Strategic Cultures of Transformative Organization_1 pdf

62 TRANSFORMATIVE ORGANIZATIONS the organization exist (the ownership problem; the formative challenge), by whom should the organization be defined in terms of vision and values (the integration problem; the normative challenge), and of whom the organization would assume responsibility (the boundary problem; the fulfillment challenge). These challenges are best understood in the context of the organization as a democratic citizen, seeking to sustain and further the democratic spirit of the international society. By focusing on supporting exchange among the stockholders and other stake- holders, multiple local institutions, and diverse contributors to the organizational functioning, the transformative organization can better fulfill its formative and normative roles, without necessarily favoring one constituency over the other, and one institutional system over the other. We showed how the evolutionary perspective invokes the concept of mutation as a God-given gift in order to explain the formative force in effective organizational design. We underlined that this God-given gift can be cultivated through learning conversations about the mission and vision of the organization within the pioneering group, and then enhanced through normative development that brings the organization into the mainstream. The final test of the organiza- tional effectiveness is highlighted by the summative evaluation, which captures the milestones achieved by the organization. Our case analysis of the Wesman Group in the State of West Bengal in India showed that the firm has reached tremendous milestones in terms of its market position and respect by the international partners. However, from a normative perspective, the commitment of its top management was not strongly related to the optimism about the organizations future, though both were moderately and equally positive. Though neither top management commitment nor top management optimism were part of the firms formative vision, the current CEO had become increasingly aware over time about the need to give space and freedom to the employees, and the role of the top management in this respect. To ensure effective performance, the firm identified common values and their shared meaning through conversations at various levels of the organization. These initiatives were inspired primarily by the feedback from the grassroots level, and thus resulted in strongest performance enhancement at that level. The middle management, which was the source of disenchantment at the grassroots levels, actually saw some deterioration in its performance. While the core values reflected the top management vision, and their operational meaning was identified using the grassroots conversations, no explicit effort existed as yet to discover and integrate the middle managerial values. In general, the role of the middle managers has come under increasing scrutiny around the world with the rise of the downsizing and the horizontal organizations during the 1990s. With empowerment and multi-skilling at the grassroots level, and the spread of information technology at the mass level, the control and information transfer role of the middle managers has lost much of its relevance. Yet, middle managers represent a valuable resource for the organizations, since their distinctive expertise is to codify and balance the more abstract knowledge and values of the top management, and the highly diffused knowledge and values at the grassroots. Such an expertise is uniquely appropriate to the role of A MODEL OF THE TRANSFORMATIVE ORGANIZATION 63 promoting exchange in knowledge and values, not only across different levels in the organization, but also across different radii of commitment outside the organization, multiple stakeholders of the corporation, and the varying local and national institutions. It is only by re-discovering the relevance of each resource, including middle managers, that the organizations can become truly transformative and perform most effectively. That is the essential challenge for the organizations in the 21st century democratic societies. References Bartlett, C.A. & S. Ghoshal (1991). Managing Across Borders: The Transnational Solution. Boston: Harvard Business Publishing. Bhola, H.S. (1990). Evaluating Literacy for development projects, programs and campaigns: Evaluation planning, design and implementation, and utilization of evaluation results. 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The Electricity Supply Industry (ESI) is one of the largest industries and it occupies an important position in the world economy. Over the past decade, several countries worldwide have taken steps to implement reforms in the ESI (Joskow 1998; Berg, 1997; Munasinghe, 1997; and Bates, 1997). Most studies of these reforms have not focused on the transformative process within an organization (Rajan Thillai, 2000a; Pollitt, 1997). In this chapter, we study the role of principal players during restructuring using a process framework that looks at the sequences of events, actions and activities (Rajan Thillai and Anandram, 2001). Literature Review: Privatization Restructuring Any privatization results in a new environment for the firm which is characterised by changes in the markets (capital and product markets according to their relevance), introduction of new threats (competition and regulation), and reduction in politically imposed constraints. Prominent changes expected in the external environment after privatization are: 1. Budget Constraint: Public ownership is based on the notion of a soft budget constraint (Rowthorn and Chang, 1993). The losses incurred by a corporation were made up by the government, either by way of subsidies or direct grants. After privatization, the firm will not be able to depend on this kind of comfort from the government. 2. Political Intervention: Under state ownership, public corporations are subject to direct political control (Ferner and Colling, 1993). This political control gives ministers more diffuse means of exerting informal pressure on the management either through arm twisting methods or direct intervention in management decision-making over a range of issues. But after privatization, the corporation 66 TRANSFORMATIVE ORGANIZATIONS is more subject to market forces (competition or regulation as the case may be) and less influenced by political or administrative control (Ramanadham, 1988). 3. Capital Market and Consumer Discipline: Privatization would expose the firm to the discipline of the capital market as it needs to address the concerns of the new shareholders for future resource mobilization. The privatized firms would also need to be more customer conscious as they are required to respond to market demands rather than political constraints (Clarke, 1993). To function effectively in the new environment, appropriate changes are required in the internal mechanisms of the organization (Parker, 1993; Woodward, 1988). Literature indicates several changes in the internal environ- ment of the organization following privatization. Hammer et al., (1989) say a firm under transition from a public sector to the private sector would require a change in their corporate culture. Salama (1995) says that for the firms to function effectively in the new circumstances following privatization, the firm must possess appropriate skills to manage in a market economy. She also says the introduction of entrepreneurial behaviour is required to provide ex-state enterprises with the dynamism needed for the expected transformation in the firms efficiency. After privatization, a firm is forced to function differently from the state government enterprise. Wallis (1995) describes these changes in PowerGen, which was privatized from the Central Electricity Generating Board of the UK. He states, The extent of change needed was enormous. Whereas the Central Electricity Generating Board had been risk averse, PowerGen needed to be innovative. Whereas the Central Electricity Generating Board had been engineering-led, PowerGen needed to be commercially driven. Whereas the Central Electricity Generating Board had no concept of the customer, the customer needed to be PowerGens main focus. And whereas the Central Electricity Generating Board had been slow moving and bureaucratic, PowerGen needed to be flexible and responsive. In their study on the privatization of British utilities, Ferner and Colling (1993) note that the management of privatized companies strive to adapt an organization culture to a more market-driven environment, by making it more responsive to customer demands and more innovative and flexible in the face of competitive pressures. Simnett (1997) also indicates that several measures were taken by National Power, the privatized generation entity of the UK to overcome the legacy of a nationalised industry workforce and inefficient plant. Some of the measures taken were reduction in the workforce, increased employee training, performance- related incentives for employees, and improved IT systems. Parker (1993) attempts to identify various changes in the internal environ- ment of the organization following privatization by studying 10 organizations ROLES OF PRINCIPAL PLAYERS DURING RESTRUCTURING 67 in the United Kingdom that underwent privatization. He says that the organization structure changed from a rule bound bureaucratic one to one that was less hierarchical, less centralised and less rule bound. Salama (1995) studied the effects of privatization on culture change in five companies that had been privatized in the UK and Brazil. Her results indicate that it is not just ownership that triggers a culture change. The top managements perceptions about the changes in the business environment were the conditions for the process of change in the firms investigated. New CEOs were appointed to prepare the organizations for the new environment; they modified the core mission (bringing in profit orientation) and organization structure (decentralisation) in the organizations. The need for change was communicated to the employees at all levels in the organization. During the process of culture change, all companies under investigation modified their personnel practices regarding managerial careers. The study also found that after privatization, the managers started to learn and embrace new ways of doing things. Davidson (1994), while studying the developments in two privatized utilities in the UK, found that after privatization, the organizations move towards contract labor from direct employment. There was a separation of various activities into independently accountable profit centers, which must buy and sell services from and to other departments or profit centers within the organiza- tion. She also notes that these organizations adopted new accounting practices and performance-related pay for its executives. Nelson and Dowling (1998) have studied the commercialization of Tasmania Electricity using the contextual method developed by Pettigrew (1987) and Dawson (1994). They conclude that though the environmental forces do have an impact on organizational plans for change, the difficult thing for management is to control the unfolding events, as much as possible, as change progresses. Some studies suggest that the performance improvements that occur after privatization can be traced to changes in the organization following privatization. Newbery and Pollitt (1997), for instance, note that the productivity increases that occurred following the privatization of the British electricity sector are not just derived from plant closures, reduction in employees and fuel switches, but also as a response to a different management style. Research Design Case study is an appropriate strategy when there is no control over behavioral events and the research focuses on contemporary events (Yin, 1984). The restructuring of the Orissa State Electricity Board (OSEB) in India has been used as a case in this research study. The restructuring of OSEB was a part of the larger reform program that was implemented in the Orissa power sector. Restructuring of OSEB was chosen for the study because: 1. OSEB was the first utility in India and South Asia to undertake reform and restructuring. 68 TRANSFORMATIVE ORGANIZATIONS 1 Circular No. 7786/E, Department of Energy, Government of Orissa, Bhubaneswar, dated April 20, 1995. 2. The restructuring program had the active involvement of multilateral lending agencies like World Bank, DFID, Asian Development Bank, and several leading management consultants. 3. Several other utilities in India and elsewhere were planning to restructure more or less on the lines of OSEB. Therefore the experience of Orissa would be important to other states, in policy or practical terms. ORISSA POWER SECTOR REFORM PROGRAM: A BRIEF OVERVIEW Orissa was the first state in India and also in South Asia to implement a compre- hensive power sector reform program. Prior to reform, the responsibility for power sector management and development in Orissa was vested in the following organizations: l Department of energy, Government of Orissa; l Orissa Power Generation Corporation; and l Orissa State Electricity Board (OSEB) OSEB obtained the required power for distribution either from its own generating stations, generating stations owned by the department of energy, or from other power generators. By using its transmission and distribution network, it supplied power to the end consumers. The process of power sector reform started in November 1993 when the Orissa government had discussions with the World Bank to improve the operational and financial performance of OSEB to enable Orissa to attract private investment for power development. These discussions resulted in an agreement between the Orissa government and the World Bank to implement power sector reform to secure funding for the sector. The reform program was subsequently reviewed and approved by the chief minister and council of ministers of Orissa. 1 The Orissa power sector reform program comprised the following components (World Bank, 1996): l Restructuring of OSEB by corporatization and commercialization: Unbun- dling and structural separation of generation, transmission and distribution into separate services to be provided by separate companies. l Privatization: Private sector participation in hydro generation and grid corporation, and privatization of thermal generation and distribution. l Competition: Procurement of new generation through competitive bidding. l Separate Regulation: Development of an autonomous power sector regulatory commission. l Tariff Reform: Reforming of electricity tariffs at the bulk power, transmission and retail levels. ROLES OF PRINCIPAL PLAYERS DURING RESTRUCTURING 69 OSEB was vertically unbundled into separate companies for generation, transmission and distribution. All the hydro power generating plants were vested with Orissa Hydro Power Corporation. The transmission assets were vested with Grid Corporation of Orissa. Though the Orissa government initially owned Grid Corporation and Orissa Hydro Power Corporation, they were gradually expected to attract private participation. New legislation was enacted to govern the power sector of Orissa after reform. An autonomous regulatory commission, called the Orissa Electricity Regulatory Commission, was constituted to ensure operational, managerial, and financial autonomy of the new utilities and to promote transparency, efficiency, and economy. To ensure autonomy of the regulatory commission, the commis- sion members were chosen on the basis of their ability, integrity, knowledge, and experience in dealing with various problems relating to the power sector. After the regulatory commission was constituted, the role of the Orissa govern- ment was restricted only to policy making and planning for the sector. Four zones were created for power distribution in Orissa. As a first step towards privatizing distribution, Grid Corporation of Orissa entered into a management contract called the Distribution Operations Agreement, with Bombay Suburban Electricity Supply Company, a private sector utility, to take over the power distribution in one of the zones on October 1, 1996. Under this arrangement, the private utility was responsible for distribution of energy, maintenance of the distribution system, and collection of electricity dues in the Central zone. Though the initial distribution agreement was for three years from October 1996, Grid Corporation of Orissa cancelled the agreement in April due to drawbacks in certain contractual provisions in the Distribution Operations Agreement. After the failure of the Distribution Operations Agreement, the Orissa government decided to privatize distribution forming the four zones as separate distribution companies. The four companies were incorporated as subsidiaries of Grid Corporation in November 1997 and four new managing directors were appointed for these companies in March 1998. 2 Privatization was introduced in distribution by offering 51 per cent of the equity in these companies to private investors. The investors were selected through international competitive bidding on the basis of their financial and technical capability, track record and commit- ment to the improvement of the electricity distribution system. Though the investors were to be given full managerial autonomy, they were required to honor the terms and conditions of employment of employees of the distribution companies. After privatization, Grid Corporation held 39 per cent of the equity in the distribution companies, while 10 per cent of the shares was held by the employees trust. The privatization process for the distribution companies was completed in the first half of 1999. There was an unfortunate setback to the process of reforms when Orissa was ravaged by two devastating cyclones in quick succession following the 2 The GRIDCO Newsletter, March 1998. 70 TRANSFORMATIVE ORGANIZATIONS privatization of distribution. The damage caused to the transmission lines and sub-stations in the state had been estimated at Rs 3000 million ($ 65 million). However, there have been some indications of improvement in the quality of service and revenue collections 3 . DATA COLLECTION AND ANALYSIS The data collection methods for the study included documentation, field observations, and from in-depth interviews. Such multiple sources of evidence helped in developing converging lines of inquiry. Any finding or conclusion in a case study is likely to be much more convincing and accurate if it is based on several different sources of information, as this leads to a within-method triangulation (Denzin, 1978:301). Documentary evidence was collected from various sources such as: l letters, memoranda, and other communiqués; l agendas, announcements and minutes of meetings, and other written reports of events; l administrative documentsproposals, progress reports and other internal documents; l newspaper clippings and other articles that appeared in the media. These documentary sources helped to construct the chronology of events in the reform program, and also provided information about various decisions taken during the period and the rationale behind those decisions. The gaps after the study of documentary evidence also provided further insights that were probed in greater detail during the interviews. As indicated by McCutcheon et al., (1993), observations made during field visits serve as another important source of evidence in a case study. The main form of data collection for this study was through in-depth interviews with key people involved during different stages in the restructuring process. The partici- pants for the interviews were chosen based on their involvement and contribu- tion to the implementation and planning of the Orissa power sector reform program. The interviews were semi structured where the broad area of informa- tion needed from each respondent was determined before the interview was taken. On an average each interview lasted between 90120 minutes. FRAMEWORK FOR ANALYSIS A processual framework developed based on the various events that took place has led to an emergence of three conceptual phases in the restructuring process, with each phase being characterized by different sets of activities and tasks (Rajan Thillai and Anand Ram, 2001). 3 Anecdotal evidence on this is given in the various Grid Corporation of Orissa newsletters between the period MayDecember 2000. ROLES OF PRINCIPAL PLAYERS DURING RESTRUCTURING 71 The three conceptual phases and their definitions are as follows: 1. Impetus Phase. It is defined as that period during which the momentum for change originated and got strengthened, thereby providing a definite thrust for reforms. An analysis of the causal factors of Orissa power sector reform program has been published elsewhere (Rajan Thillai, 2000b). 2. Reorganization Phase. It is defined as that phase of the reform program that was characterised by structural changes in the power sector, resulting in a new industry structure. 3. Consolidation Phase. It is defined as that phase during which the new organiza- tions created by restructuring were strengthened to make them financially and commercially viable companies. A description of the different strengthening measures undertaken has also been published earlier (Rajan Thillai, 2000c). Impetus phase, Reorganization phase, and Consolidation phase incorporates the temporal element of the restructuring process. It starts with a phase during which the momentum for change originates, and ends with a phase during which the new organizations are strengthened to make them financially and com- mercially viable organizations (Rajan Thillai, 2000a). PRINCIPAL PLAYERS IN UTILITY RESTRUCTURING The principal players in the restructuring process are the government, top management of the utility, the lending agencies, and the consultants. The reasons for identifying them as the principal players are as follows: Since the government has a statutory role in overseeing the power sector, therefore, any change in the sector will, ipso facto, involve it. The restructuring of the ESI and its subsequent privatization will require several changes in the internal environment of the organization. The top management will play an important role in implementing these changes. The poor financial position of the utility and the inability of the state government to support the sector results in the utility seeking external assistance. In such conditions, the lending agencies will stipulate reforms before providing assistance to the power sector. Consultants will assist the host utility during the restructuring process. They would also co- ordinate with the host utility in implementing the restructuring process. The following paragraphs summarise the role played by the principal players in the three phases identified in the restructuring process. IMPETUS PHASE R OLE OF THE GOVERNMENT The power sector of Orissa accounted for a significant and increasing share of the state governments resources, both in terms of planned investment and subsidies. Such large spending on investments and subsidies in the power sector had contributed to the fiscal deficit of the state and had also affected the [...]... per cent of these in the rural sector Almost every village with a population of over 500 has a post office On an average, a post office serves an area of 21.32 sq km and a population of 5477 As on March 31, 1999, the department had 292,672 full-time regular employees and 309,915 part-time extra-departmental agents, employed in rural branch post offices.2  At the end of 1998–1999, the Department of Posts... telephone and fax Each time, everyone has written off the post office And now in the age of e-mail, the Post is still growing at 6 per cent a year in my country Rather than be reactive to the world of change, the post office will play a proactive role and lead the way.’ –B N Som, secretary, Department of Posts, India**  India is a country of contrasts: it boasts of the second largest population in the world... Posts, because of its wide reach and large number of points of presence, is utilized by other departments of the central government and state governments to perform several functions on their behalf l l l The Post Office Savings Bank (POSB) is the most important of such agency functions performed by the Department of Posts on behalf of the Ministry of Finance The POSB operates 113.8 million accounts... Several dot com companies are offering e-mail to snail mail services They usually promise delivery of messages within three days, while conventional post, can take one or two weeks in remote locations Bharatmail.com, Hotmailindia.com are some of the prominent players Most of them target Non Resident Indians (NRIs) Some of these players even offer services free of charges The number of players entering into... cent The other alternative is to buy a prepaid card from any of the district headquarter’s head post offices in any of the What is ePost?, www.indianpostoffice.net/whatisepost.html, Jan 22, 2002 FAQS, www.indianpostoffice.net/faqs.html, Jan 22, 2002 94 TRANSFORMATIVE ORGANIZATIONS Fig 5.4: Screen Shot of ePost Homepage Fig 5.5: Screen Shot of Terms and Use and Privacy Policy METAMORPHOSIS AT INDIA POST... under-utilization of these fixed assets Hence effective utilization of these very high-sunk costs becomes imperative for the department to function profitably and not rely on heavy budget subsidies The Department of Post continues to own and operate a large number of ancillary logistic services even though outsourcing these might be a cheaper alternative The Department of Posts, because of its wide reach... resolution of the OSEB board which was also backed by a government order This meant that the government decided the SEB chairman’s powers For important decisions, he had to get the approval of the state government But after corporatisation of GRIDCO, the Companies Act and Articles of Association of the company gave the broad parameters of the chairman’s powers In keeping with the spirit of the reform... projects of other segments of postal operations like mail processing, savings bank and materials management As part of mechanization and modernization of mail processing, 56 registration sorting centers, 20 transit mail offices have been computerized up to March 31, 2000 During 1999–2000, six head record offices were computerized and during 2000–2001 another seven were being computerized Around 142 mail offices... with the new means of communication As a result of the transformative learning from the ePost, E-BillPost is another service recently launched by India Post that offers customers a single point payment of bills of all types in a queue-less and hasslefree environment The ePost is also planning a new service on e-shopping (B2C e-commerce) In this chapter, the organizational context of the Indian Postal... procedures of the new processes As a consultant remarked, ‘The basic idea of this was that, even a person who has been trained when he is not sure of something, can refer to the manuals and when new people are recruited it would help them to learn the effective procedures.’ R OLE OF TOP MANAGEMENT There was new recruitment of professionals to top management posts (chief general managers and directors of departments) . Review, 45 (1) : 12 9 13 9. Donaldson, T. & L.E. Preston (19 95). The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications, Academy of Management Review, 20 (1) : 65 91. Drucker,. (Joskow 19 98; Berg, 19 97; Munasinghe, 19 97; and Bates, 19 97). Most studies of these reforms have not focused on the transformative process within an organization (Rajan Thillai, 2000a; Pollitt, 19 97). In. Linguistics, 1( 2): 89 11 1. Business Line (2000). Wesman to make oil, gas-fired cremators, October 10 , Calcutta, India: The Hindu Group of Publications. Chambers, D.E., K.R. Wedel & M.K. Rodwell (19 92).