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A Priority Rating System for Public Health Programs DOUGLAS VILNIUS, MS, MPA SUZANNE DANDOY, MD, MPH The authors are with the Utah Department of Health. Mr. Vilnius is Director, Division of Community Health Services, and Dr. Dandoy is Executive Director of the Department. She is also Adjunct Professor, Department of Family and Preventive Medicine, University of Utah. The authors are indebted to George E. Pickett, MD, MPH, Univer-sity of Michigan, who initially developed the Basic Priority Rating (BPR), and Denise Basse, Utah Department of Health, who suggested the application and adaptation of the model. Tearsheet requests to Douglas Vilnius, Division of Community Health Services, Utah Department of Health, P.O. 16660, Salt Lake City, Utah 84116-0660. Synopsis ..................................... When resources are limited, decisions must be made regarding which public health activities to undertake. A priority rating system, which incorporates various data sources, can be used to quantify disease problems or risk factors, or both. The model described in this paper ranks public health issues according to size, urgency, severity of the problem, economic loss, impact on others, effective-ness, propriety, economics, acceptability, legality of solutions, and availability of resources. As examples of how one State can use the model, rankings have been applied to the following health issues: acquired immu-nodeficiency syndrome, coronary heart disease, injuries from motor vehicle accidents, and cigarette smoking as a risk factor. In this exercise, smoking is the issue with the highest overall priority rating. The model is sensitive to the precision of the data used to develop the rankings and works best for health issues that are not undergoing rapid change. Cost-ben-efit and cost-effectiveness analyses can be incorporated into the model or used independently in the priority-set-ting process. Ideally, the model is used in a group set-ting with six to eight decision makers who represent the primary agency as well as external organizations. Using this method, health agencies, program directors, or community groups can identify the most critical issues or problems requiring intervention programs. PUBLIC HEALTH AGENCIES, like all governmental services, never have adequate resources to address the needs of all constituents. Over time, the resource pen-dulum may swing, but most who pursue public health funding through the political process would agree that major distinctions between the good and bad times are based on relative degrees of "lean," "leaner," or "devastating.'" Such is the environment in which scarce public resources must be competed for among vast and growing social needs. The competition for resources mandates that public health decision makers seek methods and apply skills that produce efficient and effective outcomes. State leg-islators, local boards of health, city and county com-missioners, and taxpayers occasionally demand and certainly deserve public health programs and services which maximize cost-effective and cost-beneficial pub-lic health outcomes. What methods and tools are avail-able to public health administrators and managers that enable them not only to do things right but, even more important, to do the right things? There seems to be reasonable consensus within the public health community that prolonging productive life is a societal value that has been adopted as part of the public health mission. The reduction of pain and suffer-ing is another generally accepted goal of public health. However, further clarification of the mission and goals may become clouded by politics, ethics, economics, and public opinion. Life satisfaction, quality of care, confidentiality, access to care, blaming the victim, the right to die, and cost containment are issues tied to societal values that affect health decision making in the 1990s. What, if any, effect do these issues have on public health's mission, and how are their implications translated into information upon which decisions and priorities can be based? A Decision Making Model There is no "one best way" to set public health pri-orities. What is essential, however, is that a process or method be adopted that is systematic, objective, and allows for a standardized comparison of problems or alternatives that incorporate the scrutiny of science and the realities of the environment. One approach to this challenge is a methodology which attempts to consoli-Soptomber-October 1990, Vol. 105 No. 5 463 Table 1. Problem size ratings for selected health problems on a scale of 1-10 Incidencelprevalence Mortality Problem Rate, Scale Rate' Scale BPR score AIDS .......... 11.2 2 3.9 0 1 CHD .......... 3,058 6 313.4 4 5 MVI .......... 176 4 18.0 2 3 Smoking ....... 10,006 8 44.1 2 5 I per 100,000 population. NOTE: AIDS = acquired immunodeficiency syndrome; CHD = coronary heart dis-ease; MVI = motor vehicle injury requiring hospitalization. date these factors into a process having a quantifiable outcome. That model, Basic Priority Rating (BPR), (1, 2) applies a defined problem or issue to a set of cri-teria that rate the size and seriousness of the problem, the effectiveness of potential interventions, and a reality test of miscellaneous items. The resulting process pro-duces a quantifiable value for each problem being ana-lyzed, thus providing a basis for priority setting. The BPR formula is as follows: [(A+B) C]÷3xD = BPR where A equals the size of the problem, B the serious-ness of the problem; C the effectiveness of intervention, and D equals propriety, economics, acceptability, and legality, known as "P.E.A.R.L." We shall now describe the model and its use with specific examples. Defining the problem. Decision makers who engage in problem solving can conserve considerable energy by constructing clear statements of problems. Many frus-trating hours and lost opportunities have resulted from an imprecise definition of a problem. Is the problem a dysentery outbreak or a contaminated water supply? Is the problem that people are dying from heart failure at an old age or prematurely, or is the problem better defined by lifestyle practices that lead to heart disease? A clear statement of the problem will not only provide a consensus for direction among those engaged in the pri-ority-setting process, but it will also establish a basis for concise objective setting if, and when, the problem is identified as a priority for which planning, interven-tion, and evaluation are necessary. If the link between risk factors, health status condi-tions, and mortality is recognized, each risk factor or each cause of illness may be considered as a problem. Four potential problems-the incidence of acquired immunodeficiency syndrome (AIDS), motor vehicle injuries requiring hospitalization (MVI), coronary heart disease (CHD), and cigarette smoking (smoking)-will be analyzed to illustrate the application of BPR. The nature of priority setting and decision making often involves choices among a variety of conditions requir-ing a public health response, thus further complicating the decision making process. Consequently, care should be taken to arrange problems by category, such as dis-ease and accidents, risk factors, and target populations, before the analysis begins. In our example, we will, for illustration only, be comparing three direct causes of morbidity and mortality (AIDS, MVI, and CHD) and one risk factor (smoking), using both national and Utah data. Size of the problem. The size of a health problem is most often represented by incidence or prevalence rates in 100,000 population segments. These rates are spe-cific to disease and nondisease conditions, such as 176 motor vehicle injuries per 100,000; 10,006 cigarette smokers per 100,000; 11.2 AIDS cases per 100,000; 3,058 heart disease cases per 100,000. Disease specific morbidity data are often difficult to obtain compared with the relative ease of acquiring cause of death information. Most information on dis-ease incidence emanates from hospitals and physicians as a record of treatment and payment. Few States have a morbidity registry that provides a centralized source for disease and injury data, unless the diseases are con-sidered communicable. Therefore, finding reliable data to compare relative problem incidence-prevalence may prove to be a difficult task. Lifestyle risk factor data, on the other hand, are being collected on a regular basis by the majority of States through the Behavioral Risk Fac-tor Survey (3). Mortality rates may also be applied to the process of rating the problem size and, like the incidence and prevalence rates, are presented per 100,000 population, for example, 313.4 CHD deaths per 100,000. These data are easily obtained from State health department offices of vital records and traditionally play a major role in determining public health priorities. The BPR model suggests the following scale for scoring relative rate ranges: Incidence or prevalence per 100,000 population Score (1) 50,000 or more ............... 10 5,000 to 49,999 ............... 8 500 to 4,999 ............... 6 SOto 499 ............... 4 S to 49 ............... 2 0.5 to 4.9 ............... 0 Depending on the magnitude of problems being consid-ered, the scale may require adjustment to compensate for lower incidence or prevalence rates. In table 1 we apply this rating scale to the four prob-lem conditions being analyzed. Smoking and CHD war-rant the highest ratings for problem size, while AIDS scores the lowest. 464 Public Halth Reports Seriousness of the problem. A health problem's seriousness is defined by four factors in the BPR model: (a) urgency, (b) severity, (c) economic loss, and (d) impact on others. Each factor should be evaluated on a per case basis only. Readily identifiable and acces-sible data sources are not available for ranking problem seriousness. The analysis of each seriousness factor will require a considerable degree of investigation in order to obtain quantifiable data. Some factors related to the problem under consideration may require literature searches, while other factors may require the decision making group's best guess. As each seriousness factor is applied, it is important to keep its analyses independent of the other factors, both within the seriousness category as well as the other categories. For example, when assessing the severity of AIDS, the analysis should be undertaken without regard for the size or economic loss of the AIDS problem . This principle of independent assessment within criteria and factor should be applied throughout the process. Each of the four problems is rated according to the four factors that define seriousness in the model. 1. Urgency. Some problems require a rapid response in order to prevent the spread of the problem or death as, for example, in a spill of radioactive waste, con-taminated food, or a rabies outbreak. In BPR we use a 0-5 scale for each factor within the seriousness cate-gory. Since there is no clearly defined data source for these ratings, one must rely on a combination of scien-tific knowledge and public opinion. The four problem areas under consideration and their relative urgency rat-ings, using a scale of 0-5, are: Problem Rating AIDS .... 3 CHD ....1 MVI .....2 Smoking ..... 0 AIDS receives the highest urgency rating, while smok-ing rates lowest of the four problems. 2. Severity. Severity is a major factor which fre-quently drives public health programs. Hence, the severity of a disease, injury, outcome, or event is often the key to health program decision making. AIDS, chronic obstructive pulmonary disease, diarrhea from Salmonella, measles, spinal cord injuries, and low birth weight babies present varying levels of severity. How should one rate these conditions on a scale ranging from 1 to 5? What factors determine severity? Certainly the case fatality rate (CFR), which measures the proportion of those with a disease who die from it, would be the ulti-Table 2. Problem severity ratings by averaging case fatality rate (CFR) and years of potential life lost (YPLL) for selected health problems, on a scale of 0-5 Total average Problem CFR Rating YPLL per case Rating ratbng AIDS ....... 1.00 5 35.0 5 5 CHD ....... .06 3 13.3 3 3 MVI ....... . 10 3 43.7 5 4 Smoking ... . .004 1 1.9 0 0.5 NOTE: AIDS = acquired immunodeficiency syndrome; CHD = coronary heart dis-ease; MVI = motor vehicle injury requiring hospitalization. mate measure of severity. Rabies, for instance, has a CFR of 100 percent. An additional severity index important to priority-set-ting is based on deaths which are deemed premature, that is, before age 65. Premature mortality is repre-sented by years of potential life lost (YPLL) for persons dying before age 65 within a specific disease category (4). Hence, motor vehicle fatalities generate more years of potential life lost per case than heart disease because motor vehicle deaths generally occur at younger ages. For the purpose of severity assessment, consideration of YPLL should be limited to its face value and not include aspects of economics related to productivity, a subject to be addressed at another juncture in BPR. In addition to CFR and YPLL, there are certain "'conditions" or "states of being" which warrant severity consideration because they affect the quality of life. Arthritis, blindness, and spinal cord injury would be examples of such conditions. Because hard data to measure the severity of a disability or condition are fre-quently nonexistent, the information and experience of the decision making group and their personal assess-ments of the problem often determine the ranking of this factor. Risk factors may also be considered legitimate meas-ures of severity. Considering the fact that the risk of dying from lung -cancer is 23 times greater for males who smoke 40 cigarettes per day than for male non-smokers (5), does cigarette smoking warrant a severity rating? Is its rating higher because smoking is also asso-ciated with other cancers, chronic obstructive pulmo-nary disease, and vascular disease? How should one rate smoking versus unsafe sex versus sedentary life-style? Because quality of life conditions and risk factors are difficult to quantify with respect to seriousness, we have limited our severity ratings to CFR and YPLL (table 2). Thus, AIDS is the most severe problem and smoking the least severe. A decision making group may choose to weight these subfactors differently. Note that the scale considered for September-October 1990, Vol. 105 No. 5 465 each subfactor can greatly influence the outcome of the ratings. Should AIDS, with a CFR nearly six times that of CHD, proportionally establish the subfactor scale, thus relegating all other problems proportional to AIDS and resulting in CHD perhaps receiving a score of 0 or 1? The application of a scale with a range based more on a pre-determined standard, versus relative com-parisons, as indicated previously, is another option. There is no hard and fast rule as to what procedure to follow. If the relative scale is used, it is possible to achieve a total score for seriousness of 20 points. If the problem size score warranted a 10, a seriousness score of 20 implies that seriousness warrants twice the weight of problem size, which may or may not be valid. 3. Economic costs. The economic aspects of a prob-lem should include the costs of medical expenses, pub-lic services, and prevention programs to the community, to the person or the family or all three. Although these costs can, and later will, be applied to the aggregate problem as identified in problem size, at this point the costs should be addressed on an individual case basis. There is no one central source for average case costs, although some publications provide cost information that could be used in the absence of State or local data (6-8). If at all possible, costs should be adjusted to a given year's dollar value if cost data are based on dif-ferent years for different problems. Both direct and indirect costs, if available, should be applied. Cost estimates by case for each study problem, using a scale of 0-5, would be Problem AIDS................ CHD ................ MVI................. Smoking ............. Case cost per year $50,151 8,700 45,500 643 Rating 5 2 5 Again, the decision to use a standard versus a relative scale arises. Based on the cost information considered, AIDS and MVI warrant the highest rating and smoking the lowest. 4. Impact on others. A basic principle upon which public health was established is that society has legiti-mate concern over individual actions or conditions that may affect many. Communicable disease control remains an important agenda for public health today, but the concept of effect on others has been expanded to include water and air pollution, toxic waste spills, pas-sive smoking, and alcohol use by pregnant women. Economic loss and the cost to society also may be considered as impacts on others, even when the out-come of one person's disease or behavior may not directly affect others. Legislation mandating use of seat belts and motorcycle helmets has been passed partially because of high insurance rates and increased Medicaid costs for injuries. The BPR attempts to capture the effect of health problems on other persons in a quantifiable manner. The decision maker is asked to consider the problem's potential and its actual effect on others, as in the case, for example, of the effect of suicide on a family, or the transmission of AIDS, or drinking while driving. Data for this category may be found in a variety of sources, based on probability of infection per exposure, such as, for example, measles exposure in an 80-per-cent immunized school population; the probability of contracting lung cancer over time as a result of exposure to cigarette smoke; or the probability of spouse abuse in a given population of alcoholic men. These data are not easily linked, however, in the midst of a variety of public health problems and may require considerable interpretation and assumption. Once again, the process requires consideration of the problem on a case basis. The preferred scale is 0-5, but the decision maker may chose a standard or relative scale. The fol-lowing ratings, using a scale of 0-5, indicate that AIDS has the greatest impact on others, while CHD has the least impact. Problem Rating AIDS .... 5 CHD ....1 MVI .....3 Smoking .....2 Summary of seriousness criteria. The ratings of each of the four factors comprising the seriousness category are totalled in table 3. Based on the factors considered in the process, AIDS is rated most serious, followed by motor vehicle injuries, coronary heart disease, and smoking. Effectiveness of interventions. Some public health 466 Public Halth Reports problems seem more easily resolved than others, such as, for example, measles versus AIDS, or smoking versus obesity. The difficulty of educating intravenous drug users, combined with the lack of a vaccine or curative drugs, places AIDS in a less favorable inter-vention position than dental cavities, for instance. An effective intervention, like measles vaccine, may not eliminate a local disease outbreak if less than 80 percent of the targeted child population receive the vaccine. A proven worksite blood pressure control program may be poorly attended if the workers have confidentiality con-cerns. Thus, the BPR model recognizes effectiveness of intervention at two levels: (a) the overall success of the method to be employed and (b) the degree to which the targeted population will respond. Locating information concerning effectiveness of programs and receptivity of a target audience requires an extensive literature search. Occasionally, reports or journals present research summaries for select pro-grams, such as school health (9), smoking cessation (5), or worksite health promotion (10). The pursuit of infor
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goegle terjemahan Abstract Purpose - The greatest competitive challenge facing companies today is said to be embracing change. The business environment is in constant flux and companies must grapple with a host of new realities. This backdrop of change has catalyzed a reassessment of traditional managerial concepts and practices. Aims to trace the evolution of a new management paradigm and identifies its main drivers. Design/methodology/approach - The paper provides narrative and analysis. Findings - Assesses the implications of the change in management paradigms for the educational system, highlights needed adjustments in orthodox management education and lingering challenges for management education providers. Originality/value - Provides help in understanding the perspectives of the various business stakeholders that can help academics allocate resources and design programs that cater for the needs of managers in the 21st century. Keywords Change management, Management activities Paper type General review Introduction The dawn of the 21st century has brought with it an unprecedented wave of change. The days of mass production or standardized products appear to be over. The key words for the future are variety, flexibility, and customization. Indeed, a new techno-economic rationale is emerging, with a clear shift towards information intensive rather than energy or material intensive products. Globalization has also brought with it new business opportunities, and a growing global marketplace, where information goods and capital flow freely and customer choice is expanding. Against this backdrop of change, the field of management has suffered some degree of dislocation (Collins, 1996). This dislocation has in turn catalyzed some soul-searching on the part of managers and academicians alike, and a reassessment of traditional managerial concepts and practices. This paper argues that this introspection has resulted in a discernible evolution in traditional theoretical approaches/orientations as well as fundamentally changed organizational practices, to the extent that the changes qualify as a genuine paradigmatic transformation. Noting that a paradigm is a framework of basic assumptions, theories and models that are commonly and strongly accepted and shared within a particular field of activity, at a particular point in time (Mink, 1992; Collins, 1998), this paper synthesizes the main assumptions of what is commonly referred to as the traditional management and identifies the main drivers that facilitated the ascendancy of new paradigm are then addressed. The implications of this paradigm shift for institutions of higher education are in turn assessed to delineate the challenges associated with the evolution of a new management pedagogy in universities. The traditional management paradigm Functional hierarchical line management was the main management paradigm for nearly 200 years. The system was based on the theories of Fayol, Taylor and Weber that viewed the management environment as stable and as such tended to prescribe centralized decision-making processes and hierarchical communication channels (Table I). Organizations were perceived to be rational entities pursuing specific rational goals through their organization into highly formalized, differentiated and efficient structures (Turner and Keegan, 1999; Burnes, 2000; Jaffee, 2001). This mechanistic orientation dominated most businesses in the past and is still commonly encountered especially in the context of developing countries. As shown in Table I, the traditional management paradigm was characterized by its inward focus, with special attention accorded to cutting costs, complying with rules, respecting hierarchy, and dividing labor into simple, specialized jobs. It was narrowly focused on promoting production efficiency and combating waste. Within the spirit of this overarching objective, a range of practices were prescribed and allowed to flourish, including a focus on order giving and control, enforced standardization/cooperation, and authoritarian/disciplinarian approaches to management. This was generally associated with a mechanistic orientation to structural design, emphasizing high specialization, rigid departmentalization, clear chain of command, narrow spans of control, centralization and high formalization (Kreitner, 2002; Robbins and Coulter, 2003). The overriding concern of the traditional paradigm was thus with improving the firm’s productivity, and managing available resources in a static and stable technological environment (Khalil, 2000). Within this context, managers were viewed to be solely accountable for making strategic decisions that all had to embrace and implement (Black and Porter, 2000). They were commonly perceived as watchdogs, police officers and manipulators pertaining to a privileged elite class (Burnes, 2000). Labor was also commonly characterized as unreliable and predisposed to seek the Emphasis on Experimentation, standardization, and the use of diligent scientific observation, time and motion study, systematic worker selection and training and managerial responsibility for monitoring and control A core management process revolving around universal functions (e.g. planning, organizing and controlling) and principles such as division of work, discipline, centralization, order and stability Division of labour, hierarchical authority, formal rules/regulations, and impersonality contributing in turn to efficiency, precision, consistency, subordination, and reduction of friction/personal costs Source: Kreitner (2002); Robbins and Coulter (2003) maximum reward for the minimum effort. Access to information systems and data was therefore tightly controlled as concern about low trust, suspected motives, and fear about confidentiality prevailed (Boyett and Boyett, 2000). Promoting knowledge was also accorded low priority as emphasis on specialization and standardization undermined the need for learning. In such an environment, individuals had a tendency to be inhibited and uncreative, whereby new ideas were dismissed and people were discouraged to take risks, or experiment (Carnall, 2003). The classical management system worked well when markets, products and technologies were slow to change (Turner and Keegan, 1999). Nevertheless, the system’s revealed weaknesses and limitations were gradually exposed with accelerating globalization and technological innovation. Drivers of change A rapidly changing techno-socio-economic environment is presenting new challenges for structuring and managing organizations. Increasing technological complexity and the need to diffuse information and technology within the organizations is proving to be beyond the capacity of the old rigid hierarchal management system. Technological complexity implies the need for higher levels of human knowledge and multi-disciplinary involvement (Bridges, 1996; Boyett and Boyett, 2000). Firms operating in the knowledge economy need to harness growing knowledge, technology and engineering advances and a whole range of new skills and dynamic competencies (Liyanage and Poon, 2002). Knowledge workers on the other hand rightfully perceive the old management system as under-utilizing their expertise and under-estimating their willingness to take initiative and responsibility. New attitudes towards work involve feelings of pride and ownership and employees are becoming more concerned about merit, value, worth, meaning and fulfillment (Stallings, 2000). Customers are also becoming better educated, more enlightened, more sophisticated, more inquisitive and critical - in sum more demanding when it comes to spending (Chapman, 2001). New products are having to be innovative, flexible for customization and of high quality while having a short life cycle in a fickle global market (Turner and Keegan, 1999; Longenecker and Ariss, 2002). On the economic level, the old hierarchal organizations that flourished in a relatively stable market are facing the prospects of a new world order, with permeable geo-political boundaries. The General Agreement on Trade and Tariffs (GATT) and the proliferation of international standards such as ISO 9000 and ISO 14000, allow every company that satisfies the new rules to enter the game. Taken together, these drivers have necessitated a fundamental re-orientation to management, implying that organizations are having to manage in different ways to survive and prosper in the new environment. Some analysts group the different environmental triggers of change into four distinct categories under the acronym PEST (Johnson and Scholes, 1999) or STEP (Goodman, 1995), both of which refer to the political, economic, technological and socio-cultural triggers of change, which have influenced the organizations and their management processes (Figure 1). A new management paradigm Organizations have become increasingly aware that the world has turned on its axis, necessitating a fundamental re-assessment of objectives, operations and management orientation. Therefore the 1980s have witnessed the emergence of a paradigm shift, or to be more accurate the search for new more appropriate paradigms (Collins, 1996; Burnes, 2000). The theories that have most widely affected contemporary management thinking include the behavioral approach, the systems theory, the contingency approach, the culture-excellence approach, and the organizational learning theory, each of which contributed new insights to our understanding of contemporary management processes. The behavioral approach for example turned attention to the human factor in the organization and the importance of group dynamics and complex human motivations. The systems approach alerted managers to the notions of embedded-ness and interdependencies, while the contingency approach underscored adaptability/situational appropriateness. The culture-excellence approach reminded managers to accord more attention to the softer issues of people, values, and employee/customer satisfaction. It also posited innovation as a central driver of excellence in organizations. The organizational learning approach emphasized the usefulness of carefully nurturing and cultivating the capacity to acquire new knowledge and to put it into new applications. Inspired by these various contributions, traditional management perspectives are being transformed, and the long-held criteria for evaluating organizational and managerial effectiveness are being reinvigorated. While the changes have proved unsettling for many managers and organizations, 21st century corporations are surely charting new grounds where familiar themes and practices are being disrupted and remolded. Business discourse increasingly revolves around intelligence, information and ideas (Handy, 1989) and capitalizing on brainpower and intellectual capital to add value and sustain competitiveness. Management in the 21st century has accordingly taken a new orientation. It is increasingly founded on the ability to cope with constant change and not stability, is organized around networks and not hierarchies, built on shifting partnerships and alliances and not self-sufficiency, and constructed on technological advantage and not bricks and mortar (Carnall, 2003). New organizations are networks of intricately woven webs that are based on virtual integration rather than vertical integration, interdependence rather than independence, and mass customization rather than mass production (Greenwald, 2001). Table II presents the contrasting assumptions of the traditional and new management paradigms. Organizations embracing the new management changes are restructuring their internal processes and management approaches around rapidly changing information and technology. This shift is favoring cellular and matrix organizational structures with fewer layers of management over the old inflexible multi-layered vertical hierarchical organizations (Benveniste, 1994; Cravens et al., 1997). The new management philosophy is also embracing innovation as a key ingredient of success and increased competitiveness (Khalil, 2000; Liyanage and Poon, 2002). This entails developing the creative potential of the organization by fostering new ideas, harnessing people’s creativity and enthusiasm, tapping the innovative potential of employees, and encouraging the proliferation of autonomy and entrepreneurship (Blanchard, 1996; Kuczmarski, 1996; Boyett and Boyett, 2000; Black and Porter, 2000). Modern organizations as such, are making major strides to nurture innovation, positing human knowledge as a key component of their asset base, and creating knowledge bases or repositories to shorten learning curves (Khalil and Wang, 2002; Carnall, 2003). People are treated as the natural resource and capital asset of the organization and the most important source of sustainable competitive advantage. Whereas the traditional paradigm considered labor a commodity to be bought, exploited Table II. Contrasting assumptions of the traditional and new management paradigms Reduction of the direct costs of production as the primary focus of management The operations of an enterprise characterized and analyzed as stable Single critical technology-based product lines with long product lifetimes Managers regarded as decision-makers and labor as passive followers of instruction World markets divided on a national basis, with national firms dominant in domestic markets Source: Adapted from Khalil (2000) Reducing the indirect costs of the enterprise while improving competitiveness Flexible and agile operations and continuous improvement Multi-core technology product lines with shorter product lifetimes Managers regarded as coaches/facilitators and labor as knowledge workers/intellectual capital Global world markets and greater attention to international economic and political structures to exhaustion, and discarded when convenient, a much different orientation currently prevails, requiring the careful nurturing and skillful management of human resources, with a focus on psychological commitment, empowerment, teamwork, trust, and participation. The new management paradigm therefore revolves around teamwork, participation, and learning. It also revolves around improved communication, integration, collaboration, and closer interaction and partnering with customers, suppliers and a wider range of stakeholders. Value creation, quality, responsiveness, agility, innovation, integration and teaming are increasingly regarded as useful guiding principles in the evolving new environment (Table III). Kanter (1989, p. 20) aptly describes the revolution in management practice. She writes: The new game of business requires faster action, more creative maneuvering, more flexibility and closer partnerships with employees and customers than was typical in the traditional corporate bureaucracy. It requires more agile, limber management that pursues opportunity without being bogged down by cumbersome structures or weighty procedures that impede action. Corporate giants, in short, must learn how to dance (Kanter, 1989, p. 20). Against the myriad changes and conflicting expectations, individual managers and executives are being asked to change their approach to running their operations and managing people. The “new” managers we are told must learn to be coaches, team players, facilitators, process managers, human resource executives, visionary leaders, and entrepreneurs (Longenecker and Ariss, 2002). They must also be knowledge-integrating boundary spanners, stimulators of creativity, innovation muses and promoters of learning (Harvey et al., 2002). They must be more bottom-line driven, more innovative, and more focused on the human dynamics of the organization (Chapman, 2001). The 21st century managers are therefore expected to nurture a complex amalgamation of technical, functional, and socio-cultural skills to cope with the new paradigm, that has changed their responsibilities, increased their risks and weakened their control by flattening hierarchy (Nohria and Ghoshal, 1997; Pucik and Saba, 1998; Fish, 1999). They are increasingly conceived as pillars and architects of organizational competitiveness, linking people, opportunities and resources (Chapman, 2001). on the other hand, failing to live up to these expectations may limit the organization’s ability to thrive in an increasingly complex and dynamic environment. While managers search for new approaches to management in an ever-turbulent environment, academics also have to search for new approaches and methodologies. Management education indeed needs to reflect the changing times by overhauling not Value creation Value added constitutes the basic social responsibility of the enterprise Quality Quality as a fundamental requirement influencing competitiveness Responsiveness Responsiveness to external environmental changes and customer demands Agility Flexibility in communications and operations Innovation Fostering new ideas, harnessing people’s creativity and enthusiasm Integration Integration of a portfolio of technologies for a distinctive competitive advantage Teaming Decentralized, multi-functional and multi-disciplinary enterprise teams Source: Adapted from Carnall (2003) only its content and delivery modes, but also its overall approach and orientation (Liyanage and Poon, 2002). Implications for management education In this context of transition and radical change, the field of management education has attracted extensive attention, reflection and criticism. Management education can be described as a formal classroom (off-site) learning experience that attempts to expose managers to new concepts, practices, and situations that can be transferred to the workplace (Longenecker and Ariss, 2002). Formal management education programs may cover a host of specialized topics (e.g. financial management, strategic planning, leadership, negotiation) or may include more comprehensive programs such as certificate granting programs or executive MBA programs. While formal management education is only one way in which managers learn, organizations and individuals often rely on this developmental intervention as a vehicle for improvement (Talbot, 1997). A key question that is increasingly echoed in management education circles concerns the efficacy and relevance of traditional management education. Various criticisms have been raised and doubt has been cast upon the nature, relevance and appropriateness of orthodox management education. Spender (1994, p. 387) for example notes that, “management education ostensibly designed to equip managers to deal with the world seems to have changed little in recent years”. In the US context, Hayes and Abernathy (1980) specifically linked the decline in competitiveness of US industry with the effect of the traditional professional education model on management graduates. Their critique of this model asserted that management graduates learnt analytic detachment over insight, and that methodological rigor prevented them from learning from experience. A similar criticism has been raised in a recent article by Handy (1987), which linked the decline in the UK economy to the increasingly irrelevant management education which many undergraduate students and post experience managers receive. Other criticisms abound. Cheit (1985) for example identified 13 major complaints, which have been made against North American business schools, mostly revolving around emphasizing the wrong pedagogical model, ignoring important work, fostering undesirable attitudes and failing to meet society’s needs. He concluded that graduate business education was not preparing students adequately for the challenges of corporate life. Porter and McKibben (1988) criticized the emphasis in the dominant professional management model on quantitative, analytical and rational ap
goegmenurut adam smith dalam teorinya hubungan antara majikan dan karyawan adalah hubungan "jual-beli" an sich (tak lebih dan tak kurang). Oleh karenanya, jika upah di sector lain naik maka karyawan berlomba lomba berpindah ke sector terebut. artinya, tidak ada ikatan sama sekali sama sekali antara majikan dan karyawan. hubungannya adalah sebatas pekerjaan sehingga turn over karyawan sangat tinggi. artinya tingkat perputaran (keluar masuk) tenaga kerja sangat tinggi. Berbeda dengan konsep syariah yang menegaskan bahwa para karyawan adalah saudara majikan.Dengan demikian majikan menanggung amanah dari allah untuk bertanggung jawab pada karyawan sehingga tidak ada karyawan yang kelaparan,tidak ada yang telanjang dan tidak akan dieksploitasi . le terjemahan
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Investors’ Reaction to the Implementation of Corporate Governance Mechanisms The study investigates the impact of corporate governance on investor reaction. This is the first study till date that addresses this gap in literature. The design of the study comprises of corporate governance, investor reac-tion. Data was taken from 125 non-financial sector of Pakistani companies listed at KSE for the period of 2005-2010. Data was extracted from balance sheet analysis (SBP report), KSE website and annual reports of companies. Correlation (individual and composite) and linear regression tests were applied to validate the out-comes. The results confirm that there is no impact of corporate governance on investor reaction and relationship between them is negative. This implies the inefficiency of financial market where noise trades create sentiment. Corporate Governance; Investor Reaction; Emerging Market Introduction Corporate governance is an important component for profitability and growth of firms through achieving the allocative efficiency, so that scarce funds were transferred to investment projects with higher returns. Generally, efficiency can be achieved if the investment projects offer higher returns as compared to cost of capital . Corporate governance mechanism provides protection to shareholders and other stakeholder particularly investors. Good governance practices help to increase the share prices that could get higher capital. It also facilitates the international investor to lend money and purchase shares in domestic companies . [3,4] investigated the market reaction to corporate governance mechanism. They argued that those firms which were greatly affected from such governance practices reacted more profoundly as compared to firms exhibiting good governance practices. Furthermore,  investigated the market reaction to corporate governance practices. They criticized the governance practices are value destroying as they found abnormal return, reducing in CEO pay, number of large block holders, easiness of institutional investors and presence of a staggered board. Although, researchers scrutinized the market reaction to corporate governance mechanism, but there is no study till date that investigates impact of corporate governance mechanism on investor reaction. So the specialty of this study is to gain the attention of academicians and practitioners by bridging this gap in literature. Two research questions has been addressed which are: Does corporate governance impact the investor behavior? Is this relationship significant across different economies? This study confirms that the corporate governance mechanism impacts insignificantly on investor reaction. This paper is organized in a way that the first section describes the introduction of the study followed by literature review to build theoretical framework. The next one discusses the methodology, followed by discussion of the results and conclusion; the last section explains the managerial implications and future research direction. Literature Review Corporate governance is a “process whereby suppliers of capital (shareholders) attempt to ensure that managers of the firms in which they invest provide a sufficient return. It addresses the agency problem whereby the shareholders (principals) are the ultimate owners of the firm and want to ensure that managers (agents), who are separate from the shareholders, act in the shareholders’ best interests rather than the interests of managers” .  scrutinized the link between measures of corporate governance and stock returns. They highlighted that high governance ranking firms outperform than other port- folios. Moreover, market reacts significantly to governance related information which reflects that good governance does matters to Canadian investors. Similarly,  investigated the price reaction to corporate governance announcements. They confirmed that investors react to these governance practices but the sign of their reaction depend upon the extension and nature of these types of announcements. Moreover,  studied the corporate governance mechanisms and market reaction and liquidity impact. They depicted that market price reaction is significant positive when firm committed for higher transparency and minority shareholder protection in its announcement. Furthermore, shares having voting rights experience stronger price reaction and liquidity enhancement rather than non-voting shares. They suggested that corporate governance mechanism can be effective strategy for countries having weak investor protection provisions. Corporate Governance announcements are important ways for interacting with the investors.  demonstrated the link between corporate governance rating announcements and stock returns of companies. By using event study, they analyzed the 11 top listed corporate governance companies for the period of 2004-2005 and found no relationship between corporate governance and share performance of firms, might be attributable to perception of Thai investors.  scrutinized the link between market reaction to corporate governance regarding to regulatory and legislative actions. They proved that abnormal re-turns relating to corporate governance mechanism are reduction in number of large bondholders, CEO pay, ease of institutional investors to access the proxy method and presence of stagnant board.  studied that how corporate governance would impact the market reaction to earning surprise regarding to post earnings announcements drift. They confirmed the investor ‘reactions both, over-reaction and under-reaction to earnings surprises can create post earnings announcement drift. They investigated for bad governance firms, that investor would under-react to earnings surprises as they believed that earnings surprises might be attributable to firm’s luck rather than its ability. On the other scenario i.e. for good governance firms, they scrutinized that investor would over-react to earnings surprises as they believed that earnings surprises are attributable to firm’s ability rather than its luck.  studied the role of corporate governance in abnormal returns regarding to seasonal equity offerings. They confirmed that investors react positively for companies in which people hold the CEO and chair-man positions. Moreover, investor reacts positively for companies having high outsider members, low CEO ownership and small board size. They highlighted that investors also react positively to seasonal equity offerings by companies having stronger corporate governance mechanism that ultimately reduces the agency problems.  demonstrated the relationship between governance and asymmetric information and other imperfections that usually firm faces. They found that corporate governance is highly related to high market valuation and operating performance. They highlighted that countries having weak legal system are more probable to firm level corporate governance mechanism.  examined the firm announcement that is negatively valued by investor might be attributable to information asymmetry and its adverse features. They also depicted that stronger corporate governance mechanisms experience low price de-cline from the information symmetry, transpiring that strong corporate governance mechanism might mitigate the agency problems.  explored the impact of corporate governance on investment decisions. They proved that strong corporate governance structure can ease the investment decisions. Owner-owned firms get less financial distress and more positive stock evaluation than management controlled firms, reflecting that firms with better corporate governance practices can get positive investor evaluation from investors.  depicted the effectiveness of corporate governance mechanism for increasing capital and Re-search and development investment decisions. They found that higher ownership governance yields greater abnormal returns to capital investment decisions however; higher board governance mechanism yields abnormal returns to research and development investment decisions. Institutional investors play a vital role in corporate governance activities like  examined the institutional investors would impact the corporate governance through analyzing the portfolio holdings of institutions in companies over the period of 2003-2008. They proved that change in institutional investment would bring positive change in firm level governance; however, they did not find any impact of governance on institutional investments. Furthermore, they highlighted that firms having higher institutional ownership could easily terminate poorly performing chief executives and made further improvements.  investigated the corporate governance mechanism and investor protection. They found that investor’s evaluation of investor protection regimes are related to firm-level corporate governance mechanism along with characteristics of their portfolio holdings. They also depicted that firm level corporate governance are attributable to mitigation of agency problems between large and small shareholders, irrespective of weaker investor protection. Furthermore, countries having weak legal structure might be attributable to attract investors through having strong corporate governance regime. The investor preferences for country level investor protection and good corporate governance mechanism are highly related to investment decisions.  investigated that governance-sensitive institutions is related to improvement in shareholder rights. They also confirmed that low turnover institutions with preference for small cap and growth companies are attributable to be more governance sensitive. Furthermore, they suggested that common proxies for governance sensitivity do not measure governance preference clearly.  scrutinized the relationship between governance mechanisms and firm investment choices by using Real Estate Investment Trusts (REITs) as a sample. They highlighted that responsiveness of REITs’ investment opportunities depend upon their corporate governance structures. Moreover, REITs have higher institutional ownership, then their investment opportunities are closely related to Tobin’s q. However, Real Estate Investment Trusts (REITs) may vitiate the effectiveness of internal governance mechanism. They found that information asymmetry diminished by REIT governance. Further-more, they confirmed that high financial incentives for board members along with experienced board members and independent audit committee having financial expertise reduces asymmetric information . From above discussion it can be inferred that corporate governance mechanism impacts the investor reaction positively. Therefore, a proposed hypothesis is. H1: Corporate governance mechanism has a significant impact on investor reaction. Methodology Methodology portion comprises of two sections. One describes the variables, proxies and data collection and other highlights the statistical tests applied on the data. The aim of current study is to investigate impact of corporate governance mechanism on investor reaction. Therefore, data has been collected for the 125 non-financial sector of Pakistani companies listed at Karachi Stock Exchange, for the period of 2005-2010 on yearly basis. Data was extracted from Balance sheet analysis (SBP report), KSE website and annual reports of companies. Variables Corporate governance mechanism has been taken as in-dependent variable and investor reaction has been taken as dependent variable. Equation α = Intercept CG= Corporate Governance IR = Investor Reaction, BS= Board Size, ACI = Audit Committee Independence, OS = Ownership Structure, ε = Error Term. Proxies Corporate Governance Corporate Governance can be measured through four proxies: Board size = Natural log of Number of Total Directors Board independence = Number of Non Executive Directors divided by Total Number of Directors Audit Committee independence = Number of Non Executive Directors divided by Total Number of Audit Committee Members Ownership Structure = Shares held by Directors divided by Total Shares Investor reaction Investor reaction can be measured through stock re-turns. Stock Returns = Natural log of Pn/Po Methodological Tests Correlation test has applied to find out the interrelationship between variables. Linear regressions have applied to check the hypothesis. Result and Discussion Correlation Correlation tests were used to find out inter-relation- ship among Corporate Governance and Investor Reaction. The findings highlight that Investor Reaction (IS). Tables 1 and 2 depict the correlation analysis. Table 1 shows the correlation between variables of corporate governance and investor reaction. It depicts that board size is negatively related to director independence, ownership structure and investor reaction while it is positively related to audit committee independence. Director Independence is positively related to audit committee independence however, it has negative relationship between ownership structure and investor reaction. Audit committee independence is negatively related to ownership structure and investor reaction. Lastly, Ownership structure also exhibits a negative relationship with investor reaction. When correlation test was applied between corporate governance and investor reaction, it highlights that corporate governance has negative relationship with investor reaction. Linear Regression OLS regression was applied for testing the hypothesis. i.e. corporate governance has significant impact on investor reaction. The results of OLS regression have been presented in Tables 3 and 4. When investor reaction was regressed with individual component of corporate governance, it has been seen that there is no impact of corporate governance on investor reaction. The value of R-square is 0.53%[ERROR] which means that this model explains only few factors of corporate governance that affect investor reaction (IR) while 99%[ERROR] are other factors that influence investor reaction (IR). F- statistics is insignificant at 0.94. When investor reaction was regressed with corporate governance, it has been seen that corporate governance is insignificantly negatively related to investor reaction. The value of R-square is 0.16%[ERROR] which means that this model explains only 0.16%[ERROR] of factors of corporate governance that affect investor reaction (IR) while 99%[ERROR] are other factors that influence investor reaction (IR). F-statistics is insignificant at 1.19. Conclusions Corporate governance is insignificantly negatively related to investor reaction. On the basis of these findings, our hypothesis has been rejected. Previous studies confirmed the corporate governance practices provide investor protection, due to which investor invest more in those firms which incorporated corporate governance mechanism in their strategic policy. This study does not support the above justification. One interpretation might be that this study was con-ducted in inefficient market, due to which investor don’t have much knowledge about financial markets. They don’t respond to market rationally. Due to this behavior investor creating sentiment in markets and exploit stock return, Noise trader exploit corporate governance practices as well. In such market corporate governance mechanisms is unable to provide protection to their investors. Managerial Implications Corporate governance has no impact on investor reaction. Therefore, mangers should focus other factors while making their strategic policies to attract their investors, not solely focus on corporate governance Limitation and Future Research In future studies, further variables would be incorporated to investigate the impact of corporate governance on investor reaction. This relationship would be generalized among different economies in order to validate the out-comes. Review of Accounting Gimmicks Called Depreciation Depreciation is a complex, intricate and confusing term in the fields of engineering, social and management sciences. As a result, it has been over used, over stressed, and over worked by the accountants and professional valuers. International Accounting Standard (IAS) 4, qualifies assets for depreciation when assets are used for more than one accounting period, i.e. assets held by an enterprise for production or service, and has economic useful life. Whereas, under Standard Statement of Accounting Practice (SSAP) 12, depreciation is viewed as wearing out, consumption or other loss of value of fixed asset, whether arising from use, affluxion of time or obsolescence through technology and market changes. Complexity may arise when it is viewed as a fall in price, physical deterioration, allocation of cost, fall in value, valuation technique and asset replacement. Intricate and confusion are inevitable when accountants employ various methods of providing for depreciation on the same or similar assets of different life span. These methods may include straight line, reducing balance, sum of the year’s digit, revaluation, annuity, output, sinking fund etc which will definitely give different values in the financial statement. The consequential effect is either to undermine or overstate the reported profit or distributable profit in the hands of the stakeholders, hence the absurdity of the financial reports. It is recom- mended that depreciation should be used with caution especially when the anticipated economic useful lives of the asset is short lived by new technology or passage of time thereby making it extremely difficult to recover or replace the net book value of the asset. Depreciation; Measuring Profitability; Expense Capture; Corporate Performance Measures; Earnings Engineering Currently the theory and practice of depreciation have not generally unified the fixed amount to be charged as annual expenses in the Income Statement and Balance Sheet due to different meanings and computations. Al- though materiality concept affirms that what might be material to one person/company may not necessarily be material to another person/company (Concept of Value). Materiality concept is viewed as fundamental when inclusion, exclusion of a particular item, transaction into or from the financial statement could lead to distortion, misleading and/or debase financial statement anticipated report, meaning and understanding. In order to avoid this confusing nature of any inclusion or exclusion there is the need to explain vividly such aspects in the form of notes to the accounts which gives credence and reliability to the users of financial statement. The word depreciation has been grossly over worked, over used, over stressed and above all has varying senses with different connotations even among intra and inter group disciplines. International Accounting Standard (IAS) 4 and Statement of Standard Accounting Practice (SSAP) 12 view standards in accounting for depreciation as the allocation of depreciable amount of assets over its estimated useful life. Depreciable amount from assets is anchored on its historica
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