Expected Values and Risk of Project Revenues and Costs

For all business expenditure proposals, revenues and costs are estimated for the future years and hence they are subject to the laws of probability and sometimes one may not know even probabilities. When probabilities can be assigned objectively or subjectively, expected values and risk measures can be calculated for revenues and expenditures and hence for summary measures like NPV and IRR. Engineering economic analysis used probability calculations.

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https://www.youtube.com/watch?v=NF36OKabEvs

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Project Risk Analysis

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https://www.youtube.com/watch?v=9lyE3zz71us

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Ud. 10.2.2022

Pub. 11.12.2011

Digital Platform Business Enterprise - Basics

 

https://www2.deloitte.com/za/en/pages/financial-services/articles/the-business-of-platforms.html

https://sloanreview.mit.edu/article/competing-on-platforms/

https://www.bis.org/publ/work986.htm

https://www.linkedin.com/pulse/types-platform-business-models-bhupesh-kumar-pandey

https://www.iimb.ac.in/prof-srinivasan-iimb-podcast-series-broadcast

https://www.sciencedirect.com/science/article/abs/pii/S0040162521008039

https://www.gartner.com/smarterwithgartner/how-to-build-a-digital-business-technology-platform

https://www.pwc.de/en/strategy-organisation-processes-systems/digital-innovation-platform-business.html

https://www.hindawi.com/journals/jhe/2021/5519891/

https://community.sap.com/topics/business-technology-platform

https://hbr.org/2021/09/how-xiaomi-redefined-what-it-means-to-be-a-platform

http://www.businessworld.in/article/Business-In-The-Platform-World/12-02-2021-376865/

https://aisel.aisnet.org/wi2021/GFuture18/Track18/4/   SLR

https://www.ilo.org/global/topics/cooperatives/publications/WCMS_809250/lang--en/index.htm

https://portal.findresearcher.sdu.dk/en/publications/digital-platform-based-business-models-an-exploration-of-critical

https://www.computerweekly.com/news/252503286/How-GSK-Consumer-Healthcare-builds-out-its-platform-business

https://www.taylorfrancis.com/chapters/edit/10.4324/9781003204268-4/effects-platform-business-models-internationalisation-outcomes-speed-tamara-galkina-irina-atkova-petri-ahokangas

https://www.mdpi.com/2071-1050/13/20/11296/pdf

https://ideas.repec.org/h/spr/lnichp/978-3-030-86800-0_27.html

Present-Worth Comparisons

Engineering Economics Revision Article Series

Net present worth (NPW) or Net present value (NPV) is the difference between the present worths of benefits and costs of an engineering decision. It is the most widely used present-worth model.

Illustrative Problem

A single underground transmission circuit is needed immediately, and load studies indicate the need for a second circuit in 6 years. If provision is made for a second conduit when the conduit for the first circuit is installed, there will be no future need for reopening, trenching, backfillng, and repaving.

the cost of installing a single circuit wiht minimum preparation for the eventual second circuit is $850,000. the installation of the second circuit will be considered to cost $800,000 at the end of year 6 in order to be in operation by the beginning of year 7. If the second circuit is installed immediately, the total cost will be $1.4 million.

Constant annual operating and maintenance costs of the circuits are 8 percent of the first cost. The average life of a circuit is 20 years. The required rate of return on such investments is 10 percent before taxes.

To take a decision, Comparison of the deferred investment with the immediate investment needs to be made.
(Exercise Problem 3.25, Riggs)
References

Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996

__________________

https://www.youtube.com/watch?v=Q_lqNmVzgMY

__________________

http://knol.google.com/k/narayana-rao/present-worth-comparisons/  2utb2lsm2k7a/  250


Updated   6.2.2022, 21.4.2012

Evolution of Human Resource Management

Managing the Human Factor: The Early Years of Human Resource Management in American Industry

Bruce E. Kaufman

Cornell University Press, 30-Jun-2019 - Business & Economics - 392 pages

Human resource departments are key components in the people management system of nearly every medium-to-large organization in the industrial world. They provide a wide range of essential services relating to employees, including recruitment, compensation, benefits, training, and labor relations. A century ago, however, before the concept of human resource management had been invented, the supervision and care of employees at even the largest companies were conducted without written policies or formal planning, and often in harsh, arbitrary, and counterproductive ways.

How did companies such as United States Steel manage a workforce of 160,000 employees at dozens of plants without a specialized personnel or industrial relations department? What led some of these organizations to introduce human resources practices at the end of the nineteenth century? How were the earliest personnel departments structured and what were their responsibilities? And how did the theory and implementation of human resources management evolve, both within industry and as an academic field of research and teaching?

In Managing the Human Factor, Bruce E. Kaufman chronicles the origins and early development of human resource management (HRM) in the United States from the 1870s, when the Labor Problem emerged as the nation's primary domestic policy concern, to 1933 and the start of the New Deal. Through new archival research, an extensive review and synthesis of the historical and contemporary literatures, and case studies illustrating best (and worst) practices during this period, Kaufman identifies the fourteen ideas, events, and movements that led to the creation of specialized HRM departments in the late 1910s, as well as their further growth and development into strategic business units in the welfare capitalism period of the 1920s.

The research presented in this book not only uncovers many new aspects of the early development of personnel and industrial relations but also challenges central parts of the contemporary interpretation of the concept and evolution of HRM. Rich with insights on both the present and past of human resource management, Managing the Human Factor will be widely regarded as the definitive account of the early history of employee management in American companies and a must-read for all those interested in the indispensable function of managing people in organizations.

https://books.google.co.in/books?id=efytDwAAQBAJ

Human Relations Era:

During Scientific Management development period, Lilian Gilbreth examined the impact of scientific management practices on people in her book "Psychology and Management." While Frank Gilbreth outlined the variable that affect human motion speed, they were more of physical variable associated with human operators. Around 1920s, management researchers gave a close look at the human factor at work and the variables that affected people’s behaviour. Hugo Munsterberg, a Harvard faculty member, wrote a book on ‘Psychology and Industrial Efficiency’ which suggested the use of psychology in the field of personnel testing, interviewing, attitude measurement, learning, etc. Thus there was an era in human resource management  termed as ‘Industrial Psychology Era’.

In 1924, a group of professors from Harvard Business School, USA, began an enquiry into the human aspects of work and working conditions at Hawthorne plant of Western Electric Company, Chicago.

They conducted researches from 1924 to 1932 and arrived at the conclusions that productivity of workers also depended on- (i) social factors at the workplace, (ii) group formation and group influence, (iii) nature of leadership and supervision, and (iv) communication. These human variables act independent of working conditions and methods of work.

They concluded that in order to have better productivity, management should take care of human relations besides the physical conditions at the workplace. Consequently, the concepts of social system, informal organization, group influence, and irrational behaviour entered the field of management of personnel.

Evolution of HRM
http://www.economicsdiscussion.net/human-resource-management/evolution-of-human-resource-management-hrm/31460

Ud. 5.2.2022

Pub 4.8.2019

Cash Flow Estimation for Expenditure Proposals

For each expenditure proposal, engineers have to estimate revenues and expenditures years wise in the future. They need to estimate salvage values of capital assets at the end of project period.

The cash flow estimation has to follow certain standard practices as they have to be comparable across projects in an organization and in conglomerate companies across various subsidiaries.

Cash flow Estimation - Some Principles

Cash flows of a project have to be estimated for a time horizon. The time horizon is the minimum of physical life of the plant, technological life of the plant, or the product market life.

In estimating the cash flows of a project, incremental principles (that considers all incidental effects), separation of investment and financing principle, post-tax principle and consistency principles are employed.

Incremental principle

In an existing company, the cash flows are to be estimated by evaluating the cash flows of the company with the project and without the project. The difference will be incremental cash flows related to the project.

Separation of investment and financing principle

In a standard capital expenditure analysis, interest payment to be made on borrowings is not brought into the picture. Borrowing is considered a financing decision and its impact is included in the cost of capital estimation. Hence cash flow estimates do not have any interest payment of component.

Post-tax principle

Tax impact on the cash flow is considered and after tax cash flows are estimated.

Consistency principle

The inflation expectation built into estimation of revenues and costs and cost of capital have to be consistent or same.
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Some Examples Issues That I came Across Recently

1. Acquisition of a software by a design department.
2. Replacement of boiler tubes.
3. Replacement of an electronic equipment as some cards used in the equipment are not available anymore for replacement (the equipment manufacturer is not supplying those cards anymore as the equipment is phased out for production).

The approval authority for the expenditures wants the concerned departments to calculate the payback period for the expenditure proposals.



Payback Period

Payback period is an investment appraisal metric. This period will indicate the number of years it will take to get back the cash initially invested in a project. The period is calculated using the estimated cash flows, both outflows and inflows.

Original Knol - http://knol.google.com/k/narayana-rao/payback-period-estimation-of-cash-flows/  2utb2lsm2k7a/  1952#

Ud. 3.2.2022

Pub 11.12.2011

Engineering Economy or Engineering Economics: Economic Decision Making by Engineers

IE Economic Analysis. Module of Industrial Engineering Online Course Notes

Lesson 322 of IEKC Industrial Engineering ONLINE Course Notes.

Engineering Economy: An Explanation

An engineering economy study involves technical considerations and it is a comparison between technical alternatives in which the differences between the alternatives are expressed so far as practicable in money terms (Grant and Ireson, 1960).

Every engineering decision must be subjected to the question "Will it pay?"

The late General John J.Carty, Chief Engineer of the New York Telephone Company, had asked three questions for every engineering proposal that came to him for review.

1. Why do this at all?

2. Why do it now?

3. Why do it this way?

The first question makes an enquiry regarding profit. In business you do a thing because it is profitable to do so.

The second asks whether the person proposing the investment or expenditure has considered the time alternatives. Can we postpone the investment/expenditure and make more profit?

The third question forces the concerned person to consider all other alternatives to the issue at hand and certify that the solution proposed is the most profitable proposal.

Thus General John Carty made sure that engineering economy studies were done by his technical departments.

 

Economic Decision Making

 

Every dollar an executive proposes to spend or proposes not to spend has to be subjected to economic decision making. If an executive decides to keep a machine in service even though it has frequent breakdowns, giving more number of defective items and consuming more energy, he is making an economic decision. A decision to do nothing is a decision to continue the present production equipment or the system and to reject all alternatives, those which were known and those which were not searched for if he has not searched for them.

Most executives agree that the decision to invest Rs. 5,00,000 for the purchase of a new machine is a typical example of an economic decision. But they do not consider their choice not replacing a machine as an economic decision.

Executives are Unprepared for Economic Decision Making

George A. Taylor in his text book, Managerial and Engineering Economy emphasizes that executives are unprepared for their responsibility in generating and examining alternatives by economic criteria. Most of the executives seldom justify their actions and the resulting expenditure by adequate economic criteria. Too many executives do not a feel a true responsibility for the costs they create or the costs they protect by maintaining the status quo. A designer may take it granted that he has the privilege of creating any cost that may result from is design. He feels costs are the responsibility of the company or somebody else in the company. Proper reflection will make him conclude that costs that result from design are in his sphere of management and hence are his responsibility, because he and not somebody else selected the proposed design from all the possible alternative designs.

If an executive disregards the economic effects of a decision, he is disregarding the cost commitments that will result from his decision.

 

Engineering Efficiency Versus Financial Efficiency

In 1923, O.B. Goldman, who wrote the book, Financial Engineering,  said that the primary duty of the engineer is to consider costs in order to obtain real economy – to get the most power, for example, not from the least number of pounds of steam, but from the least possible number of dollars and cents: to get the best financial efficiency.”

 

The goal of equipment selection in a business system is acceptable financial efficiency, not engineering efficiency.

Searching for  Low Engineering Efficiency Alternatives

If the final choice is based on financial efficiency alone, the search for alternatives must be conducted on either side of current engineering efficiency. Search for higher financial efficiency is not necessarily a search for higher engineering efficiency.

Cost Reduction Expenditures and Income Expansion Expenditures

 Expenditure and Investment proposals can be for cost reduction or income expansion. In some cases, both may be realized.  A characteristic of cost reduction expenditure is that the decision does not affect the gross income. A decision in which the gross income increases is an income expansion proposal. For both the proposals, economic decision making is essential.  

Rate of Return on Capital (Finance)

Finance is the money resources of a business organization. Money resources of an organization consist of equity capital contributed by owners of the firm and loans (short-term as well as long-term) given by various  banks, other firms and individuals. All the entities who provide finance to a firm expect to get back the principal and additional return on principal. The business operations of a firm need have the ability to generate that return or more than that return to acquire capital or finance in the first place and then generate the return to satisfy the expectations afterward. This idea gives rise to cost of capital.

 

Cost of Capital

The user of capital must satisfy the profit motive of the supplier of capital. This obligation of the user of capital is termed as the cost for using capital or cost of capital. Hence all expenditure proposals need to include an evaluation mechanism that considers the cost of capital for the capital required to implement the proposal.

Profit: Accounting and Economics Viewpoints

Profits are measured by accountants. But they are evaluated by economists, engineering economists and financial executives.

The accountant computes profit earned during past periods after incomes and expenses are known. The accountant subtracts expenses from revenue to find the profit on the owner’s investment.

 

The economy analyst or engineering economy analyst tests the profitability of a proposed operation.

Engineering Economy Study

The process of engineering economy study will include data gathering and data analysis.

Analysis requires analytical methods and Engineering Economy texts mainly concentrated on analytical techniques. The analytical techniques express the alternatives in comparable measures of money with respect to their cost, revenue or return on capital.

Data gathering will include some current estimates made by engineers by combining the technical information and costs/prices relevant to the materials and processes used to provide goods or services. The data gathering effort cannot be a one time effort and systems are to be put in place to record appropriate data as and when it first appears. For this purpose accounting sections or departments (financial, cost and management accounting) and technical departments have to jointly work out the need for future engineering economy studies and install appropriate recording systems.

Is There a Need for Engineer to Involve Themselves in Financial Calculations?

While the financial calculations that necessarily follow the engineers designs and technical estimates are in no sense an exclusive engineering function. Such calculations can be done by persons with accounting background and business administrators.

However, these calculations are such a necessary part of the numerous choices between technical alternatives that every engineer has to do as a part of his design function or process that an engineer who is not equipped to make them is a  poor choice for the job. A deficiency in this matter is particularly serious in an engineer who has administrative responsibility for technical matters (Grant and Ireson, 1960).

 

References

 

George A. Taylor, Managerial and Engineering Economy, Van Nostrand Reinhold Company, New York, 1964.

Grant, Eugene, L., and W. Grant Ireson, Principles of Engineering Economy, 4th Ed., The Ronald Press Company, 1960, P.3.

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Engineering Economics is an Efficiency Improvement Tool for Industrial Engineers

Engineering Economic Appraisal - A Special Role for Industrial Engineers

Engineering economic analysis is to be carried out by all engineers. These analysis reports must be appraised by IE department engineers. IEs can evaluate whether sufficient technical alternatives were considered in proposing the technical solution now recommended and then check the data and calculations of the economic analysis. From IE department, the proposal can go the project appraisal committee.

Engineering Economics is part of Industrial Engineering Tool Kit

Industrial Engineering Tool Kit

________________________________________________________________________

Engineering Economics - Knol Book by Narayana Rao

Related Articles

http://nraomtr.blogspot.com/search/label/Engineering%20Economics

Bibliography

A NEW FRAMEWORK FOR ENGINEERING ECONOMICS

http://www.sie.arizona.edu/faculty/arnold_ASEM_paper.pdf

Environmental Engineering Economics Program

http://www.epa.gov/nrmrl/std/sab/e3/

Optimal Response to Periodic Shortage: Engineering/Economic Analysis for a Large Urban Water District
Anthony C. Fisher, University of California, Berkeley and Giannini Foundation, David Fullerton, Nile Hatch, Peter Reinelt

http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1183&context=are_ucb

Software Engineering Economics

http://csse.usc.edu/csse/TECHRPTS/1984/usccse84-500/usccse84-500.pdf

Recently Published Books

Principles of Engineering Economic Analysis, 5th Edition
White, Case, Pratt
ISBN 978-0-470-11396-7, © 2010

Management  Knols by Narayana Rao are being consolidated in

http://nraomtr.blogspot.com/

Originally posted in Knol
http://knol.google.com/k/  engineering-economy-or-engineering-economics-economic-decision-making-by

Updated on  2.2.2022,  2 December 2012

Visionary Leadership for Operations Management

Aligned Vision, Task Completion capability (with Effectiveness and Efficiency), Happy Employees and Supply Chain Partners - Three Dimensions of Importance in Operations Management

                                      Picture source: https://en.wikipedia.org/wiki/Steve_Jobs

Stage 3 Leadership - David El Berlew - Leadership and Organizational Excitement

Stage 3 leadership  comprises of  custodial,  managerial and charismatic  leadership.  The word "charisma" has been used in many ways with many meanings. Berlew defines it  in terms of three different types or classes of leadership behavior which provide meaning to work find generate organizational excitement. These are:

• the development of a "common vision' organization related to values shared organization's members;
• the discovery or creation of value opportunities and activities within the work of the mission and goals of the organization; and

• making organization members feel and more in control of their own destiny individually and collectively.


The first requirement for Stage 3 or leadership is a common or shared vision the future could be. To provide mean generate excitement, such a common vision must reflect goals or a future state of affairs valued by the organization's members thus important to them to bring about.

All inspirational speeches or writings have the common element of some vision or dream of a better existence which will inspire or excite those who share the author's values. This basic wisdom has to be incorporated in managerial practice.

Characteristics of Visionary Leadership

In describing the characteristics of visionary leaders, David Berlew (1974) purports that the first requirement for Stage 3 leadership is the existence of a common or shared vision for the future of

the organization. He states that "all inspirational speeches or writings have the common element of some vision or dream of a better existence which will inspire or excite those who share the author's

values" (1974, p. 24) . He claims "a vision, no matter how well articulated, will not excite or provide meaning for individuals whose values are different from those implied by the vision" (1974, p. 24), Berlew states that no matter how well articulated, a vision that is not congruent with the values and beliefs (or individual visions) of the subordinates will not be accepted. Therefore, the vision must arise from the values of the group being led. It is not just created by the leader and then "sold" to the subordinates. Berlew states, "one problem for heads of complex organizations is that . . . they must represent and articulate the hopes and goals of many different groups. . . . Only the exceptional leader can instinctively identify and articulate the common vision relevant to such diverse groups" (1974,

p. 24) .

Another quality of the exceptional leader is the ability to act consistently in accordance with the vision. "The effectiveness of the common vision depends upon the leader's ability to 'walk the talk':

Bennis and Nanus in their research found that  leaders were all concerned primarily with the organizations ' basic purpose and were "vision-oriented" (1985, p. 21) . They identified four areas of competency ("strategies") that all of these leaders embodied. Strategy I is attention through vision . The leader clearly articulates a compelling results-oriented vision for the future that grows out of the needs of the entire organization. Bennis and Nanus claim, "Leaders are the most results-oriented individuals in the world, and results get attention. Their visions are compelling and pull people toward them" (1985, p. 28)

Strategy II is meaning through communication . The leader influences and organizes meaning and interprets events for the members of the organization in a way that fosters creation of the vision. "An

essential factor in leadership is the capacity to influence and organize meaning for the members of the organization" (Bennis and Nanus , 1985, p. 39)

Strategy III is trust through positioning . Trust is created and subordinates accept the vision when the leader is "reliable and tirelessly persistent" (Bennis and Nanus, 1985, p. 45) . The leader acts consistently with the vision which creates trust in the leadership. The leader communicates through actions his/her commitment to the vision. "Leaders acquire and wear their visions like clothes" (Bennis and Nanus, 1985, p. 46). This concept is similar to Berlew's (1974) description of the importance of the leader's willingness to "walk the talk."

Strategy IV is deployment of the self through positive self-regard and through the "Wallenda Factor." It is important to have self confidence and to maintain one's focus on the vision, not the obstacles. These leaders, like Karl Wallenda, the tightrope aerialist, "simply don't think about failure, don't even use the word (Bennis and Nanus, 1985, p. 69) . Mistakes are not considered failures because they lead to new learnings.

The ability to articulate and define reality and the vision for the future is especially important in the change process, in transforming organizations, where the social architecture must be revamped (1985, p. 139) . Bennis and Nanus state that "for a successful transformation to be achieved, three things have to happen . . . [the leader must] 1) create a new and compelling vision capable of bringing the work force to a new place, 2) develop commitment for the new vision, and 3) institutionalize the new vision" (1985, pp. 140-141).

Mary Parker Follett (1941) supports this concept in her statement: . . . the most successful leader of all is one who sees another picture not yet actualized. He sees the things which belong in his present picture but which are not yet there. . . . Above all, he should make his co-workers see that it is not his purpose which is to be achieved, but a common purpose, born of the desires and the activities of the group, (pp. 143-144)

According to Bennis and Nanus (1985) , commitment is created, achieving the "alignment" within the organization around a common vision, by helping co-workers realize that one's vision is in fact a common vision. They state: A vision cannot be established in an organization by edict, or by the exercise of power or coercion. It is more of an act of persuasion, of creating an enthusiastic and dedicated commitment to a vision because it is right for the times, right for the organization, and right for the people who are working in it. (p. 107)

Bennis and Nanus (1985) agree with Berlew (19 74) that "if the organization is to be successful, the image must grow out of the needs of the entire organization and must be 'claimed' or 'owned' by all the important actors" (Bennis and Nanus, 1985, p. 109). Bennis and Nanus also agree with Berlew that the vision must begin at the top of the organization and is the responsibility of the CEO (chief executive officer) who "articulates the vision and gives it legitimacy" (Bennis and Nanus, 1985, pp. 109 and 141)

Sashkin (1986) discusses thinking processes used by visionary leaders. He describes visionary leaders as being able to think in terms of long time spans (10 to 20 years or more) in order to conceptualize long-range visions. He terms this characteristic "cognitive ability" which is derived from the work of Elliott Jacques' (1964) theory of "time span of discretion." Sashkin (1986) further describes four processes or thinking skills that visionary leaders use in creation of a vision. The first skill is called "expressing the vision" and involves performing actions to make it real such as meeting with involved people or writing a policy. The second step involves "explaining" the vision or describing the actions required. The third skill is "extending" the vision, the ability to apply the necessary actions to a variety of situations. The fourth skill is called "expanding" the vision and involves applying it not just in a variety of similar ways but in a wide range of circumstances.

Sashkin (1988) identifies three critical elements of visionary leadership. The first element involves personality prerequisites concerning the leader's need for power and the four cognitive skills described above. The second element involves the leader's understanding of "key content dimensions" that are essential for an effective vision and which are based on certain functions that define the organization's culture. Sashkin describes three underlying themes that constitute an effective vision: dealing with change effectively, developing high-standard and important goals, and providing ways that people can work together and feel ownership for the vision. The third element involves the leader's ability to articulate the vision through certain behavioral skills which are used to implement programs and policies that reflect the leader's organizational philosophy.

Kiefer and Stroh (1984, p. 182) state these leaders are able to:

1. Create and communicate a personal and organizational vision to which they are wholeheartedly committed,
2. Catalyze alignment around a common vision.
3. Revitalize and recommit to the vision in the face of obstacles
4. Understand an organization as a complex system whose structure may enable or thwart realization of the vision. Develop (or change) structures as needed to support the vision.
5. Empower themselves and empower others.
6. Develop intuition as a complement to rational thinking.

Kouzes and Posner (1987) report the results of a study where over 500 executives were asked to describe their "personal best" leadership experiences. From analysis of responses, they determined consistent leadership practices that involved five strategies. The first is "challenging the process" or looking for new innovative ways to do things. The second is "inspiring a shared vision." The third is "enabling others to act" or empowering others. The fourth is "modeling the way," which is similar to Berlew's (1974) concept of "walk the talk." The fifth is "encouraging the heart," which involves celebration and recognition of successes along the way.

Kouzes and Posner (1987) describe ten behavioral commitments that visionary leaders exhibit (p. 14) . These commitments are listed below with the strategy to which they relate.

Challenging the Process
1. Search for Opportunities
2 . Experiment and Take Risks Inspiring a Shared Vision
3. Envision the Future
4 . Enlist Others Enabling Others to Act
5. Foster Collaboration
6 . Strengthen Others Modeling the Way
7. Set the Example
8. Plan Small Wins Encouraging the Heart
9. Recognize Individual Contribution
10. Celebrate Accomplishments

Abraham Zaleznik (1977) describes the following characteristics of Stage 3 leaders. He refers to these leaders as "twice-born" personalities, who search for change; who possess an imaginative capacity to visualize purposes; who have the ability to communicate it to others; and who are able to generate value in their work. He compares these leaders to Stage 2 leaders which he refers to as "once-born" personalities.

Value of a Clear Vision for Groups

The process of creating, articulating, and agreeing upon a vision for a group elucidates the purpose of the group (Kiefer and Stroh, 1984) . When the purpose of the group is clear, members move more easily in the same direction with less conflict and are able to agree upon goals and objectives more easily.

Allen and Kraft (1984) assert an advantage of articulating a clear, agreed-upon vision and the resulting goals for groups is that this process directly influences the group's norms. Norms are the implicit and explicit expectations held by group members about acceptable group behavior (Schein, 1969, p. 59). Allen and Kraft (1984) describe norms as "the building blocks of our cultures-those expected, accepted, and supported ways of behaving that determine so much of what we do" (p. 93) .

Allen and Kraft (1984) assert that influencing norms is essential in any change process, a concept which is supported by Kanter (1983)
.
Allen and Kraft (1984) maintain that a focus on a clear, articulated vision for a group facilitates the development of helpful norms for a group.

Kiefer and Stroh (1984) also speak to the power of having a clear vision for a group. They state, "A vision has the capacity to motivate people far more effectively than a precisely defined solution" (p.
174) . They maintain, "The vision embodies people's highest values and aspirations (for self-actualization, excellence, service and community) . It inspires people- to rise above their fears and preoccupations with current reality" (p. 174)

Bennis and Nanus (1985) state, "Vision animates, inspirits, transforms purpose into action" (p. 30). They offer a description by Jerry Neely of how a clear vision influenced daily functioning in Smith
International, a major manufacturer of oil drilling and rigging equipment: "The employees were willing to take a chance because they felt part of something magic and they wanted to work that extra hour or make that extra call, or stay that extra Saturday" (p. 216)

Vision in Peak Performing Organizations

Kiefer and Senge (1984) and Kiefer and Stroh (1984) describe visionary or high performing organizations as ones where all members are aligned around a powerful, unifying vision. Kiefer and Stroh (1984) assert that these organizations are capable of inspired performance and have attained the highest levels in both organizational performance and in human satisfaction (p. 171) . The organization operates with viction that it can shape its own destiny (Kiefer and Senge, 1984, p.
70) . This viewpoint is grounded in the interpretive paradigm described by Smircich (1983) and Weick (1979) which asserts it is possible to affect one's sense of reality through the meaning one assigns to events. Stroh (1984), Kiefer and Senge (1984), Kiefer (1983) et al. assert that it is possible to create whatever one wants and that people and organizations need not be bound by current circumstances or limited by outside forces. For example, perhaps an organization might define a new product line developed by a competing organization as an obstacle or a limiting factor. The peak performing organization would maintain its focus on its purpose or vision, not the obstacle, and
might define the obstacle as a "challenge" or "test" or "step" in movement toward the vision. In other words, the peak performing organization would use the "obstacle" to its own advantage instead of fighting it or giving up, while another organization might limit itself in the face of the "obstacle."

Kiefer and Senge (1984) state that the unifying principle of these high performing organizations is that "individuals aligned around an appropriate vision can have an extraordinary influence in the world" (p. 70) . This principle forms the basis for a coherent organizational philosophy with five primary elements:

(1) a deep sense of vision or purposefulness,
(2) alignment around that vision,
( 3) empowering people
(4) structural integrity,
(5) the balance of reason and intuition


Bennis, Warren and Nanus, Bert. Leaders: The Strategies for Taking Charge . New York: Harper and Row, 1985.

Berlew, David E. "Leadership and Organizational Excitement," in California Management Review , 1974, 17, 21-30.

Follett, Mary Parker. Dynamic Administration . New York: Harper and Row, 1941.

Jacques. Elliott. Ti.e-Span Handbook. London: Hainemann. 1964.

Sashkin, Marshall "The Visionary Leader," Training and Development Journal, 1986 May.

Doctoral Dissertation 1988

Visionary leadership, management, and high performing work units : an analysis of workers perceptions.
Madelyn Jessica Stoner-Zemel
University of Massachusetts Amherst

https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1943&context=dissertations_1

Visionary Leadership - Leadership Competency - Strategic Alignment

Visionary leadership, the communication of a future image of a collective with the intention to persuade others to contribute to its realization, is widely seen as a particularly effective way of mobilizing and motivating followers.

We take stock of the state of the science in visionary leadership and conclude that conclusions regarding the effectiveness of visionary leadership are overly optimistic at least in the sense that the existing evidence base leaves much to be desired.

We identify methodological and conceptual issues to take into consideration in moving the study of visionary leadership forward.

Visionary leadership is widely seen as key to strategic change. That’s because visionary leadership does not just set the strategic direction — it tells a story about why the change is worth pursuing and inspires people to embrace the change. Not surprisingly, then, science and practice have a very positive view of visionary leadership as a critical leadership competency.

But research finds that the positive impact of visionary leadership breaks down when middle managers aren’t aligned with top management’s strategic vision. This can cause strategic change efforts to slow down or even fail.

Visionary leadership is not just important for senior managers; it also matters for middle and lower level managers, who play a key role in carrying out strategic change. Their ability to inspire their own teams and create strategic alignment — a shared understanding of and commitment to the company’s strategy — within them is a core element in successful strategy execution.

Google’s data-driven Project Oxygen identified visionary leadership as one of the eight traits of stellar middle managers.

When middle managers were aligned with top management’s strategic vision, things played out as the widespread view of visionary leadership would suggest: the more these managers engaged in visionary leadership (by communicating their vision for the future and articulating where they wanted their team to be in five years,) the greater the shared understanding of strategy in their team, and the more the team was committed to strategy execution.

For managers that were misaligned with the company strategy, however, the dark side of visionary leadership became evident. The more these misaligned managers displayed visionary leadership, the less strategic alignment and commitment were observed among their teams.

Out interview findings extended these results. Employees of misaligned visionary managers indicated that their managers created confusion and uncertainty about what the company strategy entailed. This disengaged their teams from the company strategy.

Whereas visionary leadership thus was a positive force when managers were aligned with the company strategy, it became a negative force standing in the way of strategic alignment when the middle manager’s vision diverged from the company’s.

The importance of these findings lies in the fact that they caution against what is common practice in many companies. Many companies invest heavily in leadership development. Almost invariably, visionary leadership is seen as a crucial leadership competency in such efforts.

At the same time, companies tend to invest markedly less in creating strategic alignment among their managers.  Research on strategy execution has documented, however, that there are a range of reasons for why managers may not be aligned with company strategy. Managers’ strategic alignment cannot be assumed as a given.

How do you ensure that managers are aligned on your company’s strategy? strategic alignment  starts with creating strategic alignment among middle managers before strategy execution efforts begin. This should not be one-time communication but a dialogue; people will only take ownership of strategic change if they are consistently persuaded by its value.

Why Visionary Leadership Fails

Nufer Yasin Ates, Murat Tarakci Jeanine P. PorckDaan van KnippenbergPatrick Groenen
HBR, February 2019
https://hbr.org/2019/02/why-visionary-leadership-fails

Colette M. Taylor, Casey J. Cornelius, Kate Colvin, (2014) "Visionary leadership and its relationship to organizational effectiveness", Leadership & Organization Development Journal, Vol. 35 Issue: 6, pp.566-583, https://doi.org/10.1108/LODJ-10-2012-0130
https://www.emeraldinsight.com/doi/abs/10.1108/LODJ-10-2012-0130?mobileUi=0&journalCode=lodj

Visionary Leadership: Creating Scenes that Change the Future

Nano Tools for Leaders® are fast, effective leadership tools that you can learn and start using in less than 15 minutes — with the potential to significantly impact your success as a leader and the engagement and productivity of the people you lead.
https://executiveeducation.wharton.upenn.edu/thought-leadership/wharton-at-work/2013/02/visionary-leadership/


Are You a Visionary Business Leader?
Dave Lavinsky
2013
https://www.forbes.com/sites/davelavinsky/2013/04/26/are-you-a-visionary-business-leader

Visionary Leadership: A Proven Pathway to Visionary Change
William A. Ihlenfeldt
AuthorHouse, 2011 - Education - 116 pages
https://books.google.co.in/books?id=DpII6pVFV2sC

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Ud. 2.2.2022

Pub: 25.4.2019