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September 14, 2003
"Fire in the belly" is an interesting term, often used by various people to illustrate things quite different. I want to draw from others, but put my own definition to this term, "Fire in the Belly!"
Mostly what I find, searching the web, are uses of this term to promote some "career counseling" or "psychological mumbo jumbo."
I prefer to use this term to mean an intense enthusiasm for some cause greater than yourself.
This concept is noted in other pages on this web here:
Necessity Level And Responsibility -- The Severe Reality Adjustment Needed
Maintaining Principal Commitment
Fire in the Belly -- An Exploration of the Entrepreneurial Spirit
Where Does Innovation Come From?
The beginning of breakthroughs: do breakthroughs come from large or small business?
Herbert Hoover, "Rugged Individualism Speech" (October 22, 1928)
Nurture Your Spirit of Individualism
THE RELATIONSHIP OF
THREE MEASURES OF CORRUPTION TO INDIVIDUALISM AND COLLECTIVISM: IMPLICATIONS FOR
At a time in our practice when principals are working an
average of 70 hours a week, cutting their bonuses to make up for inefficient
project managers whose projects have soared over budget, and being required to
manage, market, network and manage and serve as referee, therapist and parent,
many of those in an ownership position are asking themselves, "What's it all
for?" Scott Simpson of Boston-based Stubbins & Associates, talks about what it
takes to become and stay fulfilled.
One of the myths about being an architect is that once you make principal, your troubles are over. As a boss, you expect loyalty and obedience from subordinates. As a professional leader, you expect a certain deference from consultants and clients. As a citizen, you expect the respect of the community at large. (And around the house, no doubt your family thinks you leap tall buildings with a single bound.) The truth, however, is quite different. None of these things happens automatically just because you get a new business card.
Making principal means that your life gets harder, more complicated, more hectic, more challenging. This is because your responsibilities have increased exponentially. Instead of being concerned about a single project or client, you are now expected to be a provider, creating new work for the office, mentoring the staff, and producing results for your clients, not to mention keeping the bank happy by covering payroll every two weeks. Make no mistake about it--being a principal is hard work. And it should be. It is a position of great responsibility, and it carries commensurate professional, financial, and psychic rewards.
Becoming a principal is one thing. Maintaining the energy, commitment and enthusiasm that got you there in the first place is quite another. In sports, it is very common for a championship team to have an off season the following year, because the emotional and physical energy that are required to win are even harder to sustain. The same thing is true in architecture. It is not uncommon for principals in firms, especially those nearing retirement, to do a little coasting. After all, they've earned it. Shorter work weeks, longer vacations, and longer lunches become the norm rather than the exception. While it is certainly true that exceptional performance should have its rewards, it is very dangerous for the firm to allow anybody to slack off. This is especially true of principals, because they set the tone for the entire organization. If the principals are not giving their all, who will?
How do you make sure that the principals in your firm continue to perform at the peak of their ability? How do you make sure that a partnership is not a sinecure? How do you keep the fire in the belly from going out? The answers to these questions are complicated by the fact that design firms are often as much a club as a business. Partnership is not only a measure of professional achievement, it is also an affinity group, like a basketball team or a posse. Each member is likely to bring different skills and attitudes to the mix, and establishing equal performance measures for all can be dangerous. At the same time, ignoring principal performance measures is asking for trouble--no one, not even the president or CEO, should assume entitlement or tenure. For when a firm loses its momentum, it is exceedingly hard to recapture.
Obviously, the most important time to discuss principal performance is when new partners are brought in. This is an opportunity for the entire group, not just the new blood, to consider what it means to be a firm leader and to renew their personal commitment to the overall success of the office. The key here is to focus not on what you get, but what you give. In some ways, this is like the difference between Christmas eve and Christmas morning. When we were kids, we got to open the presents. When we become adults, we have to make sure they're wrapped first.
While every firm is different, there are some standards that can be reasonably applied to measure principal performance. The four critical success factors in any firm are marketing (creating new work), professional services (creating and producing design), operations (providing for a productive working environment), and finance (counting the money). Some firms are driven by marketing, some by design, some by technology, and still others by profitability, but each and every successful firm will need leadership in all these four basic areas in order to thrive.
Firms that are not sole proprietorships should average one principal for every ten to twelve staff members, and at least $100,000 in gross fees per staff. On this basis, a principal can be reasonably expected to produce not less than a million dollars in new fees annually. In larger firms, with more sophisticated marketing support, $2 million per principal per year is a very reasonable goal.
On the professional side, principals should be expected to produce their projects on time and on budget, setting an example for others, and performance can also be measured by numbers of design awards won, numbers of projects published, and amount of repeat business generated by satisfied clients. In operations, whether or not the principal is involved in direct firm management, teambuilding, training of younger staff, and attention to routine details such as filling out timesheets and checking project reports are minimum standards. Principals should always support firm management, and be alert to new ideas about how to run the office more efficiently.
Finally, in finance, it is easy to measure project performance. How many dollars of gross fees were billed in a year? How much in net fees? What were the profit margins on specific projects? What is the average utilization of principal time? How much overtime? And here's an interesting one--what is the ratio of new fee dollars generated per dollar of salary? Without being punitive, it is easy to tabulate these results for all principals in the firm and then compare them on a year-to-year basis, looking for trends. The numbers themselves won't prove anything. (It was Mark Twain who said that there are three kinds of lies--lies, damned lies, and statistics.) But at the same time, objective measures of principal performance are hard to deny. Use them for enlightenment, not punishment.
If your firm tolerates less than full commitment by its principals, everyone gets sold short. This includes not only internal staff, but your clients, consultants, and contractors as well. As principals near retirement age, their interests and value to the firm may change--it's perfectly understandable. When this happens, don't get mad. Instead, get creative about re-structuring their involvement so that you can take advantage of what they can offer, but without the baggage.
In short, being a principal is both a privilege and a responsibility. Provide one and demand the other.
Fire in the Belly
An Exploration of the Entrepreneurial Spirit
Oak Tree Press
1-86076-210-7 : Paperback
Price : €15.00
Our Website price €13.50 You Save €1.50 (10 %)
Related Titles : Starting a Business in Britain; Starting a Business in Ireland
If you're thinking of being your own boss, you MUST read
If you're already running your own business, you SHOULD read this book.
But if you have no intention of ever becoming an entrepreneur, you may find some of the material in this book OFFENSIVE!
According to the author, the conventional view is that the decision to be
your own boss is straightforward. The difficult part is to effectively and
successfully run your own business. That's why the focus of Start Your Own
Business programmes is almost exclusively on skills. According to Fachler,
the emphasis in current entrepreneurial training is on what you have to do,
not what you have to be, to start your own business.
In this book, Fachler shows that this thinking is back to front. He claims that the critical stage in the entrepreneurial process is the realisation that you want to leave the security of paid employment and go out on your own. Once that decision has been taken, he says that anyone of average intelligence should be capable of mastering the necessary business skills.
The author does not seek to undermine the need to learn management skills. But the theme of the book is that before you go and start your own business, you have to successfully navigate the mental transition from the world of employment - the ladder world - to the entrepreneurial world.
The book looks at different definitions of entrepreneurship, and differentiates between the ladder world with its regular salaries and greater security, and the non-ladder world of irregular cashflow and higher risk. The book examines whether nature or nurture produces entrepreneurs, and looks at why ladder people can come to regard the ladder world as a health hazard. The triggers that can push you off the ladder are discussed, and the process of choosing in which business to make your mark is analysed.
Fire in the Belly explores the prerequisites for starting your own business, and takes a sober look at some of the bad things that can happen when you are your own boss. The author also describes the fun bits of going it alone. The entrepreneur's ability to wear so many hats is discussed, and the phenomenon of people who hop on and off the employment ladder is also examined. The book finishes with some useful tips about how to overcome potential obstacles on your route to becoming your own boss.
Where Does Innovation Come
Innovation - where does it come from? These articles are concerned with issues surrounding biotechnology, research and development and Australia's potential for breakthroughs large and small.
[Karl Note: Here is a
particularly "collectivist approach" to individualism!]
It could well be the greatest paradox of the post-industrial age.
The creation and application of knowledge is increasingly the battleground on which commercial competition is fought.
Yet we still do not know exactly how lightbulbs turning on in people's heads are systematically turned into commercial applications.
We know that humanity has demonstrated an innate ability to do this, and to do it repeatedly, but history is replete with examples of great breakthroughs that have occurred more by fluke than design.
But the world is entering an age where luck, more than ever, is not enough. If staying in business means continuing to apply knowledge more effectively, companies need to be able to rely on an institutional framework that allows them to be confident that the process that takes an idea to a product can be repeated.
Yet this is also an era of rapid structural economic change, which some students of innovation fear might break up the very economic entities which enabled the breakthrough flukes to occur. see articles: The frictionless economy and The view from the R&D coalface
Economists, not surprisingly, have different opinions about the type of industrial organisation that creates the best environment for these breakthroughs.
Classical economic theory holds that monopolies suppress innovation. Indeed, according to Nobel Laureate, Stanford University Economics Professor, Kenneth Arrow, the effects of monopolies on national innovation are a more compelling reason for competition policy than their effects on prices.
Arrow says the loss caused by inefficiency in monopolistic markets has been calculated to be only about one percent.
"If you take the classical apparatus which tells you that monopolies are inefficient, then say, okay, what is the loss to the monopoly, that is, using the same theoretical base, these losses turn out to be not very big," Arrow says.
"The effect on things like innovation are far more serious," he says.
"The trouble is, if you're already a monopolist, say due to a previous innovation, you've got two conflicting tendencies.
"On one hand, you want to protect your monopoly power through a new innovation. On the other hand, you are competing with yourself, so to speak, if the new innovation replaces the old one.
"If it's a small enough innovation, you may prefer not to introduce it, because you'll be undermining your previous monopoly."
But the problem also extends to the structure of industries overall. Arrow says history suggests that more large, transformational innovations come from small businesses.
He argues it is difficult for large businesses to break free in their thinking from what they have done in the past to take genuinely new approaches. Also, it is too tempting for them to concentrate their resources in a "big push" for what appears to be the most promising lines of research, based on their past experience. "This leaves room for others to follow up the lines that the big firms don't take," he says.
Arrow concedes that big business has done "some pretty innovative things", but cites IBM as an example of both the strengths and limitations of big corporate innovation.
"The development of electronic computers by IBM was pretty impressive," he says.
"They had a whole way of life built on punch card machines and they broke away from it. Admittedly, they didn't start the idea, but they picked it up and made it practical, with the development of the big mainframes.
"They were a little slow on the PC. They saw mainframes as everything, didn't have the imagination to develop personal computers.
"I won't say big firms haven't introduced some new ideas alright, but the disproportionate amount comes from small firms, precisely because of this," Arrow says.
If one large company dominates an industry, a small firm attempting to enter the market on the basis of an innovation is vulnerable to being driven out of the market.
US courts are being asked if just such a situation has arisen in the Microsoft case. The US Department of Justice case is against the company that most benefited from IBM's tardiness in getting into the PC market. Microsoft is accused of leveraging its domination of the desktop software market into domination of the new, internet browser market. In the process, Microsoft is accused of trying to unfairly drive out Netscape, which created the market with its Navigator browser. Microsoft allegedly used a series of tactics, including predatory pricing, forcing business partners to favour its browser, and bundling its own browser product into its operating system.
Microsoft founder and chairman Bill Gates, a man who must sometimes wonder how he has attracted so much opprobrium, regularly points to the $US3 billion a year that his company spends on R&D, to defend Microsoft from charges that it is not innovative. But Arrow dismisses the bulk of this as simply the price of incremental product development needed for a company such as Microsoft to stay in business.
Other leading economists, however, take a different view. They are not convinced that large businesses, even monopolists, have a stifling effect on national innovation. In fact, they argue that the presence of monopolists has been an essential element in the innovation process of at least some industries.
In his recent book, The Productive Edge, Professor Richard Lester, director of the Massachusetts Institute of Technology Industrial Performance Center, argues that the existence of monopolies has allowed countries such as the US to fudge a lack of understanding about how innovation actually happens.
Lester quotes work by the late Princeton University Professor Donald Stokes, who produced a matrix of R&D. At one end of the R&D spectrum is work such as that by Neils Bohr into atomic structure. This work was designed to advance basic knowledge but had no applied use in mind.
At the other end of the spectrum is the work of Thomas Edison, who Lester says went as far as to ban his researchers from doing any work that sought to advance theoretical understanding, so determined was he to focus only on the application of existing knowledge.
But in the middle, was the work of Louis Pasteur, who wanted to address real world problems, such as treating disease and preventing milk spoiling, but had to make advances in basic knowledge to do so.
Lester says this middle category of research has been little understood, but is absolutely crucial in an effective national innovation system. The difficulty with it is that it is difficult to see how the research should be paid for and what incentives should be created to encourage it.
Pure research aimed at advancing knowledge, with no specific application in mind, is properly the responsibility of the nation as a whole, and should be publicly funded through institutions such as universities or research centres. Work to commercialise knowledge should be paid for by the businesses or individuals that expect to profit from their work. But what of work that could take many years and might never result in a commercial application, or, if it does, takes so long to result in a product that no private financier would be able to recoup the investment before others are able to imitate or recreate their work?
"Historically, this sort of work has been funded partly by industry and partly by government with a variety of ad hoc approaches of varying effectiveness," Lester says. Most of these relied on the sheer size of the research budgets available to public or private enterprises that enjoyed monopoly or near monopoly power. He cites AT&T's famous Bell Labs, IBM's Yorktown laboratories and Du Pont's central research labs, the place where nylon was invented. "But many of these great labs have been dismantled in recent years, and those that have escaped this fate have mostly been repositioned to do shorter term, product-specific research."
Lester says Microsoft is an exception that proves the rule. He says the software giant announced plans to create a long-term research centre in 1995, swimming against the corporate tide.
Lester concedes that there are strong arguments that large corporations lack the flexibility to recognise transformational technological breakthroughs at times, sometimes even when they are occurring within their own laboratories, and gives IBM's failure to move into personal computers as an example. Nonetheless, he argues that the trend for large companies, such as Intel, to have their own venture capital funds to encourage new applications for their own products does not represent an alternative to the giant corporate labs as sources of Pasteur-type innovation.
Lester says start-up companies based on innovative technologies are very heavily concentrated at the Edison end of the R&D cycle, and doubts they can adequately substitute for the giant labs of the past. They are too dependent on their ability to add to shareholder value in the short-term, so that the funds can realise capital gains by selling their shares. See articles: An Audience with Jeff Sohl and How Angels are Giving Flight to the High Tech Boom.
Lester proposes a scheme devised by Stanford University economist Paul Romer as a potential funding solution. Put simply, Romer suggests industries which see an opportunity for technological or scientific advances that individual companies could not or would not fund should be able to approach the government with a proposal to establish an industry research board. The government, after accepting such a proposal, would levy a sales tax on the industry, the proceeds being allocated by companies to research projects they assess as most valuable. All businesses in the industry would have equal access to the results of the research.
Romer's solution seems elegant. But it would take a courageous politician to champion it in an age where any suggestion of government involvement in business is politically anathema, and where economic specialisation and the release of individual entrepreneurial zeal are lauded as the drivers of the latest regional economic miracles in places such as Silicon Valley. More likely, perhaps, the solution to developing new innovative institutions will be in the hands of business people themselves. See accompanying article: The view from the R&D Coalface.
The Productive Edge: How U.S Industries Are Pointing the Way to a New Era of Economic Growth. Richard K Lester.
Bell Labs is Dead, Long Live Bell Labs. Robert Buderi. Technology Review, September-October 1998.
© This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited.
[Back to the Unit Ten Summary]
United States History Survey
Herbert Hoover, "Rugged Individualism Speech" (October 22, 1928)
Herbert Hoover closed his campaign for the presidency in
1928 with this speech. It expresses the philosophy not only of Hoover, but of
the Republican party during the 1920s. As you read, think about what sort of
role Hoover sees for the federal government in the economic affairs of the
nation. Why does Hoover favor such a role for the government? Also, think about
in what sense Hooverís response to the Great Depression might be seen as an
extension of the philosophy he articulates here.
I intend... to discuss some of those more fundamental principles upon which I believe the government of the United States should be conducted....
During one hundred and fifty years we have builded up a form of self government and a social system which is peculiarly our own. It differs essentially from all others in the world. It is the American system.... It is founded upon the conception that only through ordered liberty, freedom and equal opportunity to the individual will his initiative and enterprise spur on the march of progress. And in our insistence upon equality of opportunity has our system advanced beyond all the world.
During [World War I] we necessarily turned to the government to solve every difficult economic problem. The government having absorbed every energy of our people for war, there was no other solution. For the preservation of the state the Federal Government became a centralized despotism which undertook unprecedented responsibilities, assumed autocratic powers, and took over the business of citizens. To a large degree, we regimented our whole people temporally into a socialistic state. However justified in war time, if continued in peace-time it would destroy not only our American system but with it our progress and freedom as well.
When the war closed, the most vital of issues both in our own country and around the world was whether government should continue their wartime ownership and operation of many [instruments] of production and distribution. We were challenged with a... choice between the American system of rugged individualism and a European philosophy of diametrically opposed doctrines doctrines of paternalism and state socialism. The acceptance of these ideas would have meant the destruction of self-government through centralization... [and] the undermining of the individual initiative and enterprise through which our people have grown to unparalleled greatness.
The Republican Party [in the years after the war] resolutely turned its face away from these ideas and war practices.... When the Republican Party came into full power it went at once resolutely back to our fundamental conception of the state and the rights and responsibility of the individual. Thereby it restored confidence and hope in the American people, it freed and stimulated enterprise, it restored the government to a position as an umpire instead of a player in the economic game. For these reasons the American people have gone forward in progress....
There is [in this election]... submitted to the American people a question of fundamental principle. That is: shall we depart from the principles of our American political and economic system, upon which we have advanced beyond all the rest of the world....
I would like to state to you the effect that... [an interference] of government in business would have upon our system of self-government and our economic system. That effect would reach to the daily life of every man and woman. It would impair the very basis of liberty and freedom....
Let us first see the effect on self-government. When the Federal Government undertakes to go into commercial business it must at once set up the organization and administration of that business, and it immediately finds itself in a labyrinth.... Commercial business requires a concentration of responsibility. Our government to succeed in business would need to become in effect a despotism. There at once begins the destruction of self-government....
It is a false liberalism that interprets itself into the government operation of commercial business. Every step of bureaucratizing of the business of our country poisons the very roots of liberalism that is political equality, free speech, free assembly, free press and equality of opportunity. It is not the road to more liberty, but to less liberty. Liberalism should not be striving to spread bureaucracy but striving to set bounds to it....
Liberalism is a force truly of the spirit, a force proceeding from the deep realization that economic freedom cannot be sacrificed if political freedom is to be preserved. [An expansion of the government's role in the business world] would cramp and cripple the mental and spiritual energies of our people. It would extinguish equality and opportunity. It would dry up the spirit of liberty and progress... For a hundred and fifty years liberalism has found its true spirit in the American system, not in the European systems.
I do not wish to be misunderstood.... I am defining general policy.... I have already stated that where the government is engaged in public works for purposes of flood control, of navigation, of irrigation, of scientific research or national defense... it will at times necessarily produce power or commodities as a by-product.
Nor do I wish to be misinterpreted as believing that the United States is a free-for-all and devil-take-the-hindmost. The very essence of equality of opportunity and of American individualism is that there shall be no domination by any group or [monopoly] in this republic.... It is no system of laissez faire....
I have witnessed not only at home but abroad the many failures of government in business. I have seen its tyrannies, its injustices, its destructions of self-government, its undermining of the very instincts which carry our people forward to progress. I have witnessed the lack of advance, the lowered standards of living, the depressed spirits of people working under such a system....
And what has been the result of the American system? Our country has become the land of opportunity to those born without inheritance, not merely because of the wealth of its resources and industry but because of this freedom of initiative and enterprise. Russia has natural resources equal to ours.... But she has not had the blessings of one hundred and fifty years of our form of government and our social system.
By adherence to the principles of decentralized self-government, ordered liberty, equal opportunity, and freedom to the individual, our American experiment in human welfare has yielded a degree of well-being unparalleled in the world. It has come nearer to the abolition of poverty, to the abolition of fear of want, than humanity has ever reached before. Progress of the past seven years is proof of it....
The greatness of America has grown out of a political and
social system and a method of [a lack of governmental] control of economic
forces distinctly its own our American system which has carried this great
experiment in human welfare farther than ever before in history.... And I again
repeat that the departure from our American system... will jeopardize the very
liberty and freedom of our people, and will destroy equality of opportunity not
only to ourselves, but to our children....
[Back to the Unit Ten Summary]
Paul G. Wilhelm, University of Texas-Permian Basin
In a sample of 49 nations, three measures of corruption each correlated significantly with Hofstede's individualism-collectivism dimension, meaning that collectivist countries tended to be more corrupt. Although these findings may appear counter-intuitive to some, the evolving theory and experience is consistent with the statistical results. It is argued that our understanding of this dimension needs to go deeper.
National culture affects the behavior, expectations and the exchange process of managers and employees in the worldwide workplace. People from different cultures process information differently. Hofstede (1983) argues that persons form similar cultures have a 44 collective mental programming" which is part of their conditioning that they share with other members of their group, region or nation, but not with other groups, regions or nations. He defines this collective mental programming as culture.
Ethics and culture have been linked by theorists, but very little work has been done to test this relationship (Armstrong, 1996). Vitell et al (1993) stated that there is a "significant gap" in the conceptualization of business ethics within different cultural influences and that few researchers have addressed how culture influences ethical decision making. This study tests the relationship between the individualismcollectivism dimension and the observation and perception of ethical problems or corruption.
Hofstede (1980, p. 19), defined culture as "an interactive aggregate of common characteristics that influence a group's response to its environment." His work identified five important dimensions along which people seem to differ across cultures. These were identified as the social, power, uncertainty, goal, and time orientations by Griffen and Pustay (1999), and did not represent absolutes, but instead reflect tendencies within cultures. Within any given culture, there are likely to be people at every point on each dimension.
The focus of this study is on the social orientation dimension which is a person's belief about the relative importance of the individual and the groups to which that person belongs. Individualism is the cultural belief that the individual comes first. People holding this belief tend to put their own interests and that of their immediate families ahead of those of others. Individualists show high degrees of self-respect and independence. They tend to put their own career interests before the good of their organizations, and assess decisions relative to how those decisions affect them as individuals. People in individualist cultures are expected to be motivated to satisfy their own self-interests and personal goals. They tend to place higher priority on individual initiative and achievement, as well as on personal rewards based on satisfying transactional agreements. The United States' paradigm for entrepreneurial activity is set in a culture that values independent action, taking personal chances, and self-reliance (McGrath et al, 1992). The most individualistic countries are the United States, the United Kingdom, Australia, New Zealand, Canada, and the Netherlands (Hofstede, 1980,1993).
At the other end of the individualism collectivism (IC) continuum, collectivists enjoy working together more, are generally more cooperative, and are less inclined to be free riders or let others do the work while coasting themselves (Earley, 1993). In individualist cultures the person or self is defined as an independent entity. In contrast, the self is defined in association with groups or organizations in collectivist cultures (Triandis, 1995). In collectivist cultures, there is a strong tendency to support organizational values and there is typically a high level of value congruence between followers and leaders owing to greater socialization processes (Jung and Avolio, 1999). Hence, it could be predicted that individualists, more likely to engage in the unethical activity of shirking or free-riding, would be more corrupt than collectivists.
This is consistent with the stereotype that entrepreneurs are individualists seen as having low ethical standards. The great robber barons of the American industrial revolution - the Rockefellers, Fords, Melons, and Carnegie - were all seen in their time as ruthless and unethical (Dollinger, 1999).
A further examination of collectivism, suggests the potential for less corruption there as well. A number of cross-cultural studies have shown that collectivists, tend to have a stronger attachment to their organization and tend to subordinate their individual goals to group goals (Earley, 1989: Triandis, 1995). Collectivistic societies believe that groups come first and are characterized by well defined social networks, including extended families, tribes, and coworkers. People are expected to subordinate their own personal welfare to the good of the group. The emotion of shame strongly influences individual behavior, such that when a group fails, its members take that failure very personally. Additionally, group members try to fit into their group harmoniously, with a minimum of conflict or tension. The most collective countries are Mexico, Greece, Hong Kong, Singapore, Taiwan, Peru, Columbia and Pakistan (Hofstede, 1980).
Some might argue that the shaming aspect of collectivism would help those countries fight corruption. However, a closer examination of this dimension might indicate otherwise. International firms need to be aware of aspects of collectivism that could increase corruption. For example, nepotism is often frowned on in individualistic cultures but is a fairly common hiring practice in collectivist countries.
Perhaps the pay systems of countries could best indicate whether corruption can get a better grip on the culture. In individualistic countries such as the U.S., many workers believe that they should be compensated according to their individual achievements. Fairness of any compensation system is judged by whether it achieves this objective. U.S. firms expend much time and money appraising individual performance in order to link pay and performance. Firms failing to do this often lose their more productive employees to firms that better maintain equity. It can therefore be argued that individualism may enhance individual accountability and ethics and thereby reduce corruption. This is further bolstered by Hofstede's (1994) argument that individualism utilizes guilt, instead of the more social concept of shame, used more in collectivistic countries. However, Hofstede (1994) also acknowledges that in the collectivistic workplace, a moral versus a calculative model of employer-employee relationship prevails. Hence in Japan, a person's compensation reflects the group to which he or she belongs, not personal achievements. If a person changes jobs often, it tends to be interpreted as reflecting disloyalty to the collective good (the firm) and may brand the person as unworthy of trust (Ferraro, 1990). Because of this stigma, job switchers traditionally have had difficulties finding appropriate jobs in other Japanese companies. This might be argued to lead to corruption of the human spirit. Indeed, collectivists have invested in the in-groups while neglecting their communities (Banfield, 1958).
On the other hand, moderately individualistic people can be concerned with abstractions such as "the community," and act in socially more responsible ways than collectivists who are "exhausted: by acting correctly toward their overdemanding groups." Individualists invest in their in-groups a little less, but in their community a little more (Triandis, Husker, and Hui, 1990). Individualists in the workplace believe in universalism wherein the same value standards apply to all. This could lead to a lower level of corruption. In contrast, under collectivism, particularism prevails wherein value standards differ for in-group and out-groups (Hofstede, 1994), In summary, collectivists tend to apply different sets of values and norms, depending on whether they are dealing with in-group or outgroup relationships (Earley, 1989). Perhaps this could allow collectivists to rationalize and accept corruption. Individualists however, tend to treat all people with a universal consistency (Waterman, 1988).
The foregoing is consistent with the finding that individualistic cultures perceive higher levels of importance of ethical problems (Armstrong, 1996). It is therefore predicted or hypothesized that individualism will correlate significantly negatively with corruption, The validity and reliability of three measures of corruption have very recently been established (Wilhelm, 1999). Therefore a statistical test of this hypothesis is in order.
The individualism-collectivism, (I-C) dimension values used were from Hofstede (1980).
Two measures of corruption come from a ten factor measure of economic freedom for 150 countries, which provides compelling evidence that economic prosperity and economic freedom go hand in hand (Johnson et al, 1998). These two factors are over-regulation and black market activity.
The factor of regulation was compiled utilizing embassies, interviews with businesses engaged in the country, and World Bank data. In more fairly regulated countries such as the United States, obtaining a business license is as simple as mailing in a registration form with a minimal fee. However, in more corrupt countries, such as in Sub Saharan Africa and parts of South America, obtaining a business license entails never ending trips to a government building, countless bribes and upward of a year's time. Selective or haphazard enforcement of regulations means that business owners become confused over which regulations must really be obeyed. Too many regulations can cause corruption as harried business owners try to avoid red tape. Countries have been rated on a Likert-type scale ranging from one for corruption-free, to 5, wherein the government discourages new business creation, bribes are mandatory and regulations are applied randomly (Johnson et al, 1996).
The factor of black market activity is measured by answering several questions. For example, does the country have a substantial smuggling market? If so, does this indicate too many restrictions of foreign imports? Do consumers have to turn to black marketers to obtain televisions and other electronics? This could indicate that they are not legally available or that too high of tariffs are being applied. Are there many illegal workers, indicating an overly regulated economy where labor must be supplied by the black market? These and other activities were used to estimate the size of the black market as a percentage of gross domestic product (GDP). Where black market information exists for specific countries, it is noted. A score of one was given where the black market constituted less than 10 percent of GDP. At the other end of the scale, a 5 was scored where the black market made up 30 percent or more of GDP (Johnson and Sheehy, 1995).
The third measure of unethical or corrupt activity is the Corruption Perceptions Index (CPI), which draws upon numerous distinct surveys of business people and risk analysts who are usually close enough to actual incidences of corruption and who can adequately recognize corruption when they see it. The CPI ranges between 10 (highly clean), and 0 (in which a country's business transactions are entirely dominated by kickbacks, extortion, bribery, etc.). 85 countries were measured in the third annual survey.
The index is a "poll of polls," and has been prepared using seven sources. These include two surveys from the World Competitiveness Yearbook, Institute for Management development, Lausanne- ' one from the Political and Economic Risk Consultancy Ltd., Hong Kon& one by Gallup International; two assessments by DRI/McGraw-Hill Global Risk Service and the Political Risk Services, East Stracuse, New York; and lastly a survey conducted at Gottingen University via internet (Http: // www.uni-gottingen.de/ uwuw) which gives contributors the possibility for anonymous contributions and also directly approaches employees of multinational firms and institutions. Because these measures are consistently reproducing similar assessments, they are argued to be an indicator of a real world phenomenon (Transparency International, 1997a).
The reliability of the new data in the CPI is improved by including only countries that have been part of polls in 1997 and 1996). The publishers argued that the use of historical comparison and the relative stabilities of data indicated a high level of credibility. They contended that the idea of combining data implied that a malperformance of one source could be smoothed by the inclusion of a least two other sources. This way the likelihood of misrepresenting a country was reduced (Transparency International, 1998). Details of the seven major sources used indicated a fairly well supported, reliable and documented index (Transparency International, 1997a, 1997b).
Nevertheless, the CPI figures are acknowledged to be somewhat subjective because an objective approach is almost impossible. Corruption is by definition hidden. It is often a misuse of public power for private benefits, e.g. the bribing of public officials, taking kickbacks in public procurement or embezzling public funds. The CPI tries to assess the degree to which public officials and politicians in particular countries are involved in corrupt practices. Of course there is objective data created by the justice systems and the media. However, this data, rather measures the effectiveness of the media in discovering and reporting scandals and how independent and well trained the judiciary is in prosecuting, An efficient and incorruptible judiciary may result in a high conviction rate. Instead of acknowledging this, "objective" data would punish such countries with a bad score (Transparency International, 1997a).
Table I shows significant correlations (probability less than 0.034 or less), all in the hypothesized direction, indicating that individualism is consistently related to higher levels of ethics in business practices or lower levels of corruption. The exceedingly significant correlation of 0.713 with the CPI is especially noteworthy.
The findings of this study may pose problems for cultural relativism, which is interpreted to mean that there is no single right way. In other words, people should not impose their values and standards on others. The reasoning behind the arguments usually is that we should behave as the locals do, or "When in Rome, do as the Romans do." It is probably still unethical to encourage emulation of locals who are corrupt (Lane, Distefano, and Maznevski, 1997).
Assimilating into a more corrupt collectivistic culture could encourage denial of accountability that individualism better maintains.
Consistent with these results, another perspective that managers may find useful is described by Perry (1970) as a process of ethical and intellectual development. Perry's ideas reflect a cultural bias toward individualism and were derived from a narrow part of the U. S. population. However, they appear to be validated by this study. In Perry's scheme, his third "level" of development is commitment to relativism, in which an individual understands the relativistic or interdependent nature of the world, and makes a commitment to a set of values, beliefs and a way of behaving with this expanded world view. Consistent with individualism, those operating at the highest level of ethics assume responsibility for their own actions and decisions based upon careful consideration and the application of the essential tools of moral reasoning - deliberation and justification (Gandz and Hayes, 1988).
Individualism may reduce corruption by inducing people to ask themselves how they, as individuals should act. Perhaps individualism better allows people to avoid corruption because they are less likely than collectivists to avoid making ethical decisions on issues that are their responsibility alone. In collectivistic cultures there can be intense hostility regarding the need for any citizen involvement in the identification of wrongdoers. However, in the evolving complex corporations of today, the need for continuous learning, and limited supervision challenges individual workers to be moral legislators. Individualists may be better able to retain enough power to maintain their standards whereas collectivists tend to adhere more to in-group needs, Individualistic cultures may better maintain high standards by doing as the better Romans do when they are in Rome. Fortunately there does seem to be some movement in the direction of corporate standards for host country moral minimums (Berenbeim, 1999).
Individualism plays a very strong role in entrepreneurship. The reputation of the firm is built on the personal integrity of the entrepreneur and the way the entrepreneur and the new venture are viewed. Entrepreneurs establish both the ethical climate and ethical behavior of the organization. The latter is defined as any business decision that creates value for the customer by matching quality and price. Ethical decisions (1) give customers valid data about products and services, (2) enable customers to make free and informed choices, and (3) engender customer commitment to the product and the organization providing it. If any of these three rules are violated then unethical behavior is produced. A firm's reputation declines when there is invalid and false data, coerced or manipulated decisions and low integrity (Argyris, 1973). It has been argued that the only sustainable competitive advantage any business has is its reputation (Caminiti, 1992).
Small business owners and entrepreneurs repeatedly face some ethical dilemmas, all of which involve the meaning of honesty. Sometimes the entrepreneur may feel that to be "completely honest" diminishes or hinders the new venture and his or here efforts to create it. However, to be less than completely honest jeopardizes the credibility and reputation of the new venture. These are dilemmas faced by promoters, innovators, and transacters in the economy (Dees and Starr, 1992).
It can also be argued that individualism facilitates higher economic achievement, allowing for a stronger legal system. Countries with higher income may have more funds to devote to fighting corruption. Thus, the high correlation may also be a product of developed countries ensuring that companies play by the rules.
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Correlation of Individualism-Collectivism (I-C) with three Measures of Corruption
|Tables Of Contents With Full Details: Page Title, Comment and Date Last Modified|
|Alphabetical List Of All Company Policies||Table Of Data in Title Order||Staff Assignments showing titles||Programs & Projects In Title Order||Table of Notes In Title Order|
|Policies In Order Of Last Modified||Data In Order of Last Modified||Staff Assignments showing date last modified||Programs & Projects In Order of Last Modified||Table of Notes In Order Date Last Modified|