Dec 26, 2006

Coffin for WTO? International Business- Part 2


End of the road for WTO?

It will be appropriate to foresee that WTO and the present form of DOHA development forum has failed and will go to extinction unless something dramatic happens in 2007

The goal of the Doha talks

The expectation of the Doha talks was that all forms of export subsidies would end by 2013. Trade distorting domestic support would be chopped by at least 60% and tariffs on farm products would be halved by 2013. This seems unlikely to happen because of the present standoff.

Standoff

Trade ministers from 60 of the 149 World Trade Organization member states talked in Geneva for three days pm July 2006 but failed to agree on a blueprint. The conference collapsed two days ahead of its scheduled close, preceded by a walkout by Indian Commerce Minister Kamal Nath in protest against the talks' futility.
The breakdown was hardly unexpected, as it was clear that few members were ready to relax the rigid position they had held for the past two years. While WTO opponents used the collapse to endorse the view that globalization was in crisis again, others said any hopes for an agreement at this "mini-ministerial" conference on reducing farm subsidies and import tariffs for agriculture and industrial products as a part of the Doha round on multilateral trade, were overly optimistic anyway.
A primary focus and stumbling block of the Doha talks are agriculture (read farm subsidies particularly in rich nations) and market access (Read Lesser Industrial tariff and services in developing countries). Supporters of free trade argue that farm tariffs and subsidies in rich countries hit poor nations unfairly because agriculture is a much larger part of the economies of poor nations. EU-US combines inflexible attitude towards cutting domestic support to its farmers and cutting down the export subsidies have stalled negotiations in 2003 (cancum), 2004 (Hongkong). In Geneva (2006) the developing countries les by India, China and Brazil argued that Industrial tariffs couldn’t be brought down to reasonable levels until there is a visible progress on the agriculture issue. The developing countries under the umbrella of G20 understand that the Uruguay talks only marginally benefits them.

Minefeild

While the US refused to reduce farm subsidies to the levels demanded by the developing countries like India, Brazil and China (members of the so-called G20), the EU stance also was an obstacle: it offered just a 50% cut in its agriculture tariffs instead of 64% suggested by the US. On other hand, India and Brazil, which represented the developing countries in the negotiations, were upset because the US, instead of talking about reducing subsidies, actually wanted to increase them while at the same time insisting that developing countries open their markets to industrial products.

Present Scenario as on End of 2006

In July 2006,the talks were dissolved, and may take months or possibly years to restart. Talks on the Doha Development Agenda were put into deep freeze. One of the key reasons talks were down to crunch time is that the US president's "fast track" trade negotiating power runs out in 2007. With it unlikely Congress will vote to extend fast track, any Doha agreement will have a hard time making it through Congress. (MarketWatch)
WTO Director General Pascal Lamy called negotiations to a halt because too many countries refused to compromise on their offers. The aims of the Doha Development Agenda negotiations according to him were to liberalize trade rules and make them more fair, to give developing countries a bigger slice of the global trade pie. The indefinite suspension of the talks means trade rules will remain as they are. Most analysts agree that there is no point in resuming talks until two key election dates have passed - the American congressional elections in November 2006 and the French presidential elections in May 2007.

Let us analyze the various stakeholders of the standoff.

United States

The US as such plays a double game by playing with the farmers as well as with the WTO against subsidies. The industrial lobby is fighting for WTO approval, so that they can penetrate into the developing markets like India , Brazil and China. At the same time they are not ready to stop the subsidies to the farmers.
The congressional elections gave a shot on Pres Bush and the last thing Bush is expected to do is upset US hugely powerful farm lobby citing the presidential elections slated for 2008.
The timescale is made more complicated by the impending expiry in July 2007 of fast track authority, the rule under which the US Congress can only approve or scrap trade deals, rather than change their detail.

European Union

EU is pressurizing for more concessions from developing nations like Brazil and India on Industrial tariffs and services. They are not with US to extending subsidiary reductions in the case of agriculture. They are more adamant against reduction of agricultural subsidies. This is the muzzle power they tried to attain after forming the union- being the larger economy comparable to US and sometimes bigger.

Japan

Japan as such has taken a protectionist position in agriculture as well as tariff cap. Developed countries often give a dig on Japan for the position citing dumping.

G 20 Nations

During the earlier talks the developing countries could shut the mouth of other developing nations. G-20 comprising India, Brazil, South Africa, China, Pakistan and other countries was formed on August 20, 2003, in response to the joint US-EU proposals on farm negotiation before the Cancun Ministerial. Brazil and Argentina have offensive interests in agriculture and advocate trade liberalization through reduction in tariff barriers, while India, Pakistan and China have defensive interests in agriculture.

India and Brazil emerging as power brokers

The group proposed a middle ground formula for tariff reduction that was widely accepted as a basis for further negotiation. On export competition, it proposed a 5-year deadline for eliminating all subsidies. The G20 comprises Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Tanzania, Thailand, Venezuela and Zimbabwe. It took a lot of lobbying before and during Hong Kong, with both governments putting their reputation as leaders of the developing world on the line, but they succeeded in getting everybody, though not without some grumbling, to assent to a bad deal. In the lead-up of the Hong Kong ministerial, Brazil and India's new role as power brokers between the developed and developing world was affirmed with the creation of a new informal grouping known as the "New Quad". This formation, which included the EU, US, Brazil, and India, played the decisive role in setting the agenda and the direction of the negotiations.

Developing countries sinister moves

During the Cancun Ministerial, the bullying and arm-twisting tactics of the EU and the US seriously backfired when, in the face of intense pressure, developing countries formed alliances, such as the G20, G90 and G33, to defend their trading interests. Unwilling to accept this shift in power dynamics, developed countries, such as the US, adopted a ‘divide and rule’ response, with a series of aggressive attacks, designed to undermine the new alliances and pick off countries.
Attempts to break G20 by ‘divide and rule’
the G20 membership continued after Cancun with most extreme pressure being exerted on those countries aiming to negotiate FTAs with the US. Guatemala, Peru, Ecuador, Colombia and Costs Rica all left the G20 in the weeks following Cancun in response to threats that their trading arrangements with the US would be jeopardized if they continued as members. Developed countries has started a set of bilateral trade deals, handpicking developing countries so that the developing countries go against their leadership, particularly against India and Brazil.

Bilateral pacts to tame G-20

As the WTO talks are getting into a never ending loop, Developing countries US has already signed 10 bilateral pacts, including that with Australia, Columbia and Oman. Treaties with South Korea, Taiwan and Malaysia are planned on 2007.EU also has got grant plans to press ahead with aggressive bilateral deals irrespective of the outcome of Doha talks , and adopt a “WTO Plus” strategy thereby building a layer up the level of liberalization achieved at the WTO. France intended to focus its bilateral efforts on certain countries where there was strong demand, such as countries in the Association of Southeast Asian Nations (ASEAN) which includes Thailand, Vietnam, Indonesia and Malaysia.They also tries to target the Gulf and the Mediterranean basin in a push towards bilateral trade deals following the collapse of global free trade talks The countries are picked one after the other and are forced into more concessions than what they must have normally got in the WTO framework. The idea is to weaken G20 , particularly India and Brazil. The weakened G20 can be dealt more easily so that the developed countries get more concessions during the next round of talks.

Fight back of Developing countries

What can developing countries do at the scenario? Fight the developed countries in their own game. India is working on a comprehensive economic cooperation agreement with Mauritius, Malaysia and Indonesia and a preferential trade agreement with South Africa and Chile. A free trade pack with Japan is on the way for next year. All other developing countries are thinking in that line. End result? Premature Death of WTO like GATT of course.

Coffin for WTO?

World Trade will survive the multi lateralism or not is an open question which only time can tell. Once the WTO comes apart or the talk fails, most countries have bilateralism to fall back on. Even if the Doha talks continues the delivery will be very late and after all the deadlines have been missed.

Bibliography:

CNN - mainstream news mediaBBC - mainstream news mediaThe Economist - mainstream news media
U.S. Proposal for Global Agricultural Trade Reform
Outlook business weekly
For more information on the Doha round:
A Washington Post article summarizes the current situation.Information on the G8 and G20 groups of nations.The World Trade Organization home page, and statistics on all member nations.
Different Images of same story line .
Different level of protests occured round the world after WTO. Lots of discussion happened on prons and cons of Free trade. I would like to reserve my thoughts to later.


Dec 24, 2006

International business- Intro


International trade is the exchange of goods and services across international boundaries or territories. In most countries, it represents a significant share of GDP. Increasing international trade is the primary meaning of "globalization".

International trade is also a branch of macro economics, which, together with international finance, forms the larger branch of international economics.

International trade theory

Several different models have been proposed to predict patterns of trade and to analyze the effects of trade policies such as tariffs.

Ricardian model

The Ricardian model focuses on comparative advantage and is perhaps the most important concept in international trade theory. In a Ricardian model, countries specialize in producing what they produce best. Unlike other models, the Ricardian framework predicts that countries will fully specialize instead of producing a broad array of goods. Also, the Ricardian model does not directly consider factor endowments, such as the relative amounts of labor and capital within a country.

Heckscher-Ohlin model

The Heckscher-Ohlin model was produced as an alternative to the Ricardian model of basic comparative advantage. Despite its greater complexity it did not prove much more accurate in its predictions. However from a theoretical point of view it did provide an elegant solution by incorporating the neoclassical price mechanism into international trade theory.

The theory argues that the pattern of international trade is determined by differences in factor endowments. It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce.

Specific Factors

In this model, labour mobility between industries is possible while capital is immobile between industries in the short-run. The specific factors name refers to the given that in the short-run specific factors of production, such as physical capital, are not easily transferable between industries. The theory suggests that if there is an increase in the price of a good, the owners of the factor of production specific to that good will profit in real terms. Additionally, owners of opposing specific factors of production (i.e. labour and capital) are likely to have opposing agendas when lobbying for controls over immigration of labour. Conversely, both owners of capital and labour profit in real terms from an increase in the capital endowment. This model is ideal for particular industries. This model is ideal for understanding income distribution but awkward for discussing the pattern of trade.

Gravity model

The Gravity model of trade presents a more empirical analysis of trading patterns rather than the more theoretical models discussed above. The gravity model, in its basic form, predicts trade based on the distance between countries and the interaction of the countries' economic sizes. The model mimics the Newtonian law of gravity which also considers distance and physical size between two objects. The model has been proven to be empirically strong through econometric analysis. Other factors such as income level, diplomatic relationships between countries, and trade policies are also included in expanded versions of the model.

Law of comparative advantage

Countries have different endowments of factors of production. They differ in raw materials, labor, economics, capital and priority, which are mostly or relatively immobile between countries. The ability to supply goods differs between countries. We will distinguish between absolute advantage and comparative advantage.

Absolute advantage

When one country produce a good which less resources than another country, it is said to have an absolute advantage on that good. Production can be maximized by the specializing county and then trading with the other country will gain maximum for both of them

Comparative advantage

Provided opportunity costs of various costs of various goods different in two countries, both of then can gain from mutual trade if they specialize in producing and exporting those goods that have relatively low opportunity costs compared with the other country.

The basic argument for free trade is based on the economic theory of comparative advantage: each region should concentrate on what it can produce most cheaply and efficiently and should exchange its products for those it is less able to produce.

Companies have a comparative advantage in those goods that can be produced at a lower opportunity cost than in other countries. If companies are to gain from trade, they should export those goods in which they have a comparative advantage and import those goods in which they have a comparative disadvantage.

Gains of trade

  • Decreasing costs
  • Difference in demand
  • Increased competition
  • Non-economic advantages

Restricting trade

Arguments on restricting trade

  • The infant industry argument
  • Reduced reliance on goods, which have little dynamic potential
  • To prevent dumping and unfair trade practice
  • To prevent the establishment of a foreign based monopoly
  • To spread the risk of fluctuating market
  • To reduce the influence of trade on consumer tastes
  • To import the trade of harmful goods

Methods of restricting trade

  • Tariffs and customs duties
  • Quotas
  • Exchange controls
  • Import licensing
  • Embargoes
  • Export taxes
  • Subsidies
  • Admistrative barriers
  • Procurement policies

Regulation of international trade

Traditionally trade was regulated through bilateral treaties between two nations. For centuries under the belief in Mercantilism most nations had high tariffs and many restrictions on international trade.

Mercantilism is an economic theory that holds that the prosperity of a nation depends upon its supply of capital, and that the global volume of trade is "unchangeable." Capital, represented by bullion (gold or silver) held by the state, is best increased through a positive balance of trade with other nations (exports over imports). Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy, by encouraging exports and discouraging imports, especially through the use of tariffs.

Free trade

After World War II, strong sentiment developed throughout the world against protection and high tariffs and in favor of freer trade. The results were new organizations and agreements on international trade such as the General Agreement on Tariffs and Trade (1948), the Benelux Economic Union (1948), the European Economic Community (Common Market, 1957), the European Free Trade Association (1959), Mercosur (the Southern Cone Common Market, 1991), and the World Trade Organization (1995).

In the 19th century, especially in Britain, a belief in free trade became paramount and this view has dominated thinking among western nations for most of the time since then. free trade is an idealized market model, often stated as a political objective, in which trade of goods and services between countries flows unhindered by government-imposed tariff and non-tariff barriers. Intellectually, this arrangement is supported by microeconomic analysis and nearly all economists, who argue that the benefit of trade is a net gain to both trading partners. It is opposed by anti-globalization and some labour campaigners due to what they see are many tendencies for abuse by wealthier states.

The term is given to economic policies, as well as political parties that support increases in such trade.

Free trade is usually most strongly supported by the most economically powerful nations in the world, though they often engage in selective protectionism for those industries which are politically important domestically, such as the protective tariffs applied to agriculture and textiles by the United States and Europe. The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, China and Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves. As tariff levels fall there is also an increasing willingness to negotiate non tariff measures, including foreign direct investment, procurement and trade facilitation. The latter looks at the transaction cost associated with meeting trade and customs procedures.

Traditionally agricultural interests are usually in favour of free trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in the United States, Europe and Japan, are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services.

In the years since the Second World War multilateral treaties like the GATT and World Trade Organization have attempted to create a globally regulated trade structure.

GATT

The General Agreement on Tariffs and Trade (typically abbreviated GATT) was originally created by the Bretton Woods Conference as part of a larger plan for economic recovery after World War II. The GATT's main purpose was to reduce barriers to international trade. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements. The GATT was an agreement, not an organization. Originally, the GATT was supposed to become a full international organization like the World Bank or IMF called the International Trade Organization. However, the agreement was not ratified, so the GATT remained simply an agreement. The functions of the GATT have been replaced by the World Trade Organization which was established through the final round of negotiations in the early 1990s.

The history of the GATT can be divided into three phases: the first, from 1947 until the Torquay round, largely concerned which commodities would be covered by the agreement and freezing existing tariff levels. A second phase, encompassing three rounds, from 1959 to 1979, focused on reducing tariffs. The third phase, consisting only of the Uruguay Round from 1986 to 1994, extended the agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of this round the WTO was born.

WTO

In the early 1990s the nations of the European Union (the successor organization to the Common Market) undertook to remove all barriers to the free movement of trade and employment across their mutual borders

The WTO discussions should follow these fundamental principles of trading.

1. A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services.

2. A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers).

3. A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open.

4. A trading system should tend toward greater competition.

5. A trading system should be more accommodating for less developed countries, giving them more time to adjust, greater flexibility, and more privileges.

WTO governing rules

· Non-discrimination

· Reciprocity

· Prohibitions of quotas

· Fair competition

· Binding tariffs

Unlike the GATT ,the WTO has the power to impose santionson countries breaking trade agreements. Provision for appeals is there, if the disputes between member countries cannot be taken care by WTO in an amikable way

The Uruguay Round.

Trade talks started in September 1986, in Punta del Este, Uruguay. They eventually accepted a negotiating agenda that covered virtually every outstanding trade policy issue. The talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles. All the original GATT articles were up for review. It was the biggest negotiating mandate on trade ever agreed, and the ministers gave themselves four years to complete it.

Two years later, in December 1988, ministers met again in Montreal, Canada, for what was supposed to be an assessment of progress at the round’s half-way point. The purpose was to clarify the agenda for the remaining two years, but the talks ended in a deadlock that was not resolved until officials met more quietly in Geneva the following April.

Despite the difficulty, during the Montreal meeting, ministers did agree a package of early results. These included some concessions on market access for tropical products — aimed at assisting developing countries — as well as a streamlined dispute settlement system, and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members. The round was supposed to end when ministers met once more in Brussels, in December 1990. But they disagreed on how to reform agricultural trade and decided to extend the talks. The Uruguay Round entered its bleakest period.

On 15 April 1994, the deal was signed by ministers from most of the 123 participating governments at a meeting in Marrakesh, Morocco. Pitfalls were talked about and were incorporated into the Doha Development Agenda in late 2001.

DOHA Development agenda

The rebuilding process of trhe WTO began in Doha ,Quatar in November 2001. The meeting between the 142 members of WTO continues with the decision to launch a new round of WTO trade talks ,to be called the ‘Doha Development agenda’

The Doha negotiations are designed to increase the liberalisation of trade. However incorporated negotiations already underway on agriculture and services. Agriculture and services were the only areas where negotiations on further trade liberalization had been mandated in the Uruguay Round WTO Agreements (see Agreement on Agriculture: General Issues).

The Doha Ministerial Declaration sets out the basic mandate for the negotiations. With over three quarters of WTO members identifying themselves as developing countries, the Doha Declaration gives developing country issues a high priority in the negotiations.

The main objectives for agriculture found in the Doha Declaration are for "substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade distorting domestic support." Members also agreed to "take note of the non-trade concerns reflected in the negotiating proposals submitted by members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture." Most countries accept that agriculture has functions other than producing food and fiber-non-trade concerns-such as food security, environmental protection, structural adjustment, rural development, poverty alleviation, and animal welfare. Non-trade concerns have not received much attention in the Doha negotiations, as countries have concentrated on negotiating cuts in tariffs, domestic support, and export subsidies, while providing for the special and differential needs of developing countries.

In addition to the Doha Ministerial Declaration, two other key Doha documents track progress in agricultural negotiations:

  • The General Council Decision of August 1, 2004—also called the "July Package"—provides a framework for "modalities," broad outlines or formulas for reducing import barriers, export subsidies, and domestic support in the final agreement in agriculture.
  • The Hong Kong Ministerial Declaration of December 2005 includes preliminary agreements on several issues in the agricultural negotiations. In the area of market access, this includes progress on establishing ad valorem tariff equivalents on which cuts will be based; adopting four tariff bands that would subject higher tariffs to larger cuts; accepting the criteria to select certain products ("Special Products") for reduced tariff cuts by developing countries; and agreement by developed countries to extend duty- and quota-free market access for most products originating from LDCs. The Declaration also documents the agreement to end export subsidies in agriculture by 2013.

For information on the status of the negotiations and other details, see WTO's Doha Development Agenda: Negotiations, Implementation and Development.

WTO Doha Round: The Agricultural standoff

On July 24, 2006, the WTO's Director General announced the indefinite suspension of further negotiations in the Doha Development Agenda or Doha Round of multilateral trade negotiations. The principal cause of the suspension was that a
core group of WTO member countries -- the United States, the European Union (EU), Brazil, India, Australia, and Japan -- known as the G-6 had reached an impasse over specific methods to achieve the broad aims of the round for agricultural trade:
substantial reductions in trade-distorting domestic subsidies, elimination of export subsidies, and substantially increased market access for agricultural products.

Reference:

Wikipedia

Agriculture and the WTO - meeting series - ODI 2005

WTO Official site

Dec 19, 2006

Leadership discussion

What is Leadership?

Many people believe that leadership is simply being the first, biggest or most powerful. Leadership in organizations has a different and more meaningful definition. Very simply put, a leader is interpreted as someone who sets direction in an effort and influences people to follow that direction. How they set that direction and influence people depends on a variety of factors that we'll consider later on below. To really comprehend the "territory" of leadership, you should briefly scan some of the major theories, notice various styles of leadership and review some of the suggested traits and characteristics that leaders should have. The rest of this library should help you in this regard.

Theories About Leadership

There are also numerous theories about leadership, or about carrying out the role of leader, e.g., servant leader, democratic leader, principle-centered leader, group-man theory, great-man theory, traits theory, visionary leader, total leader, situational leader, etc. The following article provides brief overview of key theories.

Leadership theories

Leadership Styles

Leadership styles

The role of leadership in management is largely determined by the organisational culture of the company. It has been argued that managers' beliefs, values and assumptions are of critical importance to the overall style of leadership that they adopt.

There are several different leadership styles that can be identified within each of the following Management techniques. Each technique has its own set of good and not-so-good characteristics, and each uses leadership in a different way.


The Autocrat

The autocratic leader dominates team-members, using unilateralism to achieve a singular objective. This approach to leadership generally results in passive resistance from team-members and requires continual pressure and direction from the leader in order to get things done. Generally, an authoritarian approach is not a good way to get the best performance from a team.

There are, however, some instances where an autocratic style of leadership may not be inappropriate. Some situations may call for urgent action, and in these cases an autocratic style of leadership may be best. In addition, most people are familiar with autocratic leadership and therefore have less trouble adopting that style. Furthermore, in some situations, sub-ordinates may actually prefer an autocratic style.

The Laissez-Faire Manager

The Laissez-Faire manager exercises little control over his group, leaving them to sort out their roles and tackle their work, without participating in this process himself. In general, this approach leaves the team floundering with little direction or motivation.

Again, there are situations where the Laissez-Faire approach can be effective. The Laissez-Faire technique is usually only appropriate when leading a team of highly motivated and skilled people, who have produced excellent work in the past. Once a leader has established that his team is confident, capable and motivated, it is often best to step back and let them get on with the task, since interfering can generate resentment and detract from their effectiveness. By handing over ownership, a leader can empower his group to achieve their goals.


The Democrat

The democratic leader makes decisions by consulting his team, whilst still maintaining control of the group. The democratic leader allows his team to decide how the task will be tackled and who will perform which task.

The democratic leader can be seen in two lights:

A good democratic leader encourages participation and delegates wisely, but never loses sight of the fact that he bears the crucial responsibility of leadership. He values group discussion and input from his team and can be seen as drawing from a pool of his team members' strong points in order to obtain the best performance from his team. He motivates his team by empowering them to direct themselves, and guides them with a loose reign.

However, the democrat can also be seen as being so unsure of himself and his relationship with his sub-ordinates that everything is a matter for group discussion and decision. Clearly, this type of "leader" is not really leading at all.

Is Leading Different than Managing? (Pros and Cons)

Traditional views of management associate it with four major functions: planning, organizing, leading and controlling/coordinating. However, many educators, practitioners and writers disagree with this traditional view.

Views that Leading is Different Than Managing

The following articles offer views different from the traditional view that leading is a major function of management.
Management Styles (says they're different and compares different traits)
Leadership (includes good overview of styles, and differences of manager and leader)

View That Separating "Leading" from "Managing" Can Be Destructive

Another view is that to be a very effective member of an organization (whether executive, middle manager, or entry-level worker), you need skills in the functions of planning, organizing, leading and coordinating activities -- the key is you need to be able to emphasize different skills at different times.

Yes, leading is different than planning, organizing and coordinating because leading is focused on influencing people, while the other functions are focused on "resources" in addition to people. But that difference is not enough to claim that "leading is different than managing" any more than one can claim that "planning is different than managing" or "organizing is different than managing".

The assertion that "leading is different than managing" -- and the ways that these assertions are made -- can cultivate the view that the activities of planning, organizing and coordinating are somehow less important than leading. The assertion can also convince others that they are grand and gifted leaders who can ignore the mere activities of planning, organizing and coordinating -- they can leave these lesser activities to others with less important things to do in the organization. This view can leave carnage in organizations.


How Do Leaders Lead?

The Challenge of Suggesting Which Methods to Use

The particular competencies (knowledge, skills and abilities) that a person needs in order to lead at a particular time in an organization depend on a variety of factors, including:
1) Whether that person is leading one other individual, a group or a large organization;
2) The extent of leadership skills that person already has;
3) That person's basic nature and values (competencies should be chosen that are in accordance with that nature and those values)
4) Whether the group or organization is for-profit or nonprofit, new or long-established, and large or small;
5) The particular culture (or values and associated behaviors) of whomever is being led.

Dec 17, 2006

Motivation

Motivation

Nearly all the conscious behavior of human being is motivated. The internal needs and drives lead to tensions, which in turn result into actions. The need for food results into hunger and hence a person is motivated to eat.
A manager requires creating and maintaining an environment in which individuals work together in groups towards the accomplishment of common objectives. A manager cannot do a job without knowing what motivates people. The building of motivating factors into organizational roles, the staffing of these roles and the entire process of leading people must be built on a knowledge of motivation. It is necessary to remember that level of motivation varies both between individuals and within individuals at different times. Today in the increasingly competitive environment maintaining a highly motivated workforce is the most challenging task. The art of motivation starts by learning how to influence the behavior of the individual. This understanding helps to achieve both, the individual as well as organizational objectives.
Motivation is a powerful tool in the hands of leaders. It can persuade convince and propel. People to act.
WHAT IS MOTIVATION?
It is a general tendency to believe that motivation is a personal trait. Some people have it and the others don’t. In practice, some are labeled to be lazy because they do not display an outward sign of motivation. However, individuals differ in their basic motivational drives. It also depends upon their areas of interest. The concept of motivation is situational and its level varies between different individuals and at different times. If you understand what motivates people, you have at your command the most powerful tool for dealing with them.
DEFINING MOTIVATION
Motivation is to inspire people to work, individually or in groups in the ways such as to produce best results. It is the will to act. It is the willingness to exert high levels of effort towards organizational goals, conditioned by the efforts and ability to satisfy some individual need.
Motivation is getting somebody to do something because they want to do it. It was once assumed that motivation had to be injected from outside, but it is now understood that everyone is motivated by several differing forces.
Motivation is a general term applied to the entire class of drives, desires, needs, wishes and similar forces. To say that managers motivate their subordinates is to say that they do those things which they hope will satisfy these drives and desires and induce the subordinates to act in a desired manner.
To motivate others is the most important of management tasks. It comprises the abilities to communicate, to set an example, to challenge, to encourage, to obtain feedback, to involve, to delegate, to develop and train, to inform, to brief and to provide a just reward.

PROCESS OF MOTIVATION

In the initiation a person starts feeling lack nesses. There is an arousal of need so urgent, that the bearer has to venture in search to satisfy it. This leads to creation of tension, which urges the person to forget everything else and cater to the aroused need first. This tension also creates drives and attitudes regarding the type of satisfaction that is desired. This leads a person to venture into the search of information. This ultimately leads to evaluation of alternatives where the best alternative is chosen. After choosing the alternative, an action is taken. Because of the performance of the activity satisfaction is achieved which than relieves the tension in the individual.
TYPES OF MOTIVATION
(1) Achievement Motivation
It is the drive to pursue and attain goals. An individual with achievement motivation wishes to achieve objectives and advance up on the ladder of success. Here, accomplishment is important for its own shake and not for the rewards that accompany it. It is similar to ‘Kaizen’ approach of Japanese Management.
(2) Affiliation Motivation
It is a drive to relate to people on a social basis. Persons with affiliation motivation perform work better when they are complimented for their favorable attitudes and co-operation.
(3) Competence Motivation
It is the drive to be good at something, allowing the individual to perform high quality work. Competence motivated people seek job mastery, take pride in developing and using their problem-solving skills and strive to be creative when confronted with obstacles. They learn from their experience.
(4) Power Motivation
It is the drive to influence people and change situations. Power motivated people wish to create an impact on their organization and are willing to take risks to do so.
(5) Attitude Motivation
Attitude motivation is how people think and feel. It is their self confidence, their belief in themselves, their attitude to life. It is how they feel about the future and how they react to the past.

(6) Incentive Motivation
It is where a person or a team reaps a reward from an activity. It is “You do this and you get that”, attitude. It is the types of awards and prizes that drive people to work a little harder.
(7) Fear Motivation
Fear motivation coercions a person to act against will. It is instantaneous and gets the job done quickly. It is helpful in the short run.
REQUISITES TO MOTIVATE
• We have to be Motivated to Motivate
• Motivation requires a goal
• Motivation once established, does not last if not repeated
• Motivation requires Recognition
• Participation has motivating effect
• Seeing ourselves progressing Motivates us
• Challenge only motivates if you can win
• Everybody has a motivational fuse i.e. everybody can be motivated
• Group belonging motivates
MOTIVATING DIFFERENT PEOPLE IN DIFFERENT WAYS
Motivation is not only in a single direction i.e. downwards. In the present scenario, where the workforce is more informed, more aware, more educated and more goal oriented, the role of motivation has left the boundries of the hierarchy of management. Apart from superior motivating a subordinate, encouragement and support to colleague as well as helpful suggestions on the right time, even to the superior, brings about a rapport at various work levels. Besides, where workforce is self motivated, just the acknowledgement of the same makes people feel important and wanted.
DIFFERENCE BETWEEN MOTIVATION, SATISFACTION, INSPIRATION AND MANIPULATION

Motivation refers to the drive and efforts to satisfy a want or goal, whereas satisfaction refers to the contentment experienced when a want is satisfied. In contrast, inspiration is bringing about a change in the thinking pattern. On the other hand Manipulation is getting the things done from others in a predetermined manner.

Hence, manipulation or external stimulus as well as inspiration or internal stimulus acts as carriers of either demotivation or motivation which in turn either results into dissatisfaction or satisfaction depending upon.
The types of existing situation.


Theories of Motivation
1) Contribution of Robert Owen:
Though Owen is considered to be paternalistic in his view, his contribution is of a considerable significance in the theories of Motivation. During the early years of the nineteenth century, Owen’s textile mill at New Lanark in Scotland was the scene of some novel ways of treating people. His view was that people were similar to machines. A machine that is looked after properly, cared for and maintained well, performs efficiently, reliably and lastingly, similarly people are likely to be more efficient if they are taken care of. Robert Owen practiced what he preached and introduced such things as employee housing and company shop. His ideas on this and other matters were considered to be too revolutionary for that time.
2) Jeremy Bentham’s “The Carrot and the Stick Approach” :
Possibly the essence of the traditional view of people at work can be best appreciated by a brief look at the work of this English philosopher, whose ideas were also developed in the early years of the Industrial Revolution, around 1800. Bentham’s view was that all people are self-interested and are motivated by the desire to avoid pain and find pleasure. Any worker will work only if the reward is big enough, or the punishment sufficiently unpleasant. This view - the ‘carrot and stick’ approach - was built into the philosophies of the age and is still to be found, especially in the older, more traditional sectors of industry.
The various leading theories of motivation and motivators seldom make reference to the carrot and the stick. This metaphor relates, of course, to the use of rewards and penalties in order to induce desired behavior. It comes from the old story that to make a donkey move, one must put a carrot in front of him or dab him with a stick from behind. Despite all the research on the theories of motivation, reward and punishment are still considered strong motivators. For centuries, however, they were too often thought of as the only forces that could motivate people.
At the same time, in all theories of motivation, the inducements of some kind of ‘carrot’ are recognized. Often this is money in the form of pay or bonuses. Even though money is not the only motivating force, it has been and will continue to be an important one. The trouble with the money ‘carrot’ approach is that too often everyone gets a carrot, regardless of performance through such practices as salary increase and promotion by seniority, automatic ‘merit’ increases, and executive bonuses not based on individual manager performance. It is as simple as this : If a person put a donkey in a pen full of carrots and then stood outside with a carrot, would the donkey be encouraged to come out of the pen ?
The ‘stick’, in the form of fear–fear of loss of job, loss of income, reduction of bonus, demotion, or some other penalty–has been and continues to be a strong motivator. Yet it is admittedly not the best kind. It often gives rise to defensive or retaliatory behavior, such as union organization, poor-quality work, executive indifference, failure of a manager to take any risks in decision making or even dishonesty. But fear of penalty cannot be overlooked. Whether managers are first-level supervisors or chief executives, the power of their position to give or with hold rewards or impose penalties of various kinds gives them an ability to control, to a very great extent, the economic and social well-being of their subordinates.
3) Abraham Maslow’s “Need Hierarchy Theory” :
One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy, ascending from the lowest to the highest, and he concluded that when one set of needs is satisfied, this kind of need ceases to be a motivator.
As per his theory this needs are :
(i) Physiological needs :
These are important needs for sustaining the human life. Food, water, warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the primary list of need satisfaction. Maslow was of an opinion that until these needs were satisfied to a degree to maintain life, no other motivating factors can work.
(ii) Security or Safety needs :
These are the needs to be free of physical danger and of the fear of losing a job, property, food or shelter. It also includes protection against any emotional harm.
(iii) Social needs :
Since people are social beings, they need to belong and be accepted by others. People try to satisfy their need for affection, acceptance and friendship.
(iv) Esteem needs :
According to Maslow, once people begin to satisfy their need to belong, they tend to want to be held in esteem both by themselves and by others. This kind of need produces such satisfaction as power, prestige status and self-confidence. It includes both internal esteem factors like self-respect, autonomy and achievements and external esteem factors such as states, recognition and attention.
(v) Need for self-actualization :
Maslow regards this as the highest need in his hierarchy. It is the drive to become what one is capable of becoming, it includes growth, achieving one’s potential and self-fulfillment. It is to maximize one’s potential and to accomplish something.


As each of these needs are substantially satisfied, the next need becomes dominant. From the standpoint of motivation, the theory would say that although no need is ever fully gratified, a substantially satisfied need no longer motivates. So if you want to motivate someone, you need to understand what level of the hierarchy that person is on and focus on satisfying those needs or needs above that level.
Maslow’s need theory has received wide recognition, particularly among practicing managers. This can be attributed to the theory’s intuitive logic and ease of understanding. However, research does not validate these theory. Maslow provided no empirical evidence and other several studies that sought to validate the theory found no support for it.
4) “Theory X and Theory Y” of Douglas McGregor :
McGregor, in his book “The Human side of Enterprise” states that people inside the organization can be managed in two ways. The first is basically negative, which falls under the category X and the other is basically positive, which falls under the category Y. After viewing the way in which the manager dealt with employees, McGregor concluded that a manager’s view of the nature of human beings is based on a certain grouping of assumptions and that he or she tends to mold his or her behavior towards subordinates according to these assumptions.
Under the assumptions of theory X :
• Employees inherently do not like work and whenever possible, will attempt to avoid it.
• Because employees dislike work, they have to be forced, coerced or threatened with punishment to achieve goals.
• Employees avoid responsibilities and do not work fill formal directions are issued.
• Most workers place a greater importance on security over all other factors and display little ambition.
In contrast under the assumptions of theory Y :
• Physical and mental effort at work is as natural as rest or play.
• People do exercise self-control and self-direction and if they are committed to those goals.
• Average human beings are willing to take responsibility and exercise imagination, ingenuity and creativity in solving the problems of the organization.
• That the way the things are organized, the average human being’s brainpower is only partly used.
On analysis of the assumptions it can be detected that theory X assumes that lower-order needs dominate individuals and theory Y assumes that higher-order needs dominate individuals. An organization that is run on Theory X lines tends to be authoritarian in nature, the word “authoritarian” suggests such ideas as the “power to enforce obedience” and the “right to command.” In contrast Theory Y organizations can be described as “participative”, where the aims of the organization and of the individuals in it are integrated; individuals can achieve their own goals best by directing their efforts towards the success of the organization.
However, this theory has been criticized widely for generalization of work and human behavior.
5) Contribution of Rensis Likert :
Likert developed a refined classification, breaking down organizations into four management systems.
1st System – Primitive authoritarian
2nd System – Benevolent authoritarian
3rd System – Consultative
4th System – Participative
As per the opinion of Likert, the 4th system is the best, not only for profit organizations, but also for non-profit firms.
6) Frederick Herzberg’s motivation-hygiene theory :
Frederick has tried to modify Maslow’s need Hierarchy theory. His theory is also known as two-factor theory or Hygiene theory. He stated that there are certain satisfiers and dissatisfiers for employees at work. In- trinsic factors are related to job satisfaction, while extrinsic factors are associated with dissatisfaction. He devised his theory on the question : “What do people want from their jobs ?” He asked people to describe in detail, such situations when they felt exceptionally good or exceptionally bad. From the responses that he received, he concluded that opposite of satisfaction is not dissatisfaction. Removing dissatisfying characteristics from a job does not necessarily make the job satisfying. He states that presence of certain factors in the organization is natural and the presence of the same does not lead to motivation. However, their nonpresence leads to demotivation. In similar manner there are certain factors, the absence of which causes no dissatisfaction, but their presence has motivational impact.

Examples of Hygiene factors are :
Security, status, relationship with subordinates, personal life, salary, work conditions, relationship with supervisor and company policy and administration.
Examples of Motivational factors are :
Growth prospectus job advancement, responsibility, challenges, recognition and achievements.
7) Contributions of Elton Mayo :
The work of Elton Mayo is famously known as “Hawthorne Experiments.” He conducted behavioral experiments at the Hawthorne Works of the American Western Electric Company in Chicago. He made some illumination experiments, introduced breaks in between the work performance and also introduced refreshments during the pause’s. On the basis of this he drew the conclusions that motivation was a very complex subject. It was not only about pay, work condition and morale but also included psychological and social factors. Although this research has been criticized from many angles, the central conclusions drawn were :
• People are motivated by more than pay and conditions.
• The need for recognition and a sense of belonging are very important.
• Attitudes towards work are strongly influenced by the group.
8) Vroom’s Valence x Expectancy theory :
The most widely accepted explanations of motivation has been propounded by Victor Vroom. His theory is commonly known as expectancy theory. The theory argues that the strength of a tendency to act in a specific way depends on the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual to make this simple, expectancy theory says that an employee can be motivated to perform better when their is a belief that the better performance will lead to good performance appraisal and that this shall result into realization of personal goal in form of some reward. Therefore an employee is :
Motivation = Valence x Expectancy.
The theory focuses on three things :
• Efforts and performance relationship
• Performance and reward relationship
• Rewards and personal goal relationship
This leads us to a conclusion that :

9) The Porter and Lawler Model :
Lyman W. Porter and Edward E. Lawler developed a more complete version of motivation depending upon expectancy theory.


Actual performance in a job is primarily determined by the effort spent. But it is also affected by the person’s ability to do the job and also by individual’s perception of what the required task is. So performance is the responsible factor that leads to intrinsic as well as extrinsic rewards. These rewards, along with the equity of individual leads to satisfaction. Hence, satisfaction of the individual depends upon the fairness of the reward.
10) Clayton Alderfer’s ERG Theory :
Alderfer has tried to rebuild the hierarchy of needs of Maslow into another model named ERG i.e. Existence – Relatedness – Growth. According to him there are 3 groups of core needs as mentioned above. The existence group is concerned mainly with providing basic material existence. The second group is the individuals need to maintain interpersonal relationship with other members in the group. The final group is the intrinsic desire to grow and develop personally. The major conclusions of this theory are :
1. In an individual, more than one need may be operative at the same time.
2. If a higher need goes unsatisfied than the desire to satisfy a lower need intensifies.
3. It also contains the frustration-regression dimension.
11) McClelland’s Theory of Needs :
David McClelland has developed a theory on three types of motivating needs :
1. Need for Power
2. Need for Affiliation
3. Need for Achievement
Basically people for high need for power are inclined towards influence and control. They like to be at the center and are good orators. They are demanding in nature, forceful in manners and ambitious in life. They can be motivated to perform if they are given key positions or power positions.
In the second category are the people who are social in nature. They try to affiliate themselves with individuals and groups. They are driven by love and faith. They like to build a friendly environment around themselves. Social recognition and affiliation with others provides them motivation.
People in the third area are driven by the challenge of success and the fear of failure. Their need for achievement is moderate and they set for themselves moderately difficult tasks. They are analytical in nature and take calculated risks. Such people are motivated to perform when they see atleast some chances of success.
McClelland observed that with the advancement in hierarchy the need for power and achievement increased rather than Affiliation. He also observed that people who were at the top, later ceased to be motivated by this drives.
12 ) Equity Theory :
As per the equity theory of J. Stacey Adams, people are motivated by their beliefs about the reward structure as being fair or unfair, relative to the inputs. People have a tendency to use subjective judgment to balance the outcomes and inputs in the relationship for comparisons between different individuals. Accordingly :

If people feel that they are not equally rewarded they either reduce the quantity or quality of work or migrate to some other organization. However, if people perceive that they are rewarded higher, they may be motivated to work harder.
13) Reinforcement Theory :
B.F. Skinner, who propounded the reinforcement theory, holds that by designing the environment properly, individuals can be motivated. Instead of considering internal factors like impressions, feelings, attitudes and other cognitive behavior, individuals are directed by what happens in the environment external to them. Skinner states that work environment should be made suitable to the individuals and that punishments actually leads to frustration and de-motivation. Hence, the only way to motivate is to keep on making positive changes in the external environment of the organization.
14) Goal Setting Theory of Edwin Locke :
Instead of giving vague tasks to people, specific and pronounced objectives, help in achieving them faster. As the clearity is high, a goal orientation also avoids any misunderstandings in the work of the employees. The goal setting theory states that when the goals to be achieved are set at a higher standard than in that case employees are motivated to perform better and put in maximum effort. It revolves around the concept of “Self-efficacy” i.e. individual’s belief that he or she is capable of performing a hard task.
15) Cognitive Evaluation Theory :
As per these theory a shift from external rewards to internal rewards results into motivation. It believes that even after the stoppage of external stimulus, internal stimulus survives. It relates to the pay structure in the organization. Instead of treating external factors like pay, incentives, promotion etc and internal factors like interests, drives, responsibility etc, separately, they should be treated as contemporary to each other. The cognition is to be such that even when external motivators are not there the internal motivation continues. However, practically extrinsic rewards are given much more weightage.
TASK TO BE PERFORMED :
DEBATE :
LIST 10 STRONG POINTS OF YOUR PERSONALITY
LIST 10 NEGATIVE POINTS OF YOUR PERSONALITY
ARE THIS 20 POINTS DEBATABLE ?
TRY CHANGE THE NEGATIVE TO POSITIVE
“Ask yourself :
1. What sort of manager would you like to be managed by ?
2. Are you that sort of person ?
This are two basic questions conducive to a healthy management style.”

BEING A MOTIVATING MANAGER
(1) Treat staff well :
Subordinates have to be treated with diligence. The manager has to stay friendly as well as maintain a level of distance with his staff. It’s a tricky ground to tread. The staff looks up on the manager as their leader. They expect maturity, rationality and understanding from their superiors. Simple things like calling people by their first name, chatting about their families for a while or even a general inquiry about their well-being, brings in a feeling of belongingness. Small gestures of this type help in building up of a cordial relationship.
(2) Think like a winner :
A manager has to handle two situations, “The Winning” and “The loosing”. The crux is to think like a winner even when all the odds seem against you. It is necessary to equip yourself with all the tools of a winner. Always remember that winning and loosing rotate in a cycle. If you have been loosing from a long time you are very near the winning edge.
(3) Recognize the differences :
All the employees in the organization vibrate to a different pace. A treatment that motivates one may demotivation the other. Understanding the difference in temperament in between the individuals is important.
4) Set realistic goals :
Set moderate goals. Setting too high a task creates a feeling of non-achievement, right from the beginning itself. The goals set should be such which seem feasible to the employees to be achieved. A slightly higher target than expected provides a challenge.

(5) Prevent Demotivation :
A job of the manager is to motivate people. His task requires him to punish and penalize people. This might create resentment in the mind of the staff members, which may affect the productivity of the workforce. Henceforth, care should be taken, that punishment and penalties are used as a controlling technique and that they do not demotivation.
(6) Job-financial enrichment and small job changes are handy :
To make job more effective and to break the monotonous routine, small task additions and minor changes are always welcome. Even small suggestions of the manager seem valuable to the employees. A few challenges in the same job can enrich it.
(7) Non-financial rewards :
Monetary rewards have always had a high motivational capacity. But non-monetary rewards are equally helpful. A thank you note, a letter of appreciation or even few words of praise can help smoothen the creases between the different levels of management.
QUOTATIONS
1. The enemy of the ‘best’ is the ‘good’
2. Think Win – Win
3. You have be very clever to do simple things
4. There is always a better way
5. The man who makes no mistakes does not usually make anything
6. Allow yourself the permission to make mistakes
7. The best are optimists having vision
8. Never promise more than you can perform
9. No pain no gain
10. Get organized
11. In action, be primitive; in foresight, a strategist
12. All easy problems ha e already been solved
13. Include the success of others in your dreams or your own success
14. To be a winner, all you need to give is all you have
15. Success means winning the war, not every battle
16. Daring ideas are like chessman, moved forward, they may be beaten but they may start a winning a game
17. A man is not paid for having a head and hands, but for using them
18. Work half day but don’t care if it’s the first 12 hours or the second 12 hours

Dec 14, 2006

Becoming a Successful Mentor

Leaders should focus 80% of their time and attention noticing and praising successes - because that is how people will really learn what to do, and not just what not to do.

The best leaders ignore the mistakes that can be ignored, quickly correct other errors in performance without making a big deal of it, and yet spend most of their time shaping people’s efforts through praise, rather than criticism. This is a key to successful business mentoring - getting this balance right.

With that in mind, it is still necessary to understand that different people learn differently. In order to help you be successful as a business mentor, review the practical tips below so you can adapt your teaching styles and get the most from your people and their potential:


Business Mentoring Question #1: Do they like to gather information through words, and if so, what kind?

Everyone responds to the spoken word, but some people are more “doers” than listeners or readers. For those who do rely more on verbal instruction, pay attention to whether or not they like to read and digest information through a kind of independent study process. If they like to read, give them things to read that will help them grow.

If they learn best by spoken word or through discussion, then supply them with that kind of experience. Pay attention to whether or not they learn best by hearing stories and examples from you - based on your own experience - or if they respond best to thought provoking questions. Thought provoking questions can be very effective for some people, as in the classic Socratic method.


Business Mentoring Question #2: Under what conditions do they prefer to take action?

Some people want and need to have a demonstration first of something new, a hands-on way that you can show them how to do a new task. Other people prefer to jump right in, maybe after some period of observation, which can be short or long, depending on the person’s needs and learning style. Pay attention to each person’s “action style” for new tasks, and adjust your tactics accordingly.


Business Mentoring Question #3: Do they need a “hands-on” or “hands-off” instruction style?

There are some people who, through the process of mastering a new task, need to be prompted to try new things. They might not even take the initiative as confidently as some others do. Others can go on “auto-pilot,” and you can trust that they will let you know when they need to ask a question or refine their performances. Pay attention to how often you need to check in with people as they acquire new skills, and pay attention to whether or not they need you to prompt them or if they succeed best taking more of the initiative to check in for more learning.


Business Mentoring Question #4: Is the key to motivating them through the language of logic or of feeling?

This is one way to understand a person’s motivational style. Pay attention to what words people use when they describe a result that pleases them. If their basic, underlying message is that thing went “smoothly” or that the final result “made sense,” that’s a clue that they will most appreciate seeing how new lessons will “make life easier” or be more “sensible” or “logical.” Likewise, if conditions that frustrate them most are things that to them seem “stupid” or “senseless,” then this is further evidence that teaching them requires showing them lessons they get will increase efficiency.

On the other hand, if they describe good results as things that “made everyone happy,” and bad results in terms of how awful they felt, then new lessons need to be framed in terms of emotion - how they or others will “feel great” once the new way is adopted. When learning, people need to see “what’s in it for them,” so it’s the mentor’s job to get that message across in the way that best fits each person’s motivational style. Though people are usually a blend of thinking/feeling types, people usually “lead” with one more than the other - one side tends to be stronger for each of us, at least most of the time.


Business Mentoring Question #5: Do you know your own learning style, and can you broaden your approaches?

Read through these different learning styles and think about your own learning experiences. Who have been the best teachers for you, and what approaches did they take with you? Recognize that all of us tend to have the habit of assuming - without even realizing it - that others learn the way we do. Then, when they don’t respond to our attempts to teach them, it’s easy to presume that they are unwilling, resistant or just not very sharp.

We need to be able to recognize our own styles and broaden our approaches to fit the needs of those whom we lead. If the art of leadership is the art of getting things done through other people, then we have to be flexible enough to become experts on other people and their styles of learning.


Business Mentoring Question #6: Are you sure your best performers are learning lots and lots!?

Finally, learning by itself is highly motivational. People who feel that they are learning - that they are challenged - are people who are growing and who don’t have time to be negative. Leaders often make the mistake of thinking that their best performers don’t need to be challenged with new learning, but this is exactly the wrong approach!

Challenge and stimulate the strongest performers the most, since they will also grow the most - yielding the highest dividends in productivity for the organization. If you don’t, your high performers can get bored and may jump ship, leaving your team with a talent drain that reinforces long term mediocrity.

If you focus most of your attention on mentoring your weakest links, you will have weaker performance dividends for the team and accidentally place an artificial ceiling on the performance of your group -and of your top performers. So don’t be afraid to challenge people to discover their own potentials for greatness!

Dec 13, 2006

Board of Directors-4 (Staffing and Norming)

Staffing (Size, Joining, Recruiting, Informing, Communicating, Rewarding, Removing)
One of the most important aspects of Board operations is Board staffing. Just like the careful staffing that is usually done with employees, Board members should be carefully selected, trained and evaluated, as well. In for-profits, Board members and leaders must appreciate the strong value that Boards can bring, rather than tolerating Boards as if they are some necessary evil to be avoided at all costs. In nonprofits, Board members and leaders should not approach recruitment and selection as if they are somehow lucky just to get Board members who will show up at Board meetings. Board members and leaders in those organizations must act as if they deserve a very dedicated and participative Board -- that attitude alone can make a huge difference in achieving highly effective Boards.
There are different perspectives on staffing. Some people believe that Boards should be staffed primarily with the expertise needed to establish and achieve current strategic goals (this is functional staffing). Others believe that staffing should also achieve a wide diversity of values and perspectives among members on the Board (diversification staffing). In nonprofits, members are also sought who have strong passion for the mission (passion-driven staffing). We're learning, though, that passion alone is not enough -- Board members also must have the time and energy to actively participate in the Board. Yet another pespective is to get members who represent the major constituents of the organization (representative staffing).
Ironically, many people perceive for-profit Boards as being more established and effective. Yet nonprofit Boards very often have highly involved members who take a very strong role in establishing strategic plans and in ensuring that those plans are achieved. Board members of for-profit and nonprofit organizations have much to learn from each other.
Establishing a system
Establishing and maintaining a board information system is the joint responsibility of the board chairperson, board members, the chief executive, and staff members who work with the board. The board should discuss
• what information it needs to do its job
• how often it wants this information
• in what form it needs the information
Given this board feedback, the staff can establish the content, format, and frequency of information they will provide the board.
Characteristics of good board information
Barry S. Bader, a consultant and author specializing in hospital governance, identifies seven guidelines for developing effective board information:
1. CONCISE
Is the information communicated as quickly or as briefly as possible?
2. MEANINGFUL
Is the information presented in relationship to a significant factor, such as a goal set by the board, past performance, or comparative data?
3. TIMELY
Is the information relevant to the current agenda?
4. RELEVANT TO RESPONSIBILITIES
Does the information help the board or board committee discharge its responsibilities?
5. BEST AVAILABLE
Is the information the best available indicator of the situation or condition being described? Can better information be provided?
6. CONTEXT
Is it clear why this information is important?
7. GRAPHIC PRESENTATION
Could the information be presented better graphically than in words?
Basic ingredients of a board information system
Every board must decide for itself exactly what information it needs. For most organizations, however, the following checklist is a starting point.
At least two weeks before each board meeting:
• Agenda
• Information about issues for discussion, when appropriate
• Financial information
• Committee reports
At least two weeks before the board meeting at which it is discussed:
• Annual budget
• Audit report
• Strategic plan
After each board meeting:
• Minutes
• Notice of next meeting
Monthly:
• Financial report
• Significant published articles about the organization
Quarterly:
• Financial report
Regularly, when appropriate:
• Memo from chief executive summarizing current activities, accomplishments, and needs
• Updated material for board handbook
• Advance copies of publications, brochures, or promotional material
• Annual report
How do we become a nonprofit organization?
Forming a Nonprofit Organization: A Checklist
Every nonprofit organization must have a carefully developed structure and operating procedures in order to be effective at fulfilling its purpose. Good governance starts with helping the organization begin on a sound legal and financial footing in compliance with the numerous federal, state, and local requirements affecting nonprofits.
• Determine the purpose of the organization. Every organization should have a written statement that expresses its reason for being. Resources: Board members, potential clients and constituents.
• Form a board of directors. The initial board will help translate the ideas behind the organization into reality through planning and fund-raising. As the organization matures, the nature and composition of its board will also change.
• File articles of incorporation. Not all nonprofits are incorporated. For those that do wish to incorporate, the requirements for forming and operating a nonprofit corporation are governed by state law. Resources: Your secretary of state or state attorney general's office.
• Draft bylaws. Bylaws — the operating rules of the organization--should be drafted and approved by the board early in the organization's development. Resources: An attorney experienced in nonprofit law.
• Develop a strategic plan. The strategic planning process helps you express a vision of the organization's potential. Outline the steps necessary to work toward that potential, and determine the staffing needed to implement the plan. Establish program and operational priorities for at least one year. Resources: Board members; planning and management consultant.
• Develop a budget and resource development plan. Financial oversight and resource development (e.g., fundraising, earned income, and membership) are critical board responsibilities. The resources needed to carry out the strategic plan must be described in a budget and financial plan. Resources: financial consultant.
• Establish a record keeping system for the organization's official records. Corporate documents, board meeting minutes, financial reports, and other official records must be preserved for the life of the organization. Resources: Your secretary of state or state attorney general's office.
• Establish an accounting system. Responsible stewardship of the organization's finances requires the establishment of an accounting system that meets both current and anticipated needs. Resources: Certified public accountant experienced in nonprofit accounting.
• File for an Internal Revenue Service determination of federal tax exempt status. Nonprofit corporations with charitable, educational, scientific, religious, or cultural purposes have tax exempt status under section 501(c)(3) – or sometimes section 501(c)(4) – of the Internal Revenue Code. To apply for recognition of tax exempt status, obtain form 1023 (application) and publication 557 (detailed instructions) from the local Internal Revenue Service office. The application is an important legal document, so it is advisable to seek the assistance of an experienced attorney when preparing it. Resources: Your local IRS office, an attorney.
• File for state and local tax exemptions. In accordance with state, county, and municipal law, apply for exemption from income, sales, and property taxes. Resources: State, county, or municipal department of revenue.
• Meet the requirements of state, county, and municipal charitable solicitation laws. Many states and local jurisdictions regulate organizations that solicit funds within that state, county, or city. Usually compliance involves obtaining a permit or license and then filing an annual report and financial statement. Resources: state attorney general's office, state department of commerce, state or local department of revenue, or county or municipal clerk's office.
Other steps:
• Obtain an employer identification number from the IRS
• Register with the state unemployment insurance bureau
• Apply for a nonprofit mailing permit from the US Postal Service
• Obtain directors' and officers' liability insurance
What are the basic responsibilities of nonprofit boards?
Ten Basic Responsibilities of Nonprofit Boards
1. Determine the organization's mission and purpose. It is the board's responsibility to create and review a statement of mission and purpose that articulates the organization's goals, means, and primary constituents served.
2. Select the chief executive. Boards must reach consensus on the chief executive's responsibilities and undertake a careful search to find the most qualified individual for the position.
3. Provide proper financial oversight. The board must assist in developing the annual budget and ensuring that proper financial controls are in place.
4. Ensure adequate resources. One of the board's foremost responsibilities is to provide adequate resources for the organization to fulfill its mission.
5. Ensure legal and ethical integrity and maintain accountability. The board is ultimately responsible for ensuring adherence to legal standards and ethical norms.
6. Ensure effective organizational planning. Boards must actively participate in an overall planning process and assist in implementing and monitoring the plan's goals.
7. Recruit and orient new board members and assess board performance. All boards have a responsibility to articulate prerequisites for candidates, orient new members, and periodically and comprehensively evaluate its own performance.
8. Enhance the organization's public standing. The board should clearly articulate the organization's mission, accomplishments, and goals to the public and garner support from the community.
9. Determine, monitor, and strengthen the organization's programs and services. The board's responsibility is to determine which programs are consistent with the organization's mission and to monitor their effectiveness.
10. Support the chief executive and assess his or her performance. The board should ensure that the chief executive has the moral and professional support he or she needs to further the goals of the organization.
What are the legal responsibilities of nonprofit boards?
Under well-established principles of nonprofit corporation law, a board member must meet certain standards of conduct and attention in carrying out his or her responsibilities to the organization. Several states have statutes adopting some variation of these duties which would be used in court to determine whether a board member acted improperly. These standards are usually described as the duty of care, the duty of loyalty and the duty of obedience.
Duty of Care
The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of "care that an ordinarily prudent person would exercise in a like position and under similar circumstances." This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.
Duty of Loyalty
The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.
Duty of Obedience
The duty of obedience requires board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission.
What are the responsibilities of individual board members?
Individual Board Member Responsibilities
• Attend all board and committee meetings and functions, such as special events.
• Be informed about the organization's mission, services, policies, and programs.
• Review agenda and supporting materials prior to board and committee meetings.
• Serve on committees or task forces and offer to take on special assignments.
• Make a personal financial contribution to the organization.
• Inform others about the organization.
• Suggest possible nominees to the board who can make significant contributions to the work of the board and the organization
• Keep up-to-date on developments in the organization's field.
• Follow conflict of interest and confidentiality policies.
• Refrain from making special requests of the staff.
• Assist the board in carrying out its fiduciary responsibilities, such as reviewing the organization's annual financial statements.
Personal characteristics to consider
• Ability to: listen, analyze, think clearly and creatively, work well with people individually and in a group.
• Willing to: prepare for and attend board and committee meetings, ask questions, take responsibility and follow through on a given assignment, contribute personal and financial resources in a generous way according to circumstances, open doors in the community, evaluate oneself.
• Develop certain skills if you do not already possess them, such as to: cultivate and solicit funds, cultivate and recruit board members and other volunteers, read and understand financial statements, learn more about the substantive program area of the organization.
• Possess: honesty, sensitivity to and tolerance of differing views, a friendly, responsive, and patient approach, community-building skills, personal integrity, a developed sense of values, concern for your nonprofit's development, a sense of humor.
What is the job description of a board chair?
• Oversee board and executive committee meetings
• Serve as ex-officio member of all committees
• Work in partnership with the chief executive to make sure board resolutions are carried out
• Call special meetings if necessary
• Appoint all committee chairs and with the chief executive, recommend who will serve on committees
• Assist chief executive in preparing agenda for board meetings
• Assist chief executive in conducting new board member orientation
• Oversee searches for a new chief executive
• Coordinate chief executive's annual performance evaluation
• Work with the nominating committee to recruit new board members
• Act as an alternate spokesperson for the organization
• Periodically consult with board members on their roles and help them assess their performance
What is the job description of a board vice chair?
• Attend all board meetings
• Serve on the executive committee
• Carry out special assignments as requested by the board chair
• Understand the responsibilities of the board chair and be able to perform these duties in the chair's absence
• Participate as a vital part of the board leadership
What is the job description of a board secretary?
• Attend all board meetings
• Serve on the executive committee
• Maintain all board records and ensure their accuracy and safety
• Review board minutes
• Assume responsibilities of the chair in the absence of the board chair, chair-elect, and vice chair
• Provide notice of meetings of the board and/or of a committee when such notice is required
What is the job description of a board treasurer?
• Maintain knowledge of the organization and personal commitment to its goals and objectives
• Understand financial accounting for nonprofit organizations
• Serve as financial officer of the organization and as chairperson of the finance committee.
• Manage, with the finance committee, the board's review of and action related to the board's financial responsibilities.
• Work with the chief executive and the chief financial officer to ensure that appropriate financial reports are made available to the board on a timely basis.
• Assist the chief executive or the chief financial officer in preparing the annual budget and presenting the budget to the board for approval.
• Review the annual audit and answers board members' questions about the audit.