2. Welcome to Class 13 Research: Qualitative Domain Parts 1 & 2 Chapter 7

3. Qualitative Performance

4. Qualitative performance data Qualitative performance data is information associated with an organization's: 1. Tactical and Strategic planning processes 2. Decision-making 3. Behaviors 4. Interaction with each of its stakeholders Qualitative performance data is a window into a firm's personality and character.

5. Generally, it is not possible to measure the impact of qualitative performance in quantifiable terms – BUT … – this should not be mistaken as a zero-influence factor. at least as significant The consequences of qualitative performance are at least as significant in determining a firm's long-term viability as its financial performance.

6. Resources Quantitative & Qualitative

7. Resources Corporations have two major classes of crucial valuables: (1) Quantitative resources (2) Qualitative resources The techniques and competence with which TMTs corral, coalesce, and utilize these can determine whether a corporation achieves its goals and objectives. The focus of this lecture is on qualitative resources however quantitative resources are highlighted for comparison purposes.

8. 1. Quantitative Resources $$$ Quantitative resources are the tangible and intangible assets of a corporation. numerical These resources can be measured and managed in numerical terms. Tangible assets = Tangible assets = facilities, equipment, inventories, receivables, investments, financial resources, etc. Intangible assets = Intangible assets = patents, copyrights, goodwill, etc. and (Intangibles lack physical substance and are classified as –noncurrent – – noncurrent – items on the firm's balance sheet)

9. 2. Qualitative Resources resources Qualitative resources are sometimes referred to as intangible resources. These resources offer great value to an organization but their precise worth cannot be measured or managed in the same way as quantitative resources. impossible Although it is impossible to establish a precise value for qualitative resources, they contribute significantly to a firm’s long-term viability.

10. Qualitative resources include such things as: KSA The Knowledge, Skills, and Abilities of all of its employees The Reputation of the firm The Positive Relationships the firm has established Its record of positive and productive – Decision-making, Decision-making, Actions, and Actions, and Behaviors Behaviors Its Infrastructure – Communication Networks, Operational systems and procedures, etc. Scenario and strategic planning expertise Qualitative resources coalesce to form a company’s core capabilities Action = what you do Behavior = how you do it

11. Performance

12. Qualitative Performance Sustainable success by any corporation is correlated to its qualitative performance There are two primary areas of qualitative performance: Both OC and SP are propelled by unique performance drivers and among these drivers none is more significant than (1) Organizational Citizenship (OC) (2) Strategic Positioning (SP) "culture."

14. Organizational Citizenship (OC) = Organizational Citizenship (OC) = a category of specific corporate behaviors and relationships. OC reveals the firms PERSONALITY and CHARACTER. A significant influence on OC is the firm’s corporate culture.

15. Assessing Organizational Citizenship = investigating a series of behaviors, actions, and decisions that reflect a firm’s: OC Create a database for Organizational Citizenship by: 1.Identifying strategic and tactical decisions by TMTs 2.Examining the associated actions and behaviors 1.Core personality – (how key personnel act and react to situations, conditions, and people) 2.Core character – (how they are likely to act and react to changing situations and conditions)

16. Investigating Corporate Relationships Requires patience and perseverance. Do not expect to discover clear, unbiased, definitive information. Information related to relationships is, by its very nature, subjective ( It is dependent upon perspective ). It is important to filter data collected. Search for collaborating information to validate the initial finding.

17. Strengthening the "Researcher-created" Database Two-pronged approach – for Reliability and Comparability Comparing these to each other can filter source biases thus enhancing objectivity 1) Collect qualitative information on the target company from a variety of sources – Comparing these to each other can filter source biases thus enhancing objectivity cross-company comparisons help determine whether the target company is behaving within industry norms 2) Collect similar data on other organizations – cross-company comparisons help determine whether the target company is behaving within industry norms

18. Create a list of questions to guide the investigation Does the company seem to be sensitive to local communities? Is it responsive to local concerns? Does it have publicized or well-known difficulties with governmental agencies, customers, competitors, or its own board of directors? Does the firm encourage its employees to be culturally sensitive? Does the firm appear to appreciate and respect its employees? What type of relationship does the firm maintain with its competitors? (Competitors do not have to be enemies.) See your textbook for an extensive list of questions

19. Organizational Citizenship Employees Customers Competitors Directors Government Environment Community/ Culture Stockholders Communication Public Persona Vendors (Suppliers)

21. Strategic Positioning Strategic Positioning (SP) = a category of a firm’s creative and planning processes. This area of examination sheds light on the firm's commitment to: (1) Being innovative, creative, and visionary (2) Predicting and adapting to environmental changes (3) Recruiting, developing, and retaining talented employees (4) Executing strategic and tactical plans effectively

22. Competitive viability is dependent upon TMTs who can craft strategically sound plans. There are two types of TMTs: (1) strategically incompetent (2) strategically competent It is important to identify which type is leading your target company Strategic Incompetence = (1) Strategic Incompetence = Those who simply point out strategic alternatives but fail to pursue these or do so erratically and inconsistently (talkers and pointers) Strategic Competence = (2) Strategic Competence = Those who actually take the appropriate actions to strategically position the firm as it moves continuously closer to its primary goals and objectives (the doers)

23. Strategic Incompetence Incompetent TMTs can easily be identified. They will: Continuously find excuses for their failures Continuously pursue the same strategy and expect different results Attempt to justify the validity of their failed strategies by blaming the business environment (recession, inflation, hyper-competition, etc.) for unfulfilled goals and objectives

24. Strategic Competence Competent TMTs can be easily identified. They are willing to acknowledge their strategic and tactical errors and use these as a spring board for future improvements. They do not repeat their mistakes. They think out of the box. They think big, they thinkon a global scale. They think – INTERNATIONAL TRADE

25. What is international trade? Why is it important to strategic positioning? International trade = The exchange of products and services between countries. International trade = The potential for unimaginable opportunities that can ensure corporate growth and prosperity.

26. Does the company's TMT think GLOBALLY? Has it taken any actions toward participating in the global market? If so, have these been effective? What plans have been announced for diversification or divestitures? Do these seem realistic? Do Strategies appear to suggest growth in revenue and profits? Is there a clear plan for growth in appropriate areas? Is the Human Resource Management Department part of upper management or is it simply a service department? Respect for the value of human resources is an important ticket on the train to strategic success. (See your textbook for an extensive list of questions) Create a list of questions to guide data collection related to a firm’s Strategic Positioning

27. Performance Grading Scale 1 to 5 Directions for Grading Follow PLEASE addendum slides which are located on the web lecture notes

29. Grading Scale 1 to 5 1 = Really Bad 2 = Bad 3 = Do not know 4 = Good 5 = Excellent

30. Organizational Citizenship Looking for Outliers Organizational Citizenship – Looking for Outliers Employee Relations [1] [1] Strikes, discontent, class action lawsuits, violence [5] [5] Employee satisfaction, widely acknowledged as a good place to work, awards and recognitions for employee sensitivity Customer Relations [1] [1] Product recalls, misleading advertising, class action lawsuits, customer service department is considered more like a customer insult department [5] [5] Customer satisfaction, reputation for quality products and/or services, strong, friendly, and helpful customer service department Competitor Relations [1] [1] Price wars, name calling in advertising, lawsuits [5] [5] Apparent mutual respect, does not sue or attack competitor in advertising campaign, has strategic partnerships Grading Extremes – 1 and 5

31. Relationship with Directors [1] [1] Publicized discontent, public criticism of management by directors, rated as Board of Shame by Fortune 500 Magazine [5] [5] Large number of external directors, maintain excellent relationship with those directors, rated as the Board of Fame by Fortune 500 Magazine Government Relations [1] [1] Attorney general lawsuits, SEC or IRS investigations, other governmental problems [5] [5] Received awards and highly recognized for good business practices, no record of governmental problems, awarded government contracts Environmental Record [1] [1] Apparent total lack of concern for the aesthetic and general physical environment [5] [5] Received awards for environmental sensitivity, consistently known as an environmentally concerned corporate citizen Community/Cultural Sensitivity [1] [1] Careless decisions that impact a community with no input from citizens, opens facilities in spite of massive public protest, shows defiance and distain for those with differing opinions, closes facilities with no apparent concern for workers [5] [5] Received awards and highly recognized as a good corporate citizen, supports community and social/cultural activities

32. Stockholder Satisfaction [1] [1] Publicized discontent, calls for resignation of officers, class action suits, losses, restatement of earnings [5] [5] Stockholders appear very satisfied (market price of stock rising), corporate earnings are solid, dividends appear appropriate, market position increasing, assets and earned capital increasing Communication with the Public [1] [1] Secretive, closed to public comment, condescending in comments, refuses to acknowledge or accept any responsibility for bad results [5] [5] Openness, honesty, comfortable with probing questions, no attempt to hide information from the public Public Persona [1] [1] Poor public image, profit more important than any other factor, facilities uninviting, company considered to be a bully [5] [5] Solid public image, consider a good guy company, in all respects is viewed highly by customers and non-customers, considered by a wide range of constituents as committed to doing the right things Vendor Relations [1] [1] Notoriously late in paying debts, lawsuits by suppliers, bankers, and/or other creditors [5] [5] Apparent solid respect by suppliers and other creditors, possesses exclusive licensing agreements

34. Grading Scale 1 to 5 1 = Really Bad 2 = Bad 3 = Do not know 4 = Good 5 = Excellent

35. Vision and Mission [1] [1] Vision and Mission statements hard to find, unclear and confusing, or not readily available [5] [5] They are prominently displayed on the company website and/or in other obviously visible places and they appear to be focused, clear, and logical Strategic Positioning Looking for Outliers Strategic Positioning – Looking for Outliers Grading Extremes 15 Grading Extremes – 1 and 5

36. Competitive Advantage [1] [1] The market share of the target company appears to be diminishing. The company appears to be behind the eight ball, getting caught off guard by competition. For the corporate-level strategy consideration, the corporation has not yet established synergies between the companies within its portfolio and there is no evidence that this will happen soon. The company is in a weak position to deal with competitive threats. [5] [5] The target company appears to have a solid rapport with its primary customer base. Strong customer loyalty is obvious. Its products and services are widely recognized. Its name is widely recognized. Its market share is expanding. Its line of products and/or services is expanding and they appear innovative. For corporate-level strategies, synergies have been created between companies within the portfolio and the corporation is in a strong position to deal with competitive threats and to capitalize upon new opportunities.

37. General Environment (Competing companies have little or no control over the general environment. It includes such things as demographic, sociocultural, political/legal, economic, and technological changes.) [1] [1] The target company is frequently caught off guard by general environmental changes. The Management Discussion and Analysis section of the target’s annual report indicates that executives blame general environmental changes for all of the company problems. (It was not our fault; we simply could do nothing about the environment. [5] [5] Company anticipates changes and exhibits the ability to adapt so that it can capitalize on new opportunities that may evolve from a changing general environment.

38. Innovation [1] [1] The Company is continually caught off guard by competitive development of new ideas, products, and/or services. The target company does not innovate and does not support KSA development by employees. [5] [5] The Company has a long tradition of promoting new thoughts and ideas. It is innovative and has a reputation for new discoveries and/or acquisition of new technologies, systems, copyrights, patents and/or the development of new types of services. The Company encourages KSA development of employees at all levels of the organization.

39. Plans and Progress [1] [1] The Company’s is significantly less than stellar. The company’s strategy is confused and unsuccessful. The Company’s financial health is not strong and does not show systemic improvement. The Company has formed no strategic partnerships or if it has, they appear lacking in synergy or diversions from the Company’s core competencies. Company shows no significant interest in expansion. Management does not have a global mentality. [5] [5] The Company has a history of successful expansion and acquisitions. Its plans are announced every year, often in the annual report and they seem well conceived and logical. Progress is admirable and progress reports are publicly announced. The Company continues to experience internal growth as well as growth related to acquisitions and/or new acquisitions.

40. 2. Looking Outward – National Culture

41. National culture is: 1.The mental programming of a group of people 2.Comprised of the values, customs, and belief systems shared by a group of people National cultures National cultures occasionally clash with Corporate cultures Clashes usually occur when employees of one nation work in another nation.

42. National Culture Cultural CLASHES can cause irreparable damage to a firm’s reputation. Potential Clash!  Corporate Culture: & National cultures alien to the corporation can present formidable challenges. They require flexibility and creative management thinking. Challenges include understanding the value systems of: 1. Newcustomers; and 2. New employees from the local culture.

43. TMTs should understand the characteristics and subtleties of national culture of the “new” country in which they wish to compete. Dr. Geert Hofstede. A technique for corralling the characteristics and subtleties of national cultures was developed by Dr. Geert Hofstede. He organized national cultures into “dimensions” or categories of predispositions.

44. Hofstede’s Cultural Dimensions Five dimensions: Power DistancePower Distance IndividualismIndividualism Uncertainty AvoidanceUncertainty Avoidance MasculinityMasculinity Short and long-term orientationShort and long-term orientation The following slides are directly from Hofstede’s data

45. Power Distance Index (PDI)… High Power Distance Low Power Distance Power Distance Index (PDI)… The degree of equality, or inequality, between people in a country’s society 1. High Power Distance The imbalances of power and wealth that have been allowed to grow within the society. (Rich are powerful)  These are more likely to follow a caste system that does not allow significant upward mobility of its citizens. 2. Low Power Distance A society de-emphasizes the differences between citizen’s power and wealth.  In these societies equality and opportunity for everyone is stressed.

46. Uncertainty Avoidance Index (UA)… High Uncertainty Avoidance Low Uncertainty Avoidance Uncertainty Avoidance Index (UAI)… The level of tolerance for uncertainty and ambiguity within the society – i.e. unstructured situations. 1. High Uncertainty Avoidance Indicates the country has a low tolerance for uncertainty and ambiguity.  A rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. 2. Low Uncertainty Avoidance Indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions.  A society that is less rule-oriented, more readily accepts change, and takes more and greater risks.

47. Individualism (IDV)… High Individualism Low Individualism Individualism (IDV)… The degree society reinforces individual or collective achievement and interpersonal relationships. 1. High Individualism Indicates that individuality in these societies may tend to form a larger number of looser relationships. 2. Low Individualism Typifies societies of a more collectivist nature with close ties between individuals.  Reinforced extended families and collectives where everyone takes responsibility for group members

48. Masculinity (MAS)… High Masculinity Low Masculinity Masculinity (MAS)… The degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control, and power. 1. High Masculinity Indicates the country experiences a high degree of gender differentiation.  Males dominate a significant portion of the society and power structure, with females being controlled by male domination. 2. Low Masculinity Indicates the country has a low level of differentiation and discrimination between genders.  Females are treated equally to males in all aspects of the society.

49. Long-term Orientation (LTO)… High Long-Term Orientation Low Long-Term Orientation Long-term Orientation (LTO)… The degree to which a society respects cultural traditions and the value it places on long-term commitments. 1. High Long-Term Orientation Indicates the country prescribes to the values of long-term commitments and respect for tradition.  Supportive of a strong work ethic where long-term rewards are expected as a result of hard work. Business may take longer to develop in this society, particularly for an “outsider.” 2. Low Long-Term Orientation Indicates the country does not reinforce the concept of long-term traditional orientation.  Change can occur more rapidly as long-term traditions and commitments do not become impediments to change.

50. Summary… Culture, both corporate and national, play a significant role in a firm’s qualitative performance. Qualitative performance should be the everyday concern of every manager. The global nature of business increases the risk of clashes between corporate cultures and national cultures.

51. End: Research: Qualitative Domain Assignment: Read Chapter 8 Research: Issues & Challenges Very Important: Remember: Next time you meet in your individual teams – no formal class!!! Review Appendix B of your text (pages 170 – 172) “Hofstede’s Cultural Dimensions.” You are responsible for this information and IT WILL BE ON THE TEST!