The politics of offshoring

career-jobs

By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

Offshoring or offshore outsourcing has entered the modern lexicon following globalization. It refers to jobs that are outsourced to countries outside the United States that are normally done within the border (Levine, 2012). Enabled by technological advances, these jobs not only include manufacturing, but also, service jobs such as stock market research for financial firms, legal online database services, call centers, payroll, and other back-office related tasks (Bardhan & Kroll, 2003).

There are no official estimates that exists, but BLS, the Bureau of Labor Statistics (BLS, 2004) regularly publishes out-of-country mass layoffs as a result of company closures. According to its 2004 estimates, there are approximately 29-30 million jobs, or 20% of total US employment that are vulnerable to such large-scale displacements (BLS, 2004). Forrester Research, as reported by PBS in November 2002, estimates that another 3.3 million jobs will be lost due to outsourcing by 2015 (PBS, n.d.; Aspray & Marklund, n.d.). Bardhan and Kroll (2003) write that the share of ‘imported’ manufacturing labor increased from 10.5% to 16.2% between 1987 and 1997, with data from high-technology manufacturing such as computers and related electronics rose from 26% to 38% (Bardhan & Kroll, 2003).

China, India, and the Southeast Asian countries are the favored destinations for these outsourced jobs. China has captured bulk of manufacturing jobs, propped by an artificially low currency, the Chinese Yuan vs. the US dollar (Aspray & Marklund, n.d.). India has become the software programming capital of the world; while the Philippines, on the other hand, has emerged as the front-runner for voice-based call-center jobs. The wide use of English language in India, the Philippines, Malaysia and South Africa has facilitated the creation of a global village where 24x7x365 service has become the norm (Bardhan & Kroll, 2003).

Amidst this exodus, US policymakers have begun to be alarmed and have started initiatives to stem the tide. There are currently more than 20 federal bills that have been introduced in Congress, none of which have yet passed (Aspray & Marklund, n.d.). Most, if not all, have protectionist underpinnings, which, as we shall see, may be moot in the face of an increasingly globalized world.

 

Background

Researchers have identified the jobs that are most vulnerable to being outsourced. These are routinary jobs that can be performed remotely from customers. There are no extensive research of the total population that is potentially impacted, but in another analysis by BLS (2007), it estimated that approximately 30 million jobs are vulnerable, representing 20% of total US employment (Levine, 2012). There are several players or stakeholders that are either directly or indirectly affected by outsourcing (Aspray & Marklund, n.d.).

Workers. What began as a ‘blue collar’ phenomenon with manufacturing workers, later became a ‘white-collar’ trend following the exodus of computer programmers and call center jobs to low-wage countries. With the rapid pace of advancement in telecommunications technology (i.e., computers, bandwidth), once remote countries have become readily accessible. This modern-day ‘bridge’ connecting the first- and third-world countries have made doing backroom operations feasible and cost-effective.

Labor Unions. Unlike the more organized labor unions in Germany and France, the labor unions in America have seen their declining influence. Labor laws in these European countries, for example, have strict labor codes that structurally limit the export of jobs to low-wage countries. As well, there are not too many German- or French-speaking countries that could absorb these offshored jobs even if the labor conditions are conducive to offshoring (Aspray & Marklund, n.d.).

Business. Companies have resorted to outsourcing as a means to become cost-competitive in an ever increasing competitive market place. It’s the law of comparative advantage (Porter, 1998) that is at work on a global scale. Leaders of businesses have to make these hard choices not because they lack social conscience, but because of economic reasons and the shareholders’ demand to find the greatest value for every dollar invested in their business.

Science and Technology Students. According to Forbes, there will be 2.8 million jobs opening in science, technology, engineering and mathematics (STEM) by 2018 of which 800,000 of these would require a master’s degree (Lenzner, 2013). Yet, the American-born students that are entering in these critical disciplines are dwindling. The decline is partly due to a false belief that these types of jobs can easily be outsourced (Aspray & Marklund, n.d.). The truth, as we shall discuss, is nowhere close.

Many of the high-technology start-up businesses in the US were started by engineers and entrepreneurs who were of foreign origins (Aspray & Marklund, n.d.). Many of these immigrants came into the country as foreign students and founded some of the biggest technology companies that the world has now known—eBay, Google, Brightstar (Lenzner, 2013). According to Forbes, 25% of high-technology companies that were founded between 1995 and 2005 have at least one immigrant founder (Lenzner, 2013). This record goes back centuries with Proctor & Gamble (1837), Pfizer (1849) and U.S. Steel (1901) being started by their founders with foreign descents (Lenzner, 2013).

Legislators. Amidst the popular clamor to ‘protect’ local jobs, legislators have become the main players in adjudicating who wins or loses in this outsourcing game. Unlike in Germany or France where organized labor are more active, US legislators (both the executive and legislative branches) have stepped in to fill the policy void. However well-intentioned, these bills are often short-term, and ‘protectionist’ in orientation, and ignore the laws of global supply and demand (Aspray & Marklund, n.d.).

 

Policy Responses

The 20 plus bills that are in various stages of policy debates, and therefore, have not been tested in courts can be summed as follows:

Tax Equalization. Because of the relatively high corporate tax in the US, multinational companies prefer to ‘park’ their profits in so-called ‘tax haven’ countries or territories where they are not taxed at all, or if they are, at a much lower rate than the US’s. Former presidential candidate, John Kerry for example, recently introduced a bill changing the timing at which profits could be taxed, i.e., at the year the profits are incurred vs. the time they are being repatriated (Aspray & Marklund, n.d.).

US Visa Policy. The issuance of H-1B and L-1 visas to foreign workers was intended to mitigate the skills gap that was at issue during the technology boom of the 1990s to early 2000s. Started in 1991, the USCIS or the US Immigration Service allocates 65,000 temporary worker visas annually, but this facility has been ‘abused’ by some BPO companies with Indian descent. Critics argue that these companies are using cheap Indian software programmers at US-labor rates, which is another form of ‘dumping’ (i.e., the selling of goods at below market value). To curb this practice, Sen. Christopher Dodd (D-CT) and Rep. Nancy Johnson (R-CT) have introduced bills to limit the issuance of these visas. The business community isn’t happy, arguing that there is a lack of young people who have science and engineering backgrounds to support their labor requirements (Aspray & Marklund, n.d.).

Retraining. A third approach that is gaining ground is retraining for displaced workers. Originally passed in 1962 as ‘Trade Adjustment Assistance Act’ (TAA), this law provides re-training assistance and extension of unemployment benefits to American workers who are displaced as a result of trade readjustments. It is currently being amended to include not just manufacturing workers, but also, software programming jobs and other service workers. None of these bills has passed into law (Aspray & Marklund, n.d.).

Move to Higher-Value R&D Jobs. Capitalizing on America’s inherent advantages on innovation and creativity, there is a growing realization among scholars and business leaders that the only way to protect local jobs is to migrate to higher-value added jobs such as research and development. Whereas the US may have been the leader in technological innovation in the last 50 years, its lead is fast eroding because of structural shifts: (1) US share of worldwide science and engineering graduates with masters and doctoral degrees is declining due to declining numbers of young Americans entering into these fields of discipline; (2) US share of patent applications is on the decline, whereas Asia’s is growing seven times faster; (3) thirty-year decline as percentage of GDP in support of basic research in engineering and physical sciences; (4) twenty-year decline in US share of worldwide high-tech exports (Aspray & Marklund, n.d.).

 

Policy Analysis

The extent of damage wrought by outsourcing to American jobs may have caught legislators and policymakers by surprise, and the impact of globalization on the local economy may have been underestimated. Given the delicate balance between keeping jobs, and remaining competitive as a nation, policymakers are at a crossroads. On the one hand, there is the very real temptation to give in to the populist demand to raising barriers, as suggested by majority of the bills that are currently in review. Not only are these short-term solutions to a long-term challenge, but, more critically, they fly in the face of market economic forces. The more proactive stance, on the other hand, which this author suggests, is to invest more in worker retraining for higher-value added jobs like what Sweden has done.

Sweden is a small country with a highly internationalized and globalized economy, a member of the European Union. Its success with globalization can be linked to its open, and liberal trade with the rest of the world, which started in late 19th century and continued into the late 1970s (Aspray & Marklund, n.d.). While there were early attempts in the 1970s at (a) protectionist policies to thwart international competition (e.g., steel, apparel and marine industries); and (b) artificially depreciating its currency to make Swedish products look ‘cheap’ overseas, the government quickly abandoned these protectionist policies in favor of open, market-based policies. There were massive labor displacements during the early stages of the economy’s transformation, but the Swedish government stayed firm.

Today, Swedish policy response to globalization is devoid of any protectionist rhetoric and job-protection arguments (Aspray & Marklund, n.d.). In addition, the Swedish government has increased its private-public partnership and increased its total investment in advanced R&D by focusing on its top three industries where it still commands relative comparable advantage, e.g., automotive, biotech, and security (Aspray & Marklund, n.d.).

 

Conclusion and Recommendations

America’s painful experience with outsourcing is not entirely new. As Sweden has demonstrated, the short-term pain of rebalancing displaced workers as low-skilled jobs are lost and higher skills are created, is inevitable. The immediate temptation is to introduce protectionist laws to stem the tide, but as Sweden has shown, these initiatives ignore market forces, and are therefore, bound to fail.

The US budget deficit has burgeoned beyond the current generation’s ability to pay, and continuing the route of protectionism will only add to that deficit (Anderson, 2011). As a policy adviser, I would recommend (1) higher investments in advanced R&D, (2) expand the temporary worker visa program to mitigate the lack of high-skilled workers, (3) amend the corporate tax law to make it competitive with those of tax havens so that profits that are made overseas can be repatriated and reinvested back into the local economy (4) expand job retraining programs to cover not only displaced manufacturing workers, but also, including those from service industries. These solutions might be too painful to swallow, but, as the experience by other countries who have had a head start show, there is really no other way but to let the market forces dictate who buys what and from whom.

 

References

Anderson, James E. (2011). Public Policymaking, 7th Ed. Boston, MA: Wadsworth. ISBN-13: 978-0-618-97472-6. ISBN-10: 0-618-97472-5.

Aspray, William & Marklund, Goran (n.d.). Chapter 8: Policies and politics of offshoring: An international perspective. Retrieved from http://www.acm.org/globalizationreport/chapter8.pdf

Bardhan, Ashok Deo & Kroll, Cynthia (2003). The new wave of outsourcing. Fisher Center for Real Estate & Urban Economics, November 2, 2003. Retrieved from http://escholarship.org/uc/item/02f8z392

Bureau of Labor Statistics (2004, 2007). Retrieved on April 12, 2014 http://www.bls.gov/mls/home.htm

Lenzner, Robert (2013). 40% of the largest U.S. companies founded by immigrants or their Children. Retrieved from http://www.forbes.com/sites/robertlenzner/2013/04/25/40-largest-u-s-companies-founded-by-immigrants-or-their-children/

Levine, Linda (2012). Offshoring (or offshore outsourcing) and job loss among U.S. workers. Congressional Research Service. http://www.crs.gov

Porter, Michael (1998). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, June 1, 1998. ISBN-10:  0684841460. ISBN-13: 978-0684841465

Public Broadcasting Service, PBS (n.d.). Retrieved http://www.pbs.org/now/politics/outsource.html

Roots, Roger I (2004). When laws backfire: Unintended consequences of public policy. The American Behavioral Scientist, 47, 11. July 2004. ABI-INFORM Complete. P 1376.

Our pursuit of happiness

By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

Carl Gustav Jung, the Swiss psychiatrist, and founder of analytic Psychology, once said: “The word ‘happiness’ would lose its meaning if it were not balanced by sadness.” Joshua Wolf Shenk’s article, “What makes us happy?” is an important literary piece that speaks to our generation, and therefore, must be included in a Psychology curriculum. “Man is a goal-setting animal,” says Aristotle. “His life only has meaning if he is reaching out and striving for his goals.” Outside of survival, man’s search for happiness has been a primary pre-occupation for centuries (Maslow, 1971).

Shenk’s work, based on a longitudinal research by George Eman Vaillant, a psychiatrist from Harvard University, provides us with an unusual vantage point from where to look for answers. The experience of the sample population—268 white, middle-class, Harvard-educated males—while may not necessarily be a representative of the general population, contains insights that have broader application to humanity. The essay has corroborating parallels in the works by Anna Freud (1936), Alain de Botton (2010), Martin Seligman (2002), Nathaniel Branden (1969), Gail Sheehy (1976), Daniel Gilbert (2006), Daniel Goleman (1998), and David D. Burns (1980).

Shenk’s main thesis, referencing the work of the 74-year old research’s main curator, George E. Vaillant, is that we live life through episodes of pain and happiness (Shenk, 2009). In between these episodes, we develop coping habits, or ‘defense mechanisms’ (Vaillant, 1977) that enable us to navigate the vicissitudes of life. According to Shenk, Vaillant’s four adaptive mechanisms, which can be ranked from worst to best, are: (1) “psychotic” adaptations, (2) “immature” adaptations, (3) “neurotic” defenses, and (4) “mature” adaptations. Shenk goes on further and identifies Vaillant’s seven secrets to happiness: (1) employing mature adaptations or defense mechanisms, (2) education, or continuous learning, (3) stable marriage, (4) not smoking, (5) not abusing alcohol, (6) some exercise, and finally, (7) healthy weight.

The results of this research are certainly not unique. The popularity of happiness as a subject (categorized as a Science in Positive Psychology), as evidenced by its weaving into the pop culture, is as old as human history. Martin Seligman, director of Positive Psychology at the University of Pennsylvania, and credited as the ‘father’ of the movement, postulates that happiness can be learned or unlearned (Seligman, 2002). Having a positive outlook in life is a choice, not a destiny. This observation is supported by David D. Burns’ own theory that our thoughts create our emotions, not the other way around. We can choose to be happy. The secret lies in our choice—to be mindful of our thoughts. Negative thinking is the by-product of our tendency to dwell on what can possibly go wrong. Left on its own devices, this thinking pattern spirals into a vicious circle feeding our negative emotions (Burns, 1980).

The popular media has joined the bandwagon. For instance, BBC came out with a series of programs that explored the subject in 2006, The Happiness Formula (BBC, 2006). BBC wanted to study the relationship between GNP—gross national product, a country’s measure of wealth—and relative happiness or feelings of ‘well-being’. What the researchers found was a bit of a mystery: There was no correlation between material plenty and happiness. This dichotomy gave rise to the idea that, perhaps, our measure for well-being is wrong.  The results are consistent with the sobering fact that the rich countries in the OECD also have one of the highest suicide rates in the world. In stark contrast to Bhutan, a landlocked state in South Asia, one of the ‘poorest’ in GNP terms, but ranked highest in relative happiness (Revkin, 2005).

This fascination on positive psychology has bred other genres. Alain de Botton’s series on the subject titled, “Epicurus on Happiness,” presents a similar finding (de Botton, 2010). According to de Botton, a Swiss philosopher based in the UK, happiness, as described by the Epicurean tradition, consists of having (1) friends, (2) freedom, and (3) an examined life. “They teach happiness at Harvard,” headlined another article by author, Matt Mabe in August 20, 2008’s issue of Bloomberg-Businessweek magazine. In the case of Harvard, the Positive Psychology (or science of happiness), has supplanted Economics as the most popular undergraduate course (Mabe, 2008). What’s the reason behind positive psychology’s popularity? We offer three postulates, as follows:

The Great Recession and the ‘American Dream’.  The full account of the Great Recession that we just went through may not be fully known, or its full impact on our collective psyche fully understood. The concept of the ‘American Dream’ may have suffered a serious blow. There is possibility that, subconsciously, we have begun to question the value system that we’ve been fed since birth. We collectively think that our happiness can be equated to the size of the house we live in, or the car we drive, or to schools our kids go to. This message is programmed into our national psyche that we don’t even realize that it exists. The economic recession was a turning point. It punctured not only the housing bubble, but also, the mirage that we’ve been holding on for so long. F. S. Michaels, in his book “Monoculture” (Michaels, 2011), poignantly summarizes this phenomenon:

“The governing pattern a culture obeys is a master story—one narrative in society that takes over the others, shrinking diversity and forming a monoculture. When you’re inside a master story at a particular time in history, you tend to accept its definition of reality. You unconsciously believe and act on certain things, and disbelieve and fail to act on other things. That’s the power of the monoculture; it’s able to direct us without us knowing too much about it.”

The materialist paradigm that’s been foiled in front of us has been shattered, perhaps, irreparably with the collapse of the housing market. That nugget sent a jolt into our collective consciousness, which is creating a yearning for life’s meaning beyond our material possessions.

Quest for Sustainability. The concept of the ‘American Dream,’ which was rooted in the Declaration of Independence—“life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement” (Adams, 1931)—will undergo a reframing based on our collective recollection of this epoch. As with other epochs in the past—the Great Depression, the Two World Wars—this global shock will be recalled with both sadness and regret. Only time can tell what the final chapter of this discourse will be, but what’s clear is that collectively, we’ve come to realize that we cannot continue exploiting the common pasture on which we rely on for our sustenance without risking the consequences of over-consumption—as poignantly illustrated in the “Tragedy of the Commons” (Hardin, 1968). The sustainability of the concept, at its materialist core, if carried to its teleological end, will implode on itself. Including this essay in the Psychology curriculum, therefore, offers an alternative paradigm to which we can view the outside world.

Vacuous leadership. The recent spate of corporate failures—from Enron, to WorldCom, Lehman Brothers, and Tyco—has shattered our implicit belief on authority figures. That we can trust our leaders to do what’s right (Milgram, 1974), and that they have our best interests at heart, has stumbled upon a conundrum. The implicit social contract—to maximize happiness, or reduce pain for the most number—the utilitarian ethical view between leader and follower, as propounded by John Stuart Mill and Jeremy Bentham, has been breached (Mill & Bentham, 2004). This breach of trust, sadly, is not only isolated to for-profit organizations. Erstwhile paragons of virtue, leaders from government, religious, including non-profit organizations have shown a similar propensity for abuse of power—e.g., former President Bill Clinton’s Affair with Monica Lewinsky, the Roman Catholic Church’s handling of child abuse allegations against some of its priests, Jim Bakker and Tammy Bakker of the PTL organization, Jimmy Swaggart, etc.

Given this carnage, we can’t help but ask: To what degree do our leaders have our interest at heart, really? Can we trust them to do what is right? Leaders, in the past, have assumed the role of ‘sense-makers’ for the masses.  Followers relied on their leaders to articulate a vision of the future. Masses ascribed to, and followed their lead, but, with trust gone, regaining the implicit social contract between leader and led will take a long time to heal. Meanwhile, we are at a loss—for direction, for responsible leadership. This deep-seated unease drove us to dig inside, to be more introspective. Psychology, in our search for deeper meaning, provided some soft answers.

Finally, Shenk’s work, as an introduction to Psychology, offers useful hints on where to look for answers. While certainly not exhaustive, at its best, this essay provides a research-based framework. Vaillant’s conclusions, where Shenk has based his own thesis, can be empirically proven. At its worst, the essay will pique our interest. We need the time to pause, to reflect on the debris left by the carnage. With our own lives juxtaposed with the 268 men in the research group, we can say to ourselves with humility: How much different or similar our lives are from theirs? The fact that we’re able to read, and critique this literary piece means that in many respects, we are in at least comparable position as the majority of the men—not better off, or worse off, but about the same. That thought, can be a source of comfort, in uncertain times like ours. If we follow the arguments in parallel studies, we then come to a humbling realization that our happiness is not dependent on any outside circumstance. As Viktor Frankl has intimated in his poignant work, happiness is within us to give away (Frankl, 1969). This insight is consistent with Nathaniel Branden’s thesis that there’s no more important conception that a man can have than his conception of himself (Branden, 1969).

For a piece in Psychology, this essay is quite philosophical, and provides us with a glint that understanding human nature, and his incessant search for happiness, is a multifaceted enigma requiring different angles. Regardless of our starting point of view, we agree that the search for happiness is as elusive as ever. Happiness is as private an affair that only we can define. The perspectives we covered above are only approximations of reality. By articulating these approximations, we hope that we have come closer to answering the question: What is happiness?

References.

Branden, Nathaniel (1969). The Psychology of Self-Esteem.

BBC, British Broadcasting Corporation (2006). The Happiness Formula. Retrieved from their website: http://news.bbc.co.uk/2/hi/programmes/happiness_formula/default.stm.

Burns, David D. (1980). Feeling Good: The New Mood Therapy.

De Botton, Alain (2010). Epicurus on Happiness: A Guide to Happiness (from The Consolations of Philosophy).

Frankl, Viktor (1969). The Will to Meaning: Foundations and Applications of Logotherapy.

Hardin, Garrett (1968). Tragedy of the commons, Journal of Science.

James, William (1890). The Principles of Psychology.

Mabe, Matt (2008). They teach happiness at Harvard. Bloomberg-Businessweek, August 20, 2008.

Maslow, Abraham (1971). The Farther Reaches of Human Nature.

Michaels, F. S. (2011). Monoculture: How One Story is Changing Everything.

Mill, John Stuart, & Bentham, Jeremy (2004). Utilitarianism and Other Essays, Alan Ryan (Ed.). London: Penguin Books.

Milgram, Stanley (1974). On Obedience to Authority: An Experimental View.

Revkin, Andrew C. (2005).  A new measure of well-being from a happy little kingdom. New York Times, October 4, 2005.

Shenk, Joshua Wolf (2009). What makes us happy? The Atlantic Online, June 2009.

Seligman, Martin (2002).  Authentic Happiness: Using the New Positive Psychology to Realize Your Potential for Lasting Fulfillment.

Sheehy, Gail (1976). Passages: Predictable Cries of Adult Life.

Vaillant, George Eman (1977).  Adaptation to Life, Boston, MA: Little, Brown.

Professional comportment and academic excellence at The Chicago School of Professional Psychology: A review

professional
By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

Part One

The “Professional Comportment” policy of The Chicago School of Professional Psychology (TCSPP or “The Chicago School”), is a preamble of the premiere institution’s commitment to the highest standards in Psychology training prior and post-graduation. The policy covers standards of academic excellence during the program, as well as professional code of conduct post-graduation.  The policy, adapted from the Council of Chairs of Training Councils (CCTC) of the American Psychological Association (APA), sets expectations on academic standards, professional and ethical behavior expected from its graduates, including the responsibilities to the broader community in which all graduates ultimately belong – e.g., student-trainees, graduates, professional practitioners who serve both as supplier and consumer for such services.

The policy articulates TCSPP’s commitment to: (1) academic and professional excellence, (2) self-regulation, responsibility and shared duty for maintaining the quality of both training and practice, and (3) support provided to members of the learning community who may not be meeting these high standards in both academic and professional conduct.

Commitment to the highest standards in academic performance and of professional comportment. The Chicago School adheres to a comprehensive and holistic evaluation of its graduates’ academic performance, as well as, and perhaps more importantly, applied practice. This includes demonstrated competence within and across interrelated areas, including “coursework, seminars, scholarship, comprehensive examinations, and related program requirements” (TCSPP, 2012). As well, “other aspects of professional development and functioning (e.g., cognitive, emotional, psychological, interpersonal, technical and ethical)” (TCSPP, 2102).

Self-regulation and shared responsibility amongst members of the learning community.   As a quasi, non-publicly regulated professional discipline, members of the community have an implicit duty and responsibility to each other for self-policing and self-regulation. This includes being a personal watchdog for maintaining “student’s academic integrity (e.g., cheating, plagiarism, fabrication) and/or professional comportment (e.g., interpersonal and professional competence, self-awareness and self-reflection, openness to feedback, problem solving skills)” (TCSPP, 2012). All members of the community are expected to abide by this comprehensive appraisal of its fellow members’ “entire range of academic performance, development and functioning” (TCSPP, 2012). And if warranted, raise to the attention of the governing committee any breach of the ‘code of conduct’ for proper investigation, mitigation, including disciplinary action.

Assistance provided to those who do not meet the high standards of academic training and professional practice. The learning community provides robust supporting structures for assisting individual members who might be falling short of these high performance standards. This assistance may lead to an Academic Development Plan, which aims to help the struggling member toe back into line. This requires the involvement of the student, his/her advisor, academic chair, other TCSPP staff, up to external parties who may have a stake in the student-trainee’s successful completion of the program and/or professional conduct. Elevation to the Student Affairs Committee may ensue if there remains unresolved issues in the Academic Development Plan.

Relevance to Social Psychology. Every member of society, group, or community has an implicit responsibility to ‘give back’ to the community in which he/she derives sustenance or other forms of benefit from. Reciprocity in social psychology is the expectation that one repays what one receives in kind (tit-for-tat). It is a social construct wherein a positive, friendly favor proffered elicits a positive response, and the more uplifting the exchange, the more positive reinforcement it generates, thereby creating a virtuous circle of growth and stability. Conversely, a negative, or hostile stimulus could trigger a similarly negative reaction, but to the degree greater than its original force (Fehr & Gächter, 2000). This ‘live-and-let-live’ ethos governs all living communities, not just our species. It is present amongst colonies of ants, bees, and bats, including meerkats or suricates of Botswana’s Kalahari Desert.

This intricate human exchange and behavior within group settings is akin to paying taxes to the government. If everyone contributes his/her part religiously, taxes will be lower than if there were only a few who pays those taxes. The presence of ‘free-riders’ results, ultimately, in higher taxes because the system will need the same amount of money to build and/or maintain the roads, bridges, hospitals, and other social support structures to maintain a self-sustaining ecosystem. The ‘equal’ distribution of such necessities, a burden to some, in the end, benefits all members in that community. One cannot be expected to live off the backs of others’ efforts for extended periods. To do so is unethical and unsustainable in the long run as beautifully illustrated in the ‘Parable of the Commons’ (Hardin, 1968).

Part Two

This stringent policy highlights the importance of professional comportment at the individual, team, and organizational perspectives. At the individual level, the high standards protect the individual from potential malpractice suits by ensuring he/she receives the highest quality of training, or education in the first place. At a team level, such high standards protect this small community from internal weakness brought by substandard practice by any one of its erring members. At the organizational level, The Chicago School, as a brand, has its reputation to protect as provider of high quality education in the field of Psychology. Sans this brand recognition, assiduously maintained and protected, The Chicago School cannot sustain its ability to attract future high-caliber students seeking to acquire quality education in the discipline. TCSPP depends on the continued inflow of new student-practitioners for its own existence, which might be compromised if the standards of academic performance were below par or substandard vis-a-vis its peer group.

At a macro level, maintaining such high standards in education is a socially responsible thing to do given its impact on the broader community if left unregulated. Like many forms of professional practice (e.g., law, architecture, engineering), Psychology as a discipline must regulate itself so that the delivery of its service to the broader community is consistent, predictable, and effective. This self-imposed standard of discipline aims to protect the profession from any willful or accidental malpractice, ethical impropriety, or substandard service delivery at the individual or collective realms. Sans a governing body imposing such quality control, it only behooves that the learning community plays a proactive role in self-governance and self-regulation. A healthy, self-sufficient system relies upon its members for sustainability and continued relevance. Any breach that is left unmitigated may undermine that system’s continued effectiveness, societal relevance, leading to that system’s untimely demise.

References

Fehr, Ernst, & Gächter, Simon (2000). Fairness and retaliation: The economics of reciprocity. Journal of Economic Perspectives 14 (3): 159–181. doi: 10.1257/jep.14.3.159.

Hardin, Garrett James (1968). The tragedy of the commons. Science 162 (3859): 1243– 1248. doi: 10.1126/science.162.3859.1243

TCSPP, The Chicago School of Professional Psychology (2012). Professional comportment policy.

Outsourcing: ethical and cultural dilemmas


By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

The exodus of jobs, which began three decades ago, from high-labor cost countries such as the United States to low-wage, developing countries is transforming American society never before seen since the early 19th century Industrial Revolution, when the locus of economic power shifted away from England to the United States (Shafaeddin, 1998). That shift is happening again with the outsourcing of jobs—from manufacturing, back-office support staff to computer software programming—from the United States to East Asia. A similar trend is happening in Germany and U.K., where multinational companies are ‘forced’ to relocate some, or all their operations, from their roots to Central and Eastern European countries where labor is relatively lower, to remain globally competitive. Although the exodus span across industry segments, in the United States, this is most dramatic in the manufacturing sector (Waddell, 2009).

Let’s take as a case in point the state of Michigan. In the 19th century, manufacturing accounted minimally in Michigan’s total economy. By early 20th century, it is estimated that one in four workers is employed in the manufacturing sector (Michigan Industry, 2011). The “Big Three”—General Motors (GM), Ford, and Chrysler—were traditionally the biggest employers, turning the state into a manufacturing hub for automobiles and trucks. Michigan posted annual revenues of $218 billion in 1997, mostly from manufacturing activities.  By 1998, the state was producing 23% of all U.S. car and truck requirements. Michigan, in 2000, was host to 14 headquarters of the Fortune 500 companies—including GM, Ford and Chrysler (ranked #1, #2 and #9, respectively)—making the state a major manufacturing center in the world not just for cars, but also, other durable goods.

Today, Michigan is at the center of another storm as it has the highest unemployment rate in the country at 10.9% as of July 2011, according to the Bureau of Labor Statistics (BLS, 2011).  (This figure has come down from its peak of 14.1% since August-September 2009, as the U.S. economy was just pulling out of the 2007-2008 economic recession.) Michigan’s over-dependence on a single industry, it is now viewed, has turned into a liability. When the economy was doing well, as in the 1960s and 1970s, the auto industry was the state’s engine for economic growth; but, when the economy turned south, the auto industry became its Achilles’ heel.

Contrast this scenario with what’s happening at the other side of the world, China. As the world’s fastest growing economy in about the same period as America has been losing jobs, China, has attracted manufacturing companies one at a time to become today’s de facto global workshop—manufacturing from the humble hammer, to the high-tech iPads, to luxury cars such as Volvo. Growing an average of 17% annually from 1990 to 2002 (Weiss, 2005), in less than a generation, China, has eclipsed Japan, in 2010, to become the world’s second largest economy, next to the United States.

On surface, China emerged as the ‘winner’ and the United States the ‘loser’ in this bilateral trade arrangement, anti-globalization advocates would argue. The economic recession and the pain of job loses have raised the globalization debate at the forefront. The debate on the ‘ethics’ of globalization in general, and outsourcing in particular, has gathered enough momentum that it could be one of the political tipping points in the next Presidential election come November 2012.

The ethical, social, and cultural dilemmas that leaders have to grapple with are complex and multidimensional. If one side gains, while the other loses, who is to decide which side has the right to gain? Where’s the morality of ‘cultural invasion’ (Hendee, 2010)? Should government get involved, or leave market forces entirely to find its equilibrium? At a micro-, more personal-level, Can anyone place a dollar value on the anxiety ensuing from losing one’s job and potential displacement in a largely different job world?  Can we attach a cost/benefit to the lost opportunities? What about the loss to one’s self-esteem? These are some of the dilemmas we will attempt to tackle and provide some answers.

THE BENEFITS. Let’s face it; companies move their operations overseas to less-developed economies primarily for economic reasons: (1) create new markets for their existing products and services; (2) take advantage of the lower labor costs; and (3) facilitate flow of foreign direct investments (FDI). Let’s start with the last one.

Foreign direct investment (FDI). With our interconnected world, money can move freely anywhere in the world by a click of a mouse. It will flow, like water on a stream seeking the path of least resistance, to any investment location where there is a higher expected yield or return (ROI, or return on investment). Thus, through FDI, money will naturally flow from a low-yielding, but stable, often advanced economy to a higher-yielding, but volatile, developing foreign market without much help from either government or the private sector. Governments may impede the flow of money into the country by erecting tariff barriers, or other forms of taxation; or encourage its flow via incentives such as tax holidays. In the end, it is ROI that serves as true magnet for foreign capital.

The receiving country welcomes this capital, and with it, technology transfer, because it benefits the local economy through job creation, as well as incremental tax revenues. Sans the ‘human cost,’ this market-driven exchange works well in theory, and provides a ‘win-win’ arrangement on both sides. What makes this theory difficult in practice is that, in the process of transferring wealth from one advanced economy to a lesser one, one inevitably creates ‘winners’ and ‘losers.’ The winners, where new jobs are created are the same countries that are attracting massive amounts of foreign investments—China, the United States, India, and Brazil (A.T. Kierney, 2011) and the losers are the workers from the advanced economies, e.g., the United States, Germany, UK, and developed Europe. (Note that the United States are on both sides of the equation, reflecting the fact that, the cost-benefit in any bilateral trade relations is a two-way street.)

Competition, cost, and technology enablers. Gone are the days when a company can dictate the price for its products and/or services. Today, markets are very competitive and price-sensitive that an organization’s profitability (let alone, survival) is squeezed on both sides of the value chain—customers wanting value for their money on one hand, and inflating factor costs on the other. Since cost-of-goods-sold is often the single largest cost item in the P&L, companies benefit from the cumulative reduction on both materials and labor by locating overseas. Some countries even offer ‘tax holidays’ on income earned, adding to the attraction of relocation.

Coordination of multiple locations is made possible with advances in technology. Computers and telecommunications technology have advanced at such a pace that companies are able to coordinate their front- and back-office operations seamlessly regardless of physical location on the planet. The front office, Sales, may be located in the United States; production in Thailand or Indonesia; accounting, HR, including customer service in the Philippines, logistics and shipping in Singapore or Hong Kong.  Distance and time have truly become irrelevant in this day and age.

Creating new markets, enhancing customer service. Moving operations overseas has the added benefit of access to large pools of English-speaking, college-educated workforce who are willing to work at a fraction of their U.S. counterparts. Juxtaposed against a graying workforce back home, requiring higher medical support, access to a younger generation provides companies potential new markets for their products that are too attractive to ignore. In addition, the same company can serve its customers 24 x 7 x 365 by leveraging time zones. This global strategy has proved to be an effective risk insurance in times of natural or man-made disasters. This happened to Toyota when its global supply chain was immobilized for six months following the triple disasters of earthquake, tsunami and nuclear fallout, which struck Japan in March 11th this year.

WALMART.  In 2001, Walmart became the world’s largest company, surpassing Exxon Mobil, the oil giant, with revenues in excess of $218 billion (Belsie, 2002). Listed as WMT in the New York Stock Exchange, Walmart outsources 60% of its merchandise in China—from Nike shoes, to Kraft dinners, to furniture, to pants, clothes, dishwashing liquids, to Colgate toothpastes—and sells them all over the world (Smith & Young, 2004). In a segment of the documentary film titled, “Is Walmart Good for America?” producers Smith and Young featured an interview with Alan Tonelson, author of The Race to the Bottom: Why a Global Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards. Tonelson argues that, referring to bilateral trade agreements between the U.S. and other countries, in particular with China, “The problem is that U.S. trade policy writ large has encouraged large and politically powerful multinational companies to supply the U.S. market from China. It gives these firms the ability to charge U.S. prices for goods … but to pay Chinese wages.” He warns that unless the U.S. corrects this trade imbalance, time will come when Americans can no longer afford to pay imported goods and services (Tonelson, 2002).

THE DOWNSIDES. While the benefits of globalization are well covered in the board rooms and academic circles, what’s often left unspoken are the ‘collateral’ costs, by-products of this changing global landscape. We will discuss two that are the most sensitive and strongest criticisms: (1) job-loss, and (2) impact on endemic culture as a result of the foreign influence.

High unemployment. The last unemployment rate for the United States, according to Trading Economics was recorded at 9.1% in August 2011, and remains largely unchanged since April. This unemployment rate contrasts starkly to the historical average of 5.7% (from 1948 until 2010). While we may be shocked by these statistics, seeing them now in the context of high unemployment, the government policy to replace manufacturing jobs with service jobs has been on-going for the last three decades, costing the United States 10 million of cumulative jobs lost, writes Bill Waddell in his essay, The Hollow American Economy: A Clarion Call for Leadership (Waddell, 2009). According to Waddell, manufacturing, as a share of the total workforce, dropped from about 20% in 1982 to less than 13% today. Arguing the Bureau of Labor Statistics (BLS) conclusion that “An increasing share of jobs was in high-paying jobs and required college training; but most jobs that were filled paid below-average wages and did not require a college education,” Waddell counters that the loss of high-paying manufacturing jobs has been replaced by low-skilled, low-paying jobs in the service sector (janitors, servers, cashers). He believes that unless we collectively reverse this short-sighted policy, we are effectively mortgaging our children’s future (Waddell, 2009).

Destruction of indigenous cultures. When foreign investments enter a country, the ripples they create is not contained to the economic circle alone. In an article that appeared in Asian Social Science, Xiang Ye, asks:  Cultural Invasion and Cultural Protection: Should Chinese Celebrate Christmas? The author presents a pragmatic view to this dilemma, reflecting the reality that, China, with its rapid ascent to become the world’s second largest economy, has indeed been economically integrated with the rest of the world. The author concludes that the Chinese will embrace Christmas, with all its western trappings, but in a form that is distinctively Chinese (Ye, 2010).

The dilemma raised by those who are opposed to cultural integration is about integrity. Local customs develop over generations. When a foreign idea or custom is introduced, the new idea will compete with the prevailing beliefs, but in time, will eventually ‘absorb’ the new idea forming a hybrid form of the original. To the purists, this is tantamount to cultural invasion, and therefore, unacceptable because it interferes with the natural process of cultural development. F. S. Michaels, pointed this phenomenon in his book “Monoculture” when he posits: “The governing pattern a culture obeys is a master story—one narrative in society that takes over the others, shrinking diversity and forming a monoculture. When you’re inside a master story at a particular time in history, you tend to accept its definition of reality. You unconsciously believe and act on certain things, and disbelieve and fail to act on other things. That’s the power of the monoculture; it’s able to direct us without us knowing too much about it” (Michaels, 2011).

LEADERSHIP DILEMMA.  The tide of globalization has risen and probably will continue to rise. The economic benefits from both sides of the transaction far outweigh the perceived human costs. If a manager/leader is to perform his duty to society, he/she has to balance the requirements of the various stakeholders—owners, employees, suppliers, customers, and the broader community (O’Toole, 2009). This balancing act is easy to grasp, and its cause-and-effect relationship easy to understand when a company’s operations is located in one area. He/she can see the immediate benefits to society because he/she is able to satisfy the wants of the customer, keeps his/her suppliers and partners in business, provides employment to his/her employees, and still make a decent profit for the business owners. It’s easy to see where the business starts and ends. If any of these stakeholders are not happy, say, the employees are not having enough jobs to feed their families; he/she is able to see the direct impact of that loss. If the business is not making any profit from operations, it will not take too long before the business closes shop.

The challenge of balancing the needs and expectations of the various stakeholders remains the same within the larger context of global operations. What changed are the scope, and the time it takes for feedback to return. The social costs—job loss in one area, and jobs created in another—happens at the national, or country level. The principle of “maximizing gain and reducing pain for the most number of people” (Mill & Bentham, 2004) no longer applies on a local, but global scale. It is only by taking this paradigm shift to heart that a manager can reconcile the inherent conflict of what he is trying to facilitate, via outsourcing, versus the utilitarian ideal. If jobs are disappearing within his immediate watch, he can take comfort that those jobs are appearing cross-border, in another country.

Finally, globalization is here to stay. There will be winners and losers. We can adopt either a reactive or proactive posture to this global phenomenon. If we just watch this unfold by the way-side, companies will continue to find a lower-cost country to leverage cost and create new markets. This is Economics 101. Being proactive, on the other hand, is to grab the challenge by its horns. That is, facilitate its unfolding by actively getting involved in the decision-making process, help those affected adapt to the impact by providing career counseling services and re-training programs, skills upgrading, and continuous employee development.

We prepare our subordinates by freely sharing information, and helping them understand what these new developments mean to them, their families, and the organization they rely upon for their livelihoods. It is when their minds are primed of several scenarios that the pain of adjustment becomes less painful. If we keep information to ourselves, we have done a disservice to our team members. Making sense of the world, afterall, is one of our key functions as leaders. In times of uncertainty, the more it is expected of us to step up, articulate, and figure out an answer to the questions, “What does this all mean to me as a leader? What is the implication of this to my team? What can I do to help during the transition?”

References:

A.T. Kierney Management Consultants (2011). Foreign Direct Investment (FDI) Confidence Index. Retrieved from their website: http://www.atkearney.com.

Belsie, Laurent (2002). Walmart: World’s Largest Company. Christian Monitor. Retrieved from: http://www.csmonitor.com/2002/0219/p01s04-usec.html.

Bureau of Labor Statistics, (1999, 2011). Various National & Industry-Specific Occupational Employment & Labor Statistics Data. Retrieved from their website: http://www.bls.gov/.

Hendee, James G. (2010). Profitable Globalization and the Ethical Dilemma of U.S. Job Loss. The McNair Scholars Research Journal.

Michaels, F. S. (2011). Monoculture: How One Story is Changing Everything.

Michigan, Industry Data. Retrieved from their website: http://www.city-data.com/states/Michigan-Industry.html.

Mill, John Stuart and Bentham, Jeremy edited by Ryan, Alan (2004). Utilitarianism and Other Essays. London: Penguin Books.

O’Toole, J. (2009). Connecting the Dots Between Leadership, Ethics, and Corporate Culture. Ivey Business Journal Online, Sep/Oct.

Shafaeddin, Medhi (1998). How Did Developed Countries Industrialize? The History of Trade and Industrial Policy: The Cases of Great Britain and the USA.

Smith, H. and Young, R (2004). Is Walmart Good for America? (documentary film). Public Broadcasting System (PBS) Video. United States of America.

Tonelson, Alan (2002). The Race to the Bottom: Why a Global Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards.

Trading Economics. Various Economic Statistics. Retrieved from their website: http://www.tradingeconomics.com.

Waddell, Bill (2009). The Hollow American Economy: A Clarion Call for Leadership.

Weiss, John (2005). China and its Neighbours: Partners or Competitors for Trade and Investment?

Ye, Xiang (2010). Cultural Invasion and Cultural Protection: Should Chinese Celebrate Christmas?Asian Social Science. Retrieved from: http://www.ccsenet.org/ass.

Trust: A retrospective on its role in the Leader-Follower Equation

Building Trust
By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

“Trust men and they will be true to you; treat them greatly and they will show themselves great.”

~ Ralph Waldo Emerson

As leaders, we have a choice: to give or not to give away trust. Withholding it not only undermines our role, but also, robs ourselves and our teams with a powerful lever to changing a culture. Call it ‘self-fulfilling’ prophecy, as you might, but we respond positively to positive expectations from our leaders. Just as well, we respond negatively to negative expectations. Leaders, and those in positions of authority, have that much influence in how members feel about themselves, and their attitude toward each other. Leaders set the tone, and the followers pick it up. Mike Krzyzewski, Duke University’ Duke Blue Devils college basketball coach once said: “The team that trusts—their leader and each other—is more likely to be successful.”

In today’s environment, a manager cannot afford not to trust his team. Roger Staubach, Real Estate Entrepreneur and Hall of Fame Quarterback once said, “If you don’t have trust inside your company, then you can’t transfer it to your customers.” Larry Light, CEO of Arcature concurs: “Trust is what drives profit margin and share price. It is what consumers are looking for and what they share with one another.” In today’s society of overlapping networks, self-interests, and teams, leaders have the choice to give team members the trust and confidence in their capabilities. In so doing, leaders build goodwill, which then ignites a virtuous cycle of achievements. Employees strive to live up to the expectations of their leaders, because to be trusted is to be recognized.

Leaders create their reality. Leaders have the power to create their reality. They do this by articulating a vision, a point-of-view, and allocating resources to get to that point. They are able to influence the team’s view of the outside world by their outlook and interpretation of the events surrounding their organization (Yukl, 2010). In the same token, leaders are able to influence the attitude of people they lead by giving away trust.

Trust smoothens the inner workings of a group, facilitating cooperation, reducing risk of conflict. According to Warren Bennis, “Trust is the lubrication that makes it possible for organizations to work.” At a time of widespread downsizing, trust is the emotional ‘glue’ that bonds people to their organizations (Bennis, 1999). Without a modicum of it, employees will be sitting by the fence, alienated and emotionally dissonant with their jobs. A high-trust environment, in contrast, engages the person’s entire being—his mind, as well as his heart.

Through his actions, a leader creates this environment 70% of the time, either positively or negatively, according to a research by the Hay Group (2010). A high-trust, nurturing work environment, Hay Group’s research suggests, contributes 30% to bottom line results. By implication, a leader influences 21% of the bottom line (Hay Group, 2010). An effective leader accomplishes this feat by giving away trust. The followers take up the leader’s cue, start to trust each other, and an energy vortex is created that lifts the whole team to a higher plane of performance.

“Leaders strengthen credibility by demonstrating that they are not in it for themselves; instead, they have the interests of the institution, department, or team and its constituents at heart. Being a servant may not be what many leaders had in mind when they choose to take responsibility for the vision and direction of their organization or team, but serving others is the most glorious and rewarding of all leadership tasks” (Kouzes, & Posner, 2006).

The power of self-fulfilling prophecies. We expect the best in our teams by the level of trust (or distrust) we accord them. A manager cannot expect quality from his people if he can’t trust that the people are capable of making these quality decisions. He extends trust to the extent that he empowers them to make the right decisions. When it comes to trusting someone, there’s some truth in the saying, “faking it until it becomes real.”

By unilaterally extending trust to his employees, a leader creates this goodwill, to which the employees will try to live up to. It is a unilateral decision, because it is up to the leader’s discretion to extend this ‘risk’ to the other party. By initiating such candor, employees return the favor, thereby, creating a virtuous cycle of positive reinforcement: trust begets trust. This is the thesis by David Cooperrider, the man credited for Appreciative Inquiry (Cooperrider & Godwin, 2010). By creating a trusting environment that highlights the best that men can be, employees, live up to the expectation, generating the energy to actualize those expectations (Cooperrider & Godwin, 2010).

Social exchange theory is built on the rule of reciprocity. A leader creates this circular reciprocity by bestowing trust upon its members. “Trust,” according to Castaldo, et al (2010), “is only bestowed where there is an uncertain or risky situation. In this case, the trustor, by trusting the counterpart, voluntarily puts himself in a vulnerable situation” (Castaldo, 2010). Ralph Waldo Emerson, aptly described this dynamic: “The glory of friendship is not the outstretched hand, nor the kindly smile, nor the joy of companionship; it is the spiritual inspiration that comes to one when you discover that someone else believes in you and is willing to trust you with a friendship.”

Robert Cialdini (1984) in his book, Influence: The Psychology of Persuasion, argued this well. He cites the tactic of the Hare Krishna group of giving away free token gifts—say a flower, book—at the train stations or airports. Once a person accepts the free flower (or book), he/she feels obligated to make a ‘small’ donation. Reciprocation occurs in every society according to Cialdini (1984). An astute leader knows this well. By giving away trust, the followers now feel obligated to live up to his/her expectations. This sounds Machiavellian but the reality is that we’ve been programmed by our culture to always reciprocate. In certain Asian cultures, not returning the favor is considered a faux pas, an affront to the ‘face’ of the giver. A person who accepts the favor but doesn’t repay will be frowned upon, even ostracized.

Milgram experiments. Followers will naturally follow orders from their leaders, as consistently demonstrated by Stanley Milgram’s classic obedience to authority experiments (Milgram, 1974). The implication that followers will do whatever the leader expects him/her to do to gain a favorable impression is a sobering fact of human nature. A leader creates the type of environment he wishes to create because we are naturally programmed to ‘trust’ our leaders and follow his/her lead. In Milgram’s experiments, this follower behavior persists even in situations where the leader’s motives may be questionable. The employee becomes a ‘passive’ participant—an agent of malice.

That being said, it goes without saying that the reverse is also true. A leader, who cannot trust his team members, cannot expect his members to trust him implicitly. Without a climate of trust, an organization will not survive in this hyper-competitive environment. It slows down decision-making because of the layers of ‘checks-and-balances’ that are being built to counter the lack of trust. This exacerbates an already toxic climate by passing the onus to the person to prove his/her own trustworthiness.  Unless an organization has a high-trust environment, more nimble competitors will always win the race.

Why does a leader not trust at the outset? If trust speeds an organization’s processes, why does a responsible leader not give that out freely? A controlling manager is often a distrustful manager. At the core of the issue is the leader’s self-esteem—his self-efficacy, or his self-concept—which he sub-consciously projects to the outside world, including his people. While it is true that trust can only be earned over time, there’s a positive correlation between giving that trust to a person and his future performance. It’s part human nature, part goodwill building, part self-fulfilling prophecy. By showing freely that you trust someone, you as a leader are implicitly stating that you yourself are trustworthy. A leader with low self-esteem cannot bestow a high-regard for someone because doing so is giving away control. A person low in self-esteem finds solace in controlling others.

In today’s environment, a company cannot afford not to tap on the goodwill of its employees. The old social contract is long gone, and the bond that previously connects the employees to their organizations has been tenuous, if not broken. Leaders who cannot trust their team can actually make matters worse, by being insecure and overly controlling. An enlightened leader can reduce the stress levels during these uncertain times by becoming more open, and flexible to their team’s needs, an accommodating spirit that comes only from high-levels of self-esteem, and trust that comes only from a belief in the general goodness of men.

Leaders have the difficult task of gaining the employees’ trust because it is only when there’s high enough trust that an organization can truly survive. A happy employee will spread this happiness to the organization’s customers by serving well. An emotionally engaged employee is often willing to give discretionary effort to advance the organization’s cause. This doesn’t occur in a vacuum. Employees reciprocate to their manager’s treatment. The leader plays a crucial role in making this cycle work. A trusting leader communicates, and invites others to contribute their best because he has first shown that he can be trusted. The whole virtuous cycle is only set in motion by the leader’s act of giving away trust—freely and unconditionally.

References.

Bennis, Warren (1999). The leadership advantage. Leader to Leader, No. 12 Spring 1999. Retrieved at http://www.hr-newcorp.com/articles/bennis_Leaders.pdf.

Caldwell, Cam; Hayes, Linda A.; Long, Do Tien (2010). Leadership, trustworthiness, and ethical stewardship. Journal of Business Ethics, 96. 497-512. doi: 10.1007/s10551-010-0489-y.

Castaldo, Sandro; Premazzi, Katia; Zerbini, Fabrizio (2010). The meaning(s) of trust. A content analysis on the diverse conceptualizations of trust in scholarly research on business relationships. Journal of Business Ethics, 96. 657-668. doi: 10.1007/s10551-010-491-4.

Cialdini, Robert (1984). Influence: The Psychology of Persuasion.

Cooperrider, David L., & Godwin, Lindsey N. (2010). Positive Organization Development: Innovation-inspired Change in an Economy and Ecology of Strengths. Retrieved at http://appreciativeinquiry.case.edu/intro/comment.cfm.

HayGroup (2010). EI at the Heart of Performance: The Implications of our 2010 ESCI Research.

Kouzes, Jim and Posner, Barry (2006). The Leadership Challenge. Jossey-Bass. ISBN:978078792966.

Milgram, Stanley (1974). Obedience to Authority: An Experimental View.

Yukl, Gary (2010). Leadership in Organizations, 6, 151-189. Upper Saddle River, New Jersey: Prentice Hall.

Leadership across the World: Bridging the ‘cultural divide’

kintai-bridge
By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

 

“People can only live fully by helping others to live. When you give life to friends you truly live. Cultures can only realize their further richness by honoring other traditions. And only by respecting natural life can humanity continue to exist.”

~ Daisaku Ikeda, Japanese peace activist and Buddhist Leader, Soka Gakkai International

 

That our world is ‘shrinking’ is undeniable. The internet has enabled peoples from remote and less-developed places to share the same life experiences as those living in advanced countries. The diaspora from developing to developed countries are facilitating a cultural convergence never seen in history. According to Ellen Galinsky, president and co-founder of the Families and Work Institute in New York, there are more people of color—up from 12% in 1977 to 21% in 2008; among employees under age 29, the percentage of people of color increased from 13% in 1977 to 39% in 2008; there are more employees age 40 and older—up from 39% in 1977 to 68% in 2008.

As ageing populations in developed economies retire, they are increasingly being replaced by immigrants from developing economies who are young, educated and highly mobile. As a result of this cross-border exchange and people living longer, healthier, we are seeing not only four generations of workers working side-by-side, but a workforce that is increasing diverse in its mindset, physical appearance, and values.

The popularity of Hollywood movies all over the world has facilitated the transfer of North American ethos to cultures that have otherwise been isolated. This cultural exchange has not been a one-way street. Following the rise of Confucian Asia in global economic importance—first by Japan in the 1970s, and China in this century—erstwhile ‘collectivist’ values such as teams, group dynamics, and employee empowerment are making their inroads into the Western psyche, culture, and corporate boardrooms. Increasingly, formerly ‘individualist’ values high on masculinity are giving way to more ‘collectivist’ attitudes that are more nurturing and feminine in character.

Leadership models are also undergoing a similar transformation abetted by the rise of multinational corporations (MNCs) in cross-border trade. We’re seeing a convergence of leadership effectiveness across cultures, and a reassessment of followers’ perceptions of what constitute effective leadership. Increasingly, the global trend points to a workplace that’s more holistic, humane, egalitarian, flexible, and values-, rather than rules-based. These changes incorporate the best of global cultures—a hybrid of East and West, North and South, developed and developing, First and Third-world paradigms.

Common cultural dimensions in Project GLOBE. Hofstede (1980, 2001), Trompenaars (1998), and Kluckhohn & Strodtbeck (1961) conceptualized and developed nine cultural dimensionsGlobal Leadership and Organizational Behavior Effectiveness (GLOBE)—which are facets of culture that influence the behavior of employees in that country.  Project GLOBE, touted as “the most ambitious study of global leadership” (Morrison, 2000), was conceptualized by Hofstede, et al, to test the hypothesis of the existence of relationship between culture and societal, organizational, and leadership effectiveness (Javidan et al, 2006).

Conducted for 10 years, 170 researchers and social scientists collected and analyzed the leadership attributes of 17,000 managers in 62 countries. Their findings were then classified into nine so-called cultural dimensions: (1) performance orientation, (2) assertiveness, (3) future orientation, (4) humane orientation, (5) institutional collectivism, (6) in-group collectivism, (7) gender egalitarianism, (8) power distance, and (9) uncertainty avoidance. The results were further summarized per country, per region, and differences were examined. What emerged are ten so-called cultural clusters, countries within a region, that share a common cultural heritage. The 10 clusters are: (1) Eastern Europe, (2) Latin America, (3) Latin Europe, (4) Confucian Asia, (5) Nordic Europe, (6) Anglo, (7) Sub-Saharan Africa, (8) Southern Asia, (9) Germanic Europe, and (10) Middle East (Javidan et al, 2006).

From these ten clusters came the question: “What makes a good leader?”, “Is there a common set of leadership qualities that makes one leader effective in one culture that could be transplanted into another?” This gave rise to the concept of implicit leadership theory, ILT, (Shaw, 1990). This theory is a set of perceptions about leadership qualities that enhance or impede team performance that is shared by individuals within that cluster. This beliefs system is an outgrowth of the broader culture in which the person belongs to, and is a function of the collective mental models, schemas, worldviews, and ways of seeing the world within that cluster (Lord & Maher, 1991).

House, et al (1999) postulate that there are 21 primary, and six global leadership dimensions—later known as culturally endorsed leadership theories (CLT). These six culturally endorsed leadership theories are: (1) charismatic/value-based, (2) team-orientation, (3) participative management, (4) humane-orientation, (5) autonomy, and (6) self-protection (Javidan et al, 2006). The first four CLTs positively correlate to leadership effectiveness and team performance (i.e., charismatic/values-based, team-orientation, participative, humane-orientation); whereas the last two are considered negatively correlated—autonomy, and self-protective leadership predilection.

Charismatic/values-based. The leadership dimension that inspires followers to achieve greater things based on the power of ‘shared’ vision or values. The implicit underpinning is that of Theory Y management (McGregor, 1960)—followers can be intrinsically motivated by tapping into their inner longing to be part of something bigger than themselves. The Anglo cluster ranked highest in this theme, contrasting with Middle Eastern cluster which ranked lowest. It is interesting to note that intrinsically motivated Anglo countries (e.g., England, US, Canada, Ireland, New Zealand, South Africa, Australia) share a common Calvinist or protestant work ethic, which believes that hard work is beneficial to both the individual and society (Weber, 1959).

Team-orientation. Borne out of traditionally collectivist societies (i.e., Latin America, Confucian Asia, Southern Asia clusters) is the leadership ability to build strong and lasting teams through team facilitation, team building, employee development (coaching) and empowerment. Strength on this leadership quality has a high positive correlation on team performance. The Middle East cluster ranked lowest in team-orientation, followed by Germanic Europe which ranked middle-low, which is not surprising given the traditionally individualist orientation of this cluster.

Participative management. Participative leadership dimension promotes shared decision-making and is deemed to have positive correlation on overall team performance. Clusters that rated high on this dimension are from Nordic Europe, Anglo and Germanic Europe. Clusters that ranked low on this dimension are Eastern Europe, Confucian Asia, Southern Asia and Middle East. Perhaps not surprisingly, clusters that ranked low tended to have high power distance, and those that ranked high have low power distance.

Humane-orientation. This is the leadership propensity to show compassion and generosity to the people with whom one leads. This has also shown high positive correlation to overall team performance. Countries in Southern Asia ranked highest in this dimension, in contrast to Nordic Europe, which ranked lowest.

Autonomy. Borne out of individualist societies, this is the leadership dimension that veer toward independent, non-participative decision-making, and has been shown to impede or slow-down team performance. Eastern Europe cluster ranked highest, in contrast with Latin American cluster which ranked lowest.

Self-protection. Self-preservation, is another perceived leadership dimension that has a negative correlation toward team performance because of its self-centered and inward-looking nature. Not surprisingly, this dimension promotes the leader’s self-interest more than the team’s. Southern Asia cluster ranked highest, contrasting with Nordic Europe, which ranked lowest in this dimension.

Teams as a global phenomenon. As a result of unabated downsizing by companies, teams as an organizing principle is becoming more and more prevalent in today’s organizations, not only for multinational companies, but also for local ones. The elimination of middle management requires leaders to have the ability to build teams out of a diverse pool of workers, promote cross-functional awareness, and empower themselves to achieve organizational goals.

Countries that are traditionally individualist are slowly adopting the collectivist society’s values of participative management, such as giving people a voice, and power-sharing work arrangements. This trend will continue into the 21st century as globalization advances. Leaders from multinational companies are serving as catalysts to spreading this ‘glocal’ ethos—a cultural mixture that capitalizes on the strengths of global teams, and the flexibility and adaptation of local sensibilities without encroaching into each other’s domains.

The evolving role of leaders in this new reality, therefore, is that of a ‘bridge’—narrowing the differences that exist across the cultural divide—bringing about the best in both worlds. The top leadership challenge in this new reality is how to balance competing demands of an increasingly diverse workforce, requiring leaders to have five minds: the creative mind, disciplined mind, synthesis mind, ethical mind and respectful mind (Gardner, 2009).

References.

Gardner, Howard (2009). Five Minds for the Future. Harvard Business School Press.

Hofstede, Geert (1980). Culture’s consequences: International difference in work-related values. New Bury Park, CA: Sage.

Hofstede, Geert (2001). Culture’s consequences: Comparing values, behaviors, institutions, and organizations across nations. 2nd ed. Thousand Oaks, CA: Sage.

House, R.J.; Hanges, P.J.; Ruiz-Quintanilla, S.A.; Dorfman, P.W.; Javidan, M.; Dickson, M. et al (1999). Cultural influences on leadership and organizations: Project GLOBE. In W.F. Mobley, M.J. Gessner & V. Arnolds (Eds.), Advances in Global Leadership (Vol.1). 171-233. Stanford, CT: JAI Press.

Javidan, Mansour; Dorfman, Peter W.; de Luque, Mary Sully; & House, Robert J. (2006). In the eye of the beholder: Cross cultural lessons in leadership from Project GLOBE. Academy of Management Perspectives, February, 67-90.

Kluckhohn, F.R. & Strodtbeck, F.L. (1961). Variations in Value Orientations. New York. Harper & Row.

Lord, R.G., & Maher, K.J. (1991). Leadership and information-processing: Linking perceptions and performance (Vol. 1). Cambridge, MA: Unwin Hyman.

McGregor, Douglas (1960). The Human Side of Enterprise.

Morrison, A.J. (2000). Developing a global leadership model. Human Resource Management Journal, 39(2&3). 117-131.

Shaw, J.B. (1990). A cognitive categorization model for the study of intercultural management. Academy of Management Review, 15(4). 626-645.

Trompenaars, F., & Hamden-Turner, C. (1998). Riding the Waves of Culture. 2nd ed. New York. McGraw-Hill.

Weber, Max (1959). The Protestant Ethic and the Spirit of Capitalism. Chas. Scribner’s sons.

Power and followership: An ecosystem

Chrom Network By Gerald A. Daquila, Ph.D. (Candidate)
The Chicago School of Professional Psychology

“Great empires are not built by people who see two sides to every question.” ~ David K. Hurst

 

Leaders are appointed to positions of authority, and with it power, to achieve a goal, a task or a mission. They accomplish this through careful planning, organizing, and allocating of resources to accomplish the end result. People, the followers, are assigned to them as a resource to be managed. Followers, unlike other types of resources, however, are complex. Leaders need deep appreciation of human nature to get the best out of them. As sentient beings, employees have free-will, emotions and the potential for greatness or failure (Hume, 2006).

Yves Morieux and Robert Howard describe this dialectic, “The concept of uncertainty provides the basis for a rigorous understanding of power in human behavioral systems. Power is the capability to act in—and on—the system: it is a function of the uncertainties one controls for other members in the system. Actors with power set the rules of the collective game and thus influence the behavior of others. In this way, actors that have power are able to minimize their own uncertainty and thus expand their freedom to pursue their goals” (Morieux, & Howard, 2000).

Leaders, therefore, have a legitimate use of power to achieve their ends. However, unlike Machiavelli’s fictional world, the end doesn’t justify the means. People have to be treated as persons with respect because they have the inherent right to their existence and happiness (Hume, 2006). There are five basic forms of power as originally defined by French and Raven (1959). Included is the sixth form in recognition of the knowledge-based economy we now live in (Woldring, 2001), and explore each power base’s effectiveness in achieving particular ends.

Coercive power. Coercive power is the reliance on command-and-control and intimidation tactics to get things done (French, & Raven, 1959).  Slavery is the most egregious example in the old days, but may take subtle forms in today’s workplace—e.g., withdrawal of status, benefits, promotion or other perks for non-compliance. The ability of today’s leaders to tap into this gilded power tactic has been curtailed by law in many developed countries. As well, leaders can no longer rely on coercion to get results because of fundamental shifts in power, as well as changes in the demographic profiles for those whom they lead.

Firstly, the social contract between the corporation and the ‘organization man’ (Whyte, 1956) is long gone. It is now replaced by a collegial, egalitarian ethos that is quintessentially psychological. Secondly, the workforce is more educated, and well-informed with what goes on in the world outside of work. Thirdly, technology has untethered the knowledge worker not only just from his/her desk, but also, from the organization’s all-encompassing reach—allowing for him/her to telecommute or work virtually anywhere in the world.

Under this new milieu, the employee’s loyalty to the organization depends on his perception of how much he is gaining psychologically and spiritually from his/her contractual relationship with the company. The ‘rules’ of the new economy has opened man’s inner hunger for higher order needs of self-actualization, and a desire for making one’s life count for something—to make a difference (Maslow, 1998). Coercion as a source of power, in contemporary society, is ineffectual, if not totally unethical. It’s been made ineffectual by the emergence of ‘distributed’ model of decision-making.

Technology, at its core, is about empowerment. It empowers the member that’s generating value—the knowledge worker—and away from the manager, traditionally playing the role of ‘gate-keeper’ or ‘traffic controller.’ If information exchange (i.e., decisions) is unimpeded, the erstwhile ‘concentrated’ model, whereupon coercive power is founded, no longer stings (Evans, & Wurster, 2000). Abraham Lincoln’s words proved prophetic when he said, “No man is good enough to govern another man without that other’s consent.”

Referent or inspirational power. In order to tap into this reservoir of talent, an astute leader has to use inspirational power to bring out the best in the people he leads. He does this by communicating a clear vision of a different future state. An inspirational leader paints a compelling picture and then invites followers to join him—voluntarily.  Followers who are engaged with their work will accomplish great things no one ever thought possible (Maslow, 1998).

Napoleon Bonaparte said it best: “A leader is a dealer in hope.” All of us long for greatness, for making a difference as if our humdrum existence counts. We go to such extent as climb Mount Everest, risk life and limb spelunking, withstand hunger to paint the Sistine Chapel, create a work of art in everyday gizmos such as the iPhone, travel to the moon, or raise well-adjusted children who later become leaders. Inspiration is the spark between insignificance and greatness.

Brendan Greeley, writing for a column at Bloomberg magazine, succinctly said: “We humans follow base and pedestrian needs. We need narratives for our lives, and we look to the speechmakers, the prisoners of conscience, to write them for us. These narratives render our desires into abstract phrases. Freedom. Self-determination. Democracy. All of which means to an end. For us humans, the ends are almost always just a house and some quiet to raise our daughters. Some friends, and a measure of something fermented. Someone to love. Enough soap to rinse off the coal dust. A fruit stand” (Greeley, 2011).

Reward power. Reward power is the ability to give away rewards, status or recognition for achieving a goal. The exchange implies an inherently hierarchical structure defined by power differential between leader and follower. Reward power is Pavlovian in some sense (Pavlov, 1960). It assumes that men are driven by their physiological needs (Maslow, 1998). This power source is based on an outdated, if not flawed, assumption of the world of work we live in.

Educated, well-informed employees today have since moved from the short-lived ‘extrinsic’ to more lasting ‘intrinsic’ forms of motivation. Reward power in today’s context is appreciated if meted out in such forms as ‘flexible’ work arrangements, new and challenging work assignments, unconditional trust. Reward power is effective if it meets employees’ deep sense to belong, a chance to give back to the broader community, or be part of a larger cause.

Legitimate power. Legitimate power is the inherent power that goes with the formal title or position of a person in the organization hierarchy. On its own, it is a weak source of power especially for effecting culture change. Any change or action that ensues of this power base elicits only superficial, passive compliance from followers. Employees will go with the flow for as long as it’s necessary, but once the ‘threat’ of non-compliance is withdrawn, they will revert to their old habitual ways.

Expert power. Expert power is accorded to someone who possesses a specialized knowledge that’s rare or difficult to find. Its power to influence resides in scarcity. In the distant past, reliance on this power alone worked because people were not as ‘connected’ in ways that they are today—social media, push technology, Internet access 24×7. The manager who relies on this power will naturally keep knowledge to himself and will refuse to train others, perceiving a zero-sum game.

In organization settings, this style stifles both open communication and organizational learning. In a knowledge economy, this power source is anachronistic because our knowledge (and, therefore, power) grows only when we share freely what we have. This is where the true power of ‘open-source’ communities such as Wikipedia’s pool of writers and editors, or Linux operating system’s army of developers resides.

Knowledge power.  With the advent of teams as an organizing paradigm, distributed computing, and the power to accomplish something of value no longer resides in one person’s head. Increasingly complex, work is done through virtual teams, ‘neural networks’ of inter-dependent parts. Interdependence enables the various ‘knowledge generators’ to tap on the strengths of the other members within the network. Power differential (between the leader and follower) has no place under such an environment, because it only undermines cooperation wherever it exists.

Trust, both tacit and conscious, is what keeps this ecosystem thriving. In effect, “Self-confidence,” says Rosabeth Moss Kanter, “is not the real secret of leadership. The more essential ingredient is confidence in other people. Leadership involves motivating others to their finest efforts and channeling those efforts in a coherent direction. Leaders must believe that they can count on other people to come through” (Moss Kanter, 2004).

Power and followership: the new norm. “We’re all taught the Lord Acton saying that power corrupts and absolute power corrupts absolutely. But the more time I spend looking into power, the less I feel that is always true. What I do feel is invariably correct—what power always does—is reveal. Power reveals. When a leader gets enough power, when he doesn’t need anybody anymore—when he’s president of the United States or CEO of a major corporation—then we can see how he always wanted to treat people, and we can also see—by watching what he does with his power—what he wanted to accomplish all along” (Caro, 2006).

An effective 21st century leader needs power to set things in motion. He dispenses different types of it, in different times and situations, to remain effective.  Ralph Szygenda (2004), former editor-in-chief of Optimize Magazine posits: “There are two thoughts that often get lost in the discussion about being effective in building and using influence: Don’t assume you have all the right answers—that’s why a strong team is essential. And, above all, do the right thing—not only for business or economic impact, but also for social and philosophical implications. Ultimately, power is the ability to influence and facilitate change, and people naturally rally around leaders who do the right thing consistently.”

References

Caro, Robert A. (2006). LBJ’s deliberate march for power. HBS Working Knowledge. Retrieved at: hbswk.hbs.edu/archive/5332.html.

Evans, Philip, & Wurster, Thomas S. (2000). Blown to Bits: How the New Economics of Information Transforms Strategy. Boston, Mass.: The Harvard Business School Press.

French, John R.P.; & Raven, Bertam (1959). The bases of social power. In D. Cartwright and A. Zander, Group Dynamics. New York: Harper & Row.

Greeley, Brendan (2011). Al-Qaeda’s leader lost because he was wrong. Bloomberg. Retrieved at: http://www.bloomberg.com/news/2011-05-05/al-qaeda-s-leader-lost-because-he-was-wrong-commentary-by-brendan-greeley.html.

Hume, David (2006). A treatise of human nature: Being an attempt to introduce the experimental method of reasoning into moral subjects. Ebooks@Adelaide. Retrieved at: http://ebooks.adelaide.edu.au/h/hume/david/h92t/.

Maslow, Abraham (1998).  Towards a Psychology of Being. Wiley; 3rd ed. ISBN   978-0-471-29309-5.

Morieux, Yves; & Howard, Robert (2000). Strategic workforce engagement: Designing the behavior of organizations for competitive advantage. Boston Consulting Group (BCG). Retrieved at: http://www.bostonconsulting.com.au/documents/file14006.pdf.

Moss Kanter, Rosabeth (2004). How leaders build winning streaks. HBS Working Knowledge. Retrieved at: http://hbswk.hbs.edu/item/4388.html.

Pavlov, Ivan P. (1960). Conditional Reflexes. New York: Dover Publications.

Whyte, William H. (1956). The Organization Man. Simon & Schuster.

Woldring, Roelf (2001). Power in organizations: A way of thinking about what you’ve got, and how to use it. Workplace Competence International Limited. Hillsburgh, Ontario, Canada.