Strategic Cultures of Transformative Organization

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Strategic Cultures of Transformative Organization:

The Coates of India Story1

Vipin Gupta

Assistant Professor, Fordham University, New York, USA

Kumkum Mukherjee

Assistant Professor, Eastern Institute for Integrated Learning in Management, Calcutta, India

Roma Puri

Fellow, Eastern Institute for Integrated Learning in Management, Calcutta, India

1 We are thankful to the US National Science Foundation and Centre for New Economy and Culture in eGLOBE

(EMPI Business School, Delhi), for funding the study as part of worldwide cross-cultural CEO research of GlobeResearch and Educational Foundation; and to Robert House, Principal Investigator, GLOBE Program, forallowing us to participate in the study.

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Abstract

In this chapter, recent developments in the transformative perspective are reviewed, with

special reference to the concepts of change, leadership, and learning. The transformative

perspective emphasizes how dynamic organizational learning can shape not just what the firm

does, but also the meaning the firm associates with what it has been doing and its mission in

the future. The transformative organizations gain a competitive advantage in a global milieu,

as reflected in their high performance on multiple criteria, including profitability, agility,

growth and reputation. In other words, transformative perspective allow the firms to

transcend the paradox of performance, identified by Meyer & Gupta (1994), that an emphasis

on some measures of performance makes the organizations simultaneously effective on those

measures, and ineffective on other measures and thus subject to failure. A model of four

strategic cultures is formulated, and the workings of the transformative organization are

explicated using the story of Coates of India.

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Introduction

In recent years, transformative perspective has gained popularity among the social

scientists, as is indicated by the concepts such as transformative change (Lichtenstein, 2000),

transformative leadership (Astin & Astin, 2001; Bass, 1985; Bemis & Nanus, 1985),

transformative mediation (Bush & Folger, 1994), transformative justice (Morris, 1994),

transformative learning (Mezirow, 1991), transformative knowledge (Vargas, 1987), and

transformative technology (Brent, 1991). Here we review the core insights of the

transformative perspective with respect to change, leadership and learning. Then, we develop

a theoretical model that highlights the importance of four domains investor, competence,

post-competence, and spiritual in the strategic decision-making of the organizations.

Our theoretical model builds on the GLOBE research (Gupta, Hanges & Dorfman,

2002) that highlights distinct sets of cultural values and practices in different regions of the

world. We propose that the transformative organizations must deal with all these domains of

strategic issues in their decision-making and learning process. The firms in different regions

simplify the complexity of simultaneously managing multiple domains by prioritizing them

from most important to least important, and then rewarding and legitimating firms based on

the extent to which they adhere to the institutionalized expectations. Each firm is influenced

by the institutional norms of the region for including the most important domains as critical

element in its strategic decision-making, but at the same time enjoys substantial freedom of

giving at least equivalent importance to the other domains. The processes of globalization and

transnational investments make the need for excellence in all the domains particularly salient.

The transformative perspective emphasizes how dynamic organizational learning can

shape not just what the firm does, but also the meaning the firm associates with what it has

been doing and its mission in the future. Such dynamic organizational learning is facilitated

by a comparative understanding of the behaviors and values, generated through processes

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such as perspective taking (Parker & Axtell, 2001) and relational capability (Dyer & Singh,

1998), which allows the firms to identify common patterns in apparently divergent behaviors.

Through interactive learning, firms realize that the alternative strategic domains are also

associated with high-performance, and so it is important to emphasize each, and not one over

the others. The result is a change in the very system of organization, that encourages the firm

to identify how devaluing some domains in the past limited its overall performance, and

impeded development initiatives under conditions where the norms for the targeted domain

were fulfilled. We identify the firms that demonstrate a focus on transformative perspective

as the transformative organizations. We propose that the transformative organizations seek

multifaceted competitive advantage in a global milieu, emphasizing multiple criteria,

including profitability, agility, growth and reputation. In other words, transformative

perspective helps the firms to transcend the paradox of performance, identified by Meyer &

Gupta (1994), that an emphasis on some measures of performance makes the organizations

simultaneously effective on those measures, and ineffective on other measures and thus

subject to failure. The failure of Enron, whose policies were very effective in the investor

domain, but not other domains, is a case in point.

Next, we review the literature on transformative perspective, and present a theoretical

model of strategic cultures of transformative organizations. Then, we explicate the theoretical

model using the story of Coates of India. The story is based on the CEO interview and survey

of the top management team conducted in 2001 as part of an international cross-cultural study.

Review of the Transformative Perspective

Below, we review transformative perspectives in three major domains: change, leadership,

and learning.

Transformative Perspective and Change

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The transformative perspective fundamentally involves a transition in the forming

process, from one focused on incremental change to that catalyst oriented towards quantum

change. The emphasis is not on accelerating the incremental change, or bypassing certain

steps of incremental change, but to generate a qualitatively different approach on how the

change is evaluated and managed.

In general, change happens when there is some variance, either in what the firm does

and what it is expected to do (practices and norms to be met), or it what it does and what it

expects to do (practices and values to be fulfilled). Once the change is formed, the firm

seeks to benefit from its learning by institutionalizing the change intervention in all relevant

aspects of its functioning. It may also diffuse the change among its external constituencies,

and seek financial or non-financial benefits from such knowledge spillovers. This

institutionalization and diffusion reflects norming of the change. As the norms mature,

including through reverse learning from the outcomes of other internal applications and of the

use by the external constituencies, the change initiative is fulfilled, and the changed behavior

becomes routinized for effortless enactment. However, the outcome of the changed behavior

may not be the same in all cases. The more systematic and sustained the institutionalization

and diffusion process, the greater the possibility of learning about its shortcomings. When the

shortcomings are diagnosed and validated, the firm seeks to develop corrective interventions,

and again goes through the forming, norming, and fulfilling phases, as shown in Figure 1.

Insert Figure 1 About Here

Thus, typically, the organizations go through a sequential process of change. In this

process, they (1) may deny the need for change (Change by denial), (2) may become aware of

the need for change, only after it has already happened gradually (Change by experience), (3)

may mandate an instant change, as soon as they recognize and validate the need for change

(Change by mandate), or (4) may reinterpret the pre-changed behavior in a way that the need

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as well as direction for change becomes self-evident (Change by reinterpretation). In our

view, the transformative change reflects a continuous openness to the change by

reinterpretation, and a systematic approach to change by mandate and change by experience,

so that the need for change is not denied.

One may relate the four processes of change to Fergusons (1980) types of change.

These types include: (1) Change by exception: the firms allow exceptions to their beliefs but

do not change these beliefs. For example, when they encounter a case that does not fit their

mental models, they classify them as being an exception to the rule (e.g. a profitable e-firm at

the height of internet revolution). (2) Incremental change: a collection of small changes

eventually alters, rather unconsciously, the mental model of the firm (e.g. failure of several

unprofitable e-firms, along with reduced e-funding before the burst of internet bubble). (3)

Pendulum change: an extreme point of view is exchanged for its opposite, and past is

completely discredited as irrelevant or mistaken (e.g. a unprofitable e-firm that suddenly

mandates profit as its Number 1 goal after the burst of internet bubble, and divests most of its

businesses as not expected to be profitable). (4) Paradigm change: the firm steps out of the

box for a more fundamental rethinking of premises, based on the integration of available

information (e.g. a initially unprofitable e-firm that is able to stick to its fundamentally viable

business plan, by improving its learning about new project management).

In short, from a change perspective, transformative organizations recognize not only

the reality of the changing world and of the accelerating pace of change, but also of the

changing nature of change. Consequently, they do not seek to be effective in only some parts

of a system, but seek proficiency in managing the multifaceted dimensions of their operation.

Transformative Perspective and Leadership

The transformational theory of leadership focuses on the ability of the leaders to

motivate others to do more than they originally expected to do (Bass, 1985). The

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transformational leaders shape and elevate the motives and goals of followers, thereby

achieving significant change reflecting the community of interests of both leaders and

followers, and freeing up the collective energies in pursuit of a common goal. The thrust is on

creating institutions that motivate employees to recognize the community of their needs, and

to empower them to satisfy these collective needs (Bemis & Nanus, 1985).

The transformative perspective further integrates the collective organizational needs

with an enhanced understanding of the potentiality of each member, and a wholesome

conception of self in the personal, relational, societal, and communal domains. By

recognizing that each employee is more than just an individual or a member of the

organization, and has societal and communal identities also, the transformative leaders

facilitate more of what each employee truly wants to accomplish without necessarily

sacrificing the realization of collective needs. The employees also discover that their life in

the organization need not be disjointed from their lives in the society and the community, and

that the former can be lived in a way which serves their purpose and enhances their prestige in

the society and the community also. As a result, transformative leadership becomes a

reciprocal process whereby both leaders and followers raise one another to higher levels of

motivation and morality. In this sense, transformative leadership builds on the values-based

approaches to transformational leadership (Kuczmarski & Kuczmarski, 1995; Goeglein &

Indvik, 2000).

Further, Gandhis concept of trusteeship, which recognizes service as the purpose of

leadership; moral principles as the basis of goals, decisions, and strategies; and employing a

single standard of conduct in both public and private life; is crucial to the transformative

leadership (Gupta et. al., 2002). In contrast to the transformational leadership, which focuses

on enhancing efficiency and effectiveness through first-order quantitative change in

motivation, the transformative leadership emphasizes a higher-order qualitative integration of

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motivation over multiple domains. Consequently, transformative leadership generates

changes in basic assumptions and goals of life, so that accomplishments in each domain are

reinterpreted as being related to other domains, and thus serves higher-order purposes of life.

Despite some similarities, the transformative leadership can also be distinguished from

the transactional, transformational, and values-based transformational models of leadership.

In the transactional model, the roles of each individual are clearly defined, and the

responsibilities and expectations are limited and predictable. In contrast to the view of a

transactional leader who must get things done, whether by focusing on the task or on the

person, the transformative leader emphasizes the purpose, mission, and spirit of the action, so

that the quantum nature of its benefits become self-evident to all. While the transformational

model allows the expectations to be challenged, and motivates the individuals to see

themselves as a member of the group and to focus on the satisfaction of collective needs, the

values-based transformational model emphasizes how certain values of the leader are

fulfilling for the followers, and encourage them to seek their attainment. Both these

approaches could result into unjust outcomes, for they may exclude the members who do not

find the values of the leader as fulfilling. The transformative model, on the other hand,

generates a new interpretation of the reality, where the previously marginalized members are

also able to engage themselves in the task of learning, and where meaningful linkages can be

constructed between these members and the dominant organizational values and social and

communal institutions. This is made possible because of the common learning on part of both

organization as well as the members that they are an important part of others life.

In summary, from a leadership perspective, transformative organizations recognize not

just the reality of changing roles and of the need to empower participants to effectively and

rapidly perform these roles, but also the changing nature of the roles that the leadership should

be focusing on if the participant lives as well as the organizational mission are to be fulfilled.

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Transformative Perspective and Learning

Transormative approaches to learning focus on how learners construe, validate, and

reformulate the meaning of their experience. One of the most popular models of

transformative learning is of Mezirow (1991). According to Mezirow (1991: 167),

transformative learning involves perspective transformation, which "is the process of

becoming critically aware of how and why our assumptions have come to constrain the way

we perceive, understand, and feel about our world; changing these structures of habitual

expectation to make possible a more inclusive, discriminating, and integrating perspective;

and, finally, making choices or otherwise acting upon these new understandings" Mezirow

distinguishes between meaning structures, which are frames of reference based on the totality

of individuals' cultural and contextual experiences that influence how they behave and

interpret events, and meaning schemes (specific beliefs, attitudes, and emotional reactions)

that make up these meaning structures. The usual learning process, as an individual adds to

and integrates ideas within an existing scheme, contributes to a routine change in meaning

structures. However, transformative learning, involving change in meaning structures, results

from an accumulation of transformations in meaning schemes over a period of time, or more

often from a disorientating dilemma triggered by a life crises or major life transition. In

general, Mezirow identifies experience, critical reflection, and rational discourse as three

major catalysts of transformative learning. Each of these can encourage a change in the

peoples frame of reference through critical reflection of their assumptions and beliefs, and

consciously bringing about new worldviews.

Boyd & Myers (1988) offer an alternative approach, which recognizes transformative

learning to be more of an intuitive, creative, emotional process. They use the term

transformative education to connote a fundamental change in one's personality involving both

the resolution of a personal dilemma as well as the expansion of consciousness resulting in

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greater personality integration. Transformative education draws on the "realm of interior

experience, one constituent being the rational expressed through insights, judgments, and

decision; the other being the extrarational expressed through symbols, images, and feelings"

(Boyd & Myers, 1988: 275). It builds on the process of discernment, i.e. creating a personal

vision or meaning of being a human. The discernment involves receptivity, recognition, and

grieving. First, an individual shows receptivity to "alternative expressions of meaning," then

recognizes that the message is authentic, and finally realizes that old patterns or ways of

perceiving are no longer relevant, moves to adopt or establish new ways, and to integrate the

old with the new patterns.

Bush & Folger (1994) apply the transformative perspective to Alternative Dispute

Resolution (ADR). They suggest a shift from a problem solving or settlement-oriented

mediation that focuses on finding a mutually agreeable settlement of an immediate dispute, to

transformative mediation that seeks to transform the disputing parties by empowering them

to understand their own situation and needs, as well as enabling them to recognize the

situation and needs of their opponents. At the organizational level, transformative mediation

may transform the representatives, but could leave out the constituencies, and engender a

scale up problem (Burgess & Burgess, 1996). Lederach (1989) emphasizes a more inclusive

concept of conflict transformation which entails development of not just empowerment and

mutual recognition, but also interdependence, justice, forgiveness, and reconciliation. The

thrust is on creating dialogues in which people are empowered to express their needs and

explore their differences, so that inclusion and participation is encouraged. Similarly,

Montville (1993) underlines how dialogue helps people confirm each others' humanity and

recognize beliefs and values of the other person, and the importance of historical analysis,

including sharing of grievances and their recognition by the opponents, for encouraging

transformation in the parties' relationships.

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In essence, from a learning perspective, transformative organizations recognize not

only the differences in perspectives and the need to empower participants to advocate their

unique perspectives, but also the need to transform each individuals meaning associated with

these perspectives so that a more inclusive perspective is developed.

Summary:

There are significant similarities in the transformative approaches used in change,

leadership, and learning domains. Each emphasizes the importance of recognizing differences

and the need for change, empowering participants to share these differences and to bring

about the change, and finally developing an integrative perspective relating these differences

and changes to the very purpose of human and organizational life across multiple domains.

As a result, the differences and changes are not seen as threatening or exceptions, and are

instead sought for improving multiple dimensions of organizational and participant life.

Consequently, the target of transformative approaches is not the actions of the organization,

but the very culture of the organization. It is the emic aspect of the culture the meaning the

participant attach to the actions, that is more relevant for transformative approaches, than the

etic aspect the cross-culturally comparable actions and behaviours.

Theoretical Model

Using a transformative lens, we develop a theoretical model of the importance placed

by the firms on alternative strategic values. We identify four types of strategic cultures, each

typical of a distinct region of the world, and each reflecting an alternative domain of strategic

values and associated change, leadership, and learning. The four strategic culture types are:

(1) Investor Orientation, (2) Competence Orientation, (3) Post-competence Orientation, and

(4) Spiritual Orientation. The first type is typical of the Western Hemisphere, the second of

the Asia-Pacific, the third of the Europe, and the fourth of Africa. The key characteristics of

each of these types are summarized below.

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1) The first strategic culture type isInvestor Orientation. It reflects paramount importance of

cost control, sales volume, product quality and firm profitability in strategic decision-making.

A focus on firm profitability, along with the significance of cost, sales and quality variables

that have a direct impact on this profitability, indicates a strong investor culture where the

emphasis is constantly on business unit and corporate performance. Investor culture is

typical of the Western Hemisphere and Anglo societies, where the foremost responsibility of

the business is towards its owners. Such cultures support autonomous organizational learning

oriented towards tapping of well-defined business opportunities and resolution of anticipated

and experienced business threats. The investor-oriented firms invest into multiple learning

trajectories, each oriented towards a distinct business opportunity, and seek flexibility of

shifting resources from one trajectory to another depending on the changing environmental

context and the expected jackpot from the chosen trajectories. The change typically occurs

through exception, recognizing that the same jackpot can not be shared by all firms; and the

leadership is transactional in nature oriented towards realization of the expected jackpot.

2) The second strategic culture type is Competence Orientation. It signifies a decision-

making value where most emphasis is put on long-term competitive ability of the

organization, along with the relational issues with those directly involved in the business

operations. The thrust is mostly on cultivating and sustaining relationships with key business

partners such as suppliers, alliances, and government agencies, customer satisfaction,

employee professional growth and development, and employee relations issues such as

employee well-being, safety and working conditions. Competence culture is typical of the

Asia-Pacific societies, where the relationships and long-term competitive ability are most

critical. Such cultures support collaborative organizational learning, but limit the flexibility of

the firms in seeking new know-how. This is so because the benefits of know-how generally

are diffused quite quickly throughout the relational network. On the other hand, the firms

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incur the costs of know-how discovery and its codification on their own, and thereby seek to

stand out from the rest and be recognized for their pioneering contributions. The change

typically occurs through experience, based on accumulated learning of self and the partners;

and the leadership is transformational in nature identifying community of group interest.

3) The third strategic culture type isPost-competence Orientation. It signifies a strategic

perspective that puts most priority on societal welfare, including environmental concerns,

welfare of local community, nations economic welfare, minority employees, and employee

gender. Post-competence culture is typical of the European societies. Such cultures support

socialist organizational learning, where the non-business partners such as the special interest

groups, social activists, and community leaders play an important role in the corporate

decision-making. The primarily responsibility of the firms is not to their investors or their

business partners, but to respect collective interest of the members of the community in

ecology and welfare issues. The post-competence oriented firms are most willing to assume

the costs of social charter, and to believe that the social charter is not necessarily at odds with

the investor and business relationship concerns. Such firms develop competence in specific

areas of social charter through targeted interventions, such as environment-friendly machinery

and products, which are supported by the institutionalized laws at the national level. These

firms are valued as responsible corporate citizens and enjoy high stock valuation as rewards to

their investors and that brings prestige and similarly high valuation for the business partners.

The change tends to occur through mandate, where specific interventions are legitimated; and

values-based transformation is emphasized for supporting the participant initiatives towards

these interventions.

4) The final strategic culture type is Spiritual Orientation. It reflects a strategic preference for

ethical considerations, and being devoted to the super-natural forces, such as auspicious days,

forecasts by truth sayers, and pleasing, respecting, not offending a divine being. Spiritual

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culture is typical of the firms in Africa. Such cultures support communal organizational

learning, where the self-identity of the firms is defined in terms of the membership of a

specific community of beliefs. Each community of belief, religious or otherwise, expect

certain forms of role performance from its members, including holding to certain beliefs about

a deity, engaging in ritual behaviors, and using certain spiritual, cognitive and emotional

criteria about morality. Glock and Stark (1965) have identified five manifestations of spiritual

orientation. These include: (1) an experiential manifestation, capturing normative religious

experiences; (2) a belief manifestation, capturing normative religious beliefs, (3) a ritual

manifestation, capturing normative religious practices, (4) an intellectual manifestation,

capturing knowledge about these religious norms, and (5) a devotional manifestation,

capturing enacted religious practices and attitudes. The spiritually oriented firms are highly

concerned about the kind of people they deal with. To them, it is difficult to separate the

identity of the firm from that of the others the firm interacts with. The key implication is the

importance of the relationship with and recognition by others, since the key organizing

principle is ubuntu or that a person is a person through others. Ubuntu refers to

humaneness a pervasive spirit of caring and community, harmony and hospitality, respect

and responsiveness that individuals and groups display for one another. (Mangaliso, 2001:

24). In Africa, ubuntu is invariably invoked as a scale for weighing good versus bad, right

versus wrong, just versus unjust, while interpreting critical issues and solving problems. The

change is based on self-interpretation process, involving assessment of its humaneness; and

the transformative leadership is favored to facilitate an integrative interpretation.

Strategic Types and Cultural Salience: While the four strategic types typify the strategic

cultures of firms in distinct regions, each is also characteristic of the firms in any given

region. Since each region is multifaceted, each firms culture puts at least some strategic

significance to issues identifiable with more than one type. The cultural orientation of the

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the respondents were asked how much importance should be assigned to each factor when

making critical management decisions. These 17 value items were used to construct four

types of strategic culture scales. The item composition of the four scales is given in Table 1.

A scale validation analysis of 212 firms from 7 states in Northeast India showed that the four

scales were internally consistent (Cronbach alpha>0.70), both at the firm level as well as the

top management level.

---------------------------------

Insert Table 1 About Here

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The interview guide asked the CEOs about their background, leadership goals,

management philosophy, and personal strengths and weaknesses. These items were

supplemented withquestions about the industrial relations climate in the main plant of the firm

in India, located in the same city where the firm had its domestic headquarters. More details

about the firm (Coates of India) are given in the next section to set the research context.

Research Context:

Coates of India (COI) was set up in 1947 as a wholly owned subsidiary of Coates

Brothers Plc, UK in the state of West Bengal in Calcutta, for manufacturing and marketing of

printing inks and allied products used in the process of printing. The parent firm diluted its

stake in COI to 66.2% in 1962. In 1991, French group TotalFina, a leading player in global

crude and petroleum industry, took over the parent firm, and acquired a 51% stake in COI. In

1999, TotalFina sold its printing inks business worldwide to Sun Chemical group of the

Netherlands, which is a wholly owned subsidiary of $10-billion Dainippon Inks and

Chemicals (DIC) Group of Japan. DIC Group, besides being a global leader in graphic arts

products, has a significant presence in printers' supplies, machinery, pigments and

reprographic products. As part of the deal, the resins and industrial adhesives business of COI

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were spun off to TotalFina, and the ownership of COI was transferred to DIC. DIC had been

operating in India through marketing agents, and saw COI as a valuable opportunity for

expanding further into India. It immediately sought to use the entire marketing network of

COI, and increased its equity stake in COI to 59.4 per cent. The board of COI was

restructured to bring in four Japanese directors to oversee the strategic growth.

On December 31, 1997, COI had transferred its packaging coatings business to a

separate 100% subsidiary Coates Coatings India Limited (CCIL). The goal was to bring in

Valspar Corporation of the US as a joint venture partner for the packaging coatings business,

and to divest that business in a phased manner totally to Valsper as the business develops

through a capital infusion and new technology from the latter. In the meantime, there was a

shift in packaging concept from metal containers to plastic poly-tubes in India, which led

Valsper whose interests lay principally in can packaging coatings market to back out of

the joint venture deal in 2001.

In June 2001, COI/CCIL initiated an alternative agreement with the new group parent

company DIC for perpetual transfer of printing inks technology. The printing ink industry

essentially consists of pigments, resins, additives and solvents. Pigment is the main raw

material for manufacturing inks, resins give special properties to the inks while additives are

necessary for maintaining the flow. The principal users of printing inks are packaging,

printing and publishing industries. In India, packaging market for fast moving consumer

goods (FMCG) sector is a key segment, accounting for a share of 40 per cent. In addition, in

November of 2001, a new $1.3 million plant was inaugurated in the state of Gujarat at

Ahmedabad for the manufacture of newspaper blank with the technology support from DIC.

DIC is currently looking to upgrade product mix of COI, which has a battery of seven

manufacturing plants spread in all parts of India, at Calcutta, Mumbai, Ahmedabad, Delhi,

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Chennai, Bangalore and Noida (New Delhi), and seven sales offices located in various

metropolitan cities, deemed a key advantage in the applications-oriented printing ink industry.

Globally, the US, Japan, and Germany account for two-thirds of the $15 billion sales

of the printing ink industry. The US accounts for about 30 percent of the global market. Two

firms hold a total of 80% market share in the US: Sun Chemicals and Flint Ink. These two

firms have transformed the industry into a highly concentrated structure through a series of

acquisitions of smaller ink manufacturers in the US and overseas. With diminished

opportunities for growth through acquisitions, DIC is now looking for organic growth

opportunities for its subsidiary. India represents a key emerging market for such organic

growth.

The Indian domestic ink market is valued at $125 million (Rs. 6 billion), with a

production volume of 50,000 tons. It has seen 12-15% growth over the past few years, and is

expected to sustain this growth rate in the near future. The market is divided equally between

a concentrated organized sector, with a few medium-to-large scale firms, and a fragmented

unorganized sector, with more than 200 small-scale ink manufactures. At the top are the two

firms: COI and its principal competitor, Hindustan Inks & Raisins Ltd (HRIL). HRIL, set up

in 1991, has been steadily gaining market share from COI, principally because of a 15-year

sales tax exemption for its core plant at Daman, that has allowed it to become the first Indian

firm to successfully backward integrate manufacture of two core ingredients of printing inks

viz. resins and flushed pigments, and to set up new units including a wholly-owned subsidiary

in Austria to facilitate exports.

In response, COI has increasingly focused on the premium segment, realizing a greater

price per kg of ink as compared to other players in the market. The strategy of COI is based

on its strong brand equity, regional manufacturing plants and sales offices to cater to specific

needs of different markets, and now on the technological and marketing support of the DIC

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group. Its products are perceived to be high quality, backed by continuous research and

development expenditures, and its technology state-of-the-art. It has been at the forefront of

ongoing modernization of its plants through extensive capital investments, raising its installed

capacities by 10-15 percent every year, and revamping the computer system and other

balancing equipment in its factories to meet the higher demand for products, and has seen

profitable growth despite a recent slowdown in the global and Indian packaging coatings

market.

In summary, Coates of India has been historically influenced by the culture of the

Anglo parent, and later of the European parent, and more recently by the Japanese parent.

Further, its presence in the State of West Bengal which is known to have leftist/socialist

leanings should also influence the strategic culture of Coates of India. It has strong brand and

technological base that has enabled it to realize profitable growth, but does not necessarily

have a significant competitive edge in costs over the new entrants. On the whole, the

formative Anglo influences appear to support its Investor Orientation, while the recent

Japanese influences appear to be dominant in a focus on Competence Orientation. The French

influences appear to be relatively weak on the strategic culture of Coates of India, particularly

because the core business of the ex-French parent was quite different from that of the Coates

of India. Also, the Dutch influences are possibly dwarfed by the proactive role taken by the

Japanese global parent company with respect to the Indian subsidiary. Still, the presence in

the socialist state of West Bengal should have strengthened its Post-competence Orientation.

Finally, since the firm is based in India, where the culture is relatively spiritual in nature, one

would expect non-trivial significance of Spiritual Orientation in firms strategic culture.

Next we confirm these expectations using the top management questionnaire survey.

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Findings: Top Management Questionnaire Survey

Table 2 gives the scores of the firm on the four Strategic Culture scales, both at the

individual top management level as well as the aggregated firm level.

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As can be seen, on a scale of 1 to 7, the firm scored 6.29 on Investor Orientation and

6.03 on Competence Orientation. The difference between these two types of strategic culture

was not significant (difference = 0.26; df=5; p>0.05). Thus, the top management of the firm

puts very high importance on both Investor Orientation and Competence Orientation. The

Spearmans rank correlation between the scores of top management on these two was 0.96

(p


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1.79; df=5; p


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business vision, pursuant to the liberalization of Indian economy in the early 1990s and a

concomitant change in parent group from Coates Brothers of UK to Totalfina of France.

The new vision emphasized substantial modernization of the plant, with sustained

increase in the production capacity, and introduction of automated machines and application

of latest technologies, in ways that would be labor and skillenabling, rather than labor and

skill displacing. Table 5 provides data on the investments made by the firm in Computers and

Plant & Machinery at Calcutta Plant.

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The success with modernization in the Calcutta plant, home to Indias one of the most

left-leaning workforce, unions and the government, instilled the company with confidence to

persist with further investments in computerization and technology improvement in other

plants of COI, in the second half of the 1990s. The State of West Bengal was notorious for

perpetual strikes, politically sanctioned labor agitation and industrial unrest and sense of

animosity between the managers and the workers, which were at their peak during 1960-90.

Despite such a historically dismal socio-political context of the workplace, COI led the

transformation in the industrial atmosphere of West Bengal during the 1990s. The thrust of

COIs vision was not on incentives in fact, no incentive schemes were operational in the

Calcutta unit. Rather, there was a new sense of collaboration among managers, workforce and

the unions, which helped contain the average absenteeism levels to single-digit levels of 7-

10%, avoid overtime costs with mutual consent, and enhanced the productivity and standards

of living for the benefit of the workforce, consumers and the investors at the same time.

COIs new model for managing the living assets was founded on mutual respect and

trust. It recognized the shift in workforce ranks to thefourth generation workers, who were

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extremely loyal to the firm and were looking at better futures than ones obtained by their

predecessors as part of COI. It was built on the confidence that the firm had not experienced

any strike or lockout throughout its history, in a socio-political context where these incidents

were quite common part of the industrial life. The firm had since its inception resolved all the

issues with the workers and the unions through continuous discussions, formalized into annual

agreements, signed by both union and the management. This allowed the firm to keep its

industrial relations free from political intervention. Now, the new governance environment,

both at the corporate level as well as at the national and state level, encouraged the

management to bring the two rival unions together, and for seeking a collaborative approach

for enhanced productivity of the firm and welfare of the workers, within a framework of

modernization, technological advancement, and organizational learning.

The Old and the New

In the past, especially during the 1980s, the rivalry between the two unions for

realizing supremacy among the workforce and having their say in the discussions with

management disrupted the organizational climate. Both the unions had about an equal

number of members, and each struggled hard to prove their majority showing 49:51 or 51:49

situation almost as a rule. There were always several opportunist members who made the most

of this by switching unions on a regular basis and threatening to leave one particular union in

the event of not being given a coveted status in the union. Their movement back and forth was

a sheer nightmare for most loyalists in the two unions and they tried every trick in the book to

win back the lost members. Once it went to the extent of one union coercing members of the

other union to join their union by going to their respective houses and making them sign the

membership related documents. And consequently the other union made a big hue & cry over

this issue.

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The unions had so many complaints against one another that the management had to

employ some selected individuals in management position especially for listening to their

problems and negotiate issues separately with each of the unions. The amount of time spent

by these people with each of the unions was so much that eventually the persons concerned

were jokingly referred to as owningthat particular union. Under these conditions, the

management had to sit with the two unions separately and it was almost impossible to arrive

at any consensus at any given point of time. Any agreement with one of the unions

automatically meant opposition from the other union. It was more of a vicious circle with no

end in sight in so much that some members of the management thought that classic divide and

rule policy would be the best course of action.

As the British parent company was mulling its takeover by Totalfina of France, and

the new economic policy being introduced in the nation and the state, a new managerial

philosophy emerged at COI at the turn of the nineties. The change agent was Dr. P. K. Dutt,

who had joined COI in 1970 as a management trainee, after Ph. D. in polymer science and

decade-long job as a faculty at University of Arizona over 1960-1970. Dutt rose rapidly to

become the first non-British Chief Technical Manager of COI over the next few years. After

a 2-year strategy stint at the British head-office, he came back as a General Manager for COI

and West African operations of the parent company in 1982. Soon thereafter, he was

appointed to the Board of COI in 1984, given charge as Assistant Managing Director in 1986,

and eventually made Managing Director (equivalent to CEO) of COI in 1991. Regarding this

period, Dutt commented in our interview:

I had no intention of coming back to India when I was posted in UK but I was calledhere as the company was going through some difficulty. In this context therefore I had a veryclear mandate: (1) to modernise the company and (2) to take it forward. Though one shouldnot boast, the subsequent results, however, proved that after I came back the turnover morethan doubled and the profit grew to four times during the period 1988-89.

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With his appointment as Managing Director, Dr. Dutt and his management team

charted out a fresh approach to break the long- standing union impasse. The previous

management had worked under the assumption that the existence of two weak rival unions

instead of one strong union flexing its muscles was certainly an ideal situation from the

control point of view. The belief of the new management was that if they could appeal to the

good senses of the workers they would understand the importance of collaboration and unity.

No employee, whichever union he belonged to, was interested in petty squabbles and union

fights on a daily basis. They were coming to work to earn their daily bread and had enough

sense to understand what was good for them in the long run. In other words, the new model

was to approach workforce as loving and living assets, who loved their firm and who

would prefer to live in a healthy and vibrant work environment. In words of Dr. Dutt, the

model was guided by the changing worldview of competition and strategy:

Till the mid-eighties we had to become competitive against local small-scalecompanies which had a lot of fiscal advantage and the product did not require anysophisticated technology. Being a British company, on the other hand, we had a very highoverhead cost. During that time we could, however, manage to improve our efficiency andsurvive. From mid-nineties and afterwards, due to liberalisation, our competitors are not thelocal companies anymore. We have to now compete with anybody, anywhere across the globeand remain really world-class. It was not easy for the company to become world-classwhich was functioning in a country closed for nearly forty years.

Taking the opportunity of upcoming annual agreements with the unions, the

management put to test their hypothesis of workforce as loving and living assets. In

response to the two separate charters of demand from the two unions, the management placed

a unique and hitherto unheard of proposal. They intended to recognize both the unions as one

representing the interests of the entire workforce. They announced that the management

would only entertain ajoint charter of demands and the process of negotiation and final

settlement would only be done with representatives from both the unions attending the

meeting. There was an immediate resistance from all the quarters, including members of the

management that the new model was doomed to fail.

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However, the management took a firm stand and adopted the strategy of

communicating extensively highlighting the benefits of such collaboration at several meetings

with workers on the shop floor. They explained to the workers that the strength in numbers in

deciding majority /minority did not make much of a difference to them as the management

was committed to treating both the two unions at par. The management would always follow

a policy of non-discrimination, recognizing both the unions as representing the interest of the

workers. The union leaders resisted this move strongly, fearing to lose the power and

attention they had become accustomed to. But the communication exercises of the

management were beginning to have a profound effect on the general workers. In this regard,

Dr. Dutt observed:

my major strength is my total openness. I dont hesitate to say the truth straight andvalue transparency. It might be seen as my weakness as well but I do honestly perceive it asmy strength. I could be blunt, if required. I believe that after all the CEO is the leader and ifanything is not right the leader has to say it. To tell the truth in the Indian situation speakingthe truth may be, often perceived as weakness. Culturally, we are always looking forsympathy. Sympathy for the right reason or the right cause is humane. But sympathy forsomebodys failure does not exist in my book. I believe that everybody should show a senseof responsibility. I also have a very high expectation from people as I believe that

performance is truly limitless. Though I at times sound rather blunt, people know that what Itell them is nothing personal based on my liking/disliking. I am always perceived asfair.

The rank and file members recognized the new model as fundamentally designed for

their own benefit, and at the same time for enhancement of organizational effectiveness. The

union leaders soon gave in to the popular grassroots sentiments, and called a joint meeting for

joining hands together and tried to resolve mutual differences on their own without

managerial intervention. Finally they decided to accept practically all the pre-conditions of

the new model, i.e. they agreed to sit in joint negotiation meeting with the management

having equal representatives from both the unions. They also decided to have equal number

of representatives for the Works committee and the Canteen Committee where the number of

union reps required was even. But the Provident Fund committee seemed to pose a problem,

as the number of reps required was three. This was resolved through a management

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suggestion to have a ratio of representation from the two unions as 2:1 in one year and 1:2 in

the next year. In addition, switching between the unions was banned forever. Any new recruit

would be given a choice to join any of the union but they would have to remain with that

union for life. Though the union leaders vehemently opposed the idea of submitting a single

memorandum, they eventually landed up submitting virtually identical copies of Charter of

Demands on their union letterheads. As part of the new Code of conduct, built on the

message of solidarity, no labor related issue was at all to be discussed from now onwards,

without the presence of both the union representative even when discussing issues pertaining

to one union only. Further, to contain costs and ensure dedicated work during normal hours,

all overtime hours were eliminated with mutual consent. Looking back in 2001, Dr. Dutt

noted:

Here, the unions have different political affiliations. But we always talk to themtogether. I dont even know who belongs to which union and people often laugh at me forthat, but it really does not matter. There are only some token symbols ( like union flags ) butno real politics goes on inside the company. Long back, in mid-eighties I had told them it istheir choice whether they want to be a part of a sick company or a healthy businessorganisation. If they want politicking and unionism they would surely dig their own grave.

Towards a Shared Future

Today, after almost a decade, the workplace climate has so transformed that the union

members hardly differentiate between the unions. More often than not, they invite the

opposite unions leader to solve intra-union problems, urging that the presence of any one

leader would be enough to handle any situation. In the event of any one leader being absent it

would be taken for granted that the other leader would intervene. The two union leaders, who

used to avoid being seen together in public, now share a very good rapport, and an equal

status from members of both the unions. Management is seen as a true friend, guide and

philosopher, with umpteen instances where workers, after having been promoted to the

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managerial positions with adequate experience, still retaining their union memberships. In

this regard, Dr. Dutt observed:

I do not believe in any management-union division, which is very artificial in nature.

I know almost all the workers personally go, meet and talk to them and they can also talk tome freely. I tell them, Look, what you are doing is not right and they listen to me since theyknow I dont talk rubbish. I am working in this company for so many years and whenever inCalcutta I go to the factory, at least three-four times a day. I never restrict myself in the office

because I dons believe in running a company from an office.

The success of the loving and living asset model has allowed COI to move ahead

with several innovative work practices, to face the new era of globalization and competition

that is emerging. As part of the annual agreement signed on 2nd January, 2000, to celebrate

the new millennium, the management and unions decided to introduce a new night shift, to

relocate existing manpower and support further growth in productivity through multi-skilling

and flexible learning. Already, there is an increased thrust on training workers to run several

machines, instead of limiting them to only one. To capitalize upon the opportunity for

enhanced learning, the number of holidays has been reduced to 12 instead of earlier 16,

without any extra compensation for these days, which has allowed the company to commit to

the enhanced training despite growing competition.

The boundary of the jobs has now become flexible, so that in case of shortage of

manpower the work never suffers. Further, the workers have been entrusted with tasks, such

as quality control, previously entrusted to management staff only. In addition, housekeeping

is now a part of everybodys job. On the other hand, peripheral jobs like security have been

contracted with outside agency to allow focus on jobs where the firm can contribute to skill

enhancement of the workers. All the workers are now paid through cheque, and are eligible

to draw money using an ATM card from zero-balance accounts with a bank. As noted by Dr.

Dutt, these developments have taken a fresh meaning with changeover to the Japanese parent:

being a part of DIC, a very large group of companies, COI has access to the very best

technology in the world. We are training the people all the time and like any other companythe focus is now on cost, we are now much more cost-conscious than we were before.

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In summary, the management belief in treating human assets with dignity and

believing in their inherent goodness has been key to the development of COI. While the firm

has done well in preserving and fostering its human and technical competencies, and

responding to the Post-competence challenges, it is looking forward to a renewed integration

of these with Investor Orientation. As shown in Table 6, the profits of the firm took a beating

in 2000, as compared to the earlier years, on account of increased depreciation and material

costs.

---------------------------------


---------------------------------

In this regard, a spiritually guided attitude of Dr. Dutt, reflected in the following quote,

may prove as decisive in the transformative organization without any discontinuity:

I dont see or need any major change, which can only happen when there is no properplanning. I believe the changes should be focused on the business process. I do not believe indrastic downsizing because I understand that in this country without any social securitysystem people are really helpless without a job. I firmly believe that in every sick company itis the failure on the part of the management rather than the fault of the workers. I attribute75% weight to the change of business process and reducing wastage and 25% reducing thenumber of people. In a country with a tremendous growth potential, in fact, we need people. Iwelcome the process of automation but I will also like to calculate the real cost-effectiveness.We reduce numbers through a really soft Voluntary Retirement Scheme (VRS) programwhich basically emphasizes the concept of natural attrition and job-freezing.

Already, Coates of Indias positive climate has become an exemplar in the State of

West Bengal, which is now shedding its past image of leftist unionism and moving towards a

more positive, meaningful, relationship between the workforce and the management.

Conclusions

In this chapter, we reviewed the transformative perspective in change, leadership, and

learning domains. In its essence, transformative perspective allows an organization to

develop a higher-order integrative insights into the differentiated features of various domains,

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so that a new meaning of change, leadership, and learning is created, which allows the

organization to live a fulfilling life in each of those domains. The participants in the

organization are also thereby able to share their differences, and develop a shared sense of

reality, and construct bridges between their different realms of life. The transformative

organizations go to the very purpose of human and organizational life, which pervades all the

domains of human and organizational behavior. Thus, transformative approaches influence

the heart or culture of the organization, and help generate a new integrative emic meaning of

each behavior.

We developed a theory of strategic cultures of organizations, identifying four types of

strategic cultures each associated with one region of the world. The four types were

Investor Orientation (typical of Western Hemisphere and Anglo), Competence Orientation

(typical of Asia-Pacific), Post-Competence Orientation (typical of Europe), and Spiritual

Orientation (typical of Africa). We proposed that the globalization creates the challenge for

developing an integrative culture, and suggested that the transformative perspective allows the

firms to put appropriate proportionate priorities on each of these strategic domains without

sacrificing any one of them.

We tested the proposition about the integrative strategic cultures of the transformative

organization using the analysis of an Indian firm, Coates of India, whose holding shifted from

a British parent, to first French parent, and then to Dutch/Japanese parent over the last ten

years. Using survey data from the top management team, we found that the firm puts very

high priority on Investor and Competence Oriented culture, high priority on Post-competence

culture, and some but limited priority on Spiritual culture. The CEO interview further

indicated that the firm has enjoyed greatest gains in Competence oriented culture over the

recent years, as manifested in a complete transformation of the industrial relations climate,

while also building up Post-competence orientation involving the positive effect of this

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transformation on the local state. The Investor oriented culture has taken some beating in the

recent times, but may improve as the firm looks at its role in transformative terms, covering

co-development of employees, community, and the nation.

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Table 1: Item Composition of Strategic Culture Scales

Investor Orientation Cost control; firm profitability; product quality; sales volume

Competence Orientation Long-term competitive ability of the organization; effect on

relationships with other organizations with which you do

serious business; employee professional growth and

development; employee relations issues; customer satisfaction

Post-Competence

Orientation

Contribution to the economic welfare of the nation; welfare of

the local community; environment; minority employees;

female employees

Spiritual Orientation Ethical considerations; supernatural forces, such as auspicious

days and forecasts by truth sayers; pleasing, respecting, not

offending a divine being

Note: All items evaluate how much importance should be assigned when making critical

management decisions, with response alternatives ranging from 1 (none) 4 (moderate) 7

(most important)

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Table 2: Strategic Culture Scores for Coates of India

Respondent

1

Responden

t 2

Responden

t 3

Responden

t 4

Responden

t 5

Responden

t 6

Firms

AverageInvestor Orientation 7.00 5.50 7.00 5.00 6.50 6.75 6.29

CompetenceOrientation 6.40 5.80 6.60 4.80 6.20 6.40 6.03

Post competenceOrientation 5.20 4.80 4.40 4.40 4.40 6.20 4.90

Spiritual Orientation 3.33 3.00 3.33 2.00 2.00 5.00 3.11

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Table 3: Production Growth at Calcutta Plant of COI during early 1990s

DEPARTMENTS PRODUCTION

BEFORE 90s

PRODUCTION

DURING 94-95

INCREASE IN

PERCENTAGE

LIQUID INKS 2000 3600 80LIQUID INKS

BLENDING

7 JOBS 10 JOBS 43

LIQUID INKS

VARNISH

1200 2600 117

PASTE INKS

WEIGHING

2000 4000 100

PASTE INKS

VARNISH

4TONS 7 TONS 75

CHIPS 3 TONS 7.7 TONS 93

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Table 4: Growth in Calcutta Plant Productivity over the early 1990s

1990-91 1991-92 1992-93 1993-94 1994-95

Production Value (Rs.

Million)

148.32 205.73 255.17 277.02 361.25

Production units (in Million

tons)

1605.13 1802.15 1958.65 2150.58 2497.93

Value Added (Rs. Million) 44.88 65.41 80.14 95.71 116.45

Wages (Rs. million) 11.87 12.75 14.74 16.03 17.12

Number of Workmen 240 237 235 234 227

Productivity (Rs. Value

Added/worker) 187,000 276,000 341,000 409,000 513,000

Profitability (Rs. Value-

added-Wages)/worker 138,000 222,000 278,000 341,000 438,000

Units produced ( in million

tons )per workman

6.69 7.60 8.33 9.19 11.00

Production Value ( Rs. per

worker)

618,000 868,000 1,086,000 1,184,000 1,591,000

Wage Cost in Rs. / units

produced in million tons

7394 7076 7527 7456 6855

Wage Cost/ Production

Value

8 6.2 5.78 5.79 4.74

Unit Realization (Rs/ton) 0.09 0.11 0.13 0.13 0.14

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Table 5: Modernization Investments in Calcutta Plant of COI, (Rs. million)

Year Computers Plant & Machinery

1994 - 52.257

1995 - 51.049

1996 11.851 24.3881997 10.347 30.715

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Table 6: Recent Performance of Calcutta Plant of COI

Year Sales Figures( in

million rupees)

Profit After Tax( in

million rupees)

Production units( in

tons)

1998 1448 85 25311999 1642 101 2657

2000 1844 90* 3051

* There was a significant increase in material costs and depreciation leading to reduction in

the amount of profits

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Figure 1: The Process of Transformative Change

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