Lecture 4&5, 2006.

Contextualising KM April 29 & 30, 2006 Outline Introduction Assessment The Challenging Nature of Global Economy

–

globalisation and free trade

National differences in the political Economy Strategy, Structure, and Process Cultural Variance- recruitment and staffing; - culture, commitment and trust

World GDP 2004 (Ranking Economy US dollars millions)

1 United States 2 Japan 3 Germany 4 United Kingdom 5 France 6 Italy 7 China 8 Spain 9 Canada 10 India

11,667,515 4,623,398 2,714,418 2,140,898 2,002,582 a 1,672,302 1,649,329 991,442 979,764 691,876

11 12 13 14 15 16 17 18 19 20

Korea, Rep. Mexico Australia Brazil Russian Federation Netherlands Switzerland Belgium Sweden Turkey

679,674 676,497 631,256 604,855 582,395 577,260 359,465 349,830 346,404 301,950

World Development Indicators database, World Bank, 15 July 2005

Implications for small home market • Reliance of MNC on its home-country market. For many firms, a small home market is one of the major motives for “going international” UNTD conference published its annual survey on FDI “index of Transnationality”- foreign asset to total asset, foreign sales to total sales and foreign employment to total employment.

The ‘top ten’ multinationals 1. Rio Tinto (UK/Australia) 2. Thomson Corporation (Canada) 3. ABB (Switzerland) 4. Nestlé (Switzerland) 5. British American Tobacco (UK)

6. Electrolux (Sweden) 7. Interbrew (Belgium) 8. Anglo American (UK) 9. AstraZeneca (UK) 10. Philips Electronics (The Netherlands)

UNCTAD Index of Transnationality

Worlds Largest Companies

• http:// www.finfacts.com/Private/curency/fortune.htm

THE 2005 GLOBAL 500 • RankCompanyRevenues ($ millions)Profits ($millions) 1 2 3 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Wal-Mart Stores BP Exxon Mobil Royal Dutch/Shell Group General Motors DaimlerChrysler Toyota Motor Ford Motor General Electric Total Chevron ConocoPhillips AXA Allianz Volkswagen Citigroup ING Group Nippon Telegraph & Telephone American Intl. Group Intl. Business Machines Siemens Carrefour Hitachi Assicurazioni Generali Matsushita Electric Industrial

287,989.010,267.02 285,059.015,371.03 270,772.025,330.04 268,690.018,183.05 193,517.02,805.06 176,687.53,067.17 172,616.310,898.28 172,233.03,487.09 152,866.016,819.010 152,609.511,955.011 147,967.013,328.012 121,663.08,129.013 121,606.33,133.014 118,937.22,735.015 110,648.7842.016 108,276.017,046.017 105,886.47,422.818 100,545.36,608.019 97,987.09,731.020 96,293.08,430.021 91,493.24,144.622 90,381.71,724.823 83,993.9479.224 83,267.61,635.125 81,077.7544.1

HISTORY OF WORLD TRADE • International business dates back to early civilisations such as the Egyptians and Greeks with evidence of extensive trade as early as 3000BC. • The basis of that trade remains virtually unchanged: product and skill differentials. • The 1400s and 1500s was the period of the birth of modern world trade with exploration of the “New World”.

PUNNETT AND RICKS’ ERAS Commercial Era (1500-1850) • Trade in exotic goods. • Joint ventures between entrepreneurs and European royalty. • The first company to be anything approaching a multinational company (MNC) was the British East India Company founded in 1600. Explorative Era (1850-1914) • Shift to trade in industrial products FDI emerged in this period with transfers of skills and emerging technologies. Concessionary Era (1914-1945) • Serious FDI with “paternalistic responsibility” by Western firms and concessions from host countries. This era also saw many nations erect formidable barriers to international trade and investment with high tariff on import of manufactured goods. This lead to retaliatory trade policies which ultimately depressed world demand and contributed to the great depression in world economy in 1930.

National Era (1945-1970) Emergence of hostility towards Western firms and emergence of sovereignty and self-government. However, this did not impede growth of multinationals and the modern MNC emerged in this period boosted by technological developments in WW2. US dominance in the world economy and world trade. US dominance in the world FDI (66.3%, 1960). The early part of this period dominated by US firms with non-US competing as major MNCs in the later part. 1970 Japanese and European firms begin to shift labour-intensive manufacturing operations to developing nations where labour costs were lower Post 1970 Era Emergence of Japan as a major global player Increasing hostility towards USA. Shifts in ownership from purely domestic to the emergence of the “global firm”

Why Invest Overseas? • Dunning’s (1979) eclectic theory is a commonly used explanation of why firms move overseas. Firms should possess: • Ownership-specific advantages (OSAs), ie their source of competitive advantage such as size, position in the world market, credit rating etc. • An incentive to internalise these advantages • Location specific advantages (LSAs) not directly related to the firm but to the environment e.g. access to sources of supply not available to domestic producers.

• When all three are present the opportunity exists for a firm to exploit the market.

Competing for the future- Video • Two of the worlds most renowned professors: Prof. Gary Hamel- (London School of Economics) Prof. C. K Prahalad (Michigan University) • Discuss the nature of competition, particularly focusing on the Japanese assault on US lead export for 30 plus years.

The History and Development of Organisations – Pioneering Ideas

Lecture outline • • • • • • •

Early management ideas Classical theorists Behavioural theorists Quantitative approach Contemporary ideas Innovation & management theory Org. culture as an evolving process

Early management ideas • Robert Owen (1771–1858) Identified the importance of working and social conditions for employees.

• Charles Babbage (1792–1871) Ideas on work specialisation, production efficiency, incentive and profit-sharing plans.

• Henry R. Towne (1844–1924) Called for a ‘management science’ that would establish ‘principles’ of management.

Early management ideas Assessing the early contributions: • Uncoordinated efforts. • Contributions tended to relate to specific problems. • Did not see ‘management’ as a separate field or skill (until Towne).

Classical theorists ‘This viewpoint emphasises managing work and organisations more efficiently. It comprises three different management approaches: scientific, administrative and bureaucratic.’

Classical theorists • Scientific management F. W. Taylor, F. & L. Gilbreth, H. Gantt

• Bureaucratic management M. Weber

• Administrative management H. Fayol

Scientific management ‘Scientific management is an approach within classical management theory emphasising the scientific study of work methods to improve worker efficiency.’

Scientific management Frederick W. Taylor Four principles of ‘scientific management’: • Select & train the best. • Determine the most efficient work methods. • Co-operate with workers to ensure best method is used. • Divide work/responsibility between workers & managers.

Scientific management • Frank & Lillian Gilbreth – Time & motion studies – Human implications of Scientific Management

• Henry Gantt – Pay incentives – Gantt chart

Bureaucratic management ‘Approach emphasising the need for organisations to operate in a rational manner rather than relying on owner’s and manager’s arbitrary whims.’

Bureaucratic management Weber’s Ideal Bureaucracy • Specialisation of labour • Formal rules & procedures • Impersonality • Well-defined hierarchy • Advancement on merit

Bureaucratic management Hierarchy of positions

Advancement on merit

Max Weber

Specialisation of labour

Formal rules & procedures

Administrative management ‘Approach focusing on principles used by managers to co-ordinate the organisation’s internal activities.’

Administrative management Henri Fayol’s Principles of Division of work management

• • Authority • Discipline • Unity of command/direction • Primacy of general interest • Remuneration • Esprit de corps

• • • • • •

Centralisation Scalar chain Order Equity Low turnover Initiative

Administrative management Organising Planning Commanding

Henri Fayol Controlling

Co-ordinating

Behavioural theorists ‘Perspective on management emphasising the importance of attempting to understand various factors affecting human behaviour in organisations.’

Behavioural theorists Early theorists: • Hugo Munsterberg Creating optimal psychological conditions, behaviour shaping

• Mary Parker Follett Importance of group functioning

• Hawthorne studies Importance of supervisory style

Behavioural theorists Human relations movement • Abraham Maslow Hierarchy of Needs

• Douglas McGregor Theory X & Y

Maslow’s Hierarchy of Needs Self-actualisation Esteem Social Safety Physiological

McGregor’s Theory X & Y Theory X

Theory Y

Work avoiding

Work is natural

Need to control

Capable of self-direction

Avoid responsibility

Seek responsibility

Workers seek security

Can make good decisions

Quantitative management viewpoint ‘Focuses on mathematics, statistics and information aids to support managerial decision making and organisational effectiveness.’

Quantitative management viewpoint • Management science ‘Approach aimed at increasing decision effectiveness through use of sophisticated mathematical models & statistical methods.’

• Operations management ‘Function or field of expertise primarily responsible for managing production & delivery of an organisation’s products and services.’

• Management information systems ‘Field of management focused on designing & implementing computer-based information systems for use by management.’

Contemporary viewpoints • Systems theory ‘Approach based on the idea that organisations can be viewed as systems.’

• Contingency theory ‘Viewpoint arguing that appropriate managerial action depends on the particular parameters of the situation.’

Contemporary viewpoints • Theory Z ‘Concept combining positive aspects of American and Japanese management into a modified approach aimed at increasing managerial effectiveness while remaining compatible with the norms and values of American society and culture.’

• Total Quality approach ‘Approach highlighting collective responsibility for product and service quality, and encouraging individuals to work together to improve quality.’

Promoting innovation

• • • •

Each management viewpoint provides a contribution to managing innovation: Classical Behavioural Quantitative Contemporary

summary • Early management ideas Generation of ideas leading to identification of management as a significant field of inquiry.

• Classical theorists Emphasised finding ways to more efficiently manage work and organisations.

• Behavioural theorists Emphasised the importance of trying to understand factors affecting human behaviour in organisations.

Summary cont.. • Quantitative approach Focuses on mathematics, statistics and information aids supporting managerial decision making and effectiveness.

• Contemporary ideas Views of organisations as systems, importance of contingency factors & amalgamating Japanese & American management practices.

• Innovation & management theory Each approach provides insights, knowledge & practice regarding the management of innovation in organisations.

The enduring context of International HRM

Writing in 1980’s on the state of the field IHRM, Laurent (1986) concluded that: “the challenge faced by the infant field of IHRM is to solve a multi-dimensional puzzle located at the crossroad of national and international cultures” (p.101)

Approaches to IHRM The field of IHRM has been characterized by three broad approaches: 1. Early work emphasized a cross-cultural management. This approach examines human behavior within organizations from international perspectives

• Developed from the comparative IR and HR literature. This approach seeks to describe, compare and analyze HRM systems in various countries. 3. Seeks to focus on aspects of IHRM in multinational firm.

Definition of IHRM Difficult to underpin- it depends on which approach the researcher takes. We will focus on the third approach- broad in nature.

Inter-relationships between approaches in the field

Defining IHRM The general field of HRM • Typically HRM refers to those activities undertaken by an organisation to effectively utilize its human resources which at least include: -HR planning -staffing -performance management -Compensation and benefits -Labour relations From the above list, which activities change when HRM goes international?

Three dimensional model of HRM (Morgan, 1986) 1. Three broad HR activities of procurement, allocation, and utilization can easily be expanded into the six HR activities above 2. The three national or country categories involved in IHRM are: -the host country where a subsidiary may be located -the home country where the firm is headquarter -”other” countries that may be the source of labour or finance -

Three dimensional model Cont…. 3. The three types of employees of an international firm are: -the host-country national (HCN’s) -the parent –country nationals (PCN’s) -the third-country nationals (TCN’s) For example, IBM employees Mauritian citizens (HCN) in its Mauritian operations, often sends US citizens (PCN) to Mauritius on assignment and may send some of its South African employees on a assignment to its Trinidad operations (as TCN).

A model of IHRM

What is an expatriate? • An employee who is working and temporarily residing in a foreign country • Some firms prefer to use the term ‘international assignees’ • Expatriates are PCNs from the parent country operations, TCNs transferred to either HQ or another subsidiary, and HCNs transferred into the parent country

International assignments create expatriates

•Thus, Morgan defines IHRM as the interplay among these three dimensions- human resource activities, types of employees, and country of operation. •In broad terms, IHRM involves same activities as domestic HRM (e.g., procurement refers to HR planning and staffing), however, domestic HRM only involves the national boundary. •The complexities involved in operating in a different countries and employing different national categories of workers is a key variable that differentiates domestic and international HRM.

Differences between domestic and international HRM • More HR activities (int. tax, relocation & orientation) • The need for a broader perspective (multiple polices e.g compensation, tax)

• More involvement in employees’ personal lives • Changes in emphasis as the workforce mix of expatriates and locals varies • Risk exposure (financial consequences of failure) • Broader external influences (government regulations, ethical concerns etc)

•Increasingly, domestic HRM is taking on some of the activities of IHRM flavour as it deals with more and more with multicultural workforce. •Domestic HRM issues on managing workforce diversity may prove to be beneficial to the practice of IHRM.

Variables between domestic and IHRM

• In addition to complexity, four other variables moderate (that is either diminish or accentuate) differences between domestic and IHRM

Variables that moderate differences between domestic and international HRM

Variables defined • Cultural environment- complex issue convergence V divergence- two assumptions 1.That there were sound principles of management that held regardless of national environment 2. That the universality of sound management practices would lead to societies becoming more and more alike in future- in other words, we will converge and we will all become like Americans. Theses assumptions took a macro-level view (structure and technology used by firms across cultures). This became an established paradigm for researchersmethodological problems.

Variables defined Cont… • Industry Porter’ model of competitive advantage (value chain)- ie industries in which a MNC is involved is of considerable importance because patterns of Int. competition vary from one industry to another. HRM is one of four support activities of the five primary and support activities. HRM cuts across the entire value chain of the firm

Variables defined Cont… • Reliance of MNC on its home-country market. For many firms, a small home market is one of the major motives for “going international” UNTD conference published its annual survey on FDI “index of Transnationality”- foreign asset to total asset, foreign sales to total sales and foreign employment to total employment.

The ‘top ten’ multinationals 1. Rio Tinto (UK/Australia) 2. Thomson Corporation (Canada) 3. ABB (Switzerland) 4. Nestlé (Switzerland) 5. British American Tobacco (UK)

6. Electrolux (Sweden) 7. Interbrew (Belgium) 8. Anglo American (UK) 9. AstraZeneca (UK) 10. Philips Electronics (The Netherlands)

UNCTAD Index of Transnationality

Variables defined Cont… • International mindset- need to make a clear distinction between domestic issues and international environment.

Factors influencing the global work environment

summary • Defined international HRM and the term ‘expatriate’. • Discussed the differences between domestic and international HRM – looking at six factors: more HR activities, the need for a broader perspective, more involvement in employees’ personal lives, changes in emphasis as the workforce mix of expatriates and locals varies, risk exposure and more external influences. (cont.)

summary (cont.) • Examined what we have called the enduring context of IHRM. The focus is on the current global work environment, looking at the forces for change that have prompted managerial responses that have implications for the way in which people are being managed in multinationals at the turn of the 21st century. However, we have made a brief comparison with the situation that confronted a 14th-century merchant as a way of drawing out some of the constants in international business.

Strategy, Structure and Process Strategic management process- in broad terms all MNC’s continuously develop their strategy given from the macro-micro analysis. This in turn develops the structure and process of MNC either in HCN, PCN & TCN. The most difficult task is implementation of strategies as polices, procedures & process can never be the same in all country: Religion Language Education levels Practices of management Power & politics Organized employee associations

Global, National, & Local Practices The National business system (NBS) approach argues that within the same business system we will tend to see similar strategic and political practices. We will try uncover how local managers influence and interpret the rules of the game and develop local sources of power within MNC itself.

Opposing arguments • Global enterprise- a topic of mainstream international management literature.

• Divergent capitalism- a debate predominantly led by European scholars.

However, both see economic organizations as mainly structurally determined despite their different focus on either global or national influences and both give little consideration to the influence of key local managers and employee representatives.

Key arguments of NBS Globalisation, ‘best practices’ and the ‘global enterprise’ •

• •

•

Recent approach stress that globalization (apart from economic & Technological change) is also driven by a convergence of business culture and policies. Claimed that MNC are becoming “placeless” –national identity is replaced GC by the commitment to a single unified global mission. Research in strategic management stresses that the organisational structure will inevitably follow Anglo-Saxon business model of capitalism with a multidimensional organisational structure with the key focus on shareholder value. Continental European firms “lost out” to Anglo-Saxon model. Thus MNC use shareholder value as a key performance measure- use similar restructure.

The globalization debate has influenced the debate about HRM as an organizational strategy. •Earlier focus on Japanization and its implication for the management of employee resources, particularly in UK gave way to Anglo-Saxon, chiefly US approaches to HRM in the wake of Japanese financial crises. •Dominance of US HRM perspectives – focus on market-led convergence and the direct transfer of US HRM practices by US MNCs. •Question is: what US-style HRM actually is in practice. •The prediction is not only of homogenous structures but a global corporate culture and the development of “global mindset” •Divergent interest and local power resources of key subsidiary managers and employee representative bodies are played down or are ignored.

NBS and societal practices in MNC •

European research raises real doubts in economic, cultural and institutional forces will lead to greater convergence. • Evidence from 20 years research show that economic organizations are not just shaped by one type of capitalism- the Anglo-Saxon model. • In comparative cross-national research, NBS, national specific ‘industrial orders’ and ‘societal effects’ create alternative paths of organizing business and management. •

The key thesis of this approach is that historically grown national institutions such as the financial, educational, industrial relations systems of a country are interdependently linked with the characteristics of business organisations in that and exert an influence on e.g. their strategy, structure, technologies and employment relations.

A key finding- the degree of “embeddedness” ie interdependency, cohesion and integration in Anglo-Saxon model of capitalism is much lower than other capitalist nations.

Thus, the implementation of global best practice and the ability to change local practices in subsidiaries situated in highly integrated NBS will be more restricted and less radical than in less integrated systems. E.g. specific national systems of IR – managers have more influence on decision making.

IHRM and Cultural Variance

Case Analysis Two Questions: 3.

How does the overall strategy of the MNC as well as the institutional environment of NBS at subsidiary level influence the power and politics of local managers to enhance or deplete their charter responsibilities?

2.

What we want to consider is whether local management and employee representatives have the power resources and strategic choice to influence, resist and negotiate the process of globalization.

Case 1 The influence of MNC strategies on local management’s ability to shape implementation of MNC global strategies. 1a. The Finish MNC -centralized, imposed global strategy. A centralized, imposed strategic decision-making approach is applied. The company bought customized escalator manufacturing business in Germany as a business learning organization. Finish HQ- attempts to impose company model.

Case 1 cont… 1b. The German MNC- a negotiated decentralised strategy The German MNC operates in its home country. This case illustrates the characteristics of German manufacturing based on diversified quality production. Its subsidiaries across the world have a local focus and therefore less subject to centralised control. “Knowledge acquisition” is of central importance.

Case 2 The influence of the subsidiary’s strategic position and its performance within the MNC on local management and employee representatives’ ability to shape the implementation of MNC global strategies. 2a. The strategic position of the subsidiary. The strategic position of the subsidiaries within MNC can give power to protect local practices. Germany is an example.

Case 2 cont… 2b. Subsidiary performance. Performance-related ‘tract record’ are also power resources. Poor performance will significantly weaken the political influences of local management. e.g. British subsidiaries who did not have the power resources to argue the case for the retention of manufacturing units.

Case 3 The influence of the degree of institutional embeddedness of the subsidiary in HCN on the ability of local management to shape the implementation of MNC global strategies. 3a. Subsidiary operating in a highly integrated NBS. The German system- marked departure from the neoclassical free-market model. Operates on the basis of institutional and organizational linkages which promotes the negotiation of issues between the major stakeholders.

Case 3 cont…. The principle of ‘strategic interaction’ in German system, is reflected both macro and micro levels with ‘dense in network linking the managers and technical personnel inside a company to their counterparts in other firms and an internal structure based on collaborative and cooperative modes of action. Thus, the firms competitive strategies, are closely connected to internal structures, and external relationships. Firms are run as portfolio of separate units, bought and sold as financial performance dictates.

Case 3 cont…. 3b. Subsidiary operating in a weakly integrated NBS. High level of compartmentalization of British business units. -low levels of commitment and cooperation between firms and between employees and high level of mobility of operations. -weak rights of employee representative bodies, means that it is easy to close down their British manufacturing operations.

Cultural Variance Recruitment and Staffing

Cultural variance Scholars have never been able to agree on a simple definition of culture- tacit Edward Taylor (1870) an anthropologist defined culture as: That complex whole which includes knowledge, belief, art, Morals, law, custom, and other capabilities acquired by man as a member of society. Hofsede (1980) an expert on cross-cultural management defines culture as: the collective programming of the mind which distinguishes the members of one human being to from another…….culture in this sense, includes systems of value, and values are among the building blocks of culture.

Cultural variance cont… • Values- are abstract ideas about what a group believes to be good, right, and desirable ie values are shared assumptions about how things ought to be.

• Norms- social rules and guidelines that prescribe appropriate behavior appropriate behavior in particular setting.

• Society- refer to a group of people who share a common set of values and norms.

Cultural variance cont….. • The concept of organisational culture broadly defined by Denison (1996) refers to the deep structure, rooted in the relatively stable values, beliefs and assumptions held by organisational members. Subsequently, organisational members attach and identify themselves with the values and beliefs of the organisation. This in turn influences their behaviour and attitude towards the organisation.

• Commitment and trust.

Organisational Commitment • Definition: "Organizational commitment is the strength of an individual's identification with and involvement in a particular organization. It can be characterised by at least three factors: 1) a strong belief in and acceptance of the organization's goals and values. 2) a willingness to exert considerable effort on behalf of the organization. 3) a strong desire to maintain membership in the organization." (Mowday et al., (1979, p. 226)

Models of Commitment Commitment Literature • Meyer and Allen’s Three Component Model of Commitment : Affective commitment (want to), Continuance commitment (have to) & Normative commitment (need to) • Becker and Billing’s Model of Commitment : Foci of commitment- individuals, groups, departments and organization. Bases of commitment- compliance, identification and internalization

Bases of Commitment Compliance (Continuance) •

Becker (1992) defines compliance as the attitudes and behaviours adopted to obtain rewards, or avoid punishment (p.233). Turo (2000) defines compliance as obligation and argues that obligation is “related mostly to rules that a person consents to or is not able to avoid” (p.347).

Identification (Affective) •

According to Kelman (1958), identification occurs when attitudes and behaviours are adopted in order to be associated with satisfying a selfdefining relationship with another person or group.

Internalisation (Affective) •

According to Kelman (1958), internalisation occurs when attitudes and behaviours are adopted because the content of the attitude or behaviour is congruent with the individual’s value system. In other words, commitment based on internalisation is predicted on congruence between individual and organisational values (Turo, 2000).

Organisational Trust Trust has many dimensions •

Specifically, it relates to the expectation that the actions of another will be beneficial rather than detrimental. At a more general level, it relates to the assumption that we can rely upon aspects of social order as a means of protection (Creed and Miles, 1996).

•

Creed and Miles (1996) argue that “Within organisations, managers obviously play a central role in determining both the overall level of trust and the specific expectations within given units” (p.19). The concept of organisational trust therefore is largely concern with manager/employee relationships.

•

At a broader level, trust represents the degree of confidence members of a team have in the goodwill of its leaders, specifically the extent to which they believe that the leaders are honest, sincere, and unbiased in taking their positions into account.

Procedural Justice Theory – organisational climate • Procedural justice theory is concerned with the impact of the fairness of decision-making procedures on the attitudes and behaviour of those involved in, and affected by, those decisions. • The basic premise of justice theory is that fair treatment is central to decision making and a major determinant of reactions to decisions (Adams, 1965).

Procedural Fairness • Fair procedures are symbolic and help to strengthen an individual’s relationships with a group, leader and organisation. • They also serve as a sign to individuals that they are valued and respected members of the organisation and promote harmony and trust with others (Korsgaard, Schweiger, and Sapienza, 1995).

Procedural Fairness cont… • Fairness is rooted in philosophy, political science and religion (Konovsky, 2000). Within organisations, fairness appeals to both managers and employees who see it as a unifying value providing “fundamental principles that can bind together conflicting parties and create stable social structures” (Konovsky, 2000, p.490). • Fairness can be seen as a core value of the organisation to which members are attached. Effective leadership is fundamental in gaining members’ trust by truth telling, promise keeping, fairness and respect for individuals (Clawson, 1999).

Communication • Open communication- refers to the free flow of information up, down and across the organisational structure.

• Information Transparency- relates to the clarity with which that information is conveyed. Implicit in the concept of transparency is the notion that the communication is not intended to conceal, misinform or in any other way mislead the recipient. • Transparent communication involves information on moral, legal, economic and political concerns of the organisation.

Managerial Communication • Managerial communication is only credible, ethical and effective when the communication is open and honest- this increases employees’ perceptions of procedural justice and future levels of trust and commitment • It is a binding force behind trust and commitment.

Communication and Information Transparency as a Link Between Commitment and Trust

Organisational Trust

Source: Naughton, S. (2005)

Transparency in Communication & Information

Organisational Commitment

An Integrated Model of Organisational Change, Commitment and Trust

R4 Organisational Trust Communication & Information Transparency

R3 Organisational Climate

Involvement in Decision Making

Organisational Commitment

Source: Naughton, S. (2005)

Organisational Culture

R2

*R1

Coordination & Competency Development

Effective Change Implementation