 44 Though organizational changes have increased the objective workload of managers, peer pressure and the need to visibly demonstrate commitment due to insecurity also force managers to work longer hours and result in the dysfunctional outcome of presenteeism, i.e. working such hours that one becomes ineffective. 45 The respondents did not experience a sense of achievement in working longer hours challenging the prevailing view that managers take a perverse pleasure 37 Cooper C.L., Marshall J.: Understanding executive stress. Macmillan Press Ltd., London 1978. 38 Schaufeli W.B., Enzmann D.: The burnout companion to study and practice: A critical analysis. Taylor & Francis, Washington, DC 1998. 39 Houkes I., Janssen P.P.M., De Jonge J., Nijhuis F.J.N.: Specific relationships between work characteristics and intrinsic motivation, burnout and turnover intention: a multi-sample analysis. European Journal of Work and Organizational Psychology 2001, no. 10/1, p. 1-23. 40 Elloy D.F., Terpening W., Kohls J.: A causal model of burnout among self-managed work team members. Journal of Psychology 2001, no. 135/3, p. 321-334. 41 Schaufeli W.B., Enzmann D.: op.cit. 42 Sutherland V.J., Cooper C.L.: op.cit. 43 Cordes C.L., Dougherty T.W.: A review and an integration of research on job burnout. Academy of Management Review 1993, no. 18/4, p. 621-656. 44 Cooper C.L., Marshall J.: op.cit. 45 Sutherland V.J., Cooper C.L.: op.cit.

Outsourcing as a strategy 145 in doing so. 46 A meta-analytic review of the effect of hours of work on health found a significant positive correlation between the number of hours at work and psycho-physiological symptoms, the important factors mediating this relation being the type of job (mental work being more taxing), working environment, age (the older being more vulnerable), and most important of all, choice or the freedom to choose particular hours of work. 47 Role Conflict Role conflict arises when one is expected to work for incompatible goals which, in the management setting, could be in the form of demands to achieve very high production targets, and yet maintaining product quality without compromising safety standards. Role conflict has been found to cause absenteeism, job dissatisfaction, hypertension and even burnout. The adverse effects of role conflict are pronounced in people who have the personality trait of rigidity. GDW sometimes involves people in marketing functions. People in market-oriented boundary-spanning positions such as those in sales and customer service are highly vulnerable to burnout as they face role conflict due to the often incompatible demands of the organization and the customers. 48 This has also been found to be true of even experienced product managers who have to communicate across organizational and environmental boundaries 49 and employees torn between the competing demands of different work groups including management, coworkers and customers, 50 all of whom end up suffering burnout as a result of role conflict. Role Ambiguity Role ambiguity refers to the absence of clarity about one s role. The ambiguity arises because of lack of information about the scope of one s responsibilities, i.e. what exactly one is supposed to do and achieve in that position, about how one is supposed go about fulfilling 46 Krone C., Tabacchi M., Farber B.: Managing burnout. Cornell Hotel and Restaurant Administration Quarterly 1989, no. 30/3, p. 58-63. 47 Sparks K., Cooper C., Fried Y., Shirom A.: The effects of hours of work on health: A meta-analytic review. Journal of Occupational & Organizational Psychology 1997, no. 70/4, p. 391-408. 48 Singh J., Goolsby J.R.: Behavioral and psychological consequences of boundary spanning burnout for customer service. Journal of Marketing Research 1994, no. 31/4, p. 558-569. 49 Lysonski S., Singer A., Wilemon D.: Coping with environmental uncertainty and boundary spanning in the product manager s role. Journal of Services Marketing 1988, no. 2/4, p. 15-26. 50 Harris E.G., Lee J.M.: The customer, co-worker, and management burnout distinction in service settings: personality influencers and outcomes. Services Marketing Quarterly 2004, no. 25/4, p. 13-31.

146 R.R. Sharma the responsibilities of the role, and absence of clarity about the behaviors that would be rewarded or punished. An employee can face role ambiguity when first inducted into a position or when changes are introduced in the organizational structure and processes. 51 The stress arising due to role ambiguity leads to job dissatisfaction, low self confidence and selfesteem, depression and hypertension. 52 Both role conflict and role ambiguity have been implicated in the etiology of job dissatisfaction across occupations. 53 Several studies suggest that it is especially role ambiguity that leads to burnout. 54 This possibility is also borne out by the findings that role conflict is mainly related to irritation but role ambiguity is mainly related to anxiety, 55 and that role ambiguity, rather than role conflict, is a better predictor of job dissatisfaction and anxiety. 56 The latter finding is implied in the findings of a study that attempted to explore the relationship of the role ambiguity and role conflict stresses to job performance. The results revealed the existence of a negative relation between role ambiguity and job performance though this was moderated by job type and rating source, but no significant relation could be found between role conflict and job performance. 57 People in BPOs are sometimes not clear about their roles and experience stress and anxiety and quit jobs. Career Development Stress The stressors involved in developing and maintaining a career are found to be those related to job insecurity and status incongruity. Job insecurity does not refer only to the risk of unemployment in the immediate future but also includes the fear of becoming obsolete and redundant, which has a strong influence on the employee s self-esteem. Status incongruity results when there is no career progression along expected lines and the employee has reached his career ceiling. 58 People working on projects of GDW experience uncertainty as their job is dependent on requirement of a particular product/service for a specific period. Besides, the nature of work tends to be repetitive and not very creative and intellectually stimulating. Initially it might have been creative but with the passage of time this aspect fades away and the employees start feeling rusted due to lack of learning opportunities. High turnover in KPOs in India can 51 Ivancevich J.M., Matteson M.T.: Optimizing human resources: a case for preventative health and stress management. Organizational Dynamics 1980, no. 9/2, p. 4-25. 52 Sutherland V.J., Cooper C.L.: op.cit. 53 Van Sell M., Brief A.P., Schuler R.J.: Role conflict and ambiguity: integration of literature and directions for future research. Human Relations 1981, no. 34, p. 43-72. 54 Schaufeli W.B., Buunk B.P.: op.cit. 55 Van Dijkhuizen N.: From Stressors to Strains. Swets and Zeitlinger, Lisse 1980. 56 Keenan A., Newton T.J.: Frustration in organizations: relationships to role stress, climate, and psychological strain. Journal of Occupational Psychology 1984, no. 5, p. 57-65. 57 Tubre T.C., Collins J.M.: A meta-analysis of the relationships between role ambiguity, role conflict, and job performance. Journal of Management 2000, no. 26/1, p. 155-169. 58 Cooper C.L., Marshall J.: Understanding executive stress. Macmillan Press Ltd., London 1978.

Outsourcing as a strategy 147 be attributed to this and employees prefer to work for those companies which offer better learning and growth opportunities. 59 The problems of career progression faced by technical people, many of whom become managers eventually, have also been studied. People in technical or engineering positions have only two options midway through their career either they could continue in the technical field of their expertise where avenues for further promotion are limited or they could get into managerial positions. For engineers, the mid-career option of management adds to prestige but also brings in its own set of stresses. The underutilization and further erosion of their technical skills in moving away from technical to management positions, and the inherent uncertainties involved in managing people (unlike managing machines) can be a major source of stress for technical people promoted to managerial cadre and it may lead to burnout. 60 Sharma 61 found role stagnation followed by role expectation conflict and self role distance together explain 28 per cent of the variance in Burnout Social Support The significance of social networks in an individual s life cannot be disregarded given the basic fact that man is essentially a social animal. Most often, we define our life in the context of our relations with other people, and even our work life is not bereft of these very essential relations it is these relations that form the core of social support. Social support has been defined as the information that leads individuals to believe that they are cared for and loved, esteemed and valued by others, and that they participate in a network of communication and mutual obligation, 62 or more succinctly as the resources provided by other persons. 63 In the KPO centers, due to large number of recruitments happening on an ongoing basis, junior employees do not get adequate attention from their seniors. This leads to disillusionment in the lower ranks and is a major demotivator. 64 Employees in knowledge industry are basically knowledge seekers and recommend that the company can sponsor seats in prestigious Indian management institutes. This will bolster employee loyalty They recommend providing onsite opportunity to young employees to reduce attrition and poaching. The ideal organizational climate should have the right blend of openness and 59 Sharma R.R., Purohit, Bajwa, Saxena, Shankar R., Sharma, Pathak et.al,: op.cit. 60 Hoyt J., Gerloff E.A.: Organizational environment, changing economic conditions, and the effective supervision of technical personnel: a management challenge. Journal of High Technology Management Research 1999, no. 10/2, p. 275-293. 61 Sharma R.R.: Determinants of executive burnout in India, Unpublished Research Report: WHO & Ministry of Health, Govt. of India, 2005. 62 Cobb S.: Social support as a moderate of life stress. Psychosomatic Medicine 1976, no. 5, p. 300-317. 63 Cohen S., Syme S.L.: Social support and health. Academic Press, San Diego, CA 1985. 64 Sharma R.R., Purohit, Bajwa, Saxena, Shankar R., Sharma, Pathak et.al,: op.cit.

148 R.R. Sharma supportiveness that would inspire trust, faith and confidence among employees so that in the face of unmanageable demands at work, an employee need not feel overwhelmed and stressed out. One should be able to share his burden and find a solution to his problems, thereby preventing the downhill slide to burnout. A framework for measuring human capital advantage has been suggested 65 which not only can measure the existing human capital in an organization but also be a guiding force for future human capital investments. She suggests that if the employees are satisfied with what they value being met by the organization then this would lead to employee retention, which would promote customer satisfaction which in turn will result in customer retention and would consequently translate into enhanced profits for the organization. 6. Conclusions The evidence based paper has identified fifteen HR challenges that employees/ organisations in the globally distributed work environment face. These challenges can be studied as per the requirement of a BPO/KPO so that appropriate strategies could be evolved to mitigate them. Needless to say, people are at the centre of globally distributed work; therefore, harnessing their potential would needs to go hand in hand with developing their potential. This would lead to better employee engagement, decrease in attrition, better service, more customer satisfaction and improved business development. The adequate attention would help in making the GDW an effective business model incorporating interests of all the stakeholders. Bibliography 1. Bassi L.: Human Capital Advantage: Developing metrics for the knowledge era. 2001, www.linezine.com/4.2/articles/lbhca.htm. 2. Cobb S.: Social support as a moderate of life stress. Psychosomatic Medicine 1976, no. 5, p. 300-317. 3. Cohen S., Syme S.L.: Social support and health. Academic Press, San Diego, CA 1985. 4. Connell J.: Influence of Firm size on organisational culture and employee morale. Journal of Management Research 2001, no. 4(1), p. 220-232. 65 Bassi L. Human Capital Advantage: Developing metrics for the knowledge era. 2001, www.linezine.com/ 4.2/articles/lbhca.htm.

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Outsourcing as a strategy 151 40. Schaufeli W.B., Buunk B.P.: Professional burnout, [in:] Schabracq M.J., Winnust J.A.M., Cooper C.L. (eds.): Handbook of work and health psychology. Wiley, New York 1996, p. 311-346. 41. Schaufeli W.B., Enzmann D.: The burnout companion to study and practice: A critical analysis. Taylor & Francis, Washington, DC 1998. 42. Schmitt N., Colligan M.J., Fitzerald M.:Unexplained physical symptoms in eight organizations: Individual and organizational analysis. Journal of Occupational Psychology 1980, no. 53/4, p. 305-317. 43. Van Sell M., Brief A.P., Schuler R.J.: Role conflict and ambiguity: integration of literature and directions for future research. Human Relations 1981, no. 34, p. 43-72. 44. Sharma R.R.: Human capital development: a strategy for enhancing performance, [in:] Creating value through people. Excel Publisher 2004, p. 308-32. Paper presented at 33 rd IFTDO World Conference held during Nov. 22-25. 45. Sharma R.R.: 360 Degree Feedback: An Approach to Performance Management and Leadership/Employee Development, [in:] Adel Safty (ed.): Future of Leadership. University of Bahcesehir, Turkey 2005. 46. Sharma R.R.: 360 Degree Feedback, Competency Mapping and Assessment Centres, Tata McGraw-Hill, 2004. 47. Sharma R.R., Purohit, Bajwa, Saxena, Shankar R., Sharma, Pathak et.al.: Application of OB in IT Industry. Management Development Institute, 2006. 48. Sharma R.R.: Executive burnout: Contribution of role related factors. Indian Journal of Industrial Research 2002, no. 38/1, p. 81-95. 49. Sharma R.R.: Determinants of executive burnout in India, Unpublished Research Report: WHO & Ministry of Health, Govt. of India, 2005. 50. Singh J., Goolsby J.R.: Behavioral and psychological consequences of boundary spanning burnout for customer service. Journal of Marketing Research 1994, no. 31/4, p. 558-569. 51. Smith M.J., Cohen H.H.: Cleveland R., Cohen A.: Characteristics of successful safety programs. Journal of Safety Research 1978, no. 10, p. 5-15. 52. Sparks K., Cooper C., Fried Y., Shirom A.: The effects of hours of work on health: A metaanalytic review. Journal of Occupational & Organizational Psychology 1997, no. 70/4, p. 391-408. 53. Sutherland V.J., Cooper C.L.: Strategic stress management: An organizational approach. Macmillan Press Ltd., London 2000. 54. Sutton R.I., D Aunno T.: Decreasing organizational size: untangling the effects of people and money. Academy of Management Review 1989, no. 14, p. 194-212. 55. Tubre T.C., Collins J.M.: A meta-analysis of the relationships between role ambiguity, role conflict, and job performance. Journal of Management 2000, no. 26/1, p. 155-169.

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Marco TAVANTI DePaul University, Chicago, USA School of Public Service SUSTAINABLE VALUE MANAGEMENT LEADING ORGANIZATIONS TOWARDS AN INTEGRATED BOTTOM LINE Summary. An organization without an integrated bottom line approach is not designed to last. Value management is the organizational glue which makes it possible to integrate financial sustainability with social responsibility and environmental concerns. This paper suggests sustainable value management in the context of recent developments in corporate social responsibility, sustainability and the triple bottom line. The author argues that economic, social, and environmental sustainability needs to be integrated into value-centered management. Sustainable value creation with leaders and managers leads to sustainable growth for 21st century managerial practices aiming to benefit both shareholders and stakeholders. Keywords: social responsibility, integrated bottom line, triple bottom line, sustainability ZARZĄDZANIE POPRZEZ WARTOŚCI W KIERUNKU ROZWOJU ORGANIZACJI Streszczenie. Organizacja pozbawiona podejścia zintegrowanej linii przewodniej nie została zaprojektowana, by przetrwać. Zarządzanie wartością jest klejem organizacyjnym, który stwarza możliwości dla integracji równowagi finansowej ze społeczną odpowiedzialnością i troską o środowisko. Niniejszy artykuł wskazuje na zarządzanie wartością zrównoważoną w kontekście współczesnego rozwoju w zakresie społecznej odpowiedzialności przedsiębiorstw, zrównoważonego rozwoju oraz potrójnej linii przewodniej. Autor dowodzi, iż równowaga gospodarcza, społeczna i środowiskowa wymaga zintegrowania wokół zarządzania skupionego na wartości. Tworzenie zrównoważonej wartości przez liderów i menadżerów prowadzi do zrównoważonego wzrostu praktyk menadżerskich ukierunkowanych na przynoszenie korzyści zarówno udziałowcom, jak i interesariuszom.

154 M. Tavanti Słowa kluczowe: zarządzanie poprzez wartości, zrównoważony rozwój, społeczna odpowiedzialność przedsiębiorstw Managers in triple-bottom-line (TBL) organizations aren t just in it for the money. Their work aims at satisfying social and environmental bottom lines as well. An integrated bottom line goes a step further by suggesting that all three topics (environment, society, and economy) should be considered together as a single bottom line. The term sustainability is fast becoming an essential buzzword in business and management discussions. Today numerous organizations welcome sustainability concepts into their value statements but struggle to integrate its meanings into their managerial operations. Managers and leaders struggle to integrate economic, environmental and social dimension of sustainability. This article argues that the translations of sustainability concepts into practices and the integration of triple bottom line passes through an authentic effort to create and rediscover sustainable values in managerial education and practices. The 2008-2009 global economic crises have vividly illustrated both the flaws and dire consequences of an unregulated and greedy financial market which focuses exclusively on the financial bottom line without appropriate consideration of our common future and shared interests. Adam Smith himself based all his arguments for the Wealth of Nations (1776) on the assumption that people are born with a moral sense, as highlighted in his previous publication Theory of Moral Sentiments (1759). Recuperating the moral values in our economic and managerial activities is the first step for understanding the wisdom behind sustainable practices. 1 If in the past ethics in business and integrity in management were merely good recommendations, today s compelling crisis and fragility of our economic and eco-social systems requires us to commit our values and practices to sustainability. The success of a few and the failure of many as driven by the political economic ideologies of the last 30 years have seriously undermined the moral responsibility, social nature and ecological dependency of humankind. Chilean economist Dr. Alfredo Sfeir-Younis, the first environmental economist hired by the World Bank 28 years ago recognizes the centrality of values and self-realization in the pursuit of a sustainable society: In essence, the future of Sustainable Development lies in a major revolution in values. This is to say, to move from a system of purely individualistic values (those of competition, hoarding, consumerism, individual welfare only), to collective values (interdependence, interconnectedness, sharing, caring, stewardship). And, it is here where we must introduce ethical and spiritual values. Economic and financial values will not bring us to a sustainable 1 Sulak Sivaraksa, Kotler A., Bennett N.: The wisdom of sustainability: Buddhist economics for the 21st century. Koa Books, Kihei, Hawai'i 2009.

Sustainable Value Management 155 society. This is not an ideological debate. It is an empirical one. Just focus on where we are now in terms of ecological destruction, economic inequities and social instability. 2 What is needed is a cultural change in the current managerial values. Today s companies and organizations, even those who preach sustainability, often reward competitiveness more than collaboration, individual achievements more than the common good, rational pragmatism more than relational inclusivity. The current economic, financial and global crisis should be the occasion to accelerate such cultural organizational and managerial change. While undesirable for the many personal crisis, jobless situations, foreclosures, bankruptcy and bailouts, the 2008-2009 financial crisis has generated a momentum to redirect our economy toward a more environmentally sustainable and socially responsible future. Our Common Future, published in 1987 by the United Nations Brundtland Commission defined sustainability as meeting the needs of the present without compromising the ability of future generations to meet their own. 3 Although having many different definitions and conceptions, CSR has increasingly become an integral part of the debate surrounding sustainability, as well as a central component of business management. Corporate and organizational CSR reports and global citizenship reports increasingly represent a new trend in green investing and social accountability. Contrary to conservative predictions, the current economic crisis does not slow down the sustainability trend in corporate management. Instead the crisis invites corporate boards and CEOs to revise their plans and reinvent their trajectory toward innovative sustainable solutions that would bring economic benefits by investing in the base of the pyramid (BOP), social entrepreneurs and green technologies. 1. Beyond Corporate Social Responsibility With the shift from shareholder to stakeholder management, today s multinational corporations (MNCs) and an increasingly larger number of small and medium enterprises (SMEs) have been directing their practices toward sustainable values. 4 Multi-sector partnerships, along with the participation and leadership of the private sector in the field of poverty reduction, have become a common and essential reality for implementing international sustainable development. The public sector, often inspired by intergovernmental 2 Sfeir-Younis A.: The Ethical and Spiritual Dimensions of Sustainable Development. The Zambuling Institute for Human Transformation (ZIHT) 2007. Available at www.silentpeacemeditation.com 3 Brundland G.H.: Our Common Future. World Commission on Environment and Development. Brussels 1987.

156 M. Tavanti organizations is today operating in partnership with the private sector and in dialogue with the third sector. 5 An important member of the global society, corporations are in a unique position of power to further the cause for sustainability. In spite of nongovernmental organizations (NGOs) skepticism on the true intensions of corporations, numerous forprofits have been engaging in very important development projects in collaboration with the United Nations Global Compact (UNGC), the UN Development Program (UNDP) and other inter-governmental coalitions to make multi-sector collaboration a channel for implementing sustainable international development projects. Key achievements toward Millennium Development Goals (MDGs) and targets for halving poverty, increasing basic education, improving health services and making cities more sustainable have been possible thanks to direct investments of corporations. These examples are indicative of a new trend that includes and transforms the concepts and practices of CSR toward a more inclusive, integrated and sustainable approach. Organizations that view CSR as a task separated from the larger policies and practices of business are a past phenomenon soon to be transformed and integrated into the management of the corporation at every level. This change in the development and acceptance of CSR as a core business and management strategy signals the recognition of the important leadership role that corporations will have to play as part of the movement towards global sustainability. In the last half century or so, the conception of CSR has undergone what Lee 6 calls a progressive rationalization. He describes the conceptual change in the theory of CSR as the transformation from an idea that was once frowned upon, to one that has become widely accepted as a fundamental part of doing business. 7 This transformation of the conception of CSR can also be seen as the movement from a focus on shareholder approaches to business and management to one that increasingly incorporates and recognizes the key role that stakeholder approaches play. 8 One of the most notable critics of CSR was Milton Friedman, who argued that the corporation s only responsibility is to create profit for its shareholders. 9 Friedman further 4 Esquer-Peralta J., Moure-Eraso R.: Sustainability management systems (SMS): An integrative approach to management systems towards sustainable development. Thesis (Ph.D.). University of Massachusetts. Lowell 2007. 5 Steger U.: Sustainability partnerships: The manager's handbook. Palgarve Macmillan, Basingstoke 2009, www.palgraveconnect.com/doifinder/10.1057/9780230594685; Gomes R., Tesolin L.: Sustainability partnerships Moving from goodwill to action: a guide to creating meaningful partnerships for sustainable development. Canadian Institute for Environmental Law and Policy, Toronto 2003. 6 Lee M.: A review of the theories of corporate social responsibility: Its evolutionary path and the road ahead. International Journal of Management Reviews 2008, no. 10(1), p. 54. 7 Ibidem. 8 Ibidem. 9 Friedman M.: The social responsibility of business is to increase profits. The New York Times Magazine 1970.

Sustainable Value Management 157 argued that a corporate manager or executive s use of company funds for any such social responsibility, was a misuse of shareholder money. This highly controversial position draws from two assumptions: that 1) CSR is not integrated into the main directives and scope of the organization and that 2) For-profits benefit society by focusing on their primary role as profit maker and therefore responding to society s needs through Adam Smith s invisible hand. 10 While Friedman and others did not conceive of CSR as having a place in business, other conceptions of CSR in the context of shareholder approaches to business and management view CSR as a purely economic pursuit of the corporation, either as a way of maximizing shareholder wealth or achieving economic competitive advantages for the corporation. 11 The growing global inequalities and the market crisis have deeply challenged Milton Friedman and the Chicago School s neoliberal ideology favoring deregulated free markets and the international privatizations mantra. The 2009 Nobel Prizes in Economics, given to Elinor Ostrom and Oliver E. Williamson, two scholars who emphasize the centrality of social interaction and responsibility of corporations in conflict resolution, are indicative of a new chapter in economics. 12 As the 20 th century has progressed, a change in the conception of CSR has occurred under the heading of what many scholars have called stakeholder approaches to business and management. According to the stakeholder approach, shareholders are no longer the only individuals who have an interest in a corporation s business decisions. Instead there exists a broader group of individuals at all levels within society (stakeholders) who are affected by the corporation and therefore have a vested interest in its policies and practices. 13 More recently, efforts have been made to more fully develop the link between sustainability and corporate social responsibility. This relationship has best been described in terms of the idea of the triple bottom line (TBL) in business (also known as people, planet, profit ), a concept which highlights the need for integration of economic, social, and environmental factors into sustainable business management. 14 First coined by John Elkington in 1994, the TBL agenda seeks to address how corporations can focus not just on 10 Smith A.: The Invisible hand. Penguin great ideas. Penguin Books, London 2009; Lydenberg S.D.: Corporations and the public interest: Guiding the invisible hand. Berrett-Koehler, San Francisco 2005. 11 Garriga E., Melé D.: Corporate social responsibility theories: mapping the territory. Journal of Business Ethics 2004, no. 53(1), p. 51-71; Van Marrewijk M.: Concepts and definitions of CSR and corporate sustainability: between agency and communion. Journal of Business Ethics 2003, no. 44(2), p. 95-105. 12 Miller M.: The tyranny of dead ideas: Letting go of the old ways of thinking to unleash a new prosperity. Times Books, New York 2009. 13 Garriga E., Melé D.: Corporate social responsibility theories: mapping the territory. Journal of Business Ethics 2004, no. 53(1), p. 51-71; Van Marrewijk M.: Concepts and definitions of CSR and corporate sustainability: between agency and communion. Journal of Business Ethics 2003, no. 44(2), p. 95-105. 14 Elkington J.: Enter the triple Bottom Line, [in:] Henriques A., Richardson J. (eds.): The Triple Bottom Line: Does It All Add Up? Earthscan, London 2004, p. 1-16; Dyllick T., Hockerts K.: Beyond the business case for corporate sustainability. Business Strategy and the Environment 2002, no. 11, p. 130-141.

158 M. Tavanti the economic value that they add, but also on the environmental and social value that they add or destroy. 15 2. An Integrated Bottom Line Expanding on the idea of TBL, Chris Laszlo has taken the concept of sustainable business management even further, calling for the integration of shareholder and stakeholder value into what he calls sustainable value. 16 In The Sustainable Company: How to Create Lasting Value Through Social and Environmental Performance and Sustainable Value: How the World s Leading Companies are Doing Well by Doing Good, Laszlo advocates for a new business paradigm, one in which the drive for sustainability has necessitated that corporations take on a new role in society. No longer is the corporation the unit of consciousness. 17 Instead, corporations must turn away from a single-minded focus on the economic dimension of their business and must develop a broader and deeper understanding of their impact and connectedness with the social and environmental dimensions as well. Further recognizing the important role that corporations must play in the movement towards an integrated approach to global sustainability, major international organizations like the United Nations Global Compact (UNGC) have called on businesses to voluntarily commit themselves to aligning their business operations and strategies with the Global Compact s ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption. Today, the Global compact has 6,500 signatories based in over 135 countries. 18 A number of outstanding examples have made the business case for this integrated approach to sustainability and the TBL agenda, showing how sustainability can be successfully incorporated into all facets of a corporation s management. Two such informative cases can be found in the experiences of the outerwear company, Patagonia, Inc., and the flooring company, Interface, Inc. Both of these companies have demonstrated how an understanding of and commitment to the social and environmental aspects of sustainability have been successfully integrated with the economic aspect of their business practices and policies. 15 Elkington J.: op.cit., p. 3. 16 Laszlo C.: The sustainable company: how to create lasting value through social and environmental performance. Island Press, Washington, DC 2003. 17 Ibidem. 18 www.unglobalcompact.org/docs/news_events/9.1_news_archives/2009_04_08/gc_2008ar_final.pdf.

Sustainable Value Management 159 Patagonia has long been committed to the health and safety of those working in the factories that produce their products, and in 1990 began asking their contract managers and quality assurance staff to review the factories they visited for both product quality and working conditions. 19 Then, in 1994 Patagonia decided to drastically change the way they conducted business by taking their cotton sportswear 100% organic by 1996. This decision came after the company commissioned an environmental impact assessment of four major fibers used in Patagonia s clothing. 20 The assessment found cotton to be a major environmental polluter, and after several trips by company executives to the San Joaquin Valley to experience firsthand the environmental devastation caused by the conventional methods used to grow their cotton, the company made the move to procure only organic cotton. 21 In the same way, the carpet company Interface made the conscious choice to integrate sustainability into its business practices. Interface CEO Ray Anderson has described this as a process in which he began to make the connection between Interface and its various stakeholders, leading to the creation of the company s Seven Fronts of Mount Sustainability, a metaphor for its journey towards sustainability. 22 Anderson has discussed how making the switch to a more sustainable organization has been good business for Interface: Sustainability doesn t cost; it pays. 23 While these examples paint a portrait of successful integration of sustainability into a triple bottom line approach for these companies, the question still remains, what is the best way to integrate sustainability into business practices and policies? 3. Sustainability Values Creation The answer to this question begins with a discussion about values. Values are the foundation for economic, ecologic, social and moral development. To be sure financial resources are essential, but they alone do not guarantee a more human or sustainable outcome in communities or organizations. This point was illustrated to me when I started working with impoverished community organizations in Metro Manila. The first thing they told me was, Please do not bring us micro-finance. We need to work on our people s value and moral formation first. I was surprised by that comment as many of my colleagues in the 19 www.patagonia.com/web/us/patagonia.go?assetid=37492. 20 www.patagonia.com/web/us/patagonia.go?assetid=3351. 21 Laszlo C.: The sustainable, op.cit. 22 www.interfaceglobal.com/sustainability/our-journey/7-fronts-of-sustainability.aspx. 23 Anderson R.: Climbing Mount Sustainability. Quality Progress 2004, no. 37(22), p. 32.

160 M. Tavanti business school interpreted the micro-credit work of Mohamed Younis, the charismatic founder of Grameen Bank in Bangladesh, as a clear example of community transformation through cash flow. Yet, many researchers have shown that true sustainable development is attainable only by combining and applying an integrated plan for increasing economic, social and organizational capacity. 24 The ineffectiveness of numerous international development plans are often explained by a sector-divided approach that does not consider economic capital as integrated to social capital, environmental capital and moral capital. Hernando de Soto identifies this materialistic view of capital and western approach to development as the main cause behind underdevelopment and social exclusion. 25 The field of management has traditionally focused on the how and efficiency practices but tended to put very little focus on the why and sustainability practices. We need to recognize that management and leadership practices are systems for the definition and transmission of values. Yet the individualistic, competitiveness and opportunistic values of often praised managerial practices are rarely questioned, nor are the economic mechanisms, structure of laws and regulations that govern these mechanisms. We need to remember that these systems and practices are a powerful vehicle for the transmission of values. The basic values that guide our mainstream managerial practices follow an economic ideology that, with the exception of Malthus and Marx, did not pay much attention to its environmental and social consequences. As we need a re-examination of the values that are represented by our economic systems, so we need to look into the values and responsibility of management operations. We need to re-focus on the values and directions organizational leadership practices behind the goals and objectives of managers and teams. As indicative in recent integrated value chain of management strategies like Six Sigma, Balanced Score Card, Total Quality or Cycle-time reduction, the trend in integration should also include also the environmental and social aspects of management. 26 Emotional intelligence (EQ), for example, which has gained popularity in leadership and management studies, is not enough. The IQ needs to be integrated in a multiple intelligence model that includes emotional (EQ), social, cultural (CQ) environmental and moral intelligence or spiritual intelligence (SQ). The management intelligence needs to do more than identify smart strategies for survivorship in the workplace. It needs to find its role and responsibility toward authentic collective changes and transformational sustainable practices. 27 24 Narayan-Parker D., Petesch P.L.: Moving out of poverty. Vol. 1, Cross-disciplinary perspectives on mobility. Palgrave, Basingstoke 2007. 25 Soto H.D.: The mystery of capital: Why captitalism triumphs in the West and fails everywhere else. Basic Books, New York 2000. 26 Laszlo C.: The sustainable, op.cit. 27 Furnham A.: Management intelligence: Sense and nonsense for the successful manager. Houndmills, Basingstoke. Palgrave Macmillan, Hampshire 2008.

Sustainable Value Management 161 4. Towards Sustainable Value Management Laszlo points to mental models as a key barrier to overcome in effectively managing for sustainable value, stemming in particular from the leader s mind-set. 28 Others have also issued a call for a change in management thinking. Waddock & McIntosh argue for a change in management education in order for businesses to make the shift towards more integrated approaches to managing for corporate social responsibility and sustainability. 29 In Management for a Small Planet, Stead & Stead echo this call for a new mind-set in business, one in which business managers recognize the need for integration of both society and nature in managerial decision making. Business managers must also have the ability to be multidimensional leaders, drawing upon the tenets of various leadership style s including transformational leadership, servant leadership, and even spiritual leadership. 30 Important lessons in management, however, may also be draw from the success of businesses in other ways. In their book, Built to Last: Successful Habits of Visionary Companies, James Collins and Jerry Porras profile a number of America s most successful companies in an attempt to pinpoint the reasons for their success. One of the most compelling conclusions they reach in the success of these companies is that contrary to the classic business concept of maximizing shareholder wealth and corporate profits, for visionary companies business has historically been more than an economic activity, more than just a way to make money, or what they call a core ideology that transcends purely economic considerations. 31 Transforming business for an integrated approach to sustainability will require a major overhaul in business and management practices, but as many companies have demonstrated, it can be done in a way that maximizes both shareholder and stakeholder value. The emphasis on sustainability and social responsibility begin with innovative ideas and practices of courageous and visionary leaders like Ray Anderson at Interface, Inc. However, a true transformation can happen only with a renewed managerial education centered on the values of sustainability and social responsibility. The United Nations Global Compact has pushed this effort and convened prominent business ethicists to develop the Principles of Responsible Management Education (PRME). 32 This important initiative recognizes how the 28 Laszlo C.: Sustainable value: how the world's leading companies are doing well by doing good. Stanford Business Books, Stanford, CA 2008. 29 Waddock S., McIntosh M.: Beyond corporate responsibility: Implications for management development. Business and Society Review 2009, no. 114(3), p. 295-325. 30 Stead J.G., Stead W.E.: Management for a small planet. M.E. Sharpe, Armonk, New York 2009. 31 Collins J., Porras J.: Built to Last: Successful Habits of Visionary Companies. Harper Business, New York 1997, p. 55. 32 www.unprme.org.

162 M. Tavanti values of environment, corporate responsibility and sustainability have entered but not yet become embedded in the mainstream of business-related education. Like other academic institutions partnering with the UNGC, DePaul University s Institute for Business and Professional Ethics has been on the forefront of the PRME. Academic institutions have a primary responsibility to educate capable managers with a value-centered trajectory to face the complex business, societal and environmental challenges of the 21st century. The PRME are inspired by internationally accepted environmental, human rights, labor rights and integrity values which ground the sustainable development, peace and justice works of the United Nations Global Compact. International organizations cannot do much to transform the culture of greed on Wall Street and corporations unless academic institutions do their part in educating a new generation of managers and leaders capable of effectively working for the promotion of a sustainable, inclusive and prosperous future for all. The PRME are therefore an essential call to universities and business schools worldwide to adapt their teaching, research and services toward sustainability values and practices. While the term of sustainability is increasingly becoming an integral part of the mission, vision and value statements of organizations, management practices still do not focus on sustainable values. In spite of the recognition of our global awareness of social interconnectedness and environmental interdependence, we still operate our organizational and financial plans without considering universal or collective values. Values like integrity, respect, compassion, solidarity, equity, sharing, caring, peace, security, respect for nature, justice, inclusion, etc. must be translated beyond fancy brochures or policy declarations to actual strategies and true investments for attaining them. Higher and continuing education has the primary responsibility for fostering these transformations. Green-washing initiatives are obviously not enough in management or educational management. Academic institutions have the possibility and challenge to make sustainability an integral and core value in their curricula, operations, research and engagement with the community. Leaders and administrators often do not fully recognize how sustainability investments are more than green investments. They are and should include economic, societal and global benefits. 33 An organization focused on sustainable values gain not only in their marketing strategies, but also primary mission of educating socially responsible leaders for the 21st century. DePaul, the largest American Catholic University, is driven by its Vincentian values to make a difference in the society, especially for the poor and socially excluded. These social concerns are its mission and values. They are the glue that sustains its institutional commitments and engagement for an economically sustainable, socially 33 Barlett P.F.: Chase G.W.: Sustainability on campus: Stories and strategies for change. MIT Press, Cambridge, MA 2004.

Sustainable Value Management 163 responsible and environmentally friendly educational service. Other organizations need to identify their glue that would make the triple bottom line stick together and better integrate with their mission. Sustainability is more than big business it is our educational, social and global responsibility for us and future generations. To educate sustainable value managers capable and concerned with the implementation of an integrated triple bottom line, we need to start with the fourth-bottom line: our moral values and deepest motivations in the workplace. If it is true that one of the distinguishing characteristic of homo-sapiens is its moral value and sense for higher purpose in life, we need to re-discover our true needs and work as homoeconomicus in integration with our identity as homo-sociologicus and our destiny as homobiologicus. Bibliography 1. Anderson R.: Climbing Mount Sustainability. Quality Progress 2004, no. 37(22), p. 32-37. 2. Barlett P.F.: Chase G.W.: Sustainability on campus: Stories and strategies for change. MIT Press, Cambridge, MA 2004. 3. Brundland G.H.: Our Common Future. World Commission on Environment and Development. Brussels 1987. 4. Collins J., Porras J.: Built to Last: Successful Habits of Visionary Companies. Harper Business, New York 1997. 5. Dyllick T., Hockerts K.: Beyond the business case for corporate sustainability. Business Strategy and the Environment 2002, no. 11, p. 130-141. 6. Elkington J.: Enter the triple Bottom Line, [in:] Henriques A., Richardson J. (eds.): The Triple Bottom Line: Does It All Add Up? Earthscan, London 2004, p. 1-16. 7. Esquer-Peralta J., Moure-Eraso R.: Sustainability management systems (SMS): An integrative approach to management systems towards sustainable development. Thesis (Ph.D.). University of Massachusetts. Lowell 2007. 8. Furnham A.: Management intelligence: Sense and nonsense for the successful manager. Houndmills, Basingstoke. Palgrave Macmillan, Hampshire 2008. 9. Friedman M.: The social responsibility of business is to increase profits. The New York Times Magazine 1970. 10. Garriga E., Melé D.: Corporate social responsibility theories: mapping the territory. Journal of Business Ethics 2004, no. 53(1), p. 51-71.

164 M. Tavanti 11. Gomes R., Tesolin L.: Sustainability partnerships Moving from goodwill to action: a guide to creating meaningful partnerships for sustainable development. Canadian Institute for Environmental Law and Policy, Toronto 2003. 12. Hawken P., Lovins A.B., Lovins L.H.: Natural capitalism: Creating the next industrial revolution. Little, Brown and Co., Boston 1999. 13. Kotler P., Lee N.: Corporate social responsibility: doing the most good for your company and your cause. John Wiley & Sons, Inc., Hoboken, New Jersey 2005. 14. Laszlo C.: The sustainable company: how to create lasting value through social and environmental performance. Island Press, Washington, DC 2003. 15. Laszlo C.: Sustainable value: how the world's leading companies are doing well by doing good. Stanford Business Books, Stanford, CA 2008. 16. Lee M.: A review of the theories of corporate social responsibility: Its evolutionary path and the road ahead. International Journal of Management Reviews 2008, no. 10(1), p. 53-73. 17. Lydenberg S.D.: Corporations and the public interest: Guiding the invisible hand. Berrett-Koehler, San Francisco 2005. 18. Miller M.: The tyranny of dead ideas: Letting go of the old ways of thinking to unleash a new prosperity. Times Books, New York 2009. 19. Narayan-Parker D., Petesch P.L.: Moving out of poverty. Vol. 1, Cross-disciplinary perspectives on mobility. Palgrave, Basingstoke 2007. 20. Savitz A.W., Weber K.: The triple bottom line: How today s best-run companies are achieving economic, social, and environmental success and how you can too. John Wiley & Sons, Inc., San Francisco, CA 2006. 21. Smith A.: The Invisible hand. Penguin great ideas. Penguin Books, London 2009. 22. Sfeir-Younis A.: The Ethical and Spiritual Dimensions of Sustainable Development. The Zambuling Institute for Human Transformation (ZIHT) 2007. Available at www.silentpeacemeditation.com 23. Soto H.D.: The mystery of capital: Why captitalism triumphs in the West and fails everywhere else. Basic Books, New York 2000. 24. Stead J.G., Stead W.E.: Management for a small planet. M.E. Sharpe, Armonk, New York 2009. 25. Steger U.: Sustainability partnerships: The manager's handbook. Palgarve Macmillan, Basingstoke 2009, www.palgraveconnect.com/doifinder/10.1057/9780230594685. 26. Sulak Sivaraksa, Kotler A., Bennett N.: The wisdom of sustainability: Buddhist economics for the 21st century. Koa Books, Kihei, Hawai'i 2009. 27. Van Marrewijk M.: Concepts and definitions of CSR and corporate sustainability: between agency and communion. Journal of Business Ethics 2003, no. 44(2), p. 95-105.

Sustainable Value Management 165 28. Waddock S., McIntosh M.: Beyond corporate responsibility: Implications for management development. Business and Society Review 2009, no. 114(3), p. 295-325. Reviewers: Dr hab. Agata Stachowicz-Stanusch, Prof. nzw. w Pol. Śl. Prof. dr hab. Wojciech Dyduch