Sep 14

What are Dynamic Capabilities?

Concept of Dynamic Capabilities of a Firm

A dynamic capability refers to company’s ability to integrate, build and transform internal and external competencies. They can help an organization to achieve innovative forms of competitive advantage through integration, building and transformation of internal and external competencies, as to respond to changes in the environment. This management theory was defined by David Teece, Gary Pisano, and Amy Shuen in their 1997 paper Dynamic Capabilities and Strategic Management. In the context of achieving organizational change, aligned to the external pressure: namely, these capabilities are perceived as business processes that use resources – specifically the processes of integration, restructuring, acquisition and release resources – to adapt or create market changes. Dynamic capabilities are especially helpful in explaining the sources of competitive advantage in extremely volatile markets.

Dynamic capabilities are determined by organizational and managerial processes, positions and paths. The organizational and managerial processes refer to the routines, i.e. current practices in an organization, such as coordination, integration, learning, transformation, etc. This is especially important, since most organizations engage in repetitive processes, such as production and/or service delivery, which require standardized performance of specialized tasks, in order to achieve adequate performance. Routines have developed over time and, at the moment of analyzing an organization, they represent successful solutions to common problems.

Organizational knowledge, accumulated through learning activities, results in new routines, which can, nevertheless, be shaped by future decisions and development directions. In the dynamic capability perspective, the strategic alternatives available to an organization are referred to as paths.… Read the rest

Jul 09

Case Study: Nick Leeson and the Collapse of Barings Bank

In 1985, Nick Leeson had a job as a clerical work at Coutts & Co. The Coutts & Co is a private banking house in United Kingdom which own by aristocrat. This bank was a subsidiary of the National Westminster Bank. During that period, the stock markets were rising for several years and the bank were expanding into a new financial instruments coming in and demand for labor was high. During that time, Nick Leeson was the person who had many working class young men.

After two years, Nick Leeson moved to Morgan Stanley, one of the US investment bank. Nick Leeson be a settlements clerk at that bank. Nick Leeson can absorb more knowledge about new derivatives market from that bank. In 1989, Nick Leeson was applying a for job at Baring Securities due to his own knowledge with trading in Japan, that time Nick Leeson was 22 years old . In the same year, the Bank just begin to trade Japanese Futures and options.

Nick Leeson was lucky, he had a chance to overcome severe settlement problems in Jakarta Indonesia because Ian Martin, the finance director was appointed him and give him a chance to settle this problem. That time Baring Securities scared their losses running into million and million and sent out four-man team to settle this problem. One of the member in Four-man team was Lisa, Lisa become Nick Leeson wife at 1992. That time, Nick Leeson feels unsatisfied that he need spending whole life in sorting out share certificates.… Read the rest

Jun 22

The Importance of Core Competencies in Strategy Formulation

Strategy allows an organisation to deliver its vision. To develop a deliberate strategy which could potentially increase the sustainability of an organisation clearly requires the identification of core competencies but often a single strategy is not the answer. Organisations require a headline strategy to fit a brief which resonates the vision but several strategies are required over many departments such as research and development, production and marketing to deliver the main strategy. The process of strategy development is complex and methodology depends on several factors including the availability of resources and the external environment. The first step in strategy development is the identification of core competencies then followed by the the process of leveraging resources so they can be exploited for maximum benefit.

Strategy development is a crucial step in attaining competitive advantage but a strategy is only as successful as its implementation. The process of leveraging core competencies therefore is vital and requires careful consideration since it forms the basis of implementation.

Identifying Core Competencies

Formulating strategies is a cyclical process in which an internal analysis of an organisation plays a crucial part. This analytical process involves taking a theoretical approach known as a resource-based view in which an organisation objectively looks at all its resources and capabilities to see how best they can give an organisation competitive advantage. An organisation’s resources can be tangible, intangible or human and that these can be matched to its capabilities to eventually provide competitive advantage. This process of exploiting the unique combination of resources and capabilities has given rise to the term of core competencies which have been defined as the ability of an organisation to coordinate all its technologies and production skills in order to deliver its strategy.… Read the rest

May 27

What is Succession Planning? Definition, Need and Process

Succession planning is a process for identifying and developing internal people with the potential to fill key leadership positions in the company. Succession planning increases the availability of experienced and skillful employees that are hopeful to undertake these roles as they become available. This process focuses on seeking the right person, not just the available person. It’s built on the idea of recognizing the potential leaders in organization and developing them so that they are ready to move up when the opportunity arises. It’s one of the best methods to promote recruitment and retention in organization.

Although people often mix up replacement planning and succession planning, the latter goes beyond former planning because its focus is larger than one position or department. While often related to planning for senior executive replacements only, it is really broader than that can extend as far down the organization chart as managers want to go. It also differs from replacement planning because successors are considered by level on the organization chart. A talent pool is identified based on each level of management and a typical goal is to prepare as many successors as possible to be 80 percent ready for promotion to any position at the next level on the organization chart. The remaining 20 percent of development is provided when individuals have been promoted to higher level responsibility.

Succession planning is usually based on the assumptions that:

  1. A goal is to identify a talent pool of many people who are willing to be considered for promotion and work to be developed for it.
… Read the rest
May 22

Workplace Flexibility and Work-Life Balance

In the modern highly volatile business environment, organizations go through a tough time keeping up with the market forces due to the severity of the competition they face. This makes the customer search for the best quality and value for their money. Therefore organizations formulate strategies and these strategies are then transformed into quantitative objectives and are broken down to each employee in the organization in order that they can carry out their part in it. This creates pressure in the minds of the managers and their employees. The managers persuade the employees and get the tasks done one way or the other. This increasingly demanding workplace complexity is what causes work-life balance issues. In other words, employees find it rather difficult to balance the work with their own personal lives.

Is Workplace Flexibility the ‘Solution’ to Work-Life Balance Problems?

In the context of human resource management, workplace flexibility refers to the ability of an organization to adapt according to its various human resource needs. In the contemporary business organization, there are four main sources of workplace flexibility. Functional flexibility refers to employees being multi skilled and able to undertake a range of tasks, thereby making the organization immune to the absence of any key person in the workforce because his duties can be delegated to someone else. Numerical flexibility is more a short term approach that enables management to increase or decrease the workforce strength depending on the requirement. Temporal flexibility requires changing patterns of hours that are worked and wage flexibility refers to using a non-standardized pay structure, such as performance related pay.… Read the rest

May 22

Influence of Work-Life Balance Practices on Employees Retention

Before examining how work-life balance programs contribute to increased retention of employees, its better to examine some of the key reasons for employee turnover. It is widely acknowledged that conditions at the workplace affect job turnover. There are many reasons why employees quit because of conditions at the workplace such as long hours, conflict with colleagues and superiors, lack of appreciation shown by employers and unclear job descriptions.

For example, long hours at work and increased work intensity both contribute to adverse physical and psychological conditions and lead to negative family functioning. Workplace stress can be caused by long working hours, excessive workloads, weekend duties, inadequate physical activity and an unhealthy lifestyle. All these lead to a reduction in the quality of health. When employees are severely overworked and excessively strained, they experience symptoms of fatigue, depression, musculo-skeletal pains, sleeping disorders and an increase in chronic diseases. When the situation becomes too stressful, employees leave their jobs, even opting for those that pay far less but involve less stress.

If workplace stress is prolonged, it leads to burnout. The psychological dimensions of job burnout consisted of three components namely emotional exhaustion, de-personalization and diminished personal accomplishment. Burnout is potentially fatal as it increases the risk of coronary diseases, stroke and suicidal tendencies. Employees who lack time to spend with their family or maintain a social life are more likely to be emotionally exhausted, which impact negatively on their job satisfaction and eventually cause them to leave their organizations.

Also, employees quit their jobs because of dissatisfaction.… Read the rest