ORGANIZATION CULTURE CHANGE

Emerging Market Dynamics

ZAFAR AZIZ OSMANI

October 27, 2009

1 Organization Culture Change
ORGANIZATION CULTURE CHANGE
E M E R GI NG M AR K E T D YN AM I C S
Changing culture has always been one of
the most difficult challenges of the leadership
in times of transition. The success of change is
now directly relevant to the survival of the
institutions. The quantum of change and the
response time determine the fate - existence
or extinction of an organization in the new
world we are living now.
The unprecedented technology breakthrough
and power of ready access to knowledge are
changing work culture paradigms in the world
we live in today. This is happening in a way
which has never been witnessed in the human
civilization. The position in emerging markets is
actually more pronounced than the
developed world. The need for a change
responsive culture in emerging markets is
therefore a matter of survival now and not just
an option to move into the future.
The impediments towards organization culture
change have certain uniqueness due to the
geopolitical, historical and substantially
divergent economic fundamentals.
It will therefore be important and helpful to
look at the economic and demographic
dissimilarities between the two worlds before
reconciling their current approach towards
culture change and developing effective
strategies for emerging markets
The Demographic Variance:
It is interesting to note the visible variance in
the employment segment demographics
between the developed economies and the
emerging markets. The trends also speak
about the fast changing shift in the
employment sector data. Both these elements
have a deep co-relation with the work
cultures in the two types of economies in the
world today.
Emerging Markets:
The broad based analysis of the available
data estimates in South Asia, China and Far
East are as under:
50
40
30 Agriculture
Manufacturing
20
Services
10
0
South Asia China Far East
Employment by Sectors – Emerging Markets
The above chart shows a general similarity in
the employment sector spread between the
agriculture, manufacturing and the services
sector.
South Asia employment sector is notably
predominantly agrarian. China, though
following a similar pattern, has the highest
comparative employment ratio in the
manufacturing sector followed by the Far East
which shows lowest ratio of employment in
the agriculture sector.
October 27, 2009
Dominated by the employment in agriculture,
the work culture in these economies has some
basic similarities where during the transition of
economies human values can generally over
ride the business and financial factors.
A review of similar demographics for the
developed economies also provides some
interesting insight.
1 Organization Culture Change
Developed Economies:
For a broad understanding of the
employment sector profile, estimated data
from US, ECC and UK has been obtained
which shows the following picture:
80
60
Agriculture
40
Manufacturing
20 Services
0 2.
USA EU UK
Employment by Sectors – Developed Markets
An interesting similarity by way of the
predominance of services sector in these
markets is noticeable. This is by and large
indicator of a more dynamic employment
culture which can be highly responsive to the
market changes.
The trend of a relatively lower employment
ratio in manufacturing sector indicates
greater reliance on technology and
automation and also a generally stable
market composition in these economies.
Striking dissimilarity from emerging markets is
visible in the ratio of agriculture sector
employment, which has a different impact on
the work culture in these countries.
Emerging Markets Work Culture Factors:
Within South / East Asia, one can identify
commonalities in economies, organization
culture and state of the historical evolution.
Some of the key cultural influencing factors
include agriculture sector dominance, early
levels of economic transition, colonial
background, mass unemployment, lower
education, marginal level of social services,
human intensive work processes and slow
induction of automation and technology.
There are several organization related factors
that also indicate similarities in work culture
across the emerging markets typically
dominated by stagnant, inert and highly
resistant institutions, mostly within the
government and public sector. Private sector,
both local as well as MNC’s, have yet to add
a visible impact at the overall work culture.
Some of the key characteristics of the
government and the public sector work
culture include
1. The permanent employment concept
Oversized organizations
3. Control oriented work processes
4. Strong resistance to change
The Permanent Employment Concept: This
feature has its base from the colonial era with
secured employment in positions of authority
and respect in society in consideration of
sustained loyalty. The jobs only end after
retirement with full benefits and the system
has been continued by the following
governments. Salaries are low but the
permanency of the position and the respect
for government jobs are generally considered
good trade off. The concept has deep rooted
impact on the work culture in most of these
economies.
Later, employment in government services
and the fast expanding “Public Sector”
continued on the similar basis with a popular
term of “Pakki Naukri” (Permanent
Employment) as one of the success milestones
in one’s life. Families derived respect if their
children got into government or public sector
jobs. Performance in the job has typically no
impact on compensation or career growth.
October 27, 2009
Oversized Organizations:
Government and public sector jobs are seen
as solutions to unemployment and
subsequently as a strong tool for political favor
granted to the loyal party workers and also as
a tool for building political supporters.
Persistent following of this process over
decades has caused ever growing over-
employment in government and public
sectors, mostly on positions that actually do
not exist.
Large organizations led to work culture
inefficiencies, escalating costs, uncompetitive
pricing, declining service standards and
eventually, a number of failing organizations.
Many public sector institutions are financially
insolvent. Some are being kept on survival
mode due to the national priorities through
large capital injections and continued
subsidies.
At times governments are forced to go for
massive restructuring of key public sector
organizations followed by a process of
privatization. There have been turnarounds of
unprecedented magnitude involving financial
restructuring, introduction of technology,
business processes re-engineering and
massive staff rationalization. There are
examples of success with useful learning’s and
evolution of some innovative best practices
within these markets.
Control oriented work processes:
Creating justification for the new jobs also has
a massive impact on the organization
structure, which had to grow in all cases with
various tiers of authority through introduction
of processes involving input from chains of
levels with little value addition.
An interesting example -clearance of import
documents by customs in one case involved
63 signatures.
These work processes not only cause
inefficiencies but also result in unnecessary
delays and most of the time create basis for
corruption.
Strong Resistance to Change:
Resistance to change is in fact a very
common phenomenon, even in the most
developed economies and world class
organizations. It is seen as a human factor and
is linked to many reasons some of which are
common, irrespective of education,
financials, social and any other factor that
may exist from situation to situation.
The position in emerging markets is however
different due to the state of mind linkage to
the cultural background. The level of
economic insecurities and the social factors
have a direct and strong impact on the minds
of people. Retrenchment from job is a more
acceptable fact of life in developed
economies and organizations. In emerging
markets, loss of job is just not end of a
livelihood. It is a loss of self esteem before
oneself, family members, friends and the
society as a whole. It is seen as a stigma which
is still very difficult to reconcile by the
incumbent, family and the society.
Resistance to change therefore has a
different level of intensity and complexity
which requires different approaches and
creative solutions varying from market to
market, organization to organization and
people to people.
Institutional Reforms and Privatization Efforts:
A number of institutional reforms and
privatization initiatives has been observed to
address the challenge of enhancing
efficiency and organization financial viability
Organization Culture Change | 10/27/2009
in emerging markets. Interestingly, there are
many successful examples where efforts have
been made for creation of innovative
solutions and implementation of institutional
reforms with success. The reforms have
covered critical aspects of financial and HR
restructuring. In many cases, there are
evidences of successful downsizing and staff
retrenchments against all odds which
managing a challenge of a totally different
magnitude in the cultural perspective in
countries where employment opportunities
are inadequate and one person is feeding an
average family of five also operating with a
strong mindset that employment ends only at
retirement age.
2
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CONCLUSION:
Organization culture change is a necessity of
survival which is impacting all economies and
markets. The impact of globalization and
growing interdependence of markets leaves
no choice of existence without ongoing
alignment with the rest.
Quest for survival demands continuous
innovation and improvement in quality of
products and services with ever increasing
emphasis on cost efficiency. Everyone is now
competing with world class products cheaper
and better in quality with fast changing
customer requirements.
It is important to note that in their efforts to
respond to the changes, emerging markets
have to heavily rely on the research,
learning’s and the best practices being
evolved in the developed markets and world
class organizations. Unfortunately the reliance
is inevitable as not much work has been done
towards understanding the organization and
people related specifics, the change
dynamics and creative solutions needed for
better success rate in these economies.
There seems to be a lack of appreciation of
the point that while many of the concepts
from developed market are valid and
applicable successfully there, the
implementation of these practices as “cut
and paste” solutions in emerging market
institutions may not be completely possible
without compromising social, society or even
country interest.
It is important that while evaluating the needs
of institutional transformation and cultural
changes in government, public or even
private sector, collective studies may be
initiated evaluating the overall requirements,
time frame, local economic and cultural
dynamics and, taking the key concepts from
the developed markets, innovative solutions
may be evolved which should have
relevance to the realities specific to the local
institutions’ and yield better results at smaller
costs to the overall social and economic
fabric of the society.
As an example, in situations of over
employment, rather that straight away opting
for massive downsizing, one may find it more
viable to restructure the organization as per
business requirements, yet find viable avenues
of redeployment of the excess manpower in
alternate avenues which can still add value to
the business albeit at a lower return during the
transition. The challenge of organization
culture change with the uphill task of
changing the mindset of the people living in
past will not be easy to manage. But if it can
be achieved with effective utilization of the
modern HR tools and best practices. Success
here will benefit the society, country and the
market the institution is operating.
Comparative studies of the situation analysis,
turnaround efforts and successes and failures
have a lot of learning to offer to the architects
of future turnaround and business leaders.
Examples of success in countries like
Singapore, Malaysia, as well as in the South
Asian markets of India, Pakistan, Bangladesh
and Sri Lanka may have a lot to offer in this
regards.
Zafar Aziz Osmani
The author is a management professional with over
38 years of learning’s gained while working in
diverse organizations in government, public and
private sector organizations including multinationals
like Exxon, American Express and Gulf International
Bank.
He work experience includes assignments with in
Pakistan, Middle East and Singapore markets.
October 27, 2009
Zafar has been involved in key institutional
transformations like Federal Board of Revenue of
Government of Pakistan in association of the World
Bank and IMF.
He has played key role in post privatization
restructuring and transformation of HBL the largest
private Bank in Pakistan.
He has been part of the leadership team involved in
turnaround of the Karachi Electric Supply Company
as Chief Operating Officer – Organization
Management.