Session 3 - The Business Context

The term globalization can be taken as referring to a process whereby traditional, local (i.e. regional or national) boundaries are transcended or rendered obsolete. Although there is some debate as to whether globalization as a phenomenon is actually happening, it is perhaps easiest to think of globalization as a summary term, encompassing references to wide-spread change in several arenas, such as politics, international relations, the world’s economic systems, and business and management. Some specific examples of such change might be; the rise of global financial markets; the development of world-wide communications technology (such as the Internet); political unification and transnational organizations (such as the European Union, NATO); transnational regulatory agreements (GATT). From a business and management perspective, each of these examples could also be viewed as signalling opportunities and challenges for contemporary organizations.

Confusion can arise as to whether globalization is itself a driver of change, or whether it is merely a description of multiple changes in different contexts. Each example above could be thought of as evidence of globalization (a manifestation), or a consequence of globalization (an effect) or a driver of globalization (a cause), or a mix of these. Complexity and confusion about causal processes is itself a characteristic of the phenomenon, and also a pointer to a key theme that because no one process (or institution) can be identified as a cause, correspondingly, no one institution can exercise sovereignty. In other words, ‘no one is in charge’. Allied to this is the idea that globalization results in a shrinking of the social world, or space-time compression. The sociologist Anthony Giddens defines globalization as "…the intensification of world wide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa (p 64)."

Another key theme is that globalization will affect national or local cultures. Two contrasting theories (convergence theory and divergence theory) address this. Convergence theory holds that as national boundaries are eroded in the political, technological and business arenas, so too local differences in culture will be eroded, with the end result being one ‘global’ culture. Divergence theory maintains the opposite, namely that cultural diversity will persist or even be reinforced by the rejection of superficial commonality. Each view has implications for Human Resource Management (HRM) insofar as HRM concerns the management of culture.

There are limitations with the definitional framework as given above. For example, it often goes unchallenged that there is an ideological aspect to globalization. It may result in a form of cultural imperialism, with an agenda set by the Northern hemisphere nations. Giddens has memorably referred to this as being less like ‘global village’, and more like ‘global pillage’. Writers such as Baumann have been quick to point to problems with any Utopian construction of globalization. Whereas the removal of established boundaries and compression of space-time may offer unprecedented opportunity for personal growth, it is likely this privilege will be denied the poor, i.e. the majority of the world’s citizens. Also, that globalization is a complex term and not easy to locate or define makes it susceptible to use as a rhetoric to justify otherwise unacceptable change, such as restructuring, de-layering or the relocation of manufacturing plants at short notice.

Further Reading

Baumann Z. (1999) Globalization: The Human Consequences, Polity Press, Cambridge

Giddens A. (1990) The Consequences of Modernity, Polity Press, Cambridge

Hoogvelt A. (1997) Globalisation and the Postcolonial World: The New Political Economy of Development, Macmillan, London

Lawrence P. (1999) Issues in European Business, Macmillan, London

Legge K. (1995) Human Resource Management: Rhetorics and Realities, Macmillan London

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Bradley H., Erikson M., Stephenson C. & Williams S., 2000 Myths at Work, Polity, London

"Our exploration of the myth does not dispute the importance of economic rewards, but suggests that work plays a much more complex part of in our life than the mere receipt of a weekly or monthly pay packet." 10

"…work is central to the construction of identity." 169

"…few managers and academics would consider that their own primary motivations for working are purely financial, yet they still uphold the myth and apply it in managing and formulating academic analyses of work." 170

"…explanations pitched purely at the level of the rational pursuit of economic goals are insufficient to explain the range of workplace attitudes and behaviour." 171

"..,how can we make sense of the role of work for individuals without an analysis of what work actually is?" 172 [So we need to, "… move towards a ‘sociology of work’…" 178]

Quoting Hannah Arendt: " ‘The work of our hands, as distinguished from the labour of our bodies… fabricates the sheer unending variety of things whose sum total constitutes the human artifice’." [i.e. makes us who we are] 176

‘Work’ (‘creative production’) for Arendt is different from ‘labour’ (‘activity orientated towards subsistence needs’) and different again from ‘action’ (‘social action, interaction and communication’). 177

The goal of a ‘sociology of work’ would recognise "…the structural implications of formal employment under capitalism [and] also acknowledge that work, as an activity and a set of social relationships, may provide meaning and identity for the individual." 179

"The extent to which an organisation combines financial and non-financial rewards in its reward strategy reflects a clear value position. Overreliance on pay as a motivator is likely to be accompanied by other human resource policies which assume a scientific management perspective (e.g. no involvement in management decisions, minimum employee control over the way in which jobs are performed)."

Lewis P. (2001: 113) ch 4 in T. Redman and A. Wilkinson (Eds.) Contemporary HRM, London, FT Prentice Hall

"Organizations… are experiencing high levels of rewards failure because most of their pay systems do not reflect strongly enough strategic thrusts towards quality, teamworking, and competition based on time."

Sparrow P. and Marchington M. (1998) in H. Newell and H. Scarborough (Eds.) Human Resource Management in Context, (2002: 29)

"Work is then, more than a means towards the end of earning a living; people work for more than money. If work were purely a means to an economic end there would be no way of explaining the dislocation and deprivation individuals feel when they retire… People who win the pools or the lottery continue to work even if they hold jobs that could be described as dull, routine and repetitive."

Wilson F. M. (1999: 11) Organizational Behaviour: a critical introduction, Oxford University Press, Oxford

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Types of Reward:

Promotion

Pay (PRP, shares etc. etc.)

Bonus

Recognition (Timely Accurate Relevant Reliable)

Awards

Praise

Appraisal

Training and Development

Empowerment

Job Satisfaction / Sometimes the job itself can be a reward

"In today’s rapidly changing and highly competitive environment, a message that says grow, develop and perform well seems to be more on target than one that says you will be rewarded for outgrowing your job and getting promoted. In organizations whose key assets are its human resources, a system that focuses on people rather than on jobs would seem to be a better fit." Lawler (1990) Strategic Pay p142.

"The design and management of reward systems constitute one of the most difficult human resource management tasks for the general manager. Of the policy areas in HRM, this is where we find the greatest contradiction between the promise of theory and the reality of implementation." Beer M. Spector B. Lawrence P. Mills D. and Walton R. (1984) Managing Human Assets p113.

"There are strong grounds for contesting the suggestion that rewards systems in Britain have been selected on the basis of a systematic assessment by managers of business plans, other human resource management policies and the range of internal and external contingent factors … Rather it has been driven by relatively crude and unplanned attempts to relate pay to performance in a manner detached from a consideration of contextual factors." Kessler I. ‘Reward Systems’ in HRM – A Critical Text ed. Storey (1995) p270.

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"…the human resource approach tends towards a dislike of rules and procedures, in favour of a more individualised approach, there are times when this is not possible because of the need to comply with legislation or Codes and Practice. This is the case where discipline and grievance are concerned. While discipline and grievances are individual issues, it would be unfair to treat each case in a totally different way, and to do so might result in a claim for unfair dismissal against the organization, or dissatisfaction among the workforce." Foot and Hook (1999) Introducing HRM

Discipline: organization > employee Definition (Shorter Oxford English Dictionary): To subject to discipline; in earlier use, to educate or train; later, to bring under control.

Grievance: employee > organization Definition (SOED): The infliction of wrong or hardship on a person; injury, oppression; a cause or source of injury.

Pigors and Myers (1977) Personnel Administration distinguish between dissatisfaction, complaint and grievance, each being progressively more formal;

Dissatisfaction: anything that disturbs an employee, whether or not (s)he expresses his unrest in words.

Complaint: a spoken or written dissatisfaction, brought to the attention of the supervisor and/or shop steward.

Grievance: a complaint which has been formally presented to a management representative or to a union official.

From Armstrong (A Handbook of Personnel Management Practice 1993), guidelines for both types of procedures can be as follows:

Individuals should know the standards of performance they are expected to achieve and the rules to which they are expected to conform.

They should be clearly told where they are failing or rules are being broken.

Except in gross misconduct, they should have opportunity to improve before disciplinary action is taken.

Additionally, (from case law):

Individuals should know the nature of the accusation against them.

They should be given the opportunity to state their case.

The disciplinary tribunal should act in good faith.

Employees should be allowed to appeal.

Listen with intelligence and sympathy.

Define the problem.

Stay alert and flexible.

Observe behaviour.

Conclude the interview.

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River blindness is an agonising disease that afflicts some 18 million impoverished people living in remote villages along the banks of rivers and tropical regions of Africa and Latin America. The disease is caused by a tiny parasitic worm that is passed from person to person by the bite of the black fly, which breeds in river waters. The tiny worms burrow under a person skin where they grow as long as two feet curled up inside ugly round nodules half an inch to an inch in diameter. Inside the nodules, the worms reproduce by releasing millions of microscopic offspring called microfilaria that wriggle their way throughout the body moving beneath the skin, discolouring it as they migrate and causing lesions and such intense itching that victims sometimes commit suicide. Eventually, the microfilaria invade the eyes and blind the victim. Pesticides have proved ineffective as the black fly has built up resistance. In some cases people have left the rivers, thus leaving the most fertile land abandoned. In most cases however, villages along the rivers accept the illness as an inevitable part of life.

In 1979, Dr William Campbell, a research scientist for Merck and Company discovered evidence that one of the company's bestselling animal drugs Ivermectin, might kill the parasite that causes river blindness. Further study suggested this could result in a cheap, effective alternative to other medicines. Campbell petitioned the company chairman, Dr Vagelos to allow his research team to develop a human version of the drug.

The medical research and large-scale clinical testing required to develop a version of the drug for humans could cost over 100 million dollars. It was unlikely the company could recover these costs or that a viable market could develop in the poverty stricken regions where the disease was rampant. Moreover, even if the drug were affordable, it would be virtually impossible to distribute it because victims lived in remote areas and had no access to doctors, hospitals, clinics, or commercial drug outlets. Some managers also pointed out that if the drug had adverse side-effects when administered to humans, ensuing bad publicity might taint the drug and adversely affect sales of the animal version of the drug, which were about 300 million dollars a year. The risk of harmful side-effects was heightened by the possibility that incorrect use of the drug in underdeveloped nations could increase the potential for harm and bad publicity. Finally, if a cheap version of the drug were made available, it might be smuggled on the black market and sold for use on animals, thereby undermining the company's lucrative sales of Ivermectin to the animal industry.

Company managers were undecided what do. Although the company had worldwide sales of 2 billion dollars a year, its net income as a percent of sales was in decline due to the rapidly rising cost of developing new drugs, the increasingly restrictive and costly regulations being imposed by government agencies, a lull in basic scientific breakthroughs, and the decline in the productivity of company research programmes. The US Congress was getting ready to pass the Drug Regulation Act, which would intensify competition in the drug industry by allowing competitors to more quickly copy and market drugs originally developed by other companies. In the face of these worsening conditions in the drug industry, Merck managers were reluctant to undertake expensive projects that showed little economic promise. Yet without the drug, millions would be condemned to lives of intense suffering and partial or total blindness.

After many earnest discussions, they came to the conclusion that the potential human benefits were too significant to ignore. Many of the managers felt, in fact, that because of these human benefits the company was morally obligated to proceed despite the costs and slim chance of economic reward. In late 1980, Vagelos approved a budget that provided the sizeable funding needed to develop a human version of Ivermectin.

After seven years expensive research and numerous clinical trials, they succeeded in developing human version: a single pill of the new drug taken once a year would eradicate the human body of all traces of the parasite. Unfortunately, exactly as the company had earlier suspected, no one stepped forward to buy the miraculous new pill. Company officials pleaded with the World Health Organisation, the US government, and the governments of nations afflicted with the disease, asking that someone – anyone - come forward to buy the drug to protect the 85 million people who are at risk with the disease. None responded to the company's pleas. Merck decided therefore that it would give the drug away free to potential victims. However, this plan proved difficult to implement because, as the company had earlier feared, they were no established distribution channels to get the drug to the people who desperately needed it. Working with the World Health Organisation, therefore, the company financed an international committee to provide infrastructure to distribute the drug safety to people in the Third World and to ensure it would not be diverted into the black market to be sold for use on animals. By 1996, they had provided the drug to millions of people, effectively transforming their lives in relieving intense suffering and potential blindness.

When asked why the company invested so much money and effort, Vagelos replied that, once the company suspected that one of its animal drugs might cure a severe human disease that was ravaging people, the only ethical choice was to develop it. Moreover, people in the Third World "will remember" that Merck help them, and respond favourably to the company in future. Over the years the company had learned that such actions have strategically important long-term advantages. "When I first went to Japan 15 years ago, I was told by Japanese business people that it was Merck that brought streptomycin into Japan after World War II to eliminate tuberculosis. We did that. We didn't make any money. But it's no accident that we are the largest American pharmaceutical company in Japan today."

In your judgment, did Merck have a duty to develop Ivermectin into a drug for humans? Explain your answer.

Is it sensible to highlight an ethical duty, but simultaneously point to the ‘business case’ (‘… strategically important long-term advantages…’) for developing a treatment programme?

Are there any ethical arguments to be made against Vagelos’ choice?

Who are the stakeholders in this situation? What might be argued from each of their different perspectives?

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Background: each group has the responsibility of maximising their earnings over the course of ten ‘rounds’, in a simple business game which is intended to represent some features of the market place. Every group is paired with another and each round ends with a simple transaction between the two groups.

Each group has the choice in the transaction of either: a) co-operating, or b) not co-operating. The amount earned (or lost) depends on the combination of choices, as follows:

This transaction must be conducted by two nominated spokespeople – one from each group. The spokespeople are not allowed to speak or otherwise communicate, but exchange a slip of paper which states their group’s choice. Members can discuss tactics between themselves (and out of earshot of the other group), but there is to be no dialogue with members from another group, except through the spokespeople. The spokespeople are allowed to confer, in private, at the end of round 4, and then again at the end of round 8.

Before starting each group will need to: nominate a spokesperson, nominate someone else to keep score, prepare ten slips of paper, discuss tactics. Please make sure you cannot overhear what other groups are saying.

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