Year: 2020

Management Notes

International Monetary System

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International monetary system refers to a system that forms rules and standards for facilitating international trade among the nations.

It helps in reallocating the capital and investment from one nation to another.

It is the global network of the government and financial institutions that determine the exchange rate of different currencies for international trade. It is a governing body that sets rules and regulations by which different nations exchange currencies with each other.

With the growing complexity in the international trade and financial market, the international monetary system is necessary to assign a standard value of the international currencies. The rules and regulations set by the international monetary system to regulate and control the exchange value of the currencies are agreed upon by the respective governments of the nations. Thus, the government’s stand may affect the decision making of the international monetary system. For example, change in the trade policy of a government may affect the international trade of goods and services.

International monetary system motivates and encourages the nations to participate in the international trade to improve their BOP and minimize the trade deficit. It has grown over the years as a single architectural body with a vision to integrate the global economy. Some of the important achievements of the international monetary system over the years have been the establishment of World Bank and International Monetary Fund in the year 1944.

The establishment of IMF and World Bank is the result of the agreement among nations to set a body, which promotes and supports the international trade. Now, let’s discuss the evolution of international monetary system. Earlier in 1870 to 1914, trade was carried with the help of gold and silver without any institutional support. At that time, monetary system was decentralized and market based and money played a minor role as compared to gold in international trade.

The use of gold declined after World War I as war increased expenditure and inflation. In such a scenario, countries planned to revive the standard of gold but failed due to great depression. Thus, in 1944, 730 representatives of 44 nations met at Bretton Woods, New Hampshire, United States to create a new international monetary system.

This was called as the Bretton Woods system, which became a turning point in the history of international trade. The aim of new international monetary system is to create a stabilized international currency system and ensure a monetary stability for all the nations.

It was decided that since the United States held most of the world’s gold, thus all the nations would determine the values of their currencies in terms of dollar. The central banks of nations were given the task of maintaining fixed exchange rates with respect to dollar for each currency.

The Bretton Woods system ended in 1971 as the trade deficit and growing inflation undermined the value of dollar in the whole world. In 1973, the floating exchange rate system, also known as flexible exchange rate system was developed that was market based.

Paper Currency Standard & Purchasing Power Parity

With the breakdown of the gold standard during the period of the First World War, gold parities and free movements of gold ceased, therefore the mint par of exchange lost significance in the exchange markets.

Exchange rates fluctuated far beyond the traditional gold points and there was complete confusion. Hence, to explain this phenomenon and the problem of determination of the equilibrium exchange between inconvertible currencies, the theory of purchasing power parity was enunciated.

The basic idea underlying the purchasing power parity theory is that the foreign currencies are demanded by the nationals of a country because it has power to command goods in its own country.

When domestic currency of a nation is exchanged for foreign currency, what is in fact done is that domestic purchasing power is exchanged for foreign purchasing power. It follows that the main factor determining the exchange rate is the relative purchasing power of the two currencies.

For, when two currencies are exchanged, what is exchanged, in fact, is the internal purchasing power of the two currencies.

Thus, the equilibrium rate of exchange should be such that the exchange of currencies would involve the exchange of the equal amounts of purchasing power. It is the parity of the purchasing power that determines the exchange rate. Thus, the purchasing power theory states that exchange rate tends to rest at the point at which there is equality between the respective purchasing power of the currencies. In other words, rate of exchange between two inconvertible paper currencies tends to close to their purchasing power ratio. Hence,

The Purchasing Power Theory

(PPT) seeks to explain that under the system of autonomous paper standard the external value of a currency depends ultimately and essentially on the domestic purchasing power of that currency relative to that of another currency.

The PPT has been presented in two versions, namely

  • Absolute Version of Purchasing Power Parity and
  • Relative Version of Purchasing Power Parity.

  1. Absolute Purchasing Power Parity

The absolute version of the purchasing power parity theory stresses that the exchange rates should normally reflect the relation between the internal purchasing power of the various national currency units.

The price of a tradable commodity in one country should theoretically be equal to the price of the same commodity in another country, after adjusting for the foreign exchange rate. The theory is known as the international law of one price. When the international law one price applied to the representative good or basket of goods, it is called the absolute purchasing power parity condition.

To illustrate the point, let us assume that a representative collection of goods costs Rs.9,625/- in India and US$ 195 in USA. As per the Absolute PPP theory, the exchange rate between US$ and Indian Rupee is the ratio of two price indices.

Spot price (In Indian Rupee) = Price Index of India/ Price Index of USA

Spot Rate = PRupee / PUSA

As per the example mentioned above, the exchange rate would be;

Spot (in Rupee) = 9625/195 = Rs.47.5128

The theoretical argument behind the Absolute PPP condition is that a country’s goods are relatively cheap internationally; goods market arbitrage would create pressure on both foreign prices and goods prices to correct, and thereby conform to uniform international prices.

  1. Relative Purchasing Power Parity

Purchasing Power for two currencies can be different not because of differences in their internal purchasing power, but some other factors also.

Relative purchasing power parity relates the change in two countries’ expected inflation rates to the change in their exchange rates. Inflation reduces the real purchasing power of a nation’s currency.

If a country has an annual inflation rate of 5%, that country’s currency will be able to purchase 5% less real goods at the end of one year. Relative purchasing power parity examines the relative changes in price levels between two countries and maintains the exchange rates, which will compensate for inflation differentials between the two countries.

The relationship can be expressed as follows, using indirect quotes:

St / S0 = (1 + iy) ÷ (1 + ix) t

Where,

S0 is the spot exchange rate at the beginning of the time period (measured as the “y” country price of one unit of currency x)

St  is the spot exchange rate at the end of the time period.

iy  is the expected annualized inflation rate for country y, which is considered to be the foreign country.

Ix  is the expected annualized inflation rate for country x, which is considered to be the domestic country.

Example

The annual inflation rate is expected to be 8% in the India and that for the US is 3%. The current exchange rate is Rs.46.5500/- per US $. What would the expected spot exchange rate be in six months for Indian Rupee relative to US$.

Answer:

So the relevant equation is:

St / S0 = (1 + iy) ÷ (1 + ix)

= S6month ÷ Rs.46.5500 = (1.08 ÷ 1.03)0.5

Which implies S6month = (1.023984) × Rs.46.550 = Rs.47.6665.

So the expected spot exchange rate at the end of six months would be Rs.47.6665 per US$.

Inflation, taxes, quality of products, and other circumstances that change the market also have bearing on the price or internal purchasing power. All these factors need to be adjusted while estimating the exchange rate under in-convertible paper currency standard. PPP theory may not reflect the true exchange rate in the short-run however; it actually indicates the fundamental equilibrium exchange rate in the long-run.

International Monetary System: The Bretton Woods System

Attempts were initiated to revive the Gold Standard after the World War I, but it collapsed entirely during the Great Depression of the 1930s.

It was felt that adherence to the Gold Standard prevented countries from expanding the money supply significantly so as to revive economic activity.

However, after the Second World War, representatives of most of the world’s leading nations met at Bretton Woods, New Hampshire, in 1944 to create a new international monetary system.

United States of America, at that time, was accounted for over half of the world’s manufacturing capacity and held most of the world’s gold, the leaders decided to tie world currencies to the US dollar, which, in turn, they agreed should be convertible into gold at $35 per ounce. Under the Bretton Woods system, Central Banks of participating countries were given the task of maintaining fixed exchange rates between their currencies and the US-dollar.

They did this by intervening in foreign exchange markets. If a country’s currency was too high relative to the US-dollar, its central bank would sell its currency in exchange for US-dollars, driving down the value of its currency. Conversely, if the value of a country’s money was too low, the country would buy its own currency, thereby driving up the price. The purpose of the Bretton Woods meeting was to set up new system of rules, regulations, and procedures for the major economies of the world.

The principal goal of the agreement was economic stability for the major economic powers of the world. The system was designed to address systemic imbalances without upsetting the system as a whole.

The Bretton Woods System continued until 1971. By that time, high inflation and trade deficit in the USA were undermining the value of the dollar. Americans urged Germany and Japan, both of which had favorable payments balances, to appreciate their currencies.

But those nations were reluctant to take that step, since raising the value of their currencies would increase prices for their goods and hurt their exports. Finally, the USA abandoned the fixed value of the US-dollar and allowed it to “float” against other currencies, which led to collapse of the Bretton Woods System.

The Bretton Woods system established the US Dollar as the reserve currency of the world. It also required world currencies to be pegged to the US-dollar rather than gold. The demise of Bretton woods started in 1971 when Richard Nixon took the US off of the Gold Standard to stem the outflow of gold. By 1976 the principles of Bretton Woods were abandoned all together and the world currencies were once again free floating.

World leaders tried to revive the system with the so-called “Smithsonian Agreement” in

1971, but the effort could not yield. Economists call the resulting system a “managed float regime,” meaning that even though exchange rates most currencies float, central Banks till intervene to prevent sharp changes.

As in 1971, countries with large trade surpluses often sell their own currencies in an effort to prevent them from appreciating. Similarly, countries with large trade deficits buy their own currencies in order to prevent depreciation, which raises domestic prices. But there are limits to what can be accomplished through intervention, especially for countries with large trade deficits. Eventually, a country that intervenes to support its currency may deplete its international reserves, making it unable to continue support the currency and potentially leaving it unable to meet its international obligations.

At present almost all countries having their own paper currencies standard which is neither linked to gold or US-dollar or any other foreign currencies and they have adopted the currency system which is “managed floating” in nature.

The Mint Par Parity Theory

This theory is associated with the working of the international gold standard. Under this system, the currency in use was made of gold or was convertible into gold at a fixed rate. The value of the currency unit was defined in terms of certain weight of gold, that is, so many grains of gold to the rupee, the dollar, the pound, etc. The central bank of the country was always ready to buy and sell gold at the specified price.

The rate at which the standard money of the country was convertible into gold was called the mint price of gold.

If the official British price of gold was £6 per ounce and of the US price of gold $12 per ounce, they were the mint prices of gold in the respective countries. The exchange rate between dollar and pound would be fixed at $12/£6 =2, which in other words, one pound is equal to two dollar.

This rate is called mint parity rate or mint par of exchange because it was based on the mint price of gold. However, the actual exchange rate between these currencies would vary above or below the mint parity rate by the cost of shipping gold between two countries. To illustrate this, suppose the US has a deficit in its balance of payments with Britain. The difference between the value of imports and exports will have to be paid in gold by the US importers because the demand for pounds exceeds the supply of pounds. But the transshipment of gold involves cost. Suppose the shipping cost of gold from the US to Britain is 5 cents. So the US importers would have to pay $2.05 per £1. This is exchange rate, which is equivalent to US gold

Because currencies were convertible in gold, then nations could ship gold among themselves to adjust their “balance of payments.”

In theory, all nations should have an optimal balance of payments of zero, i.e. they should not have either a trade deficit or trade surplus.

For example, in a bilateral trade relationship between Australia and Brazil, if Brazil had a trade deficit with Australia, then Brazil could pay Australia gold. Now that Australia had more gold, it could issue more paper money since it now had a greater supply of gold to support new bills.

With an increase of paper bills in the Australian economy, inflation, i.e. a rise in prices due to an overabundance of money, would occur. The rise in prices would subsequently lead to a drop in exports, because Brazil would not want to buy the more expensive Australian goods.

Subsequently, Australia would then return to a zero balance of payments because its trade surplus would disappear.

Likewise, when gold leaves Brazil, the price of its goods should decline, making them more attractive for Australia. As a result, Brazil would experience an increase in exports until its balance of payments reached zero. Therefore, the gold standard would ideally create a natural balancing effect to stabilize the money supply of participating nations.

The Gold Standard in Operation

However, the operation of the gold standard in reality caused many problems. When gold left a nation, the ideal balancing effect would not occur immediately. Instead, recessions and unemployment would often occur. This was because nations with a balance of payments deficit often neglected to take appropriate measures to stimulate economic growth. Instead of altering tax rates or increasing expenditures – measures which should stimulate growth – governments opted to not interfere with their nations’ economies. Thus, trade deficits would persist, resulting in chronic recessions and unemployment.

With the outbreak of the First World War in 1914, the international trading system broke down and nations valued their currencies by fiat instead, i.e. governments took their currencies off the gold standard and simply dictated the value of their money. Following the war, some nations attempted to reinstate the gold standard at pre-war rates, but drastic changes in the global economy made such attempts futile. Britain, which had previously been the world’s financial leader, reinstated the pound at its pre-war gold value, but because its economy was much weaker, the pound was overvalued by approximately 10%. Consequently, gold swept out of Britain, and the public was left with valueless notes, creating a surge in unemployment. By the time of the Second World War, the inherent problems of the gold standard became apparent to governments and economists alike.

Following the second world war, the International Monetary Fund replaced the gold standard as a means for nations to address balance of payments problems with what became a “gold-exchange” standard.

Currencies would be exchangeable not in gold but in the predominant post-war currencies of the allied nations: British sterling, or more importantly, the U.S. dollar. Under the new International Monetary Fund approach, governments had a more pronounced role in managing their economies. Ideally, governments would hold dollars in “reserve.” If an economy needed an influx of money because of a balance of payments deficit, the government could exchange its reserve dollars for its own currency, and then inject this money into its economy. The dollar would ideally remain stable since the U.S. government agreed to exchange dollars for gold at a price of $35 an ounce. Thus, world currencies were officially off the gold standard. However, they were exchangeable for dollars. Because dollars were still exchangeable for gold, the “gold-exchange” standard became the prevailing monetary exchange system for many years.

The effect of the gold-exchange system was to make the United States the center for international currency exchange. However, due to the inflationary effects of the Vietnam War and the resurgence of other economies, the United States could no longer comply with its obligation to exchange dollars for gold. Its own gold supply was rapidly declining. In 1971,

President Richard Nixon removed the dollar from gold, ending the predominance of gold in the international monetary system.

In retrospect, the gold standard had many weaknesses. Its foremost problem was that its theoretical balancing effect rarely worked in reality. A much more efficient means to resolve balance of payments problems is through government intervention in their economies and the exchange of reserve currencies. Today, very few commentators propose a return to the gold standard.

Management Notes

Methods of Payment

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To select the best payment method, it can be helpful to think about it in terms of the above risk ladder. The nature of the relationship with your buyer may also determine the settlement method used.

Payment Method 1: Open account

This is probably the least secure payment method for you as the exporter. Your buyer receives the goods and then pays for them, usually with a credit period attached (30, 60 or 90 days).

This payment method extends the period before which your business receives cash –and your working capital position will be impacted further if a period of credit applies.

You might consider offering this option under the following circumstances:

  • You have an established relationship with the buyer
  • The buyer is a multinational business with strong buying power and strong buyer credit rating
  • Smaller value exports.

Payment method 2: Bank collection

This is a more secure option than an open account, whereby, as the name suggests, your bank collects the money on your behalf. It is also known as a documentary collection.

An instruction document is forwarded by your bank to your buyer’s bank for release against either Payment (Documents against Payment) or Acceptance – of a Bill of Exchange (Documents against Acceptance).

This can be a good way of “meeting in the middle” with your buyer, wherein the risk is reduced (but not eliminated) for you both.

It is also not as time consuming or costly as a letter of credit, and doesn’t take up any credit facilities.

Payment method 3: Letter of credit

A letter of credit is essentially a bank’s promise to another bank that you they know you and (hold your overdraft facility) will act as a guarantor for your transaction. You need both banks’ party to the transaction to agree to act in this way.

Once it is agreed, in the event that your buyer is unable to make payment, the bank will cover and pay the outstanding amount, provided that certain delivery conditions have been met.

One of the important things to note from a payment method perspective is that, if ever you receive a letter of credit, ensure you give it your immediate attention and check it in detail.

Remember, it is a document that should lead to your business being paid on time. Lack of attention to detail could delay payment and cost you money.

Payment method 4: Advance payment

This is the most advantageous method for you as the exporter as, where the buyer has to pay for the goods before they receive them. Consumers essentially do this every day when purchasing online, being charged either at the time of order or when the goods dispatch.

This method is advisable in the following circumstances:

  • You have a new relationship with the buyer, where there is a ‘lack of trust’ between buyer and seller
  • The buyer does not have a strong credit rating
  • You sell a unique/rare product of high value.

So, once you have selected the appropriate method of payment, allow sufficient time to get everything in place and make sure you ask questions of your buyer, if need be, and especially of your bank, who are there to help.

Time Rate System

Under this system, the amount of remuneration or the total wages outstanding to the workers depends on the time for which he is employed. This is a simple and common method of wage payment. In this method, the workman is paid an hourly, daily, monthly or yearly rate of wages.

Thus, the worker is paid on the basis of time but not on his/her performance or unit of output. A number of wages payable to a workman under this method is to be calculated as follows:

Total wages = Actual time took x time rate

or, Total wages = Total hours worked x Wages rate per hour.

Advantages of Time Rate System

The following are the advantages of time rate system,

(i) Simplicity

It is really easy to understand and simple to calculate the earnings of workers under this method.

(ii) Guarantee of minimum wages

It guarantees minimum wages to the workers.

(iii) Quality production

Since, a number of wages rate is not linked to the quantity of output, this method ensures production of better quality due to the careful attention of the workers.

(iv) Unity among workers

Under this system, all workers falling under a particular category are paid at an equal rate without any calculation of their quantity of output. It encourages a feeling of equality among workers on account of which this method is also favored by trade unions.

(v) Economical

It involves less critical work and detailed records are not necessary. Since, the output is not the criteria for identification of wages, tool and materials are handled carefully and wastages are also minimized.

Disadvantages of Time Rate System

This method has the following disadvantages:

(i) No incentive to the efficient workers

It lacks incentive to efficient workers since all workers are paid equally and no distinction is made between efficient and inefficient workers. So, effort and rewards are not correlated.

(ii) Go-slow policy

The worker in order to earn more wages may try to perform the work slowly which leads to increase in labor cost per unit.

(iii) Dissatisfaction among the efficient workers

The efficient workers are paid wages at the rate equal to those payable to inefficient workers, which creates dissatisfaction among the efficient workers.

(iv) Payment for idle time

Under this method, the idle time of the workers is also paid that increases the cost of production.

(v) The high cost of supervision

Since, there is no direct link between the quantity of output and wages, wastage of time on the part of the workers is common and the negligence of which requires considerable supervision leading to increased costs.

Piece Rate System

In this method, wages are paid to the employees after completion of work. Under it, a worker is paid on the basis of output not the time taken by him. This is one of the simplest and most commonly used systems of wage payment. In this system, the wage rate is expressed in terms of per unit of output, per job or per work-order. A number of wages payable to a workman under this method is to be calculated as follows:

Total wages = Total output x Rate per Unit of Output.

Advantages of Piece rate system

The advantages of piece rate system are given below:

(i) Simplicity

Just like time rate system, the piece rate system is also simple to calculate and easy to understand. It does not involve tedious calculations.

(ii) The incentive to workers

This system provides an incentive to the workers to work hard as the wages are paid on the basis of the quantity of output, not on the basis of time. So, efforts and rewards are correlated.

(iii) Ascertainment of accurate labor cost

Piece rate system wages are paid on the basis of output, the exact cost of labor per unit of output or job can be ascertained.

(iv) No payment for idle time

Under this rating system, no payment were made to the worker for the idle time as a result of which the cost of supervision is not considerable.

(v) Proper care and use of machines and tools

The workers take proper care of their machines and tools since the breakdown of machines and tools means a decrease in output resulting in less remuneration to them.

Disadvantages of Piece Rate System

(i) Less attention to quality

As the payment of wages is made on the basis of output, the workers would try to produce more quantity of products and not focus on the quality of products which results in production of less quality products.

(ii) Inefficient use of machines and materials

Since, the wages are paid on the basis of the quantity of output, an excessive wastage of materials and frequent breakdown of machinery may be caused by the workers due to their efforts to obtain maximum output.

(iii) No guarantee of minimum wages

Since, there is a direct relationship between quality of output and wages, the workers suffer if they fail to work efficiently. There is no guarantee of minimum daily wages to workers.

(iv) Dissatisfaction among inefficient workers

The inefficient workers, who work slowly, become dissatisfied by reason of lower wages as compared to the wages paid to their efficient counterparts.

(v) Adverse effect on worker’s health

The workers may try to work abnormally to earn more which has an adverse effect on their health and efficiency. So, this method is not accepted by a trade union.

Management Notes

Issues involved in International Business and Finance

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International business finance is the art of managing money on a global scale. Students interested in this field study various areas of finance, such as investments and corporate finance. Before you continue your study of international markets and global financial institutions, you must understand the fundamentals of domestic operations.

As an expert in international business finance, you may pursue a career with a multinational corporation, financial institution or consulting firm. Your level of education and experience will be key to obtaining a position, as international jobs are usually reserved for candidates with strong foreign language skills and knowledge of a specialized area of finance. For example, you may work as a financial officer, helping organizations grow through mergers, contracts and expansions in the most cost-effective way possible. As a financial analyst, you’ll guide businesses and individuals through investment decisions by studying financial statements and the global economy.

  1. Different Trade Patterns

International business has to deal with the business patterns among the various countries of the world.

It has to take into account these business policies of various countries which govern their imports and exports. These policies and practices impose certain constraints and restrictions on international business.

  1. Regulatory Measures

Every country wants to export its surplus natural resources, agricultural produce and manufactured goods to the extent, it can and import only these goods and products which are not produced or manufactured within the country. For this purpose regulatory measures like tariff barriers (custom duties) non-tariff barriers, quota restrictions, foreign exchange restrictions, technological and administrative regulations, consulter for­malities, state trading and preferential arrangements, trade agreements and joint commis­sions etc. Come in the way of free trade and unfettered flow of foreign business.

  1. Lop Sided Development of Developing Countries:

Developed counters are equipped with sophisticated, technologies capable of transforming raw materials into finished goods on a large scale. While developing countries on the other-hand lack technological knowledge and latest equipment. It leads to the lop sided development in the international business.

  1. Economic Unions

There is an increasing tendency among nations to form small groups of Economic Unions which help them to negotiate terms for the business with other countries.

  1. National Policy of Development

The country desirous of achieving self-sufficiency, follows a strategy of importing capital goods equipped with latest and sophisticated technology and restricting imports of less important consumer goods with a view to lowering down its import bill.

  1. Procedural Difficulties

Different countries have evolved different procedures, practices and documents in order to regulate the export trade. Some of these such as foreign exchange control regulations and others have been formulated after keeping in view the national objectives and have posed certain procedural problems to exporters and importers.

  1. Other Problems

Apart from the problems written above there are many other internal difficulties which restrict our export business and consequently affect the foreign exchange earnings.

They are:

(i) Business and industry have not recognised the importance of international business,

(ii) Inflation, high prices and black marketing are starting us in the face. If the situation persists it may put our price level beyond the means of our customers abroad, no matter how badly they need our export,

(iii) Our internal economy is being managed very badly in recent years. If it continues we cannot supply our own essential need. What to say about supply to other nations,

(iv) Poor business ethics is also responsible for our international business.

Management Notes

Organizational Constraints

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The four constraints are:

  • Business model and strategy
  • Processes and organizational structure
  • Leadership
  • Culture

When we started Leaderonomics a few years ago, I decided to see if these four constraints worked even in a start-up. Surprisingly, it does.

  1. Business model

This is simple. If you have a wrong business model, you will fail. If you have a wrong strategy in place, you will ultimately be doomed.

For years, despite the advent of the smartphones and with Apple and Samsung ripping up their mobile phone market dominance, Nokia refused to relook at its business model. By the time it did, it was too late.

The same happened to Eastman Kodak who refused to budge from their “film” business model. Likewise Polaroid and many others that refused to pivot their business model when they needed to change or scale. Your business model and strategy is the cornerstone of your success.

If you are having issues scaling your business, the first place to start examining is your business model as an organizational constraint.

  1. Processes and organizational structure

One of the biggest mistakes organizations make is to focus on people. Yes, you read that right! The problem with solely focusing on people is that we end up pampering our people.

The key to successfully getting your employees to achieve high performance is to focus on “process.” You can still care and love them, but your emphasis must be on building institutional processes.

One of the biggest mistakes Enron and its leadership made was to rely on their “top talent”. They hired really smart people and focused entirely on these “special” people making the organization great.

Initially, Enron had stellar performance. But ultimately, it blew up. Structures and processes dictate behaviour.

If we do not spend time intentionally creating structures and processes that drive the behaviours and performance that we want, we will continually lament the actions of our employees.

  1. Leadership

When we talk about leadership being a constraint, it not only means the quality of leadership at the top of the organization but also the quality of leaders across all the different levels.

It’s said that people don’t leave companies, they leave bosses, and we have had employees who made the decision to leave due to dissatisfaction with their leaders.

This shows that it is not only the senior leadership team who are important, but also the middle managers who play an equally important part in talent retention and growth.

If you look at all the top organisations in the world, a key part of their success is leadership. In fact, many problems of the world and even in our country are related to the lack of leadership.

  1. Culture

Culture is the cumulative beliefs or mindsets of an organization, manifested in actions. These actions ultimately drive a result. But the “mindset” each of us has is deep-seated. So are organizational beliefs. Martin Seligman at the University of Pennsylvania believes that our mindset dictates our actions.

For example, if you believe that your failures are produced by personal deficits beyond your control, you will make no effort to try to change.

Management Notes

Components of Creativity and Innovation

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Main Components of Creativity and Innovation

  1. Originality

The method or idea must be new and unique. It should not be the extension of something, which already exists. However, one can take inspiration from the already existent methods and ideas to fabricate something new and unique.

  1. Functionality

Another important component of creativity is its functionality. A creative idea must work and produce results, otherwise, the whole effort will be in vain.

Most of the times, people wonder how does creativity happen. It has been seen that creativity become another nature of some people whereas others have to spend hours on road or on a mountain to think of a tiny idea. In the following paragraph, you will learn about when does creativity happen and what kind of people called creative?

People who are thought-provoking, curious and have a variety of uncommon thoughts are known to be creative people. Sometimes these people don’t even know what they are doing and how much importance does that innovation holds. Therefore, they usually fabricate new ideas, which leave people flabbergasted.

People who had important self- discoveries, who view the world with a fresh perspective and have insightful ideas. These people make unique discoveries which they don’t share with the outer world.

People who make great achievements which are known to the world. Inventors and artists fall under this category.

Creative people have numerous traits that influence their creative thinking. Followings are the few personality traits of creative people.

Qualities of Creative People

  1. They are Energetic

Creative people tend to have a great amount of physical as well as mental energy. They utilize their energy to invent new ideas. These people spend a great deal of time in solitude to introspect and think.

  1. They are intelligent

It is believed that intelligence plays a key role in creativity. According to a study high IQ is important for creativity. However, not all people with high IQ are creative. To become creative, people should be smart and they should also have a child-like attitude to view things.

  1. Discipline

Most of the people have the wrong notion that creativity happens unexpectedly. Therefore, they usually spend their time sitting around and to wait for the creativity to happen to them.

Aren Dietrich has classified creativity in four domains using four discrete processing modes such as emotional, cognitive, deliberate and spontaneous. He created a quadrant of creative types using these four characteristics.

In the following paragraphs, four types of creativities are discussed and explained.

4 Types of Creativity

  1. Deliberate and Cognitive creativity

People who possess deliberate and cognitive characteristics are purposeful. They have a great amount of knowledge about a particular subject and combine their skills and capabilities to prepare a course of action to achieve something. This type of creativity built when people work for a very long time in a particular area.

People who fall under this type of category of creativity are usually proficient at research, problem- solving, investigation and experimentation. This type of creativity is located in the brain’s prefrontal cortex, which is at the front part of the brain. These types of creative people spend a great deal of time every single day testing to develop new solutions.

Thomas Alva Edison is one prominent example of this type of creative people. He ran experiment after experiment before inventing electricity, the light bulb, and telecommunication. Hence, deliberate and cognitive creativity requires a great deal of time, dedication and abundance of knowledge about a particular subject.

2) Deliberate And Emotional Creativity

People who are categorized as deliberate and emotional let their work influenced by their state of emotions. These types of creative people are very emotional and sensitive in nature. These individuals prefer relatively quiet and personal time to reflect and they usually have a habit of diary writing. However, they are equally logical and rational in decision making.

Their creativity is always a balanced product of deliberate emotional thinking and logical actions. This type of creativity is found in the amygdala and cingulate cortex parts of the human brain. Amygdala is responsible for human emotions whereas cingulate cortex helps in learning and information processing. This type of creativity happens to people at random moments. Those moments are usually referred to as “a-ha!” moments when someone suddenly thinks of a solution to some problem or think of some innovative idea.

For example, there are situations when you feel low and emotional which distracts you from your work. In those kinds of situations, you should take 5 minutes and point out the things which are making you sad and keep them aside and focus on the work in hand. It will help you to get improvised results and you will get work done easily. One should seek “quiet time” for deliberate and emotional creativity to happen to them.

  1. Spontaneous and Cognitive creativity

There are times when you spend a long time to crack a problem but can’t think of any solution. For example, when you want to make a schedule for a month to get a job done, but you can’t seem to think of any possible way and when you are watching television and having your relaxed time and suddenly you think of a solution and everything falls in place. The same case happened with the great scientist Isaac Newton. He got the idea about the law of gravity when an apple hit his head while he was sitting under a tree and relaxing.

This is the “Eureka!” moments for Newton and an excellent example of a spontaneous and cognitive person. This type of creativity happens when one has the knowledge to get a particular job done, but he requires inspiration and a hint to walk towards the right path. This type of creativity usually happens at the most inconvenient time, such as, when you are in bed with your partner or having a shower. Spontaneous and cognitive creativity takes place when the conscious mind stops working and go to relax and unconscious mind gets a chance to work.

Mostly, this type of creative person stops conscious thinking when they need to do “out of the box” thinking. By indulging in different and unrelated activities, the unconscious mind gets a chance to connect information in new ways which provide solutions to the problems. Therefore, to let this type of creativity happen one should take a break from the problem and get away to let conscious mind overtake.

  1. Spontaneous and Emotional Creativity

Spontaneous and emotional creativity takes place in the “amygdala” part of the human brain. Amygdala is responsible for all emotional type of thinking in the human brain. Spontaneous ideas and creativity happen when conscious and Prefrontal brain is resting. This type of creativity is mostly found in a great artist such as musicians, painters, and writers etc. This type of creativity is also related to “epiphanies”.

Epiphany is a sudden realization of something. Spontaneous and emotional creativity is responsible for a scientific breakthrough, religious and also philosophical discoveries. This allows the enlightened person to look at a problem or situation with a different and deeper viewpoint.

Those moments are defined as rare moments when great discoveries take place. There is no need to have specific knowledge for “spontaneous and emotional” creativity to happen but there should be a skill such as writing, musical or artistic. This type of creativity can’t be obtained by working on it.

Management Notes

Creativity and Innovation: Meaning and Need

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Creativity

As the word suggests, creativity is about creation. It’s about harnessing the power of the mind to conceive new ideas, products plans, thought experiments, tastes, sensations or art. Creativity can be a form of expression or a way of solving problems. Anyone can be creative, and in any context. There’s creativity in the marketing department, just as there can be creativity on a football pitch.

Creativity has traditionally been left to those ‘wacky’ companies that are deliberately trying to do things differently, with the majority of businesses tending to favor a traditional and monotone approach to running their organizations. However, the changing business landscape means that companies are beginning to consider a more creative approach to working.

Need of creativity

Creativity can help a company manage tasks, improve staff performance and create quality products. It is also vital in fostering a likeable and aspirational company image. With consumers now able to get a snapshot of what company life is like, businesses need to be able to depict their inner culture in a way that makes it seem appealing.

As new technologies continue to develop and become available, companies have to be flexible and able to keep up to date. Creativity allows them to easily identify new ways in which technology can be applied to help their businesses. Likewise, with social media and other interactive forms of marketing now available, it’s never been more important for companies to be able to be creative.

Allowing employees to be more creative can inspire them to come up with more interesting ideas as well as improve their overall output. Many of the world’s leading companies have started to adopt unorthodox methods of encouraging maximum creativity from their employees, such as sleeping pods and flexible working areas.

Innovation

Innovation, on the other hand, needs stability and establishment. It’s about changing a common or long-standing process by improving it. It’s only by having a status quo in existence, that you can develop it in order to innovate. So, while creativity and innovation share strong links, the processes are entirely different.

Innovation is about taking newly created ideas and developing them into something useful and practical. In many ways, innovation is the process of converting theory into action.

The most common type of innovation is evolutionary, which means finding ways of making incremental improvements to your products and services. This type of innovation carries fewer risks, as it’s generally easier to establish demand for these improvements and to calculate the likely return on investment. However, it still requires a strategic, targeted approach – there’s little point in improving a product in a way that customers don’t value.

The best way to identify opportunities for evolutionary innovation is to talk to existing customers and find out what they value most about your products and services, and what aspects they’d like to see improved. If longer battery life is their number one priority, then it probably should be your number one target for innovation. However, if they also value the product’s easy portability, it’s probably not a good idea for your new version to be much larger or heavier.

Need of innovation

Innovation is important because it’s the only way that you can differentiate your products and services from those of your competitors. For customers and clients to choose your business, your offer needs to be distinctive and valuable, and the only way to achieve this is through innovation.

It can be tempting to let your rivals do all the heavy lifting of creativity and innovation, with all the investment, experimentation and risks that this entails. Then, when they come up with a dazzling new product or improvement, you can simply copy what they’ve done at a fraction of the effort. However, there are several pitfalls to this approach.

Most importantly, you’ll always be playing catch-up. However quickly you get your version to market, your rivals will always have the lead on you and they’ll already be planning their next move. This means customers will go to your rivals first, who will maintain a reputation for leading the pack. Your business won’t stand out because there’ll always be someone else who’s already met the needs and desires of your customers. You’ll harm your own brand, and could also risk infringing on your competitor’s intellectual property rights.

However, innovation doesn’t have to be focused on changing a product or service. If you can find an innovative new process that enables you to create a product more efficiently without compromising on quality, you’ll be able to stand out from your rivals by undercutting their prices. Similarly, your innovation could come in the form of a new distribution system, enabling you to stand out by offering the fastest delivery to customers.

Creativity and innovation in the workplace

Exploiting both creativity and innovation in business can boost performance and the bottom line. But first, you need to make space for both to happen.

Encouraging creativity can involve lots of different strategies, from enabling employees to work outside the office to letting people come into and leave the office when they feel ready to, not when they’re expected to. The office itself needs to be creativity-friendly and there are ways you can adapt the working environment to support employees’ talents.

It’s important to let staff feel free when exploring new ideas – whether it’s tweaking your existing product or developing a whole new concept. Involve the team, share accountability, reward good work and be ready to respond to market feedback. Remember, your ideas and innovation, no matter how amazing, still need to fulfil a need among customers.

There’s no guaranteed source of great ideas, but they do tend to be generated by the most engaged, positive employees. They don’t come from staff who are bored or stressed. Great ideas sometimes come from brainstorming sessions, but trying to force out ideas can be counterproductive. In reality, great ideas are equally likely to occur when a particular problem occurs that requires a solution, or even when an employee is on their way home, thinking about their day.

The key is to use your business’s culture and processes to capture these ideas when they happen, wherever they come from. Staff suggestion boxes and allocated creative time can work well, but sometimes all that’s required is a clear message from the boss that all ideas are welcome.

Management Notes

Comprehensive Intervention

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The Comprehensive Intervention Model is a response to intervention approach. In 1991, Linda Dorn implemented the small-group model to support Reading Recovery teachers who worked with small groups of struggling readers in kindergarten and first grade. Dorn’s work is secured in several years of solid research and proven data.

The success of CIM is grounded in three critical areas: the specialized knowledge and expertise of reading teachers, the training and ongoing professional development that focuses on sensitive observation and flexible decision making, and the collaborative relationship between university trainers and reading teachers in the refinement of the literacy components. 

The Comprehensive Intervention Model includes individual and small-group interventions that align with classroom curriculum. These include: Reading Recovery, Emergent Language and Literacy Groups, Guided Reading Plus Groups, Assisted Writing Groups, Writing Process Groups, Comprehension Focus Groups, and Comprehension Focus Groups in Content.

CIM is designed as a System Intervention in that it provides a seamless comprehensive approach to student achievement. It provides teachers with a framework for aligning and managing interventions across the school system.  CIM uses a problem-solving, data-driven process for increasing literacy achievement across the school. It is based on five core principles:

  • Intervene early
  • Use a seamless approach
  • Provide layered interventions
  • Make ethical and informed decisions
  • Employ a collaborative, problem-solving method.

The heartbeat of the CIM is the responsive teacher, one who understands change over time in literacy processing and is able to adjust instruction to accommodate student learning.

Management Notes

Structural Interventions

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Techno-structural interventions focus on improving the organizational effectiveness and human performance by focusing on technology and structure. These interventions are rooted in the fields of engineering, sociology, and psychology, combined with socio-technical systems, job analysis and design.

These types of interventions rely on an improvement-based approach; the idea is to shape the organizational techno-structural elements to get a best fit to the current situation and future development of the company.

The two main focus points of techno-structural intervention approaches are the improvement of an organization’s technology, for example, task methods and job design, and structure, for example division of labour and hierarchy. The following interventions are included in techno-structural interventions: 

  • Organizational structure
  • Organization systems
  • Innovation and design thinking
  • Socio-technical systems
  • Change management  
  • Job design / enrichment
  • Competency-based management
  • Knowledge management
  • Organizational learning
  • Work design
Management Notes

Job Enrichment, Functions, Scope, Challenges

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Job enrichment is a motivational strategy focused on enhancing a job’s depth by giving employees greater autonomy, responsibility, and control over their work. Unlike job enlargement, which adds tasks at the same level, enrichment vertically loads a role by incorporating planning, decision-making, and managerial functions traditionally held by supervisors. Core techniques include empowering employees to schedule their tasks, make decisions, and solve problems independently, while also providing opportunities for skill development and direct feedback. The goal, rooted in Herzberg’s Two-Factor Theory, is to create intrinsically satisfying work by fulfilling achievement, recognition, and growth needs, thereby boosting engagement, reducing turnover, and improving performance.

Functions of Job Enrichment:

  • Enhances Employee Motivation

A key function of job enrichment is to increase employee motivation by making jobs more meaningful and challenging. It involves adding responsibilities, autonomy, and opportunities for personal growth. Employees feel valued when they are trusted with decision-making or problem-solving tasks, leading to higher job satisfaction. Motivated employees are more productive, committed, and engaged in their work. Unlike job enlargement, which only adds tasks, job enrichment focuses on making the job more fulfilling. This intrinsic motivation encourages creativity, responsibility, and loyalty, reducing turnover and improving overall organizational effectiveness by aligning personal satisfaction with organizational goals.

  • Improves Skill Utilization

Job enrichment ensures the better utilization of employee skills and talents by giving them opportunities to take on challenging tasks beyond routine work. When employees are encouraged to handle planning, decision-making, and problem-solving activities, they apply their knowledge and competencies more effectively. This not only develops new skills but also ensures existing abilities are not underutilized. Skill utilization leads to personal growth and boosts employee confidence, making them more resourceful and versatile. For organizations, it means having a capable workforce ready for higher responsibilities, succession planning, and leadership roles, ultimately strengthening long-term growth and competitiveness.

  • Promotes Employee Responsibility

Another important function of job enrichment is that it increases employee responsibility. By delegating greater decision-making power and control over work, employees develop a stronger sense of ownership. They are accountable for the quality, efficiency, and outcomes of their tasks, which enhances discipline and commitment. Greater responsibility encourages employees to focus on problem-solving and continuous improvement rather than just completing assigned duties. This sense of accountability also builds leadership qualities and prepares employees for managerial positions. Thus, job enrichment fosters responsibility, maturity, and reliability among employees, leading to higher productivity and organizational success.

  • Facilitates Employee Growth and Development

Job enrichment functions as a tool for employee growth and development by providing opportunities to handle diverse and challenging roles. Employees learn new skills, improve decision-making, and enhance problem-solving abilities, which help in personal as well as professional advancement. Exposure to higher-level responsibilities prepares them for promotions and career progression. From an organizational perspective, it ensures succession planning and reduces dependency on external hiring for leadership roles. By enriching jobs, employees remain engaged, ambitious, and future-ready, while organizations benefit from a skilled, motivated, and growth-oriented workforce capable of adapting to changing business environments.

Scope of Job Enrichment:

  • Granting Greater Autonomy

A fundamental scope of job enrichment is increasing employee autonomy. This involves empowering individuals with the freedom and authority to make decisions related to their work, such as setting their own schedules, choosing work methods, or prioritizing tasks. This trust and independence boost feelings of personal responsibility and ownership over outcomes. Employees transition from being passive executors of orders to active decision-makers, which significantly enhances intrinsic motivation, job satisfaction, and accountability for the results they produce.

  • Providing Direct Feedback Channels

Enrichment involves creating systems for providing employees with direct, timely, and constructive feedback on their performance. Instead of receiving assessment only through a formal supervisor, they might have access to performance data or interact directly with clients. This allows them to independently monitor, evaluate, and correct their work. Direct feedback helps employees understand the impact of their efforts immediately, fostering a sense of achievement and enabling continuous self-improvement without always waiting for managerial input.

  • Designing Complete Natural Work Units

This scope aims to make a job more meaningful by ensuring an employee is responsible for a complete, identifiable piece of work. Instead of performing a fragmented, repetitive task (e.g., just one step on an assembly line), they handle a whole project or a logical module from start to finish. This provides a clearer view of how their contribution fits into the bigger picture, fostering a sense of completion, pride in the final product, and a stronger connection between their effort and the tangible outcome.

  • Introducing New and More Difficult Tasks

Job enrichment expands a role vertically by introducing more challenging and complex responsibilities that require higher-level skills and problem-solving. This moves beyond adding similar tasks and instead incorporates duties that stimulate intellectual growth, such as planning, budgeting, or quality control. By constantly challenging employees, the organization addresses their need for growth and learning, prevents skill obsolescence, and helps them build a more robust and valuable skill set, preparing them for future advancement.

  • Assigning Specific Responsibility

A core element is assigning clear ownership of a specific task, project, or outcome to an individual. This makes them personally accountable for the success or failure of that endeavor. Specific responsibility clarifies expectations and eliminates ambiguity about who is answerable for results. This accountability fosters a deep sense of personal investment, diligence, and commitment to maintaining high standards, as the employee’s reputation and sense of achievement are directly tied to the performance of their assigned responsibility.

  • Resource Control and Authority

This scope grants employees greater control over the resources needed to do their jobs effectively. This could include authority over a budget, discretion in selecting tools or contractors, or influence over workflow processes. Having control reduces frustration caused by dependency on others and enables employees to execute their responsibilities more efficiently and innovatively. It is a powerful form of trust that signals the organization values their judgment, thereby enhancing their sense of empowerment and professional status.

Challenges of Job Enrichment:

  • Increased Workload and Employee Stress

While intended to motivate, adding complex responsibilities like planning and control can significantly increase an employee’s cognitive and emotional workload. Without proper support or relief from routine tasks, this vertical loading can lead to overwhelming pressure, stress, and potential burnout. Employees may feel that enrichment is merely a disguised way of demanding more without adequate compensation, leading to anxiety and decreased job satisfaction instead of the intended engagement and motivation.

  • Resistance from Employees

Not all employees desire enriched jobs. Some may prefer structured, predictable tasks with clear instructions and minimal responsibility due to personality, confidence levels, or work-life balance preferences. Being pushed into roles requiring autonomy, decision-making, and problem-solving can cause discomfort, fear of failure, and active resistance. Forcing enrichment on unwilling staff can demotivate them, lower morale, and increase turnover, defeating the purpose of the initiative.

  • Resistance from Middle Management

Managers may perceive job enrichment as a threat to their authority and traditional role. When employees are empowered to make their own decisions, managers might feel their control is diminished, leading to insecurity and resistance. They may hesitate to delegate meaningful authority or undermine the process, consciously or unconsciously. Successful enrichment requires buy-in from management and a shift in their role from controller to coach, which can be a significant cultural and personal challenge.

  • Lack of Proper Training and Skills

Enriched roles require higher-level competencies such as problem-solving, decision-making, time management, and analytical thinking. A major challenge is ensuring employees possess or can develop these skills. Without comprehensive training and ongoing coaching, employees placed in enriched roles may feel unprepared, leading to poor performance, mistakes, and heightened frustration. The organization must invest significant resources in capability development, which can be time-consuming and costly.

  • Inadequate Compensation and Recognition

With greater responsibility and complexity should come appropriate reward. A significant challenge is fairly compensating enriched jobs. If employees take on higher-level duties without a corresponding increase in pay, benefits, or recognition, they will likely feel exploited and undervalued. This perceived inequity can breed resentment, decrease motivation, and negate any positive impacts of enrichment, ultimately affecting retention and organizational trust.

  • Potential for Organizational Disequilibrium

Job enrichment can disrupt established workflows and power structures. If not implemented uniformly, it can create inequities between enriched and non-enriched roles, leading to jealousy, perceived unfairness, and internal conflict. Additionally, poor decisions by newly empowered employees—due to lack of experience—could impact quality, costs, or customer relationships. Managing this transition requires careful change management to maintain organizational balance and ensure that increased autonomy does not lead to operational chaos.

Management Notes

Conditions for Optimal Success of OD

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Organizational Development has come a long way from languishing in the shadows of HR to being widely recognized as the primary driver of core organizational competencies through targeted interventions. It traverses the delicate path of progressive transition to a better state by employing the services of Change Management that embodies the systematic approach to managing risk in reaching desired goals and objectives.

However, too many promising initiatives fail due to lack of foresight in instilling and institutionalizing certain principles that are critical to ensuring a high probability of success.

These keys are:

  1. The Irrefutable Need

This refers to the timely realization of the significance of development and change that is required to ensure the survival/competitiveness of the organization. It normally stems from the organizational analysis (PESTLE, SWOT, Balanced Scorecard, Weisbord’s 6 Box Model, Mckinsey 7S, etc.). It generally indicates the stagnating business growth, commoditized core competencies, misalignment of strategic priorities with tactical measures and precarious financial situation. It is imperative in nature and demands the undivided attention on the part of top/senior management.

  1. The Burning Desire

This refers to coaxing of the passion that simmers in an enlightened top/senior management to excel beyond the conventional and foreseeable horizon. It is manifested as an intrinsic motivation within the primary decision makers to engage their ambitions in taking calculated risks from a position of relative comfort. It requires the courage to question the status quo and the willingness to initiate appropriate actions for shining within the constellation of relevant industry competitors without extinguishing the fire of innovation by dousing it with impending complacency.

  1. The Optimized Decisiveness

This refers to the knack for taking balanced decisions that are warranted in view of the indubitable need and the infectious desire for the long-term survival/competitiveness of the organization. It takes into account the available evidence in the form of analytical reports, employee/client feedback and the stated vision for scaling new heights by a certain time frame in the future. The respective decision should be deliberated between the senior management in a democratic fashion, however, the final conclusion should be drawn by the person gracing the top position with a clear idea, acceptance, preparedness, and accountability for the positive and negative consequences of ensuing actions.

  1. The Transcendent Message

This refers to creating, designing and communicating the message that inspires a passionate following/buy-in within the organization to the call for progressive change and development. The respective message needs to embody an optimum mix of both fluidity and viscosity. Fluidity to ensure that it flows at all levels of the organization and can funnel/seep through functional silos/questioning mindsets/grapevine gropers without any hindrance. Viscosity to ensure that it sticks in the reflective minds/thoughts/attitudes of employees long after the initial communication has taken place for providing a “safe house“ to keep doubts/inhibitions/fears at bay.

  1. The Wise Selection

This refers to indulging in an inspired selection of the team that can get the job done. It has to be led by a person who is comfortable in his/her own skin with an intellectual and technical acumen that is able to demand attention at the very top and carry enough charisma to charm all parts of the organization. The real challenge is to become the beacon of hope in the “dark places” of the organization, where fear and doubt breed profusely. The associated team members should be bundles of infectious energy, enthusiasm and drive coupled with a delightful disposition as interactive sources of information, facilitation and application.

  1. The Insightful Plan

The inception and development of an astute plan, peppered with strategic and operational objectives, is essential in order to proceed forward with OD initiatives in a systematic manner. It is an ode to action that needs to be firm in its intent, unambiguous in its direction and accommodating in its application to safeguard against elevation to such a “sacrosanct” status that it breeds massive alienation and incentivizes a buy-out situation. It should bolster the confidence of key stakeholders and neutralize the active/passive resistance from pessimistic quarters.

  1. The Keen Acceptance

The embrace of the OD plan by the employees whose desire for expediency has been emboldened by the transcendent message is crucial to success. It should be evident by the “reverberating chatter” permeating throughout the organization and manifested in the invigorated emphasis on going beyond the routine. This also serves as a timely reminder to all the conniving forces lurking within the “dark alleys” of the organization that the time for Machiavellianism is over and “crossing the picket lines” would be a more productive option.

  1. The Religious Application

This refers to the devout realization of the OD plan through the blissful harmonization of comprehensive planning with practical rendition. It should be knitted with the reflective process of “action research” and provide an opportunity for the dedicated implementers to raise the flag for personal competence as a foreword to subsequent reward and recognition. The momentum for effective execution should be robustly maintained with visible support from the top/senior management to sustain/reinforce the psychological contract with key stakeholders.

  1. The Dogged Engagement

 This refers to the unwavering deployment of the “organizational citizenship“ behavior that is entrenched in the intrinsically motivated employees and sparkles during the performance of their duties and responsibilities.

It should be actively coveted and encouraged by elevating its status to a “core value” for the progressive organization. Great examples of its application should become a part of the “corporate folklore” and case studies preserved within the knowledge bank for onboarding/imbuing new inductees with the finer aspects of the espoused organizational culture.

  1. The Stimulating Review

This refers to the invigorating process of formal analysis done at defined intervals to gauge the effectiveness of actions taken to meet the strategic and operational objectives. It should be meticulously planned, smoothly conducted, actively participated and resolutely followed up to avoid detachment from reaching the ultimate destination of competitive nirvana. Records of such reviews should become an important ingredient to the development of case studies and for the replenishment of the knowledge bank.

  1. The Honest Affirmation

This refers to the diligent completion of corrective/preventive actions (CA/PA) that emanate from the stimulating review. It requires an intrinsic pledge of sincerity and industriousness on behalf of the employees tasked with the efficient completion and effective closure of CA/PA, since sedentary/rudimentary/disingenuous efforts will only exacerbate the situation and compromise the noble intent of the whole exercise. Records of such CA/PA should be deposited in the knowledge bank.

  1. The Fair Remuneration

This refers to the inducement of intrinsic and extrinsic motivation through the allocation of appropriate rewards and recognition for services rendered by employees involved in the successful OD initiatives. It should have a high “felt fairness” perception among the beneficiaries and their peers by upholding the best tenets of organizational justice.

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