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COPYRIGHT UCT DEVELOPMENT OF A SCALE TO ASSESS ASSET MANAGEMENT FIRMS ON QUALITATIVE ISSUES A Research Report presented to The Graduate School of Business University of Cape Town in partial fulfilment of the requirements for the Masters of Business Administration Degree by Katarina Johnsson Cassandra McKeown November 2000 Supervisor: Professor Mike Page
Transcript of DEVELOPMENT OF A SCALE TO ASSESS ASSET...
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DEVELOPMENT OF A SCALE TO ASSESS ASSET
MANAGEMENT FIRMS ON QUALITATIVE ISSUES
A Research Report
presented to
The Graduate School of Business
University of Cape Town
in partial fulfilment
of the requirements for the
Masters of Business Administration Degree
by
Katarina Johnsson
Cassandra McKeown
November 2000
Supervisor: Professor Mike Page
The 2 year confidentiality embargoon this Research Report has expired
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ACKNOWLEDGEMENTS
This report is confidential for two years and may then be used freely by the University of
Cape Town Graduate School of Business.
We would like to thank Mike Page formerly of University of Cape Town, South Africa and
now of Erasmus University, Netherlands for suggesting this direction of our initial topic and
for his outstanding assistance in supervising this project. We were particularly appreciative
of his providing us with invaluable contacts with the Asset Management Industry.
We would also like to thank Professor Trevor Wegner, University of Cape Town for
answering our queries on the statistical methods utilised in the project. As well we would like
to thank Professor Deon Nel, Henley University, United Kingdom and Professor Leyland Pitt,
Perth University, Australia for their insights into the project.
Finally we would like to thank Investec Asset Management Limited for allowing us access to
their employees for interviewing purposes and for the distribution of our questionnaire to
their entire organisation. We would also like to thank Old Mutual for their assistance.
We certify that except as noted above the report is our own work and all references used are
accurately reported by footnotes.
Signed
Katarina Johnsson Cassandra McKeown
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ABSTRACT
This research report presents the development of a measurement scale of qualitative issues
within the asset management industry. Trends in the industry, such as increasing competition
and market effectiveness have generated a need for assessing the differentiation between asset
management firms.
There currently exists no such measure in South Africa as the industry relies on historical
performance data to measure the effectiveness of firms. This is despite market awareness that
this is not an optimal method, as historic performance is no guarantee of future performance.
Having initially conducted a cross-discipline literature review, and interviews with academic
and industry experts, a 120 item multi-dimensional questionnaire construct was generated.
Once the data from the cross-functional survey of the collaborating asset management firm
was collected, advanced statistical methods were applied to purify and refine the scale.
A six dimensional scale of 32 questions was obtained. Evidence of the scale’s reliability,
dimensional distinctiveness and validity were confirmed. The six dimensions identified were:
Indibaniso, Umdla, Indela Yoqoqosho, Ulwandiso, Inxaxheba and Ingqubo (Integration,
Drive, Investment Philosophy, Process, Reward and Involvement).
The report concludes with recommendations of further research in order to ensure the
robustness of the instrument. Further stages of the research are also envisaged in order to
investigate whether there is any correlation between the dimensions identified and the
performance of the organisation.
Key words: Asset Management, measurement scale, performance.
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GLOSSARY
Asset Management
Asset Management Firm Firm that pools investor funds across various financial
instruments.
Funds of Funds Combinations of portfolios across asset management firms.
Fund The pool of cash made up of investor’s contributions and
invested in stocks, bonds and other investments.
Fund Manager The person responsible for running the fund, choosing and
monitoring the investments it makes.
Methodology
Internal consistency The degree to which different questions measure the same
problem or subject.
Psychometrics Applicable statistics for construction and control of
(psychological) tests.
Histogram Graph displaying frequency distribution.
Correlation coefficient Indicates the magnitude of relation between two variables.
Cronbach alpha Measure of internal consistency of a set of items.
Factor loading The weight assigned to a factor by a model in order to
determine the response of an individual to a question.
Multidimensional The property of having more than two dimensions.
STATISTICA A comprehensive, integrated statistical data analysis, graphics,
data base management, and custom application development
system featuring a wide selection of basic and advanced
analytic procedures for science, engineering, business, and data
mining applications.
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TABLE OF CONTENTS
ACKNOWLEDGEMENTS...................................................................................................................................I
ABSTRACT.......................................................................................................................................................... II
GLOSSARY.........................................................................................................................................................III
ASSET MANAGEMENT....................................................................................................................................... III
METHODOLOGY ................................................................................................................................................ III
TABLE OF CONTENTS.................................................................................................................................... IV
1 INTRODUCTION ....................................................................................................................................... 1
1.1 BACKGROUND ........................................................................................................................................... 1
1.2 PROBLEM DEFINITION........................................................................................................................ 2
1.2.1 Introduction to the Issue.................................................................................................................. 2
1.2.2 Significance of the Study ................................................................................................................. 3
2 METHODOLOGY...................................................................................................................................... 4
2.1 GENERAL................................................................................................................................................... 4
2.2 THE STAGES .............................................................................................................................................. 4
3 THEORETICAL DOMAIN ....................................................................................................................... 9
3.1 GENERAL................................................................................................................................................... 9
3.2 FRAMEWORKS ........................................................................................................................................... 9
3.2.1 Organisational Culture ................................................................................................................... 9
3.2.2 Intellectual Capital........................................................................................................................ 10
3.2.3 Scales and Measurements in Related Areas.................................................................................. 11
3.2.4 Link to Performance...................................................................................................................... 12
4 DIMENSIONS AND ITEMS.................................................................................................................... 13
4.1 INTRODUCTION........................................................................................................................................ 13
4.1.1 Fields............................................................................................................................................. 13
4.1.2 Dimensions.................................................................................................................................... 13
4.1.3 Item Generation ............................................................................................................................ 15
4.2 VISION..................................................................................................................................................... 15
4.2.1 Clarity Of Vision ........................................................................................................................... 16
4.2.2 Investment Philosophy................................................................................................................... 17
4.2.3 Employee Involvement................................................................................................................... 17
4.2.4 Fit .................................................................................................................................................. 18
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4.3 COHESIVENESS ........................................................................................................................................ 19
4.3.1 Integration..................................................................................................................................... 21
4.3.2 Team Structure .............................................................................................................................. 21
4.3.3 Warmth.......................................................................................................................................... 22
4.4 PROCESS.................................................................................................................................................. 23
4.4.1 Investment Decision Making Process............................................................................................ 23
4.4.2 Operational Processes .................................................................................................................. 24
4.5 BEARING ................................................................................................................................................. 25
4.5.1 Performance Orientation .............................................................................................................. 25
4.5.2 Reward Systems............................................................................................................................. 26
4.5.3 Drivers .......................................................................................................................................... 27
4.5.4 Attitude .......................................................................................................................................... 29
4.6 COMMUNICATION.................................................................................................................................... 29
4.6.1 Internal Communication ............................................................................................................... 30
4.6.2 Conduciveness of Debate .............................................................................................................. 31
4.6.3 Leadership..................................................................................................................................... 32
4.7 PEOPLE .................................................................................................................................................... 33
4.7.1 Human Resources.......................................................................................................................... 33
4.7.2 Diversity ........................................................................................................................................ 34
4.7.3 Innovation ..................................................................................................................................... 35
4.8 ENVIRONMENT ........................................................................................................................................ 36
4.8.1 External Relationship Orientation ................................................................................................ 36
4.8.2 Customer Relationship .................................................................................................................. 37
4.8.3 Responsiveness.............................................................................................................................. 37
5 STATISTICAL ANALYSIS ..................................................................................................................... 39
5.1 DATA COLLECTION ................................................................................................................................. 39
5.2 SCALE PURIFICATION .............................................................................................................................. 40
5.2.1 Return to Original Dimensions ..................................................................................................... 41
5.3 CONFIRMATION OF SCALE RELIABILITY AND VALIDITY.......................................................................... 43
5.4 INTERPRETATION OF FINDINGS................................................................................................................ 45
5.4.1 Limitations .................................................................................................................................... 48
6 RECOMMENDATIONS FOR FURTHER RESEARCH...................................................................... 50
7 BIBLIOGRAPHY...................................................................................................................................... 51
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1 INTRODUCTION
This research report describes the development of a scale for assessing asset management
firms on qualitative issues. After introducing the reader to the industry, the problem and the
methodology used, conceptualised dimensions with corresponding items are presented. Then
the statistical findings and their interpretation are discussed, and finally the report is
concluded with recommendations for further studies.
1.1 Background
An Asset Management Firm may be defined as a firm that pools investor funds across various
financial instruments, predominantly shares, bonds and cash, so as to take advantage of
economies of scale and experience. In South Africa, before 1990 the asset management
industry was undifferentiated with only a few life insurance companies such as Old Mutual
and Sanlam. In the early 1990’s players such as Investec entered the market changing the
rules of the game, for example by offering customised funds, and for a number of years
outperforming the market. Post 1994 South Africa opened its markets to the international
arena. The increased competition has made the market more efficient though harder to
outperform.
The number of asset management firms in South Africa at present is 34. Total funds under
management in South Africa at the end of 1999 were almost R110 billion (Coleman 2000).
The largest clients consist of pension funds, insurance companies and large global
corporations. These investors are commonly referred to as the institutional or wholesale
market, whereas the smaller private clients are referred to as the retail market. The
management fees, regulatory issues, taxation implications and other aspects differ for the
retail and institutional markets. The large investors, such as corporate pension funds with
funds in excess of R100 million, will have their own customised fund. It is made up of solely
their investments and is often referred to as a segregated fund. The retail market however
tends to invest in unit trusts.
The total number of unit trusts available for investment across the South African firms is
nearly 300. By international comparison South Africa is small with only 300 funds compared
to the United States, with over 10,000 mutual funds, and the United Kingdom with around
1800 funds. There has however been rapid growth in the number and variety of new funds
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with almost 100 new funds created the last year. Funds from which the investor can choose
include; unitised funds, growth funds, bond funds, derivative enhanced funds, socially
responsible funds, indexed funds, and fund of funds. Independent investment committees or
trustees, often in conjunction with the services of benefit consultants, make the choice of
fund.
1.2 PROBLEM DEFINITION
1.2.1 Introduction to the Issue
When choosing which asset management firm to manage their funds potential investors look
predominantly at historic fund performance, as it is easily measured, readily available and no
other meaningful measurement exists. There is however general recognition that past
performance does not necessary infers anything about future performance. “Although
historical performance doesn’t predict the future, it is the only objective measure we have to
go on, so it will remain an important yardstick for choosing funds” (Profile’s Unit Trusts,
2000). The authors further suggest that one should ‘consider other qualitative factors’, such as
stability of management and a fund that meets one’s investment needs.
Larger investors, in addition to assessing past performance, will either directly or through
benefit consultants, use in-depth interviews and questionnaires to investigate asset
management firms. For the institutional client, performance appraisal is part of a regulatory
responsibility and legal duty of care. In the selection appraisal a range of criteria are applied,
such as, due diligence, risk/return trade off and product range. However, although these
decision makers are taking account of qualitative factors, there exists no one standard and
generally accepted benchmark to measure these dimensions against. In South Africa, for more
than 90% of institutional clients, benefit consultants carry out these appraisals. Often
actuaries, benefit consultants are utilised by investors for their superior knowledge of the
market and to ensure an objective decision is made on choice of manager. Multi-management
within the asset management industry is increasing the demand for this type of expertise and
thus the need for improved methods of assessment.
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1.2.2 Significance of the Study
A construct for assessing the qualitative dimensions of an asset management firm will be
utilised by those decision makers making the selection between firms. Despite, and perhaps
due to, technological advances and an exponential growth in information availability most
fund managers are increasingly finding it difficult to beat the market’s financial performance
benchmarks. These factors, combined with competitive pressures both locally and
internationally have led to commoditised, undifferentiated organisations. Hence the growing
need exists to differentiate asset management firms on a range of criteria, rather than solely
relying on indistinguishable financial performance.
We envisage that the primary users of the scale will be benefit consultants and multi-
managers who would utilise it as part of their assessment process. However the asset
management firms themselves could also use the scale construct for their own purposes. They
can concentrate on monitoring and enhancing those dimensions within their business that the
market considers important. Another application could be to alleviate the reliance on costly
use of benefit consultants, especially for the smaller investor.
An extension to this current study will be to take the dimensions identified and investigate the
hypothesis that a correlation exits between the dimensions and superior performance. This
may provide an alternative to the current sub-optimal practice that focuses on past
performance as an indicator of future performance.
It is our hope that the final instrument resulting from the expanded study will become
institutionalised in performance reviews industry wide and ultimately become a standard
selection method for potential investors. It is possible that the measure will not just be used by
institutional investors, but by the retail market as well for fund selection purposes.
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2 METHODOLOGY
2.1 General
The research methodology for developing a scale for assessing asset management firms on
qualitative measures followed a staged approach as outlined below. The process began with a
literature research combined with general interviews with academic staff and industry experts.
Then the focus shifted to more in depth exploratory interviews with experts in asset
management to identify issues specific to the industry. These stages allowed the formulation
of the initial dimensions for our construct. These dimensions were then refined and items
generated for the chosen dimensions.
The questionnaire construct was sent out to all staff at the collaborating asset management
firm. On receiving the data an extensive statistical analysis, including item analysis and factor
analysis, was undertaken. This enabled us to purify the construct by decreasing the number of
items and dimensions and to test the reliability and validity of our construct.
2.2 The Stages
OBJECTIVEDATA
DEVICE
STAGE I
Conceptualisation
To conceptualise a
broad range of
dimensional fields.
Broad ranging
dimensions drawn
from across
disciplines.
Literature review and
general interviews.
STAGE II
Redefine Construct
Domain
To redefine the
identified
dimensional fields.
Expert insights and
opinions on the asset
management
industry.
Exploratory
interviews.
STAGE III
Generation of Items
Select items for the
dimensions
identified.
Approximately 6
items per identified
dimension.
Expansion of
identified
dimensions.
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STAGE IV
Data Collection
To collect scaled
answers to the
questionnaire
developed.
Completed
questionnaire from
representative
sample.
Questionnaire
distributed via e-mail
across functional
areas of collaborating
firm.
STAGE V (a)
Item Analysis
To reduce the
number of items and
to obtain internal
consistency.
Data from above
questionnaire.
Item analysis.
STAGE V (b)
Factor Analysis
To reduce the
number of
dimensions and to
test the validity and
the reliability.
Data from above
questionnaire
purified in Stage V(a).
Factor analysis.
STAGE VI
Reliability and
Validity
To establish the
reliability and
validity of the final
construct.
Data from questions
relevant for purified
scale.
Same as for stage
V(a) and V(b).
Table 1: The Stages.
The stages of our research were as follows:
Stage I: Initial Conceptualisation of the Construct
Stage I involved the definition of the conceptual specification of the construct, i.e. a broad
range of seven potential dimensional fields were identified. This stage entailed literature
reviews as well as general discussions with industry and academic sources across varied
disciplines. It generated many qualitative issues pertinent to the client selection of an asset
management firm.
Stage II: Redefine Domain of the Construct
The range (domain) of potential dimensions of the construct was redefined during this stage
of the research. This included discarding some dimensions whilst adding others. In-depth
exploratory interviews were conducted with experts from the asset management industry, for
their verification of the relevance and prioritisation of the potential dimensions, as well as for
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suggested additions of dimensions unique to the industry. In total eight interviews were
performed with the result that the original seven broad dimensional fields were broken down
into twenty-two separate dimensions.
Exploratory interviews
The interviews consisted largely of open-ended questions. These interviews required a
flexible approach with emphasis on the seeking of explanations, insight and ideas. The
interviewees were selected from across functions within the firm in order to gain a broader
perspective of the relevant issues.
Stage III: Generation of Scale Items
The first step in the development of the questionnaire was to generate a pool of items
(questions) from the dimensions identified. The items were generated from theoretical
frameworks, marketing scales and exploratory interviews. The number of items per dimension
varied from four to six, hence for the 22 dimensions, 120 items were generated. This more
than satisfied the criteria of being approximately 1.5 times as many as are planned for the
final questionnaire (Smit, 1991). The items derived represented the various facets of the
dimensions. In creating the items Oppenheim’s rules of item writing were considered
(Oppenheim, 1965). All questions are close-ended, using Likert-type scale response options,
which is preferred as it provides greater discrimination by allowing ranked response. In the
questionnaire approximately half of the items were formulated positively and half negatively
for optimum response (Churchill, 1979).
Stage IV: Data Collection
The above questionnaire was distributed to all employees at the collaborating asset
management firm across functional areas. Cross-functional testing was chosen so as to
capture the different perspectives of the underlying issues of the whole organisation. For
practical use the questions were divided into 12 parts of 10 questions, each consisting of 1or 2
dimensions, captured into Excel format and sent out via e-mail. Utilising the Excel e-mail
format enhanced the ease of completing the questionnaire. As well the data collection was
more efficient by increasing the response rate, decreasing the response time and facilitating
the data capturing. See Appendix 1 for the questionnaire. It was explained that the process
was anonymous and for research purposes only, hence encouraging uninhibited and honest
responses.
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Stage V (a): Item Analysis
By using item analysis the number of items within the construct can be decreased. The
reliability, or internal consistency, of the items within each dimension can thus be increased.
The assessment of reliability is based on the correlations between the individual items that
make up the dimension, relative to the variance of the items. The first step in item analysis is
to create a correlation matrix to determine those items highly correlated, as this would suggest
that items ask the same question. The second step is to look at internal consistency by
computing the Cronbach alpha coefficient for each dimension. A score of 100% reflects
perfect reliability. An item-to-total correlation is then run, the lowest correlated item is then
removed and the Cronbach alpha of the total dimension is recalculated. This process is
reiterated by removing the lowest correlation each time from the remaining items until the
Cronbach alpha cannot be improved further. The software STATISTICA ’99 Edition by
StatSoft Incorporated has been used.
Stage V (b): Factor Analysis
Factor analysis further purifies the scale construct. Factor analysis is used to remove
redundancies in observations by determining the minimum number of items needed to
account for most of the variance in the total set of variables (Sterling, Pollack 1968). Validity
is the degree to which the variance in the measures is due to variance in the underlying
construct, hence a construct is valid when the difference in observed scores reflects the
differences in the characteristics that the construct is attempting to measure. Factor analysis
extracts the variance as a percent of total variance for the factors, this is referred to as
Eigenvalue. The factors derived from the factor analysis represent dimensions of the construct
and the factor loading is a measure of the validity of the dimensions.
One must avoid considering less significant factors and keep the number of factors small.
Two criteria can be used to determine the number of factors. Firstly, only factors with
Eigenvalues greater than one should be retained. Secondly is to use a scree plot, and to utilise
only those factors points on the curve before it flattens out (Statistica, 1999).
To examine the dimensionality with factor analysis one ‘loads’ the dimensions (factors). In
order to obtain a clear pattern of the loadings, the data is rotated. Within the statistic software
package, Statistica, Varimax rotation is used. This is the most common rotation method and it
is aimed at maximising the variances of the squared normalised factor loadings across
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variables for each factor. It is equivalent to maximising the variances in the columns of the
matrix of the squared normalised factor loadings. Factor loadings of 0.7 roughly correspond
to the 5% significance level. Loadings over 0.5 or 0.6 can be considered high loadings
(Hofstede, 1990). When examining the factor loading matrix a high loading of an item on
several factors implies that the factors are not independent and can therefore be combined.
Factor loading may also suggest the reassignment of certain items to dimensions other than
the original dimension.
Stage VI: Confirmation of Reliability and Validity
The last stage was a final confirmation of the reliability and validity of the final purified scale.
This was to ensure the robustness of the final construct. There are many types of validity from
which to choose. Our research looked at:
!" Content validity - The measure of the consistency of the construct with the theoretical
definition outlined. The items should be representative of what they are trying to
measure and be easy to respond to by avoiding jargon and ambiguity. Also known as
face validity, an instrument has face validity if the sample is appropriate and the items
“look right” (Churchill, 1978).
!" Nomological validity - The degree to which predictions from theory are confirmed.
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3 THEORETICAL DOMAIN
3.1 General
The first stage of defining the theoretical domain of the scale was by a literature review and
general discussions with academics across various disciplines. Many disciplines have
attempted to holistically assess organisations, such as Organisational Behaviour, Human
Resources, Behavioural Psychology and Strategy. The discussion below outlines some of the
frameworks utilised from these disciplines in order to define the theoretic domain of the
study.
3.2 Frameworks
3.2.1 Organisational Culture
Organisational culture can be defined as the pattern of basic assumptions that a given group
has invented, discovered, or developed in learning to cope with its problems of external
adaptation and internal integration. They have worked well enough to be considered valid,
and therefore to be taught to new members as the correct way to perceive, think and feel in
relation to those problems (Schein, 1980). There are numerous measures of organisational
culture, many of which were utilised in the item generation. Some of these measures are
mentioned below.
Measures of Organisational Culture
Hofstede (1990), a study measuring organisational cultures qualitatively and quantitatively
across twenty cases. It concludes that shared perceptions of daily practices are the core of an
organisation’s culture.
Van der Post (1997), the author stated that research on organisational culture has been
characterised by the application of a large number of dimensions defining culture, which
cannot be neatly organised in organisational theory. He has synthesised those dimensions
identified by developing a questionnaire.
Rossiter (1989), the author introduced an approach to assess organisational culture in order to
use the data to improve effectiveness. He identified the following dimensions in order to
generate a ‘winning organisation’; delegation, empowering people, people integrated with
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technology and a shared sense of purpose. He also emphasised the need to integrate the
dimensions holistically.
Bettinger (1989), this study identified twelve dimensions of culture that interact in a variety of
ways namely; attitudes toward change, focus, standards and values, rituals to support values,
concern for people, rewards and punishment, openness, communication and supervision,
conflict resolution, market and customer orientation, excitement, pride and esprit de corps,
commitment and teamwork.
3.2.2 Intellectual Capital
The essence of any company is often its soft assets, intellectual capital (IC) being one of
them. Most current literature breaks IC into three dimensions; human capital, structural or
organisational capital and customer or relationship capital.
Human capital encapsulates the skills and capabilities of the employees that make up the
organisation. Human capital can also be regarded as the accumulated value of the investment
that an organisation makes in its employees training and future development.
Structural capital is the organisation’s capabilities and includes the software networks,
databases, patents and trademarks. It can be seen as the infrastructure within which
intellectual capital operates.
Relationship capital refers to organisational relationships with external stakeholders such as
customers, suppliers and government.
Measures of Intellectual Capital
Value Added Intellectual Capital (VAIC) is a useful model for our purposes, as it has been
tested within financial markets and it has an underlying proposition that intellectual capital
should be reflected in an organisation’s business performance. M. Bornmann of the
Department of International Management at the University of Graz, Austria, conducted a
study of 24 Austrian Banks in which he tested the VAIC method. As part of his study he
compared the external business press rankings of the banks to their VAIC ratios. He found
that the banks that were ranked in the top five positions had high VAIC ratios, whilst the 5
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worst performing banks had poor VAIC ratios. A similar comparison using our developed
scale could be undertaken in the second phase of the broader research.
Celema (The Intangible Assets Monitor) is based on the notion of people as an organisation’s
only profit generators. Human actions are converted into both tangible and intangible
knowledge "structures". These structures are directed outwards (external structures) or
inwards (internal structures). The Intangible Assets Monitor can be integrated in the
management information system.
3.2.3 Scales and Measurements in Related Areas
Service Quality (SERVQUAL) by Parasuraman, Zeithaml and Berry (1986, -88, -91). The
construct measures perceived and expected quality and is the judgement of an entity’s overall
excellence or superiority. SERVQUAL measures 5 dimensions using perception minus
expectation gap scores for: tangibles, reliability, responsiveness, assurance and empathy. The
scale is comprised of two matched sets of 22 items.
A Scale to Measure Excellence in Business (EXCEL) by Sharma, Netemeyer and Mahajan
(1990). Corporate excellence is viewed as those managerial practices and principles that lead
to sustained performance. The scale is a 16-item scale designed to measure eight attributes of
excellence. The 8 attributes are as follows: bias for action, closeness to customers, autonomy
and entrepreneurship, being productive through people, a shared value system, a lean staff,
loose and tight properties i.e. centralisation of core values, and a focus on what is known. The
validity of the scale was measured against financial ratios, stock market performance and
rankings from Fortune magazine.
Organisational Commitment (OCQ) by Mowday, Steers, and Porter (1979). Organisational
commitment is defined as the relative strength of an individual’s identification with, and
involvement in a particular organisation. The 3 dimensions of organisational commitment are
as follows: belief in goals and values of the organisation, willingness to exert effort, desire to
remain in the organisation. The OCQ is composed of 15 Likert-scaled items
Organisational Commitment (OC) by Hunt, Chonko and Wood (1985). Organisational
commitment was defined as a strong desire to remain a member of a particular organisation,
given opportunities to change jobs. OC is a four-item scale to measure the degree of loyalty.
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Incentives to change jobs included higher pay, more freedom, more job status and friendlier
work environment.
Seashore Index of Group Cohesive by Seashore (1954). This index measures group
cohesiveness, defined as attraction to the group or resistance to leaving. The index consists of
three questions and has wide research applications.
The Balanced Scorecard (BSC) by Kaplan and Norton (1992). This concept looked at a
company, not only from the financial perspective, but also from customer, learning and
growth, and internal processes perspectives.
3.2.4 Link to Performance
Many of the dimensions identified through this study have been proved to have links to the
performance of an organisation. This augurs well for the later stages of this research that will
be attempting to show correlation between the dimensions identified and performance of the
firm. There is plenty of evidence that corporate culture can have a significant impact on the
long-term performance of a firm (Rollins, 1993). Of the key factors that contribute to
sustained high performance, none is more important than strong positive corporate culture
(Bettinger, 1989). Other dimensions identified as having a link to performance and discussed
in more detail later include reward systems, drivers, communication and leadership.
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4 DIMENSIONS AND ITEMS
4.1 General
An organisation can be viewed as an open system that continuously interacts with its
environments. An organisation’s efficiency depends on the internal functioning of the
organisation and its success depends on a number of factors (Schein, 1980).
In searching for these factors we used a staged approach as discussed in Section 2 -
Methodology. This section outlines the results of Stages I to III from conceptualising broad
dimensional fields to the generation of items.
4.1.1 Fields
In order to derive our initial broad dimensional fields of qualitative issues within asset
management firms we looked for major recurring themes across the literature review of
different academic disciplines discussed above and from our general interviews. Seven major
qualitative issues were identified.
!" Vision
!" Cohesiveness
!" Process
!" Orientation
!" Communication
!" People
!" External Relations
4.1.2 Dimensions
A series of in-depth exploratory interviews with experts from a range of asset management
firms was then undertaken in order to identify unique dimensions specific to the industry.
There was much overlap with these dimensions and the original broader dimensional fields
identified. These interviews allowed us to redefine and breakdown the original dimensional
fields as follows:
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!" Vision
- Clarity of Vision
- Investment Philosophy
- Employee Involvement
- Fit
!" Cohesiveness
- Integration
- Team Structure
- Warmth
!" Process
- Investment Decision-making Process
- Operational Processes
!" Bearing
- Performance Orientation
- Reward Systems
- Drivers
- Attitude
!" Communication.
- Internal Communication
- Conduciveness to Debate
- Leadership
!" People
- Human Resources
- Diversity
- Innovation
!" External Relations
- External Relations
- Customer Relations
- Responsiveness
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4.1.3 Item Generation
The next stage of the research was to formulate items for each dimension. The items must
reflect the attitude from extreme to extreme (Oppenheim 1966). The range of items generated
varied in number from four to ten. A rationale for particular items is given in the following
discussion.
Some of the items selected, directly utilised questions from well-known scales, see Appendix
2, whilst in other cases the wording of these questions was modified to fit to the environment
of the asset management industry. The remaining items were suggested by our literature
review and interview process.
The following discussion is structured under the headings of the broad dimensional fields,
which are described and then broken down further into sub-dimensions. A definition of the
dimension is given, followed by the items chosen with a rationale for their selection.
4.2 Vision
Vision can be considered a major dimensional field when one defines it in terms of the
expression of the organisation’s reason for existence. All actions and performance of the
organisation can only make sense in the context of this greater macro view of the
organisation. This view is likened to a sense of destiny, a picture of the future you seek to
create, where you want to go and what it will be like when you get there (Senge, 1999).
In attempting to define vision, and when generating the items, one must look at its different
components, such as values, goals and rituals. Values can be defined as guiding symbols of
behaviour that will help move people toward the vision, and goals as a means of making the
purpose real and creating milestones on the way to the vision (Senge, 1999). Rituals are the
repetitive sequence of activities that express and reinforce the key values of the organisation
(Robbins, 1993).
Much of the literature on Change Management refers to the need for creating a shared vision.
Jick’s Ten Commandments for Change include as the first commandment the need to create a
shared vision and common direction (Jick, 1991). This vision must reflect the philosophy and
values of the organisation and help it articulate what it hopes to become. According to Senge
the content of a truly shared vision cannot be dictated - it can only emerge from a coherent
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process of reflection and conversation .The dimension of vision is broken down into the
following sub-dimensions for better understanding.
4.2.1 Clarity of Vision
DEFINITION – The extent to which the organisation has clear objectives and performance
expectations. The goals are articulated clearly and the organisation has sound vision, values,
strategy and ethics.
RATIONALE
Though many organisations may have visions, this vision cannot be achieved unless it is
clearly understood and communicated to all stakeholders. Kotter uses a rule of thumb that
within 5 minutes the vision must be able to be communicated and have created a reaction that
signifies both understanding and interest (Kotter, 1995). A well-communicated vision will
attract to the organisation like-minded employees that share its values.
Also important is the commitment to the vision itself. This is created by not just ensuring the
vision is well defined and understood, but ensuring that it is seen in terms of the personal link
of the individual’s role to the vision. This requires the business rationale to be made known to
all levels, so that they can all appreciate the expected organisational benefits and the personal
ramifications of the vision on their own jobs.
Understanding of vision is enhanced if the vision does not continuously change. It has been
found that companies that enjoy enduring success have a core purpose and core values that
remain fixed while their strategies and practices endlessly adapt to a changing world. It is the
vision that balances this continuity and change. The core vision must be preserved and
aligned to operation activities, and people (Collins, 1999).
The vision message must be incorporated into all daily activities and it is important to
remember that communication comes in both words and deeds, with the latter often the most
powerful form. Finally in order to empower others to act on the vision there is the need to
remove obstacles in the way e.g. hierarchical structures and rewards systems.
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Items of Clarity of Vision dimension
!" Employees in this organisation fully understand the vision of the organisation.
!" The organisation’s vision and objectives do not change.
!" Employees appreciate the implications of all their actions on the overall company goals
and objectives.
!" In this organisation the vision is not clearly defined.
!" This organisation does not have a sound realistic vision.
!" Employees in this organisation have a clear understanding of what its values, ethics and
beliefs are.
4.2.2 Investment Philosophy
DEFINITION - What the organisation wants to achieve and how it will achieve it. The
overriding direction and guidance for the investment decision process.
RATIONALE
In addition to having an overall organisational vision, it is common for asset management
firms to have in place an investment philosophy. It is usual to have separate philosophies for
equity, fixed interest and property portfolios. Common philosophies include growth or value
and top down or bottom up philosophies. Similarly to vision it must be clearly defined and
communicated, set over time yet with some degree of flexibility to substantial change. There
should be no impediments to implementation of the philosophy and divergence from the
philosophy must be minimal.
Items of Investment Philosophy dimension
!" The investment philosophy is implemented with ease by the employees.
!" Divergence from the investment philosophy is common.
!" This organisation has a flexible investment philosophy.
!" The investment philosophy of this organisation are not clearly communicated.
4.2.3 Employee Involvement
DEFINITION - Opportunities exist for all the employees to make a contribution to the
organisation’s goals and objectives.
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RATIONALE
In discussions of shared vision, sharing refers not only to involvement in deriving an
organisation’s vision and goals, but also to an awareness of ones personal contribution to the
achievement of the vision. Again the item questions were phrased so that this issue was
addressed at various levels of vision, from the overall vision to the more specific investment
philosophy of the asset management firm. Kanter, Kotter, Beer et al see this involvement of
employees as integral to gaining the employees’ commitment. In this way commitment is
ensured as all understand the vision and values and believe that the vision is sound and
workable (Beer et al, 1990).
The involvement of all levels of employees across functions is also seen to enhance cohesion,
decision-making and diversity. The decision-making and diversity dimensions are discussed
in more detail later.
Items of Employee Involvement dimension
!" Employees in this organisation do not have a say in the organisations work methods.
!" All employees contribute towards the organisation’s goals.
!" Employees in this organisation are not consulted in respect of decisions regarding the
organisation’s future strategy.
!" In this organisation employees are involved in decisions regarding investment
philosophy.
4.2.4 Fit
DEFINITION – There is identification with organisational rituals, values and beliefs. All
employees have a shared sense of purpose.
RATIONALE
Much of the literature on vision points to the importance of individual employees identifying
with the organisations values and beliefs. It is believed that employees will not be happy or
last within an organisation that has values that are not aligned to their own personal values.
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The previous dimension ‘Clarity of Vision’ asked about the vision itself, however although
related, this dimension attempts to establish the fit of employees to the vision and the extent
to which the vision is shared with their peers. When the fit is good between the individual
and the organisation both benefit, humans are able to do meaningful and satisfying work
while providing the resources the organisation needs to accomplish its mission (Bolman,
1990).
Shared meaning is a collective sense of what is important and why. It is this shared meaning
that binds the organisation together, and can only come from within (Senge, 1999). Sharing
encompasses both the individual sharing personal values with the organisation and with
fellow employees. The core ideology of values and purpose is the ‘glue that holds a company
together’. This sharing of values can occur without jeopardising diversity (Collins, 1999).
Items of Fit dimension
!" There is nothing holding this organisation together and binding its members to one
another.
!" Traditions and rituals are valued in this organisation.
!" Employees identify with their peers.
!" Employees do not experience a sense of belonging to this organisation.
!" All employees in this organisation share its values and philosophies.
4.3 Cohesiveness
Cohesiveness has been defined as the unity and closeness of members within a group (Athos,
1968) and as the degree to which members are attracted to each other and motivated to stay in
the group (Robbins, 1993).
There are many measures of cohesiveness including: cooperative relations, the clarity and
solidarity of the group’s norms, the attitude to achieving the group’s purpose (extent to which
they are willing to do their share and to make personal sacrifices for the good of the group),
group tenure, friendliness, as well as the degree to which members feel free and easy about
expressing their opinions. The determinants of cohesiveness are:
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!" Group characteristics – How individual needs such as for security, belonging and
achievement are matched to the group needs
!" Nature and strength - The greater the degree to which a group satisfies the needs of the
individual members, the greater will be its degree of cohesiveness.
!" Leadership – A leader initiates ideas and provide direction, and fosters harmonious,
friendly relationships among members
!" Environment – A group may become closer on facing hostile external pressures, or where
it is difficult to join the team (Athos, 1968).
Again there appears to be a link between the dimension and performance that may prove
important to later stages of the research. Many studies have shown a positive link between
cohesiveness and productivity (Nel, 1989).
Of further interest is that the link has a positive feedback loop. Hence not only will strong
cohesiveness result in improved performance, but this improved performance will in turn lead
to greater cohesion (Robbins, 1993). This loop can be seen as a history of success reinforcing
commitment to goals.
Cohesiveness
High Low
HighHigh
Productivity
Moderate
Productivity
Perf
orm
ance
Nor
ms
LowLow
productivity
Moderate to low
Productivity
Figure 1: Cohesiveness – Performance Norms Matrix (Source: Robbins, 1993).
The above graph shows that as cohesiveness and performance orientation increases
productivity increases. However it also shows that too much cohesiveness can sometimes
make a group dysfunctional.
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4.3.1 Integration
DEFINITION – The cohesion of individuals and business units within the organisation,
locally and internationally. Includes the co-operation and co-ordination towards achievement
of organisational goals.
RATIONALE
This is a broad reaching dimension that overlaps with many of the other dimensions within
our study. The processes that allow a group to internally integrate itself reflect the major
internal issues that any group deal with: communication, definition of group boundaries,
norms of intimacy and rewards system (Schein, 1992). Integration merits a separate
dimension as the process of how these dimensions all come together, is as important as the
dimensions themselves. It covers the integration of the individuals within an organisation and
their sense of belonging, as well as the integration between work groups.
The integration of an organisation with its external environment will become an increasingly
important issue for the South African asset management industry as many organisations are
now opening foreign offices. The integration with these international offices or alliance
partnerships will be critical to the overall organisation, and adaptation of successful local
integration formula will greatly assist this process.
Items of Integration dimension
!" There is a close working relationship between portfolio manager, portfolio administrator
and client relationship manager.
!" Employees are not often transferred between departments.
!" In this organisation employees do not feel that they are really part of the group.
!" In this organisation support and assistance across work groups and departmental
boundaries is strongly encouraged.
4.3.2 Team Structure
DEFINITION - How all employees work together as teams for the good of the organisation. It
is the degree of consistency and synergies within the teams.
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RATIONALE
A team can be defined as any group of people who need each other to accomplish a result.
This entails a pulling together (Senge, 1999). Teams allow diverse contributions and
perspectives and forge them into an integrated approach (Tjosvold, 1991).
The team orientation of the asset management industry makes the dimension of team structure
particularly important. Industry sources were quoted as saying ‘we firmly believe that
effective teams outperform strong individuals’. However an item has also been selected to test
whether the individuals within the team share this common organisational view.
Consistency of team membership was also tested. It is a qualitative criterion used by many of
the industry’s benefit consultants. A cohesive group will display a longer tenure together than
a non-cohesive group (Athos, 1968) and time spent together is a determinant of cohesive
teams (Robbins, 1993). This is believed to be due to the fact that as teams spend more time
together they discover more interests in common and ‘attractions’ increase.
Items of Team Structure dimension
!" Employees within the team always support the other members of the team.
!" Teams are overemphasised within this organisation.
!" The team operates more efficiently than the sum of the individuals’ efforts.
!" Employees prefer to work individually rather than in teams.
!" There is consistency of membership within the team.
4.3.3 Warmth
DEFINITION - The prevalence of a supportive environment with a friendly atmosphere. A
sense of comfort / stability with job security. Warmth is reflected by social interaction on and
off the job.
RATIONALE
Warmth can be defined as the feeling of good fellowship that prevails in the work group
atmosphere (Van der Post, 1997). The Chambers Dictionary defines warmth as kind-
heartedness and affection. Warmth of an organisation is important for its link to the
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motivation and morale of the individual, and to the organisation’s overall cohesiveness.
Studies have proved that groups are more cohesive when members enjoy being together and
there is friendliness towards one another (Athos, 1968). Social interaction outside of work has
been used as an item to measure this internal friendliness. Security has also been used as a
measure of warmth. The feelings and speed of inclusion, as well as the degree of personal
support, also reflect warmth.
Items of Warmth dimension
!" Employees do not socialise outside the work environment.
!" Employees do not have personal support within the organisation.
!" Employees do not feel secure in their jobs.
!" New employees are immediately made to feel at home.
!" In this organisation all employees feel included in most ways.
!" In this organisation opportunities to develop close friendships exist.
4.4 Process
The dimensional field of process includes the decision-making process and other processes,
such as back office support and IT, which are grouped as operational processes. Intellectual
capital literature refers to this area as structural capital and notes that it is integral to an
organisation. It is also recognised within the asset management industry as an important
dimensional field, especially processes such as compliance.
4.4.1 Investment Decision Making Process
DEFINITION - The degree to which the organisation has a healthy investment decision-
making process, where decisions are based on shared information and all employees take full
ownership and accountability for decisions.
RATIONALE
A decision can be defined as the selection of a proposed course of action (Butler, 1991). The
decision-making process can be both formal and informal. Decisions grow in the topsoil of
formal and informal conversation – sometimes structured, sometimes technical and
sometimes ad hoc (De Geus, 1997). They must involve all members of the team, as without a
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full airing of different points of views, decisions can be disastrous (Tjosvold, 1991). It is the
mix and clash of the discussion that creates new positions not previously considered, as well
as a commitment to the decisions.
The investment decision-making process has been identified as a separate dimension for its
centrality to the asset management industry. The process is generally seen to include the
decisions involving asset and sector allocation, as well as stock selection. The strong team
environment within the asset management industry makes team decision-making a central
issue. There are many advantages to team decision-making including; more complete
information and knowledge, increased diversity of views, increased acceptance of solutions
and increased legitimacy. These advantages however rest on the assumptions that all team
members are involved in the decision (Callahan, 1986).
Important to any decision making process is availability and accessibility of information, and
the full utilisation of this information. Of particular importance to the asset management
industry is that employees understand the implications of their investment decisions,
especially with regards to risk. Related to this risk sensitivity is the notion of ownership and
accountability for the decision made.
Items of Investment Decision Making Process dimension
!" Employees are reluctant to take ownership of their poor decisions.
!" All members of the team are consulted in respect of decisions regarding the investment
decision.
!" All employees make decisions understanding the implications with regard to risk.
!" In this organisation the team, rather than the individual, is accountable.
!" Decisions are made without utilising all available information.
4.4.2 Operational Processes
DEFINITION - The functionality and sophistication of the organisation’s support systems,
such as research capabilities, valuation tools, IT and front, middle and back office.
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RATIONALE
Within the context of the fast changing conditions of financial markets, and in view of the
risks and the large amount of funds involved it is imperative for there to be smooth links
between all processes, so as to avoid costly errors. Having well defined and standardised
processes, as well as technical tools that are well understood and optimally utilised, create
such links. This dimension is very much linked to the above decision-making dimension as
efficient operational processes facilitate better decision-making.
Items of Operational Process dimension
!" Front, middle and back office processes are smoothly linked.
!" Recommendations from the research department are not always followed.
!" All employees fully utilise the potential functions of the technical tools.
!" Operational processes are not well defined and standardised.
!" The organisation’s technical tools are robust to changing market conditions.
4.5 Bearing
The term bearing has been used to describe this dimensional field as it contains dimensions
that give direction and orientation to an organisation’s behaviour. Bearing can be defined as
the sense or awareness of one’s own position or surrounding, or a bodily attitude expressing
character (Chambers, 1996).
4.5.1 Performance Orientation
DEFINITION - The extent to which employees feel a norm of striving towards excellence and
commitment to achieving superior organisational performance.
RATIONALE
Performance orientation is the extent to which emphasis is placed on individual accountability
for clearly defined results and high levels of performance (Van der Post, 1997). It is the extent
to which the company is demanding of employees, expecting high levels of performance from
them, and holding them personally accountable for results (Gordon, 1988).
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Integral to any such orientation is the need for an accurate and fair measurement of
performance. This measurement must be carried out in a consistent and regular manner, and is
often in the form of appraisal systems by management or peers. The asset management
industry is generally accepted as having a very strong performance orientation. Asset
managers compete for business predominantly on the basis of the historic performance of
their funds. Performance in this sense is regarded as the rate of return achieved as measurable
against standard market benchmarks. However one must be aware of the variations in
definitions of ‘good’ performance, as this could include a high, consistent or tax efficient
return as measured against a benchmark, level of risk or inflation (Profile 2000).
Stretch goals are seen as vital to encouraging performance, however although they strive for
excellence, they must appear realistic in order not to demotivate staff (Collins, 1999). Such
goals strive towards excellence whilst tolerating little underperformance. The team norms of
performance are also reflected in the way employees prioritise their work, and how individual
and team accountability for performance are balanced.
Items of Performance Orientation dimension
!" The performance benchmarks used are not good proxies for actual performance.
!" In this organisation individual performance is not recognised within the team
environment.
!" In this organisation the employee priorities work over personal commitments.
!" Poor performance is not tolerated to any degree.
!" The goals that are set in this organisation are tough but realistic.
!" In this organisation it is the norm to strive towards excellence.
4.5.2 Reward Systems
DEFINITION - Extent to which the organisation focuses on reinforcing behaviour that
supports the organisation’s objectives.
RATIONALE
The dimension of reward systems can be seen as a reflection of the above dimension of
performance orientation. Employees in any organisation tend to follow the reward system and
to do things that are rewarded, thus incomplete measurement and rewards results in
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incomplete performance as well (Bettinger, 1989). Evidence consistently shows that financial
incentives are associated with higher performance (Gupta and Shaw, 1998). For reward
systems to be linked to performance the following critical success factors must be present;
control the team or the individual has over its output, clearly measurable performance criteria,
a valid performance measuring system, timorous allocation of rewards, equitable pay criteria,
control over factors that are directly related to the job, simple measurement formula, extensive
communication and consultation and rewards that are valued by the employees concerned
(Human Resources expert: Frank Horwitz, 1998).
In the asset management industry reward is performance based not time based, and it is most
commonly incentivised by either semi-annual or annual bonus payments. Individual bonuses
are paid from a bonus pool reflecting the teams overall performance. Whilst some firms
favour low basic salary and high incentives, others favour the reverse, but whatever the mix it
must be seen as balanced and linked to performance and representative of overall goals.
Finally it is important to appreciate that rewards can take many forms from praise through to
promotion with higher salary.
Items of Reward Systems dimension
!" In this organisation employees are rewarded not for whom they know but for what they
produce.
!" In this organisation the mix between basic salary and performance bonus is balanced.
!" In this organisation there is not a clear link between reward and performance.
!" In this organisation contribution towards the achievement of the organisation's overall
objectives is not rewarded.
!" There is non-monetary recognition of good performance.
4.5.3 Drivers
DEFINITION – Covering a broad spectrum including passion, competitiveness, mutual
respect, work ethics and commitment it can seen as those emotions that drive one to achieve
their best performance.
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RATIONALE
Drivers are those factors that motivate a person to do their best in the performance of their
role and as a contribution towards the successful achievement of the organisations vision. It is
claimed that employees need to see themselves as part of the greater vision working together
to create the best solution. This will foster morale, personal awareness and development
(Tjosvold, 1991).
Different individuals are driven by different drivers, although the culture of an organisation
may espouse certain values that attract employees driven by similar factors. Motivational
theories quote many different drivers and rankings of these drivers. Well-known motivational
theorists investigated for item selection included Maslow and Herzberg (Robbins, 1993;
Senge, 1994; Fielding, 1993). The majority of these studies prove positive correlation of
motivation to productivity. This may have interesting implications for the next stages of this
study that will look for links between the qualitative dimensions identified and overall
performance.
Items were also selected from Seashores Group Cohesiveness Index (Nel, 1989). These
questions are phrased in terms of whether various factors would drive one to change
companies. As the asset management industry is generally perceived to be highly competitive
we also questioned whether this was a driver at the individual level. Another perception
identified from interviews and research, and formulated as an item, was the importance of
employing individuals who are passionate about the industry (Financial Mail, September
2000).
Items of Driver dimension
!" Morale strongly influences job performance.
!" Employees need to be competitive to succeed in this organisation.
!" Employees in this organisation are willing to change companies if the new job offered
was with people who were more friendly.
!" In this organisation employees are passionate about their industry.
!" Employees are strongly committed to the success of the organisation.
!" Employees in this organisation are willing to change companies if the new job offered
more creative freedom.
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!" Employees in this organisation are willing to change companies if the new job offered
more status.
!" Employees in this organisation are driven by strong work ethics.
!" Employees are inspired to do their best for the organisation.
4.5.4 Attitude
DEFINITION – The term here covers various attitudes including; risk appetite, questioning /
challenging, introspection, openness / willingness to listen to suggestions.
RATIONALE
Attitudes reflect how one feels about something (Callahan, 1986). They are evaluative
statements or judgements concerning objects, people or events (Robbins, 1993). Attitudes are
distinguished from values by the fact that they always concern a particular target or object
(Nunnally, 1978). These items were generated to identify what different attitudes are
prevalent within the asset management industry.
Items of Attitude dimension
!" Employees rarely take an introspective view of their behaviour.
!" Employees do learn from their mistakes.
!" This organisation expects employees to behave a certain way.
!" There is no an air of openness and trust in this organisation.
!" In this organisation employees are willing to take personal risks.
4.6 Communication
Communication can be defined as the transference and understanding of meaning (Robbins,
1993) or as the conveyance of the meaning of information (Callahan et al, 1986). Effective
communication is critical to all organisations, and more than qualifies for inclusion as a
dimensional field as it improves the efficiency and commitment of employees, reduces
conflicts and elicits feedback.
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Communication is the key for better performance of an organisation. People spend 70% of
their day communicating, of which 45% is listening (Gerber et al, 1999). This clearly
illustrates why poor communication is one of the most inhibiting forces to successful group
performance (Robbins, 1993).
In organisations a supportive climate allows for open, honest and effective communication. In
order to achieve the supportive climate people need to listen empathetically in order to
capture both the content of messages as well as the emotions expressed (Fielding, 1993).
Communication can flow vertically or laterally. On the vertical level it can flow either
upwards or downwards and on the lateral level it flows between members in the same work
groups, or between personnel horizontally equivalent (Robbins, 1993).
4.6.1 Internal Communication
DEFINITION - The effectiveness of the flow of information vertically as well as laterally
throughout the organisation. The extent to which the information flows freely, is accurate and
undistorted.
RATIONALE
Few things are as important to an organisation as good internal communications. Many of the
other dimensions identified are highly dependent on effective communication skills, such as,
clarity of vision, investment decision-making and integration. Communication is important to
the effectiveness of the organisational information flow. This information flow results in a
shared meaning and common understanding.
The importance of informal communication structures should not be ignored, and may
sometimes prove more effective when barriers to formal communication exist. Many barriers
to effective communication have been identified (Robbins, 1993; Callahan et al, 1986;
Fielding, 1993). They include; hierarchical structures, a lack of understanding of meaning, the
shortening of messages, a filtering of messages at each stage, deliberate distortion,
information overload and insufficient information. Within the asset management industry
large investments are made in technology to ensure speed and accuracy of market information
flows.
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Key communication skills include active listening and feedback skills. Feedback is the final
link in the communication process; it loops the message back into the system as a check
against misunderstanding (Robbins, 1993).
Items of Internal Communication dimension
!" Employees in this organisation do not have well developed communication skills.
!" Information flows quickly through this organisation.
!" In this organisation communication is restricted by hierarchical structures.
!" Knowledge and information is willingly shared within the organisation.
!" Feedback between employees at all levels is not standard practice.
!" Informal communication structures are important in this organisation.
4.6.2 Conduciveness to Debate
DEFINITION - The degree to which the organisation encourages the expression of different
opinions and to what extent a healthy environment for debate exists. Questioning is
encouraged and opinions can be challenged.
RATIONALE
Having an environment that is conducive to employees expressing their opinions, in a manner
that engages debate and allows the team to test the assumptions, is very important for an asset
management firm. Opinions are expected, especially with regards to questioning market
views and investment decisions. According to Thomas Jefferson, third president of the United
States of America, ‘Difference of opinion leads to inquiry and inquiry to truth.’ In the process
of debating opposing views the team delves into issues, searches for information and insights,
and integrates ideas to create solutions responsive to several perspectives (Tjosvold, 1991).
Conduciveness to debate is dependent on a number of factors including effective
communication. It is very much affected by employees being willing to listen to views that
differ from their views. Another important factor is the notion of a supporting climate that
encourages questioning and debate. The organisation must allow forums, formally and
informally, for this debate. Decision-makers need to value their diverse views and confront
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them directly, recognise that their goals are cooperative, and have forums and skills to discuss
their opposing ideas constructively (Tjosvold, 1991).
Items of Conduciveness to Debate dimension
!" In this organisation employees listen to each other’s suggestions.
!" Different opinions of employees in this organisation are not expected.
!" The people in this organisation are not interested in hearing views that do not agree with
their views.
!" Employees are not encouraged to reveal any differences in opinion, with those in
seniority.
!" Employees in this organisation are encouraged to challenge and question market views
and decisions.
!" There is a forum for debate on market views and opinions.
4.6.3 Leadership
DEFINITION - The degree to which management provides a vision with clear
communication, systems and support to their subordinates.
RATIONALE
Leadership is the ability to persuade others to seek defined objectives enthusiastically. It is the
human factor that binds a group together and motivates it toward goals (Davis, 1977). A
leader is one who influences his followers to achieve an objective in a given situation (Athos,
1968). It is therefore important that the leader both communicates the vision and how it is to
be achieved. This is a two-way process with employees and hence the importance for
channels of communication and feedback.
In formulating the dimension and its items questions arose as to difference between a leader
and a manager. The distinction can be made that a manager directs through use of formal
position and authority only, whereas a leader influences through the use of personal power or
informal authority (Callahan, 1986). A leader need not be a manager and a manger need not
be a leader (Athos, 1968).
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There are many different schools of leadership theory. Situational theories of leadership
suggest that what makes a good leader in one situation will not necessarily suit another
situation, and more specifically that the situation of tight teamwork requires a less hands-on
leadership style. Thus according to Fiedler’s Contingency Model of Leadership a strong team
environment, such as is common to the asset management industry, would diminishes the
need for direct leadership (Callahan, 1986).
Again we note a link between the dimension and overall performance of the organisation. The
leader significantly affects the attitudes, behaviour and ultimate performance of individual
workers and is indeed one of the most important influences on organisational performance
(Callahan, 1986).
Items of Leadership dimension
!" The leaders are accessible within this organisation.
!" In this team environment leadership is not important.
!" Employees in this organisation cannot rely on management support when needed.
!" Leadership in this organisation is visionary and clearly show what is important for the
organisations long-term success.
4.7 People
Current organisational theory recognises that organisations are not just entities within
themselves, but that they are made up of people. De Geus refers to the notion of the ‘living
organisation’ (De Geus, 1997).
4.7.1 Human Resources
DEFINITION – The processes through which an optimal fit is achieved among the employee,
job, organisation and environment so that employees reach their desired level of satisfaction
and performance and the organisation meets its goals.
RATIONALE
This recognition of the human element of an organisation can be manifested in many forms,
such as the reward systems, training and development of employees. Organisations must
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believe in the importance and future of their people not just in their ability to perform a
certain task. As part of the ongoing commitment to its people succession mechanisms must be
designed to enhance those parts of the culture that provide identity and distinctive competence
(Schein, 1992).
An interesting perspective is that organisations exist to serve human needs not vice versa,
although there is a mutual relationship where organizations and people need each other
(Bolman, 1990).
Items of Human Resources dimension
!" Ability to perform is the only criterion in hiring new employees.
!" This organisation focuses on training and development of skills.
!" In this organisation employees are not clear about their career path.
!" The executive succession is planned in this organisation.
!" Management believe that its people are of the utmost importance to the company.
!" This organisation does not encourage personal development.
4.7.2 Diversity
DEFINITION - The extent to which the organisation has a diverse mix of employees with
regards to background, skills and experience.
RATIONALE
There are many benefits to diversity including; learning, creativity, flexibility, organisational
and individual growth and the ability of a company to adjust rapidly and successfully to
market changes (Thomas and Ely, 1996). Diverse experiences and efforts help teams to
understand issues more deeply and create innovative solutions to exploit opportunities and
adapt to new realities (Tjosvold, 1991). Cohesion is improved by diversity (De Geus, 1997) as
are many of the other dimensions, such as conduciveness to debate, innovation and
integration.
Diversity is created by recruiting people with different cultures, backgrounds, education,
skills and experience. Redressing the legacies of the past has prioritised the issue in South
Africa; the asset management industry is no exception.
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Items of Diversity dimension
!" This organisation only recruits a particular type of person.
!" This organisation has a balance of employees with experience form different industries.
!" You are not allowed to display your individual characteristics in this organisation.
!" This organisation has employees from many different academic backgrounds.
!" Diversity in the organisation is what brings creativity to the organisation.
4.7.3 Innovation
DEFINITION - Predisposition and environment for the generation of a range of new ideas,
concepts and products.
RATIONALE
Innovation has been defined as the engine that keeps an organisation vital and growing. It
implies an organisational culture that embraces creativity, seeks different perspectives and
risks pursuing new opportunities (Plevel, 1994). This dimension is of particular importance to
the competitive and fast-moving environment of financial markets. Organisations must
continuously and rapidly innovate in order to differentiate themselves in conditions where
financial products quickly become commoditised. The organisation must encourage
innovation and integral to this is for management accept that not all innovations will be
successful. An environment conducive to innovation also provides for all stages of the
innovation process including implementation, not just development.
Items of External Relationship dimension
!" In this organisation employees are always encouraged to search for better ways of
performing tasks.
!" This organisation has an environment conducive to creativity and innovation.
!" This organisation is not seen by the markets as a leader in innovation.
!" If you fail in the process of creating something new, management encourage you to
keep trying.
!" Implementation of innovations is always delayed by organisational constraints.
!" Proprietary tools are developed rather than purchased externally.
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4.8 Environment
An organisation cannot operate in isolation to the outside world but must be responsive to the
external environment. The external environment is often broken down into its components of
political, economic, social and technological environments (Hall and Goodale, 1986).
4.8.1 External Relationship Orientation
DEFINITION - The degree to which the organisation emphasises interaction and alignment
with external stakeholders, such as competitors, suppliers (brokers), international alliances
and regulatory bodies.
RATIONALE
It is important that an organisation has both internal and external focus. It must be conscious
of the forces of the external context within which it operates. Porter’s five forces analysis
recognises the importance to industry of buyers, suppliers and competitors in the form of
current, potential and those producing substitute products (Porter, 1980).
Intellectual Capital models see this interaction with the external environment as integral to the
functioning of an organisation (Dzinkwoski, 2000). It is particularly relevant to the closely
regulated and controlled asset management industry. Also on day to day trading it is
important to have working relationship with competition in order to trade positions and also
useful to exchange market views and ideas. International relationships are especially
important to South African asset management firms in their current drive to move offshore.
Items of External Relationship dimension
!" This organisation does not have strong co-operation with overseas alliances.
!" This organisation has a reputation for a good working relationship with market players.
!" This organisation has a strong reliance on external research.
!" The brand image of this organisation in the market portrays a true picture.
!" All employees agree with the organisation’s strict compliance to regulatory conditions.
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4.8.2 Customer Relationship
DEFINITION - There is a client focus, the team identifies with end users needs and
objectives. Communication with customers, products offered, delivery, their perceptions.
RATIONALE
Although an external relationship, the customer relationship has been made a separate
dimension due to its importance to the success of any organisation. Delivering superior
quality of customer service is a prerequisite for the success of businesses and a way to
differentiate in an environment of intensifying competition and rapid deregulation
(Parasuraman, 1988). This statement is still relevant for the environment the asset
management industry in South Africa finds itself in today. Intellectual capital theory
recognises the importance of the relationship and defines it in terms of customer capital
(Dzinkowski, 2000). Once again there is overlap with the dimension of communication. It is
vital to the understanding and meeting the needs of customers. The client mandate covers
specific needs of asset management customers, however firms must also be trusted and
adaptable to changes in their customers goals.
Items of Customer Relationship dimension
!" This organisation continuously adapts and aligns its goals with the clients’ goals.
!" This organisation does not regularly communicate with the customers.
!" It is of the utmost importance to adhere to the client mandate.
!" In this organisation understanding the needs of the clients is not the main objective.
!" Clients trust employees in this organisation to have their best interests at heart.
!" Employees do not enjoy direct contact with customers.
4.8.3 Responsiveness
DEFINITION - The extent to which there is timeliness of decisions and implementation of
action. The organisation is flexible and adaptable to information flows and changes.
RATIONALE
Globalisation, intensifying world competition, and increasing rates of technological advances
are only some of the trends to which the asset management industry is exposed. In order to
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grow and survive a company must be responsive to such changes. This responsiveness entails
not just making fast decisions but also taking action. There needs to be a timeliness with
which decisions are made, a sense of urgency to get things done and responsiveness to
changes in the market place.
Asset mangers must always be sensitive to risk, but especially so when responding to changes
in the market place. Sensible risk management entails flexibility and the existence of
contingency plans for when something goes wrong. Augustine recommends that organisations
plan for dealing with crises by making plans (Augustine, 1995).
Items of Responsiveness dimension
!" This organisation emphasises fast decisive action.
!" It is not standard practice to plan for contingencies.
!" It is important to this organisation to flexible to market changes.
!" This organisation is not open to change.
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5 STATISTICAL ANALYSIS
5.1 General
The statistical analysis used a staged approach as discussed in Section 2 -Methodology. This
section outlines the results of Stages IV to VI from data collection to the confirmation of scale
reliability and validity.
5.2 Data Collection
The questionnaire was distributed by e-mail to all 120 employees at the collaborating asset
management firm. 64 responses were received within the time allowed which corresponds to a
response rate of 53%. The respondents represented different functional areas, levels of
responsibility and years of experience. See breakdown in tables 2 to 4 below. This data is
presented graphically in Appendix 3.
Function No.
Investment administration 10
Information technology support 21
Business support 3
Human resources 9
Investment – portfolio management 10
Investments – analysis 8
Investments – dealing 3
Table 2: Functional Area.
Level of responsibility No.
Non-managerial position 45
Managerial position 16
Executive position 3
Table 3: Level of Responsibility.
Experience in the Industry No.
less than 1 year 12
1-2 years 11
3-5 years 24
6-9 years 10
10 or more 7
Table 4: Years of Experience.
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5.3 Scale Purification
The first step was to identify questions that asked the same thing and were thus redundant.
The reason for including questions with different shades of meaning was that seemingly
identical statements can provide very different answers and generate a question pool that
provides a better foundation for the final measure. The criterion for eliminating questions on
this basis was a correlation between two similar questions exceeding 0.70. Having calculated
the correlations, three questions were eliminated on this basis so that the number of items was
reduced from 120 to 117.
The next stage (Stage V(a)) consisted of a reiterative process of item analysis to further
reduce the number of items. In item analysis it is argued that items with the highest
correlation to the total item score will most likely become the final items, thus one begins the
process by removing the items with low correlations. A rule of thumb is to retain items with
greater than 0.50 item-to-total correlation (Bearden et al, 1996). In order to do this the total
item score must first be computed, which is the score of all items within the dimension. It is
also referred to as the Cronbach coefficient alpha. The Cronbach alphas ranged from 0.299 to
0.860 across the 22 dimensions and suggested that deletion of certain items from each
dimension would increase the alpha values. According to Nunnally (1979) the Cronbach
alpha should be greater than 0.70 for the measurement to have internal consistency, although
others suggest that greater than 0.60 is sufficient (Bearden, 1996). On deletion of a low
correlation item the alpha values and item-to-total correlations were recomputed. This process
was repeated until the Cronbach alpha ceased to improve. The final result was 86 variables
with an improved alpha range from 0.450 to 0.870.
Stage V(b) entailed a factor analysis on the now reduced item set. By defining Eigenvalues
above 1.0, the analysis identified 21 factors. These factors explained 78.7% of the total
variance, however the composition of the items within these 21 dimensions was completely
different to the composition of the original 22 dimensions hypothesised. The loading matrix
Appendix 5 showed that several of the items had high loadings on more than one factor,
implying that the factors were not independent of one another. The loading matrix was then
rotated using normalised varimax rotation, however the items still loaded to more than one
factor, and thus no distinct factors could be identified.
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Overlap between the 22 dimensions was expected, and in order to evaluate the dimensionality
a scree plot of Eigenvalues was run. The graph suggested the existence of 6 factors, see figure
2. As the original theoretical domain was made up of seven dimensional fields that we had
classified into 22 dimensions, it was decided to return to these seven broad dimensions to
rerun the item and factor analysis.
Plot of Eigenvalues
Number of Eigenvalues
Va
lue
0
5
10
15
20
25
30
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Figure 2: Scree Plot
5.3.1 Return to Original Dimensions
Cronbach alphas were computed for each of the seven dimensional fields. Before beginning
the item analysis reiterations the Cronbach alphas generated ranged form 0.655 to 0.869. The
deletion process of items with low item-to-total correlation resulted in a 72-item questionnaire
with an improved alpha range from 0.684 to 0.891.
The reduced set of questions was then factor analysed with the number of factors again
restricted to factors with Eigenvalues in excess of 1.0 in order to keep the number of factors
small. The number of factors that resulted was six and the percentage of variance explained
by the 6 factors was 63%. The amount of variance explained should exceed 0.50 in order for
the scale to have internal stability (Bearden, 1996). However, although not as many as
previously, several items still had high to moderate factor loadings on more than one factor.
As some items had high loadings on factors to which they were not originally assigned, it
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suggested reassignment as part of the reiterative process of item-to-total correlation and factor
analysis.
The reiterative process finally resulted in an instrument consisting of 32 questions in 6
dimensions; Integration, Drive, Investment Philosophy, Stretch, Contribution and Process. For
ease of viewing only factor loadings above 0.20 are presented in table 5 below; see full matrix
in Appendix 4. The loading criterion was to retain items with a primary loading above 0.50.
Where items loaded on another factor, this secondary loading was ignored if below 0.40,
otherwise reiteration was continued.
Factor loadings matrix (varimax normalised) for the 32-item questionnaire.
Factor loadings in excess of 0.2 in absolute magnitude are presented.
Extraction: Principal components
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6
P12Q7 0.812 0.209
P12Q4 0.811 0.210
P5Q6 0.774
P12Q8 0.766 0.291
P4Q6 0.708 0.314
P6Q9 0.647 0.237 0.203
P6Q4 0.623 0.202 0.417
P8Q9 0.618 0.379
P5Q8 0.592 0.287
P10Q9 0.812
P9Q5 0.786 0.225
P11Q7 0.772 0.371
P11Q10 0.768
P10Q5 0.236 0.738
P9Q2 0.704 0.245 0.406
P11Q8 0.669 0.240
P11Q5 0.647 0.351 0.313
P11Q6 0.591
P7Q5 0.809 0.252
P7Q2 0.800 0.243
P7Q4 0.296 0.740
P2Q8 0.223 0.764
P2Q6 0.207 0.667 0.443
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P1Q10 0.218 0.617 0.244
P2Q5 0.303 0.548 0.388
P5Q1 0.210 0.671 0.206
P6Q1 0.311 0.669
P6Q5 0.312 0.392 0.625
P5Q2 0.372 0.363 0.480
P1Q9 0.805
P1Q6 0.242 0.218 0.629
P1Q5 0.356 0.213 0.623
Expl.Var 5.300 5.561 2.421 2.377 2.951 1.967
Prp.Totl 0.1656369 0.1737903 0.075653 0.0742781 0.0922059 0.0614713
Table 5: Factor loadings of refined questionnaire.
The Eigenvalues for the refined questionnaires are summarised below.
Eigenvalues for the 32-item questionnaire.
Eigenvalue % total
Variance
Cumul.
Eigenvalue
Cumul.
%
Factor 1 10.07 31.48 10.07 31.48
Factor 2 3.59 11.22 13.67 42.71
Factor 3 2.44 7.64 16.11 50.34
Factor 4 1.70 5.30 17.81 55.64
Factor 5 1.48 4.64 19.29 60.28
Factor 6 1.29 4.02 20.58 64.30
Table 6: Eigenvalues for refined questionnaire.
5.4 Confirmation of Scale Reliability and Validity
Lastly in Stage VI the final scale of 32 items across 6 dimensions is tested for reliability and
validity. The item-to-total correlation for each of the dimensions was computed resulting in
Cronbach alpha values in a range from 0.624 to 0.906; see Appendix 6. For each of the
dimensions the mean score, standard deviation, alpha values and the average inter-item
correlation are listed in table 8.
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Dim-
ension
Mean
Score
Standard
deviation
Cronbach
alpha
Standardised
alpha
Average
inter-item
correlation
Items
146.42 8.72 0.906 0.907 0.527 P12Q7, P12Q4,
P5Q6, P12Q8,
P4Q6, P6Q9,
P6Q4, P8Q9,
P5Q8
2 38.56 10.00 0.905 0.906 0.521 P10Q9, P9Q5,
P11Q7, P11Q10,
P10Q5, P9Q2,
P11Q8, P11Q5,
P11Q6
3 12.28 3.12 0.790 0.795 0.565 P7Q5, P7Q2,
P7Q4
4 17.44 4.37 0.741 0.737 0.418 P2Q8, P2Q6,
P1Q10, P2Q5
5 18.80 4.42 0.776 0.768 0.457 P5Q1, P6Q1,
P6Q5, P5Q2
6 12.91 3.58 0.624 0.633 0.367 P1Q9, P1Q5,
P1Q6,
Table 7: Summarised characteristics of refined scale.
The high alpha values indicate good internal consistency among items within each dimension.
Dimensional distinctiveness suggested by the factor analysis, table 5, is further supported by
the low positive and negative inter-factor correlation in table 8.
Inter-factor correlation
FACTOR 1 FACTOR 2 FACTOR 3 FACTOR 4 FACTOR 5 FACTOR 6
FACTOR 1 1.000 -0.405 -0.409 -0.027 -0.047 -0.302
FACTOR 2 -0.405 1.000 -0.122 -0.290 -0.181 -0.264
FACTOR 3 -0.409 -0.122 1.000 -0.247 -0.040 0.032
FACTOR 4 -0.027 -0.290 -0.247 1.000 0.022 -0.066
FACTOR 5 -0.047 -0.181 -0.040 0.022 1.000 -0.070
FACTOR 6 -0.302 -0.264 0.032 -0.066 -0.070 1.000
Table 8: Inter-factor correlation refined questionnaire.
The statistical analysis shows that the amount of variance captured by the instrument is 0.64,
which exceeds 0.50, the Cronbach alpha values are 0.624 to 0.906, which is above 0.60, and
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the item-to-total correlation with the exception for three items above 0.50. Therefore the
refined instrument displays high levels of internal consistency.
5.5 Interpretation
Although the item and factor analysis resulted in 6 dimensions the items within these
dimensions were quite different from those in the initial 7 dimensions identified in the early
stages of the study. For this reason we have reclassified the dimensions, to now stand as:
Integration, Drive, Investment Philosophy, Stretch, Contribution and Process. Furthermore in
appreciation of the unique South African context in which this study has taken place, and in
order to capture the sense of the dimension and not limit the meaning to a preconceived
English definition, we have also given the dimensions Xhosa titles. These translated into:
Indibaniso, Umdla, Indela Yoqoqosho, Ulwandiso, Inxaxheba and Ingqubo. Note that these
six dimensions are listed in order of importance, i.e. those factors explaining most of the
variance. The items within the dimensions are also ranked in the following tables to reflect the
highest factor loading.
INTEGRATION / INDIBANISO
P12Q7 New employees are immediately made to feel at home.
P12Q4 This organisation has a friendly, congenial atmosphere.
P5Q6 Information flows quickly through this organisation.
P12Q8 In this organisation all employees feel included in most ways.
P4Q6 Employees within the team always support the other members of the team.
P6Q9 Employees in this organisation cannot rely on management support when needed.
P6Q4 In this organisation employees listen to each other’s suggestions.
P8Q9 In this organisation employees do not feel that they are really part of the group.
P5Q8 Knowledge and information is willingly shared within the organisation.
INTEGRATION / INDIBANISO - The extent to which the organisation displays integration
in the form of supportive teams, cohesiveness and effective communication.
This new dimension includes items from all the dimensions under the initial broad
dimensional fields of cohesiveness and communication. These were respectively integration,
team structure, warmth as well as internal communication, conduciveness to debate and
leadership. As discussed previously this link between cohesiveness and communication is
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well recognised. The relationship is one of a positive feedback loop where greater
cohesiveness creates better communication, which in turn then creates greater cohesiveness
and so on.
DRIVE / UMDLA
P10Q9 Employees are inspired to do their best for the organisation.
P9Q5 Clients trust employees in this organisation to have their best interests at heart.
P11Q7 In this organisation employees are always encouraged to search for better ways of
performing tasks.
P11Q10 Employees in this organisation are encouraged to use their own initiative in doing
their jobs.
P10Q5 Employees are strongly committed to the success of the organisation.
P9Q2 This organisation does not regularly communicate with its customers.
P11Q8 This organisation has an environment conducive to creativity and innovation.
P11Q5 This organisation does not have a sound realistic vision.
P11Q6 Employees in this organisation have a clear understanding of what its values,
ethics and beliefs are.
DRIVE / UMDLA - The manner and degree to which an organisation’s people are driven
towards the successful achievement of its vision and goals.
This is more than just achieving set goals and visions, but also the pursuit of excellence by
striving to exceed expectations. The link to customers is believed to be due to the fact that
satisfaction of customer needs is an integral part of the vision of asset management firms
today. The innovation link can also be explained by the drive to stay abreast of changes in
technology in order to satisfy customer needs for up to date financial products.
INVESTMENT PHILOSOPY / INDLELA YOQOQOSHO
P7Q5 The performance benchmarks used are not good proxies for actual performance.
P7Q2 Divergence from the investment philosophy is common.
P7Q4 The investment philosophy of this organisation is not clearly communicated.
INVESTMENT PHILOSOPHY / INDLELA YOQOQOSHO - The extent to which the
investment philosophy in the asset management firm provides direction.
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As the investment philosophy is so central to an asset management firm it was always
expected to be one of the final dimensions. It is as critical to having a vision, but on a more
industry-specific level. As with a vision it is important that the philosophy is well
communicated. This enhances understanding and commitment to the philosophy. To further
improve understanding and commitment it needs to be steadfast, and only change when
changes in the environment make it no longer feasible. The link to a performance item is also
not surprising, as the main aim of the investment philosophy is most usually the optimisation
of performance.
STRETCH / ULWANDISO
P2Q8 In this organisation there is not a clear link between reward and performance.
P2Q6 In this organisation employees are rewarded not for whom they know but for
what they produce.
P1Q10 The organisation’s technical tools are robust to changing market conditions.
P2Q5 All employees in this organisation share its values and philosophies.
STRETCH / ULWANDISO – The degree to which the organisation is equipped to
successfully follow and utilise changes in the marketplace.
It is important that all employees share values and philosophies in order for the organisation
to be successful within an environment of continuous change. This outlook can be encouraged
by a reward system that recognises this adaptability. It is also important that technical tools
can be stretched to accommodate these changing conditions.
CONTRIBUTION / INXAXHEBA
P5Q1 Employees in this organisation do not have a say in the organisation's work
methods.
P6Q1 Different opinions of employees in this organisation are not expected.
P6Q5 Employees are not encouraged to reveal any differences of opinion with those in
seniority.
P5Q2 All employees contribute towards the organisations goals.
CONTRIBUTION / INXAXHEBA – The extent to which all employee contributes towards
the organisations goals.
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This dimension also refers to contribution in the sense that it includes the input of all
employees' views, opinions and feedback on all levels of issues from minor work methods to
visionary goals.
PROCESS / INGQUBO
P1Q9 Operational processes are not well defined and standardised.
P1Q6 Front, middle and back office processes are smoothly linked.
P1Q5 Decisions are made without utilising all available information.
PROCESS / INGQUBO – The degree to which processes are disciplined and efficiently run.
This dimension surfaced strongly in interviews with industry experts and was also always
expected to become one of the final dimensions. The items for this dimension were included
in the original dimensions of operational process and decision-making process. Smooth,
standardised processes are important in the fast-moving environment of financial markets.
Decisions making must be rapid, informed and fast, as the costs of mistakes or delay are high
in such markets.
Some interesting findings include that the dimension of integration contains three of the four
items with high loadings generated from the original dimension warmth. In the initial stages
of the research it was not believed that this dimension would be one of the most highly
ranked. This was especially so as the asset management firm from which the data was
collected is known for its strong performance orientation, which in many organisations can
override personal concern for employees as people. Secondly, no correlation was found
between the performance and the reward dimensions, in contrast to many findings we came
across in our literature review. Nevertheless it is considered that overall predictions from
theory were confirmed, thus the nomological validity of the construct is satisfactory. In
conclusion the analysis has generated results sufficient to conclude that the instrument is
ready for the next stages of testing.
5.5.1 Limitations
It must be recognised that this study encompasses only the preliminary stages of an extended,
longer-term study. Thus we were limited to the initial stages of data collection and testing.
Furthermore, factor analysis generally requires the number of cases to be much larger that the
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number of variables, although no allowable limit has ever been stated (Hofstede, 1990). In
relation to the initial number of questions this requirement was not fulfilled due to the
limitation of the maximum number of cases that could have been obtained from the chosen
population size.
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6 RECOMMENDATIONS FOR FURTHER RESEARCH
This research report has produced a 32-item scale for assessing asset management firms on
qualitative issues.
Firstly, it is recommended that in order to further evaluate the instrument and its psychometric
properties, data should be collected from a variety of asset management firms and analysed
separately. This cross-validation will evaluate the robustness of the scale. It will also
overcome the limitation of bias generated by utilising data from only one asset management
firm.
Secondly, now that 6 dimensions have been identified, the instrument should be compared to
other scales that measures these or conceptually related variables. It may prove difficult to
source such scales, as few exist let alone within the asset management industry. This lack of
scales was one of the original motivations behind our study.
When the instrument’s robustness is considered sufficient, a longitudinal study should be
carried out to investigate the developed instrument’s accuracy in predicting future
performance of an organisation. This would test whether the dimensions of the scale construct
can be correlated to performance and may verify the hypothesis that future returns can be
better explained by the dimensions proposed, rather than solely by past performance. This
further research suggestion was envisaged at the outset of this study.
In collecting the data for our study we classified the respondees by area of activity, level of
responsibility, years employed at the firm and years worked in the industry. This breakdown
will allow further studies on the developed scale in terms of whether results vary if employee
data is stratified by these classifications.
Finally the data captured by the 120-item questionnaire provides a comprehensive database of
information regarding the collaborating asset management firm and can be utilised internally
by the firm with various different aims.
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7 BIBLIOGRAPHY
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