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I had the pleasure of recently giving a training at the Palestine Securities Exchange and also introduced the below model of “Communicating the gap”, which I had mentioned in a previous post.   Of course I could not just let the  theory speak for itself – it appears to be very abstract – so I was happy to find a study by the University of St. Gallen and the German Association for Investor Relations (DIRK), very helpful people,  who also have a range of studies published on IR. Unfortunately most of the material is in German, so I see it as adding value to present main points of their joint study here in English, since it generated great interest in the PSE training. Back to meaning creation and “communicating the gap”:

The study emphasizes that the calculated value of an organization by mathematical models is not identical to the valuation of the capital markets, so other value drivers must be taken into account. In the study interview partners state that they take the quantitative data and correct by using qualitative data. However, they also state that – and this is important for IR practitioners – that relevant qualitative information is hard to come by and that

corporate communication delivers elementary information as input of “sense-making” efforts of investors.

As stated before, I had expanded on the sense-making process and was glad to see the concept in action. The study goes on to show that the perception of a public company on the capital market decides on its value and thus also on its strategic options. Qualitative factors of the corporation

  • are used to contain risk
  • allow a realistic assessment
  • form “capital markets reputation”
  • and shape the collective judgment of actors on capital markets

The study, which rests on qualitative interviews with European analysts and institutional investors. identified seven main categories of qualitative data  which are relevant to the respondents:

  1. Corporate Communication
  2. Quality of Management
  3. Corporate Strategy
  4. Corporate Culture
  5. Corporate Governance
  6. Customer- and Industry Relations
  7. Public Affairs

The study goes on to identify another 46 sub-factors of above categories, and created a weighted ranking of all these. I do not want to give the comprehensive list of all the weighted factors and categories, but in the training we created a “Top Ten List”, which I want to present here, and which showed some remarkable results

  1. Longterm  Strategy (Strategy)
  2. Implementation of Strategic Plans (Quality of Management)
  3. Complete Disclosure (Corporate Communication)
  4. Shareholder Value (Strategy)
  5. Comprehension of Top Management of Business (Quality of Management)
  6. Leadership (Quality of Management)
  7. Approachability of IR (Corporate Communication)
  8. Attainment of Prognosis (Quality of Management)
  9. Pro-active Theme Setting (Corporate Communication)
  10. Continuity of Corporate Communication (Corporate Communication)

What was surprising to me, was that Leadership ranked so high with all factors, in fact “Quality of Management” is pretty dominant in the top ten as well with “Corporate Communication”.  It was good to see “Strategy”  in the top ten, after reading so much on the demise of strategy.Iit was good to see that analysts and investors  apparently see it as very relevant for their recommendations or decisions.

Of course the other 34 factors are also important and relevant for IR. Another common interest in  the course that an identical study for the Arab region would be of great interest and help to IR practitioners in the region. Would be an interesting survey to work on.

Source: DIRK Deutscher Investor Relations Verband e.V.  &  Universität St. Gallen (2007) Corporate Perception on Capital Markets

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So bear with me: I had to make somehow the link between the whole issue of sense making and communication, because next week I am booked to give a course on PR Strategy at the Palestine Securities Exchange and was asked to expand a bit more on the subject of communication.

Now I have to add that I find the communication concept given by Wolfgang Reineke and  Gerhard A. Pfeffer in  “PR Check-up” quite convincing and use a lot of it a basis. I found it very useful in my consulting work and really has enormous amounts of helpful material. A book by the way, which is now out of print, but I would really recommend to all those PR people out there: try to get your hand on it.  It is amazing how many tools and concepts are introduced in this book. Back to the communication model they introduce.

It consists of three levels: The polity level, which is responsible for corporate culture, corporate identity and corporate design and which through communication, creates the corporate image. Then the policy level of PR, Public Affairs and Internal Relations which impacts publics internal and external also on the level of corporate image and. On the third level all those marketing tools such as Sponsoring, Product Placement, Advertisement, Sales Promotion and Marketing kick in to finally create the Brand Image and have the emphasis on products on services. It sort of clarifies that a company cannot not communicate and that perhaps there is not necessarily congruence on how a corporation perceives itself and how it is perceived by the outside. So we come back to the culture issue here, but more of that later. I appreciate in any way, how this model attempts to show different layers of communication.

Of course the good old sender, encoding, decoding and recipient is presented as well.

But was never quite happy with this model, until I stumbled over this paper by Reijo Savolainen and recognized some things I have been working on lately.  He describes that since human beings are bound by time and space to solve problems and to shape their surroundings around them, the always take a step by step approach, called here “step-taking”, in a world which is characterized by “ultimate discontinuity”. In this “step-taking” process every step “Means an act of defining the situation emerging due to the continuous moving ahead”. This definition is what we can call sense-making. So what the wanderer does, he receives information being sent and uses it to create meaning to gap the bridge between the present into the future.

Savolainen: Sense-Making assumes that each individual is the expert on his in developing strategies for bridging his own gaps, each individual consciously or unconsciously theorizes why certain strategies are appropriate or useful for him.

Of course others confirm this point of view.

Communication is the process by which people interactively create, sustain, and manage meaning (Conrad and Poole, 1998)

But what it means for me and for the messages created by PR people is that they should somehow get an idea of what ultimately would make sense to the people there are addressing. In effect they would have to sit down with a journalist or a member of a public they which to address and talk about their perception of the meaning of life. One should not ask them what story they would like to hear or what they are working on, or what their responsibilities are, but rather ask them:

What does your work mean to you? What makes sense in your everyday experience? Describe a moment, when everything just fell into place.

To get someone to talk about the meaning of life might not be easy, and I d not know if is being done at all, but it sure would be interesting to find out. It needs empathy, courage and wisdom to do and to take this issue serious. To get some guidance, one can use the tool below.

Sources:

Conrad, C.  & Scott Poole, M.S. (2004) Strategic Organizational Communication: In a Global Economy , Wadsworth Publishing; 6 edition ISBN-10: 0534636217 ISBN-13: 978-053463621

Savolainen, R.  (2006)  Information Use as Gap-Bridging: The Viewpoint of Sense-Making Methodology , JOURNAL OF THE AMERICAN SOCIETY FOR INFORMATION SCIENCE AND TECHNOLOGY, 57(8):1116–1125

Reineke, W. & Pfeffer, G.A. (2000) PR Check-up , Stamm Verlag; Auflage: 1. Aufl.  ISBN-10: 3877730191

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In an interview with a retired public manager of a Berlin tax revenue office, we went through the topic of leadership in several sessions. First of all it was a great interview; I got insight into how the state finances itself.  Also it was quite interesting to see the results and how much they mirrored the findings of the private sector.  This is what I noted down in my analysis of the discussion:

1)      Several concepts known from literature have remerged, such as:

  • Value leadership as the driving concept, here specifically the value of justice. A driving value used to
    • Resolve conflicts
    • Make decisions – even to the extent to which the decision might go against assumed organizational interests and generally accepted behavioral norms.
    • Influence employees
    • Create culture
  • The concepts of culture and sub-culture and these being dependant on the leaders values and behavior
  • The concept of coaching as a main source for personnel development
  • The concept of employees as stars, cash cows and poor dogs, but presented here in the concept of a “Gauss distribution curve”, with the top 5 to 10% of employees as high performers, the middle 80 to 90% as medium performers, and the bottom 5 to 10 % as low performers.  This included different strategies on how to address these different employee groups.
  • External collaboration, political management: According to the subject, very little contact to the political level existed, however: “It is necessary to have ‘Bundesgenossen’ (strong allies) to influence the political level.” … and in this specific case to improve cooperation between agencies.
  • Internal collaborative leadership

2)      New concepts emerged, which have not yet been observed in existing literature:

  • An office can have “goodwill”. According to the subject, leaders need to build the “goodwill” of an organization to incur trust in oversight bodies to allow the leader more flexibility in solving problems, while at the same time not overstepping any legal boundaries. The concept of “goodwill”, known in the private sector, and here referred to a virtual value of the organization,  reminds the researcher very much of the concept of “social capital” (Fukuyama, 1995) which is needed for individuals to trust each other and to foster collaboration.
  • The concept of empathy, which Crosby and Bryson (2005) perhaps define as “caring for the common good”. In this case  Mr. C. said: “We have to be aware that people suffer and we should try, if possible, to ease their suffering.”

I still like the idea that a good leader instills trust into collaborating agencies and thus creates public value and I thought I had hit a jackpot in my research.  But I was overly enthusiastic about having discovered the connection of leadership and social capital in fact there are some very good papers out there which did just that. I can just name three of them:

  • Hitt, M. A. & Ireland, R.D. (2002) The Essence of Strategic Leadership: Managing Human and Social Capital
  • King, N.K.  (2004) Social Capital and Nonprofit Leaders
  • Maak, T.  (2007) Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital

Instead of ranting on what a great concept that is and how social capital relates to values, culture, internally and externally, I will give a little room for those excellent researchers.

King writes: “Nonprofits and their leaders would do well to take stock of their organization’s social capital, assessing the strengths and areas for improvement. The assessment could include identifying strategic networks and relationships that they need to developed. Importantly, this audit could also help the organization identify any problems or costs related to generating or leveraging social capital.”

Maak writes: “To conclude, I suggest to think of a responsible leader with respect to stakeholder engagement as a weaver of social ties, as an embedded and engaged networker who makes sure that her organization is ‘in sync’ with stakeholder expectations, and who is able to mobilize multiple stakeholders in a coalition to build a responsible and sustainable business.”

A leader as a weaver of social capital – I like that.


Sources:

Crosby, C. & Bryson, J.  (2005) “Leadership for the common good”, San Francisco: John Wiley & Sons

Fukuyama, F.  (1995), “Trust: Human Nature and the Reconstitution of Social Order: The Social Virtues and the Creation of Prosperity”, New York: Free Press

Hitt, M. A. & Ireland, R.D. (2002) The Essence of Strategic Leadership: Managing Human and Social Capital, The Joumal of Leadership and Organizational Studies, 2002, Vol. 9, No.l

King, N. K  (2004) Social Capital and Nonprofit Leaders,  NONPROFIT MANAGEMENT & LEADERSHIP, vol. 14, no. 4, Summer 2004

Maak, T.  (2007) Responsible Leadership, Stakeholder Engagement, and the Emergence of Social Capital,  Journal of Business Ethics (2007) 74:329–343

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New Public Management and Governance have shaped the public sector in the last twenty years. Strategic management has become a standard tool for the public manager to create value and to shape the organization. In the light of growing complexity, standard models such as MBO or the Deming cycle are arriving at limits to describe what public service organizations must be able to accomplish in terms of performance and satisfaction of stakeholder expectations. Standard prescriptive literature suggests using iterative, step-by-step models which guide the manager though the strategic management cycle. Logical incrementalism however points towards a dynamic approach with tactical shifts and partial solutions using consciously structured flexibility. Based on logical incrementalism and existing literature, the researcher proposes using a “strategic triangle” with three management dimensions, combined with “tactical mapping”, as a guiding and communication instrument for management and staff. The strategic triangle and logical incrementalism are tested by exploring a case study of a public service organization, the Training Center for Development Cooperation (V-EZ), which has formulated a new strategy in 2005. First findings indicate the strategic triangle and tactical mapping could prove useful in consulting, management and teaching.

Attached paper was presented at the E-Leader conference in Singapore this year http://www.g-casa.com/ .

Please feel free to download, comment or  contact me for further questions:Strategic management in the public sector McBain

You will find the slides here: STRATEGIC MANAGEMENT IN THE PUBLIC SECTOR E-Leader


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