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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Vision statements have been overwhelmingly accepted as an indispensable
part of the strategic management process for organizations of all types; be it
public sector, not-for-profit, private, for profit, a multinational or a small and
medium scale enterprise. It is widely believed that vision statements impact
on strategy and most aspects of organizational performance. Most firms have
vision statements. In the worst case scenario, vision statements are implied
implicitly. Supporting the above argument, Bart et al. (2001) posited,
referring to Bain et al. (1996) study, that vision statements had consistently
been shown to be the top-rated management tool deployed by senior
managers during each of the ten years prior to his study. Mullane (2002)
argued and supported it empirically that mission and vision statements are
useful for practical day-to-day operations, taking a contrary view to those
who assert they are archaic documents that are typically exhibited as wall
hangings.
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What differentiates firms from one another is their vision of the future and
their practical ability to act to realize that future by using their aesthetic
sensibilities to create knowledge (Nonaka, I. (2008). The process of creating
a sustainable vision is thought by some to be as important as the vision
itself. Although widely accepted in practice, the idea of a shared vision as a
driver or setting for sustainable change is elusive in academic literature. Yet,
little to no theoretical work has been done to integrate existing approaches in
the field of knowledge-based management and learning theory to design a
common vision model.
In the business world, a vision is a leaders ideological statement of a
desired, long-term future for an organization. A vision describes the ideal
future that the leader wants to create; it is articulated in what is referred to as
a vision statement. Most vision statements are not intended to be fully
achievable on a planned-out timetable; rather, they are intended to be
pursued or worked toward on a daily basis over the long term. The vision
often is communicated through concrete examples, stories, or analogies that
vividly describe the desired long-term state. For example, one flower shops
vision statement is We dont sell flowers,we sell beauty(Peters 2000).
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Its valuable to put your vision down on paper. A brief, well-crafted
statement creates clarity and provides employees and stakeholders with a set
of broadly stated principles against which our efforts can be measured and
that can be used to develop more specific guidelines, including your
strategy, goals, and key performance indicators.
But a sustainability vision is more than catchy words. It requires you to see
how to incorporate an emphasis on environmental, social, and economic
prosperity into every decision made throughout the organization, to think
about how it takes hold at the operating level. Having a vision means
constantly seeking answers to questions like these: What resources does
your business take from the environment? How are those resources
replenished? What are the biggest economic and social issues you face?
How do you interact with the community?
Each organization, in order to build their sustainable competitive ability and
long term growth and survival, has to include strategic and active monitoring
of their environment in their daily operations. In other words, organizational
change management. Example of long living companies show how change
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management can be considered as one of the major lever in organizational
survival. Only through active change management ,understanding needs and
predicting potential problem, mangers in long term can ensure case
functioning and development of organizations. With proper change
management and understanding the importance of organizational change in
different phases of life cycle, organization will be able to build and maintain
their sustainable competitive ability. Given that organizational change can
and should be managed if organization wants to be competitive, through this
paper basic principles of organizational change and change management in
building competitive advantage are presented as well as their impact on the
overall organizational behavior and longevity.
Special attention is given to the analysis of research done among long living
companies in the USA and Europe. Researches done among these companies
(Collins & Porras, 1994; de Geus, 2002; Stadler, 2007) have revealed that
one of the reasons why they survived is their sensitivity to the environment
in which they operate. Regardless of whether they have built their business
on knowledge or natural resources, they have stayed in harmony with the
environment surrounding them (de Geus, 2002:6). Although access to
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information as well as to other resources was not as easy as today, they still
have managed, in accordance with the given circumstances, to respond to the
conditions and requirements of the society around them. These companies
knew how to successfully manage their growth and development and they
have had a powerful engine for progress that allowed them to change and
adapt without compromising their fundamental ideals and values (Collins &
Porras, 1994).
1.2 Statement of the Problem
The role of organizational change and change management in building long
term organizational sustainability has been a major problem for most
corporate organizations. Organizations need to recognize the need for
different types of organizational changes that help them to achieve
congruence with their environment in order to stay in business for a long
period of time without critical shackles. Business practice has shown that
successful adaptation to changing environment can be considered as one of
the major source of sustainable competitive advantage and a source of
longevity. Most organizations find it difficult reacting to environment
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demands and managing changes in building sustainable competitive
advantage due to lack of visioning.
The sensitivity to the environment in which companies do business in is one
of the reasons for long term survival. Long living companies knew how to
successfully manage their growth their strong visioning for progress had
enabled them to change and adapt without endangering their core ideals and
values.
Long living companies differ from companies whose life expectancy was
very short by having successfully recognized needs of their organizations to
change in order to avoid different declines and crisis in their life cycle. The
capability to adapt to the environment, but at the same time to maintain
stability necessary for daily activities, becomes a critical issue.
Organizations need to have a built in mechanism for recognizing different
needs for change and developed mechanism for successful change
management.
However some organizations faced setbacks and made mistakes at some
point during their lives, they cant manage to maintain their basic principles
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and values, probably due to improper visioning. As Nohria, Joyce &
Roberson (2003) pointed out; with proper visioning an organization will
tend to display a remarkable resiliency, an ability to bounce back from
adversity. As a result, they attain extraordinary long-term performance. As
Nohria, et al., (2003) argue constant renewal to stay on top is essential since
falling down is easy but climbing back up is not. This study intends to
evaluate the effect of corporative visioning and organizational longevity in
Nigeria and thus recommends effective solution.
1.3 Objective of the Study
The main objective of this study is to evaluate the effect of corporate
visioning and organizational longevity in Nigeria, specifically the study aim;
1. To establish the relationship between corporate visioning and
organizational longevity
2. To establish the relationship between corporate visioning and
succession planning for longevity.
3. To recommend positive solutions towards organizational longevity
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1.4 Research Questions
1. What are the relationship between corporate visioning and
organizational longevity?
2. Is there any relationship between corporate visioning and succession
planning for longevity?
3. Are there positive factors that enhance organizational longevity?
1.5 Research Hypotheses
Hypothesis One
H0: There is no significant relationship between corporate visioning and
organizational longevity?
H1: There is significant relationship between corporate visioning and
organizational longevity
Hypothesis Two
H0: There is no significant relationship between corporate visioning and
succession planning for longevity
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H1: There is significant relationship between corporate visioning and
succession planning for longevity.
1.6 Significant of the Study
The important of visioning to organizational longevity are economical and
socially vital issues with important implications for shareholders. It seems
from the press, personal observation and scholars that the current economic
downturns have created awareness to corporate organizations in the business
environment unlike any in recent memory.
This research will be significance to all stakeholders such as the financial
sector, private sectors, government and policy maker
The research findings will enable the financial sector to know the right
approach in running their organization in order to create a strong vision to
successfully manage their growth and adapt without endangering their core
ideals and values.
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The findings from the research will be of immense benefit to private sectors
such as business organization, it will enable them to explore the barriers
behind growth and productivity in order to remain in business.
It is very obvious that key issue in accomplishing a high productivity
business organization is creating an effective visioning in order to remain
rigid in the business environment.
Finally this study will be of help to student and intellectuals, it will serve as
a body of literature for student who which to carry out research relating to
the topic.
1.7 Scope of the Study
The scope will cover issues on corporative visioning and organizational
longevity in Nigeria in ensuring growth, development and long life span in
an organization, with particular reference to Cutix Cable Plc Nnewi
1.8 Limitation of the Study
The researcher was limited by some constraint such as unavailability of
information as at when needed, as well as financial constraint.
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1.9 History Background of Cutix Cable Plc Nnewi
The idea for the company was conceived in 1981, when Dr.(Engr.) Ajulu
Uzodike decided to leave Raychem Corporation, a major international
manufacturer of aircraft & military wires and accessories, to set up an
indigenous firm to manufacture electrical cables and switchgear assemblies.
Adtec Ltd, a venture capital and management firm, which was incorporated
in 1978, started the two projects as separate divisions in 1982. Cutix Plc was
incorporated on November 4, 1982 as a Private Limited Company,
manufacturing electric cables and wires.
Ownership Structure
By mid-1983 some friends and relations of the founder and foundation staff
handling the projects were invited to invest in the projects initiated by Adtec
Ltd. After the private placement, 18 founding shareholders emerged for
Cutix Ltd, which took over the business of the cables division of Adtec Ltd.
The startup capital was N 400, 000.00. Cutix Ltd had been incorporated
earlier in 1982. Soon after the economy was liberalized in 1986, the
company went to the capital market, through the Second Tier Security
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Market, to raise funds. The public issue, which made Cutix the first private
company east of the Niger to be quoted on The Nigerian Stock Exchange,
was concluded by late 1987 (August 12,1987). After the public issue, the
company became Cutix Plc. The amount of new capital raised by Cutix since
inception to April 2008 stood at N264, 198,304.00 from both the private and
public issues. Through plough back of retained earnings into capital, the
book value of her capital as at April 2010 stood at N 475 million. The
market value of the company was N 1,057 million as at April 2010.
Machinery Programme
Cutix Plc started production with one extrusion line in 1984 and has been in
continuous production with the capacity to produce various cable and wire
products, and by 1985, they added a second line. By 1986, they added
several wire-processing lines to achieve integration par with leading cable
makers in Nigeria and elsewhere in the world. All machines were specified,
installed and commissioned by Cutix staff which is 100% Nigerian as a
deliberate policy. They also incorporated as much locally fabricated parts as
they could without lowering overall quality and efficiency. Their belief in
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the value of integration was so strong that during the difficult days of import
licensing, 1984 - 1986, the company used the bulk of the licenses obtained to
buy machinery for forward and backward integration. In 1992 the company
went a step ahead to become the first cable manufacturer to acquire a plastic
compounding line. In 1999 the first machine built by staff of Cutix was
successfully put in service.
Within 2000 to 2007, with a view to expanding our product lines and
capacity, Cutix had installed and commissioned a number of machines.
Which include, LBTS, F13, F-Shaw, Armouring Line, and Cabling machine
among others. The company believes in continual improvement and for the
purposes of expansion, another factory site is being developed opposite the
present one, and is expected to be commissioned before the end of 2012.
Business Logistics
Cutix Plc started manufacturing at Nnewi in a 1000 m2 facility it rented
from Adtec Limited. By 2009, they moved all their machinery to their own
factory premises and head office at 17 Osita Onyejianya Street, Umuanuka,
Otolo, Nnewi. Production now goes on at the new site, which has about
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6,000m2covered space. The company recently procured a new piece of land
adjacent to the head office where a permanent head office complex has been
completed and commissioned. The existing factory has also been extended
to create room for the installation of more machinery. The companys water
borehole and a 1000KVA generator have been commissioned. The company
has also acquired new delivery trucks to serve the distributors spread across
Nigeria. There are also sales offices of the company at Nnewi, Aba, Abuja,
Kaduna, Lagos and Uyo.
Stakeholders Welfare
Cutix Plc ensures that returns are distributed fairly to all stakeholders. The
company is managed in a way that maximizes long-term shareholders value
and takes into account the interest of all the stakeholders. Cutix Plc has been
paying regular dividends to her shareholders since she went public with the
dividends paid between 1997 and 2010 totaling about N246 million.
Cutix Plc has operated with an all-Nigerian workforce since inception. The
companys corporate philosophy is such that encourages growth of staff
from within and allows staff the opportunity for self-improvement while
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working. She was the first company in Nnewi to have a Condition of Service
in place for her workers. Salary paid to her staff is based on the productivity
of the company and she is generally respected for paying her staff very well.
Salaries have always been paid promptly on the 25th or 26th day of every
month.
Social Responsiveness
Cutix Plc are socially responsive and responsible. They pays due taxes to the
government promptly. Between 1997 and 2010, they pay about N239
million as Corporate Income tax to the Federal Government. Apart from
paying taxes and dividends, Cutix Plc has been pro-actively involved in
various social projects. Some of the projects include: - tarring and
maintenance of access roads to her factories; financial support to approved
vigilante groups, educational institutions, motherless babies homes,
community projects; educational assistance to the needy; heavily discounted
sales of cables to churches; sole sponsorship of annual ENIC Tennis League
tournaments; annual subvention to Nnewi Sports Club and provision of
water from her factory borehole to neighbours etc. Her top officers also have
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been playing and continue to play leading roles in many community
organizations.
Corporate Quality Policy
To provide exclusive high quality cable and wire products and
services with continual improvement in accordance with national and
international standards.
To meet customers requirements timely and at competitive prices.
Corporate Mission
To Power and illuminate the World.
Corporate Vision
To become one of the major three top players in the World producing
electrical energy products/services.
Core Values
Boldness
Excellence
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Innovation
Integrity
Openness
Corporate HSE Policy
Cutix Plc is committed to policies, procedures, regulations and code of
practices to enable her provide healthy and safe operating conditions for all
employees, visitors and the host community, as well as maintaining high
standard of environmental protection.
Points to Note
Cutix Plc is the first cable manufacturer in Nigeria to acquire a plastic
compounding line.
Cutix Plc is the first company east of the Niger to be quoted on the
Nigerian Stock Exchange.
There is a high commitment to quality as shown by the various quality
control (QC) points on their production chart.
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1.10 Definition of Terms
Corporative: A large company or group of companies authorized to act as a
single entity and recognized as such in law.
Visioning: The action of developing a plan, goal, or vision for the future.
Organizational:of or relating to an organization; "organizational structure
Longevity: Long life, long existence or service.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE2.0 Introduction
This chapter discusses the view of previous writers on related studies on
corporative visioning and organizational longevity in Nigeria. According to
Anikpo (2001) knowledge is continuous and every new research is a stand in
the same unbroken intellectual chain. Reference must be made to the earlier
stands in the unfolding human knowledge to ensure continuity. After all, the
new can be a shadow of the old or flicker of light bread from a dark past.
This chapter will no doubt help firms, entrepreneurs, organizations,
government, managers, researchers and the general public to understand and
have a conceptual view on corporate visioning.
2.1 Theoretical Frame Work/Models of Corporate Vision
In this section, early concepts of vision, the theoretical literature on vision
definitions, attributes and content is discussed, followed by a review section
of the empirical literature.
Visioning theory by Locke & Latham, (1990 and 2002) was developed
inductively within industrial/organizational (I/O) psychology over a 25-year
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period, based on some 400 laboratory and field studies. These studies
showed that specific, high (hard) goals lead to a higher level of task
performance than do easy goals or vague, abstract visioning such as the
exhortation to do ones best. So long as a person is committed to the
vision, has the requisite ability to attain it, and does not have conflicting
visions, there is a positive, linear relationship between vision difficulty and
task performance. Because visioning refers to future valued outcomes, the
setting of vision is first and foremost a discrepancy creating process. It
implies discontent with ones present condition and the desire to attain an
objective or outcome.
Visioning is related to affect in that visioning set the primary standard for
self-satisfaction with performance. High, or hard, visions are motivating
because they require one to attain more in order to be satisfied than do low,
or easy, visions. Feelings of success in the workplace occur to the extent that
people see that they are able to grow and meet job challenges by pursuing
and attaining goals that are important and meaningful.
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The key moderators of vision setting are feedback, which people need in
order to track their progress; commitment to the vision, which is enhanced
by self-efficacy and viewing the vision as important; task complexity, to the
extent that task knowledge is harder to acquire on complex tasks; and
situational constraints. With regard to the latter, Brown, Jones, and Leigh
(2005) found that role overload (excess work without the necessary
resources to accomplish a task) moderates vision effects; visions affected
performance only when overload was low.
Visioning theory has high internal and external validity. As of 1990, support
for vision-setting effects had been found on more than 88 different tasks,
involving more than 40,000 male and female participants in Asia, Australia,
Europe, and North America (Locke & Latham, 1997). Vision effects have
been found in both laboratory and field settings, using both correlational and
experimental designs and numerous dependent variables. Time spans have
ranged from 1 minute to 25 years and effects have been obtained at the
individual, group, and organizational-unit levels. Visions are effective even
when they come from different sources; they can be assigned by others, they
can be set jointly through participation, and they can be self-set. In the latter
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instance, visioning are a key element in self-regulation. Visioning theory is
an open theory in that new elements are added as new discoveries are
made.
There is no doubt however that many leadership scholars have seen vision as
important to organizational longevity, strategy implementation, and change
(Collins & Porras, 1994; Doz & Prahalad, 1987; Humphreys, 2004; Hunt,
1991; Kotter, 1990; Robbins & Duncan, 1998; Sashkin, 1998). Although
some managers dismiss visions as irrelevant to organization performance
(Rynes, Colbert & Brown, 2002), businesses need a purpose (Avery, 2005).
Supporting this view, Handy (2002) argues that the purpose of a business
goes beyond making a profit, to something better, a higher-level purpose.
Bryman (2001) argues that charismatic leaders have a vision or a higher-
order purpose that they are capable of communicating to their followers in
such as way as to ensure that followers will enthusiastically commit
themselves to it. The leaders role then is to empower people to carry out the
vision, and to structure the organization and its culture according to the
vision. In trying to integrate the fragmented field of Leadership, Avery
(2004) names a paradigm of leadership Visionary Leadership, in which a
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leader espouses a vision to bring about superior performance outcomes
through involving follower emotional commitment to the vision. This
underlines the important role that vision plays.
2.2 Corporate Visioning
Despite its obvious importance, vision is still not defined in a generally
agreed upon manner, which is critical because empirical research on vision
may be affected by the various ways in which vision has been defined.
Moreover, practitioners may also be confused as to which definition to
adopt. Hunt (1996) and Sashkin (1988) suggest that vision is a form of
leadership in which a visionary leader transforms an organizational culture
to bring organization members to understand, accept and carry out his/her
plan for the organization. Quite differently, Pearson (2001), Phillip and Hunt
(1992) have viewed vision as one of the required tasks top managers
perform. Sashkin (1998) later on have viewed vision as a demonstration of
leadership competencies. Considerable disagreement also exists over
whether terms like mission, goals, core values, strategy, and organizational
philosophy differ from vision. For example, much confusion exists between
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vision and mission. In an educational setting, Hallinger and Heck (2002)
pointed out that an organizational mission is indeed a vision shared by
organizational members. According to them, mission or shared vision exists
when personal visions of a critical mass of people cohere in a common sense
of purpose within a community. Here, vision is a purpose. On the other
hand, Levin (2000) suggested that mission instead provides a statement of
the purpose of an organization's existence, while vision is a statement of
direction. Endorsing Levins view, OBrien and Meadows (2000) concurred
that mission is a statement of purpose, although others prefer to define
mission as an often-inseparable component of a business' vision. Lipton
(2002), among others, defined vision as a combination of mission, strategy,
and culture. In Liptons view, mission was defined as the purpose of an
organization, strategy as a basic approach to achieving the mission, and
culture as the values of an organization that support purpose and strategy.
Collins and Porras (1994) suggested two different components of vision:
core identity and envisioned future. To them, a good vision builds on
the interplay between these two complementary forces. The vision defines
what we stand for and why we exist that does not change (the core
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ideology) and sets forth what we aspire to become, to achieve, to create
that will require significant change and progress to attain (the envisioned
future). Therefore, a vision here indicates both purpose and direction.
Adopting a different view, other scholars stated that vision needs to come
first in order to subsequently drive development of mission and strategy
(Hay & Williamson, 1997; Parikh & Neubauer, 1993; Zaccaro & Banks,
2004). Therefore, vision, mission and strategy are three separable
components. In addition to the confusion between mission and vision, vision
is also seen as closely related to organizational goals and strategy (Levin,
2000; Schoemaker, 1992).
Philosophy and vision are also frequently confounded, probably because
both are inspirational and idealistic. However, Levin (2000) argued that
visions should go well beyond statements of philosophy by describing those
values and ideals in action, including a description of how these ideals are
practiced, what that experience is like for those affected, and a link between
these preferred behaviors and successful performance. It seems that a vision
here paints a picture of how it looks like and feels like when a vision is
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attained. Therefore, as opposed to many concise vision statements preferred
by other scholars (e.g. Locke et al., 1991), Levins notion of vision provides
for more lengthy vision statements.
From a view of New Science that means exciting breakthroughs especially
in quantum physics that are overturning centuries-old, Newtonian models of
science, Wheatley (2002) suggested that vision is a field which leaders can
use as a formative influence. Creating a vision means creating a power, not a
place; an influence, not a destination. This field metaphor would help leaders
to understand that they need congruency by matching visionary messages
with visionary behaviors. Leaders also would know that vision must
permeate through an entire organization as a vital influence on the behavior
of all stakeholders. Leaders would also feel genuinely threatened by
incongruous acts, because leaders would understand their disintegrating
effects on what they dream to accomplish. Their organization would become
an organization of integrity, where their words would be translated into
action.
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Despite the definitional confusion, a comparison of the various definitions of
vision suggests that they share a similar set of characteristics (Table 1).
Essentially, scholars agree that vision is about the future, induces people to
act towards a common goal, provides a sense of direction, and is important
for strategy and planning. Regardless of these commonly shared
characteristics resulting from attempts to define vision, there is little
agreement among academics as to what "vision" is. The situation does not
appear very different among practitioners, as they are equally confused with
the titles of mission, vision, values, beliefs, principles and strategic intent/
direction (Baetz & Bart, 2000). Raynor (1998) suggested that these concepts
are so tied together that to speak of one was to involve them all. Van der
Heijden (1999) introduced the term Business Idea, possibly as a way out,
which he defined as an organizations mental model of forces behind its
current and future success.
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Table-1: Commonly Shared Vision Characteristics
S/N Shared Characteristics Theories
1 Vision is always about adesirable future
e.g. Collins & Porras, 1994; Kotter,1997; Lipton, 2002; Sashkin 1998;Senge 2006
2 Vision is considered asnecessary for leadership, a
process of inducing othersto act towards a commongoal
e.g. Bennias 1990; locks et al 1991;Philips & Hunt, 1992; Quigley, 1993;Sashhkin 1998; Wheatley, 2002.
3 Vision provides a sense of
direction for organizationalmembers to proceed.
e.g. Collins & Porras,1994; Davis &
Meyer, 1998; Hunt; 2001; Jacobs &Jaques, 2000; Kotter, 1997; Levin2000; Lipton, 2002; Sashkin1988,1992; Seeley,1992; Senge,2000
4 Vision is seen as importantfor business strategy and
planning.
e.g. Collins & Porras,1994; Hay &Williamsom,1997; Pankin &
Neubauer, 1993; Shoemaker, 1992;Senge, 1990; Vandernerve, 2001.
Taking a pragmatic approach to resolve the definitional confusion, Baum,
Locke and Kirkpatrick (2001) chose to define the term vision as each leader
defines it, because it is the leaders actual vision that guides his/her choices
and actions. However, it appears that Baum et al. (1998) adopted the top-
down approach to leadership in defining a vision. Baum et al., (1998)
definition might not be practical in networked organizations of the future, in
which vision emerges from all organizational members (Avery, 2004).
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Indeed, the focus on vision has shifted from a vision as proclaimed by a
single central leader to a vision as proclaimed by all organizational
members. Avery (2004) provides a reason for this by suggesting that a vision
developed by a leader may not be the most effective as the business
environment becomes more heterogeneous, highly complicated and
dynamic. In the past where a business was locally defined and predictable, a
vision from the traditional single leader was enough to provide a right
direction. In such a dynamic and unpredictable context, leadership will need
to operate more through vision and values permeating the culture (Avery,
2004), which will become or replace the single guiding vision (Drath, 1998).
In this environment, each member of the organization shares the vision and
values, being able to respond effectively, innovatively and timely to
environmental changes. Avery (2005) also asserts that leaders that espouse a
vision will be able to sustain their corporate performance in the long run.
More appropriately dealing with the definitional issue and the changing
context, Mumford and Strange (2005) suggest that vision is ultimately a
cognitive construction or specifically a mental model, a conceptual
representation used to both understand system operations and guide actions
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within the system. I agree with Mumford and Stranges vision definition
because a vision, defined as a mental model, can accommodate both the top-
down and bottom-up approaches to leadership.
Vision Attributes
Senge (2006) argues that two types of vision exist: positive and negative
visions. According to Senge (2006), a positive vision emphasizes change
and aspirations for growth, while a negative vision emphasizes continuing
the status quo, even under changing environments. Despite the diverging
views on how to define a vision, many leadership scholars appear to agree
with Senge by providing different attributes seen to be necessary for a vision
to be positive. Among various opinions, Locke et al. (1994) view that an
effective vision is inspiring, abstract, brief, stable and motivating. On the
other hand, Conger (1998) suggests that an effective vision is strategic and
well-communicated while Jacobs and Jaques (2002) assert that long-term
and focus should be included. Sashkin (1998) proposed that effective visions
are inspirational, widely accepted, and integrated with visions of others. A
large group of scholars also argues that an effective vision should have
clarity, because the degree of clarity or precision of the vision statement
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influences how well the vision is understood and accepted (Jacobs & Jaques,
2002). Concurring with this view, Nanus (2000) suggested that effective
visions should be clearly understood and act to direct effort. Other scholars
have posited that effective visions should be inspiring and challenging to
energize employees around a shared value system (Locke et al, 1994)
Though many leadership theorists have postulated different attributes of
vision, there are some commonly shared attributes among them, as shown in
Table 2, which includes definitions derived from Baum (2001), Baum et al.
(2001) and Locke et al. (1994) who are among a few scholars studying the
commonly shared vision attributes.
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Table 2: Vision Attributes
S/N Shared
Attributes
Definition
1 Brevity A vision statement should be brief, but brevity shouloverrule the endeavor to state the vision definitely.
2 Clarity A vision statement should be clear and precise in such that it is understood and accepted. Clarity makeoverarching goals understandable to enable to everyone.
3 Future
orientation
A vision statement should focus on the long-term persp
of the organization andThe environment in which it functions. It should guid
organization for into the future.4 Stability A vision statement should be general and abstract enough
is not affected by most of the changes in the market technology.
5 Challenges A vision statement should motivate people to work towdesirable outcome. Ision challenge people to do their best
6 Abstractness A vision statement should represent a general ideal as opto a specific achievement. It is not a narrow, one-time go
can be met, then discarded.
7 Desirabilityor ability toinspire
A vision statement should represent an ideal that is working towards for the followers. If followers do not pethe vision as an attractive goal, they will never cothemselves to achieving it.
Although vision is emphasized as a core issue in the prevailing vision-based
leadership theories (Conger, 1998, Westley & Mintzberg, 2002), and many
characteristics of effective vision have been introduced, none of the
prevailing theories has exhaustively explained how each characteristic might
create an impact on organizational performance. In his effort to develop a
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vision theory to fill in the gap, Kantabutra (2003) asserted that the seven
vision attributes mentioned above interact to create a positive impact on
overall organizational performance initially through follower satisfaction. A
vision that is too brief will not positively impact overall organizational
performance unless it is clear to followers what needs to be done, or it may
not appear to challenge followers to do their best. A clear vision will not
positively influence follower satisfaction because it may be too lengthy,
preventing a leader to communicate it massively and frequently. It also may
be too abstract, therefore possibly creating conflicts among groups with
different specific purposes and not allowing for individual creative
interpretation among followers. A too specific vision makes it difficult to
form an effective group to carry out the vision. Moreover, abstractness
reflects stability in the vision because it implies no radical change over time.
An unstable vision suggests to followers a serious lack of managerial
integrity and commitment to the vision, negatively affecting follower
morale. A vision that is brief, clear, abstract, challenging and stable will not
draw follower commitment in working toward the vision unless the vision is
also inspiring or desirable. In addition, when a vision is not inspiring or
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desirable, it is unlikely to develop and nurture a shared vision, which is
critical to organizational performance. An inspiring vision that is clear, brief,
abstract, challenging, and stable will not be able to attract affective
commitment from followers unless it offers a compelling view of a better
future. Without a desirable future picture, a leader is unlikely to be able to
draw followers from where they presently are to work toward the vision.
Therefore, vision characterized by the seven vision attributes can improve
the visions effectiveness.
Vision content
Literature on vision content is sparse. Andrews, Boyne and Walker (2006)
draw from their study of one hundred and nineteen English local authorities
to suggest that measures of strategy content must be included in valid
theoretical and empirical models of organizational performance in the public
sector because strategy content impacts organizational performance. Baum
et al. (2001) argued that the content or core of a vision needs to be addressed
because it is important to organizational growth. In a healthcare context,
Williams-Brinkley (2003) argued that the focus of a healthcare vision should
always be on patients, their families, and staff. In a public school setting,
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Kantabutra (2005a) argued that vision content should contain reference to
teacher and student satisfaction, student achievement, and efficiency.
Kantabutra (2005b) also argues that a vision should contain reference to
corporate sustainability for a corporation to succeed in the long run. To be
specific, such vision content should contain reference to moderation,
reasonableness, the need for self-immunity mechanisms, knowledge and
morality to be able to sustain a business (Kantabutra, 2006).
A possible reason for the existence of many vision content proposals is that
what should be included in vision content depends on the types of business
and competitive environments in which they operate. If there is indeed
common vision content across organizations, whether and how organizations
can be developed, compete and sustain their strategic advantage are in a
serious doubt. Scholars appear to agree with this conclusion. For example,
Westley and Mintzberg (2002) suggest that the strategic content of a vision
may focus on products, services, markets, organizations, or even ideals, with
this strategic component being the central image that drives the vision.
Moreover, Collins and Porras (1994) suggest that vision content need not be
common across different visionary organizations. This is consistent with
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Pearson's view (1989) that a successful vision takes into account industry,
customers, and the specific competitive environment in identifying an
innovative competitive position in the industry.
In conclusion, what should be included in vision content depends on how a
business wants to position itself strategically, given that vision is ultimately
defined as a cognitive construction or mental model used to both understand
system operations and guide actions within the system (Mumford & Strange,
2005). This proposed vision definition appears to gain support from Westley
and Mintzberg (2002) who suggest that vision process and content are
blended together in accounts of visionary leadership. Though vision content
and process, and visionary leadership, are distinctly different, it is clear that
these aspects relate to one another in some complex ways. In theory, an
effective vision should also be brief, clear, abstract, future oriented, stable,
challenging and desirable or inspiring because these characteristics can
enhance visions effectiveness.
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2.3 Component of Visioning
Vision is the ability to think about or plan the future with imagination or
wisdom; a mental image of what a future will or could be like; and a
supernatural apparition (Oxford Dictionary of English, 2006). Merriams
Webster Dictionary (on line edition, 2011) defines Vision as a thought,
concept, or object formed by the imagination; a manifestation to the senses
of something immaterial; the act or power of imagination; mode of seeing
or conceiving; unusual discernment or foresight; direct mystical awareness
of the supernatural usually in visible form. Kotter (1996) states that vision
refers to a picture of the future with some implicit or explicit commentary on
why people should strive to create that future.
According to Kirkpatrick and Locke (2000), vision is a general transcendent
ideal that represents shared values, ideological nature and moral basis.
Conger and Kanungo (1997) referred vision to an idealized goal that leaders
want to achieve for organizations in the future. Visions challenge existing
norms, policies and conventional wisdom. Vision conveys expectations
of high performance. It provides confidence to the followers (House et al.,
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2001).Vision creates the spark and excitement to stop an organization from
doing ordinary things (Senge, 2006). Senge (2002) identified four factors
important to organizations vision as
(i) Core beliefs and values as the foundations of an organizations
vision
(ii) Vision elaborates a purpose for the organization,
(iii)
Vision explains what is to be done to fulfill its purpose, and
(iv) Vision specifies broad goals. According to Covey (2004),
leadership endures and changes the world for good when
conscience governs vision, discipline, and passion.
Vision serves three important functions in motivating change. One, it
clarifies the general direction of change; two, vision simplifies detailed
decisions; and three, it helps in coordinating quickly and efficiently the
actions of people having diversified background. Vision describes and
explains the organizations journey. Vision provides the basic reason why
the leaders and their followers are taking specific organization journey. It
must energize people and bring together the commitment of employees
towards organizational goals. This gives meaning to work. It establishes the
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standards of excellence. Vision describes and explains the journey and
provides the direction to reach the destination. It is concluded that vision is
conceptual and idealized representation of an organization. It is a strong
statement of believe about the right course of action which is necessary to
control the destiny of the organization. Vision is the mental perception and
understanding of the system and the environment that an organization
aspires to create. It is the manifestation of broad, creative and
applied picture or image that an organization sees of itself in the future.
Vision helps the organizations to conceptualize and understand the system
and guides towards the right course of action. It is vibrant, compelling and
comprehensive statement describing what the organization stands for, what
it believes in, and why it exists? It helps in setting idealized goals, plans,
targets and strategies through alignment of the resources accordingly
keeping in view the moral and ethical obligations of its stakeholders
in particular and for society in general.
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2.4 Effectiveness of Vision
Mission and vision statements have been overwhelmingly accepted as an
indispensable part of the strategic management process for organizations of
all types; be it public sector, not-for-profit, private, for profit, a multinational
or a small and medium scale enterprise. It is widely believed that mission
and vision statements impact on strategy and most aspects of organizational
performance. Most firms have mission and vision statements. In the worst
case scenario, mission and vision statements are implied implicitly.
Supporting the above argument, Bart et al. (2001) posited, referring to Bain
et al. (1996) study, that mission statements had consistently been shown to
be the top-rated management tool deployed by senior managers during each
of the ten years prior to his study. Mullane (2002) argued and supported it
empirically that mission and vision statements are useful for practical day-
to-day operations, taking a contrary view to those who assert they are
archaic documents that are typically exhibited as wall hangings.
Mullane (2002) have delineated how mission and vision statements can be
used to build a common and shared sense of purpose and also serve as
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conduit through which employees focus are shaped. Other schools of
thought believe mission and vision statements tend to motivate, shape
behaviours, cultivate high levels of commitment and ultimately impact
positively on employee performance (Mullane, 2002; Collins and Poras,
1991; Daniel, 1992, Campbell, 1989; Ireland and Hitt, 1992, Klemm et al.,
1991, Drucker 1959). Having accepted at least notionally the potential
strategic role of mission and vision statements, managers, researchers and
academics have tried to explore empirically their importance, especially in
terms of how the components impact on organizational performance since
1987 when the first attempt to investigate the relationship was made. Yet
most of the earlier empirical works have concentrated on senior executives
and managers; if not investigating how they formulate their mission and
vision statements then it is about how comprehensive their mission
statements are and how they impact on performance. The perspective of the
employee and, therefore, the larger work force has remained relatively
neglected.
For instance despite the missions significant and fundamental role in the
management and leadership of organizations, we know relatively little about
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how employees perceive the missions and how these perceptions relate to
other organisational attitudes such as satisfaction and behaviours such as
turnover (Brown and Yoshioka, 2003).
2.5 Development of Corporate Visioning
When developing the strategic visioning of an organization, it is important
to develop a vision of the future within which it will operate that is, an
awareness of why, where and how the organization and its competitors will
be competing in the future. There are five reasons for this:
1. Most organizations will compete for business and resources. They will
have ambitions that go well beyond the immediate future and it is
important for options to reflect this vision. Even not for-profit
organizations or those in the public sector usually need to compete for
charitable or government funds and often wish to increase the range of
services that they offer; such organizations will also benefit from a
picture of where they expect to be in the future.
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2. The organizations mission and objectives may be stimulated in a
positive way for the strategic options that are available from a new
vision.
3. There may be major strategic opportunities from exploring new areas
that go beyond the existing market boundaries and organization
resources (Hamel and Prahalad 1994).
4. Simple market and resource projections for the next few years will
miss the opportunities opened up by a whole new range of
possibilities, such as new information technologies, biogenetics,
environmental issues. New materials and lifestyle changes. Virtually
every organization will feel the impact of these significant
developments. Extrapolating the current picture is unlikely to be
sufficient (Hamel and Prahalad 1994).
5. Vision provides challenge for both senior and junior mangers without
the rigidities of an agreed mission and objectives.
Vision is therefore the backdrop for the development of the purpose and
strategy of the organization. It is not the same as mission and objectives,
vision is the future picture; mission and objectives describe the role and
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tasks that the organization chooses to adopt, based on the current situation.
However, it may be that the vision will lead to the mission and objectives;
for example the UBA vision led to the acquisition of Trade Bank.
A Vision of Success is a clear and succinct description of what the
organization or community should look like after successfully implementing
its strategies and achieves its full potential. It is an expression by the people
about what they want the organization to be a preferred future, a word or
picture of an organization you choose to create.
A Vision statement for an organization should include the organizations:
Mission
Basic philosophy, core values or cultural features
Goals (if established)
Basic strategies
Performance criteria
Important decision making rules
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Ethical standards of all employees
A Vision statement often includes a description of what the community will
look like in the future (related to housing, agriculture, trails etc), and how it
will embody opportunities and challenges.
Benefits of a Developing a Vision
Organizational members can see how they fit in an organization
Conception precedes perception
Agreement on vision gives the organization more power
The more specific and reasonable the vision, the greater the realization
Can help members recognize barriers to realizing the vision
May reduce organizational conflict
Helps the organization stay attuned to its environment
Example visioning processes:
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Develop a worksheet with a list of key questions to elicit values, desired
future state, challenges, and unique features of the organization.
However, vision will not always lead to mission, for example a small
company competing against a new hypermarket sees its vision as being
increased competition from a newly opened hypermarket. It might then
change is mission and objectives to that of moving from that geographical
area, rather than being driven out by the larger store in two years time.
Hamel and Prahalad have suggested five criteria for judging the relevance
and appropriateness of a vision statement.
These are shown in Table 1 they are important because it would be all too
easy to develop some wild and worthy that bore no relationship to the
organization, its resources and the likely market and competitive
developments.
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Table 1: Five criteria for judging the organizations investigation of itsvision.
Foresight
Breadth
Uniqueness
Consensus
Actionability
What imagination and real vision is shown? Over what time
frame?
How bro ad is the vision of the changes likely to take place in industry? And of the forces that will lead to the changes?
Is there an element of uniqueness about the future? Will it cauour competitors to be surprised?
Is there some consensus within the organization about the futurIf not, there may be a problem if too many different visions
pursued at once. Have the implications for current activity be
considered?Is basic agreement on the immediate steps required? Have tnecessary core competencies and future market opportunit
been identified?
Source: Hamel, A. and Prahalad, C.K. (1994) competing for the future. Harvard Business
School Press, Boston, p. 31.
2.6 Step to Corporate Visioning
There are generally five steps to a visioning process which each include
specific actions and tasks.
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TABLE 1: The Five Steps of Strategic Visioning
Visioning Step Action Description
STEP 1: Where are we
now?
Inventory Find descriptive data; Iden
values
STEP 2: Where are wegoing?
Trends Analysis Gather trend data; Determpossible future scenarios
STEP 3: Where do wewant to be?
Vision Statement Identify preferred future
STEP 4: How do weget there?
Action Plan Determine actions that supvision statement
STEP 5: Are we gettingthere?
Implement andMonitor
Implement plan; Monindicators
Source:Ames (2006)
STEP 1: Where are we now?
The first step to a corporate visioning process is to create a corporate
inventory that includes important data on the social, economic and
environmental aspects of an organization.
Start with corporate meetings or focus groups that generate statements about
core values, key standards and specific strategies that will help to define the
vision for the organization's future. The Asset Inventory and Mapping
process provides an opportunity for broad public participation. Survey the
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organization to discover important values, attitudes, beliefs, and knowledge.
This information can be compiled into a corporate profile to better
understand your current organization situation.
Asset Inventory and Mapping
In this approach to corporate visioning, assets include any item or
characteristic of value in an organization, and mapping helps identify how
the assets are connected. The Asset Inventory and Mapping (AIM) process
engages individuals by asking questions and focuses on the positive
attributes of a person, a situation, a resource, or the organization as a whole.
The process concentrates on what is working well, rather than trying to fix
what does not work. Instead of focusing on what is lacking, AIM identifies,
links, and enhances the core strengths of the organization. It is particularly
helpful for the organization trends analysis and in creating the vision
statement.
Several key principles when using AIM for visioning: organizational change
in the direction in which they ask questions; positive questions lead to
positive changes. With AIM, organization will discover more of what is
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good. The process is meant to engage the entire organization in a discovery
of what is working well around here?"
People have more confidence to make changes and move into the future (the
unknown) when they carry forward parts of the past (the known). Focusing
on the positive aspects of the past can lead to a positive future.
It is important to value differences in ideas, opinions, and assets because
these differences are a key part of the visioning process.
STEP 2: Where are we going?
The next step is to create a trends analysis. First, organize the data collected
in Step 1 to determine trends that happened in the past and appear to be
continuing in the present. Use the trends analysis to construct probable
scenarios or events that are likely to continue. The analysis should be based
on factual data to avoid controversy and to better understand where there
may be missing data. The trends analysis can be organized using the
Corporate Capitals Framework.
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The Corporate Capitals Framework
The Corporate Capitals Framework can be used in all of the visioning steps
but is very important when looking at trends. The framework helps to better
understand how investments within an organization exist, interact and
complement each other. Within each corporate firm, there are various assets
or capitals that contribute to the potential of an organization to develop and
prosper. Capital in at any given time; it is the net worth or value of all of the
tangible and intangible items in an organization. A corporate firm can invest
in these goods and services with the hope of increasing the worth of overall
organizational capital.
The corporate firm can identify key elements related to the following seven
organizational capitals:
Financial capital includes the fiscal resources available to invest in the
organization capacity-building. This includes supporting business
development, encouraging civic and social entrepreneurship, and
accumulating wealth for future organizational development. Political capital
reflects access to power and power brokers, such as local, county, state, or
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tribal government officials, or leveraging resources with a regional
company. Built capital is the organizational infrastructure such as
telecommunications, industrial parks, water and sewer systems, and
streets/roads.
Natural capital refers to environmental assets (natural resources and
amenities) such as parks, farm land, and features of the landscape. Cultural
capital reflects the way people act and interact, and the values, rituals,
customs, and habits that are shared and practiced. Human capital includes
the skills, abilities, and educational potential of people in a community, and
the ability to access outside resources. It also addresses the leadership
capacity of a community to be inclusive, participatory and proactive in
shaping the future. Social capital reflects the connections between people
and organizations and involves the ties that create and maintain trust,
reciprocity and networking.
STEP 3: Where do we want to be?
With an inventory and framework established, the organization should come
together to craft a vision statement describing how the future will look when
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the organization achieves its objectives and reaches its goals. The first draft
should organize recurring themes that have appeared from the inventory and
mapping and trends analysis and any organizational surveys that were
collected. The organization may decide that this draft will first be organized
by a smaller group of individuals, such as a steering committee.
The vision statement should be brief but detailed about significant attributes
of the organization, environment, people, and culture; it should describe a
clear picture of the preferred future. Look for organization efforts including
vision statements and strategic plans from the past, as these may be helpful
jumping-off points.
The Vision Statement
The vision statement is the mission of the organization and the benchmark or
standard by which change is measured. The statement is a critical aspect of
the visioning process and should be done deliberately and with as much
cooperation from the organization as possible. The statement should briefly
address the following questions: What is important in our organization? Is it
the geographic location, the culture, the history, etc? Who are we as a
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organization and what makes our organization unique? What do we want our
organization to be known for? What are the unique features of the area? Ask
the fundamental question, What isour story? What is our desired future?
What is our dream for the future if we had all the resources available to us?
Think about the what if portion of the statement. What attributes should be
enhanced? What do we do well and how can we continue on this path?
What do we want our organization to be, or look like in the future? How
would others describe our organization? How do we want others to describe
our organization? What parts of our organization do we want future
generations to enjoy, remember and appreciate?
STEP 4: How do we get there?
This step is the action planning phase that contains specific actions and
strategies that support the vision statement. Create a specific action plan that
details the following:
What is the desired outcome of theplan?
Who is responsible for accomplishing specific tasks in the plan?
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How detailed is the timeline to meet the objectives?
Is the budget realistic and are there commitments from funding sources?
How will the plan be implemented?
STEP 5: Are we getting there?
The final step involves implementing, monitoring and continuously
evaluating the action plan to ensure that the plan is being carried out with the
intended consequences. In order to effectively monitor and evaluate the plan,
identify key indicators so that the organization knows objectives are being
met. It is critical that the entire community understand the many
characteristics of indicators since it is often difficult to determine the
qualities of a good indicator.
Using Indicators to Evaluate Action Plans
An indicator is like a yardstick to measure how well an action plan is being
carried out and whether the goals of a strategic vision are being met. Good
features of indicators can make it easier to measure the progress of an
organization visioning process.
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There are eight desirable characteristics of an indicator:
Measurable: Indicators can be counted to measure change over a
given time period. For example, "there were 15 new jobs created in the
renewable energy sector in the last two years."
Reliable:Indicators should be measured precisely and accurately. If it
is reliable, it should also be repeatable and can be measured accurately by
different people. For example, changes in the number of new jobs over a
given period of time is a reliable indicator since the jobs can be counted and
are an observable fact by anyone.
Cost-Effective: Indicators should be cost-effective, generally using
simple equipment and techniques. A measurement that takes a long time to
acquire or is expensive is not likely to be analyzed over the long-term. An
example is a short survey asking business owners about economic trends and
job opportunities.
Significant: Indicators must relate to conditions or features that are
important to the visioning process. For example, the organization is
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number of jobs in the renewable energy sector, there should be a market for
those jobs and the potential to create those opportunities.
2.7 Factors Influencing the Vision of an Organization
Four major factors are identified that influence the vision of an organization.
These factors are Ideology, Purpose, Core values and Leadership. The
themes for these factors are derived using thematic analysis. These factors
give clarity and soundness to the vision. They provide the impetus, create
organizational culture, align people with goals and objectives and transform
them into an organizational force having clear and compelling vision. The
relationship of these factors and their influence on the vision of an
organization is presented in a thematic network (Figure 1) below
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Fig. 1: Thematic Network where Vision is the Global theme and Ideology, Purpose,
Core Values and Leadership are organizing themes. On the basis of these findings it
is proposed that;
The source of Sound
and authentic Ideology
is ethical Monotheism
Sound
Ideology leads
towards clear
Is the reason
of being of an
organizationIs the soul and
spirit of an
organization
Inspires, controls
and guides vision
of an organization
Defines the
belief system
and enduring
character of an
True leadership is
driven by
ideology, purpose
and core values
Instrumental in
transcendent and
transformation
of vision of an
Influences the
direction, spirit and
discipline of an
or anization
Are ideology and
purpose driven and
Explain
and justify the
existence of an
or anization
Are the
universal system
of belief and
behavior of an
Real purpose id
ideology driven
Provides the basis
for creation of
clear vision
Captures the soul
and spirit of an
organizationIdeology
Purpose
Leadership Core Value
Vision
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Proposition 1:The factors that influence the vision of an organization are
ideology, purpose, core values and leadership
Ideology
Ideology is the systematic body of beliefs, philosophy or concepts especially
about human life or culture. It is the systems of fundamental social
cognitions. It organizes the attitudes and other social representations shared
by members of groups. Ideology is the paradigms of thought at
organizational level. It defines the character of an organization. Ideology is
the soul and spirit of an organization and it inspires, guides, and controls the
vision of an organization. The source of guidance for sound ideology is God.
Ideology derived from human rationalism and collective wisdom, without
divine guidance, is weak ideology having narrow concept of values and
purpose. Sound ideology has universal principles, core values and greater
purpose.
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Proposition 2:
Vision based on sound and authentic ideology is sound, clear and
compelling while vision based on weak ideology is blurred and
unconducive.
Purpose: is the reason of being or existence of an organization. It provides
the basis for creation of vision, strategies, and all other course of action to
realize the vision. Purpose captures soul and spirit of an organization and
hence influences the vision of an organization. Collins (2001) elaborated
that purpose is broad, fundamental, and enduring when properly conceived.
The purpose serves to guide and inspire the organization for years, even a
century or more. Purpose creates vision whereas vision clarifies purpose.
Proposition 3: The companies with sound ideology and higher purpose
assign more importance to the normative aspects of life and are likely to be
more sustainable and profitable in the long run than those having weak
ideology and purpose based on week ideology
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Core Values
Core values represent the behavior and belief system of an organization.
They are set of universal principles, and standards for choosing right course
of action in day-to-day life of an organization. Values are not the exclusive
property of any one group or institution. Core values explain and justify
what people do and what organizations stand for. Since core values are
ideology and purpose driven they influence the vision of an organization.
Therefore, working on core values and practicing on them in the
organization setting is of profound importance for creating and clarifying the
vision of an organization.
Proposition 4: Purpose and Core Values increase the organizational
commitment by engaging, aligning and creating common and shared
workplace culture and hence the efficiency and performance of an
organization improve in the long-run
Leadership
Leadership influences the direction, spirit, and discipline of an organization.
It is perhaps the most important factor that influences the vision of an
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organization. Leaders transcend and transform the vision of the followers,
groups, and organizations. The future vision of the organizations will be
based on spirituality, ideology, and purpose driven leadership. Fry (2003)
identified five basic practices that enable leaders to get extraordinary things.
These fundamental practices include inspiring a shared vision, challenging
the process, enabling fellow beings to act, guiding the way, and setting the
example by behaving in manners consistent with shared values.
Proposition 5: Among the factors influencing the vision of an organization,
Leadership is the most important factor that influence the vision of an
organization
2.8 Corporate Governance/Visioning
Corporate governance is a system of structuring, operating and controlling a
company with a view to achieve long-term strategic goals to satisfy
shareholders, creditors, employees, customers and suppliers, and complying
with the legal and regulatory requirements, apart from meeting
environmental and local community needs. When it is practised under a
well-laid out system, it leads to the building of a legal, commercial and
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institutional framework and demarcates the boundaries within which these
functions are performed (International Financial Services Act, 2005)
Black (2006) defines corporate governance as the processes, structures and
information used for directing and overseeing the management of an
institution. A good corporate governance framework establishes the
mechanisms for achieving accountability between the Board, senior
management and shareholders, while protecting the interests of relevant
stakeholders. It also sets out the structure through which the division of
power in the organization is determined.
If all the government and governance systems and the people in them are
working well, in a perfect world, business can be conducted smoothly, fairly,
honestly, without hitches for the general good of all. It is a society in which
trust is taken for granted. There are many boards, companies and responsible
investors that make a positive difference. However, as we all know, the
world is far from perfect.
Good governance enables sustainable wealth creation whereas corrupt
governance erodes everything that enables decent sustainable living for the
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common good. Poor corporate governance, usually through a combination of
incompetence or criminal or corrupt practices, causes the eventual long-term
destruction of whole communities and countries. The reason for this is that
greedy people take as much as they can for their own short-term gains rather
than re-investing in continued productivity (Becht, 2003):.
The industry then lacks the resources to develop and grow. Millions of
people eventually lose their jobs and livelihoods while selfish rich people go
off to tax havens to play. What is even worse is that corruption breeds a
culture of bribery, blackmail, threat, cover up, deceit, favouritism and
vicious attempts to destroy any people who manifest integrity. A corrupt
culture infects the quality of our lives and our ability to live together in trust
and harmony.
Boards of directors are responsible for the corporate governance of
companies. The legacies they leave behind will determine whether our
children live in a healthy or unhealthy world. The quality of board
performance makes a huge difference.
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Good governance is integral to the very existence of a company. It inspires
and strengthens investors confidence by ensuring companys commitment
to higher growth and profits. It seeks to achieve following objectives (Becht,
2003):
1. That a properly structured Board capable of taking independent and
objective decisions is in place at the helm of affairs;
2.
That the Board is balanced as regards the representation of adequate
number of non-executive and independent directors who will take care
of the interests and well being of all the stakeholders;
3. That the Board adopts transparent procedures and practices and
arrives at decisions on the strength of adequate information. That the
Board has an effective machinery to subserve the concerns of
stakeholders;
4. That the Board keeps the shareholders informed of relevant
developments impacting the company; That the Board effectively and
regularly monitors the functioning of the management team; and
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5. That the Board remains in effective control of the affairs of the
company at all times.
The overall endeavour of the Board should be to take the organization
forward, to maximise long-term value and shareholders wealth.
2.9Appropriateness of Vision
According to conventional business thinking, the main goal of a company is
to create profit, and the fundamental task of the management is to find
solutions in order to increase continually this profit. Just give a test to all the
businessmen you know about this issue and the great majority of their
answers will be only one word: profit. May be, some of them will give a
more elaborate answer concerning strategies elaboration and implementation
in order to optimize the profit making process. Hardly, there will be a few of
them to consider a different perspective.
According to the new business wisdom, the main goal of a company is to
create social values, and the fundamental task of the management is to create
a competitive advantage for the company. Value creation is the raison
detre of firms: by devising and implementing strategies, firms create value
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for their customers and obtain returns for their owners (Woiceshyn and
Falkenberg, 2008, p. 85). The operational management has an inward
perspective, concentrating on productivity, efficiency and measures for cost
reductions, in order to increase the profit of the company and, thus, the
financial values for shareholders.
The term management refers to the process of getting things done,
effectively and efficiently, through and with other people (Robbins andDeCenzo, 2005, p. 7). Efficiency is the ratio between the output value to the
input value in a given process. It seeks to minimize resource costs. Actually,
we can define the efficiency as being the ratio between the maximum output
value of a given process to the minimum input value. Effectiveness refers to
goal attainment.
By contrast to this view, strategic management has an outward perspective
toward the market competition. According to Porter, competition is at the
core of the success or failure of the company. Competition determines the
appropriateness of the firms activities that can contribute to its performance,
such as innovations, a cohesive culture, or good implementation.
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Competitive strategy is the search for a fundamental arena in which
competition occurs. Competitive strategy aims to establish a profitable and
sustainable position against the forces that determine industry competition
(Porter, 1995, p. 1). In this perspective, strategic management is the process
of elaborating, implementing and evaluating strategies whose goal is
attaining the competitive advantage. Strategic management must provide a
dynamic equilibrium between the internal field of forces and the external
field of forces at the firms functional interface, and must be based on a
strategic thinking pattern (Bratianu and Murakawa, 2004). According to
Porter (1985, p. 3) Competitive advantage grows fundamentally out of
value a firm is able to create for its buyers that exceeds the firms cost of
creating it. Value is what buyers are willing to pay, and superior value stems
from offering lower prices than competitors for equivalent benefits or
providing unique benefits that more than offset a higher price.
Thus, in understanding the real essence of management we should use a
reverse logic, from the consumers needs toward value creation by the
company in order to satisfy these needs. A company does exists to create
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value for consumers, and the profit it makes represents only a consequence
of its actions and not a first priority.
The profit is necessary since it is an existential requirement, but it is not
anymore the driving force of the company. In this view, even the company
model changed from the mechanical one to a social one. A company is a
living entity which has got a mission, a vision and business wisdom based
on some core values. All companies exhibit the behaviour and certain
characteristics of living entities. All companies learn. All companies,
whether explicitly or not, have an identity that determines their coherence.
All companies build relationships with other entities, and all companies
grow and develop until they die (De Geus, 2001, p. 17).
2.10 Succession Planning and Longevity
Handler (2001) defines family enterprise succession as the passing of the
leadership baton from the founder-owner to a successor who will either be a
family member or a non-family member. The implication here is that
ownership will remain in the family. Handler (2001) divides succession into
two parts, ownership and management, which suggests there may be a
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variety of combinations of ownership and management available to the
enterprise in transition. Alcorn (2002) maintains that succession refers
specifically to changes in the boss position. Essentially, Aronoff (2003)
says that, narrowly speaking, succession means the transition of family
business leadership and ownership from one generation to the next. Broadly
speaking, he argues, succession is a lifelong process of planning and
management that encompasses a wide range of steps aimed at ensuring the
continuity of the business through generations.
Between 80 percent and 90 percent of businesses are family owned (Alcorn,
2002). Yet, many of these businesses never establish a structure for
succession of the business from current generation to future ownership.
Without proper planning, following the original owners death or retirement,
the business could be forced into sale or collapse from improper decisions
made by new, inexperienced management. Or, a protracted dispute could
develop, which might result in serious depletion of the companys resources
and a substantial reduction in the legacy passed along to future generations.
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The problems and resistance associated with developing a viable, coherent,
and agreeable succession plan are immense. For the family business owner,
the ability or willingness to manage and direct the interactions between the
extraordinarily complex areas of personal, family, management, ownership,
and estate issues can be daunting. Moreover, these issues are often further
obscured by, or in conflict with, other family members personal wants and
needs. Add to that the owners possible fear of losing control and position,
both in the business and in the family, and its no wonder then why
avoidance and denial are the principle responses to succession planning.
Succession of a family business really includes the strategic transition of five
distinct areas for business succession (Handler, 2001):
1. Business Succession
2. CEO/Owner Succession
3. Management Succession
4. Ownership Succession
5. Estate Succession
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1. Business Succession
Strategic planning relates to the actual viability of the business itself in the
future. The goal is to ascertain whether or not this is a business with a future.
And if so, what is the vision and values that will be needed to drive and
maintain it. Questions to ask include (Handler, 2001)::
Is this a business with a future?
Should the business be sold or should it go forward?
If it goes forward, what is required to make the transition a success?
What is the best way to accomplish these changes?
What impediments exist to defeat this business?
Do I/We want to continue this business?
How much change is required to run this business in the future?
Do the future values of this business match that of the family?
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2. CEO/Owner Succession
Strategic planning relates to the personal transition of the business owner.
How able and capable they are of shifting roles and handing over the reins of
business control are paramount. Issues of moving from action-maker to
consulting advisor or outsider are central. Thedesire/ability to develop
other non business interests that are valued are included. Strategic questions
include (Handler, 2001):
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