Leadership

The relationship between employee performance assessments, self-esteem, self-efficacy and intention to stay

The relationship between employee performance assessments, self-esteem, self-efficacy and intention to stay

The Steinhoff Saga Management review - University of Stellenbosch Business School

July – December 2019

The relationship between employee performance assessments, self-esteem, self-efficacy and intention to stay

The relationship between employee performance assessments, self-esteem, self-efficacy and intention to stay

By Tarryn Gill Mushfieldt

  • DEC 2019

17 minutes to read

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Achieving a high-performance organisational culture

Attributes of high-performance organisations include a clear vision and value proposition, realistic and measurable objectives, inspired leadership, and a commitment to act in the best interests of shareholders and customers. Yet at the heart of these organisations are the employees whose day-to-day efforts play a significant role in the organisations’ ultimate success. While organisational effectiveness is heavily dependent on employees’ skills and experience, how employees are treated in the workplace and how they view their own contribution are equally (if not more) important.

Various studies have shown that effective performance management practices are key to ensuring high-performance employee behaviour. Managers need to strike a balance between ensuring that the work gets done in line with organisational objectives and recognising that employees have different personalities, emotional triggers and stress tolerance levels. Pushing too hard, for example, can lead to despondency and under-achievement. Similarly, an impersonal, task-driven approach can prove to be counter-productive. Managers should rather aim to get the best out of their employees by acknowledging their strengths and shortcomings, and helping them to satisfy their own personal career aspirations. Providing sufficient opportunities for training and professional development is critical for productivity, while involving employees in decision making and work design can boost their motivation levels. Even offering reward-based incentives can encourage excellent performance.

While organisational effectiveness is heavily dependent on employees’ skills and experience, how employees are treated in the workplace and how they view their own contribution are equally (if not more) important.

An important tool in the process of building a high-performance organisational culture is the employee performance assessment. Here a manager gives employees feedback on their performance over a specified period against agreed objectives, as well as a performance rating. Feedback invariably covers both positive and negative aspects of individuals’ performance. Not surprisingly, some employees do not take kindly to criticism – even if it is intended to be constructive. To be found wanting in certain areas can be a blow to some people’s self-esteem. As a result, they might start to doubt their self-efficacy, which is their perceived ability to cope with the demands of the job, and to question whether they should stay at the organisation.

How performance assessments impact employees’ self-esteem, self-efficacy and intention to stay is of great importance to results-driven and quality-focused organisations. However, to date, research on the interrelationships among these different phenomena has been limited. The main purpose of this study (which formed part of the researcher’s Master of Business Administration degree) was to address this knowledge gap by examining how feedback from managers during the performance assessment process impacts employees’ self-esteem, self-efficacy and intention to stay. The study, which was qualitative in nature, comprised a literature review and semi-structured, face-to-face interviews with a group of employees (spanning different occupational levels and performance categories) in a financial services organisation in South Africa.

Employee performance assessments: A double-edged sword?

Performance assessments have a dual purpose: on the one hand, they tell employees how they have fared in relation to agreed financial and/or operational targets, which could prompt rewards or some sort of remedial action; on the other hand, they provide a yardstick of whether or not the organisation as a whole has met its objectives, which could necessitate changes of a more strategic nature. Thus, while laying the foundation for employees’ ongoing development, performance assessments also offer clues to the organisation’s overarching challenges and priorities.

A performance assessment relies on a set of key performance indicators (KPIs) which managers evaluate at regular (say, six-monthly) performance reviews. Managers also provide a performance rating, indicating how well an employee has performed relative to the standard. The fact that performance can be measured helps to ensure that the award of any merit bonuses is objective and fair.

Notwithstanding the structured approach followed in performance assessments, the quality of execution is dependent on the relationship between the manager and the employee, as well as the nature of the support provided by the manager from one performance review to the next. When conducted in a professional and caring manner, a performance assessment can be a positive, worthwhile experience which prompts higher levels of employee engagement and achievement. When conducted in a careless or insensitive manner, it can be a demoralising experience, which focuses on the negative rather than on finding ways to leverage an employee’s existing talents and enhance performance through training or mentorship.

How performance assessments influence employees’ self-esteem, self-efficacy and intention to stay are discussed in more detail below.

Managers need to strike a balance between ensuring that the work gets done in line with organisational objectives and recognising that employees have different personalities, emotional triggers and stress tolerance levels.

  • Self-esteem

Self-esteem refers to how positively people view themselves – that is, whether they feel capable of performing, achieving success and making a valuable contribution. Self-esteem is linked to concepts like self-confidence, self-respect and self-worth.

Employees’ experience in an organisation strongly influences their self-esteem, which is evident in their attitudes and behaviour. The interactions they have with their manager will contribute significantly to their organisational experience and self-esteem, particularly as a superior‒subordinate relationship is characterised by a certain amount of tension. Self-esteem in turn has a strong bearing on an employee’s job performance. Therefore, a manager should, in assessing performance, aim to keep the individuals’ self-esteem intact or even boost it if possible. That is not to say that unsatisfactory performance should be overlooked, but a cautious approach is recommended – particularly if the sub-optimal performance might be attributable to stress or feelings of being unappreciated.

  • Self-efficacy

Self-efficacy is linked to self-esteem, but refers to people’s belief in their ability to perform a designated task or job in a particular environment. It is therefore more situational. Yet it influences future behaviour because it is associated with people’s expectations of their ability to deliver positive results on a sustainable basis.

In an organisational context, a lack of self-efficacy among employees can be linked to a perceived lack of proficiency or even a lack of knowledge as to how to execute a task. This can result in employees feeling insecure and self-critical, which erodes their self-efficacy. The more complex a task or job to be performed, the higher is the risk of employees’ self-efficacy being compromised.

When it comes to performance assessments, managers need to ensure that employees are properly informed about the expectations surrounding a task or job and, furthermore, that they receive proper training in order to develop the necessary competencies. Regular interactions with, and feedback from, the manager are important. When employees receive positive and/or constructive feedback, their self-efficacy will rise. This provides a firm foundation for continuous improvement.

When people leave, they take knowledge of the business, skills and institutional memory with them, often leaving a void that is difficult to fill.

  • Intention to stay

Employees’ intention to stay at an organisation is influenced by a number of factors, with emotional well-being being a key driver. Having a clear purpose, the opportunity to learn, and being recognised and valued are important contributors to employees’ emotional well-being, and therefore their desire to stay. Such aspirations can be satisfied through a well-designed personal development programme and an effective performance management system. In contrast, reasons for employees leaving an organisation include inadequate remuneration, a lack of recognition, a lack of trust in the leadership, a poor work culture, ineffective performance management practices, and limited career prospects.

Strained manager‒employee relationships will, as noted earlier, erode employees’ self-esteem and self-efficacy and could hasten their departure from the organisation. In this regard, employee complaints could range from managerial neglect to excessive micro-management and a fixation with short-term performance at the expense of personal growth. Of course, employees might decide to leave because they are poor performers, despite being given ample opportunities and encouragement. They are simply not prepared to put in the effort to meet the standards of the organisation or to uphold its values.

Employee retention is an ongoing challenge for organisations. When people leave, they take knowledge of the business, skills and institutional memory with them, often leaving a void that is difficult to fill. This hampers productivity and puts additional pressure on remaining staff members. An effective performance assessment system can help to detect employee dissatisfaction or waning morale before negative feelings escalate into an irreversible decision to leave the organisation in search of greener pastures.

What the interviews revealed

All participants highlighted the importance of management feedback – in fact, they considered it to be the most important element in the employee performance assessment process, with transparency being a central pillar. Regular feedback helps to ensure that performance remains in line with expectations, thereby acting as a sort of continuous assessment ‘dipstick’. This should minimise the risk of ‘surprise’ ratings being awarded when the formal performance reviews are conducted. In addition, participants emphasised that ongoing two-way communication is valuable because it facilitates timeous corrective action or a change in direction, if necessary.

Interestingly, those participants who were in the top-performer category met with their managers more frequently than those in the bottom-performer category. Besides having regular monthly meetings with their managers, top performers reported having frequent, impromptu conversations about various aspects of the work – which they found useful. Bottom performers reported having fewer feedback sessions with their managers and also that sometimes the performance ratings they received did not correlate with the feedback they had been given at their monthly meetings – that is, the ratings were lower than anticipated. This suggests that their managers found it difficult to speak openly and honestly about their sub-standard performance, even though the monthly meetings provided the ideal opportunity to raise the subject and discuss possible solutions in the lead-up to the formal review sessions.

Regular feedback helps to ensure that performance remains in line with expectations, thereby acting as a sort of continuous assessment ‘dipstick’.

All participants were of the view that managers should give balanced feedback, offering recognition for a job well done, while also suggesting ways in which they could improve. In a high-performance environment, they said, there is unfortunately a tendency for managers to dwell on what has not gone well. Focusing more on the positive aspects of their performance, and not simply taking the latter for granted, would go a long way towards boosting their morale. Participants said that they did not enjoy feedback sessions in which their manager did all the talking. The value of the session, they said, was in the exchange of opinions and ideas. They also said that they appreciated it when their manager took an interest in their personal lives and did not confine their discussions to work only. This paved the way for a better long-term relationship.

Although the employee assessment process can be a source of anxiety and (depending on the outcome) can negatively affect employees’ self-esteem and self-efficacy, a number of participants reported that they had grown accustomed to the idea that the rating reflected their performance in defined circumstances. It did not validate or invalidate them as human beings; nor was it a predictor of how they would perform in the future. Furthermore, performance at work should not simply be in reaction to external stimuli and events; employees’ own sense of purpose and their inner spirit should be the main driving forces behind their professional endeavours and accomplishments.

The participants were generally of the view that the organisational culture had a major influence on their decision to stay – more so than their relationship with their manager. Mixing with high-calibre staff, contributing towards the realisation of an exciting vision and living the kind of values that make for a better society all helped to give them an identity. However, the importance of an effective performance management system should not be downplayed. It is, after all, one of the keys to persuading employees to aspire to greater things.

To wrap up

Encouraging high levels of performance among employees is a complex undertaking. There is no magical formula that will work in all organisations, all of the time, among all categories of employees. Employee performance invariably fluctuates in response to external stimuli and internal drivers and concerns, some of which are difficult to discern from a management perspective. In this regard, the employee performance assessment can be a valuable tool. When used effectively, it gives definition to the management task ‒ ensuring the systematic scoping of work and the setting of realistic targets, which can be measured, reported and acted on. It also provides a useful framework for an employee development programme, taking fears, concerns, hopes and aspirations into account. When viewed together, the insights gained from employee performance assessments constitute a useful barometer of the organisational climate, which can inform human resources and other strategies.

When viewed together, the insights gained from employee performance assessments constitute a useful barometer of the organisational climate, which can inform human resources and other strategies.

Among the recommendations flowing from the study are: (1) to delink the performance rating – which is often used to arrive at a monetary reward – from the performance assessment, which should mainly have a developmental focus; (2) to build a strong feedback culture in the organisation which encourages managers to face performance issues (both positive and negative) head on when they occur; and (3) to hold employees accountable for upholding the organisation’s values through their behaviour and results.

  • This article is based on the research assignment of Tarryn Gill Mushfield – an MBA alumnus of USB. The title of her research assignment is: The relationship between employee performance assessments, self-esteem, self-efficacy and intention to stay.
  • Her study leader was Prof Mias de Klerk, Professor of Leadership and Organisational Behaviour, Director: Centre for Responsible Leadership Studies (Africa) and Head of Research at USB.

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Downsizing How this effects the emotions of the leaders implementing the change

Downsizing: How this affects the emotions of the leaders implementing the change

The Steinhoff Saga Management review - University of Stellenbosch Business School

July – December 2019

Downsizing: How this affects the emotions of the leaders implementing the change

Downsizing How this effects the emotions of the leaders implementing the change

By Leslie William Thomas

  • DEC 2019

22 minutes to read

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Downsizing is difficult

Increased globalisation, fierce competition and an informed consumer base are leading to more organisations implementing measures to ensure they have a competitive advantage, provide value to stakeholders and focus on sustainability. Downsizing is one such strategy.

This study, conducted among participants in a South African liquor company, explored how executioners – those individuals tasked with executing the downsizing – experienced their responsibilities.

How do these corporate leaders cope with the emotional burden of implementing the downsizing? How do they deal with the anxiety, anger, guilt, envy, relief and denial typically associated with this?

There is growing evidence that executioners suffer from similar symptoms as those who are survivors and victims of downsizing even though their experiences differ.

There is growing evidence that executioners suffer from similar symptoms as those who are survivors and victims of downsizing even though their experiences differ.

Why the need to downsize?

Downsizing – also called restructuring, redundancy, delayering or rightsizing – is a change management approach used by many organisations to decrease their number of employees. In the past, downsizing was usually driven by difficult economic times. It has now become a strategy to improve organisational performance because downsizing can help to reduce costs, cut down on bureaucracy, facilitate quicker decision making, encourage entrepreneurship and increase overall profitability.

Themes in understanding the emotional experience of downsizing

What does the literature say about the emotional experience of victims and survivors (and executioners) in the downsizing process? What are the themes deemed important in understanding survivors’ emotional experiences and reactions in this context?

  • Job insecurity: Researchers have shown that job insecurity increases, leading to negative responses that in the long term can harm both the organisation and the individual. Having said this, those leaders who have to execute the downsizing are survivors themselves and are just as much at risk at losing their jobs.
  • Guilt, anxiety, fear and anger: During downsizing and after its conclusion, symptoms such as depression or anger as a result of survivor guilt is a serious concern for downsized organisations. Guilt is created as a result of inequity, motivating survivors “to redress this guilt through behavioural or psychological means”. Some survivors who perceive unfairness in the dismissal of a co-worker may exhibit behaviour like increasing work performance to offset such guilty feelings. Some researchers found that survivors were more task driven post-downsizing and worked harder in order to compensate for these feelings. Other researchers argued that the survivors’ reason for working harder was as a result of them wanting to protect their employment status in the company as they fear the impact of future downsizings and possible job losses. Those executioners who were in a close relationship with victims experienced higher levels of anxiety as opposed to those who executed administrative functions. In extreme cases, managers resorted to committing suicide as living with their guilt was no longer possible.

Why was this study undertaken?

While much has been written about the reactions of survivors and victims, little is known about the emotional experience of those leaders who have to implement the downsizing.

Research on executioners (also called executors, downsizers, downsizing agents, executioners  or implementers) is limited both locally and internationally as studies mostly capture the reactions of victims (those who exit the organisation during the downsizing) and survivors (those who remain in the organisation), or concentrated on the financial and organisational consequences of downsizing.

A review of the literature on this topic shows different views of how survivors’ previous experiences with downsizing affect their perception of, and responses to, later experiences with downsizing. On the one hand, a significant number of North American researchers argued that survivors may benefit from earlier experiences with downsizing as this will help to make them more resilient over time. On the other hand, some management scholars found that experiencing multiple occurrences of downsizing made survivors more vulnerable over time and intensified feelings of stress.

Some researchers found that survivors were more task driven post-downsizing and worked harder in order to compensate for these feelings of guilt.

This study was undertaken to explore the effect of past exposure in downsizing on the emotional experience of those managers who have to implement the downsizing. The research was conducted in a South African firm and sought to confirm the work of Gandolfi (2009) and others in a different geographical setting.

How was the study conducted?

This study sought to capture the real-life experience of those leaders responsible for the planning and execution of downsizing in a large organisation that has first-hand experience of mergers and various waves of downsizing and restructuring.

The sample participants chosen for this study were those leaders who had to implement the structural changes. Qualitative data was obtained through semi-structured interviews with 12 such executioners: five manufacturing managers, two HR executives, two HR managers, one SHERQ manager, one quality manager and one programme manager. The participants had 107 years of combined work experience at management level and an average of four downsizing contacts per individual.

 What did the study find?

Four key themes emerged from the processed data:

  • Proximity to the change: The emotional experience of executioners in downsizing is determined by proximity to the change. Hence, the direct role of executioners in crafting change impacts their experience. Also, the closeness of their relationship with the victims impacted their emotional experience.
  • The impact of past exposure to downsizing: Past experience in downsizing has an influence on the emotional experience of executioners in subsequent downsizings. Past experience impacts their experience from a process perspective.
  • Coping mechanisms: Executioners employ different coping mechanisms to reduce the emotional impact of the change on themselves. These coping mechanisms include emotional, cognitive and physical distancing.
  • The key role of support: Executioners need support to help release emotions as a result of the impact of the downsizing experience. This includes support inside and outside the work environment.

Executioners employ different coping mechanisms to reduce the emotional impact of the change on themselves.

Theme 1: Proximity to the change

The first main theme that emerged from the research was the emotional response of the executioners. While executioners described their roles as emotionally taxing, their experiences varied. The following contributed to the emotional response of and the intensity felt by executioners:

  • Proximity to the emotional aspects (how close in the process they were to victims)
  • The role that executioners play in crafting the business case for change and the decision-making processes
  • The closeness of the relationship to the downsized.

Research showed that executioners who are closer to the epicentre of the emotional aspects as a result of direct contact with the downsizing victims are substantially more exposed to emotional pain. For most of these executioners, the experience was not pleasant. One participant indicated: “It’s never an easy conversation. No matter how many times you do the process, it never gets easier. It is always a dreaded conversation … It is really a combination of feelings from gosh, this person mustn’t commit suicide or do something crazy … so that’s why I think for me seeing that person go through that, you feel emotional and I get teary.”

Executioners who only performed tasks in the background were shielded from exposure to the emotional pain.

Another factor influencing the emotional experience of executioners is the direct role played by the executioner in crafting the change. Many executioners expressed feelings of guilt, sadness, anger, fear anxiety and concern. Most of them described feelings of extreme guilt when they felt that they were responsible for causing the pain and distress in those being downsized.

The closer the relationship with the victim, the more intense the feelings of guilt and sadness felt by the executioner.

The executioners struggled to deal with their emotions during and even after the event when they, by virtue of their role, contributed to the change and decision-making process resulting in others being downsized. The direct role that executioners play in the crafting of change also puts them in an advantageous position of having access to more information. However, they had to keep this information confidential until official announcements were made, and often had to sign non-disclosure agreements. In the absence of information to employees, rumours spread. In the absence of an official story, people made their own story. This led to more anxiety for these executioners. As one participant commented: “The feelings of anxiety and uncertainty is inversely proportional to the amount of information the organisation provides.”

Executioners felt as if they were forced to lie and deceive colleagues. A group of participants felt that some of these actions were not aligned with their values and some executioners struggled with dissonance. Most of the executioners were not comfortable to go about their tasks in a business as usual way, knowing that change was on the horizon.

A further factor influencing the emotional response of executioners is the closeness of the relationship that the executioners had with the victims. The closer the relationship with the victim, the more intense the feelings of guilt and sadness felt by the executioner. Most of the executioners said that it was more challenging to exercise their executioner responsibilities when dealing with employees with whom they had long-standing relationships, or when they knew about these employees’ personal circumstances. As one participant explained: “If you have that bond with a person then it doesn’t matter if it is your first or last time, it is personal.”

Theme 2: The impact of past exposure to downsizing

The role of past experience in carrying out downsizing activities was the second theme that emerged.

Research has shown that survivors who have already experienced downsizing may interpret a more recent downsizing differently from those who never had such an experience before. Veteran employees who have been through downsizing before may, as a result of constant reflection, benefit from coping mechanisms and strategies that they have developed.

On the other hand, some researchers suggested that repeated downsizing episodes had a cumulative negative effect on survivors’ well-being, as the continual fear of potential job loss together with the pressure from an increased workload led to chronic stress over time, which weakened the individual’s mental coping resources. Hence, most survivors do not become resilient after repeated waves of downsizing exposure. Instead, they became more vulnerable.

… some researchers suggested that repeated downsizing episodes had a cumulative negative effect on survivors’ well-being, as the continual fear of potential job loss together with the pressure from an increased workload led to chronic stress.

Participants in this study indicated that past experience in downsizings provided insight into expectations for future downsizings. This allowed them to be better prepared for the process aspects of the change. Some of the participants felt that the preparation and execution of the process trumped any thoughts of the emotional aspects, confirming that previous downsizing experience helped them to be more task focused. One participant noted, “You take the emotion out because you prepare for the process”.

Past experience in downsizing also impacted the way in which executioners prepared themselves for the emotional aspects of the change. Most participants found themselves better skilled to execute the process and better prepared for difficult conversations. As one executioner commented: “So in this final wave of change, it was upsetting, a lot of anxiousness … but I was more prepared for it this time now. I have a better set of skills than I did six years ago … and hence I found myself in a little bit of a better emotional state and psychological state.”

Some, especially among the HR participants, highlighted that over time they became veterans of the process and even a little emotionally distant. Emotionally numb executioners felt less emotionally taxed, allowing them to remain seemingly objective. The likelihood of burnout was found to be higher among survivors of multiple downsizings.

Most of the participants agreed that when other factors – such as relational closeness to the victim and proximity to the emotional aspects of change – are present, delivering the bad news to employees was never easy. What’s more, each situation was unique.

Theme 3: Coping mechanisms

The third theme to emerge was the coping mechanisms used by executioners to deal with the intense emotional aspects of downsizing.

Research has shown that the implementers of downsizing employ various coping techniques to lessen the negative effects of their emotional experiences. This enables them to remain composed and sensitive towards victims during the downsizing.

Executive managers were found to cope better before and during the downsizing than middle managers who used avoidance and disengagement coping strategies. Executive managers applied positive thinking while middle management reflected on their sense of helplessness to control the situation. Executioners also used emotional distancing techniques – such as detached concern (like a doctor who detaches himself from the emotions associated with a situation to make clearer decisions while still being empathetic towards the patient), physical distancing and cognitive reframing (where the individual reframes a negative situation into a positive or at least neutral one).

Most of the executioners said that support outside of the workplace was more available and effective than the support provided by the organisation.

In this study, the executioners used the following distancing reactions to decrease their stress levels:

  • Emotional distancing: To remain objective and feel better prepared for rational decision making during the process, participants sought to disengage emotionally from the process.
  • Cognitive distancing: Executioners also distanced themselves cognitively from the emotional epicentre and the pain caused as a result of their actions. This involved substituting negative aspects of an event with more neutral or positive features. Normalising, denial of injury and perception of justice and fairness were some of the tactics employed by executioners. To try and reduce the feeling of personal responsibility in letting people go, executioners normalised downsizing as necessary to build a sustainable business for the future: “It is positive to create a long-term sustainable business for the greater majority.” Denial of injury is another tactic employed. This is where executioners believe that victims do not suffer hurtful consequences. In this case, some of the executioners believed that the individuals received generous packages and that retrenchment actually led to new opportunities for these individuals. Some participants appeased feelings by suggesting that the process was fair and just, with one participant commenting: “Non-performing and free-riding individuals were exited in an amicable way.”
  • Physical distancing: Some executioners eased their feelings by engaging in physical distancing tactics. As one participant said, “When it comes to the team, after someone has exited the team, everyone has lost someone and they need space to grieve. I then just stay out of their way.”

Theme 4: Different forms of support

A fourth theme that emerged was the need for executioners to have an outlet or avenue of release for the emotions experienced. Most of the participants described a need for a support structure within and outside of the workplace to help them deal the emotions and stress.

Most participants felt that support from peers, colleagues and even line management was not adequate. They agreed that much more work needs to be done to ensure adequate support – like training interventions for the role, and more peer and line management interaction to deal with the emotional aspects of the process.

Most of the participants said that support from family and religious groups were important while some actively engaged in sports and recreational activities. Most of them said that support outside of the workplace was more available and effective than the support provided by the organisation. As one participant said, “I have a good support structure at home … I can talk about stuff with my wife; you know just unload some burden and get a non-judgemental feedback from her, obviously within no disclosure rules.”

Organisations will already do well if they abolish the terms affected and non-affected employees in downsizing and start to realise that everyone is affected in downsizing. The survivor, victim and executioner are all affected by the downsizing activities.

Downsizing affects everyone

The findings of this study illustrated that the work of executioners is emotionally challenging and that there is evidence of survivor syndrome in executioners. Also, participants experience at least the same if not a higher intensity of emotional stress after numerous downsizings. Those at the epicentre of the emotional aspects experience the intensity of emotions more prominently than those who do not come in contact with victims. In addition, when there is a close relational connection with the victim, the emotional stress increases.

This study has shown that previous experience in downsizing does make it easier for executioners to deal with the process. However, too much exposure to downsizing can create a sense of emotional numbing. Emotional numbing together with distancing techniques can reduce stress levels in executioners and make the task more bearable. This coping mechanism may work in the short term. However, it holds risks in the long term. Disconnecting from one’s emotions may lead to long-term physical, mental and emotional issues. Here, relying on support inside the company and especially outside of the workplace can help executioners to process the emotions associated with downsizing.

What should the organisation do?

This study confirms how emotionally strenuous it is for executioners to fulfil their role as downsizing agents and suggests that careful consideration should be given to equip such managers with the right set of skills.

It is recommended that organisations reflect on three areas regarding downsizing: the impact of downsizing on executioners, the effect of the coping mechanisms they use, and the role “veteran” executioners should play in subsequent change initiatives.

In downsizing … people are the first aspect spoken about, but the last group spoken to.

Organisations will already do well if they abolish the terms affected and non-affected employees in downsizing and start to realise that everyone is affected in downsizing. The survivor, victim and executioner are all affected by the downsizing activities. Adequate training needs to be in place to help executioners understand the process side of downsizing as well as the emotional aspects thereof. Executioners should receive training in how to lead others through such change while instilling hope in survivors and victims. In essence, organisations should explore how best to equip executioners with the appropriate technical, emotional and leadership skills for their task.

The findings also highlighted the value of effective communication channels and timeous messaging to lower the emotional stress of executioners. As the researcher observed during this study: People are the first aspect spoken about, but the last group spoken to.

  • This article is based on the research assignment of Leslie William Thomas – an MBA alumnus of USB. The title of his research assignment is: A manager’s experience in corporate liposuction: The effect of past or present downsizing on the emotional experience of leaders who have to implement downsizing.
  • His study leader was Prof Mias de Klerk, Professor of Leadership and Organisational Behaviour, Director: Centre for Responsible Leadership Studies (Africa) and Head of Research at USB.
  • Gandolfi, F. (2009). Executing downsizing: The experience of executioners. Contemporary Management Research, 5(2), 185–200.
  • Radcliffe, V. S., Campbell, D. R., & Fogarty, T. J. (2001). Exploring Downsizing: A Case Study on the Use of Accounting Information. Journal of Management Accounting Research, 13, 131–157.

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Gender traits in relation to work versus career salience

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2019

Gender traits in relation to work versus career salience

By Prof Madelyn Geldenhuys, Prof Anita Bosch, Shuaib Jeewa and Ioulia Koutris

  • June 2019
  • Tags Insights, Leadership

17 minutes to read

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Understanding gender traits to make the workplace more meaningful

This study used gender traits – that is masculinity, femininity and psychological androgyny (gender-flexible behaviour) – to find greater nuances in the importance of work roles versus career roles to individuals (where work has a short-term focus and career a long-term focus). Generally, self-reported sex is used to determine differences in role salience between men and women, as opposed to considering the gender traits people display.

Making a distinction between work-role and career-role salience, and their relationship with gender traits, is useful when considering workplace mentorship and career guidance, because gender traits may dictate choice of occupation and career outcomes. Even though workplace outcomes are different for men and women, studies are indicating fewer differences in work-role salience when considering sex – man or woman – than previously noted.

This study used gender traits – that is masculinity, femininity and psychological androgyny – to find greater nuances in the importance of work roles versus career roles to individuals

Some researchers have reported career-role salience differences using gender-role orientation, in line with the argument that gender roles, although socially ascribed to the sexes, can be randomly assumed by human beings, irrespective of their biological sex.

To gain a better understanding of gender traits in the world of work, this study set out to:

  • Determine whether work-role salience and career-role salience are distinct constructs, as this will help to improve theorising on role salience in work and career settings
  • Determine whether gender traits (masculinity, femininity and psychological androgyny), as measured by the revised Bem Sex Role Inventory (BSRI), can predict work-role and career-role salience rather than the use of biological sex as a variable
  • Confirm the adapted factor structure of the revised BSRI, and whether sex differences (man vs. woman) existed between the variables.

The modern work landscape

Work is focused on earning material or other benefits valued by the person doing the work. Modern forms of work may include project work or part-time work, both requiring delivery of prescribed tasks that are current and temporal in nature, where alternative contractual arrangements may be made to an employment contract. In South Africa, women take up the greater share of part-time or non-permanent work in comparison to men, and reasons provided for this phenomenon often centre on essentialising women’s care obligations resulting in the need for such flexibility.

In contrast, careers have a long-term focus. Women’s careers may be directed by their perception of the socially correct choices, which are largely based on socially ascribed feminine gender roles linked to care obligations.

In South Africa, women take up the greater share of part-time or non-permanent work in comparison to men, and reasons provided for this phenomenon often centre on essentialising women’s care obligations

Distinguishing between career-role salience and work-role salience

In this study, role salience refers to the idea that not all life roles are equally important to an individual. A salient role in an individual’s life takes greater importance, and explains the standards and prominence that individuals assign to a specific role.

Work salience usually refers to the importance of working, which emphasises the short-term aspect of work, while career salience refers to the importance of a ‘pattern of employment’, which emphasises the long-term aspect of work.

Assessing work-role salience in developmental career counselling is important, because it supports how individuals make career decisions. For example, individuals experiencing low work-role salience may need to become more aware of the importance of their work before they make decisions regarding their career. In addition, they should explore how work fits into their life. Career-role salience refers to individuals’ planning, progress and overall decision-making regarding their career across their lifespan. However, the terms work and career are often used interchangeably, without much concern for the difference. Individuals who identify with their careers have a profound and personal investment in their work role and desire to advance within an organisation, with this advancement often entailing a higher social standing and more power. Career-role salience refers to the importance of a career role for an individual in relation to other life roles, such as those related to family. It is socially assumed, and therefore potentially endorsed during career counselling and guidance, that women may not place such importance on their work role and, by extension, their career role, instead placing greater emphasis on the family role.

Career-role salience refers to the importance of a career role for an individual in relation to other life roles, such as those related to family.

Gender identity and gender traits

Gender identity, as the ‘master identity’, is informed by an individual’s sense of self in relation to social queues about gender. Being born a boy or a girl, and therefore classifying yourself as male or female when research data is collected, no longer satisfies explanations of gender differences. Instead, gender traits – being masculine, feminine or psychologically androgynous – provide a nuanced understanding of work and career decisions and outcomes. Psychological androgyny is regarded as the ability of people to be high on both masculinity and femininity.

Women may be primed from a young age to display feminine gender traits such as being caring, affectionate and gentle, while men are encouraged to display masculine gender traits such as assertiveness and dominance. Displaying gender traits, that is, masculine and feminine, could lead to roles such as work and career being more or less salient in the lives of people, irrespective of whether they were born a man or a woman. The roles of work and career are therefore assumed and relinquished, based on how people interpret social pressure to conform to gender expectations.

Understanding masculine and feminine gender traits enables us to consider the benefits of being able to enact both, resulting in psychological androgyny, which includes behavioural flexibility and adaptable behaviour as dictated by the situation. While women have displayed more masculine traits, they have not become less feminine as a result. Changes in gender flexibility are more pronounced in women than in men.

Being born a boy or a girl … no longer satisfies explanations of gender differences. Instead, gender traits – being masculine, feminine or psychologically androgynous – provide a nuanced understanding of work and career decisions and outcomes.

While we acknowledge that gender is both ‘multifaceted’ and ‘multidimensional’, gender traits can be measured by using the adapted Bem Sex Role Inventory (BSRI). The BSRI measures masculinity, femininity and a calculation for psychological androgyny.

Work is largely masculinised or feminised and therefore predominantly taken up by either men or women. Women and men who identify with being feminine, for example, showing care, submissive behaviour and focusing on precision so as not to take risks, prefer feminised work and occupations, such as teaching, domestic work, nursing and administration. Masculinised work, which also holds higher social status, is associated with men and women who identify with being masculine and is characterised by leading, managing, calculating and taking risks. A career therefore manifests as a pattern of work in either a masculinised or feminised occupation.

 How was the research conducted?

The data was collected by distributing a survey to organisations in South Africa. In total, 395 completed questionnaires (79% response rate) were received from a targeted group of 500 employees. Three measurement instruments were used: the Work Salience Questionnaire of Allen and Ortlepp, the Career Salience Questionnaire of Allen and Ortlepp, and the adapted Bem Sex Role Inventory (BSRI) of Sandra Bem, adapted by Geldenhuys and Bosch.

Psychological androgyny is regarded as the ability of people to be high on both masculinity and femininity.

What did the study find?

Among others, the study found the following:

  • In the South African context, work-role salience and career-role salience measure different phenomena, confirming that these are two separate constructs, as postulated by Allen and Ortlepp.
  • We expected that men and women would attach different levels of importance to work roles and career roles, with men positively associated with masculinity, women positively associated with femininity, and women being more psychologically androgynous than men. The results indicated that women are more feminine than men, and that women are more psychologically androgynous than men. No statistically significant differences between men and women with respect to masculinity, work-role salience and career-role salience were found. Hence, there are no differences between men and women in terms of the importance they attach to work roles and career roles or how masculine they were.
  • The results show that masculinity increases career-role salience. Masculinity and psychological androgyny increase work-role salience, while femininity decreases work-role salience. Work-role salience predicts career-role salience. In addition, masculinity indirectly affects career-role salience with a partial mediation through work-role salience.
  • The factor structure of the adapted BSRI was confirmed.

Psychological androgyny is regarded as the ability of people to be high on both masculinity and femininity.

Discussion

The study empirically distinguished between work-role salience and career-role salience as separate constructs, while confirming the factor structure of the revised BSRI. Additionally, as work and careers are less influenced by sex (i.e. man or woman) in current times, but rather by gender traits, that is, masculinity and femininity, we have determined the effect of gender traits on work-role and career-role salience. We make another important contribution by determining that psychological androgyny, or gender-flexible behaviour, creates salience in a person’s work role. The study also supports the notion that women at work are more gender-adaptable than men. This has important implications for the career development of women specifically.

Sex differences in the experience of role salience

While we could not confirm that men are more masculine than women, the women in this study were significantly more feminine and more psychologically androgynous than the men. Because of societal and cultural expectations placed on men and women, women are displaying more feminine behaviours such as caring and being compassionate and understanding. Yet, the work environment is seeing a shift in women’s display of gender, where masculine traits are rewarded. Although women’s display of masculinity has increased, as confirmed by this study, we show that they have not rejected feminine traits and ‘have not discarded their womanhood’.

… gender roles, although socially ascribed to the sexes, can be randomly assumed by human beings, irrespective of their biological sex

Family responsibilities also play a role, as women are both working and taking care of their households, while men still focus mainly on their careers. These shifts for women have resulted in greater gender flexibility on the part of women. Our analysis of the traditional focus on differences between men and women shows that work-role and career-role salience are less affected by sex and that gender traits, as operationalised by the BSRI, provide greater nuance in the interpretation of the importance that people place on work and career roles. Men and women (sex) do not experience work-role and career-role salience differently.

Feminine versus masculine gender traits

Socially ascribed gender roles have become entrenched in how men and women function in society and at work. Women are often viewed as more feminine and often occupy competing roles outside of work. The results confirmed that work-role salience predicts career-role salience meaning that people who place importance on their work-role are likely to place importance on the career-role too. Masculinity increases career-role salience, while masculinity and psychological androgyny increase work-role salience. Femininity decreases work-role salience. Consistent with the literature, people displaying masculine gender traits attach importance to work or career roles, while people displaying feminine gender traits place work and career secondary to other roles. In this study, women typically demonstrated more adaptability or psychological androgyny than men. Women today portray more masculine traits, which supports the idea that psychological androgyny can counter the negative work salience effects of femininity and allow people to become less sex-typed at work. Increased psychological androgyny enables people to experience more salience in their work role.

In addition, some researchers believe that psychological androgyny may depend on a person’s situation. It is often the case that women compromise their careers in order to comply with societally imposed behavioural norms and may not want to threaten masculinity at work. Other researchers have indicated that, for women, ‘respectable femininity’ is encouraged to advance in their careers.

… women at work are more gender-adaptable than men.

In essence, this study showed that gender traits may be a better predictor of differences in the importance attached to work roles and career roles than biological sex.

  • Find the original journal article here: Geldenhuys, M., Bosch, A., Jeewa, S., & Koutris, I. (2019). Gender traits in relation to work versus career salience. SA Journal of Industrial Psychology, 45(0), a1588. https://doi.org/10.4102/ sajip.v45i0.1588
  • Prof Anita Bosch holds the USB Research Chair: Women at Work, and also lectures in Organisational Behaviour and Leadership at the University of Stellenbosch Business School.
  • Prof Madelyn Geldenhuys is from the Department of Industrial Psychology and People Management, College of Business and Economics, University of Johannesburg.
  • Shuaib Jeewa is from the Department of Industrial Psychology and People Management, College of Business and Economics, University of Johannesburg.
  • Ioulia Koutris is from the Department of Industrial Psychology and People Management, College of Business and Economics, University of Johannesburg.

Although women’s display of masculinity has increased, as confirmed by this study, we show that they have not rejected feminine traits and ‘have not discarded their womanhood’.

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South Africa and the UN Global Compact: Do our reports and progress match?

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2019

South Africa and the UN Global Compact: Do our reports and progress match?

By Prof Daniel Malan and Prof Marius Ungerer

  • June 2019
  • Tags Insights, Leadership

18 minutes to read

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Why this study was undertaken

To gain an understanding of the role of the United Nations (UN) Global Compact, and how the South African signatories to this initiative are performing, the authors of the journal article titled Communicating progress on meeting the United Nations Global Compact goals: An analysis of the South African experience started off by looking at the changing role of business in society. They also discussed concepts such as the purpose of business, Creating Shared Value (as a proposed way to reinvent capitalism) and Optimised Collective Value (as a proposed way to shift the emphasis away from narrow corporate self-interest).

Next, the authors scrutinised the South African companies’ annual progress reports to the Global Compact to determine how they are actually performing in terms of human rights, labour standards, environmental standards and anti-corruption measures. In essence, this is what they found:

About the UN’s Global Compact

In the year 2000, the United Nations launched its Global Compact initiative in New York to enhance cooperation between the business community and the UN, and to facilitate a communal understanding of the principles and values required to support human rights, labour standards and environmental standards. Later, anti-corruption measures were also added.

The establishment of the Global Compact speaks to the changing role of business in society.

The establishment of the Global Compact speaks to the changing role of business in society. First, there was philanthropy which evolved into traditional corporate social responsibility (CSR) and then into CSR based on enlightened self-interest or strategic corporate responsibility (CR).

The UN Global Compact is the world’s largest voluntary corporate citizenship initiative. At the time of writing, there were some 9 000 business and 3 000 non-business signatories. It serves as a forum where corporate citizenship can be investigated, as there is growing consensus that multinational corporations have a moral obligation as corporate citizens to do more than make a profit.

The work of the Global Compact is based on 10 principles derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.

These principles are also aligned with the Sustainable Development Goals (SDGs), as expressed by the Global Compact: “We are a voluntary initiative based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals.”

Once a year, signatories to the Global Compact have to submit a progress report. The Communication on Progress (COP) report is one of the most important tools for signatories to provide feedback on how they have supported the 10 principles. Although the COP system is there to provide some consistency and accountability, the UN Global Compact does not want to be viewed as a compliance-based initiative. Instead, it is about “learning, dialogue and partnerships” and also about collaboration, transparency and public accountability.

About the purpose of business

The founding of the Global Compact is an outcome of years of debates and studies about corporate responsibility and the purpose of business. In the full journal article, the authors describe how the role of corporates have changed over the years.

Those corporates who have adopted traditional CSR approaches usually prefer a percentage of profits to be spent on worthy causes, often to offset the way in which the profits were made. They sometimes cynically refer to this spending as guilt money. Those corporates who choose the enlightened self-interest approach take both risks and opportunities into account, and are therefore strongly focused on stakeholder engagement. However, the latter approach is mostly opportunistic, and, if the business case is not strong enough, corporations might quickly lose interest and step away from what could be regarded as values-driven behaviour.

First, there was philanthropy which evolved into traditional corporate social responsibility and then into CSR based on enlightened self-interest or strategic corporate responsibility.

Strategic CR is based on a deeper reflection on the purpose of business and the way in which corporations form an integral part of society. Driven by a clear understanding of the nature of the business, interventions are designed and contributions are made in such a way that the corporation uses its strengths to contribute to societal needs and thrive at the same time. Strategic CR (sometimes explained as a shift from focusing on how profits are spent to how profits are made) is based on the real capabilities and specific expertise of the corporation and can achieve integration on two fronts. Firstly, so-called CSR activities are no longer peripheral, but are integrated into the core activities of the corporation. Secondly, the business case and moral case are not presented as part of an either/or choice. Instead, there is a clear acknowledgement that core values are not negotiable. In other words, the moral case trumps the business case. This is also the preferred approach in this article.

One of the reasons for this shift in focus is that corporations are increasingly confronted with challenges once thought to belong in the domain of governments. Examples include climate change and increasing inequality between rich and poor, as well as political conflict and human rights abuses, especially in developing countries.

Corporations have to confront these challenges with commitment and innovation. If they can do so successfully, it will be in their own interest and also in the interest of the planet.

Hence, the focus of corporate responsibility (CR) shifted from an internal corporate perspective to a broader systemic perspective, reflecting the view that the responsibility of corporations cannot be addressed in isolation. In terms of purpose, Porter and Kramer (2011) presented their concept of Creating Shared Value (CSV) as a way to reinvent capitalism.

Donaldson and Walsh (2015), on the other hand, argued that what counts as value for a single firm is not the same as value for business in general, and proposed a world of Optimised Collective Value (OCV) – “a world where collective value is optimised, where the dignity of every business participant is recognized and honored”.

Strategic CR is based on a deeper reflection on the purpose of business and the way in which corporations form an integral part of society.

Taking a look at the South African signatories

At the time of writing, South Africa had 19 signatories to the UN Global Compact: Altron, AngloGold, Ashanti, Barloworld, Coca-Cola Sabco, Deloitte, Edcon, Eskom, Exxaro, FirstRand, Gold Fields, Impala Platinum, Mondi, Nedbank, Pick n Pay, Richards Bay Coal Terminal, Sanlam, Sappi, Sasol and Unilever.

The authors assessed their COP reports submitted to the UN Global Compact based on the following:

  • Did they emphasise the business case or the moral case for corporate responsibility?
  • Did they emphasise the global or the local context?
  • Did they emphasise the performance or conformance aspects of governance?
  • Did they treat their Communication on Progress reports as a public relations exercise or a compliance exercise?
  • Did they demonstrate a clear commitment to the principles of the UN Global Compact?

Narrative analysis was used to analyse both the CEO statements and COP reports. In all cases a four-point Likert scale was applied.

What did the study find?

As expected, it was difficult to measure the qualitative value of certain statements. Companies tend to use different strategies to address different areas. For environment, many companies had a business-centred strategy, given that improvements in energy efficiency have financial benefits. For human rights, such as the prohibition of child labour, it was more likely that companies would approach these issues from a moral perspective.

In general, corporations tended to focus on universal values and commitments with less emphasis on local flexibility. However, companies strongly emphasised compliance with local legislation. This was understandable in the South African context where there are specific commitments to labour laws and black economic empowerment obligations. South Africa has a historical legacy of poverty and inequality, distrust of corporations, and accusations of “green-washing”. This, combined with South African peculiarities and complexities, show how difficult it is for a global standard to add value at the local level.

Strategic CR – sometimes explained as a shift from focusing on how profits are spent to how profits are made – is based on the real capabilities of the corporation …

The UN Global Compact distinguishes between three different levels of signatories: learner, active and advanced. The differentiation programme is based on self-assessment in terms of the levels of disclosure as well as the implementation of the 10 principles. In total, 68% of the South African corporations indicated that they were at the active level. The active level is reserved for participants that fulfil all the minimum COP requirements, including addressing all four areas under investigation and communicating directly with stakeholders. In addition, 21% of the assessed corporations indicated that they were at the advanced level, which is reserved for the top-performing corporations.

These “advanced” corporations declared that they had adopted, and reported on, best practices in sustainability governance and management, with specific reference to some of the UN Global Compact initiatives. The corporations which indicated that they had reached this level were Unilever, Sasol, Mondi and Eskom. In terms of organisation type, publicly listed companies dominated the South African sample (63%), followed by private companies (26%), one subsidiary (Unilever) and one state-owned company (Eskom). Large corporations dominated the sample, with 74% having more than 10 000 employees, and 63% having had a turnover of more than $5 billion in the last financial year.

The vast majority of companies used the business case to motivate their support for corporate responsibility. The one exception to this was Exxaro, which strongly emphasised the moral case. Exxaro explained its support for the UN Global Compact as a “logical progression in our ongoing commitment to sustainability, given our shared goals and focus on universal values”.

The governance focus of the COPs was analysed to assess the relative importance attached to the two main components of governance as explained in the classical definition of governance: the system by which corporations are directed (performance) and controlled (conformance). Globally, there has been a shift from conformance to performance, with the United States still a notable exception owing to its strong culture of legal regulation.

It is significant to note the good performance of Eskom – one of South Africa’s most controversial corporations.

With the inclusive, stakeholder-based approach of the South African King Reports, which also emphasise a balanced approach to governance, it was expected that performance would be the main emphasis. Here, 21% of the companies focused exclusively on performance while 53% emphasised performance and 26% emphasised conformance.

The assessment also revealed that 21% of the companies treated the COP as mainly a public relations exercise while 74% saw it as mainly a UN Global Compact compliance exercise. Only 5% showed clear commitment to the UN Global Compact, serving as an example of best practice.

The Eskom case

It is significant to note the good performance of Eskom – one of South Africa’s most controversial corporations. As the national electricity utility, the corporation has been under scrutiny for underperformance over the past few years. The fact that Eskom’s electricity generation is still largely dependent on high-polluting coal power stations does not improve its image from an environmental perspective. The reason for Eskom’s good performance in this assessment can therefore be found either in the positive view that the corporation made honest disclosures and a sincere attempt to improve performance, or in the cynical view that the corporation may be guilty of blue-washing.

The critical question is: To what extent were the disclosures accurate and made in good faith? In his introduction to the COP, then CEO of Eskom Brian Dames stated: “We are confident that we are setting the utility up for success; that our organisation is becoming financially sustainable” (Eskom, 2012). In the same document, the chairman of Eskom, Zola Tsotsi, stated: “At a time when global economic uncertainty is forcing many companies to curtail operations and limit growth, Eskom is hard at work on one of the largest capital expansion programmes in South Africa’s history” (Eskom, 2012). Yet, barely a year later Eskom had to accept a R250 billion bailout package from the South African government, the CEO resigned (for “personal reasons”), the promised capital expansion was far behind schedule, and the pressure on the national electricity grid was such that frequent countrywide rolling blackouts were required. More recently, Eskom was implicated in a report on state capture issued by the South African Public Protector.

The COP … does provide useful insight into the activities of Global Compact signatories, and is probably the most important way in which external stakeholders can assess the performance of a participating corporation.

The purpose of the article was neither to provide a detailed case study of Eskom, nor to assess whether the corporation deserved its good performance in terms of the assessment or whether the advanced status according to the UN Global Compact differentiation programme is justified. However, it does underscore the fact that publicly available reports remain just that – publicly available reports. (Note by authors: Since the publication of the article it has become abundantly clear that the situation at Eskom was far worse at the time of writing, and therefore supports the position that a healthy dose of skepticism is not wasted when reading public reports.)

Closing remarks

The purpose of business is and will remain a matter of dispute. Debates will continue within both academic and practitioner environments, and in the long term will be influenced more by a systemic focus than an organisational behaviour focus.

The main empirical findings presented in this article are that almost all South African signatories to the United Nations Global Compact emphasised the business case in their Communication on Progress reports and that the majority of corporations also focused on the global picture rather than on local complexities. Although not part of the research performed here, it would be fair to state that it is very likely that the majority of these corporations (if not all of them) will be familiar with Creating Shared Value (CSV), but not with Optimised Collective Value (OCV), and – if given an immediate choice – would prefer the first to the second.

It is proposed that more corporate support for CR based on a normative foundation (prescribing what ought to be done) should be encouraged, and that the concept of Optimised Collective Value is an appropriate way to achieve this.

The COP remains a subjective account, even if verified externally. However, it does provide useful insight into the activities of Global Compact signatories, and is probably the most important way in which external stakeholders can assess the performance of a participating corporation. It also provides a glimpse into how corporates view corporate responsibility and the philosophies underpinning them.

  • Find the original journal article here: Malan, D., & Ungerer, M. (2018). Communicating progress on meeting the United Nations Global Compact goals: An analysis of the South African experience. African Journal of Business Ethics, 11(2), 1
  • Prof Daniel Malan teaches Business Ethics and Corporate Governance at the University of Stellenbosch Business School. He is the Director of USB’s Centre for Corporate Governance in Africa.
  • Prof Marius Ungerer lectures in Organisational Strategy, Leadership and Strategic Management at the University of Stellenbosch Business School.
  • Porter, M. & Kramer, M. (2011). Creating shared value. Harvard Business Review (HBR Reprint R1101C): 1‑
  • Donaldson, T. & Walsh, J. (2015). Toward a theory of business. Research in Organizational Behavior, 35, 181‑
  • (2012). Advanced Communication on Progress 2012. Eskom, Johannesburg.

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Economic inequality

Economic inequality: Economics and theology in dialogue

The Steinhoff Saga Management review - University of Stellenbosch Business School

July – December 2018

Economic inequality: Economics and theology in dialogue

Economic inequality

Prof Piet Naudé and Prof Stan du Plessis

  • Nov 2018
  • Tags Insights, Leadership, economics

33 minutes to read

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Prof Piet Naudé and Prof Stan du Plessis

Looking at economic inequality from two different perspectives

What exactly does economic inequality mean? In this essay, a theologian and an economist use an ethics lens to look at the troublesome issue of economic inequality.

The authors have chosen the topic of inequality – specifically economic inequality – as a justice issue to address. To do this, they follow the see-judge-act model.  Firstly, there is a need to undertake a limited descriptive exercise (“see”) to gain a clearer understanding of what economic inequality entails. Secondly, this leads to a moral assessment of economic inequalities (“judge”) by pointing out which aspects of inequality are ethically acceptable or unacceptable from economic and theological perspectives. Thirdly, interventions and actions (“act”) need to be identified in order to reduce morally unacceptable forms of economic inequalities, again putting forward both economic and theological perspectives.

A few notes on classical economics and Reformed theology

Before starting, the economist author would like to acknowledge that his own work has largely been in the invisible-hand tradition, also called classical economics, as explained by Adam Smith. In essence, this tradition says there are limited individual decision makers with remarkable scope for spontaneous (or decentralised, or market) cooperation. Adam Smith’s invisible hand is therefore a metaphor for the coordinating mechanism of a decentralised society, referring to the feedback mechanism – which is often prices, but quantities too – that signals to participants whether their decisions and expectations agree with those of others.

The emphasis on market cooperation does not imply that outcomes will always be socially acceptable or that there is no role for government policy. When this economic perspective is embedded in a larger theory of justice, additional reasons for policy action against inequality are likely to emerge.

The Christian faith is confessed differently in various traditions – Orthodox, Catholic, Protestant and Pentecostal. Also, there is a diversity of opinions on economic inequality within these traditions. In this article, the theological approach is primarily from the Reformed tradition with its normative reference points in Scripture, its confessional orientation, and its social justice strand via Calvin and Barth. This particular trajectory is then subjected to a southern African contextual interpretation. The confessional inheritance refers to the legacy of the Heidelberg Catechism (1563), Barmen Declaration (1934), Confession of 1967, Belhar Confession (1986) and Accra Confession (2004).

A careful reading of these confessions shows that the issue of economic inequality and related themes of justice and the common good have become more pronounced over time. Not all aspects of inequality are addressed in these confessions. However, the benefit of this confessional approach is that it ensures that the theological perspective in the debate is not lost.

A note on the assumptions underpinning this essay: This article focuses on the public meaning and significance of the Christian faith on the assumption that Christian convictions indeed make an impact on and have practical implications for different public spheres of society.

… in a situation of secularism in which the faith perspective is lost and religion is privatised, a social system like the economy tends to lose its transcendent purpose

“See”: How economics and theology understand inequality

The two authors used the see-judge-act model to gain insight into economic inequality. In terms of “seeing”, theologians must acknowledge the moral difference between inequalities arising from relational or exploitative processes rather than achievement processes as well as a tolerable level of inequality arising from differences in God-given talents and the differential use of opportunities. Even under conditions of perfect freedom, fairness and equal opportunities, the ideal of a fully egalitarian and equal society will not be realised because of these achievement differentiations.

So, the assumption that people will realise their full potential under conditions of equal opportunities do not always materialise. When inequalities are then entrenched in certain groups, they can become morally unacceptable, no matter what the sources are. From a theological perspective, then, what might be the sources of an economic system that produces morally unacceptable levels of inequality? What do the Reformed confessions “see”?

The commodification of the world: Firstly, in a situation of secularism in which the faith perspective is lost and religion is privatised, a social system like the economy tends to lose its transcendent purpose. It often permeates other social spheres with the logic and language of commodification which may acquire a totalising and exclusive perspective on all of reality. The primary confession that Jesus is Lord includes the realm of economics and economic systems. The markets have reached a situation where monetised thinking is no longer restricted to the exchange of goods and services. The commodification of every life sphere (such as sport, religion, knowledge and leisure) has extended the logic of the market (including enhanced self-interest, efficiency and return on investment) to become a framework from which all of reality is viewed.

By way of analogy, the church found itself in a position where it needed to confess the lordship of Christ when alternative narratives have assumed a normative significance. The Barmen Declaration was a response to the threat posed to that lordship over church and state by the totalitarian Nazi regime; the Belhar Confession was a response to the disunity, irreconcilability and injustice under apartheid; and the Accra Confession sought to uphold the sovereignty of God over all creation threatened as it was by a specific interpretation of the global economic system. It is the nature of confessing to speak the truth and reject a falsehood. It is from this perspective that one should read Article 10 of the Accra Confession: “This [neo-liberal economic globalization] is an ideology that claims no alternative, demanding an endless flow of sacrifices from the poor and creation. It makes the false promise that it can save the world through the creation of wealth and prosperity, claiming sovereignty over life and demanding total allegiance which amounts to idolatry.”

One should be careful to not deny that God can and does make use of institutions like the state and the economy to care for us. The problem occurs when, from our side, we shift our trust from God to the market in its ideological form, deriving our comfort from other sources than Christ; and when, from the side of the market, it claims our total loyalty to its logic as the only perspective on self, society and the environment. From a theological perspective, an economic system that tends to subject all forms of life to market logic, and in its ideological form claims to be the only valid interpretation of reality, also tends to lose a normative link to moral values like equality, social care and restorative justice. These values lie beyond the system itself, and it is from them that the system should also take guidance in the formulation of economic and social goals.

The commodification of every life sphere … has extended the logic of the market … to become a framework from which all of reality is viewed.

Self-interest versus the common good: Secondly, the belief that it is possible to create a humane society and use nature in an ecologically sustainable way via a system of self-interested (capitalism) or centrally planned cooperation (socialism) is questioned by the confessions as unredeemed persons, because of their corrupted nature, are unable to do good. The Heidelberg Catechism is clear that outside of Christ we live in sin and misery – we are “wholly incapable of doing any good”. In an economic system predicated upon the promotion of self-interest, the common good is often lost. Instead of showing kindness and preventing hurt, a system of envy is created.

From a theological perspective, the relative success of capitalism as a wealth generator lies in its reliance on and promotion of people’s self-mastery, which also leads them to become “exploiters and despoilers of the world”.

Capitalism brings ambiguous results: enormous wealth is created amidst grinding poverty and weak re-distribution mechanisms; industrial cooperation has produced goods on a massive scale but with devastating ecological effect; and commercial advertising spurs on consumer spending but consumerism leads to a joyless economy in which everything has a price but nothing has value. From the confessions’ perception these ambiguities spring from an over-confidence in the notion that, because each person “intends only his own gain”, it will increase the wealth of society.

Theology does not – at a first take – share the optimism underlying human cooperation as set out in the Adam Smith tradition. From the perspective of the confessions, self-interest – even a temporary suspension of natural self-interest for the sake of impartial observation – can hardly be recognised as a virtue. The ambiguities of an economic system built on self-interest find their theological roots in incurvatus in se; it is the turn inward on oneself that bends the gifts of God to seek all things for its own sake and for the promotion of the self.

Three qualifications of this view are necessary. Firstly, redemption by itself does not guarantee good and just outcomes. Christians are often blinded by ideologies and even go so far as to defend injustices and unjust systems on the basis of the gospel. Both the Barmen Declaration and the Belhar Confession recognise that there need not be a direct correlation between Christian faith and the seeking of justice. What should have been confessed as wrong, grows over time into a powerful deception “to seem self-evidently right and to be ideologies foreign to good works”. Hence, confession often requires “the dismantling of structures of thought” that grew over many years. The road to reconciliation and justice is accompanied by pain and sadness. It is never easy to give up a genuinely held, but nevertheless false, belief.

Secondly, what about the good performed by virtuous non-religious people who fight for the rights of the poor, fairer global trade, ecological care, and other worthy causes? Outside of Christ’s justification, the performance of these goods cannot be seen as good works in the narrow confessional definition. Yet, they do contribute to preserve good order in society and nature. As such they should be supported by Christians and the institution of the church. Theologians and the church should indeed endorse efforts by business people to give a more humane and ecologically responsible face to capitalism via, for example, applying codes of good governance, using integrated reporting, subscribing to the Global Compact, creating socially responsible investment indices, and addressing the sustainable development goals.

The third observation flows from the confessions “seeing” that inequality arises from an unjust economic system. The Belhar Confession warned that the powerful and privileged “selfishly seek their own interests and thus control and harm others”. The Accra Confession rightly declares that ecological destruction is the result of pursuing unrestrained growth among industrialised nations. There are hints as to what the confessions mean with an unjust economic system, though the claims are not backed with empirical data. Although there is abundance in the world as a whole, the distribution systems do not benefit the poor. There is a strong power asymmetry among rich and poor, allowing the exploitation of the defenceless and the power to protect the existing order to become embedded in the system. Technology creates further divisions between those who benefit from and those outside the networked society. In addition, the population expansion puts pressure on social systems and the environment.

Instead of showing kindness and preventing hurt, a system of envy is created.

“Judge”: How economics and theology assess the moral qualities of inequality/inequality

Economists are recognising that inequality along various dimensions – such as income, wealth and opportunity – merits both analysis and, possibly, policy intervention.

There are two major theories for why one might not be concerned with inequality. Firstly, it is inequality (in ability, resources, perspectives, etc.) that creates the opportunity for specialisation and cooperation. Since the rise in prosperity depends in part on specialisation and cooperation, inequality seems to play at least a causal role in the process. According to this line of reasoning, one risks stifling the most powerful force for economic progress if one strives to eliminate differences. Secondly, others with forbearance for inequality see it as the consequence of the purposeful action that leads to private and social gains. Some scholars argue that specialisation is productive and requires cooperation and trade. In this line of reasoning, inequality emerges as the consequence and not as the initiating factor of productive specialisation and cooperation.

All the economic arguments about the potentially instrumental value of inequality rely on the assumed fairness of the process by which the inequality emerged. The premise is that the inequality emerging from voluntary exchange is unobjectionable while inequality due to plunder, exploitation, coercion or exclusion does not serve any of the instrumental roles envisaged here.

To ensure the equality of opportunity implied by voluntary cooperation, economists focus on public education as well as the removal of special privileges that artificially protect the incomes and positions of certain individuals and classes. However, they are reluctant to take the step towards ensuring equality of outcomes since such interventions may well undermine the instrumental value of inequality in the process of specialisation and trade – and thus bring about a trade-off between equality and efficiency.

Capitalism brings ambiguous results: enormous wealth is created amidst grinding poverty and weak re-distribution mechanisms

Applying theology

Next, we take a look at the criteria by which the confessions seek to judge morally unacceptable inequalities or unjust economic systems. The first criterion by which the church judges any system or institution is via deep-searching and humble self-criticism. The best example in the confessions is the Accompanying Letter to the Belhar Confession: “Along with many, we confess our guilt in that we have not always witnessed clearly enough in our situation and so are jointly responsible” that certain convictions and actions that are wrong, grew over time “to seem self-evidently right”.

However, the church knows that self-deception might still be at work. Confessing is a humble act. The church, therefore, speaks “pleadingly rather than accusingly”.

The Confession of 1967 makes this self-critical remark: “A church that is indifferent to poverty, or evades responsibility in economic affairs, or is open to one social class only, or expects gratitude for its beneficence, makes a mockery of reconciliation and offers no acceptable worship to God.” The Accra Declaration refers to “the complicity and guilt of those who consciously or unconsciously benefit from the current neoliberal economic global system”. It therefore seems clear that theology should be a humble dialogue partner in the discussion of economic justice.

The second set of criteria is summarised in the concept of justice in its relation to peace or reconciliation with a particular focus on marginalised people. In the Biblical traditions there is an integral link between God (on the one hand) and justice and peace (on the other). The theological judgement of inequality is firstly to be sought in the fact that such an economic situation contradicts the very nature and revelation of God: the Belhar Confession states that God has revealed himself “as the One who wishes to bring about justice and true peace among men”. To allow and defend injustice is tantamount to acknowledging “other events and powers” (including economic theories that would defend injustices) as sources of revelation.

… advertising spurs on consumer spending but consumerism leads to a joyless economy in which everything has a price but nothing has value

From this perspective, theology cannot endorse the arguments for unjust inequality set out above. Although one understands the need for and benefits of specialisation in economic cooperation, all inequality beyond reasonable differences are destructive whether such inequality is the cause for or the result of specialisation. Inequality resulting from voluntary exchange might be defended, but only if the underlying assumption of fair and open processes is realised to a considerable degree. However, this fair access is mostly absent in transitional societies and in the context of global competition between societies.

Secondly, the theological judgement of inequality is related to the fact that inequality is an expression of disunity among people and, therefore, it contradicts reconciliation. Morally unacceptable inequality is an injustice and contradicts peace and social cohesion. The threefold structure of the Belhar Confession is unity, reconciliation and justice. There are reciprocal relations among these three. Reconciliation comes via peace-making in the belief that God, through His Word and Spirit, “has conquered the powers of sin and death, and therefore also of irreconciliation and hatred, bitterness and enmity”, opening up new possibilities of co-existence in society. The Confession of 1967 emphasises that the mission of the church is to be a reconciling community.

What theology terms reconciliation can be linked to the economic argument above that inequality threatens social sustainability which in turn is a prerequisite for trust, business confidence, investment and growth. In divided societies, cooperation suffers, weak institutions cannot facilitate macro-economic processes, and the cost of trade risks increases significantly. In secular terms, reconciliation refers to the social (and ecological) capital required for business to operate efficiently.

The third theological criterion related to justice and inequality is an explicit preferential option for those who suffer and who are often forgotten. There is growing ecumenical consensus that preferential justice is embedded in the Christian tradition. The Belhar Confession states that “… in a world full of injustice and enmity He [God] is in a special way the God of the destitute, the poor, and the wronged”. God brings justice to the oppressed and intervenes on behalf of the marginalised. This refers to those who have fallen out of the job and consumer market, and are, therefore, often without social care and respect. This includes the hungry, the prisoners, the blind, the downtrodden, the strangers (refugees), the orphans and the widows.

“Act”: What remedies do economics and theology offer to alleviate economic inequality?

What economists call the primary income distribution is the labour market outcome in the economy. Policy can affect this income distribution by impacting the factors that cause different rewards in the labour market. The authors of this article argue that churches can play a powerful role in generating more egalitarian primary distribution in unequal societies such as South Africa.

What should have been confessed as wrong, grows over time into a powerful deception “to seem self-evidently right and to be ideologies foreign to good works

Various studies have confirmed the redistributive power of cash transfers such as grants. In South Africa, the social security system – with its social old age pension, disability and foster care grants and child support grants – is well developed. These grants, which have led to a considerable rise in social assistance expenditure by government, are benefitting more than a quarter of the South African population.

But how is social assistance reducing income inequality? The social sector of South Africa’s government budget is progressive. Grants are especially well targeted to the poor. To fund these grants requires taxes. The redistributive impact on the revenue side of a government’s budget is affected by the structure of taxes, the top marginal tax rates and the progressivity of tax scales. The redistributive impact of government revenue therefore depends greatly on different tax vehicles such as income, corporate, consumption, real estate, inheritance, social security and trade taxes.

The revenue side of the South African budget closely resembles that of a developed economy and stands in sharp contrast with the typical budget structure of countries at a comparable level of per capita income. Also, the tax system in South Africa comprises a large tax base.

The road to reconciliation and justice is accompanied by pain and sadness. It is never easy to give up a genuinely held, but nevertheless false, belief.

The theological response to inequality

When it comes to interventions to alleviate inequality, a general first point needs to be made: the most urgent cooperation between theology and economics is in the area of policy studies. It is clear that primary income distribution, which is the outcome of the labour markets, can be addressed via budgetary measures on both the income and expenditure side. Policy discourse is for theologians the most difficult of the ethical discourses because it requires compromises between high normative ideals of justice and what is practical and achievable under the constraints of monetary policy and political ideology. It is also relatively easier to express normative principles than actually take responsibility for their interpretation and policy implementation in everyday life.

However, herein lies the most fruitful cooperation: the preferential option for the poor in theology is a powerful rhetorical tool to move public policy while economists can demonstrate that in, say, social security provision, the state is able to target the poorest in a most effective manner. The ideal of greater re-distribution toward a more egalitarian society remains an ideal which theologians and some economists would put forward while the feasibility constraints of public revenue point toward a balancing act with regard to income tax raised. The point of balance in a budget will always be contentious, but the fact remains that such a balance (compromise between private income and public taxation) needs to be found.

What is the task of the church in situations of injustice?

There are three possibilities – the church as confessing, sharing and solidarity community.

The church as confessing community refers to the fact that situations sometimes arise where the very truth of the gospel is threatened. It is important to understand that a confession is always simultaneously addressed to the inside (the public of the church itself) and the outside (the array of other publics, including the economy). A prophetic critique of economic injustices is not adequate for various reasons. Nevertheless, it does not detract from the importance of the continued confessing voice of the church in combination with other forms of ethical discourse.

… fair access is mostly absent in transitional societies and in the context of global competition between societies

Although one understands the need for and benefits of specialisation in economic cooperation, all inequality beyond reasonable differences are destructive whether such inequality is the cause for or the result of specialisation. Inequality resulting from voluntary exchange might be defended, but only if the underlying assumption of fair and open processes is realised to a considerable degree. However, this fair access is mostly absent in transitional societies and in the context of global competition between societies.

Secondly, the theological judgement of inequality is related to the fact that inequality is an expression of disunity among people and, therefore, it contradicts reconciliation. Morally unacceptable inequality is an injustice and contradicts peace and social cohesion. The threefold structure of the Belhar Confession is unity, reconciliation and justice. There are reciprocal relations among these three. Reconciliation comes via peace-making in the belief that God, through His Word and Spirit, “has conquered the powers of sin and death, and therefore also of irreconciliation and hatred, bitterness and enmity”, opening up new possibilities of co-existence in society.

What theology terms reconciliation can be linked to the economic argument that inequality threatens social sustainability which in turn is a prerequisite for trust, business confidence, investment and growth. In divided societies, cooperation suffers, weak institutions cannot facilitate macro-economic processes, and the cost of trade risks increases significantly. In secular terms, reconciliation refers to the social (and ecological) capital required for business to operate efficiently.

The third theological criterion related to justice and inequality is an explicit preferential option for those who suffer and who are often forgotten. There is growing ecumenical consensus that preferential justice is embedded in the Christian tradition. The Belhar Confession states that “… in a world full of injustice and enmity He [God] is in a special way the God of the destitute, the poor, and the wronged”. God brings justice to the oppressed and intervenes on behalf of the marginalised. This refers to those who have fallen out of the job and consumer market, and are, therefore, often without social care and respect. This includes the hungry, the prisoners, the blind, the downtrodden, the strangers (refugees), the orphans and the widows.

“Act”: What remedies do economics and theology offer to alleviate economic inequality?

What economists call the primary income distribution is the labour market outcome in the economy. Policy can affect this income distribution by impacting the factors that cause different rewards in the labour market. The authors of this article argued that churches can play a powerful role in generating more egalitarian primary distribution in unequal societies such as South Africa.

Various studies have confirmed the redistributive power of cash transfers such as grants. In South Africa, the social security system – with its social old age pension, disability and foster care grants and child support grants – is well developed. These grants, which have led to a considerable rise in social assistance expenditure by government, are benefitting more than a quarter of the South African population.

But how is social assistance reducing income inequality? The social sector of South Africa’s government budget is progressive. Grants are especially well targeted to the poor. To fund these grants requires taxes. The redistributive impact on the revenue side of a government’s budget is affected by the structure of taxes, the top marginal tax rates and the progressivity of tax scales. The redistributive impact of government revenue therefore depends greatly on different tax vehicles such as income, corporate, consumption, real estate, inheritance, social security and trade taxes.

The revenue side of the South African budget closely resembles that of a developed economy and stands in sharp contrast with the typical budget structure of countries at a comparable level of per capita income. Also, the tax system in South Africa comprises a large tax base.

The theological response to inequality

When it comes to interventions to alleviate inequality, a general first point needs to be made: the most urgent cooperation between theology and economics is in the area of policy studies. It is clear that primary income distribution, which is the outcome of the labour markets, can be addressed via budgetary measures on both the income and expenditure side. Policy discourse is for theologians the most difficult of the ethical discourses because it requires compromises between high normative ideals of justice and what is practical and achievable under the constraints of monetary policy and political ideology. It is also relatively easier to express normative principles than actually take responsibility for their interpretation and policy implementation in everyday life.

However, herein lies the most fruitful cooperation: the preferential option for the poor in theology is a powerful rhetorical tool to move public policy while economists can demonstrate that in, say, social security provision, the state is able to target the poorest in a most effective manner. The ideal of greater re-distribution toward a more egalitarian society remains an ideal which theologians and some economists would put forward while the feasibility constraints of public revenue point toward a balancing act with regard to income tax raised. The point of balance in a budget will always be contentious, but the fact remains that such a balance (compromise between private income and public taxation) needs to be found.

What is the task of the church in situations of injustice?

There are three possibilities – the church as confessing, sharing and solidarity community.

The church as confessing community refers to the fact that situations sometimes arise where the very truth of the gospel is threatened. It is important to understand that a confession is always simultaneously addressed to the inside (the public of the church itself) and the outside (the array of other publics, including the economy). A prophetic critique of economic injustices is not adequate for various reasons. Nevertheless, it does not detract from the importance of the continued confessing voice of the church in combination with other forms of ethical discourse.

Thus the first intervention in arresting economic inequalities is to confess the counter-truth of justice and peace. It is especially the task of the ecumenical church to address matters of economic injustice in cooperation with policy bodies like the United Nations, International Monetary Fund, World Bank, World Economic Forum, and national and local governments.

It is crucial that economists and theologians work together. This will ensure the credibility of the prophetic voice which is backed by empirical data. There must be a move toward policy alternatives where a balance is sought between what is ideal and what is feasible.

The church as sharing community refers to the ideal that the church demonstrates in its own life the embodiment of justice and peace. In the context of negative individualism, self-centred accumulation of wealth, using power to attain and maintain privileges at the expense of others, and the building of social structures of inclusion/exclusion along class lines, the church community must stand as visible symbol of an alternative life.

Where the church itself is sociologically structured on the basis of class or where a gospel of prosperity is preached, the credibility of the incarnation is compromised. Equally true, where the church itself becomes an exemplar community of alternate altruistic values to the competitive and performance culture of the economy, the incarnation is credibly embodied. Furthermore, the values of justice and peace and sharing must be embodied in the faith community and this embodiment has significance by and for itself: the disciples are a light to the world.

In many countries churches are powerful institutions in civil society. Churches do exceptional work in social services, with or without state support, and often in association with faith-based NGOs. Many of these activities are geared toward poverty relief and empowering people to regain dignity.

However, if economists demonstrate that quality pre-school and primary education are the most powerful long-term forces for redistribution and upliftment, the church must seriously consider (re)establishing and expanding its historical concern with education. This is a form of solidarity beyond the reactive, and will over time alleviate economic inequality in real terms.

… if economists demonstrate that pre-school and primary education are the most powerful forces for redistribution and upliftment, the church must consider … its historical concern with education.

Conclusion

This bi-disciplinary journey is challenging. The two starting points in theology and economics provide a conceptual and empirical grounding for a description of inequality: some economists argue for the positive instrumental value of inequality, others for the negative consequences of inequality for economic growth. From a theological perspective some clarification was provided regarding the optimistic tradition of cooperation. Hence, it was claimed that high levels of inequality remain unacceptable irrespective of its source in relational, exploitative or achievement systems.

It is encouraging to see that theological and economic discourse can find common expression in policy studies: reconciliation and social capital describe the same ideal from different perspectives, including economists’ warning against the creation of patrician societies. The preferential option for the poor finds expression in social grants policies targeting the most vulnerable in society and in progressive tax regimes in which those better off provide the funds to serve those worse off. The discussion of budget policy demonstrated the requirement in applied ethics of compromises between the ideal (a more egalitarian society) and the real (feasibility constraints).

This discourse from two different viewpoints – theology and economics – enables empirical data to be placed in dialogue with ideals of justice and it points to a third way in which economic inequality can be addressed via policy interventions in which the church (can) play a key role.

  • The original article, titled “Economic Inequality: Economics and Theology in Dialogue”, was published in 2018 in the International Journal of Public Theology, 12(1), 73-101. Click here to access the full article.
  • Prof Piet Naudé is Director of the University of Stellenbosch Business School. He lectures in ethics related to politics, economics and business.
  • Prof Stan du Plessis is the Chief Operating Officer and Professor of Economics at Stellenbosch University.

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What drives great entrepreneurs?

It’s not just about the money: What drives great entrepreneurs?

The Steinhoff Saga Management review - University of Stellenbosch Business School

July – December 2018

It’s not just about the money: What drives great entrepreneurs?

What drives great entrepreneurs?

  • David Krige, USB MBA alumnus
  • OCT 2018
  • Tags Insights, Entrepreneurship, MBA Research, Motivation, Meaningful Work, Work Meaning

11 minutes to read

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David Krige, USB MBA alumnus 

Start by finding your purpose

Starting your own business is certainly not for everyone. Yet there are many people who embark on this challenging journey not out of necessity due to poverty, downscaling or retrenchment, but more out of a desperate desire to find meaning in their work and to make a difference.

Research done by USB MBA alumnus David Krige recently found that, following on the philosophy of Viktor Frankl that the search for meaning in one’s life is the primary motivation of man, most entrepreneurs are motivated by purpose rather than money.

This insight is important because the creation of new ventures is of critical importance for economic growth. It is equally important to gain a better understanding of the motivations behind entrepreneurial intent. Results from studies like this will help to improve venture creation and influence the success of entrepreneurship by understanding how to motivate individuals.

Krige’s research shows that to become an entrepreneur requires extraordinary levels of motivation to weather the storm of uncertainty, change and daily challenges. His research also shows that what drives this motivation is meaning and purpose.

… to become an entrepreneur requires extraordinary levels of motivation to weather the storm of uncertainty, change, and daily challenges and what drives this motivation is meaning and purpose.

His study found that some people who want to become entrepreneurs are indeed driven by financial rewards and that it is not an uncommon phenomenon that people are frustrated with their work and the role that it plays in their lives. However, not everyone starts a new venture as a result thereof. Nor do they venture off with a new business simply because they feel they are not being paid their worth. Ensuring that their work plays an important role in finding meaning in their lives is the largest contributor.

So what is meaning?

Meaning is an incredibly subjective experience. People have different priorities during different stages of their lives – such as providing for a family, starting a career, dealing with a difficult divorce or planning to have a family.

People also define meaning differently; for some it is to make a difference in the world, doing work that is valuable to others, solving a problem or helping others. For others it is the opportunity to make their own decisions, to provide a unique service to the industry, to make a difference in their own lives or to be autonomous.

In his study Krige says for many who ventured on their own, work was just a means to an end, receiving a salary at the end of the month and doing what they were told to do. He says they experienced no meaningfulness in their work. Doing only the bare minimum required from them caused them to stagnate in their careers as they were not challenged to grow.

For other entrepreneurs, although they found meaning in their work, they felt that they could achieve more by starting their own venture.

Krige says one’s regular work could make a difference but on the other hand you could be hindered since you cannot make the decisions that you feel would have a bigger impact. In addition, experiencing a sense of purpose in one’s work or starting a business that has purpose could positively enhance one’s own sense of meaning.

If one’s purpose is to develop things that one believes will add value, one’s work would contribute to a sense of purpose and meaning. Finding the significance in one’s work will translate into life becoming significant.

Finding the significance in one’s work will translate into life becoming significant.

When is the right time to start your own venture?

Krige suggests it is time to consider entrepreneurship when you are struggling with the following:

  • Feeling demotivated at work: The biggest reason why employees regard their work as lacking meaning is the feeling of insignificance, which leads to high levels of frustration. The feeling that the work you do does not matter in the bigger picture of the organisation is demotivating.
  • Feeling that your job does not contribute to the greater good: This happens when work is just a means to an end. Work really is just about earning a salary and doing what you are told to do, which leads to you doing the bare minimum that is required. This can leave you feeling stagnated in your career as you are not challenged to grow.
  • Feeling that your work does not provide you with a sense of meaning: Work is unfulfilling due to the feeling that work is meaningless. Employees have a sense that they cannot do anything that could have a real impact because things are out of their control. This could also be as a result of working for a big corporation that has specific characteristics. The environment in which work is done has a major impact on the sense of how meaningful the work actually is.

Feeling that you need to do something with more purpose: Some employees find a lot of purpose when they develop things that they believe would add value. Their work needs to contribute towards something new that will add value. In essence, the world will improve and evolve when you are doing meaningful work. If you are not practising that calling, it leaves a gaping hole in the world.

An entrepreneur, highly motivated by finding meaning, is in a better position to bring about change.

Finding meaning in the work we do

Understanding one’s meaning in life is an everlasting quest for some of us. With the important role that work plays in one’s life, it seems to be the logical place to start this understanding and search for meaning. For some, work might never provide that opportunity; for others it will.

After all, one needs to be the change one wishes to see in the world, according to Gandhi. An entrepreneur, highly motivated by finding meaning, as demonstrated in Krige’s study, is in a better position to bring about that change.

  • This article is based on research done by USB MBA alumnus David Krige. His supervisor was Prof Mias de Klerk, who is head of Research at USB and who lectures in leadership development, organisational behaviour and human capital management.

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From slaves to servant leaders

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2018

From slaves to servant leaders

  • Dr Leon Christopher Prieto, Dr Simone Trixie Allison Phipps and Dr Babita Mathur-Helm
  • MAY 2018
  • Tags Insights, Leadership

14 minutes to read

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Article written by Dr Leon Christopher Prieto, Dr Simone Trixie Allison Phipps and Dr Babita Mathur-Helm

When the abomination of slavery was brought to an end in the United States of America in the mid-19th century, freed slaves were released into society to make their own way. The contributions of these pioneering men and women in their communities (and beyond) did not receive recognition owing to the legacy of slavery and racism in the USA. This led to African-Americans being excluded from established structures and other aspects of civil life. The total lack of awareness of their plight meant that they were regularly obscured from public consciousness.

Two former slaves, John Merrick and Alonzo Herndon, excelled against all odds to become entrepreneurs who played an important role in the African-American community. While Caucasian role players’ contributions to the business world regularly feature in historic documentation, the pioneers of African descent, who also had an impact on successful businesses and entrepreneurial ventures, received far less recognition. The contributions of John Merrick and Alonzo Herndon beg to be told through the lens of servant leadership.

The contributions of John Merrick and Alonzo Herndon beg to be told through the lens of servant leadership.

Why the servant leadership research angle?
Booker T Washington, an advocate of servant leadership, was Merrick and Herndon’s inspiration to choose the business route and the application they opted for. Washington, born a slave in 1856, became a leading voice of the ex-slaves and their descendants on education issues, career-oriented training, entrepreneurship and employment. His voice was amplified in his book, Negro in Business, which highlighted the entrepreneurial activity among African-Americans and some of the factors that were facilitating economic prosperity among people of colour. Washington encouraged black business owners to serve their communities in order to contribute to the cause of economic progress.

Merrick and Washington were good friends who shared the desire to help African-Americans to achieve success via entrepreneurship and workforce development. Washington’s influence on Herndon became visible in the early 20th century. Herndon was one of the delegates who attended Washington’s founding conference of the National Negro Business League. Herndon vocalised the importance of supporting black businesses and highlighted the opportunities for African-Americans to make money and create job opportunities for the youth.

As a servant leader, Washington guided people to an elevated economic and social standing, allowing them to share in the proverbial economic pie. He understood and served the needs of the black communities and encouraged Merrick and Herndon (as well as many other successful businessmen and businesswomen) to pursue career-oriented education and entrepreneurship as the keys to black economic progress. Following in Washington’s footsteps, Merrick and Herndon became high-profile servant leaders in the African-American community.

Merrick and Herndon became high-profile servant leaders in the African-American community.

About John Merrick
John Merrick was born a slave in North Carolina in 1859. When he was 12, his mother left the plantation in Sampson County and went to Chapel Hill to become a domestic worker. The young Merrick stayed behind to attend the local school. While still at school, he worked at the local brickyard and later became a brick mason. His ambition drove him to leave his construction job to become a shoe shiner in a barbershop. Although it might seem as if he took a step backwards, he knew that being a barber was one of the best professions for young black men at the time, particularly if they wanted to become business owners. So, while shining shoes, he learnt how to cut hair. From these humble beginnings Merrick (and a partner) opened a barber shop in Durham to cater for wealthy white men. This is where he started climbing the ladder of success to become the sole owner of a barber shop, after which he expanded his business interests to five barber shops. He also became a land owner, built houses and rented them out.

His mission was to teach African-Americans how to help themselves and to show them which opportunities existed in the world of finance and entrepreneurship. Merrick rose from nothing to become a wealthy man owning a number barber shops, a real estate investor and an entrepreneur, who cofounded the North Carolina Mutual Life Insurance Company.

The way Merrick went about his business embodied the seven dimensions of servant leadership:

  • Bringing about emotional healing
  • Creating value for the community
  • Imparting conceptual skills
  • Empowering others
  • Putting subordinates first to help them grow and succeed
  • Behaving ethically

Merrick rose from nothing to become a wealthy man.

About Alonzo Herndon
Alonzo Herndon was born a slave in Walton County in 1858. He grew up on a farm east of Atlanta. His mother was a slave and his father a white master. When slavery ended, the young Herndon, his mother, younger brother and grandparents were sent away by his father to be free and penniless. From a very young age Herndon worked as a labourer and a pedlar selling peanuts and homemade molasses.

He left home when he was 20 years old and walked to Senoia in Coweta County where he started working as a farmhand. To supplement his meagre income, he began cutting hair on Saturday afternoons in a small place which he rented. He later moved to Atlanta where his top-notch barber skills and reputation quickly spread among the white residents. As his clientele increased, he expanded his business by opening more barber shops, including the most exclusive barber shop in Atlanta (known as the Crystal Palace), which was considered as one of the finest in the USA. Herndon also invested in real estate and became the owner of an extensive real estate portfolio, owning more than 100 houses in the black area of Atlanta, commercial property and a large estate in Florida.

When he purchased Atlanta Life (formerly Atlanta Mutual), it was yet another confirmation that he was fulfilling a servant leader role in the community. Herndon also embraced the seven servant leadership dimensions.

… servant leadership was already practised by black business owners in the early 20th century as a model to create jobs.

Conclusion: Servant leadership existed in the early 20th century
The study reviewed and combined facts and insights from literature sources such as journals, newspapers and other historic documentation. What the study found was that servant leadership was already practised by black business owners in the early 20th century as a model to create jobs and transform communities. Textbooks and other historic records have often omitted the contributions of people of colour to the development of servant leadership principles.

The lives of John Merrick and Alonzo Herndon represent remarkable and real-life ‘rags to riches’ stories. Adhering to Booker T Washington’s leadership and guidance, Merrick and Herndon became servant leaders within their communities. Their businesses created thousands of jobs for African-Americans and empowered them. Business and entrepreneurial pioneers such as John Merrick and Alonzo Herndon left a lasting servant leadership legacy to the world with evidence that it worked a century ago and still works.

Black students with aspirations to use small business ownership and entrepreneurship to escape poverty and contribute to their communities can learn from Merrick, Herndon and other earlier black entrepreneurs. Merrick and Herndon earned the black community’s support because they embraced servant leadership, which contributed to the success of their enterprises.

Their businesses created thousands of jobs for African-Americans and empowered them.

Implications and recommendations
Considering the major value of servant leadership and its worldwide impact, it is recommended that additional research be conducted to explore all the factors that contribute to these constructs. A question to be examined is: How do we increase the number of black businesses that can make a difference to economic and workforce development?

Recommendations to be considered include the following:

  • Implement social entrepreneurial development programmes to equip communities with knowledge, skills and resources to start up small businesses, create jobs and contribute to economic progress.
  • Universities and other institutions should train and develop future agents of change to bring about positive social change in disadvantaged communities.
  • Universities and other institutions should think about preparing and empowering black university students with the skills and resources to make a positive impact on their communities through small business ownership.
  • Entrepreneurial ventures can serve as a platform for students to become servant leaders.
  • Universities can partner with businesses which are interested in providing internships to students geared toward servant leadership.

 

  • Original article: Prieto, L.C., Phipps, S.T.A & Mathur-Helm, B. 2018. From slaves to servant leaders: Remembering the contributions of John Merrick and Alonzo Herndon. Society and Business Review.
  • Link to article: https://doi.org/10.1108/SBR-11-2017-0104

Dr Leon Christopher Prieto is from the College of Business, Clayton State University, Morrow, Georgia, in the USA and lectures at the University of Stellenbosch Business School. His teaching focuses on Human Resources and Organisational Behaviour, Entrepreneurship and other management related topics.
Dr Simone Trixie Allison Phipps is attached to the School of Business, Middle Georgia State University, Macon, Georgia, in the USA. Her research interests include the contributions of minorities to the field of management.
Dr Babita Mathur-Helm lectures at the University of Stellenbosch Business School. Her research interests include organisational transformation and development, managing diversity and gender empowerment.

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A new way to report on health and well-being in business

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2018

A new way to report on health and well-being in business

  • Dr Nicolaas Pronk, Prof Daniel Malan, Dr Gillian Christie, Dr Cother Hajat and Dr Derek Yach
  • MAY 2018
  • Tags Insights, Leadership

12 minutes to read

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Article written by Dr Nicolaas Pronk, Prof Daniel Malan, Dr Gillian Christie, Dr Cother Hajat and Dr Derek Yach

The value of happy and healthy employees

It is undeniably so that happy and healthy employees play a key role in the financial health of an organisation.

The four behaviours of physical inactivity, poor diet, tobacco use and harmful use of alcohol contribute to the four non-communicable diseases of diabetes, cardiovascular disease, cancer and chronic respiratory diseases. Collectively, these diseases account for some 60% of all deaths worldwide.

When companies are recognised for their efforts to successfully create a workplace culture of health and safety, financial modelling studies indicate that they are more likely to outperform the market. One study has suggested that the cumulative output loss as a result of unhealthy and unhappy workers will amount to US$46.7 trillion for the two decades spanning 2010 to 2030 (Bloom, Cafiero, Jané-Llopis et al., 2011). But how is the health and well-being of employees reflected in the reports of organisations?

Sadly, corporate reporting largely lacks the inclusion of health and well-being (HWB) metrics on employees. USB’s Professor Daniel Malan co-wrote an article on this – titled ‘Health and Well-Being Metrics in Business: The Value of Integrated Reporting’ – in the Journal of Occupational and Environmental Medicine.

In this article, the authors said that health has long been recognised as important for sustainable development as well as sustainable business performance. However, companies fail to capture the value of HWB metrics in their reports.

The cumulative output loss as a result of unhealthy and unhappy workers will amount to US$46.7 trillion for […] 2010 to 2030

 

Enter integrated reporting

According to the authors, a wide range of reporting instruments are used by organisations to disclose sustainability-related information. In fact, the number of reporting instruments has almost doubled since 2013, from 180 to 383 instruments, and these are being used in 64 countries. These instruments are used to support corporate reporting on financial, sustainability, social responsibility, integrated, and regulatory matters.

Today, integrated reporting is used as a cohesive approach to corporate reporting. Its main aim is to improve the quality of information that allows for the efficient allocation of financial capital. The International Integrated Reporting Council introduced a framework for integrated reporting that closely aligns human capital with financial, manufactured, intellectual, social and relationship, and natural capitals. This framework successfully positions human capital alongside the other capitals. However, it does not specifically include HWB in the human capital domain.

Integrated reporting should include more information on health and well-being in order to explain to investors of financial capital how a business creates value over time.

Introducing two new tools to report on the health and well-being of employees

Corporate integrated reporting standards (defined as reporting that demonstrates how long-term value is created for shareholders) as well as sustainability reporting standards (broadly described as triple bottom line or non-financial reporting) traditionally include occupational health and safety disclosures but are devoid of HWB indicators. Also, the inclusion of HWB metrics into corporate reporting would support efforts by the United Nations Global Compact to translate the Sustainable Development Goals into action.

Malan and his co-authors have introduced two new measurement tools that allow for the inclusion of HWB metrics into existing standards for corporate reporting. They presented a Core Scorecard and a Comprehensive Scorecard, designed by a team of subject matter experts convened by the Vitality Institute, and organised around the categories of Governance, Management, and Evidence of Success.

Why the need to include these metrics in corporate integrated reporting? According to the authors, this forms part of corporate governance and ethical leadership, and the values that ultimately align with environmental, social and economic performance.

There is a clear business argument to include HWB metrics into existing standards for corporate reporting. Healthy and well employees are more productive, incur less medical care costs, have lower turnover rates, and report higher levels of job performance. Based on these observations, it stands to reason that integrated reporting should include more information on health and well-being in order to explain to investors of financial capital how a business creates value over time.

For their scorecards, the team of experts included metrics categorised into three equally weighted categories, namely Governance (based on leadership style and culture), Management (reflective of the culture through programmes, policies and practices) and Evidence of success (considering specific measurement and assessment activities within the company that reflect programmatic efforts to reduce health risks and quantify outcomes).

Both scorecards were designed to reflect what a company does or provides that generates HWB among its employees. The scorecards reflect an organisational-level set of actions and are focused corporate governance, ethical and value-driven leadership, and conditions of work.

Linking HWB to the workforce, the community, and the performance of the company itself provides an example of creating shared value in which benefits accrue to all stakeholders involved.

The business case for including HWB metrics in integrated reporting

HWB metrics – generated via the two scorecards – can now be used to report on employee health and well-being in integrated company reports. The scorecards have been designed to complement existing standards for corporate integrated reporting where HWB represents the human capital domain alongside other business capitals. The proposed metrics are unique in this way.

Strong corporate governance and a commitment to ethical leadership and values are required to align corporate reporting with environmental, social and economic performance. Linking HWB to the workforce, the community, and the performance of the company itself provides an example of creating shared value in which benefits accrue to all stakeholders involved.

At the same time, the business sector should not only look at HWB as an input to business processes, but also as an output. This requires additional research on the health impact of products and services on consumers and society at large. As an area of future work, HWB as an output of business processes should be prioritised in the context of creating shared value for all stakeholders involved, including the workplace, the marketplace and the community.

Indeed, the authors believe that using the proposed metrics across multiple sectors and in a manner coordinated and supported by leading standard-setting agencies may allow for a standardised approach that is both comparable and material to business. Reporting on HWB in an integrated manner can yield significant returns for business and society alike.

Prof Daniel Malan teaches Business Ethics and Corporate Governance at the University of Stellenbosch Business School. He is the Director of USB’s Centre for Corporate Governance in Africa and a member of the South African Institute of Chartered Accountants’ Advisory Committee on Health and Wellness.

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The neuroscience of learning: What leaders, lecturers and learners should know

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2018

The neuroscience of learning: What leaders, lecturers and learners should know

  • Prof Renata Schoeman
  • MAY 2018
  • Tags Insights, Leadership

13 minutes to read

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Article written by Prof Renata Schoeman

It is a no-brainer that soft skills (often phrased as actions, or seen as interpersonal or people skills) such as emotional and social intelligence are as important as, or even more important than (depending on the context), hard skills (often phrased as nouns, or described as technical skills, outputs or deliverables). However, learning soft skills is difficult! The encouraging thing is that our brains are ‘wired’ for these skills. If we adopt the correct mindset, understand neuroplasticity and maximise the learning experience, we can master soft skills. This is how we can do this:

 

Step 1: Adopt a growth mindset

The process starts by adopting a growth mindset. A growth mindset sees mistakes as valuable opportunities to learn – for example, mistakes encourage us to innovate in new directions and view change as a welcome challenge. We compare our results with our own previous achievements. Small successes reinforce self-belief which inspires us to continue to improve.

In contrast to the growth mindset there is the fixed mindset. If we have a fixed mindset, we will avoid mistakes at all costs, see change as a major threat and rather remain stuck in our old ways of doing things. With a fixed mindset we compare our achievements with those of others, i.e. we ask ourselves if they are better or worse, rather than improving or having a ‘setback’ or ‘learning opportunity’, as with the growth mindset.

Another important principle is the adoption of system-setting as opposed to goal-setting. Although goals are important – and provide ‘direction indicators’ along the route to achieving our vision and mission – you can remain in a constant state of temporary or permanent failure. For example, if you have to write paper of 3 000 words, you will constantly fail until the paper is complete. However, if you have a growth mindset and have embraced system-setting, you will commit to writing for 30 minutes every day. Every day brings a small achievement and every day is an opportunity for improvement. Success breeds success.

Now that we understand the importance of the growth mindset, we can look at the ‘arboretum’ in our brain. Each neuron in our brain has thousands of ‘branches’ (dendrites) that are connected to other neurons. We can enhance these connections or ‘prune’ those we do not need. This neuroplasticity is the potential of the brain to reorganise and adapt by creating new neural pathways and connections in response to requirements or experiences. There are two types of neuroplasticity: functional neuroplasticity, which refers to the ability to move functions from a damaged area to an undamaged area, and structural plasticity, which refers to the ability to change physical structure as a result of learning. We are therefore able to teach an old brain new tricks!

Neuroplasticity is the potential of the brain to reorganise and adapt by creating new neural pathways and connections in response to requirements or experiences.

In order to utilise neuroplasticity to ‘re-wire’ our brains, we need to be exposed to a particular stimulus in an accurate and deliberate way, with enough intensity and repetition. Nothing is more effective than practice – we need to put in the effort. The more we struggle, the better!

Another important innate attribute we have in our brain is visuospatial neurons, which are essentially programmed to assist us with human social interactions. There are two mirror neuron networks in our brain: the social brain network which helps us to experience emotion, and the cognitive group which helps us to understand intellectually what another person is experiencing. These mirror neurons are stimulated both when we do something and when we observe the same action performed by someone else. For example, we experience pain when we fall, but we also cringe when someone else has fallen. We can therefore learn through experience, but also through observation and mental rehearsal.

‘Nothing is more effective than practice – we need to put in the effort. The more we struggle, the better!’

Although we often hear ‘Do not take an emotional decision!’ or the contrary ‘He is so unemotional!’, it is a fallacy that we are able to divide decision making artificially into ‘emotional’ and ‘rational’ or ‘cognitive’ decisions. Elizabeth Phelps highlighted this in her 2006 study (Emotion and cognition: insights from studies of the human amygdala. Annual Review of Psychology, 57, 27-53), saying:

 

Investigations into the neural systems underlying human behaviour demonstrate that the mechanisms of emotion and cognition are intertwined from early perception to reasoning. These findings suggest that the classic division between the study of emotion and cognition may be unrealistic and that an understanding of human cognition requires the consideration of emotion.

 

Although certain stimuli may be prone to soliciting an emotional reaction, how those stimuli are processed and interpreted can have a profound impact on both internal states and expressed behaviours and actions. Through conscious strategies and practice, we can change our interpretation of specific stimuli, enabling us to alter our own and other people’s emotional reactions. Changing emotional responses through reasoning and strategies emphasises the impact of cognition on emotion. This is good news, as it provides another useful ingredient for optimal learning.

So how can we integrate these innate abilities to learn the hard and soft skills we need in order to be successful students, lecturers and leaders? The first step is to pay attention: we must be deliberate in our endeavours. Do not mindlessly read or listen. Be curious. Avoid distractions. Do not multi-task.

 

Step 2: Generate questions

The second step is to generate questions. We have an innate value system in our ventral striatum and medial prefrontal cortex, which helps us to find value in new things and thoughts. But we can enhance this value system by priming our brain for the learning experience. We need to be able to find personal or social relevance in information. Is this worthwhile doing? What do we want to learn or gain from this? What are the implications (the ‘so what?’) of this? Even more important, is it worthwhile sharing? In other words, is this sufficiently valuable or interesting that we would want to tell someone about it (in person or on social media)?

 

Step 3: Tap into emotions

The third step in optimising learning is to tap into emotions. A bit of stress (such as a deadline or upcoming evaluation) can aid learning because of the increase in dopamine and noradrenaline which helps us to pay attention and to concentrate. We can also enhance this ability by introducing a reward system (work incentives or a self-reward like ‘earning’ a coffee break or dinner) or by avoiding punishment (like failing a test or experiencing social rejection). However, too much stress can paralyse us and have the opposite effect. How can we manage our stress levels? The basic principles of self-care (sleeping, exercising, pursuing educational opportunities, maintaining a healthy and balanced diet, and socialising) are crucial for optimising our mental health and enabling our brain to learn optimally.

 

Step 4: Repetition

The fourth and final important step is repetition: the spacing of our learning experiences over a period of time. Being exposed to information only once simply activates a circuit of reverberating neurons in our brain; when the flow of electricity stops, the information ‘disappears’ (this is what happens when we look up a telephone number, dial it … and five minutes later we have no idea what the number was). However, if we repeat the learning experience we activate neurotransmitters in our brain which produce longer-term chemical changes. This enables us to keep information in our heads for days to weeks. But we often want structural change – learning that facilitates long-term memory over a period of months or years – for which we need even more repetition. As a rule of thumb, if we want to remember something for a week, we should repeat it within days; if we want to remember it for months, repeat it within weeks, and if we want it to last for a lifetime, repeat it within months.

Investigations into the neural systems underlying human behaviour demonstrate that the mechanisms of emotion and cognition are intertwined from early perception to reasoning.

To be successful in life, we need to harbour (and continuously improve) hard and soft skills. Soft skills are more difficult to learn, but our brains are ‘wired’ for cognitive, emotional and social intelligence and learning. Yet we can only truly learn and improve the learning experience of others if we have a sincere desire to do so and are prepared to put in a concerted effort, including the requisite amount of practice.

Prof Renata Schoeman is an associate professor in Personal Authentic Leadership and Leadership Development at the University of Stellenbosch Business School. Her research interests include the neuroscience of leadership and learning, and ADHD. She is also a registered psychiatrist.

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Brain-based behaviours: Leading with SCARF in mind

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2018

Brain-based behaviours: Leading with SCARF in mind

  • Dr Dorrian Aiken
  • MAY 2018
  • Tags Insights, Leadership

16 minutes to read

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Article written by Dr Dorrian Aiken

In 2011, in preparation for the launch of the newly designed Certificate in Neuroleadership, USB-ED at the University of Stellenbosch Business School invited Dr David Rock to train a small group in the use of his SCARF model, and I was fortunate enough to attend. Rock described how he had coined the term neuroleadership in 2007 on the premise that neuroscience research was invaluable to leadership development if only lay people had access to its unfolding revelations. Indeed, neuroscience has become ‘one of the fastest growing areas of contemporary science’, according to Rock and his two colleagues, Al Ringleb and Chris Ancona, in an article they wrote for NeuroLeadership Journal in 2012 (NeuroLeadership in 2011 and 201). They added: ‘In the five years since its introduction in 2008, SCARF has become a widely discussed model in management circles, including being highlighted as one of the ‘Best Ideas of 15 Years’ by Strategy + Business magazine.’ The success of the SCARF model, an outcome of Rock’s doctoral research, is evidenced in the significant organisational following it has attracted globally.

Through our social interactions we literally change one another’s brains, for better or worse.

Rock has drawn heavily on limbic brain research data to create his SCARF model. The acronym SCARF stands for Status, Certainty, Autonomy, Relatedness and Fairness ‒ five key triggers that activate the limbic brain, either positively or negatively, in our relationship with others. The limbic brain enables us to interpret the inner world of another person, an enhanced survival strategy that would not have been part of a dinosaur’s reptilian brain skill set, for example. We are conditioned to react in the interests of survival to any perceived threat. In its imperative to ensure humans’ survival, the limbic brain defaults to fight or flight in under a fifth of a second, 24 hours a day.

A few years ago, David Rock and Christine Cox observed that: ‘People are acutely sensitive to their social status, that is, their importance relative to others, and tend to be accurate judges of where they fall on the social ladder’ (SCARF in 2012: Updating the social neuroscience of collaborating with others. NeuroLeadership Journal, 4, 129-142). Any slight to our status, for example, will initiate a flight or fight response precipitated by the release of cortisol and adrenalin into our systems. Across numerous species, status has been shown to be a critical factor in general health and survival. In the training sessions with Rock, I was surprised and dismayed to find how conscious I was of status during the course of an ordinary day: from high-status annoyance with cavalier taxis pushing in on the roads, to low-status feelings of being drably dressed in the company of chic friends at a birthday breakfast.

SCARF’s contribution to leadership development (a core theme in business school curricula) is in highlighting the link between understanding the brain and understanding people. Through our social interactions we literally change one another’s brains, for better or worse. Thomas Lewis, Fari Amini and Richard Lannon in their 2000 work, A General Theory of Love, stated: ‘… because we change one another’s brains through limbic revision, what we do inside relationships matters more than any other aspect of human life’. The implication for leadership is that for an organisation to flourish, positive relational skills are as important as technical skills.

To illustrate how SCARF can be negatively activated: I was involved in a leadership development coaching project in an organisation. Halfway through the project, I learned that the organisation was under threat of a proposed merger. The merger talks collapsed at the eleventh hour, but until that time, all of the five responses described by Rock had been negatively triggered. The status of the managing director and his executive managers was undermined by the very much bigger fish they might have had to swim with in a completely different and hostile sea; there was no certainty about either the fate of all the employees or the timelines involved; autonomy to lead the company into the future was suspended; there was little chance of being able to relate empathetically to the key players in the proposed merger; and above all, the secrecy, lack of information and sudden prospect of a possible bleak future felt very unfair. Being changed by others usually feels like a threat. The prospect of change, unless well managed and skilfully led, can push all the SCARF buttons in a negative way.

As long as we are pumping cortisol and adrenalin into our bloodstream in reaction to perceived threats, we are likely to react in the interests of self-protection – a knee-jerk reaction in response to how we are feeling.

Another example of the negative side of SCARF can be found in South Africa’s distant and more recent history. With its long colonial past transitioning into apartheid and, since 1994, ever-widening state of inequality, the country is now home to millions of people of all races who are likely to (at least at times) see all five SCARF aspects in a negative light. For example, for decades the status of black citizens has been undermined, while today white citizens may also feel that their status is threatened. The future feels uncertain. People’s sense of autonomy has been undermined, with widespread feelings of powerlessness in the face of entrenched poverty and corruption. South Africans often feel sadly adrift in their capacity to relate to one another, and for many (of all persuasions) life simply does not feel fair.

The SCARF model’s popularity as a means of creating awareness and building relational competencies in leaders and managers is no doubt its accessibility – its language is non-academic and its various tenets are easy to identify with, whether on the shop floor or in the boardroom. Most important is the fact that its five triggers are immediately recognisable through practical experience. Each of us can relate to a memory of feeling slighted ‒ perhaps we were interrupted while trying to say something at a meeting or maybe we were overlooked for a place in the team. We all know the unsettling experience of uncertainty, like not having a solution to a problem or losing our way in a strange part of town. Ask any group of employees if anyone has been micro-managed and witness the emotional response from those who have had their autonomy throttled.

As long as we are pumping cortisol and adrenalin into our bloodstream in reaction to perceived threats, we are likely to react in the interests of self-protection – a knee-jerk reaction in response to how we are feeling. The physiological consequence is restricted blood flow to the neocortex ‒ which is the brain responsible for logical sequencing, symbolic thinking, pattern-making and planning ‒ and increased blood flow to the limbic brain. So, quite literally, we cannot think clearly when we are charged with emotion. Have you ever been lost for words? When we are gripped by intense emotion – anger, shock or humiliation – the symbolic language-forming, logical, pattern-making brain is overwhelmed by the powerful limbic brain neuro-chemical response which upsets our ability to think rationally. Conversely, a positive boost to our status, like receiving a compliment and feeling valued, releases the feel-good hormones – dopamine, serotonin, oxytocin and endorphins ‒ which promote more evenly balanced activity in the brain. According to Rock, a balance of dopamine (which induces feelings of pleasure and relaxation) and norepinephrine (which induces alertness) is ideal for the kind of creative, focused thinking that drives high performance.

The research underpinning the SCARF model helps us to understand the ways in which our brains function when confronted with differences in others. This is particularly important when leaders have to manage diversity. Whether we are reacting to differences in race, gender, ethnic group, sexual orientation or personality style, the research on human brain activity indicates that our limbic brains are programmed to treat any difference as a potential threat to survival. The relationship button in the SCARF model flicks the limbic brain onto red alert, and cortisol and adrenalin pump into the blood stream. The good news is that we can choose to intervene in triggered fight or flight responses. In 1994 Jon Kabat-Zinn said: ‘Mindfulness is the awareness that emerges from paying attention in a particular way: on purpose, in the present moment and non-judgmentally.’

The concept of positive and negative triggers in relationships, which in turn are enhanced by each person’s own experiential awareness, is the reason that the SCARF model is so effective.

Being consciously aware (using the SCARF model) of our limbic brain responses gives us choices in how to intervene in a triggered response. SCARF principles suggest that nothing is more important for all levels of leadership today than self-reflection and mindfulness if leaders are to develop awareness of their own thoughts and feelings. Furthermore, cultivating mindfulness of self and others is sustainable only if it is practised daily so that it becomes an embedded skill induced by experiential learning and repeated effort.

Some years ago, research psychiatrist Jeffrey Schwartz (in conversation with Rock) challenged the notion of some neuroscientists that the complex, continuous interaction within our brain, much of which is below the level of conscious awareness, suggests that we do not have free will. Schwartz maintained, on evidence, that in fact we might not always have free will but we certainly do have free won’t – the mindful ability to contradict, in a fraction of a second, a knee-jerk reaction, which allows a more considered response. Learning to master such new behaviours is a process of neuroplasticity, which is the capacity of all of us to learn, or unlearn and relearn; with the caveat being that constant practice is necessary.

The relational skills required to engage others positively through the mindful awareness of the SCARF model are well within the capability of most normally functioning adults. Indeed, nothing could be more important for leaders to master. According to recent research conducted by Lisa Feldman Barrett, working and living in the presence of constantly belittling words and negative body language can cause irreversible damage to the functioning of our immune system. So what should we encourage leaders and managers to do?

To begin with, we can encourage them to recognise the importance of giving affirmation in social contexts. Affirm the status of all. When status is affirmed, the capacity for mindfulness and self-critical awareness is enhanced. Provide certainty by communicating frequently and inviting questions to check common understanding. Build autonomy by helping people to develop their own insights by asking good questions, by challenging and by giving affirmation. Build relationships by establishing trust that is based on consistency, timely feedback and positive engagement. Be aware that strong leadership needs to work consciously against the way the brain wants to function ‒ that is, to find solutions for others, to solve the problem! Ensure fairness. Be willing to listen without defensiveness to others’ experiences of unfairness.

The SCARF model, and the enthusiastic welcome it has received from organisations, shows that we are on a path towards new theoretical frameworks for, and new approaches in, leadership development. Given what we now know about the brain, the focus should clearly be on building positive relationship skills. To this end, the concept of positive and negative triggers in relationships, which in turn are enhanced by each person’s own experiential awareness, is the reason that the SCARF model is so effective.

The NeuroLeadership Institute, established by Rock and a number of colleagues in 2008, has made its findings accessible to the general public in many journal articles, offering insights, tools and techniques in the application of neuroscience findings to leadership and organisations.

Dr Dorrian Aiken is a visiting faculty member at the University of Stellenbosch Business School where she lectures on Leadership Development and Organisational Development. She is a Master Integral Coach™ and she consults widely in the field of coaching, organisational transformation and leadership development.

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