WD-40 is a company headquartered in San Diego, California and whose products are
ID: 447774 • Letter: W
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WD-40 is a company headquartered in San Diego, California and whose products are found under the sink, in the garage, and in toolboxes of customers all over the world. The company produces lubricants, heavy-duty hand cleaners, toilet bowl cleaners, bathroom cleaners, and carpet stain and room odor eliminators. WD-40 stands for “Water Displacement, 40th attempt.” WD-40 is a global company who, at one time, paid out bonuses to employees based upon overall financial performance and twenty percent by financial performance within an employee’s country. However, in 2008, the results of an employee survey showed that employees wanted more of their bonus to be linked to performance measures under their control. In response, the company placed greater emphasis on country-specific performance while still rewarded global business results.
One of the criteria used to evaluate a performance management system is strategic congruence. How would you evaluate WD-40s Double Vision program according to this criteria? Explain your evaluation..
Explanation / Answer
The Africa Academy of Management (AFAM) is a professional membership organization that was formed in 2011. AFAM believes that management knowledge can make a significant contribution to the productivity and prosperity of a nation. Yet, there is a dearth of knowledge about management in Africa and several studies have identified the inadequate state of management research and scholarship about Africa relative to other regions of the world. AFAM‘s mission is to help close this gap by promoting research and education about management and organizations in Africa. Specifically, the objectives of AFAM are two-fold: (1) to foster the general advancement of knowledge and scholarship in the theory and practice of management among African scholars and/or academics interested in management and organization issues in Africa. Africa is defined broadly to include all of Africa and individuals of African descent in the Diaspora (i.e., The Caribbean, South America, Europe, Asia, Oceania, Middle East, and North America); and (2) to perform and support educational activities that contribute to intellectual and operational leadership in the field of management within the African context. AFAM focuses on building and strengthening research capacity and education about management in Africa. This includes the mentoring of doctoral students, guiding and developing junior faculty, building collaborative networks among scholars, and advancing research about management in Africa. We launched the Africa Faculty Development (AFD) Workshop initiative in partnership with the Academy of Management in 2011. Since 2011, we have held two week-long AFD Workshops for doctoral students and junior faculty from African Businesses Schools in Ghana (at Ghana Institute of Management and Public Administration and in Rwanda (at University of Rwanda). These workshops have already assisted several participants to complete their doctoral studies. With a membership base of about 200 academics and practitioners from around the world, we work closely with other academic associations and ourFinancial resources are key resources for the acquisition and configuration of other resources (Brinckmann, Salomo & Gemuenden, 2011; Alsos, Isaksen, & Ljunggren, 2006). An important success factor of a business is therefore the effective use of its financial resources (Wickham, 2006:196). In the small business environment, Lindeloef and Loefsten (2005) argue that small business owners often have limited competence in managing the financial aspects of their businesses. This could be why Cooley and Pullen (1979) found that management of firm cash flows is generally not efficient in small businesses. The finding is not surprising given that a study by Berman and Knight (2006:28) showed that many people in management positions did not know the difference between an income statement and a balance sheet. The dearth of business owners who are financially illiterate can bode dire consequences for the continued existence and possible growth of the business. It is against this background that financial literacy is growing in importance, (Tatom, 2006:2) in businesses. In the specific South African case, a study conducted by the Small Business Advisory Bureau, with over 500 respondents in business, found that two-thirds scored less than 60% on a basic financial literacy test (Branam, 2008). Poor financial knowledge could possibly be a constraining factor to proper financial management and consequently, business growth. In a survey of over 28,000 SMMEs in Africa and Latin America, less than 3% of them showed growth after start-up (Liedholm, 2002; Mead & Liedholm, 1998).
Business Growth Wickham’s (1998:223) model of the dynamics of business growth shows that growth can occur in any of four interdependent dimensions: financial, strategic, structural and organisational. A business owner therefore has to consider all dimensions when planning for growth. Nieman and Nieuwenhuizen (2009:276) contend that the neglect of one element could cause business failure or lead to other problems. Financial growth: Wickham (2006:516) defines financial growth as the development of the business as a commercial entity. It is concerned with increases in turnover, the costs and investment needed to achieve that turnover, and the resulting profits. It is also concerned with increases in the assets of the business. This study utilises measures of financial growth as proposed by Wickham (2006), particularly changes in total assets, changes in capital, changes in turnover and changes in profit. Strategic growth: Strategic growth relates to changes that take place in the way in which the organisation interacts with its environment as a coherent strategic whole. According to Wickham (2006:516) it is associated with the profile of opportunities which the business exploits and the assets, both tangible and intangible, it acquires to create sustainable competitive advantages. The measures used in this study for strategic growth are taken from those proposed by Wickham (2006), specifically changes in sales and/or production volumes, changes in cost of sales/production, and changes in customer base. Structural growth: Structural growth relates to the changes in the way the business organises its internal systems, in particular, managerial roles and responsibilities, reporting relationships, communication links and resources control systems (Wickham, 2006:516). This study utilises measures of structural growth as proposed by Wickham (2006), particularly changes in number of employees and changes in the size and/or location of business premises. Organisational growth: Organisational growth relates to the changes in the business’s processes, culture and attitudes as it grows and develops. It is also concerned with the changes that must take place in the owner’s role and leadership style as the business moves from being a ‘small’ to ‘large’ firm (Wickham, 2006:516). For the purpose of this study the organisational growth dimension is excluded. This is because of the wide discrepancy in the interpretation and understanding of Wickham’s (2006) proposed measures for organisational growth, by respondents in the pilot of this study. Hypothesis Lindeloef and Loefsten (2005) have argued that small business owners often have limited competence in managing the financial aspects of their businesses. Cooley and Pullen (1979) also found that management of firm cash flows is generally not efficient in small businesses. The absence of the necessary financial acumen could be why small businesses remain unable to realise their full potential. The dearth of business owners who are financially illiterate can bode dire consequences for the continued existence and possible growth of small businesses especially as Gouws and Shuttleworth (2009:141) posit that people’s decisions and subsequent actions flow from their understanding of the surroundings in which they operate. In order to facilitate economic and financial sustainability, individuals need the cognitive ability to understand financial information. It against this background that the study hypothesises that: Hypothesis1. There is a relationship between the SMME owners’ financial literacy and business growth.
Extent of Employment Rigidity. The greater labor market liberalization should also affect the extent of employment rigidity, another important reflection of the powerful implications of labor market conditions (Cuervo-Cazurra & Dau, 2009; Misra, et al., 2012). For example, Misra et. al. (2012) found that the extent of labor market rigidity was significantly associated with business creation in emerging European countries. Pro-market reforms may be associated with changes in labor laws that reduce the costs of hiring and firing workers. As the reforms get institutionalized, more sophisticated and flexible labor markets, whereby employers and employees can more easily come into contact, will begin to form (Cuervo-Cazurra & Dau, 2009). The move away from socialism to a more market economy approach will move commercial decisions about staffing away from government bureaucrats responding to political pressure and to business managers responding to more dynamic market ones (Debrah, 2002). In sub-Saharan economies, pro-market reforms result in employee positions that are less secure than in pre-reform days, where previously the government was the major employer and complacent employees were typically cosseted from competition (e.g. Peng, 2003; Mahajan, 2008). Potential workers are more likely to stick with current employees because rigid labor markets make reemployment problematic. Consequently, we hypothesize: Hypothesis 3: Extent of employment rigidity is negatively associated with the difficulty of starting businesses in Africa.
Strategic leadership As this researcher has already observed, there is little research available on the lived experience of CEOs that offers a thick description of what effective leaders actually do, and them making sense of what they do. The few existing studies focus on executive leaders strategising (SamraFredericks, 2003) or attempt to establish a link between CEO charisma and performance (Tosi, Misangyi, Fanelli, Waldman and Yammarino, 2004). Davies and Davies (2004) defined strategic leaders as people who are insightful, dissatisfied with the present, able to think strategically, action-orientated, and able to align people and organisations behind the vision. Nevertheless, the researchers held that isolating the strategic elements of good leadership posed great difficulty. Strategic leadership has also been argued to be a responsibility and reflection of top management teams (Hambrick and Mason, 1984). Hambrick (1989) posited, however, that strategic leadership only becomes relevant in ambiguous, complex environments that called for the effective processing of high levels of information. Abell (2006) argued for the importance of strategic leadership that moved a company into the future in a world driven by significant change. He also argued that a key role of this type of leadership was the creation of systems in organisations that allowed decentralised leadership to flourish. Khurana (2002) in turn recognised that while many people saw leadership as the secret of a successful CEO, the word most frequently used to describe the qualities of an effective leader was charisma. Significantly, Tosi et al. (2004) found that the attribution of charisma was driven primarily by observations by the popular press and some academics, and not by empirical evidence. The researchers claimed further that charismatic CEOs did not have an impact on any indicator of firm performance beyond their own packages and stock prices. Charisma was therefore, not found by Tosi et al. (2004) to be a prerequisite for CEO success. Finally, the relationship between transactional and charismatic CEO leadership and financial performance in 48 Fortune 500 firms was examined by Waldman, Ramirez, House, and Puranam (2001). They discovered that perceived charisma was only minimally linked to performance, but that under conditions of uncertainty this association was more significant. 1.5 Design of the study Research design is concerned with how the study will be structured, what data collections tools will be employed, how the interpretation of the data from the fieldwork will be carried out and what skills will be brought to bear on the study as the researcher moves from his or her own paradigm to the empirical world (Denzin and Lincoln, 1994). The epistemological position of the present study is interpretivism. Bryman (2004a: p12) sees interpretivism as “predicated upon the view that a research strategy is required that respects the differences between people and the objects of the natural sciences and therefore requires the social scientist to grasp the subjective meaning of social action. Its intellectual heritage includes Weber’s notion of Verstehen; the hermeneutic1 phenomenological tradition; and symbolic interactionism”. Given the black box nature of strategic leadership, this study is concerned with the questions of how CEOs make sense of the world around them and how they undertake the CEO role (the lived experience). The choice of research methodology has a significant influence on the kind of results generated. In a leadership study it is critical, therefore, that the researcher is clear about what it is he or she is focusing on before a decision on methodology is taken. Different research methods have led to different definitions of leadership found in literature today. It is possible that any instance of a person influencing another, or a group of people influencing another group of people, can be seen as leadership or not leadership depending on the definition applied (Alvesson and Sveningsson, 2003). Furthermore, quantitative research methods such as questionnaires, will produce indications of leadership or even a strong case for leadership that are different from the outcome arrived at by qualitative or interpretative research. Qualitative research allows for alternative interpretations of the results, which may be more useful than leader-focused quantitative tools such as questionnaires. A researcher needs to be careful not to build into the methodology assumptions that he or she personally holds true. If a foregone conclusion that leadership exists is subconsciously built into a questionnaire, results confirming the existence of leadership will necessarily be produced. The challenge for researchers is to build in self-reflexivity, and a deeper and more questioning thinking process when designing research (Alvesson and Skoldberg, 2000; Alvesson and Sveningsson 2003).
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