The Impact of Organizational Culture and Leadership Behavior on Middle Manager
Involvement in Strategy and Middle Manager Satisfaction:
A Conceptual Framework by Nicole Knight
Family Business Succession Among Entrepreneurs: Evidence from Prominent
Family Businesses in Barbados by Ms Nadia Shepherd-Worrell, Ms Khadija Holder,
Ms Amanda Pierce and Dr. Philmore Alleyne
From Reactive to Proactive Discipline in Schools: Implications for Transforming the
Future Workforce by Dr. Donna-Maria Maynard and Dr. Mia Jules
Public Sector Wastage In Annual Budgeted Subscriptions and Contributions
2009-2014: The Case of Barbados by Ronnie Griffith
Revision of the List of Ineligibles: A Policy Measure to Combat the Subversion of the
CET Suspension Mechanism by Shane L. Nicholls
Effective Project Governance: A Critical Strategy for Success in Project Management
by Dr. Wayne Charles-Soverall and Dr. Juliette Brathwaite
The Journal of Public Sector
Policy Analysis
Chairperson, Review and Editorial Committee
Dr. Louis Woodroffe
Permanent Secretary, Economic Affairs Division
Review and Editorial Committee Members
Professor Frank Alleyne
Professor Paul Turner
Mr. Carson Browne
Dr. Wayne Charles-Soverall
Professor Arindam Banik
Dr. Winston Moore
Dr. Delisle Worrell
Dr. Kari Grenade
Founding Members
Mr. Ronnie Griffith, Mr. Patrick McCaskie and Mr. Bentley Gibbs
Coordinator
Research and Planning Unit
Economic Affairs Division
Published by:
Research and Planning Unit
Economic Affairs Division
Ministry of Finance and Economic Affairs,
3rd Floor East Wing, Warrens, St. Michael, Barbados
Tel: (246) 310-1300/02 Fax (246) 425-1100
Email: [email protected]
September 2015
Disclaimer
The Journal of Public Sector Policy Analysis is published annually by the Ministry
of Finance and Economic Affairs, The Economic Affairs Division. The Journal is
concerned with analytical commentaries on pertinent economic and social issues
confronting our society.
The views presented in the papers are those of the authors and are not to be
interpreted as necessarily indicating the position of the Ministry of Finance and
Economic Affairs or the Government of Barbados.
Printed by the Government Printery.
VOLUME 8 SEPTEMBER 30, 2015
Acknowledgements
THE JOURNAL OF PUBLIC SECTOR POLICY ANALYSIS represents a
watershed in the history of the Research and Planning Unit of the Economic Affairs
Division, Ministry of Finance and Economic Affairs and, indeed, of the wider public
service.
The Economic Affairs Division of the Ministry of Finance and Economic
Affairs therefore expresses its sincere gratitude and appreciation to the following:

The members of the review and editorial committee: Dr. Louis
Woodroffe, Permanent Secretary, Economic Affairs Division, Ministry of
Finance and Economic Affairs; Professor Sir Frank Alleyne, Former Dean
of the Faculty of Social Sciences and Head of the Department of
Economics, University of the West Indies, Cave Hill Campus, Barbados;
Professor Paul Turner, Department of Economics, Department of
Economics Loughborough University, Loughborough, LE11 3TU, United
Kingdom; Professor Arindam Banik, Lecturer at the International
Management Institute, India; Dr. Winston Moore, Head and Senior Lecturer
in the Department of Economics, the University of the West Indies, Cave
Hill Campus, Barbados; Mr. Carson Browne, Former Permanent Secretary,
Economic Affairs Division, Ministry of Finance and Economic Affairs; Dr.
Delisle Worrell, Governor of the Central Bank of Barbados, Dr. Wayne
Charles-Soverall, Lecturer in the Department of Management Studies,
University of the West Indies, Cave Hill Campus, Barbados; Dr. Kari
Grenade, Economist, Caribbean Development Bank.
Authors of the eighth volume - Nicole Knight, Dr. Philmore Alleyne, Dr. DonnaMaria Maynard, Dr. Mia Jules, Ronnie Griffith, Shane Nicholls, Dr. Wayne
Charles-Soverall, Dr. Juliette Brathwaite, Nadia Shepherd- Worrell, Khadija Holder
and Ms. Amanda Pierce
iii
VOLUME 8 SEPTEMBER 30, 2015
iv
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VOLUME 8 SEPTEMBER 30, 2015
Contents
The Impact of Organizational Culture and Leadership Behavior on Middle
Manager Involvement in Strategy and Middle Manager Satisfaction:
A Conceptual Framework
by Nicole Knight
Family Business Succession Among Entrepreneurs: Evidence from
Prominent Family Businesses in Barbados
By Ms. Nadia Shepherd- Worrell, Dr. Philmore Alleyne,
Ms. Khadija Holder and Ms. Amanda Pierce
From Reactive to Proactive Discipline in Schools: Implications for
Transforming the Future Workforce
by Dr. Donna-Maria Maynard and Dr. Mia Jules
3
24
52
Public Sector Wastage in Annual Budgeted Subscriptions and
Contributions 2009-2014: The Case of Barbados
by Ronnie Griffith
66
Revision of the List of Ineligibles: A Policy Measure to Combat the
Subversion of the CET Suspension Mechanism
by Shane L. Nicholls
83
Effective Project Governance: A Critical Strategy for Success in
Project Management
by Dr. Wayne Charles-Soverall and Dr. Juliette Brathwaite
102
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The Impact of Organizational Culture And Leadership
Behavior on Middle Manager Involvement in Strategy
and Middle Manager Satisfaction:
A Conceptual Framework
By
Nicole Knight
Abstract
Management scholars have paid attention to employee involvement in
strategy within organizations given their significance to the organization’s success.
However, despite their contribution to the organizations’ well-being middle manager
involvement in strategy is limited. This paper presents a conceptual model that
examines the relationship between organizational culture, leadership behaviors,
middle manager involvement in strategy and middle manager satisfaction. The model
utilizes organizational culture and leadership behaviors as independent variables to
examine the resulting effect on middle manager involvement in strategy and middle
manager satisfaction.
Keywords: middle manager involvement, leadership, organizational culture, job
satisfaction, strategic management
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VOLUME 8 SEPTEMBER 30, 2015
Introduction
Middle managers are critical to the effective operation of an organization
and in many instances are responsible for delivering successful outcomes. They are
an important link pin between the top and the bottom levels of the organization
(Likert 1961). Middle manager involvement in strategy is therefore necessary in
order for their mandate to be achieved within organizations. Research conducted by
Floyd and Wooldridge (1990; 1997) and Schilit (1987) indicates that many middle
managers are not as involved in “championing alternatives” and synthesizing
information (upward involvement). Rather, middle managers have been noted to be
involved primarily in driving/implementing deliberate strategy (downward
involvement) in their organizations which refers to involvement or roles that are
focused on implementing top management strategies within the organization.
Middle manager involvement may be positively associated with job
satisfaction (Reilly, Brett and Stroh 1993, Howard and Frink 1996). One objective of
this research is to examine the relationship between middle manager involvement and
middle manager job satisfaction. Studies also show that middle managers involved in
setting goals and generating alternatives have a greater effect on organizational
performance than when involved solely in implementation activities (Pettigrew,
Ferlie and Mckee 1992).
In order to gather insight into what actually promotes middle manager
involvement in strategy it becomes necessary to examine the antecedents of
involvement. Two important antecedents of middle manager involvement are
organizational culture and leadership behaviors. Research has indicated a relationship
between both of these variables and middle manager involvement. For example,
Carney (2006), Procter, Currie and Orme (1999) and Salih and Doll (2013), provide
empirical evidence in support of this relationship.
Within the public sector, middle manager involvement is of paramount
importance. These institutions are not for profit entities and are frequently challenged
by scarcity of resources and inefficiencies. Public sector organizations tend to be
characterized by bureaucratic structures and cultures. The influence or potential
impact of these features within public sector organizations demands attention since
middle manager involvement can contribute to effectiveness and job satisfaction.
This paper presents a framework for examining middle manager
involvement in strategy determination within the public sector context. While studies
have been conducted on middle manager involvement in the United Kingdom and
North America there is a dearth of literature on middle manager involvement within
the Caribbean context.
Research suggests that middle managers involved in setting goals and
generating alternatives have a greater effect on organizational performance than
when involved solely in implementation activities (Pettigrew, Ferlie and Mckee
1992). As far as other organizational outcomes are concerned, research also shows
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VOLUME 8 SEPTEMBER 30, 2015
that middle manager involvement is positively associated with job satisfaction. In an
effort to gather insight into what actually promotes middle manager involvement in
strategy the paper examines the antecedents of middle manager involvement in
strategy. The two contingent factors chosen for this study are leadership behaviors
and organizational culture.
Research Problem
The problem of limited involvement of middle managers has plagued public
sector organizations in the developed world. As a result, much has been written about
the importance of the middle manager role and middle manager involvement.
However, little research has been conducted to diagnose what accounts for the low
involvement of mid-level managers. The current study seeks to examine the extent of
the impact that organizational culture and leadership behavior have on middle
manager involvement in strategy and middle manager satisfaction. Further, the study
is concerned with analyzing the extent to which middle manager involvement
actually plays a role in determining middle manager satisfaction. The research
questions associated with the study are:
1. Does organizational culture exert an influence on middle manager
involvement in strategy within the Barbadian public sector?
2. Does leadership behavior exert an influence on middle manager involvement
in strategy within the Barbadian public sector?
3. Does middle manager involvement in strategy (upward and downward)
mediate the relationship between leadership behaviors and middle manager
satisfaction?
4. Does middle manager involvement in strategy (upward and downward)
mediate the relationship between organizational culture and middle manager
satisfaction?
Conceptual Model
Much has been said about how middle managers behave during the strategic
process. For example, Floyd and Wooldridge (1990; 1992; 1997), Dutton and
Ashford (1993), Currie (1999) (2001) all conducted studies on middle manager
involvement. Wooldridge’s (1990) model identified a positive relationship between
middle manager involvement and organizational performance. The proposed model is
concerned with examining the impact that leadership behaviors and organizational
culture have on middle manager involvement and job satisfaction. This paper
therefore examines the relationships between these variables. The framework also
addresses the extent to which middle manager involvement in strategy mediates the
relationship between leadership behavior and organizational culture and middle
manager satisfaction.
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VOLUME 8 SEPTE
EMBER 30, 201
15
The C
Conceptual Model
M
In the fram
mework transfformational leaadership and transactional
t
leeadership
repressents leadersh
hip behaviors as independent variables. Using the M
Multifactor
Leadeership Questio
onnaire (MLQ)) designed by Bass and Av
volio (1995) leeadership
behavvior is operattionalized as follows: Tran
nsformational leadership: ccharismaidealiized influence (attributed), charism-idealized influence (b
behavior), insppirational
motivvation, intellectual stimulattion, individu
ualized consid
deration. Trannsactional
leadership: contingent reward, management
m
by
y exception (acctive), manageement by
excepption (passive)). Using Wallaach’s (1983) Organizational
O
l Culture Indeex (OCI),
organnizational cultu
ure is operatio
onalized as burreaucratic, innovative and suupportive
culturres. The Min
nnesota Satisffaction survey
y designed by
y Weiss et.all, (1967)
repressents the depeendent variablee and is operaationalized by intrinsic and extrinsic
satisffaction. Middlee manager invo
olvement in strrategy is the mediating
m
variaable. This
is opeerationalized via
v championin
ng alternatives, synthesizing information,
i
faacilitating
adapttability and imp
plementing delliberate strateg
gy.
Figurre 1: Conceptu
ual framework
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Theoretical Contribution
Little research has been conducted on middle manager involvement in
strategy (Darkow 2014). Additionally, Chen, Berman and Wang (2014) highlight
that despite an increase in middle manager research in the generic management
literature that the studies which have been conducted have been scant in the area of
public administration. This paper responds to the call for more research on middle
manager strategic involvement from prominent researchers such as Floyd and
Wooldridge (1992), (Stewart 2004) Chen, Berman and Wang (2014) and Procter and
Currie (2005). Further, it attempts to reduce the gap in the literature on middle
manager involvement by examining the impact that organizational culture and
leadership behavior has on middle manager strategic involvement in the public
sector. These variables have not been studied within the Caribbean public sector
context. The study also seeks to examine middle manager involvement in strategy as
mediating the relationship between organizational culture, leadership behavior and
middle manager satisfaction. This has not been examined in previous studies.
This study extends the work of Floyd and Wooldridge (1992) who
conducted a study that examined the strategic involvement of 259 middle managers
in 25 organizations. The study developed measures for each role and the relationship
between middle manager involvement and Miles and Snow’s (1978) strategic type
was examined. The findings suggested that upward influence activities (synthesizing
information and championing alternatives) were significantly greater from middle
managers in “Prospectors” type organizations. This paper is similar to that of Floyd
and Wooldridge (1992) in that it is concerned with examining the strategic
involvement of middle managers. It differs in that it does not examine the
relationship between middle managers and strategic type but focuses rather on middle
managers within a public sector context.
While research has been conducted on middle manager involvement and
some of the outcomes of involvement, there is a paucity of research on the
antecedents of middle manager involvement. Although there is empirical evidence
utilizing organizational culture and leadership behavior as independent areas of
study, the researcher has not found any studies that bring together the specific
variables chosen for the study, in the way that this study will. Thus, the data
generated from this study will present a different perspective on middle manager
involvement.
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VOLUME 8 SEPTEMBER 30, 2015
Prior research has examined the antecedents or contingent factors of middle
manager involvement. For example, Goffee and Scase (1992) and Westley (1990)
suggest that job insecurity is a contingent factor which may continue to linger (due to
the delayering that occurred within organizations in the past), inhibiting any role
transition required for enhanced strategic contribution. Additionally, Floyd and
Wooldridge (1997) offer that middle managers in boundary spanning positions i.e.
between the organizations, customers, suppliers or professional associations are
better positioned to comprehend strategic problems and thereby exert upward
influence. In a similar vein Floyd and Wooldridge (1994) argue that shifting to
flatter organizational structures actually increases the significance of the contribution
that middle managers are able to make towards achieving competitive advantage.
Procter and Currie (2005) also studied the antecedents of middle managers’ strategic
contribution within a professional bureaucracy and found that role ambiguity and role
conflict were major obstacles for middle manager strategic involvement. This paper
suggests that leadership behavior and organizational culture are two important
antecedents or contingent factors of middle manager involvement. Further, it seeks to
explore the extent to which middle manager involvement in strategy mediates the
relationship between leadership behavior, organizational culture and middle manager
satisfaction.
In addition to examining the antecedents of middle manager involvement,
the paper utilizes an outcome variable of middle manager job satisfaction. The use of
middle manager satisfaction is a unique feature since empirical research involving
job satisfaction has been focused primarily on lower level employees. It is anticipated
that there will be many potential antecedents of middle manager involvement in
strategy. The two antecedents of leadership behavior and organizational culture have
been chosen for examination within the paper due to their importance within the
Caribbean context. Leadership behavior was chosen because research suggests that
leadership plays a significant role in the motivation of employees at all levels within
organizations. Additionally, the researcher chose a second independent variable of
organizational culture because despite the predominantly bureaucratic culture of
public sector organizations, the researcher was interested in exploring whether and to
what extent there were different subcultures within Barbadian public sector
organizations. The combination of variables utilized in this study has not been
examined empirically in the past.
Similar to a study conducted by Conway and Monks (2011) one of the
objectives of this research is to explore the direction of middle manager involvement.
The extent of middle manager involvement and the direction (upward and downward)
of that involvement in the public sector has implications for middle manager job
satisfaction.
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Discussion of the Literature
Middle Managers and Middle Manager Roles
Pugh, et al (1968) defines the middle manager as one who is responsible for
forming linkages between vertically related groups and subfunctional work flow but
not the work flow of the organization as a whole. Floyd and Wooldridge (1990) in a
similar vein suggest that a middle manager resides at the intermediate level within the
organization’s hierarchy. Floyd and Wooldridge (1997, p.466) further suggests that
middle managers are those who perform a coordinating role where they ‘mediate,
negotiate and interpret connections between organizations’ institutional (strategic)
and technical (operational) levels. This study uses a synthesized definition of Floyd
and Wooldridge (1997) and Pugh et al (1968).
Middle managers were chosen as the sample for the study because there has
been a paucity of research conducted on middle managers within the public sector
context. Despite the delayering of middle managers from many organizations in the
1980’s the researcher believes that the role of the middle manager is even more
critical within the context of the current global economic environment. Ensuring that
middle managers contribute to the strategic process should therefore be of paramount
importance to public sector top management, since many public organizations are
challenged with a smaller complement of middle managers and in many instances
these individuals possess vital institutional knowledge. Likert (1961) likens the role
of middle managers to that of “linking pins” within organizations. In these roles
middle managers must engage in activities (upward and downward) that will impact
on strategy within their respective firms.
Middle Manager Involvement In Strategy
According to Floyd and Wooldridge (1992) middle manager involvement
can be upward (synthesizing information, championing alternatives) or downward
(facilitating adaptability, driving deliberate strategy). Upward influence allows
middle managers to contribute to the strategic direction of organizations. In order for
there to be strategic change in public sector organizations and high quality services
delivered in the system middle managers need to be involved in activities that can
shape and positively influence strategic direction.
In a study conducted by Floyd and Wooldridge (1990) it was found that
middle manager involvement in the formulation of strategic decisions was associated
with higher financial performance. Floyd and Wooldridge (1990) also highlight that
involvement is an important stimulus to strategic thinking, so that strategies utilizing
input from middle managers is considered more important than contributions solely
from top managers. Other studies confirm that strategies suffering from a lack
of middle manager commitment tend to have implementation challenges (Guth
and Macmillan 1986). Researchers who support the view that organizational
performance is influenced by what occurs in the middle of organizations
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include Burgleman (1983a, 1983b); Dopson and Stewart, (1990, 1993); Floyd and
Lane, (2000); Floyd and Wooldridge, (1992, 1994, 1997, 2001); Huy, (2001, 2002).
As far as development and implementation of strategy is concerned Darkow
(2014) states that middle managers are the experts that need to be integrated into the
process. They add that in order to have a successful implementation middle manager
commitment as well as the roles that they play during implementation becomes
critical to the success and performance of the organization. They propose a strategy
development approach that leverages on the expertise and knowledge that is
dispersed throughout the organization.
Middle Manager Involvement In The Public Sector
Researchers such as Pettigrew et al (1992), suggest that middle managers
actually desire to be involved in setting goals and generating alternatives within their
organizations. Floyd and Wooldridge (1990) and Procter and Currie (2005) have both
examined the limited involvement of middle managers in the strategic process. This
limited involvement has been particularly evident in the not for profit organizations
(Carney 2004). This is interesting and important because public organizations have
an important role to play in the development of small economies. Various
explanations have been offered for the limited involvement of middle managers in
strategy. For example, in a study conducted by Floyd and Wooldridge (1992) it was
suggested that middle managers’ reluctance to engage in the strategic process was as
a result of role insecurity. Carney (2001b, 2004) examined involvement in the UK
NHS and found that middle managers were unsure of their strategic value and
potential. As a result they were incapable of explicitly outlining their contribution to
the organization. The effect of this limited involvement or perception of exclusion
from the strategic process is extreme dissatisfaction among middle managers (Carney
2002; Westley 1990).
There are some other empirical studies that examine middle manager
involvement in strategy within a public sector context. For example, in examining the
antecedents of middle managers’ strategic contribution Procter and Currie (2005)
found that there were limiting factors to middle managers achieving greater
involvement in strategy within the context of a professional bureaucracy. More
recently, Conway and Monks (2011) examined middle manager roles in mediating
change within the public sector. Middle manager ambivalence to change was
identified as a potential threat to the very structures required for change initiatives to
be successful. The study examined the interface between top-down and bottom-up
approaches to change and highlighted how the stress associated with managing the
interface can result in additional tension and stress for middle managers. Procter and
Currie’s (2005) research bears some resemblance to this paper in that the study
highlights some of the antecedents of middle manager involvement such as boundary
spanning and organizational structure.
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The Benefits of Middle Manager Involvement
Middle manager involvement results in better decision making and
enhanced organizational performance (Floyd and Wooldridge 1990). Currie (2000)
notes that middle managers enjoyed an enhanced role through involvement in the
strategic process. Floyd and Wooldridge (1997) also highlight the benefits of
involvement and suggest that middle managers who undertake boundary spanning
roles between the internal and external environment have been identified as being
‘better positioned than others to comprehend the strategic problem or propose an
initiative and exert upward influence’ (p. 471). Floyd and Wooldridge’s research
highlights the relevance of middle manager involvement both downward and upward
within organizations. Other researchers such as Pappas, Flaherty and Wooldridge
(2004), Schilit (1987) Ofner (1985) and Chen, Berman and Wang (2014) have
provided evidence which supports the argument for middle manager upward
involvement.
Transactional and Transformational Leadership
House et al (2002) in examining organizational leadership offers that
leadership is “the ability of an individual to influence, motivate, and enable others to
contribute toward the effectiveness and success of the organizations of which they are
members” Pg. 5. This paper is concerned with the typology articulated by Bass
(1981; 1997) and Bass and Avolio (1993) which suggests a transactionaltransformational paradigm. According to Takahashi et al (2012), transformational
leadership has been heavily researched for over thirty (30) years and extends the
traditional behavioral approach by considering the emotional aspects of leaders.
Some approaches suggest that transformational leaders assist individuals and
organizations in surviving, mastering change and getting ahead in the future. Burns
(1978) describes transformational leadership as leadership that “occurs when one or
more persons engage with others in such a way that leaders and followers raise one
another to higher levels of motivation and morality” p. 20.
Transactional leadership involves agreement, acceptance or compliance with
the leader in exchange for praise, and rewards or resources or the avoidance of
disciplinary action. In transactional leadership the provision of rewards and
recognition is dependent upon the successful execution of roles and responsibilities
by followers (Podsakoff, Todor, and Skov, 1982). Transactional contingent reward
leadership offers recognition only when objectives/goals have been realized by
followers.
In a meta-analysis, Lowe et al (1996) analyzed the effects of
transformational as opposed to transactional leadership. It was found that three
components of transformational leadership were correlated with leadership
effectiveness, (charisma, individualized consideration and intellectual
stimulation). In contrast, Judge and Piccolo (2004) conducted a similar study
which suggested that transformational leadership
was as effective as
transactional leadership. Wang,
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VOLUME 8 SEPTEMBER 30, 2015
et al (2011) in reviewing five previous meta-analyses found that
transformational leadership was consistently positively related with a number of
follower outcomes such as task and contextual performance, motivation,
organizational commitment, and job satisfaction.
It is important to highlight that although transformational and transactional
leadership are conceptually distinct that they can be used by one leader in varying
amounts and intensities. It has also been suggested that both transformational and
transactional leadership are needed for the maintenance and development of complex
organizational systems (Bass, Avolio and Goodheim 1987). It has been further
suggested that rather than transformational leadership being a replacement for
transactional leadership that transformational leadership actually augments
transactional leadership (Bass, Avolio and Goodheim 1987). This suggestion
therefore highlights the relevance of both types of leadership in relation to achieving
different follower behaviors.
Organizational culture
Organizational culture research was first undertaken in the 1940’s and
1950’s and was centered primarily in the area of anthropology. As a result, a number
of concepts of culture have emerged from scholars in this field. In keeping with its
origins, organizational culture is concerned with the study of human beings in
organizations. There has not been consensus regarding a concrete definition of
organizational culture by management scholars. The fact that the concept of culture is
quite subjective could be an explanation for why consensus is difficult to achieve.
Schein (1983, p. 14) states that organizational culture:
“is the pattern of basic assumptions that a given group has invented,
discovered, or discovered in learning to cope with its problems of external
adaptation and internal integration - a pattern of assumptions that has worked well
enough to be considered valid and therefore, to be taught to new members as the
correct way to perceive, think, and feel in relation to those problems”.
The Organizational Culture Index developed by Wallach (1983) uses the
categories of bureaucratic, innovative and supportive to classify organizational
culture. Wallach (1983) suggests that an organizational culture cannot necessarily be
split into three parts rather “the flavor of an organization will be a combination of all
three categories, to varying degrees” p. 32. A bureaucratic culture is characterized by
hierarchies, clear lines of authority and organized systematic work. This type of
culture is recognized in the literature as not being suitable for attracting and retaining
creative and ambitious people. This is due to the rules and regulations that tend to
inhibit creativity and innovativeness required for new product or service development
(Dormio, et al 2012). The innovative culture is characterized as exciting and
dynamic, providing a place for creative work. This culture type also provides risks
and challenges for employees. The supportive culture is characterized by confidence,
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encouragement, collaboration and it is also oriented to relationships. This type of
culture contributes to an open and harmonious organization (Dormio, et al 2012).
Middle Manager Job Satisfaction
Organizations are paying greater attention to ensuring that employees are
treated with respect and have their psychological and physical well-being maximized
(Spector 1997, Ellickson and Logsdon 2001). Additionally, the effects of low
satisfaction or dissatisfied employees within an organization has a negative impact on
organizational outcomes. Specifically, some of the effects include for example,
withdrawal behavior, increasing costs, declining profits and eventually customer
dissatisfaction (Zeffane, et al 2008).
Job satisfaction is examined frequently by researchers however, different
researchers have different definitions and conceptualizations of satisfaction (Aziri
2011).
As a result, there is no general agreement on what constitutes job satisfaction.
Hoppock (1935) defines job satisfaction as any combination of psychological,
physiological and environmental circumstances that causes a person to determine that
they are satisfied with their job. In contrast, Vroom (1964) defines job satisfaction in
terms of work roles. He defines the concept as affective orientations regarding work
roles that they currently occupy. Similarly, Spector (1997) defines satisfaction as
being related to how people feel about their individual jobs, the various components
of said jobs, and the extent of like or dislike for their job.
There have been a number of demographics such as age, marital status and
education and organizational or work related factors such as job level and years of
experience that have been associated with job satisfaction (Zeffane 1994, Ellickson
and Logsdon 2001, Abdulla and Djebavni 2011). In fact, recent studies have
highlighted that work related factors are actually better predictors of job satisfaction
(Ellickson and Logsdon 2001, Abdulla and Djebavni 2011).
Notwithstanding the importance of individual as well as organizational
factors and their impact on job satisfaction, research suggests that compensation,
benefits and job security are the 3 major contributors in the job satisfaction of
employees. The study will examine the impact that middle manager involvement has
on middle manager job satisfaction.
Job Satisfaction and Middle Manager Involvement
In support of the conceptual framework presented here there is research
evidence that suggests that middle manager involvement is related to middle manager
job satisfaction. In a study conducted by Westley (1990) it was suggested that major
dissatisfaction occurs among middle managers who feel excluded from the strategic
process. Consequently, middle managers who feel excluded are likely to be
demotivated and therefore more likely to be inefficient in their roles. Reilly
et al (1993) in their study found a positive relationship between middle manager
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involvement in planning and implementation of organizational changes and access
to greater opportunities for growth, which led to greater satisfaction. Howard and
Frink (1996) examined the effects of organizational restructure on employee
satisfaction found a positive relationship between middle manager access to growth
opportunities and middle manager satisfaction. The study also showed that there was
a higher level of satisfaction and internal work motivation in the managerial group of
employees sampled.
Despite the assertion that involvement should lead to satisfaction and is
likely to result in middle manager satisfaction it is important to note that inclusion
does not guarantee middle manager satisfaction. Westley (1990) supports this view
and states that when included middle managers may emerge either energized or deenergized around strategic issues. His statement presumes that there are other factors
other than middle manager involvement that may influence middle manager
satisfaction. This paper acknowledges this reality but seeks to uncover the extent to
which middle manager involvement mediates the relationship between leadership
behavior, organizational culture and middle manager satisfaction.
Practice and Policy Implications
In addition to contributing to theory this study has the potential to positively
influence management practice and policy within the public sector. Some of the
potential benefits of the study are outlined below:
1.
The study will provide analysis on a number of variables which impact on
middle manager strategic involvement. The findings may serve to better equip public
sector managers in achieving and maintaining the involvement of middle managers.
Gaining a better understanding of middle manager involvement and middle manager
satisfaction may lead to changes in the leadership behaviors and organizational
cultures within public sector agencies. The study may also identify some of the
barriers to middle manager involvement. Such information can inform the
development of policies regarding middle managers within the public sector context.
2.
The study examines the importance of middle manager involvement in
strategy determination. Middle manager strategic involvement can translate into
substantial positive outcomes for organizational structures, systems and performance.
In light of the current economic and financial crisis the conceptual framework serves
as an evaluative tool that can facilitate the re-examination of traditional structures to
create a more ‘involvement oriented’ workplace within public sector organizations.
3.
The research has the potential to positively contribute to public sector
reform initiatives across the Caribbean region. Further, agencies may benefit directly
from the analysis of the data generated from this study since the type of
organizational cultures and leadership styles that exist within Barbadian public sector
organizations and the effect that they have on middle manager involvement in
strategy and satisfaction will be identified. The research has the potential to assist
public sector agencies in explaining some of the inefficiencies and ineffectiveness
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that persists within their organizations as it relates to middle manager involvement. It
is anticipated that the study will generate solutions and recommendations to reduce or
stymie the problems identified. Overall, the study has the potential to significantly
improve the management of public sector organizations and may highlight a greater
need for better fit between organizational strategy, organizational culture and
leadership style.
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Family Business Succession Among Entrepreneurs:
Evidence from Prominent Family Businesses
in Barbados
By
Ms. Nadia Shepherd- Worrell, Dr. Philmore Alleyne, Ms. Khadija Holder and
Ms. Amanda Pierce
Abstract
This research examines the succession process of family businesses
operating in an emerging context and the factors that contribute to successful
generational transfer. Semi-structured interviews were conducted with the leaders of
sixteen (16) prominent Barbadian family businesses (5 Caucasian-Caribbean, 6 AfroCaribbean and 5 Asian-Caribbean). No formal succession planning had been utilised
by the firms across generations. However, Caucasian-Caribbean and Asian-Caribbean
family businesses were viewed more likely to undergo inter-generational transfers
than the Afro-Caribbean family businesses in the sample. While generational transfer
was heavily influenced by visions of legacy continuity in Caucasian-Caribbean
businesses, and visions of family lifestyle improvement in Asian-Caribbean
businesses, Afro-Caribbean firm leaders’ generational transfer was driven by need for
independence.
Key Words: Family business, entrepreneurship, inter-generational transfer,
succession planning, Barbados.
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Introduction
Family businesses have built a reputation of being the dominant business
enterprises within both emerging and developed countries (e.g. Wal-Mart in the U.S.,
Tata Group in India and Odebrecht in Brazil). These firms have been found to play a
vital role, not only economically and socially, but also in the modernization of their
economies (Chami, 2001). Evidence shows that family firms (family owned or
controlled) account for approximately 65-80percent of all worldwide businesses
(Gersick et al., 1997), with family businesses in many emerging countries showing
the strongest sales growth within the post-financial crisis period of 2011 (PWC,
2012). Thus, within recent years, family firms in emerging countries have formed the
basis of increased research.
Villalonga and Amit (2006) refer to family businesses as firms with
concentrated ownership by individuals who have greater incentive than majority
shareholders to monitor managers and who often assume management positions
themselves. Family businesses’ unique dynamics (e.g. patient capital, loyalty,
personable environment, community support) afford them a competitive advantage,
which allows the firms to outperform their non-family competitors throughout
generations (KPMG, 2011; Anderson and Reeb, 2003). However, there exists a
significant gap between family firms that achieve effective succession (second
generation and above) and family firms that experience failure. Ward (2004) finds
that only a minority survive beyond the founder’s generation. Similarly, Ventner et
al., (2003) show evidence of less than 15percent of family firms passing the third
generation. Prior research has posited this to an inefficient succession process,
characterised by poor succession planning, the founder’s resistance to change and
inflexibility, weak next-generation leadership skills and attitudes towards the
business, divergent family goals, family conflict, price pressure from large
multinational corporations, growing complications within the family dynamic (e.g.
rising divorce rates), weak corporate governance and restrictive government and
institutional mechanisms (e.g. Handler, 1990; Ward, 1987; Tashakori, 1977; Colli
and Rose, 2008; Alleyne et al., 2014).
Within an emerging country context, family firms occupy a dominant
segment of the private sector, providing employment, capital, new industry
opportunities and community improvement. Ownership tends to remain highly
concentrated, even after becoming publicly traded, and management is more often
undertaken by family members than non-family professionals, who are perceived to
lack the experiential knowledge and communication similarities (Fan et al., 2011;
Colli and Rose, 2008). Given the influential representation of families and their firms
on the socio-economic wealth of emerging countries, high successive capabilities of
family business leaders are essential to emerging country growth. Salvato and
Aldrich (2012) call for more research on the variations across family businesses.
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This study answers that call by investigating family business succession
within the emerging country of Barbados, where variations among diverse ethnic
groups may influence how family businesses undergo succession. Thus, the research
also adds to the literature on the role of ethnicity in succession.
Barbados has a population of approximately 300,000. Its history of slavery,
colonialism, and indentured labourers can be traced from its ethnic composition of
approximately 90percent Black, 4percent White and 6percent Asian and mixed races.
Despite, being a small island (166 square miles), the country reported a GDP per
capita of U.S. $14,917 in 2012. Within recent decades, the country has displayed
growth, industrialization and expansion, particularly within its services and
renewable energy sector (Central Bank of Barbados, 2013). Historical occurrences of
colonisation by Caucasian groups, peasant farming by African descendants,
indentured labour by Asian groups and overall social stratification by race, still
influence societal interplay in Barbados. In addition, traditional characteristics, such
as the prioritization of family (Punnett et al.,2006), remain important to Barbadians.
Thus, it is unsurprising that entrepreneurship is typically undertaken as a family
venture in Barbados and a majority of Barbadian businesses have their origins in
family businesses. However, most of the knowledge of the size and influence of
family businesses is anecdotal, with limited empirical evidence to support the extent
of the influence on the economy. To the best of our knowledge, no research or
statistical data is available to provide an accurate picture of the economic value
creation and contribution of family businesses within the Barbadian context.
There are a number of Barbadian family businesses that have managed to
survive the inter-generational transfer into the hands of successors. Many
organisations have managed not only to rejuvenate but to substantially grow during
the process. These success stories are often relatively understated, given the fact that
a number of authors, such as Small and McClean (2002), consider that the majority of
these businesses belong to the island’s Caucasian descendants, who hold the
advantage of better access to capital from inheritances transferred from white
plantation owners. As a result, this research seeks to examine the family business
succession process across ethnic groups in Barbados.
This research makes several contributions. Firstly, the study utilizes a
sample of prominent and diverse family businesses operating in an emerging country
context. Succession processes and strategies of family businesses in emerging
economies remain a highly relevant, yet understudied topic in family business
research. Furthermore, research on the differences among family firms may prove
essential to future entrepreneurial strategies and business regulation. A second
contribution is that we test the applicability of established theoretical constructs in an
emerging country environment, where Anglo-Saxon based research is often perceived
to be misrepresentative and culturally insensitive.
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Thirdly, this research seeks to provide some understanding to succession
planning in family businesses. Specifically, we try to assess the nature of succession
processes in Barbadian family businesses and investigate the transfer of
entrepreneurial vigour across varying ethnic groups. The findings may have
important implications for business entrepreneurship practices and policy- making,
and industry growth in emerging countries. Furthermore, the geographic setting of
this study, Barbados, combined with rich qualitative data is not typically found in
most conventional literature. Hence, our work has the potential to make significant
contributions to future theoretical and empirical works.
The remainder of this paper is structured as follows. The following section
reviews the extant literature, and is followed by a section that explains the research
methods. This section is followed by the results, with the last section concluding the
study.
Literature Review
Poutziouris et al., (2004, p.8) define family businesses as being “owneroperated/managed ventures with family members (and/or family units) involved
predominantly in the administration (managerial or financial), operation and strategic
determination of corporate destiny”. This is consistent with existing research within
the body of literature, where family businesses are defined by their ownership
structures, powers of control and responsibility (e.g. Apoorva, 2014; Colli and Rose,
2008). Apoorva (2014) suggests that majority ownership in the family business
context emerges when one or more family members have the authority and are
accountable for its day-to-day management, as well as its strategies and long-term
objectives. Hence, within the parameters of this study, a family business is defined as
a firm where family members (blood-related, spouses or off-spring) have significant
influence or control over the operation of the business.
Hoy and Verser (1994) find that family businesses are often founded
without the intent of generational transfer. This has resulted in little to no succession
planning by many family businesses. Within the literature, succession has been
perceived as passing the ‘torch’ to the next leader (Lansberg, 1999) and a systematic
progression (Handler, 1994). In other words, it entails the transfer of leadership to
members of the owner’s family, or in some cases employees or external
professionals. Succession is deemed successful when the business is able to operate
in continued existence, at least in the short/medium term (Ip, 2006), while providing
an exit strategy for the current business owner from the business.
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Handler (1994) highlights three stages in the succession process: a) personal
development of the heir apparent before his/her involvement in the family business;
b) the heir’s business involvement and; c) leadership succession. Handler’s (1990)
theory of mutual role adjustment suggests that the founder/leader moves from being a
sole operator (central family member in the business), to monarch (powerful
individual), to overseer/delegator, and finally to consultant who is retired or
disengaged from the business; while the successor simultaneously moves from
having no role, to helper, to manager, to leader/chief decision-maker. This extended
approach may result in targeted socialisation of the successor, where his/her role is
shaped by the predecessor’s influence and ideologies.
Family business succession may not always be smooth, given possible
disruption that may be caused by changes in family circumstances, family conflict
when the next-generation family member adopts a permanent basis and occupies
controlling interests and/or an authoritative role, founder resistance (Lansberg, 1988),
or next-generation reluctance (Blotnick, 1984). For example, on the one hand, many
founders may not move beyond the monarch stage, preferring to hold onto power and
‘protect his/her baby/mistress’ (Handler, 1994). The founder’s reasons for this
include fear of losing status and control, rivalry and emotional and sentimental ties
with the business. These issues can lead to a situation whereby succession may only
occur when the founder dies. On the other hand, many next-generation family
members may not perceive value in leading the family business (Blotnick, 1984).
Reasons for this include conflicting career goals and personal desires, incapability
and lack of interest in engaging with the family and the family business. These issues
can lead to the entrance of non-family professionals or in some cultures, the
arrangement of business-related marriages. The family relationship and attendant
emotional factors between potential successors and the incumbents are even more
complicated than their business relationship and add a dimension not normally
associated with typical CEO succession. Thus, planning for succession is more
critical in family-owned businesses (Le Breton-Miller et al; 2004).
Prior literature has shown that lack of succession planning may be one of the
major contributing factors causing many first-generation family businesses to fail and
not go beyond the founder (e.g. Lansberg, 1988). Reasons for the lack of formal
succession planning include uncertainty about the future, founders’ doubt of the
interests of their children and a general lack of interest outside the existing family
business (Howorth and Ali, 2001). Morris et al., (1997) argue that there exist family
businesses that achieved success without formal succession plans.
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Yet, since the success rate beyond the founder comprises only a few firms,
prior research has regarded formal succession planning as a likely attribute for
efficiency of family businesses, particularly those that have the desire to pass on the
business to the next generation, provide employment for family members and ensure
the survival or growth of the business (Rosa, 2005).
Nicholson (2011) argues the existence of a role for ethnicity in the
succession planning process. Nicholson (2011) observed that Afro-Caribbean1
descendants in Jamaica established family businesses for the purpose of necessity
(e.g. to fund the education of their children), however such businesses risk
discontinuation when its purpose is achieved. Other works have found support for
this finding (e.g. Carter, 2008; Fairlie and Robb, 2007; Dean, 1992; Wong et al.,
1992). For example, Carter (2008) states that children of black business owners were
not encouraged to be involved in the business operations, owners preferring their
children to be educated and take a professional path (e.g. medicine, law and
teaching), where they attain the education that the owner was not able to receive. In
other words, the owners limit the business’ functions to survival and internal
provision (Dean, 1992). However, researchers argue the existence of an ongoing shift
in these norms among Afro-Caribbean, signified by younger individuals’
involvement in trade and enterprise (Ram and Deakins, 1996).
Ethnic studies on the impact of Asian culture on performance in family
businesses, have however reported divergent views. Wong et al., (1992) argue that
Asian firms, like Black firms, are created with the purpose of educating offspring for
better careers, not longevity. Sharma et al., (1997) conflicts this finding by stating
that maintaining the family business is important to first-generation Asian family
business leaders, but not to second-generation potential incumbents who view
succeeding as an unattractive career option. However, latter findings by Sharma and
Rao show that children (i.e. prospective incumbents) enter the Asian family business
from an early age and place high importance on commitment to the family business
(Sharma and Rao, 2000). One commonality throughout major studies has been the
high embodiment of paternalism, extended family members, filial ideologies and
Confucianism in the business and the leader succession process (Kuratko et al., 1993;
Gates, 1993; Basu, 2004).
Fairlie and Robb (2007) find ethnic variances in family business succession
to be influenced by prior work experiences obtained by the founder, with Blacks
tending to rely on trial and error while Caucasians utilise techniques from previous
experience working with a family member’s firm.
1
For the purpose of this research, Afro-Caribbean refers to a person (or entity) of African
descent living in or coming from the Caribbean, specifically the island of Barbados. Similarly,
Caucasian-Caribbean refers to a Caribbean person (or entity) of Caucasian descent, while
Asian-Caribbean describes those of Asian descent (e.g. Indians, Chinese and Syrians)
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Caucasian family business succession has also differed from Blacks and
Asians by their wider involvement of outsiders (i.e. using the ‘right’ persons for jobs
and not relying on training unsuitable family members). For instance, unlike other
Asian and Black dominated regions, firms from predominantly Caucasian territories
such as the United Kingdom, Canada, Malta, Germany and New Zealand tend to pass
on ownership to family members but hire professional managers, most firms in
Sweden even preferring to also pass ownership towards professional management
(PWC, 2014). This may be accountable to their primary focus on legacy continuity,
which may be linked to periods of colonialism, capitalism and industrialisation,
where the creation of an empire was a common characteristic.
Within a Barbadian business context, McClean and Cummings (1994) found
that Caucasian-Caribbeans owned 22percent of major businesses, although they
accounted for less than 4percent of the population. Small and McClean (2002)
account this to other Afro-Caribbean ethnic groups being socialized to value status
over wealth, and pursue education as a gateway to profession and managerial
positions, at the expense of business creation. Small and McClean (2002) purport that
Afro-Caribbean entrepreneurship has suffered in the face of poor familial support, the
absence of positive inter-generational influence due to scarcity of role models, and
the inability of Afro-Caribbean entrepreneurs to secure financing from banking
institutions over successive generations.
Entrepreneurs, having established a successful business, might have an
understandable desire to leave it in the hands of his/her child, who may receive
preferential treatment (Ip, 2006). It should not be assumed that such nepotism is
necessarily to the detriment of the company in question, since there is some evidence
of economic rationale (Handler, 1994). Ip (2006) found that in order to ensure the
long-term prosperity of succession to family members, nurturing and mentoring of
other family members are essential for developing and maintaining the founder’s
entrepreneurial values and drive. Thus, the heir needs to be fully prepared and
equipped to take up the torch when it is passed (Howorth and Ali, 2001). This point
was accentuated by Morris et al., (1996), who noted that successful heirs are
generally observed to be well prepared in terms of educational background and
experience, and have spent a number of years working at all levels within the
company. Sangar and Rangnekar’s (2014) found that advanced entrepreneurial
behaviour can positively influence the business. Successful transitions also enjoy
positive family relationships with limited conflict, rivalry or hostility, and good levels
of trust (Zachary, 2011).
Risk-taking, creativity and innovation can be deemed essential to modernday family business succession. However, these activities may not be identified and
recognized as important family business activities until well after the fact.
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The development of a new business concept is entrepreneurial and passing
on that ability to succeeding generations is related to succession in family businesses.
Many successful businesses are groups of businesses that have arisen from the
entrepreneurial activities of the entrepreneur, and possibly contributions from other
family members. Thus, the transmission of entrepreneurial attitudes and capabilities
may be seen as part of the succession process (Dyer and Handler, 1994). Renewed
entrepreneurial vigour in this context then becomes not just the ability of successive
generations to manage the family firm effectively, or to modernize methods of
production, but rather to renew the overall capital through new ventures over time
and closing down those that are less successful (e.g. Danes et al., 2008).
Entrepreneurial vigour describes the entrepreneurial mind-set and tradition
which drives habitual entrepreneurs and renews and drives the family business (Rosa,
2008). Rosa and Balunywa’s (2008) concept of habitual entrepreneurship shows that
entrepreneurial vigour “can be passed on across generations as a set of attitudes,
skills and knowledge and can be combined with access to inherited capital”, resulting
in a succession process filled with new business ideas and ventures. Essentially, it
becomes possible for third generation family entrepreneurs to run an entirely
different business to that being operated by the founder (Rosa, 2005).
Research Methods
This study was designed to be exploratory in nature and embody a purely
qualitative dimension. As ethnicity in family business is a relatively underresearched area in Barbados, we chose the qualitative approach in order to allow open
description, discussion, understanding and explanation. This is similar to the
approach taken by other studies (e.g. Howorth and Ali, 2001). Thus, the main focus
of this study was placed on obtaining data of rich quality and depth, which may
unearth an open understanding of Barbadian family businesses and how they
managed to survive the inter-generational transfer. In keeping with the definition of
family businesses used by this research, the study particularly focused on Barbadian
family businesses that have survived the inter-generational transfer of management or
capital, beyond its founding generation. Emphasis was placed on obtaining
information from the current generation, with whom the future success of the
business laid. Given that the study focuses on the inter-generational dynamics, no
emphasis was placed on obtaining information from the first/founding
member/generation, other than for gathering information for corroborative purposes.
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Sampling and the Data Collection Process
Initially, twenty (20) family businesses were selected purposively from the
total population of family businesses existing in Barbados [2]. The two main criteria
that were required to be simultaneously fulfilled for the organisation to be chosen as a
part of our proposed sample were that the business had to be (1) a major prominent
family business in the community, and (2) have survived succession beyond the
founding member through the transfer of management and/or ownership to the other
generation. It was deemed immaterial if the successive generation was involved with
initial business activity or the original business corporate structure.
Our tentative sample was then short-listed based both on investigations
carried out into the current shareholders’ register and board of directors listings, and
findings from conversations with prominent entrepreneurs within the Barbadian
business community. After several telephone requests for participation in the
research, we obtained favourable responses from the active leaders (chief decisionmakers) of sixteen (16) major family firms in Barbados. The sample therefore
comprised 16 leaders (5 Caucasian-Caribbeans, 6 Afro-Caribbeans and 5 AsianCaribbeans), of which 81.25 percent were males (see Table 1). The ages of the
leaders ranged from 46 to 80 years. However, in our sample, duration of the family
businesses ranged from 31 to 105 years old. This compares favourably with Beckhard
and Dyer’s (1983) finding that U.S. family businesses have an average life span of
twenty-four years. Thus, our research into emerging economies is further warranted.
Nonetheless, the sample was found to be quite experienced and knowledgeable of the
topic under discussion.
The study used face to face semi-structured interviews as the primary means
of data collection (See Appendix A for a list of the questions on the instrument).
Each interview lasted approximately 90 minutes on average and was conducted at
times and locations convenient to the respondents. We also allowed the respondents
to indulge in areas outside of the main research focus, as we sought to make them
comfortable and gain as much meaningful information on the family businesses as
could be obtained. To preserve the anonymity and confidentiality of the participant
family businesses, the respondents were assured that the information provided would
not be disclosed by name or organisation. As a result, the information related to the
family business analysis used coded identifiers known only to the researchers. A list
of the characteristics of the firms sampled is provided in Table 1.
2
To date there is no information documented or available to account for the number of family
owned businesses specifically in Barbados. Future research should seek to investigate the
number of family owned businesses in Barbados and other emerging countries, as well as the
percentage of the total business population that family-owned businesses account for.
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Research Questions
1.
2.
3.
4.
What are the respondents’ motivational factors to be involved in the family
business?
What is the succession planning process in the family businesses in
Barbados?
What was the entrepreneurial mind-set that drove the previous generation
and what traditions were passed on to the next generation?
What was the assessment of entrepreneurial vigour on the family business?
TABLE 1: SAMPLE PARTICIPANT FAMILY DEMOGRAPHICS
FAMILY
CODE
ETHINICITY
SEX
GENERATIONS
TRANSFERRED
TYPE OF BUSINESS
Family A
CaucasianCaribbean
Male
4th
Retail concessionaire, retail store management,
Financial, Mutual funds, etc.
Family B
Afro-Caribbean
Male
2nd
Family C
Afro-Caribbean
Male
2nd
Retail, construction, Café.
Import, Distribution and Retail, Electrical
contracting, Lifestyle oriented business –
clothing, retail, bar.
Family D
CaucasianCaribbean
Male
3rd
Regional conglomerate – Airline Catering,
Manufacturing and Services, Import and
Distribution, Tourism.
Family E
Afro-Caribbean
Male
2nd
Import and Supermarket Retail.
Male
nd
Insurance, Import, Distribution and Retail.
nd
Manufacturing, Import and Export Distribution,
Retail, Industrial and Commercial property
development & management.
Family F
Afro-Caribbean
2
Family G
CaucasianCaribbean
Male
2
Family H
CaucasianCaribbean
Female
2nd
Family I
Afro-Caribbean
Male
3rd
Family J
Asian-Caribbean
(Indian)
Male
3rd
Clothing
Family K
Asian-Caribbean
(Indian)
Male
2nd
Manufacture and retail
Female
Vehicle full service dealership, Commercial
property management, Petroleum.
.
Rum Distillery, Agricultural & Commercial
property development.
Retail
Family L
Asian-Caribbean
(Indian)
2nd
Family M
Asian-Caribbean
(Syrian)
Male
2nd
Retail
Family N
CaucasianCaribbean
Female
3rd
Retail/Wholesale
Family O
Afro-Caribbean
Male
2nd
Retail
Family P
Asian-Caribbean
Male
3rd
Manufacturing
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Data Analysis
To facilitate the data analysis of the semi-structured interviews, all of the
interview sessions were audio taped and notes were also taken. The taped interviews
were later transcribed. To control for validity and reliability, we adopted several
strategies put forward by McKinnon (1988). Firstly, we behaved in a manner that
inspired trust between the respondent and the researchers. Secondly, after we
transcribed each interview, the respondent was asked to review the transcript in order
to reduce biases and misperceptions. Thematic analysis was then used to analyze all
of the data collected from the respondents (Miles and Huberman, 1994). The
narrative was reduced to encompass no more than five or six themes of importance
based upon the frequency with which it was mentioned (Neuman, 2003). Where
necessary, quotes from the actual respondents were used to corroborate the findings
and analysis.
Results of the Study
In this section of the paper, we analyse the findings from the study and
discuss them based upon the four research questions identified above.
Factors that motivate members to be involved in the family business
The predominant themes which emerged as driving factors for members to
be involved in the family business were: (i) to encourage growth and stability of the
family; (ii) socialisation; (iii) wealth creation; (iv) legacy preservation and; (v)
parental success. The majority of leaders identified growth and stability of the family
business as their main inspiration for being involved in the family business. Two
Caucasian-Caribbean respondents expanded this to note the building of a world class
business from within Barbados as their ultimate incentive.
One Caucasian-Caribbean entrepreneur preparing to end his tenure as leader
of one of the island’s oldest family businesses shared that even though he considers
ensuring the continued growth and stability of the firm as a highly important
motivator, it only represents half of what currently motivates him, and he has
therefore provided sufficient foundation for his chosen successor to continue the
family’s legacy. He highlighted that his focus in moving forward would be to assist
others through sharing his experiences, advice and business acumen. On the other
hand, one Asian-Caribbean successor who recently acquired leadership after his
father’s passing, spoke of the business being priority and how difficult it was for their
wives to understand their commitment at times. Generally, the results indicate that
respondents recognized and agreed that the motivators for the family shifted as the
business grew and developed, and the family’s ability to satisfy needs changed.
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Majority of the respondents shared the common history that their initial
motivation that fueled their entrepreneurial spirit was one of obtaining wealth for the
family. Also interesting to note was the fact that in providing an answer to this
question, none of the respondents were able to separate personal goals from those that
they envisioned for their business. This was even more so for Asian-Caribbean
business leaders, where one respondent referred to family gatherings and business
meetings as the same. This finding supports Colli and Rose’s (2008) claim that
family and business remains culturally inseparable among Asians.
When asked to state what factors motivated them to become involved in the
family business, one respondent from an Afro-Caribbean family business opined:
I did not grow into wealth; I saw my father creating and building wealth
during my existence. It is ingrained within you; it is inherently a part of
your socialisation process.
The above quote provides a fair representation of how the succeeding
generation of the Afro-Caribbean businesses viewed themselves with respect to the
family business. Afro-Caribbean respondents generally viewed the family business as
a form of independence. However, though many respondents perceived that
succession was ingrained within them and played a significant part in their
deliberation, it was not viewed as the single factor which determined their decision to
join the business. A significant majority of those interviewed had in fact joined the
existing family business in varying happenstances. For example, one CaucasianCaribbean respondent shared:
There was a genuine inner desire by us to be a part of it; there was a
desire by both my brother and I to be a part of the business and its
development, along with a combination of the unsaid expectations from
our father to join it. Being privy to seeing my dad in the pursuit of
business and the creation of wealth, and the active life that he lived, we
were acclimatized to it and there was a genuine desire to be a part of it
all.
Another leader from a ‘Caucasian-Caribbean’ business pointed out that:
A mixture of enjoying working in the business and an obligation or
responsibility towards the family to continue the legacy of the company
was the driving reasons behind me getting involved in the family
business. In those days, it was your duty to come back into the business
and take it over, which itself was an opportunity because it meant that I
came back at such a young age with a foundation to run it.
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Two others (Caucasian-Caribbeans) added:
To me, legacy preservation is important and that made me rejoin the
company. Respect for the role of my business in the economy and on the
lives of its stakeholders, and the opportunity to safeguard and grow it has
been what has kept me here.
I guess over the years, seeing someone as prominent as my father, down
there and being successful, has inspired me. It has inspired me over the
years to want to be like him – not necessarily by carrying on the business.
I think that I can obviously do something that I like and be as successful
or more (than him) in the coming years.
The above findings indicate that many Caucasian-Caribbean leaders became
involved in the business to ‘safeguard and continue the legacy’ of what their fathers
started.[3] Their aspirations came from seeing what their fathers (predecessors)
achieved and were able to accomplish, in addition to maintaining and building on the
platform that was created. Caucasian-Caribbean respondents were also motivated to
become like their fathers and enjoy a lifestyle similar to or better than what their
fathers enjoyed. In addition, high value was placed on corporate social responsibility
to customers, employees and other stakeholders. Like the Afro-Caribbean leaders,
Caucasian-Caribbean respondents knew their expected role from a young age.
However, unlike the Afro-Caribbean respondents, Caucasian-Caribbean respondents’
education was related closely to the business’ legacy.
Asian-Caribbean respondents argued that their motivation came from the
urgings of the founder or predecessor, as well as a need to work in the family
business. One Asian-Caribbean respondent said, “To work in the family business
was a sense of familiness”. This was further supported by two other AsianCaribbean interviewees, who stated:
From a young age, we had to work in the business. We worked with our
father who showed us the ropes and taught us how the business operates.
We worked long hours, even in our spare time. We were told that this
business fed the family and we needed to work in it to keep it going. He
would say, ‘this will be yours when I pass on’.
We (my brothers and I) knew up front that we had to take over. As
children we were indoctrinated and treated like employees working our
way through. On holidays while others were running around, we were
working. My father then sent me to be an accountant to prepare myself
to take over the business.
3
Given that most businesses were started by males, most respondents referred to their fathers.
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Thus, the above finding shows that the Asian-Caribbean respondents felt
motivated to carry on the family tradition, possibly as a result of their early
socialisation process initiated by the predecessors. Asian-Caribbean successors’
training and push into this direction from an early age, may explain why there may be
little apparent reluctance, on their part, to joining the family business.
All three groups of businesses (Afro-Caribbean, Caucasian-Caribbean and
Asian-Caribbean) viewed preserving the business’ wealth and growth as a motivator
and placed an underlying social value on their reasons for pursuing the family
business. However, perceptions of social value differed across all three ethnic groups.
Afro-Caribbeans appeared to associate social value with gaining independence,
possibly due to colonial influences existing within the Barbadian culture and/or
passed from their predecessors. Caucasian-Caribbeans attained social value from
leaving a legacy in Barbados, building their reputation and the placement of their
business within the market. Asian-Caribbeans obtained social value from undertaking
the business as a family affair.
Succession planning in Barbadian family businesses
The findings with respect to succession planning indicate that although these
companies have succeeded in transferring leadership to subsequent generations, there
was not, and still is not, any formal business succession process within these
businesses. Majority of the respondents were able to identify factors that were
perceived as being integral in the ‘ad-hoc’ plan that allowed for the inter-generational
transfer of the business. What they all seem to note was articulated by one CaucasianCaribbean entrepreneur, who reported “acclimatization to the company and its
operations as a result of interconnection with the business whilst growing up and
being required to work in the business”. Another Afro-Caribbean interviewee stated
that “we were raised to understand that we had a responsibility to our parents
during our free time and summer vacations”. Thus, we again see the early
socialisation and informal succession process being put in place by the predecessor
across ethnicities, where expectations are made clear to the offspring in an informal
manner from an early stage in life. However, it is noted that respondents saw no need
for succession planning when business progression has not been achieved and the
business has not shifted activities with global changes.
Across ethnic groups, preparation for succession involved working in the
family business from an early age. This early apprenticeship period allowed the
founder/leader to show the heir all the intricate operations of the business. In
addition, it allowed for the building of knowledge and commitment by the successor,
and trust by the incumbent. Among incumbents, it was perceived that the longer
hours spent in the business demonstrated a higher commitment by the prospective
heir, and as one Asian-Caribbean respondent put it, “an inner sense of satisfaction
that the business will be in good hands when I pass on”.
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All respondents agreed that there were no formal written succession plans in
place. This result was consistent with the findings of other family business studies
(e.g. Howorth and Ali, 2001; PWC, 2014). There were no rules for choosing the
potential successor, given that most respondents felt that the decision was normally
left to the predecessor/founder out of respect. It was revealed that no one questioned
the choice made by the leader. We did not detect evidence of sibling rivalry or other
conflicts against the predecessor’s choice of successor in the sample. It is possible
that that there is no challenge or disrespect to the leader or that it may not have been
revealed to us.
The Asian-Caribbean respondents indicated that they had to earn the respect
of the predecessor to gain the right to succeed. In all the cases, it was understood that
the successor was groomed to take over the torch. The succession process was
handled by the predecessor working along with the potential successor who goes
through fulfilling all types of roles in the family business with the advice of the
predecessor. This is synonymous with Handler’s (1990) argument that successful
transitions usually go through a process of mutual role adjustment.
In the handing over process, most Asian-Caribbean and Afro-Caribbean
families utilised the monarch-type exit (i.e. passing on leadership on the death of the
leader). Comparatively, Caucasian-Caribbeans took steps to get others involved and
pass the torch on retirement. This finding is consistent with Sonnenfeld and Spence
(1989) and Howorth and Ali (2001). Tardiness in passing on the torch by AsianCaribbean and Afro-Caribbean incumbents may be based on fear of losing respect
and control, lack of confidence in potential successors, or the perceived need to
control the operations up to the time of death.
Caucasian-Caribbean respondents indicated that they viewed the adoption of
a corporate hierarchy as one of the core ways to ensure continuation of the business.
They also either felt that the current hierarchy was sufficient to ensure an adequate
foundation for the survival of the business from a management and operations
situation, or were in the process of creating a suitable hierarchy, given the nature and
needs of their company. Also of interest is that none of the current generation in
large family businesses showed indications of significant fear of the future generation
being able to succeed management. A Caucasian-Caribbean reported:
The current organisational structure has been structured around and
now provides the basis for ensuring the survival of the business, no one
person runs the entire company – autonomous diversified groups
working together. Therefore, from a view-point that there were to be an
interruption to the CEO of the company, it would literally be business as
usual. As far as the ownership of the company, that will be passed on
through the personal will of the current shareholders.
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This penchant towards incorporating hierarchical structures as a means of
increasing autonomy amongst their employees, coincides with Rosa’s (2005)
argument that many family habitual entrepreneurs prefer to bring in external
corporate expertise rather than relying on empowering the family to run it. In
contrast, the Afro-Caribbean and Asian-Caribbean respondents preferred hierarchical
structures with top-down decisions made, given that the current leader made the main
decisions on the running of the operations. The leader needed to be involved at every
stage and have that control over these family businesses. It may be argued that this
may be a cultural issue within the Asian-Caribbean and Afro-Caribbean
communities. It may also be argued that the Caucasian-Caribbean businesses are
more assured of their status, given their great length of time in business, compared to
the other family businesses.
Transmission of entrepreneurial mind-set and tradition (Vigour)
Respondents were asked about the entrepreneurial mind-set or tradition that
drove the previous generation and whether this was subsequently passed on to them.
A significant majority of the respondents unequivocally believed that an
entrepreneurial mind-set was passed on. For example, one Afro-Caribbean
respondent shared:
Daddy had it and he passed it on and taught it to us through our
upbringing. We weren’t aware of it at the time, but I think he
understood the process and silently ingrained it within us whilst we were
growing up.
A Caucasian-Caribbean respondent stated:
Definitely, growing up and being involved in the business, the same
entrepreneurial passion and drive that we grew up and saw and
experienced, was somehow passed onto us and that’s what made us come
back to work in the business, and subsequently to branch out on our own
into different areas to pursue that entrepreneurial drive that we either
learnt/inherited.
An Asian-Caribbean respondent supported this by saying:
My father loved this business. I grew up seeing him working long hours
in this business. My brothers and I watched the sacrifice, and at times,
the ridicule by persons seeing us selling from suitcases. We were taught
to know what put food on the table and what brought pride to our hearts.
We were told to try to be independent!
In contrast, two Afro-Caribbean respondents and one Caucasian-Caribbean
female respondent agreed that some form of entrepreneurial trait existed with the
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predecessor generation, but did not think that the trait was passed on to them. For
example, an Afro-Caribbean entrepreneur stated:
I don’t think so, I really can’t say that. It’s just something that just
happened. I am just lucky I guess.
The Afro-Caribbean respondent went further to discuss his previous
unsuccessful business ventures, his dislike at being involved in more than one
venture at a time and his fervent advice to his son against owning or operating
multiple ventures. The Caucasian-Caribbean female stated that she did not perceive
herself as having any entrepreneurial talent, but saw herself portraying a “behind the
scenes”, supportive role that organizes and manages the ventures started by her
father. She stated that she viewed her youngest brother as the family member that
seemed to possess the same entrepreneurial drive as her father.
It is seen that majority of the family businesses in this sample highlighted
that their predecessors’ entrepreneurial vigour were transferred to them, albeit
through informal methods outside of the business. These findings support Rosa
(2005) argument for the importance of entrepreneurial vigour in family businesses
and their succession process. The results suggest that the transmission of
entrepreneurial vigour also vary across ethnicities. While Afro-Caribbean families
appeared to transfer entrepreneurial attitudes through life lessons at home, CaucasianCaribbean families achieved this via business involvement and Asian-Caribbean
families utilised life lessons through business involvement. Within the
entrepreneurship context, ethnic research has accounted their corroborative results to
Afro-Caribbean businesses’ poor inter-generational business influence (Small and
McClean, 2002) and Asians’ placement of high importance on preserving family
traditions and entrepreneurship (Joshi and Srivastava, 2014).
An assessment of renewed entrepreneurial vigour on the family business
The majority of respondents viewed entrepreneurial vigour as essential to
the creation and going concern of the business. In other words, entrepreneurial vigour
was perceived by the sample as being important for “the continued growth of the
family businesses” and “to ensure that there is still a business for the next
generation to carry on”. Although family business research in other developing and
developed markets has shown that entrepreneurial vigour influences the next
generation to leave the founding family’s original business activity and enter new
business areas (Joshi and Srivastava, 2014), this was not found to be the case for all
the family businesses within our sample. One leader from an Afro-Caribbean family
business offered the following:
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We see ourselves not as a family business, but as a business ran by
family. Without a doubt you are encouraged to make decisions and see
opportunities – all will not be accepted. However, we do everything
together. We discuss the pros and cons and determine the outcome
together. Thus, there has never has been a feeling to break-away and go
off on your own.
A comment from a Caucasian-Caribbean respondent supported this by saying:
The acceleration of the family business break-up does not apply since the
family has been fortunate in terms of not having any internal conflict
and projects have always been evaluated objectively.
Through the engagement of entrepreneurial vigour, the families were able to
remove or modify products and services that were not performing well and
strategically develop new offers with higher commercial potential. Responses show
that such engagement can lead to the break-up if it has not been progressing with
global trends. For example, a Caucasian-Caribbean male reported:
… my son is now an entrepreneur in the financial industry. Normally,
he would have come in and taken it on, but I said to him, you have a
business that is going places, so don’t worry about this old ship – I will
get someone else to steer it. You have a really nice opportunity that you
can grow with, so don’t miss that opportunity to come and do
foolishness... so that’s why he’s into that, and he will stay there with that.
But he will still check in with us. We are involved in the business with
him – we share in that and to an extent, we were helpful to get it kick
started, since we were his first investors and provided him with the initial
capital to give it a little push, but generally he runs it, and we don’t have
to get involved so much.
Another Caucasian-Caribbean stated:
My daughter was involved in creating ***. She created our line of
bookstores, but she has now gone on to be involved in creating an
interesting game where you put pictures up on the internet, Caribbean
pictures. It is a new upcoming business with great potential if it takes off.
About half of the respondents felt that the family businesses were both broken up as
well as built up as a result of renewed entrepreneurial vigour. A member of an AfroCaribbean business stated:
It caused the breaking up of the business group and then its subsequent
renewal. That passion had been transferred to us and we wanted to
pursue that passion but because he (dad) didn’t transition, it was difficult
for him to agree to embrace all of the things that we knew we wanted to
do and we had to do to take the business to another level.
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If he had been able to transition and recognize that “we have done well’
and not “I had done well”, then at the time he would have recognised it
was time to transfer to the next generation to enable the renewal and
expansion of that business. He couldn’t get used to the entrepreneurial
spirit blossoming in us in the same way it did in him, because it was a
loss of control and notoriety, etc. However, because we had the
entrepreneurial spirit within us, we then went out and pursued other
interests, and were then able to revisit the family business capital into
new opportunities.
Another respondent from an Afro-Caribbean business reported:
Let’s put it this way. I’d rather follow something that I really like to do,
something that I’m really passionate about, than to just go back into the
family business straight from higher education. I would rather take
some money and invest it somewhere and make some money, than to just
work for him (dad). I wanted my own company, my own business, the
same way he did. My other two siblings have joined the family business,
and my brother has gone further by diversifying the business, now
offering up a new subsidiary within the company that offers a line of
service to the company in an area he enjoys and is more passionate about
rather than the buying and selling of products. That is his thing and it
seems to be the new future of the company.
From our responses, it is evident that some family members stayed within
the business and continued to grow it, whilst others chose to pursue different
activities. Our results show that in some Afro-Caribbean families, the father
(founding generation) is the primary visionary and entrepreneur within the family
business, and continues to be the sole family member that pursues new business
opportunities. His successor and the other children work and manage the existing
company, which gives him spare time to pursue new ventures4. This view differs
directly to that of the female Asian-Caribbean respondent, who highlighted that she
could not rely on her father’s old ways of generating revenues and growing the
business. She advised that ongoing innovation and diversification are crucial.
4
These families were identified as interesting follow-up cases to ascertain what strategy the
succeeding generation will choose when placed at the helm of the management of the
company.
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Conclusion
Our findings show that Caucasian-Caribbean owned and managed family
businesses had more developed systems for succession planning and hierarchical
structures within their companies, than Afro-Caribbean and Asian-Caribbean
businesses within the sample. This may be due to many Caucasian-Caribbeans having
first-hand experience and advice of succession in family businesses from assisting
and interacting with the family business of relatives. Caucasian-Caribbean firms
already having a set structure and better access to resources as many are rooted from
the plantation economy of the colonial period, as well as Caucasian-Caribbean
businesses’ sense of legacy preservation.
It is evident that the socialisation process within the Caucasian-Caribbean
and Asian-Caribbean family culture, particularly with regards to entrepreneurship and
succession, differs to that of Afro-Caribbeans. The following generations in both
Asian-Caribbean and Caucasian-Caribbean families are reared from young to be a
part of the family business, and any educational undertakings are geared towards
ensuring that the next-generation is equipped to carry on the business until they too
have to pass on the mantle to their succeeding generations. On the other hand, the
focus of Afro-Caribbean Barbadian businesses is on independence, given that they
see their entrepreneurial activities as allowing their successive generations the
opportunity to attain a better life than their predecessors. Therefore, when children of
Afro-Caribbean business founders/leaders acquired professional careers, many AfroCaribbean businesses ceased to exist upon the founder’s retirement or death.
It may be perceived that Afro-Caribbean Barbadian businesses did not fail
necessarily from a lack of vision, but rather because the majority of Afro-Caribbean
business owners saw formal education rather than business as a ‘way out’ for the next
and succeeding generations, and often directed or influenced their offspring into
professions such as medicine and law, as opposed to continuation of the family
business. Basu’s (2004) study acknowledges this by showing the different aspirations
entrepreneurs possess may ultimately determine if business survival or the intergenerational transmission will be an option pursued by them.
This mind-set within the Afro-Caribbean community towards
entrepreneurial activity is however gradually changing, as entrepreneurship has
slowly been perceived as a viable business career, and has been decreasingly
associated with post-colonial periods of apprenticeship and peasant farming. This
view has also been corroborated by Nicholson (2011) who observed that educated
African descendants are going into the business. The ongoing operation of AfroCaribbean family businesses (within the sample) and even the introduction of
entrepreneurial activities within the formal education structure shows that Barbadian
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Afro-Caribbeans seem to be moving towards adapting and having aspirations of
ensuring inter-generational transfer and entrepreneurship.
As a result, we can see clear examples where these Afro-Caribbean owned
and managed businesses have been able to cross the first inter-generational hurdle,
and are striving towards achieving greater success.
Formalised succession planning did not exist and still continues to be
lacking in any structured form. Morris et al., (1997) made the point that the absence
of formal plans does not necessarily mean that there is a lack of planning, since
formalisation may stifle motivation and undermine family relationships. However,
these family businesses, by their mere continued existence, have been able to find
alternative approaches, including ensuring that capital was passed to succeeding
generations. Our results here are consistent with Morris et al., (1997) contention that
the succession plans in Barbados are more open, fluid and unstructured. Thus, we
concur with Williams and Jones’ (2010) findings that formal succession planning
improves firm efficiency but inter-generational transfers are essential to the firm
longevity. While much research in developed countries has identified formal
succession planning as a necessity for family businesses, we find that in an emerging
country context, the informal hand may be quite efficient in guiding succession and
what may therefore be needed are effective formal infrastructure and institutions to
guide the succession process and combat regressive cultural actors.
This research highlights stronger perceptions by Caucasian-Caribbeans and
Asian-Caribbeans to ensure inter-generational transfer rather than Afro-Caribbeans.
An explanation for this may result from Barbados’ historical past. CaucasianCaribbeans had a history of business ownership, while Afro-Caribbeans as an
aspiring class did not enjoy much economic control. Another explanation for this
may stem from the fact that smaller groups in a population tend to be very cohesive
and collaborative with each other (McClean and Cummings, 1994). This alliance
between individuals within Barbados’ smaller ethnic groups (Caucasian-Caribbeans
and Asian-Caribbeans) and Barbados’ cultural and business history may be
accountable for the inverse relationship between wealth (economic control) and
population, Caucasian-Caribbeans making up 4 per cent of the population and
holding majority wealth and Afro-Caribbeans making up 90 per cent and holding
minority wealth.
Theoretically, the results of this study support prior concepts on family
businesses. Specifically, the theory of mutual role adjustment by Handler (1994) was
applicable in this Barbadian context, whereby the founder adjusted his/her role in
preparing the heir/successor. Furthermore, Rosa et al., (2005) arguments of habitual
family entrepreneurs and entrepreneurial mind-set and tradition were seen in this
sample. Our research findings also concur with the prior research done by Small and
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McClean (2002) in Barbados. Taken together, these results show the applicability of
theoretical constructs from other contexts to the local economy.
More importantly these results demonstrate how family business succession
has been developed for small emerging economies.
Practically, this research shows that much needs to be done in educating and
training entrepreneurs in terms of creating successful transitions. It stands to reason
that educational institutions such as the University of the West Indies should take the
lead in implementing programmes to achieve this objective. Too often family
businesses start-up and subsequently close or break-up on the death of the founder. It
may also be important that nurturing of entrepreneurs be done at the primary and
secondary school levels, in order to sensitise children on the importance of growth
through entrepreneurship and creating a legacy. In addition, government can
implement mechanisms that foster a favourable entrepreneurial environment through
suitable infrastructure (regulatory environment), support services (training and
advice) and access to finance (e.g. government assisted programmes, incentives and
subsidies). We argue that much research needs to be done to understand the
succession plans in family businesses in Barbados, as our research can be seen as
pioneering in the area within this context.
Similar to other research, there are several limitations in this study. Firstly,
the size of the sample used was small, and therefore is not representative of the entire
population of inter-generational family businesses within Barbados. Future research
could target larger samples and determine the extent of the influence of family
businesses on the Barbados economy. Secondly, because the study was conducted in
a closed environment where sharing business information is not the norm, the
respondents may provide socially desirable responses. Thirdly, this study only used
the perceptions and responses of one individual in the family business unit to explain
the perceptions on the entire family business. Future research could focus on gaining
perceptions of other family members. Fourthly, more in-depth focus groups and/or
case studies can serve to explore and analyse the underlying factors relating to the
inter-generational transfer of Barbadian family business. In addition, further work
could be conducted to look at the impact of unexplored variables such as race, age
and gender. Finally, this research only focused on prominent firms. Future research
can compare the results of this study to that of relatively smaller firms.
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Appendix A
List of questions on interview schedule
Demographics
1.
Race
2.
Gender
3.
Age of respondent
4. Type of family business
5.
Generation level
6.
Length of time the family business was in operation
Specific questions
7.
Describe your family business.
8.
What factors motivated your involvement in the family business?
9.
Describe the succession planning within your family business. Explain.
10. Do you prefer the succession plans that you have? Explain
11. Have these succession plans (formal or informal) been properly communicated to all?
12. What was the entrepreneurial mind-set and tradition during your predecessor’s tenure?
13. Did this entrepreneurial mind-set and tradition from your predecessor’s tenure been passed
on to your generation?
14. Did you consider this entrepreneurial mind-set and tradition as having a positive impact on
the current business?
15. What do you understand by the term “entrepreneurial vigour”?
16. Did entrepreneurial vigour assist in building up the family business? How?
17. What other observations can you make about family business succession?
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VOLUME 8 SEPTEMBER 30, 2015
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From Reactive to Proactive Discipline in Schools:
Implications for Transforming the Future Workforce
By
Donna-Maria Maynard, PhD
School of Education,
The University of West Indies, Cave Hill Campus
and
Mia Jules, PhD
School of Education,
The University of West Indies, Cave Hill Campus
Abstract
An argument is presented for the long-term negative effects of the use of
corporal punishment on the productivity of the Barbadian workforce. Corporal
punishment continues to be practiced in schools despite Barbados being a signatory
to the UN Convention on the Rights of the Child. Proactive disciplinary measures
foster the development of the emotionally intelligent child and by extension worker;
one who can negotiate, resolve conflicts and effectively communicate. The
application of social cognitive theory supports changing the continued practice of
corporal punishment if an economically viable and innovative workforce is to be
developed.
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Introduction
Violence, conflict, apathy and resistance among the workforce continue to
overburden Barbados’ financial resources in terms of lost productivity, criminal
justice system and health care expenses (The National Employment Policy of
Barbados 2014). In an attempt to address problems within the labour market sector,
the Government, trade unions and the private sector have developed programmes to
actively educate and train the workforce through nationwide initiatives such as the
National Initiative for Service Excellence (NISE) at a cost in excess of two million
dollars per year (NISE Annual Report 2010). The aim of NISE is to deliver “service
excellence” at all levels so as to elevate productivity and increase Barbados’
international standing with the vision of attaining developed country status by 2025
(NISE Website 2010).
Education and by extension schooling plays a critical role in the preparation
of the future workforce of any country (Dickman, Schwabe, Schmidt & Henken,
2009). Notably, there have been a number of new teaching techniques and
technologies introduced to the school arena to enhance learning (Earle, 2002) which
in the long-term can produce much more developed and effective adults for society.
Despite advancements in teaching and disciplinary alternatives, corporal punishment
in schools continues to be a topical issue in Barbados as evidenced by statements
made by the Minister of Education, over the years which have repeatedly expressed a
preference for the prohibition of its use in schools. For example, it was reported 29
June, 2008 that the Minister in reference to corporal punishment stated "society
should eliminate that form of discipline altogether" (Farley, 2008), more recently in a
statement made in March 2015 the Minister stated, “that the time has probably come
for Barbados to do away with flogging” (Editorial Nation News, 2015, March 12).
Despite these Ministerial statements, it has been made clear at the level of
Government that the Minister of Education’s public advocacy for the vetoing of
corporal punishment in school was “not currently the official position” (Prohibiting
corporal punishment of children in the Caribbean – Progress Report 2012).
Moreover, although Barbados has signed on to the United Nations Convention on the
Rights of the Child since 1990 (Donnolo & Azzarelli, 1996); a convention which
clearly views corporal punishment as a form of abuse that should be outlawed, such
disciplinary measures still continue to be practiced in Barbadian schools.
Based on the Minister of Education’s support of the prohibition of corporal
punishment and the development of new teaching/disciplinary measures, the question
should be asked, “In what way (if any) does the continued practice of corporal
punishment benefit the education system of Barbados?”
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“What are the cognitive effects of this kind of discipline likely to have on a child as a
result of its use?” and “what are the possible implications of the continued use of
corporal punishment on the work-based characteristics of the Barbadian workforce?”
In this article, we first explore the meaning and arguable utility of corporal
punishment in various cultural contexts. Secondly the argument is made that corporal
punishment is a practice that has the power to make a person extrinsically motivated
within the work setting, stifle creativity and thus build a culture of fear and violence.
It is also argued that we as a society can better understand the redundancy of corporal
punishment by reflecting on the past and the function that it served within historical
contexts. Finally, we propose that employing proactive a behavioural disciplinary
method not only reflects techniques used within the world of work but will serve to
develop a well- rounded future workforce which is intrinsically motivated and where
all workers take pride in their work.
Corporal Punishment: Definitions and Evidence of Utility
Corporal punishment can be defined as the deliberate use of physical pain
to correct or change the behaviour of a child (Greydanus, Pratt, Spates, BlakeDreher, Greydanus-Gearhart, & Patel, 2003; Payne, 1989; Strauss & Donnelly,
1993). It also encompasses “. . . any punishment in which physical force is used and
intended to cause some degree of pain or discomfort, however light.” (UN Committee
on the Rights of the Child in the General Comment No. 8, 2006; p.6).
Corporal Punishment in the Caribbean
Christianity is the dominant religion throughout the Caribbean (Premdas,
1996); hence corporal punishment is genuinely believed to be a normal, God-given
tool for disciplining children. The religious scripture- Proverbs 13:24, “One who
spares the rod hates his son, but one who loves him is careful to discipline him”
(World English Bible), which has become the familiar adage “spare the rod and spoil
the child” (Arnold, 1982; Payne, 1989) is used to justify the continued existence of
corporal punishment. Moreover, Proverbs 13:24 poses corporal punishment as
coming from a place of love, which may further reinforce the use of corporal
punishment in the Caribbean.
In addition to the religious argument supporting the practice, many people
justify its use based on their own personal experiences of physical punishment and
sentiment after all “they turned out fine” (Graziano, & Namaste, 1990; Tafa, 2002).
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Teachers often see corporal punishment as the only tool that asserts their
power over the children. Furthermore teachers rationalize that children are being
lashed and beaten at home for punishment hence, that is what they know, and respond
to, and believe that if they use a different method of discipline it will be viewed as
being a ‘soft’ approach and teachers will be disrespected (Taitt, 2008).
Corporal punishment has become entrenched as being critical to school
discipline, hence the common argument that its abolition equals classroom disorder
and failure persists (Payet & Franchi, 2008; Tafa, 2002). Corporal punishment is
largely accepted and deemed culturally appropriate in the Caribbean (Payne 1989;
Krugman et al 1992; Anderson and Payne 1994). For example, a study of elementary
school students in Barbados showed that three-quarters of them approved the use of
corporal punishment (Anderson and Payne, 1994).
Corporal punishment has been one of the main forms of discipline used in
schools across Barbados since formal education was introduced in 1686 (Ministry of
Education, 2000). Tafa (2002) notes that corporal punishment had been an integral
part of the educational systems in England, Scotland and Wales and it was exported
to the colonies with the understanding that it was “critical to school discipline”. That
belief embedded in the formation of the education system in Barbados continues to
this very day. Clearly outlined in the Education Regulation 18 (j), provisions are
made for School “. . . principals to administer corporal punishment when necessary
and delegate to the deputy principal and senior teachers, where applicable, the
authority to administer corporal punishment.” (Ministry of Education, Youth Affairs
and Sports, 2004, p. 2). Hence the use of corporal punishment in schools is permitted
by law in Barbados (Anderson & Payne, 1994).
Dangers of Corporal Punishment to the Developing Child
A significant body of well documented research from Europe and North
America have found that children who are physically punished have psychological
concerns, including lowered self-esteem, increased anxiety, fear and depression,
diminished attention span, increased aggressive and destructive behaviour, aggression
against teachers, vandalism against school property and deficient academic
performance (e.g., Bryan & Freed, 1982; Fergusson & Lynskey, 1997; Holmes &
Robbins, 1988; Larzelere, 1986; Straus, 1991; Straus & Kantor, 1994; Turner &
Muller, 2004). For example, a survey study of Community College students found
that lower grades and a significantly greater number of problems, such as aggression,
delinquency, depression, and anxiety were reported by those who received a high
amount of corporal punishment (Bryan & Freed, 1982).
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In addition a meta-analysis of studies evaluating the impact of corporal
punishment on children’s behaviour has shown that increased exposure to corporal
punishment is associated with increased later aggression and poor mental health
(Gershoff, 2002). Straus (1991) argues that although physical punishment may
produce conformity in the immediate situation, in the long-term it tends to increase
the likelihood of deviance, including delinquency in adolescence and violent crime in
adulthood.
Ramsburg (1997) argues that the use of corporal punishment in the form of
flogging sends the wrong signals to children; that is, it communicates that beating “…
is an acceptable way to solve problems.” In addition, it “has the potentially harmful
long-term effects such as increasing the chances of …, impaired learning.”
(Ramsburg, 1997, p. 3). This is further supported by Fernald and Meeks-Gardener’s
(2003) conclusion, from their study of Jamaican children’s reports of violence that
children seem to be learning that violence is an appropriate way to deal with
problems. Given the detrimental effects of corporal punishment, what are the
potential effects for the Barbadian worker?
Detrimental Effects of Corporal Punishment on the Future Worker
A current world trend in the present economic environment is exerting a
push for independent and innovative thinking as vital for the new form of worker to
generate income for economic prosperity in any country (Howkins, 2002). Indeed,
this is also exemplified by Barbados’ national thrust towards the creation of
employment through entrepreneurship. Lumpkin and Dess (1996) have
conceptualized an entrepreneurial orientation (EO) that being one who is
autonomous, risk-taking, innovative, competitively aggressive and proactive (Lee &
Peterson, 2001). Such personality traits are viewed as being ideal for the future
workforce, yet they are not characteristics that are honed within Barbadian schools
given the current disciplinary practices which still exist today.
In fact, corporal punishment used in the 21st century may serve to be
counterproductive for economic growth. When it was used in schools in the 1960s
and 1970s, Barbados was at an earlier stage of development; building its sugar
industry, tourism product and public servant workforce. Therefore that was a time
when people were required to be obedient and subservient to move the “ball” along,
and not drop it, not necessarily having to wonder why they are moving the “ball” in
this direction or why they don’t pick it up, throw it, or even cut it in half. During that
time period that level of creativity and ingenuity was not required for the average
worker. Rather workers who were obedient, took instruction easily, and followed the
status quo were what the then workforce required.
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The colonial schooling system addressed this need and it was based on a
fundamental premise that most children were naturally reluctant to learn and
therefore required extrinsic forms of motivation. Hence, disciplinary systems based
mostly on punishments and sanctions were created (Braithwaite, 1998). Children
would therefore either avoid or stop the undesirable behaviour because of fear of, or
actual physical punishment (Talwar, Carlson & Lee, 2011). Many acknowledge that
use of corporal punishment dampens creativity in individuals (Barron, 1969; Sears &
Hilgard, 1963). Hence, one of the main features of employees in demand by
organisations is potentially being destroyed by the continued use of this punitive
archaic form of discipline in schools.
The Social Cognitive Theory
Corporal punishment has been found to be related to a number of antisocial
behaviours in children, (e.g., hostility, aggression, bullying, deliberate destruction of
property) (Gershoff, 2002). Indeed, the behaviour that teachers are most likely
attempting to stop when they utilise corporal punishment with children, is precisely
the behaviour that is most probably being strengthened. Social cognitive theory
(Bandura 1986) suggests that physical punishment facilitates children’s learning of
aggressive behaviour through modelling. Adults who inflict pain to try to alter
children’s behaviour are serving as models and those children are likely to employ
the same methods with others when they want to influence other people’s actions.
Bandura’s social cognitive theory (1986) offers a clear explanation using
observational learning as the process through which children may well be learning
aggressive and violent behaviour from the method of discipline employed. Rather,
than the lesson that they are meant to learn about the disruptive or inappropriate
behaviour that they have exhibited, and that needs to be altered or changed. The
social cognitive theory (SCT) implies that behaviour both influences and is
influenced, through continuous interaction of one’s social environment, cognitions,
and behaviour, which Bandura termed reciprocal determinism.
Most importantly SCT recognizes that we learn information by observing
others and actively engaging in a number of cognitive processes, long before we
actually perform the behaviour; when and if we are ever motivated to. Therefore, the
behaviour modelled by the adult administering corporal punishment has the potential
to be reproduced at a later time, when the observer is in a situation that serves to
motivate the use of that behaviour. Hence, in the world of work when presented with
a problem, rather than look for ways in which they can creatively address it they may
withdraw in fear of being punished, or lash out to punish the other.
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Hence, the potential danger lies in that individuals could enter the workforce
engaging in behaviours performed solely to receive a tangible reward or to avoid
punishment (Deci & Ryan, 2008). Such behaviours would have been learnt from their
experiences with corporal punishment. Yet an extrinsically motivated workforce is
not desired by business and industry (Grant, 2008), the preference for intrinsically
motivated employees; those who engage in behaviours because they find the
occupation itself interesting and satisfying exists, for they demonstrate curiosity, are
explorative and address challenges that come their way (Deci & Ryan, 2008; Deci,
1975). They also share many of the characteristics of what are referred to as
“engaged employees” in the organizational behaviour field (Bakker & Schaufeli,
2008). Corporal punishment has the power to stifle the development of such an
individual.
The concept of intrinsic motivation has been identified as a positive factor in
employees; they have been found to demonstrate enhanced levels of persistence,
performance, and productivity (Deci & Ryan 2007, Grant, 2008), as intrinsically
motivated workers tend to take much pride in their vocation (Kreps, 1997).
Furthermore Karatepe and Tekinkus (2006) in their study of intrinsic motivation on
job outcomes of employees found that high levels of intrinsic motivation result in
high levels of job performance, job satisfaction, and affective commitment to the
organization.
However, intrinsic motivation is decreased by threats of punishment (Deci
& Cascio, 1972). Therefore corporal punishment, school policies and practices
undermine learning, while those that promote consequences, significance and choice
result in greater and better quality learning (Deci & Ryan, 2008). Hence, they reduce
the likelihood that the behaviour will be repeated. The general classroom climate can
also affect individual’s intrinsic motivation, undermining it in those classrooms that
feel pressuring and controlling (Deci, & Ryan, 1981), which are often characteristic
of those where corporal punishment is widely practiced.
Corporal punishment is an external control in the school which weakens the
sense of connectedness between teachers and students, and can serve to suppress the
equitable processes central to high-quality learning (Niemiec, & Ryan, 2009).
Teachers’ support of students’ basic psychological needs for autonomy, competence
and relatedness develop intrinsic motivation for learning (Niemiec & Ryan, 2009).
Devonish (2013) in a study of workplace bullying in Barbados, has identified the
need for “encouraging positive interpersonal work climates and cultures among
employees” (p. 630). The power dynamic in workplace bullying mirrors that which
children at school are exposed to in the teachers’ position of power and liberal use of
corporal punishment as indicated in Anderson and Payne’s (1994) study of pupils
surveyed at elementary school. The students who participated in this study indicated
through their comments “. . .that a considerable amount of routine (and illegal)
“flogging” or “lashing” by regular classroom teachers occurred, which many wished
to see stopped.” (p. 377).
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Growth cannot occur in an organisation if self-growth within the worker is
not facilitated. Moving from an external locus of control to an internal locus of
control is critical to ensuring a strong workforce. Hence the use of corporal
punishment reinforces the notion of disciplining children through the use of external
forces, which in the long-term may serve to be counterproductive for economic
growth and well-being.
Bandura clearly distinguishes between learning and performance. Unless
motivated, a person does not produce learned behaviour. This may well explain the
differences in findings from research on corporal punishment and its relation to
violent and aggressive behaviour in adulthood and why many would argue that they
used to be beaten as a form of discipline but yet they are not violent in adulthood.
Positive Behaviour Management and development of the Ideal Worker: A
Paradigm Shift
Today’s labour market is demanding a different kind of employee, one who
can reason, understand and “overstand”, apply, synthesise and create (Oldham &
Cummings, 1996; Zhang & Bartol, 2010). We argue in this paper that transforming
education in an effort to meet the needs of the future workforce involves
transforming disciplinary action; discipline is an inherent aspect of all of our
interactions with people. Having considered the possible long term effects on the
economic activity in Barbados, we will now look at how a move to proactive
discipline may contribute to transforming the future workforce of Barbados.
Positive behaviour management (PBM; Canter & Canter, 2001) employs
proactive strategies for use in disciplining children which ‘open the door’ to the
development of the thinking, creative child and by extension the innovative ideal
worker. There is no physical or psychological pain inflicted, no attacking or
destruction of the individual’s self-esteem involved in PBM. The techniques that
are used are based on learning theories and involve the teacher, entering a
collaborative relationship with the children, with a coherent and consistent plan for
promoting prosocial behaviour using positive reinforcement techniques and proactive
strategies (Ducharme & Shecter, 2011). The aim therefore, is for students to develop
intrinsic motivation – self-discipline, where they can self-regulate their behaviour.
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PBM places much emphasis on techniques for developing self-discipline
and meeting the basic needs of children, and on preventing behaviour problems.
Proactive strategies are used to develop, strengthen, or increase desired thoughts,
emotions, and behaviours and for preventing those that are not desired. There is still
room for the use of thoughtful punishment (e.g., verbal reprimands, proximity
control, and removal of privileges); however there is no room for the infliction of
physical pain as a form of punishment.
The alternative methods of discipline such as those found in positive
behaviour management reflect many of those employed in large organisations
(Harter, Schmidt & Hayes, 2002) and should foster negotiation, mediation,
empathicand humane skills, among many others, in the child. However, there is a
need for research to inform if these skills are transferred to the workplace in
adulthood, do they serve to enhance human relations in the workplace, and what are
their effects on productivity and the end line – profit of the organisation?
The economic cost of having workers that are just dependent on instruction
from ‘above’ hinders the creation of an innovative workforce to drive future
development. Positive behaviour management requires a paradigm-shift for
Caribbean teachers. No longer must our teachers view children as passive recipients
of adult wisdom who need to be directed and led. It requires teachers and students to
work together to develop shared norms and expectations for behaviour. Children are
involved in deciding what acceptable behaviour is and are treated as partners in
matters of school discipline. This method uses discipline as an opportunity to build
children’s skills to behave differently the next time a similar situation arises.
Schools’ discipline policies tend to offer little room for student input and
participation. Yet schools are the environments best suited for building children’s
participation and competence. Schools must recognize both children’s capacities, as
they develop over time, and their own role in developing them. Those policies that
recognise children’s unique capacity to participate in securing their own well-being
and development will lay the foundation for a workforce that is independent,
intrinsically motivated, self-regulated, and better able to contribute to the growth and
productivity of the organisation.
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Conclusion
We need to ensure that the implementation of positive behaviour
management in our secondary schools is done in such a way that detailed empirical
longitudinal studies are conducted following the children through their school lives
and into the world of work. The aim should be to capture whether or not the much
more proactive methods of addressing disruptive and inappropriate behaviour lend
themselves to more compassionate and considerate employers and employees in the
adult world.
Clearly more research is needed on the long-term effects of corporal
punishment on the developing worker, workplace bullying, etc. We should be guided
by the data not simply adopt what has been imposed on us by others nor what others
“feel” worked for them when they were a child/parent. Using data based on
Caribbean samples to inform our policy is imperative.
When we look at what we have in terms of Caribbean research and findings
and thus far there is not sufficient evidence for or against corporal punishment in
schools in the Caribbean. However, implicit in current international research is the
understanding that corporal punishment does more harm than good.
Therefore the corporal punishment debate has to take into account the
possible psychological harm that can be caused by such measures of discipline and
by extension the direct or indirect effect on our economy at large. When we talk
about figures and profits we look at them clinically in the absence of those who work
and help to raise or lower the profit margin. What is now needed is a holistic and
comprehensive investigation into the psychological effects of the use of positive
behaviour management work on Caribbean children. In addition, the time has also
come for research to be conducted into the long-term effects that such proactive
disciplinary techniques can have on individuals within the Caribbean context. Once
guided by evidence, we in the Caribbean would be in a better position to effect
change to improve the education system but also by extension contribute to the
development of a well-rounded worker, well suited to effectively and proactively take
on the challenges of future work climates.
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Public Sector Wastage in Annual Budgeted Subscriptions
and Contributions 2009-2014: The Case of Barbados
By
Ronnie Griffith
Abstract
The objective of this paper is to look specifically at the level of expenditure
on Subscriptions and Contributions in the Public Sector in Barbados over the period
2009-2014. Many Government Ministries and Agencies have engaged in increased
amounts of subscriptions and contributions that have escalated their expenditure.
Public expenditure is the total spending of taxpayers’ money by Public Authorities
like central, state and local Governments to satisfy the collective social wants of the
population.
This paper examines an international micro entity which applies
subscription fees to Government Ministries/Departments to access information from
various sites. The payment of these subscriptions differ across the public service and
leads to wastage of funds that could be utilized otherwise. Such costs and wastage
contributes to the drain on the foreign exchange reserves and a tightening of the fiscal
space available which reduces the capacity to conduct development projects to create
growth.
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Introduction
Governments across the globe have to deal with issues of significant
wastage of public resources amidst the current global economic and financial
recession (Schuknecht L. and Vito T., 2005). Such wastage almost certainly runs into
millions of dollars (Grabosky, Peter N. (1990)). In the current climate of fiscal
restraint this practice is not affordable and should be corrected as public funds need
to be managed prudently, responsibly and effectively.
The National Budget is the main source through which Government collects
resources from the economy in a sufficient and appropriate manner to allocate and
use those resources responsibly, efficiently and effectively. The primary principles of
public expenditure management are to accomplish macro-financial discipline,
strategic productive resource allocation and technical efficiency.
Hence, prudent public expenditure policy and practices can accelerate
growth, promote employment opportunities and reduce poverty and inequalities in
income distribution. However, in recent years there has been a mismatch between
the increasing rate of government expenditure and the growth of Gross Domestic
Product (GDP).
Accordingly, a recommendation for a management information entity to be
responsible for all subscriptions and contributions across the public sector is
necessary and welcomed to manage all information pertaining to a national
information network.
While there is the macroeconomic perspective of wastage in the Public
Sector this paper specifically focuses on the microeconomic perspective of
subscriptions and contributions to one particular publishing entity to which
Ministries, Departments and related Agencies subscribe to every year.
Over the years, in the Public Sector there has emerged a callous attitude
towards the general expenditure of Public Sector resources (Grabosky, Peter N.
(1990)). However, with the emergence of the current financial and economic global
recession, Governments across the world are forced to exercise greater fiscal
prudence and have engaged in programmes of fiscal consolidation that has sought to
reduce deficits. At the same time, such measures seek to stem the level of wastage
while creating an environment of efficient expenditure levels relative to Gross
Domestic Product (GDP) that generate growth in their economies to drive and sustain
development.
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The paper is comprised of eight sections. The first section examines a
synopsis of the situation in an abstract. The second section introduces a concept of
expenditure wastage and highlights a specific micro aspect of the overall category of
such wastage that can be identified in the Public Sector Estimates of Expenditure of
various Ministries, Agencies and Departments. The third section reviews the
literature relating to public sector wastage. Section four looks at detecting Public
Sector wastage; the fifth section examines ways of preventing such wastage; the sixth
section attempts to provide ways to reduce and rectify the amount of wastage; the
seventh section examines the case of Barbados 2009-2014; and the eighth section or
the conclusion/recommendations explains the importance of adopting and
implementing essential elements of good practices in order to effectively manage
Government’s expenditure levels and prevent wastage of public sector resources.
Literature Review
John Maynard Keynes (1936) purported the view that during recessionary
times the use of expansionary fiscal policies boosts economic activities, thus leading
to growth and an expansion of public expenditures to increase community output or
Gross Domestic Product (GDP).
Wagner (1883) argues that the principle cause of growth in public sector
expenditure is the expansion of State activities. This is similar to the Keynesian
school of thought that suggests that government spending accelerates growth and
changes aggregate output (Keynes, J. M., (1936)). Although this may be the accepted
theoretical principle, there still has to be a high degree of prudence and caution with
respect to the height of expenditure levels incurred for fear of introducing high
inflationary levels in the economy where too much money chases too few goods and
services.
Dalton’s principle of “Maximum Social Advantage” (1965) stated that
government revenue and government expenditure had to balance in order to achieve
maximum social benefit.
A. C. Pigou (1928) and (1932) purported in “Maximum Aggregate Welfare” that
economic welfare is achieved when the marginal utility of expenditure equals the
marginal disutility of taxation.
The Voluntary Exchange Theory by Erik Lindahl (1919) stated that the
determination of public expenditure and taxation will happen on the basis of public
preferences that will reveal themselves based on the capacities of individuals.
In 1959, Musgrave stated that traditionally public expenditure represented a
form of Government intervention designed to promote allocative efficiency through
the correction of market failures, the equitable redistribution of resources, and the
promotion of economic growth and stability.
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The literature in summary indicates that in order for maximum benefits to be
ascertained from the expenditure of a Government there has to be a balance between
the utility derived from that expenditure relative to the revenue generated. Hence, if
the expenditure level is continuously expanding and revenue is decreasing then the
marginal benefit would be diminishing at a decreasing rate over time.
For this reason, an effective Government must seek to improve people’s
standard of living by ensuring access to essential services such as health, education,
water and sanitation, electricity, transport and the opportunity to live and work
relatively comfortably in peace and security.
It is therefore absolutely necessary and essential in a fiscal climate that mirrors the
current financial and economic crisis, to maintain a high degree of accountability for
the management of scarce public resources. Hence, Managers/Permanent Secretaries
must be accountable for the decisions regarding the way in which public financial
resources are utilized. While overly strict regulations can prohibit the efficient
allocation of public resources it is necessary for defined accountability structures to
be assigned.
Clearly defined accountability structures are therefore very essential and
management of resources must be strengthened and given high priority. Rational
public expenditure policies must be formulated by Governments, especially in
recessionary periods, in order to achieve the desired effects on income, output
distribution of goods and services, employment and growth.
Detecting Public Sector Wastage
In this regard, good security practices are very essential and integral to good
management. There must be constant internal security audits, internal inspections and
controls carried out on a monthly basis to detect any anomalies of abuse of public
funds. The efficacy of these systems is critical in reducing the amount of wastage that
is possible over a period of time. Public sector inefficiency mostly stems from poor
management choices which are related to policy and programme priorities and are
harder to detect thus requiring more thought and analysis to resolve.
In the current economic climate where fiscal restraint is very important,
public funds must be managed responsibly. Wastage and abuse of public funds can
undermine the reputation of any Government and negatively impacts economic
growth and prosperity.
The primary defense against the wastage of public funds should be
prevention where systems and policies are put in place to minimize the motivation
and opportunities to engage in wastage. Firstly, areas of wastage should be identified
and processes mandated to be instituted to reduce such wastage. Apart from this,
incentives can be provided for efficiency and effectiveness in the procurement and
management of resources.
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While this paper focuses on wastage specific only to subscriptions and
contributions to an international organization and not wastage generally across the
public sector, it gives an idea of various examples where wastage can occur and the
extent to the significant amount of wastage.
Examples of wastage include:

Duplication of administrative functions, either between Ministries and local
governments or between Ministries and other Ministries/Agencies.

Unnecessary delays and contract disputes in project implementation, which
lead to cost over-runs.
Improper appraisals and feasibility work, which lead to delays and cost
over-runs.
Poor asset maintenance, which necessitates replacement of physical capital
such as infrastructure.
Theft of public property.
Deliberate over-pricing of contracts for goods and services procured by the
Government.
Purchase of expired pharmaceutical drugs, or allowing drugs to expire on
the shelves of hospitals and clinics.
Leakages occur where funds are not spent on the inputs for which they were
intended or they are spent on the intended use but the inputs purchased do
not show up at the point of service delivery.






Preventing Public Sector Wastage
Public Expenditure Tracking Systems (PETS) are vital components in
Public Expenditure Management (PEM) and can be used to reduce the amount of
leakage/wastage in the public sector. Systems and policies should be put in place to
minimize the motivation, desire and opportunities to waste public resources. Such a
system helps with the efficient management of these resources which enable them to
do more than what is expected in some cases. Constant monitoring can identify
shortcomings in the system and can initiate a process of prevention and control
systems that will lead to better management of the resources.
In general, PEM tends to promote the achievement of three outcomes,
namely, aggregate fiscal discipline, allocative efficiency and operational efficiency.
Aggregate fiscal discipline refers to the alignment of public expenditures with total
revenues (domestic revenues plus a sustainable level of foreign borrowing). It
therefore means that government spending must be kept within sustainable limits.
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In layman’s terms, it means don't spend more than what you can afford or what you
earn.
Allocative efficiency on the other hand refers to the consonance of
budgetary allocations with strategic priorities. Budgeted resources must be allocated
to programs and activities that promote the strategic priorities of the country. Hence,
Government must spend tax-payers money on the “right” things.
Operational efficiency refers to the provision of public services at a
reasonable quality and cost. The relevant question here is whether the country is
getting the best buy for its money in all areas, and certainly on reflection and
investigation, specifically as it relates to subscriptions and contributions the answer is
clearly a resounding “no”. A number of Ministries across the Public Sector have
engaged in one year contractual agreements to subscribe to the EBSCO data base.
Although the subscription is for relevant research data and information, the cost per
Ministry is very exorbitant and can surely be rationalized into one efficient cost
structure for the entire public service.
However, though the cost of the subscription by the Ministry of Education
and Human Resource Development is very high in terms of dollar value it is
categorized as a special and distinct subscription which caters to a wider number of
individual usage inclusive of all secondary schools and some tertiary institutions such
as the Samuel Jackman Prescod Polytechnic and the Barbados Community College,
and probably various sites for accessing data bases for information. Appendix 1 and 2
show some evidence of subscriptions and contributions to EBSCO Publishing for
2013 by Ministries.
Reducing and Rectifying Public Sector Wastage
As Government expenditure increases so too does the fiscal deficit of a
country, if the revenue base is constant or deceasing. In Barbados, most of
Government’s growth in expenditure has resulted from mounting expenditure on
interest payments, subsidies, wages and salaries, supplementaries, pensions and
capital outlays. Hence, the Government used some expenditure switching and
expenditure reduction measures to try to reduce the fiscal deficit as referenced to in
its Medium Term Fiscal Strategy 2010-2014.
In addition, efficiency practices involving the appropriate utilization of
scarce resources and the continued encouragement to inspire a work culture that
increases productivity throughout the labour market are supporting measures that can
assist in closing the deficit gap relative to expenditure as there is a concerted effort to
increase revenue levels and reduce the cost of production.
With respect to specific subscriptions and contributions to EBSCO
Publishing Inc. there has been a constant increase in the expenditure levels by
Ministries and Departments across the Public Service over the review period, hence
long-term efficiency implications have been created.
71
VOLUME 8 SEPTE
EMBER 30, 201
15
While pub
blic expendituree for Barbadoss has increased
d significantlyy over the
years the specific and comparaatively high increase in expenditure
e
reelative to
subsccriptions and co
ontributions to
o EBSCO Publlishing Inc. hass generally inccreased in
numbber and value both
b
locally, regionally
r
and internationally
y. This is an eefficiency
impeddiment and is unsustainable.
u
Figure 1: Total subsccriptions and contributions
c
to EBSCO
Publiishing Inc. 20
009 - 2014
Total subscrriptions and contrib
butions 2009-2014
95,,000.00
90,,000.00
85,,000.00
Sub
bscriptions and
Con
ntributions 2009201
14
US$
80,,000.00
75,,000.00
70,,000.00
Years
During thee period 2009-2
2014 total subsscriptions and contributions iincreased
graduually over th
he first fourr years from
m approximateely US$86,0000.00 to
US$990,000.00 or 4.7 percent when the econom
my was relativeely stable and growing
slowlly. However, continued
c
presssures brought on
o by the high
h debt to GDP ratio has
considerably limited the fiscal sp
pace available to the Govern
nment and madde it very
difficcult to engage in any signifi
ficant expenditture on projectts in order to generate
growtth in the econo
omy.
Hence, witth the cuts in Government
G
ex
xpenditure acro
oss programmee budgets
in thee public sectorr, subscriptionss and contributtions to EBSCO
O Publishing IInc. were
drastiically reduced to around US
S$76,000.00 in
n one year. Su
uch reductionss in these
misceellaneous item
ms across Miniistries are neceessary in conttributing to thhe overall
effortts of reducing the
t fiscal deficit and the debt to GDP ratio.
72
VOLUME 8 SEPTE
EMBER 30, 201
15
F
Figure 2: Econ
nomic Affairs Subscriptions and Contrib
butions to EBS
SCO
Publlishing Inc. 20
009-2014
Economic Affairs Subscriptions
S
and Contributions
C
2009-22014
6,000.00
5,000.00
4,000.00
3,000.00
Econnomic Affairs
Subsscriptions and
Conttributions 200920144
2,000.00
1,000.00
0.00
The subscriptions and contributions
c
of
o the Econom
mic Affairs Diivision to
EBSC
CO Publishing
g Inc. increaased gradually
y over the period
p
2009-22013 by
12.2ppercent and fell considerably in 2013-2014
4 because of th
he non-subscripption that
year ddue to the conttinuation of thee structured fisscal consolidattion measures tto reduce
the deeficit.
73
VOLUME 8 SEPTE
EMBER 30, 201
15
Figure 3: Subsccriptions of Ind
dividual Entitties Compared
d
to thee Total Subscrriptions 2009-2
2014
Sub
bscriptions of individual entities compa
ared to the total subsscriptions
2009-2014
100,000.00
90,000.00
Total Subcrriptions 2009-2014
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
Economic Affairs
A
Subscriptio
ons 2009-2014
Subscriptio
ons for the Ministry
of Tourism
m
Subscriptio
ons for the
Barbados National
N
Library
Service
Subscriptio
ons by Financial
Institution
Comparing
g the subscrip
ptions of indiv
vidual businesss entities to the total
moneetary value of subscriptions
s
we
w see that the Barbados Library Service suubscribes
to alm
most 50.0perceent of the total monetary valu
ue of subscripttions, while a F
Financial
Instituution contribu
utes approxim
mately 25.0perccent and the Ministry of Tourism
contriibutes an estim
mated 20.0perccent. Clearly, th
here must be some
s
extensivee amount
of overlap of similaar data and info
ormation from sites that can be
b sourced throough one
entityy by initiating
g a password system that would
w
drastically reduce thee cost of
indiviidual Ministriees of subscribin
ng to EBSCO Publishing
P
Inc. This passworrd system
wouldd allow Government Ministtries and Agen
ncies to accesss EBSCO’s ddata base
throuugh the institutiion that is leadiing the processs at a far more reasonable cosst.
In support of this, there is no significaant evidence off increased addded value
for m
money relativee to the increaase cost of su
ubscribing eveery year with EBSCO.
Hence, the increaseed value for money
m
spent is questionable, and therefore steps are
m a group of entities
e
compriising Ministriees to subscribee through
underrgoing to form
one innstitution that will
w lead the prrocess.
74
VOLUME 8 SEPTEMBER 30, 2015
The Barbados Case 2009 – 2014
Barbados’ expenditure level over the period 2009-2014 has fluctuated even
though the Government has engaged in significant efforts in trying to reduce
expenditure. Total expenditure over the period 2009–2014 was $18,104.6 million
with the largest level of expenditure of $3,924.9 occurring in the fiscal year
2013/2014. Government’s total expenditure has increased every year since the fiscal
year 2009/2010 with the exception of the fiscal year 2011/2012 when it fell by
12.6percent to $3,356.5 million.
Of the components making up current expenditure for the fiscal year
2013/2014, wages and salaries and goods and services reflected very high proportions
of current expenditure at $867.9 million or 22.8 percent and 395.0 million or
10.4percent respectively. Grants to public institutions increased to $14.2 million,
amortization $726.2 million, interest $614.9 million and capital expenditure rose to
$119.0 million. Hence, the Government was justified in commencing a fiscal
consolidation programme that sought to reduce these expenditure levels to
sustainable amounts.
With respect to subscriptions and contributions to EBSCO Publishing Inc.
by Ministries an amount of US$113,567.00 was expended on the collation of
information from various websites. The Division of Economic Affairs over the 2009
to 2014 period expended US$26,933.92 to this single entity EBSCO Publishing Inc.
This highlights a very real empirical macroeconomic indication of the amount of
expenditure that occurs across the public service as a result of subscriptions and
contributions to international organizations. In 2013, five Ministries across the Public
Service spent approximately BDS$227,134.00 in subscriptions and contributions to
EBSCO Publishing Inc. alone (see Table 1). This does not include those contributions
to international donor agencies like UNDP, SELAC, SELA, IADB, CFTC, UNIDO,
World Bank, CDB, CARTAC etc. reflecting a total expenditure amount of
approximately BDS$3.9 billion.
However, this is not to say that contributions to these organizations are not
beneficial but certainly the overall contributions for a small economy like Barbados
whose GDP is just a fraction of the more developed countries like Singapore which
has similar economic structures, indicates that these amounts are too high and need to
be reduced. In this regard, careful scrutiny must be exercised in the monitoring and
evaluation of the Estimates of Expenditure relative to such subscriptions and
contributions across Ministries in the Public Service.
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VOLUME 8 SEPTEMBER 30, 2015
Table 1: Subscriptions and Contributions by Ministries to EBSCO
Publishing Inc. for 2013
Year
Ministry
2013
Tourism
MEA
MEHRD
MOH
BLS
Amount
Total
Expenditure
($BDS)
percent of Total
Expenditure
18,000.00
3,924,900.00
0.5
11,730.00
0.3
109,084.00
2.8
2,320.00
0.1
86,000.00
2.2
Total
227,134.00 3,924,900.00
5.8
Source: Ministry of Finance and Economic Affairs' subscription for 2013 only.
Table 2: MEA Subscriptions and Contributions to EBSCO
Publishing Inc. as a percentage of Total Expenditure 2009-2014
Year
Total
Expenditure
percent of
Total
Expenditure
2009-2010
2010-2011
2011-2012
2012-2013
MEA
Contributions
and
subscription
amount
10,028.00
10,530.00
10,530.00
11,249.48
3,451,300.00
3,842,300.00
3,356,500.00
3,529,600.00
0.29
0.27
0.31
0.32
2013-2014
11,530.36
3,924,900.00
0.29
Total
53,867.84
18,104,600.00
0.3
Source: Ministry of Finance and Economic Affairs
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VOLUME 8 SEPTEMBER 30, 2015
Figure 4
120,000.00
Ministries Subscriptions and
Contributions to EBSCO Publishing Inc. for 2013
100,000.00
80,000.00
60,000.00
$BDS
Series1
40,000.00
20,000.00
0.00
Tourism
MEA
MEHRD
MOH
BLS
Ministries
Figure 5
MEA Subscriptions and Contributions to
EBSCO Publishing Inc. to total Expenditure for 2009 - 2014
4,500,000.00
3,924,900.00
3,842,300.00
4,000,000.00
3,451,300.00
3,356,500.00 3,529,600.00
3,500,000.00
3,000,000.00
2,500,000.00
$BDS
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00 10,028.00
11,249.48
11,530.36
10,530.00
10,530.00
0.00
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
Years
Economic Affairs Division
Linear (Total Expenditure)
Total Expenditure
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VOLUME 8 SEPTEMBER 30, 2015
Conclusion and recommendations
Countries in general, especially those that are in transition seem to have
recognized to a greater extent, the importance of effectively managing Government
expenditure in light of the revenues that they have at their disposal for growth and
development. There must be essential elements of good practices in operation while
conducting the budgeting system and managing the taxpayers’ money.
In the context of improving public expenditure management, there must be
institutional arrangements that will influence and encourage fiscal discipline,
strategic allocation of resources and operational efficiency in the Public Sector.
Public Expenditure Management requires essentially a performance centred and
focused approach, a well-functioning accounting and financial management system
and appropriate links between policy-making, planning and budgeting.
It is therefore, very necessary that Public Sector managers identify and
implement the most effective and efficient mix of counter measures that would seek
to prevent, detect, reduce and rectify any elements of Public Sector wastage of
resources. In this current economic climate the Barbados Government can ill-afford
the wastage of valuable public resources.
Hence, the Minister of Finance and Economic Affairs announced that the
Government will be creating a National Procurement Authority (NPA) that will
monitor and regulate the level of expenditure in Government Ministries, Agencies,
Statutory Boards and Departments across the Public Sector. At present, the National
Accounts Committee investigates the operations as it relates to the level of
expenditure and revenue earnings that the Statutory Boards appointed across the
Public Service have had to manage in order to determine their competency relative to
managing these funds with a view to reducing the amount of wastage throughout the
system. In accordance with this, there needs to be new and or amended legislation
that gives the legal power to request a specific process for monitoring, analyzing and
evaluating expenditure levels.
We must all start living and doing business within our means and seek to
contribute to the reduction of the enormous debt that can prove to be a nemesis for
future generations. Revenue from taxes must not be spent with impunity, but with an
understanding of prudence and a level of accountability and transparency that is
necessary to stimulate growth and development.
Hence, it is incumbent on the public sector managers to identify and to
implement the most effective and efficient mix of counter-measures to prevent
wastage of public sector resources. In this regard, when reviewing the subscriptions
to EBSCO Publishing Inc. it is evident that there is some duplication of access to
information across five Ministries/Departments on the EBSCO website and therefore
this is reflected in the overall cost incurred. Appropriate and regular audits must be
done on subscriptions and contributions throughout the public service for a
transparent sense of accountability to be incorporated into the management process.
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VOLUME 8 SEPTEMBER 30, 2015
As a result, it is suggested that there should be a management information
network entity; preferably the Barbados Library Service given that they currently
manage such a national information network that would be responsible for all
subscriptions across the public service. This entity would be accountable for the cost
efficiency of the subscriptions, as well as the level of access to quality information
that covers various sectors in a timely manner.
Going forward, with a greater sense of efficiency and productivity at the
forefront of our minds, the concept of shared centres for photo-copiers etc. per
building and shared wifi-internet service from one service provider for an entire
building would be a worthwhile and cost effective endeavor that should be explored.
Appendix 1
Ministries Subscriptions and
Contributions to EBSCO Publishing Inc. for 2013 (US$)
Ministry/ Department
Amount paid US$
Ministry of Tourism
US$9,000
Ministry of Finance and Economic Affairs US$5,865
Ministry of Education and Human
Resource Development: Higher
US$54,542
Education Unit (EBooks US$9,656 and
Database US$44,886)
US$1,160
Ministry of Health
Barbados National Library Service
(Online subscription payment US$18,000 US$43,000
and Magazine subscription payment
US$25,000)
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Appendix 2
Table 3: Subscriptions by the Ministry of Finance and
Economic Affairs to EBSCO Publishing Inc. 2009-2014
Years
Institution
Data Base
(US$) per year
2009-2010
MEA
Business Source Corporate
5,014.00
2010-2011
MEA
Business Source Corporate
5,265.00
2011-2012
MEA
Business Source Corporate
5,265.00
2012-2013
MEA
Business Source Corporate
5,624.74
2013-2014
MEA
Business Source Corporate
5,765.18
Source: MEA-Ministry of Finance and Economic Affairs
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Appendix 3
Acronyms
Organization of American States (OAS)
United Nations Development Programme (UNDP)
United Nations Children Fund (UNICEF)
Caribbean Agriculture Research and Development Institute (CARDI)
Integration of Latin America (INTAL)
Latin American and Caribbean Economic System (SELA)
Inter-American Development Bank (IADB)
Caribbean Development Bank (CDB)
United Nations Investment Development Organization (UNIDO)
Multilateral Investment Fund (MIF)
Caribbean Regional Technical Assistance Centre (CARTAC)
International Labour Organization (ILO)
Commonwealth Fund for Technical Co-operation (CFTC)
Inter-American Institute for Co-operation on Agriculture (IICA)
World Health Organization (WHO)
Pan American Health Organization (PAHO)
Caribbean Disaster Emergency Agency (CDEMA)
Centre for Latin American and Caribbean States (CELAC)
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References
Allen, R. and Daniel, T., (2001), “Managing Public Expenditure: A Reference Book for
Transition Countries”, SIGMA, OECD.
Akrani, G., retrieved 15th February, 2012, “The Meaning of Public Expenditure”.
“Causes for Growth of Public Expenditure” retrieved 20th February, 2012.
Diamond, J. (1989), “Government Expenditure and Economic Growth”, International
Monetary Fund, Working Paper, WP 89/45.
Dalton, Hugh (1965), “Marginal Social Benefit equals the Marginal Social Sacrifice”.
Grabosky, P.N. (1990),“Controlling Fraud, Waste and Abuse in the Public Sector”,
Australian Institute of Criminology.
Keynes, J. M. (1936),“General Theory of Employment, Interest and Money”. London,
Macmillan.
Lindahl N. (1919), “Voluntary Exchange Theory”, S. Chand & Co. Ltd. pp. 57-59. ISBN,
81-219;1091-9.
Musgrave, R. (1959), “The Theory of Public Finance”, New York, McGraw-Hill.
Musgrave, R. A. (1969), “Fiscal Systems”, London, Yale University Press.
Peacock, A. T. & Wiseman, J. (1961), “The Growth of Public Expenditure in the United
Kingdom”, Cambridge, NER and Princeton: Princeton University Press.
Peacock, A. T. & Wiseman, J. (1967), “The Growth of Public Expenditure in the United
Kingdom”, New Edition, London, George Allen & Unwin Ltd.
Pigou, A. C. (1928), (1932), “Economics of Welfare: The Principal of Maximum
Aggregate Benefit”.
Schuknecht, L. and Vito, T. (2005), “Reforming Public Expenditure in Industrialised
Countries: Are there Trade-offs?”, European Central Bank, Working Paper Series
No. 435/February 2005.
Wagner, A. (1883), “Three Extracts on Public Finance”, translated and reprinted in R. A.
Musgrave and A. T. Peacock (eds.), “Classics in the Theory of Public Finance,”
London: Macmillan, 1958.
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Revision of the List of Ineligibles: A Policy Measure to
Combat the Subversion of the CET
Suspension Mechanism
By
Shane L. Nicholls
Abstract
This paper tackles the much controversial Common External Tariff
suspension mechanism of the CARICOM Single Market & Economy. It highlights its
inordinate inefficient use and proposes a revision of the list of commodities ineligible
for conditional duty exemption as a possible policy measure. The research uses
compiled descriptive data to bring attention to goods which continuously benefit
from suspensions of the CET and are the source of the bulk of suspensions; then
Revealed Comparative Advantage Indices are used to justify the removal of most of
these items.
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VOLUME 8 SEPTEMBER 30, 2015
Introduction
The suspension mechanism of the Common External Tariff (CET) regime is
an important yet controversial feature of the CARICOM Single Market & Economy
(CSME). Member states of this regional grouping5 must maintain a common external
tariff with respect to all goods imported into their territories which are not of
community origin6. This tariff was envisioned to protect goods produced within the
region while facilitating the expansion of the regional market to become globally
competitive (CARICOM Secretariat 1992). The suspension mechanism works hand
in hand with the CET to act as a safeguard; Member States are allowed to petition the
Council for Trade & Economic Development (COTED)7 within the CSME for
temporary suspension or reduction of the CET. This is provided the supply of the
product the Member State intends to import is constrained regionally8; Member
States are therefore allowed to source the intended product from outside of the CSME
without incurring the external tariff or at least incurring a lower tariff.
As highlighted earlier the suspension regime of the CET has stirred up some
controversy within the CSME. One only has to look at the landmark case TCL v
CARICOM9 which added to the jurisprudence of the then fledgling Caribbean Court
of Justice (CCJ) by clarifying certain elements of the use of the CET suspension
regime. In that case the court addressed allegations that the Secretary General of
CARICOM had erred in his application of the suspension mechanism to the financial
detriment of an adversely affected company. Outside of the courts such disputes
continue; Guyana objected to Jamaica’s grant of a CET suspension on rice, a product
Guyana contended it had the capacity to supply (Jamaica Observer 2008). The
controversy has also taken some political undertones, where some commentators
have called for unilateral suspension of the CET mechanism and gone as far as to
suggest withdrawal from the CSME (Tufton 2013). So it is clear that there are some
signs of dissatisfaction with the mechanism in its current form, a look at the literature
on the suspension mechanism offers a similar conclusion.
5
Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts &
Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname and Trinidad & Tobago
6
This regime is covered under Article 82 of the Revised Treaty of Chaguaramas
7
COTED is the body of regional ministers responsible for the promotion of trade and
economic development within the CSME, their powers are defined within Article 15 of the
Revised Treaty of Chaguaramas
8
Article 83 of the Revised Treaty sets out that COTED can alter or suspend the CET provided
the product in question is not produced within the Community, the quantity of the product does
not satisfy demand, or the quality of the product being produced is not of a standard which is
authorized by COTED.
9
[2009] CCJ 4 (OJ)
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VOLUME 8 SEPTEMBER 30, 2015
A recent joint World Bank and Organization of American States Study
(2009) found that the broad scope for suspension and reduction of the CET
complicates interaction with third states. This was through increased transactional
costs and reduced transparency for exporters who target the CARICOM market; it
also found that the mechanism frustrates the joint negotiating efforts of CARICOM.
Additionally, an Inter-American Institute for Cooperation on Agriculture (IICA)
Study (2001, 31-32) found among other things, that:
The actual experience of the operation of the CET to date, has…
been marked by a considerable number of petitions by several
Member States seeking rate suspensions on a range of products…
What is especially significant, is that the majority of these CET rate
suspension requests were not single instances of temporary
problems with the supply of regional products, but rather, they
were repeated petitions made in successive years since the first
request in 1993.
The aforementioned research also found that the vast majority of the goods
which benefitted from CET suspension mechanism were from the list of commodities
ineligible for conditional duty exemption10. This list of 500+ tariff lines of
commodities commonly referred to as the ‘list of ineligibles’ are produced within the
region at an output level that can satisfy at least 75 percent of regional demand.
These findings piqued the researcher’s interest and prompted the question,
considering the controversial and complicated nature of the CET and its broad scope
for suspension; dominated by repeated requests for suspensions of list of ineligible
items. To what extent are these list of ineligible commodities granted suspension of
the CET, and would a revision of the commodities which are eligible for duty
exemption be the policy measure to stem the overwhelming number of applications
for suspension of the CET.
This research answers this question by first looking at how the suspension
mechanism works, then using descriptive statistics to analyse the number of
applications that have come before COTED in a representative period. Specific
commodities that are continuously applied for and granted suspension are
highlighted, and a Balassa Index is used to ascertain empirically whether these
specific commodities warrant removal from the list of ineligibles. The number of, or
10
Contrary to what the title of this list might suggest these goods are still subject to the
suspension mechanism to safeguard against any potential supply constraints.
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VOLUME 8 SEPTEMBER 30, 2015
whether any goods at all warrant removal would shed some light on the continued use
of the suspension mechanism and the likelihood that a revision of the list of
ineligibles would help mitigate the inordinate use of the suspension mechanism.
The Suspension Mechanism
Categories of Goods which Benefit from Suspension
To delve into how the suspension mechanism within the CSME works, one
must first have an understanding of the categories of goods that would benefit from
such suspension. These categories of goods are incorporated into lists: List A, List C,
the list of conditional duty exemptions and the list of commodities ineligible for
conditional duty exemption. List A contains goods which do not satisfy 75 percent of
regional demand to be deemed competing but which Member States have identified
as goods in which they would like to promote production. Member States are allowed
to apply their own rates to commodities in this list as they see fit. List C contains
goods which Member States have traditionally relied on for their revenue and as such
are considered ‘revenue sensitive’. Member States are therefore free to apply rates
above the minimum agreed CET rates to products contained within this list so as to
benefit from the tariff revenue. The list of commodities ineligible for conditional duty
exemption goes hand in hand with the list of conditional duty exemptions, the latter
allows goods imported from outside the region to benefit from zero duty provided
they are imported for certain approved purposes11 by specified organizations or
individuals. The former which this paper primarily focuses is categorised into two
parts; and contains a set of commodities that would not benefit from such duty
exemptions as would have been allowed by the conditional duty exemptions list.
These commodities are widely understood to be produced at such capacity that can
satisfy 75 percent of demand within the CSME.
Application for Suspension Process
To apply for a suspension of the CET, an entity residing in a Member State
would liaise with the Competent Authority in that Member State, more often than not
this would be a Ministry or Statutory Organization which would normally have some
interaction with COTED. The entity would communicate to this Competent Authority
the commodities they are trying to source and any evidence of their inability to
acquire them nationally and regionally. The Competent Authority receiving this
request would assess the availability of the goods in question by contacting the
known local suppliers of the product making note of their responses as evidence of
national consultation. If the Competent Authority is satisfied that the product in
11
Purposes that relate to shipping, health, tourism, aircraft, education & culture, government,
military forces, movement of persons, diplomatic missions, international organizations &
personnel, industry, agriculture, fisheries, forestry, mining and in other approved purposes.
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VOLUME 8 SEPTEMBER 30, 2015
question cannot be sourced locally, it would submit the application along with
the responses compiled at the national level to COTED if a general meeting is
imminent12. The Secretary-General would circulate the application to Member States
for their consideration prior to the COTED meeting. The Competent Authorities in
the respective Member States are tasked with ascertaining from their local suppliers
whether the commodities in question can be supplied and if so in what quantities or
specifications.
After the Competent Authorities in each Member State ascertain whether
there is supply available from the respective producers, they must respond to COTED
within seven days, citing all who were contacted and whether the requisite
commodities were available. If supplies of the commodities are still unavailable, a
time frame must be established with regards to whether or when supplies may
become obtainable. However, if the requested commodities are available then the
Competent Authority of that Member State should provide the Secretary-General
with the name and contact information for the entity, the quantity that can be supplied
and the time period that supplies might be available (see Appendix I for an excerpt
of the form highlighting availability of supplies). The Secretary-General within two
working days should inform the Competent Authority of the requesting Member
State of the availability of supplies and the contact information of the entity which
can supply the product. If there is no available supplier, the Secretary-General would
within two days decide whether or not to grant approval and if so, advise the
Competent Authorities in the Member States the reasons for granting the suspension.
The Competent Authority of the requesting Member State, upon receiving a
certificate authorising suspension must ensure the quantity of goods allowed to be
imported duty free from outside the common market does not exceed the quantity
authorized by the certificate. Finally the Secretary-General must then report to
COTED, highlighting the particulars of the action that was exercised.
Methodology
Descriptive Data
Descriptive data represented copies of five suspension reports acquired from
the Barbados Ministry of Foreign Affairs & Foreign Trade, which were presented at
the 34th through to the 38th regular general meetings of COTED dating between
October 2011 and March 2014. The data was compiled to analyse the suspensions
12
This should be done at least fourteen days before the scheduled meeting. If there is no
imminent meeting or if the request is urgent, it would otherwise be sent to the SecretaryGeneral for consideration.
87
VOLUME 8 SEPTEMBER 30, 2015
that came before and were granted by the Secretary General acting on behalf
of COTED13; such applications would exceed COTED applications due to the
infrequency of COTED regular general meetings14. The data analysis shows the
suspensions that came before the Secretary General for the representative period,
with specific reference to those suspensions on the list of ineligibles. It also
highlights that specific list of ineligibles tariff lines which are continuously granted
CET suspension.
The first limitation of the study was the researcher’s inability to acquire
suspension reports which were adjudicated by COTED. However as mentioned
before; since the majority of applications for suspensions usually come before the
Secretary General, the researcher was confident that the information gathered was a
fair representation of the commodities with which CSME Member States are seeking
suspensions of the CET on. The second limitation of the study was the representative
period the data was gathered; data could only be acquired for the last five reports
which were laid before COTED. As a result the data presented is not intended to
make resolute affirmations but lend some insight into the current trends of the CSME
Member States with respect to their use of the CET suspension mechanism. The third
and final limitation of the study was that data did not show the reasons why the
entities were seeking suspension requests, therefore it was difficult to ascertain
whether it was a question of the good not being produced in the region, the quantity
not met, or quality not of a significant standard.
Empirical Analysis
Economic theory sets out that a country can benefit from trade with a partner
which produces goods more efficiently that it does, once that country specializes and
develops for export those goods which it has a comparative advantage (Ricardo
1821). This basically means that if a country is comparatively inefficient at producing
certain commodities, it would benefit from trade with a more efficient producer of
those commodities if it focuses on the commodity it is least inefficient in producing.
As a grouping of mainly small island nation developing states, Member States of the
CSME are individually and collectively competitively disadvantaged when compared
to larger nations which they trade with. This is due to the CSME’s small size which
can be a stumbling block in realizing any economies of scale from their factors of
production. Comparative advantage for the purpose of this research is therefore used
as the methodologies to ascertain which commodities produced within the CSME are
competitive when compared to other nations globally.
13
Under Article 83 (3) of the Revised Treaty of Chaguaramus, the Secretary-General can
exercise the authority to suspend the CET on behalf of COTED during any period between the
meetings of COTED.
14
Regular general meetings of COTED take place biannually.
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VOLUME 8 SEPTEMBER 30, 2015
Empirically the theory of comparative advantage has been difficult to
measure; this is because one of the conditions of comparative advantage is autarkic
trade or what can be described as closing-off one country’s trade with the world. To
measure comparative advantage, one needs to calculate the cost of a commodity in
autarkic trade when compared to its cost in free trade; unfortunately autarky is hardly
a real world condition so the Revealed Comparative Advantage (RCA) index was
developed and introduced to overcome this obstacle and ‘reveal’ the comparative
advantage. This study was first developed by Liesner (1958), but Balassa (1989)
(1965) became responsible for its popularity, and its title the Balassa Index (BI).
Additional work was done by Hinloopen & van Marrewijk (2006) which helped to
establish the validity and theoretical soundness of this concept against critics like
Harrigan and Zakrajsek (2000) who doubted the RCA’s validity and empirical rigor.
The Balassa Index or Revealed Comparative Index is defined as follows:
RCA/BI = (Xij / Xwj) / (Xi / Xw)
Where X = Exports, i = Specific Country/Region looked at, w = Specific
Country/Region compared against, j = commodity/good looked at. Such that Xij
would be the exports of commodity j from country/region i, and Xjw would be Exports
of a commodity j from a comparative country or region. Xi would be the Exports of
all commodities from Country i, while Xw would be the comparative exports of all
commodities from country/region w. Moreover commodity j is said to have a
comparative disadvantage if: 1 > RCAij > 0, if: RCAij >1 then the commodity is said
to have a comparative advantage. In the Regional literature Lewis-Bynoe & Webster
(2000) used the Balassa Index to identify the similarities or dissimilarities of
comparative advantage in CARICOM and later the wider Caribbean. Alleyne, Francis
& Lorde (2012) also used the RCA Index to compute changes in export
competitiveness for CARICOM commodities over a number of years.
This research uses the Balassa Index to compare the RCA of relevant tariff
line commodities with the world using International Trade Centre data; this was done
due to the intended nature of the CET to make CARICOM a trading block and
region’s collective position toward third states. Aggregate CARICOM export data of
trade on the 10 relevant tariff lines between 2001 and 2013 was used. One limitation
of the study was the time series data that was available, ideally the research should
have shown as many previous periods as possible to ascertain the development of
these goods that is; whether or not they would have gained or lost their comparative
advantage over time. Additionally for the periods that were given, data for some
countries in some time periods were missing, and in some cases mirror statistics were
used. These factors have the potential to skew the data, and as result end calculations
may be skewed also.
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DESCRIPTIVE STATISTICS15
Applications for Suspension; List of Ineligibles & Otherwise
Figure 1
Total Number
2500
2000
2057
1923
1500
1008
933
1000
500
134
75
Total Applications
List of Ineligibles
0
Grants
Denials
Applications
Figure 1 shows the total applications for suspension over the represented
period when compared to suspensions on the list of ineligibles. With respect to total
applications, the data shows that for the representative period there were just over
2000 total applications for CET suspension with the vast majority; 93.3 per cent of
applications granted suspension of the CET. When one considers only the list of
ineligibles, the total applications that came before COTED for this specific group of
commodities were 1008; this represents just under half (49 per cent) of the total
applications for CET suspension that came before COTED. Considering the two
other categories of goods that also benefit from CET suspension, it is then safe to
conclude that this 49 per cent of CET suspensions which are attributed to the list of
ineligibles represents the majority of CET suspensions in general. This corroborates
the findings in the literature; that most suspension requests are for commodities in the
list of ineligibles. In terms of suspensions granted; 93 per cent of the total
suspensions that came before COTED for commodities on the list of ineligibles were
granted a suspension of the CET. This is seemingly a microcosm of the percentage of
grants that were given with respect to the total applications.
15
All data described is from the representative period during the 34th through 38th Meetings
of COTED
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VOLUME 8 SEPTEMBER 30, 2015
Applications for CET Suspension per COTED Meetings
Figure 2
300
Total Number
250
217
228
200
243
263
200 209
150
119
135
154
173
100
50
11
20
9
16
19
0
COTED 34 COTED 35 COTED 36 COTED 37 COTED 38
Regular General Meetings of COTED
Grants
Denials
Applications
Figure 2 shows a breakdown of the applications per COTED meeting with
respect to the list of ineligibles. On average around 200 applications for the
representative period were considered per each COTED session, from a high of 263
applications considered for the 36th session of COTED to a low of 135 for the
following session. Generally the number of applications that the Secretary-General
considered on behalf of COTED fluctuated, however the rate of grants did not. The
percentage of grants for suspension of the CET mirrored the total grants for
suspension for commodities on the list of ineligibles and total commodities. Over 90
per cent of applications for suspension were granted in the first three COTED
sessions, and just under 90 per cent; 88 per cent and 89 per cent respectively were
granted for the subsequent two. This buttresses the data that was presented for the list
of ineligibles over the represented period; it shows that consistently for each period
that was considered, the bulk of applications for suspension of the CET for
commodities of the list of ineligibles were granted.
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VOLUME 8 SEPTE
EMBER 30, 201
15
Ap
pplications for Suspension of
o ‘List of Ineliigibles’ comm
modities per Coountry
Chart 1
310
31%
381
38%
244
24%
2
0%
Barbados
Trinidad
d
14
2%
Guyaana
Jamaiica
54
5% 2
0%
1
0%
St. Vincent
St. Lucia
Suriname
Grenada
Chart 1 shows
s
the ap
pplications for suspension on list of iineligible
comm
modities made by CSME meember state enttities for the representative pperiod. It
shows that Jamaicaa made the most
m
requests for
f suspension
n with 381 suuspension
requeests, this was followed
f
by Trrinidad & Tob
bago with 310 requests and S
Suriname
with 244. These CS
SME territoriess were then followed by Barrbados, Guyanaa and the
counttries of the OECS whosee requests weere dwarfed even cumulattively in
compparison to eitheer of the ‘big three’
t
territoriees individually
y. Interestinglyy, just the
leadinng two countriies; Jamaica an
nd Trinidad, were
w
responsiblle for just undeer 70 per
cent ((69 per cent) of
o all the requeests for suspen
nsions on the liist of ineligiblees. When
Surinname is added, these countriees account forr over 90 per cent;
c
93 per ceent of all
suspeension requestss on the list off ineligible com
mmodities for the period coonsidered.
Whatt this all meaans is, requests for suspen
nsion are conccentrated in juust three
territoories, of the 12
1 territory gro
ouping of the CSME, moreeover only eighht of the
twelvve territories made any requessts at all for susspension on the list of ineligiibles.
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VOLUME 8 SEPTE
EMBER 30, 201
15
Gran
nts of Suspensiion for ‘List of
o Ineligibles’ commodities
c
per
p Country
Chart 2
280
30%
221
24%
13
1%
48
5%
370
0
40%
%
1
0%
%
Barbados
B
Guyanaa
Trinidad
Suriiname
Jamaica
St. Vincent
Chart 2 showss the suspensio
on requests thatt were granted per CSME terrritory on
the liist of ineligiblles for the rep
presentative peeriod. The tren
nd is repeated to some
extennt when comparred to requestss for suspension
n per country; Jamaica leads with 370
requeests granted, fo
ollowed by Triinidad & Tobaago with 280 and
a Suriname w
with 221.
This data becomess interesting when
w
you com
mpare it with the
t requests, ffor some
conteext; in terms of Jamaica 97 per
p cent of theeir suspension requests weree granted,
and S
Suriname and Trinidad & Tobago were both granted
d 90 per cent of their
suspeension requestss. Even Barbad
dos and Guyan
na which are th
he only other countries
with m
more than a marginal
m
share of
o suspension grants with 48
8 and 13, had a grant of
suspeension rate of 88
8 per cent an
nd 93 per cent respectively. This
T data so faar at least
for thhe period con
nsidered seems to corroborate the literatture that a nuumber of
suspeension requestss were being grranted on list of ineligible com
mmodities.
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VOLUME 8 SEPTEMBER 30, 2015
Top 20 ‘List of Ineligibles’ Tariff Lines
Chart 3
140
Suspensions Granted
120
100
71
80
60
3
40
33
20
0
2
8
6
3
8
2
3
24
41
2
2
21 22
16 13 9
24 15 5 17
32 51 18 5 5 1 3 8 9
1
4
7
15
19
2 24
4 3
12
43 11 2 2
71
53 41
5
14 14
2
1
Tariff Headings
Barbados
Guyana
Jamaica
Trinidad & Tobago
Suriname
Chart 3 shows the top 20 tariff lines with which countries have sought and have
been granted suspension on the list of commodities ineligible for conditional duty
exemption. There have been 689 suspension requests granted on these 20 tariff lines,
which account for 74 per cent of the total 933 suspensions granted over the
considered period. This means that for the 500+ tariff lines which make up the list of
ineligibles almost ¾ of the suspension requests have been on just 20 of these tariff
lines, this shows that suspension requests for the represented period are not only
concentrated in a few countries but also a few tariff lines.
Two tariff lines can be highlighted from the chart as being peculiar, these
are 2106.90.20; which refers to ‘other flavoured and coloured sugar syrups’ and
8539.39.00; ‘other discharge lamps’. These tariff lines are peculiar because only
Jamaica has applied and been granted a considerable number of requests for
suspension on these tariff lines, additionally further research has shown that only two
companies have been making applications for suspensions on these two respective
tariff lines and have been doing so on a biennial basis. This behaviour seems to
suggest that these companies are trying to build capacity in their respective
businesses and using the suspension mechanism as a tool to further this initiative.
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Moreover, when one accounts for this anomaly, if one removes the requests granted
on these tariff lines Jamaica would be second to Trinidad & Tobago with 246
requests granted rather than their previous of 370.
The highest number of grants of suspension were given on tariff line
2106.90.90; ‘other food preparations not elsewhere included or specified’. Three
countries were granted suspensions on this tariff line, summing up to 117 grants of
suspension or 12 per cent of all suspensions granted for the represented period. The
high requests and grants can be attributed to the nature of this tariff line, which
appears to be a catch-all; a tariff line containing commodities which would not fit in
any other tariff lines. Therefore as one would imagine member states would be open
to apply and ultimately be granted suspension requests for commodities which would
not otherwise be captured under any other fitting tariff line.
Also of note, there is a high concentration of suspension grants to Trinidad
& Tobago under the two digit harmonized system code (HS Code) of 15 and the four
digit HS Code of 3301, these codes relate to Animal or Vegetable Fats, Oils &
Waxes, and Essential Oils, Resinoids, Terpenic By-products etc. This seems to
suggest that Trinidad & Tobagonian companies are heavily reliant on the suspension
mechanism to source these products for inputs in their production process. This
analysis can be extended to the other member states as well, especially in tariff lines
ex 15.11; ‘palm oil’ and 1516.20.00; ‘vegetable fats and oils’, two tariff lines which
member states collectively have sought and been granted suspensions on. Therefore it
can be inferred that these are commodities in which the region might not have the
capacity to produce and are therefore seeking suspensions, to be supplied with these
commodities from elsewhere.
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Top 10 ‘List of Ineligibles’ Tariff Lines
Chart 4
3301.12.00
14
2
Tariff Headings
20.09 2
11
24
1516.20.00
9
ex 15.15
8
24
13
15.14 3
16
15.13 1
22
2
3
15.12
5
ex 15.11
5
17
15.07 1 5
15
09.06 3 6
8 2
0
8
41
9
2
21
33
3
2
20
40
60
80
Trinidad & Tobago
Suriname
Suspensions Granted
Barbados
Guyana
Jamaica
Chart 4 is a revision of the previous chart, with a reduction of the number of
tariff lines from 20 to 10, to ensure a manageable empirical analysis. The revision
included the removal of the tariff lines which were skewed by Jamaica’s singular
grants of suspension, and the tariff line 2106.90.20, the tariff line with the most
grants due to its catch-all nature. This was all done to give a fair representation of
tariff lines which member states of the region collectively benefit from grants of CET
suspensions on list of ineligible commodities. The tariff lines in this revised list
comprise of 331 grants of suspension representing 35 per cent of the total grants of
suspension on the list of ineligibles for the representative period. That is, 10 tariff
lines in the list of ineligibles represent 35 per cent of suspensions granted, and 17 per
cent of total suspensions granted for the period considered. It is also noteworthy that
the three tariff lines removed from the revised list for their incongruity, account for
26 per cent of grants of suspension on the list of ineligibles and 13 per cent of overall
grants of suspension. This seems to indicate that a small fraction of tariff lines are at
the heart of repeated requests for suspension, which the literature suggests is
increasing transactional costs and decreasing transparency when dealing with third
states. Below in Table 1 is a description of these top 10 revised tariff lines, to be
used for easy reference as these top 10 tariff lines are now analysed.
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Table 1
15.07
ex 15.11
15.12
15.13
15.14
ex 15.15
1516.20.00
9.06
20.09
3301.12.00
Soya-bean oil
Palm oil and its fractions
Sunflower-seed, safflower or cotton-seed oil
Coconut (copra), palm kernel or babassu oil
Rape, colza or mustard oil
Fixed vegetable fats and oils (excluding jojoba oil)
Vegetable fats and oils
Cinnamon and cinnamon-tree flowers
Fruit juices (including grape must) and vegetable juices, unfermented
Orange oil
The revised list appears to be comprised entirely of agricultural and agroprocessed commodities highlighting the dependence of CARICOM countries on
these goods for inputs. This also highlights a potential lack of the technological
capacity to transform the raw materials necessary to create these commodities. Eight
of the ten tariff lines are comprised of oil extracts; surprisingly, fruit juices; a product
which many member states produce makes the list.
Empirical Findings
The tabulated Balassa index which is included in the Appendix (Appendix
II) shows that over the twelve year period two goods continuously had a Revealed
Comparative Advantage. These were tariff lines 3301.12.00; essential oils of orange
and 20.06; fruit juices; this indicates that these two sectors are ones which
CARICOM possesses the strength to specialize and develop, and for the purposes of
this paper, should not be considered for removal from the list of ineligibles.
The empirical data also shows that tariff line 15.07; soya bean oil possessed
a Revealed Comparative advantage from as early as 2001 and up to 2005. This
comparative advantage was lost and regained in 2009, then lost and never regained.
Additionally, most recent RCA levels are at historical lows, which seem to suggest
that this sector is one which the CSME region no longer has an interest. Further
analysis needs to be carried out in order to ascertain why the product’s revealed
comparative advantage has been lost and whether it can be revitalized.
The tariff line (09.06) cinnamon possesses a RCA Index which has been
declining steadily since 2005. It is not clear from the data whether or not this product
ever possessed a revealed comparative advantage, but the trend seems to point to it
never achieving one. This is not surprising when one analyses the export trend of this
product; it has had volatile export figures for the past few years. Therefore this
product should also be one which should be considered for removal from the list of
ineligibles.
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The oil extracts under tariff heading 15 apart from 15.07, suffer revealed
comparative disadvantages of varying degrees. The specific lines of ex 15.15 ‘fixed
vegetable fats and oils’, 15.14: ‘rape, colza or mustard oil’, 15.12; ‘sunflower,
safflower or cotton seed oil’ and ex 15.11; ‘palm oil’, all possess very low RCA
indices. This therefore suggests that there is no capacity for specialization in these
areas. On the other hand tariff line 15.13, ‘coconut, palm kernel or babassu oil’
possesses a rather marginal revealed comparative disadvantage; with the RCA
reaching a high of 0.9 in 2009, suggesting some unmet potential it has however
declined dramatically since then. There might be some evidence to suggest that the
impact of the financial crisis in 2008 may have affected this sector adversely. Similar
to 15.07, a study should be commissioned to look into 15.13, to ascertain what the
potential for the development of this industry might be.
These findings show that the majority of goods which CSME member states
are continuously granted suspensions on are not globally competitive. This girds the
argument that these goods should be removed from the list of ineligibles, since as we
have seen before, their continuous grant of suspension also indicates that the CSME
to some extent does not have the capacity to supply regional demand for these
commodities at least not as it once envisioned or did.
Conclusions & Recommendations
This study sought to plead a case for a revision of the list of items which are
ineligible for conditional duty exemption as a policy measure to combat the
subversion of the suspension mechanism. As it relates to suspensions; a large number
of them come before both the Secretary-General and COTED, becoming an
administrative burden on the system and a bureaucratic quagmire for applicants. This
in turn contributes to the inefficiency of the CET regime. Additionally the broad
scope for suspension within the CET regime complicates the CSME’s interaction
with third states and exporters by lowering transparency and increasing transactional
costs.
Descriptive data has shown several tariff lines benefit from continuous
application for, and award of CET suspensions; to some extent, this indicates by
definition that CSME territories do not have the capacity to produce these goods.
This data however does not indicate the reason or reasons the applicant has requested
suspension, so it would be difficult to conclude if it falls under a lack of the good
being produced, quantities not being met or the quality not met. In any case, RCA
indices have further highlighted the lack of any competitive potential in most of these
tariff lines, with goods such as vegetable oils fixed and otherwise, sunflower seed,
safflower or cotton seed oil, rape, colza or mustard oil, and cinnamon considered for
removal from the list of ineligibles.
The data analysis cannot be understated; for the period considered 49 per
cent of all suspensions granted were on list of ineligibles tariff lines. The top 20 of
these tariff lines which were continuously benefitting from CET suspension
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represented 74 per cent of grants for CET suspension and overall 36 per cent of all
CET suspensions were on just 20 tariff lines on the list of ineligibles. This means that
for the representative period if these tariff lines were considered for removal, the
grant of suspensions would be lowered by more than one quarter and requests in
general potentially lowered by more.
A few things were highlighted in this study, and the research recommends
going forward that:

Several commodities which the analysis has shown possess no comparative
advantage continue to benefit from suspension of the CET. These goods
should be considered for removal from the list of ineligibles and given a
simple tariff, this would result in increased government revenue and
lowered transactional costs for businesses seeking these suspensions.

The list of commodities ineligible for conditional duty exemption should be
continuously updated to reflect the realities of CARICOM production.
Models should be developed to constantly monitor which goods
CARICOM states have the capacity to produce.

The vast number of agricultural and agro-processed products that were
featured in the study suggests a pillar of the CARICOM Agricultural
Policy, should be a regime which tracks the goods which CARICOM has
the capacity and some comparative or competitive advantage in producing.
This regime should inform the continuous update of the list of ineligibles.

Some sectors have lost or have not realized their comparative advantage. A
study needs to be commissioned to look into what might have caused this,
and prevent it happening to other sectors in the future.

The list of commodities ineligible for conditional duty exemption, in its
present form highlights opportunities for economic enfranchisement. The
grant of suspension on certain tariff lines indicates commodities which are
demanded by entities in the CSME, this opens up an avenue for
enterprising individuals throughout to consider producing these goods to
meet this unmet demand.
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References
Balassa, Béla. Revealed” comparative advantage revisited. New York: New York
University Press, 1989.
Balassa, Béla. "Trade liberalization and “revealed” comparative advantage." The
Manchester School of Economic and Social Studies 33, 1965: 92-123.
CARICOM Secretariat. The Common External Tariff of the Caribbean Common Market .
Caribbean Export Development Project, 1992.
Harrigan, J, and E Zakrajsek. "Factor Supplies and Specialization in the World." NBER
Working Paper No. 7848, 2000.
Hinloopen, J, and C. van Marrewijk. "Empirical relevance of the Hillman condition for
revealed comparative advantage: 10 stylized facts." Applied Economics: 40,
2006: 2313-2328.
Inter-American Institute for Cooperation on Agriculture. "Study to Inform Changes in the
CET for Agriculture & Food products in CARICOM." 2001.
Jamaica Observer. May 14, 2008.
http://www.jamaicaobserver.com/news/135602_Jamaica-Guyana-rice-disputesettled.
Lewis-Bynoe, Denny, and Allan Webster. "International trade and comparative advantage
in the Caribbean." Central Bank Working Paper, 2000: 79-96.
Liesner, H. "The European common market and British industry." Economic Journal,
1958.
Lorde, Troy, Brian Francis, and Antonio Alleyne. Examining Export Performance in
CARICOM from 1992-2006: An Application of the Revealed Comparative
Advantage Measure. Barbados, November 2, 2012.
Ricardo, David. On the Principles of Political Economy and Taxation. 1821.
The World Bank; Organization of American States. Accelerating Trade and Integration in
the Caribbean: Policy Options for Sustained Growth, Job Creation, and Poverty
Reduction. Washington: World Bank, 2009.
Tufton,
Christopher. Jamaica Gleaner. July 14, 2013.
gleaner.com/gleaner/20130714/focus/focus2.html.
http://www.jamaica-
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APPENDIX 1
Application for Suspension Documentation
Request from Competent Authority to Secretary-General
CARIBBEAN COMMUNITY
Draft Application for Suspension of the Common External Tariff
(For consideration by the Secretary-General under Article 83 (2) of the Revised
Treaty)
Attached for your attention is a completed request form for the suspension of the
Common External Tariff (CET) rate on the captioned items in respect of the
Government of …………………………………for…………………………The
Suspension is being requested under Article 83 (2),{(a),(b),(c)},and the period of rate
change sought is ………………..to………………….
Further to consultations with the local business community, the Competent Authority
of (Member State) wishes to advise that the known producers provided responses to
our request for suppliers of (Requested item) dated
………………………….. as follows:
Company A – Unable to Supply.
Company B – Unable to Supply.
OR
No known suppliers exist locally.
…………………………...
Authorised signature Date
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Effective Project Governance: A Critical Strategy
for Success in Project Management
By
Dr. Wayne Charles-Soverall16 and Dr. Juliette Brathwaite17
Abstract
This paper considers project governance dimensions including how
attributes and performance of projects impact governors’ framework preference, level
of support from top management, implementation capabilities and accountability,
practitioners’ project management competency to effect project success and
contextual elements influencing progress and outcomes. This paper contends that
there is a need to leap from traditional project management to views incorporating
more recognition of varying situational factors and requirements for different
management and governance models. The dimensions are therefore examined with a
view to understanding the critical roles that they play in project management and how
they can be applied to govern projects and thus improve both strategy implementation
and project success probability and reality. The authors suggest that there is greater
chance of expected benefits realization through more fitting framework for
governance, execution and performance. The paper concludes that there must be
good structure, well-defined roles, and performance indicators combining both
project and product success measurements, heeding guidance, surveillance and
control.
Keywords: project governance, project context, project attributes, project
performance, project sponsor, corporate governance
16
Lecturer in Project Sector Management as well as Project Development, Cave Hill School of
Business and Management, The University of the West Indies, Cave Hill Campus.
17
Lecturer in Project Management, Cave Hill School of Business and Management, The
University of the West Indies, Cave Hill Campus.
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1 Introduction
Project governance is increasingly becoming a critical component of
strategy and best practice for successful project management. The traditional view of
project management was one which saw it as a way of managing individual projects
which were left to project managers while the board concentrated on managing the
organization (Business Reporter, 2014). However, although projects may have
similar attributes, they may differ in complexity, size, organizational arrangement
and operations (Khan, 2013). Thus, since all projects cannot be managed in a similar
manner, it means that they require different management models (Shenhar, 2001) as
well as surveillance, support and guidance from executives in order to achieve their
objectives which form part of the project governance framework that needs to be
implemented. The new approach is that project management is integral to driving
organizations forward and many boards now include a director with responsibility for
this critical element. In this context, just as good corporate governance is necessary
to enhance the competence and integrity of managing the business, good project
governance is equally necessary for the effective management of projects as part of
the wider overall strategy for success (Business Reporter, 2014).
A project can be defined as a temporary organization that is created for the
purpose of delivering one or more business products according to an agreed business
case (OGC, 2009). Another view contends that a project is a temporary endeavour
that is undertaken to create a unique product, service or result (PMI, 2008).
Essentially these definitions focus on three project characteristics, namely, the
temporary organization, the production function and the objective or outcome. In this
context, projects differ from each other based on different attributes which include
high complexity, uncertainty, and different conceptualization phases (Shenhar, 2001;
Miller and Hobbs, 2005). Research indicates that organizations tend to group
projects based on their attributes in order to manage them more effectively (Khan,
2013). The key project attributes identified in the literature included project
complexity, project uncertainty and project strategic value.
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2 Organization, Governance and Projects: Processes, Practices and Performance
The following focuses specifically on the contextual factors that influence
the progress and outcomes of projects, as well as the key role played by the
emergence of project governance and ensuring that governance requirements are met
in order to achieve improved project performance and success. The section begins
with a selected examination of project performance and its evolution within the
project management discipline. This is followed by a review of the current state of
knowledge derived from the project management practice literature and research
from the project management academic literature as well as from both the corporate
governance and project governance literature.
2.1 Project Performance
The major focus of research efforts in the field of project management is on
project performance which includes both product performance as well as process
performance (Jiang et al, 2004). In general, there seems to be consensus amongst
researchers that project performance measures, in terms of project progress and
project success criteria, can be differentiated from a perspective of ex ante and ex
post project closure metrics (Shenhar, Levy and Dvir, 1997; Atkinson, 1999; CookeDavies, 2002; Hartman and Ashrafi, 2002). In this context, for the project
management community, however, it is important to note the distinction between
project success – which cannot be measured until after the project has been
completed – and project performance – which can be measured during the life of the
project (Cooke-Davies, 2002). Thus, completing a project within predetermined time
and cost constraints and with the end product or service performing to expectations
remains the ultimate project quest (Bekker and Steyn, 2008; 2009). However, there
are at least three performance dimensions that should be considered in this regard,
namely, meeting constraints and stakeholder expectations meeting design goals and
expectations, and adherence to project process.
A more recent feature of project performance has been a concern with the
governance of project management and capital investments, as well as evaluating the
application of corporate governance practices in the management of such projects
(Siqueira and Neto, 2012). Research in various sectors has highlighted concerns
about poor project performance which were found to be well below acceptable
performance levels (Morris and Hough, 1987; Merrow et al, 1988; Skamris, 1994;
Miller et al, 2000; Flyvbjerg et al, 2003; Mueller, 2009; Turner, 2009; Siqueira and
Neto, 2012). In response to the foregoing concerns, various studies were conducted
to identify the contributing factors that caused, or were related to, poor project
performance and, in some instances, even project failure.
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Belassi and Tukel (1996) collated seven studies that identified factors
related to poor project performance, and when combined with the results from other
studies done by Gioia (1996) and Ives (2005), the common characteristics of
monitoring and control were cited as priority areas. In addition, other studies
explored and challenged the existing, unclear interface between the project owner’s
perspective (associated with governance) and the executing party’s perspective
(associated with management) that creates difficulties in many projects (Klakegg et
al, 2008; Klakegg, 2009).
2.2 Project Management
The foregoing priority areas constitute the core of project management and,
therefore, given the availability of a wide variety of project management tools,
techniques, training, and software to the project manager to monitor and control
projects, research is required to find out why projects are still failing. Over the years,
there has been considerable research to investigate the causes of capital project
failure. The UK-based Office of Government Commerce (OGC) published a best
practice document about construction projects in the public sector which highlighted
common causes of project failure (Morgan and Gbedemah, 2010). In the table below
is juxtaposed the conclusions from the OGC document with components from the
APM guide to illustrate the need for effective project governance, especially as it
relates to the need for adequate project sponsorship and portfolio direction to
counteract the deficiencies highlighted by the OGC with a view to ensuring effective
project management through top management sponsorship and support which
significantly affect strategy and performance.
Project management has been recognized as a strategic delivery capability
that can assist organizations in achieving their strategic objectives (Crawford, 2004;
Crawford and Terence, 2005; Besner and Hobbs, 2006; Crawford, Hobbs and Turner,
2006; Blichfeldt and Eskerod, 2008). In this context, the ability to manage projects
has become more strategically important and, therefore, in order to develop and
improve such ability, it is necessary to understand the organizational context
(Marnewick and Labuschagne, 2008). Over the years, the value of project
management has often been questioned because of a lack of empirical evidence
(Besner and Hobbs, 2006; Morris, Crawford, Hodgson, Shepherd and Thomas, 2006;
Thomas and Mullaly, 2007; Williams and Parr, 2008). In addition, despite
implementing formal project management infrastructures, as well as a large number
of project management methodologies, tools and techniques, very often they were not
suitable to all organizations’ project types, complexities, programmes and portfolios
management (Bernardo, 2010).
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Table 1: Best Practice Prescription Juxtaposed with Guide to Effective
Project Governance
OGC: Common Causes of Project Failure
APM: Components
Governance
Lack of clear links between the project and the organization’s key strategic
priorities, including agreed measures of success
Lack of clear senior management and the ministerial ownership and
leadership
Lack of effective engagement with stakeholders
Portfolio direction
Project sponsorship
Project sponsorship
Lack of skills and proven approach to project management and risk
management
Lack of understanding of, and contact with, the supply industry at senior
levels in the organization
Too little attention to breaking development and implementation into
manageable steps
Evaluation of proposals driven by initial price rather than long-term value of
money (especially securing of business benefits)
Lack, of understanding of and contact with, supply industry at senior levels
in the organization
Lack of effective project team integration between clients, the supplier and
the supply chain
Project management
of
Project
Project sponsorship
Project management
Project management
Project management
Disclosure and reporting
Project sponsorship
Project management
Disclosure and reporting
Project management
Source: Adapted from Anthony Morgan and Sena Gbedemah, 2010
Project management maturity models sought to provide an explanation for
project failures as well as solutions on how to improve capability for project success
(Marnewick and Labuschagne, 2010). However, despite these models, project
management maturity has not improved significantly (O’Leary and Williams, 2008;
Soderlund, 2004; Soderlund, Vaagaasar and Andersen, 2008). Moreover, it has been
argued that projects, programmes and portfolios can only be successfully managed if
they are governed by an adequate project management governance model, co-existing
with the organization’s governance framework (Bernardo, 2010). Thus, in
contemporary project management, executives need to be more aware of project
boundaries, and to improve their capabilities as they face increasing risks,
uncertainties and challenges while managing projects and related strategy
implementation in their drive to maintain efficiencies and realize returns (White and
Fortune, 2002).
Other researchers indicated that major public investment projects were
successful because of their emphasis on the executing party’s perspective (Olsson
and Klakegg, 2008). However, there were often signs of failure when emphasis was
placed on the owner’s perspective (Samset, 2003).
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In addition, a poorly administered project-business relationship as well as
the lack of active stakeholder management in the wider project environment was
often cited as the most important reasons for project failure. As a consequence of
these conflicting outcomes, it became clear that project management cannot be
divorced from the wider macro organizational and business environment in which it
operates, and therefore, the need for an effective project management governance
framework became even more critical. Even more disconcerting was the reality that
despite utilizing the project portfolio management approach to manage multiple
projects with finite resources in a competitive environment, there was only limited
success (Wideman, 2005).
In an attempt to address the foregoing problem and to improve results, the
Association for Project Management (APM), which is based in the United Kingdom
(UK), developed a booklet entitled Directing Change: A Guide to Governance of
Project Management which has evolved over the years (APM, 2002; 2004; 2011).
However, although the guide was intended solely to provide practical guidance
relating to the establishment of good governance of project management, in many
ways it was deemed to be inadequate (Wideman, 2005). Indeed, the fundamental
contention was that the guide did not fully serve the stakeholders’ best interests
because the benefits must not only be consistent with the organization’s goals but
must also exceed the cost of the whole project by a margin that makes it competitive
with other potential projects in the portfolio (Wideman, 2005).
The APM Guide was intended solely to provide practical guidance relating
to the establishment of good governance of project management (APM, 2004).
Moreover, its purpose was to influence directors and others to adopt excellent
practices regarding the governance of program and project management activities
which involved aligning the interests of directors, program and project teams and
wider stakeholders. However, the governance of project management was shown to
be only a smaller part of total corporate governance and, by extension, only a small
part of project management (Wideman, 2005). Thus, although the APM Guide
identified four main components of project management governance as portfolio
direction, project sponsorship, project management and disclosure and reporting, as
well as eleven principles that they support, it seemed that a project portfolio office
was required to ensure greater effectiveness (Wideman, 2005).
The gaps in the theoretical framework obscured the links between project
governance, project management and strategic outcomes, and therefore underscored
the need for a more holistic understanding of project portfolio management.
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In this context, the Project Portfolio Life Span (PPLS) model provided
assistance by offering the following five phased components: identification of needs
and opportunities (corporate fiscal planning); selection of best combinations of
projects (project portfolio management); planning and execution of projects (project
management); product launch and deployment of project deliverables (marketing and
sales); and realization of benefits (corporate due diligence and accounting)
(Wideman, 2005). Others have argued for effective project management governance
within the corporate governance framework because it allows top management to
have a clear vision and control of non-routine corporate operations and delivery
capability (Crawford and Terence, 2005; Crawford et al, 2006). However, even
where a single process exists to support governance practices, there are different
facets, and, therefore, interdependence and integration are still lacking (Too and
Weaver, 2013). Moreover, the gap in the governance framework needed to be
addressed because the literature indicated that top management sponsorship and
support significantly affected strategy and performance. The challenge at this stage
of the evolution of project governance was to establish its relationship to the wider
concepts of governance and, particularly, the corporate governance regime that was
implemented to control the delivery of business objectives.
2.3 Corporate Governance
The term governance has been defined differently by many authors and
ascribed various meanings that have been applied to many settings. The absence of a
unified definition with a clear and unambiguous meaning, therefore, underscored the
need for a clearer understanding of governance and its consequences (Klakegg et al,
2008; Klakegg, 2009). Some authors viewed governance as a hierarchical
phenomenon (Hirst, 2000; Driessen, 2005; Kaufmann and Kraay, 2007), while others
described it as a network or transaction-based phenomenon (Rhodes, 1997; Winch,
2001; 2006). The hierarchical aspects of governance can be seen at most levels of an
organization, including owners and/or shareholders, boards of directors in
corporations, corporate management, middle management, teams and individual
employees. A similar hierarchical pattern is also visible in projects where formal
command structures run from top to bottom throughout the organization and
reporting lines return upwards.
The network aspect of governance is best illustrated by the interplay of
many actors (organizations, groups and individuals) who are connected in several
ways (formal and informal). In the project context, this usually occurs through
contract arrangements.
Several interesting aspects of this relational governance network have been
highlighted in the literature, especially those relating to the power of the state and the
ability of national business systems to influence the way governments and
corporations act (Matten and Moon, 2008). The concept of corporate governance
developed as a result of heightened public interest in inadequate governance and
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investor protection and the search for an appropriate response to correct increased
global corporate failures. The net result was a global revision of existing governance
laws and policies, as well as new developments in the UK legislation such as the
Cadbury Report (1992), the Greenbury Report (1995), the Hampel Report (1998), the
Combined Code on Corporate Governance (1998), the Financial Services and
Markets Act (2000), and the UK Corporate Governance Code (2010); the Sarbanes
Oxley Act (2002) in the United States; the King Report on Corporate Governance
(2002); the Organization of Economic Cooperation and Development (OECD)
Principles of Corporate Governance (2004); and the United Nations (UN) Guidelines
on Governance in Public-Private Partnerships (2005) which sought to prevent the
occurrence of similar corporate scandals. The literature indicated that guidelines
from the developed and developing countries differed in context and, thus, developed
countries focused more on corporate financial control while the developing countries
emphasized corporate social responsibility. Despite these positive outcomes,
however, many project professionals thought that these governance principles dealt
more with the operational aspects of business and less adequately with projects which
formed the riskier aspect of an organization’s business activities.
In addition, although corporate governance deficiencies were addressed by
the previous guidelines and principles, there was still a need for further investigation
of governance principles because of the multi-company, multi-industry and multicountry nature of projects which posed a serious challenge for the application of
corporate governance principles in project environments (Bekker and Steyn, 2008;
2009). Emphasis was also placed on corporate values because they were viewed as
important aspects of the governing principles which linked top management
concepts, practices and processes, with fairness, disclosure, accountability and
compliance. Moreover, since many projects were developed and implemented at a
global level in which both developed and developing countries had to work together,
there was need for an effective conceptual framework for project governance that
incorporated the needs of both stakeholders (Bekker and Steyn, 2009). The concept
of governance, however, is not limited to either the predominant hierarchical multilevel governance aspects, or the more recent domination of the network-based,
relational multi-actor governance dimensions (Jessop, 1997; Lynn et al, 2000, Abbott
and Snidal, 2001; Klakegg et al, 2008; Klakegg, 2009).
2.4 Project Governance
Governance was also associated with projects as economists searched for
optimal governance structures to facilitate efficient contractual relations for standard
products as well as bilateral governance for recurrent products and hierarchical
governance for specific assets (Klakegg, 2009). Project governance therefore
emerged from the broader concept of corporate governance as ‘global
corporations were pressured by legislative changes and the increased expectations of
their stakeholders to improve the predictability of financial forecasts, the active
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participation of shareholders, and the need to improve return on investments so that
they could keep the value of their shares’ (Weaver, 2005). As a result of these
changes, projects were viewed as catalysts that generated new sources of income,
greater efficiency and transformation (Chesbrough and Cowther, 2006), which
triggered changes in their overall corporate performance (Weaver, 2007). Projects
were essentially viewed as temporary organizations that required a governance
structure and, therefore, project governance was created to provide the structure
through which the objectives of projects were established, including the means of
achieving them, and performance determined (Turner, 2009).
In the project literature, project governance has been attracting increased
attention with researchers focusing on project governance from different perspectives
and scope. Some researchers focused on governance using behavioural control
(Mueller, 2010) through governance of project management, whereas, others paid
attention to governing the project environment through different mechanisms, roles,
and institutions (Turner and Keegan, 2001; Muller, 2011). Yet others paid attention
to governance functions required for specific projects based on project attributes
(Miller and Hobbs, 2005; Mueller and Blomquist, 2006; Klakegg et al, 2008). The
alignment of portfolios with organizational objectives and sustainability of results
was viewed as governance through projects whereas the efficient delivery of project
was described as governance of projects (Klakegg et al, 2008). Thus, project
governance was defined as the concerns with those areas of governance (public and
corporate) that are specifically related to project activities, and good project
governance, therefore, ensures relevant, sustainable alternatives are chosen and
delivered efficiently.
There was also a focus on the objectives of governance mechanisms for
project-based organizations in which the mechanisms were adopted to support the
operation control processes, and to manage the interface between project teams and
their clients (Turner and Keegan, 2001). Thus, project governance provides a
structure through which objectives of the project are set and the means of attaining
those objectives as well as the means of monitoring the performance are determined
(Turner, 2006). In contrast to the previous views, there is an objective achievement
and value addition perspective to project governance (Mueller, 2010, 2011).
This view focuses on the value system, responsibilities, processes and
policies that allow projects to achieve organizational objectives and foster
implementation that is in the best interest of all the stakeholders, and the corporation
itself. Moreover, this perspective identified three major aspects of project
governance – defining the objectives of the project; providing the means and
resources; and monitoring and controlling the project progress and utilization of
resources through governance oversight.
Still others described it as an important new trend (Miller and Hobbs, 2005)
and as a governance movement (Patel, 2007). Several authors also contributed to a
better understanding of governance in relation to infrastructural projects (Miller and
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Lessard, 2000; Flyvbjerg et al, 2003; Altshuler and Luberoff, 2003; APM, 2004;
Aubry et al, 2008; Klakegg et al, 2008; Klakegg, 2009). Despite this focus, however,
it was still perceived as one of the most misunderstood terms in modern project
management (Bekker and Steyn, 2008; 2009). Moreover, due to the lack of a formal
definition, many institutions created more confusion by the wide variety of
connotations that they developed to suit specific applications. In an attempt to
provide some clarity, project governance was described as a set of management
systems, rules, protocols, relationships and structures that provide the framework
within which decisions are made for project development and implementation to
achieve the intended business or strategic motivation (Bekker and Steyn, 2008;
2009).
In addition, Directing Change: A Guide to Governance of Project
Management (APM, 2011) identified the following thirteen (13) principles for
effective project governance (See Table 2)
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Table 2: Principles for Effective Project Governance
Number
1
2
3
Governance of Project Management Principles
The board has overall responsibility for the governance of project management.
The organization differentiates between projects and non project-based activities.
Roles and responsibilities for the governance of project management are defined
clearly.
4
Disciplined governance arrangements, supported by appropriate methods,
resources and controls are applied throughout the project life cycle. Every
project has a sponsor.
5
There is a demonstrably coherent and supporting relationship between the overall
business strategy and the project portfolio.
6
All projects have an approved plan containing authorization points at which the
business case, inclusive of cost, benefits and risk is reviewed. Decisions made at
authorization points are recorded and communicated.
7
Members of delegated authorization bodies have sufficient representation,
competence, authority and resources to enable them to make appropriate
decisions.
8
Project business cases are supported by relevant and realistic information that
provides a reliable basis for making authorization decisions.
9
The board or its delegated agents decide when independent scrutiny of projects
or project management systems is required and implement such assurance
accordingly.
10
There are clearly defined criteria for reporting project status and for the
escalation of risks and issues to the levels required by the organization.
11
The organization fosters a culture of improvement and of frank internal
disclosure of project management information.
12
Project stakeholders are engaged at a level that is commensurate with their
importance to the organization and in a manner that fosters trust.
13
Projects are closed when they are no longer justified as part of the organization’s
portfolio.
Source: Directing Change: A Guide to Governance of Project Management (Association for
Project Management, 2011)
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The thirteen principles were provided to help organizations to avoid several
common causes of project failure. In short, project governance involves a series of
relationships among project management, the sponsors (the board), project owners
and other stakeholders. This is particularly important for projects because even
though good project management will not save an organization from a poorly
designed strategy, inefficient project management will negatively impact a good
strategy (Dinsmore and Ribeiro, 2007). In this context, three important perspectives
are required in order to ensure successful projects, namely, the owner perspective
focusing on the long-term outcomes of the project; the user perspective focusing on
the immediate effects of using the results of the project; and the executing
perspective focusing on the deliverables or outputs from the project (Samset, 2003).
Over the years, however, the project literature reflected a change from viewing
project success as delivering the right quality at the right time and cost (Atkinson,
1999), to focusing on the contribution to value and benefits by choosing the right
projects and delivering them right every time (Shenhar et al, 1997; Shenhar, 2001;
Cooke-Davies, 2002; Dinsmore and Cooke-Davies, 2006).
The UK-based APM had also established a special interest group which
focused on the governance of project management and highlighted the interface
between corporate governance and project management (APM, 2002). Their research
was further developed into a Guide to Governance of Project Management (APM,
2004; 2011). Project management was viewed from the perspective of the executing
party which had strong and explicit connections to corporate governance (Klakegg et
al, 2008; Klakegg, 2009).
Thus, governance applied to projects, programmes and portfolios, and to project
management, and coexisted with the corporate governance framework (Bernardo,
2010). Moreover, since CEOs were challenged to transform strategies into results
based on the effective implementation of the right projects, they needed to prove that
corporate governance included a governance policy that enabled strategic projects to
be effectively managed (Dinsmore and Ribeiro, 2007). Thus, good project
governance was seen as providing a good operational environment as well as a strong
institutional guarantee for project success (Jia, et al, 2012). As a corollary,
programme governance was the process of developing, communicating,
implementing, monitoring and assuring the policies, procedures, organizational
structures and practices associated with a given programme (PMI, 2008).
2.5 Project Governance Framework
As projects and programmes are the vehicles for implementing corporate
strategies, effective project management governance, within the corporate
governance framework, becomes a major concern for organizations since it offers to
top management a clear visibility and control of non-routine corporate operations and
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delivery capability (Crawford et al, 2005). The governance of project management
concerns those areas of corporate governance that are specifically related to project
activities (APM, 2004). It is difficult, therefore, to define a single project
management governance framework because it depends on the corporate governance
framework and the mix of projects managed by the organization (Bernardo, 2010).
There are three levels of governance within projects-based organizations, namely, a
first level at which the board operates and their interest in the project is stated; the
second level at which the operational infrastructures are defined to undertake projects
effectively, ensuring the capability exists within the organization to deliver projects
successfully, and ensuring that the right projects are done; and the third level
concerns individual projects which, defined as temporary organization, needs
governing (Turner, 2008). Thus, each organization has to create a framework built
for its own purposes in accordance with its culture. In this context, each particular
project management governance framework must include the following core
elements: roles and responsibilities; decision making process and levels;
methodologies; competencies; communication process; and controlling process.
These core elements should be aligned with the organization’s strategies, based on
management commitment and ethics principles.
In order for a project management governance framework to be
continuously improved and to sustain its benefits, it needs to receive and analyze
project management metrics across the project life cycle (Bernardo, 2010). In the
literature, one such governance framework presented three major steps that
represented the organization’s increasing focus on the continuous improvement of
project management (Turner, 2009). In turn, each step was divided into three forces
which impacted and determined project management quality (See Table 3) below:
Table 3: Governance Framework for Project Management
Force
What can be done- Education
and experience
What should be done –
Management demand
Step 1
Methodology – Basic
training
Steering Committees
What is done
Audits/reviews
Step 2
Certification
PMO/PSO/PO
Mentor
programs
Step 3
Advanced
training
internal certification
Benchmarking
and
Maturity model
Source: Mueller (2009); Bernardo (2010).
Force 1 depicts “what can be done” by the project manager depending on his
education and experience which needs to be planned in order to cover all technical,
behavioural and contextual project management competencies. At the first step, the
organization has to develop its own project management methodology and train all
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the project managers, team leaders, project sponsors and project support staff,
according to their needs. At the second step, the main goal is to certify the project
managers by an independent system which can be used as a career development
system by the organization’s project management personnel. The third step is
advanced training and internal certification.
Force 2 examines “what should be done” and determines how project
management should be done by the project manager, how the project management
methodology should be adapted and used, giving due consideration to the project
specificities and what project management deliverables should be used by the project
manager (e.g. status reports, change management processes). At the first step, the
organization has to pay attention to project sponsorship because the sponsor and/or
steering group must have a clear understanding of project management discipline, to
ensure the use of the most effective and efficient project management processes. In
addition, an effective project sponsorship would focus the project manager on the
business needs and avoid project manager decisions based upon his perceptions. At
the second step, the organization should have linking structures such as PSOs or
PMOs in order to improve and support project management. At the third step, the
organization should use benchmarks to compare their project management
capabilities against competitors as well as to incorporate the results in a continuous
improvement process.
Force 3 assesses “what is done” and this determines how project
management is performed in compliance with the organization’s methodology and
policies. At the first step, the organization must ensure that revisions (project audits,
formal reviews or health checks) are made in order to know what is actually being
done. At the second step, the mentor programs are used to address the attitude and
approach that project managers develop towards their work as well as communication
and teamwork issues with their teams, sponsor and project stakeholders. The final
step aligns the organization with a select project management maturity model.
3 Derived Model and Implications
Figure 1 illustrates the interrelatedness of project governance dimensions
with project management to effect a critical strategy for success.
The greatest
hindrances to interlinkages of project governance and management, and higher
success levels, involve what to avoid in terms of risks and adverse competition. The
contextual elements must therefore be sufficiently explored so as to focus more on
core competencies and opportunities that allow resources to be more effectively
utilized. Governance is impacted by value systems and learning that determine
preferences, enabling motivation, adaptation and the realization of goals. If project
implementing has support of top management and key stakeholders, they are more
likely to be involved in analysis of performance factors and diagnosis of problems
impacting desirable outcomes. This better contributes to more effective preferences
when formulating new strategies, objectives and projects.
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Figure 1 Derived Framework for Project Governance and Management
PROSPECTS AND ACTIONS
Systems to increase
prospects and knowledge
Systems central to
exploration and awareness
GOVERNANCE
Governors’ Framework
Preference
Systems
surrounding
governance
dimensions
Contextual Elements
Influencing
Core
Processes and
Values
Knowledge,
Techniques,
Risks
EFFECTIVE
PROJECT
MANAGEMENT
Systems for
Planning and
Implementation
of Strategy and
Projects
Heeding
Uncertainties
Performance
and Outcomes
Top Management Support
Accountability and Control
Capabilities,
Competencies, Analysis
Conclusion
In order for any project governance framework to be truly effective, it must
have a viable structure for organization of projects, effectively incorporate project
roles, responsibilities, decision levels and approved management boundaries that are
appropriate. These are best enhanced by heeding performance and outcomes,
describing how to monitor project performance by specifying adequate performance
indicators. In addition to Figure 1 illustrating interrelatedness of project governance
dimensions with project management to affect a critical strategy for success, the
logical framework method (LFM) is also proposed as a detailed framework for
defining and understanding the nature of project management success (Baccarini,
1996; Collins and Baccarini, 2004). Essentially, the framework argued that both
project management success and product success are the main components of
measuring project success. However, given the evolving nature of the project
governance framework, there are three other dimensions of project governance that
should also be considered in this context: accountability through project surveillance
which relates to overseeing the project progress in order to ensure that the project is
moving according to plan and within the defined threshold; project control which
relates to controlling the progress of the project and the action of the management
team; and project support and guidance which relates to the need for support and
guidance framed with key values and diligence from the project governance team
during the project life cycle. In this way, more awareness of risks and uncertainties
with systems used differently but interactively to reduce the tensions and conflicts
that hinder true success.
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