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PREFACE

This book, Organizational Management: Issues and Trends in Ghana,

combines theory, research and practice to sketch the organizational management

issues in Ghana. This book provides a guide to students, practitioners, and other

professionals interested in organizational management in Ghana and Africa. This

book is an assembly of ten different papers exploring different issues and trends in

business and organizational management in Ghana; the papers have been grouped

and placed under five appropriate themes. These are as follows:

Theme One: Performance and Productivity Issues

Theme Two: Personnel Selection Issues

Theme Three: Employee Relations Issues

Theme Four: Corporate Governance Issues

Theme Five: Entrepreneurship Issues

Each of the themes comprises two chapters with the exception of Chapters One and

Ten. Chapter One was included in order to provide readers not familiar with

industrial/organizational psychology some background information before they

proceed to the other chapters while Chapter Ten is the only chapter under Theme

Five.

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Each chapter is a standalone and as a result, the chapters can be read in any

order other than the order in which they have been presented in this book. In

addition to the references at the end of each chapter, where necessary, this book

also provides readers with lists of texts and articles for further reading on the

subject under discussion.

Seth Oppong

April 2011

Please cite as: Oppong, S. (2011). Organizational Management: Issues and Trends in Ghana.

Saarbrücken, Germany: VDM Publishing House Ltd (ISBN: 978-3-639-35178-1).

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To Ghana, my homeland

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ACKNOWLEDGEMENTS

This book could not have been possible without the help of several people whose

comments and constructive feedback turned this book into what it is. I am very

grateful first and foremost to God for giving me the inspiration and energy to

conceive and achieve this book. I am also grateful to Mary Awuakye Otoo for her

questions that led to some important revision of parts of the book. I am also

indebted to Mamuda Tobrazune Seidu, Director of Programmes at African Institute

of Management Science, Accra-Ghana, for his constructive criticisms, particularly

about the case studies presented in this book.

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Table of Contents

Preface i

Dedication ii

Acknowledgements iii

Chapter Page

1 Industrial/organizational psychology in Ghana: History, training, employment, and issues 1

Theme One: Performance and Productivity Issues

2 Improving productivity by setting STAD goals 44

3 Developing innovative workforce through empowering management practices 56

Theme Two: Personnel Selection Issues

4 An appraisal of hiring practices in Ghana 66

5 Regulating activities of private employment agenciesin Ghana through standardization 94

Theme Three: Employee Relations Issues

6 Layoffs in Ghana: causes, consequences, and impactmanagement 104

7 Oppong Plan as a viable alternative to layoffs 125

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Theme Four: Corporate Governance Issues

8 Corporate governance in Ghana: A critical appraisal of the current policy 141

9 Psychology of corporate governance 154

Theme Five: Entrepreneurship Issues

10 Are successful entrepreneurs born or made? A psychological analysis 175

125

CHAPTER SEVEN

OPPONG PLAN AS A VIABLE ALTERNATIVE TO LAYOFFS

In the previous chapter, layoff was discussed as the most adopted strategy by

organizations to deal with organizational decline or when faced with excess supply

of labour. However, I believe there are alternatives that management may be

benefit from their applications. In this chapter, I present an approach and make a

case for it as a possible alternative to layoffs. In the meantime, let us talk about

some alternatives that can be learned from HRM and Industrial/Organizational

Psychology textbooks upon careful perusal.

We can find that the current literature seems to suggest that such practices as

job sharing and part-time working can serve as alternatives to layoffs (Bernardin,

2003). In job sharing at least two employees perform the same job that only one

employee used to perform and split the salary accordingly. This enables the

employees involved to have some income as against losing income when they are

all or one is laid off. As the name suggests, part-time working requires that the

employee does not work full time and may be paid for the work done in the

moment or on hourly basis. Both practices have sometime in common; in both

situations the employee is underemployed.

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The Alternative to Layoffs

Layoff is usually a response to organizational decline; this decline may result from

deteriorating demand for goods and services of the organization or deteriorating

resources or deteriorating performance or a combination. In this situation,

management usually acts in ways consistent with threat-rigidity hypothesis. This

hypothesis states that people response to situations they consider threatening

rigidly by searching for ways to centralize to regain control (Meyer, 1997).

According to Meyer (1997: 575), “perceived threat leads to inappropriate

responses to decline; to the extent that decline is an outcome of maladaptation to

the environment, rigidity is likely to increase rather than attenuate maladaptation.”

This implies that the search for more control as a response to threat facing the

organization may lead to greater problems for the organizations instead of solving

its problems. As a result, the usual response of layoffs does not always yield the

expected and desired outcome. In case of an organizational decision to automate or

redesign the organization for efficiency and to become lean, this alternative to lay-

off may not be the best option. Again, it may not be the best option in times of

mergers and acquisitions. Rather when lay-offs are simply to produce cost-savings.

Most organizations in Ghana execute massive lay-offs because they are in a crisis

that required something be done in the short-run. As a result, lay-offs in most

organizations are only a short-term solution.

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What is then the alternative? I refer to this alternative as Oppong Plan or

STEM cycle. STEM cycle involves information-sharing, determination of

timeframe for freezing salary increments, executing plans and monitoring level of

natural attrition to make necessary adjustment to the timeframe for salary freezing.

The essence of this alternative as a way of dealing with decline in which

management agrees with employees to have their salaries frozen for a period of

time while monitoring the employee movements in order to re-estimate how long

salaries have to be frozen in order to recover from its financial problems. It is

important to state clearly that this alternative is not applicable to situations where

an immediate and drastic reduction in cost to salvage the organization is a sine qua

non for survival. Even in such circumstances, it is possible to discuss with

employees the possibility of implementing the Oppong plan. What is key to

applying this alternative is open communication between management and the

employees and the joint determination of the timeframe within which salaries of

both management and employees should be frozen. In order to estimate the

timeframe, a mathematical equation is presented in this book to simplify the time

estimation process.

Oppong Plan or the STEM cycle (See Figure 7.1 on pp. 128) is in four

phases. These are (1) sharing information with employees or unions about the

financial crisis the organization is facing, (2) timeframe determination with

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employees to work out how long they (including managements) will have to forgo

salary increments to make cost savings, (3) executing the plan with the employees’

support in a trusting atmosphere accompanied by open communication, and (4) and

(5) monitoring organizational exits, voluntary and involuntary, to adjust the time

estimation.

Figure 7.1: Oppong Plan in diagram

When will the Plan be most effective?

This plan is not appropriate for crisis situations that require immediate and drastic

reductions in cost in order to salvage the organization but those in which cost-

savings can be spread over time without leading to insolvency. When is this

alternative most effective then? Meyer (1997) discussed on organizational decline

as a multi-stage process consisting of (a) blindness, (b) inaction, (c) faulty action,

(d) crisis, and (e) dissolution. Meyer (1997) described the blindness stage as one

Stage 1: Information Sharing

Stage 2: Time Estimation

Stage 3: Execution

Stage 4: Monitoring &

Recording

Stage 5: Adjustment Process

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during which the organization fails to detect early signs of decline; inaction stage

as the stage during which the decline is detected but nothing is done about it; faulty

action stage as the phase when decisions are taken and/or implemented

inappropriately; crisis stage is the phase when the faulty decisions or actions taken

are recognized; and the dissolution stage as the stage at which the organization

folds up or prepares to fold up.

Meyer (1997) added that there are three distinctive types of decline: sudden,

gradual, and lingering decline. In sudden decline, the decline is characterized by

rapid deterioration of resources and collapse of the organization itself while

gradual decline is characterized by slow fall of resources whiles the organization

remains intact until its resources are exhausted. Lingering decline occurs when

resources falls to subsistence levels (break-even point) but the organization

remains in existence for some time (Meyer, 1997).

This alternative is most useful for dealing with gradual decline at the

inaction or faulty action stage once the early signs of the decline are detected. In

other words, Oppong Plan helps deal with gradual decline without laying

employees off. In addition, open and honest communication is vital. As result, a

joint management-employee taskforce need to be set up to facilitate

communication and the implementation of the plan.

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The Formula

Up to now, I only talk of “the formula”. Which formula? This formula is a linear

equation that expresses the cost savings needed to save the firm as a multiplicative

function of average salary increment percent per annum, current salary level, and

the timeframe for freezing salaries.

Symbolically,

Cost-savings = Median salary increment percent x Current salary x Time in years

or CS = S% x S x T

However, because the increment in salary accumulates on the salary, the above

simple linear equation may not be a good estimate of the total cost savings. In view

of that, the following formula, which operates like compound interest, is to be

used:

CS = S (1 +S%)t – S

CS + S = S (1 + S%)t

(CS + S)/ S = (1 + S%)t

Log(CS + S) – Log(S) = t x Log(1 + S%)

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Formula Box 1

where‘t’ represents the timeframe, ‘CS’ represents cost savings per worker, ‘S’

represents the salary and ‘S%’ represents the annual salary increment percent.

Cost savings per employee will then equal total Cost savings per category divided

by the number of employees per category, ‘n’. This is given in the formula below.

Formula Box 2

where ‘CS’ represents total organization-wide cost-savings required, ‘K’

represents number of categories of employees, and ‘n’ represents number of

employees in the group, assuming that management divides up the cost equally.

In the following paragraphs, I elaborate on the stages of Oppong Plan and

the use of the CS-formula in the process. As noted earlier, the organization which

is in crisis should first communicate to its employees the situation, giving them

information about the financial status and the cost savings required to get the

organization back on track. If possible, management should work with employees

to determine the magnitude of cost savings required to salvage the organization for

t = {Log(CS + S) – Log(S)}/ Log(1 + S%)

CS per employee = (CS/ K)/ n

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total collapse. This is the time that the organizational leaders should make clear to

employees that they do not intend to embark on massive lay-offs as a solution to

the problem. The importance of this is that it will communicate to the employees

how caring the organization is about them and this may influence their

commitment towards the organization positively. The employees will become

more cooperative and willing to go the extra mile for the organization because they

will now view the organization’s problem as theirs. As a result, the management

can even test the idea of instituting a small pay-cut alongside the freezing the

salary increments. The other reason for information-sharing is getting the

employees involved in the planning stage of the solution in order to create a sense

of ownership and also to minimize resistance. This should be approached as a

change management situation.

Joint timeframe determination is the second phase. This stage a little

straightforward and it is the time during which the CS-formula is applied for the

first time in the process. Management together with employees or their

representatives jointly determines the timeframe for the freezing of salary

increment. Naturally, it will be appropriate for management to announce the cost-

savings required with reasons explaining its magnitude. The average salary

increment percent be worked out for the employees but the more appropriate thing

to do is to determine the salary increment percent per each category of employees

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within the organization. There are several options: (a) management and worker

representatives can divide up the cost savings required in such as a way that the

employee category with the largest salary covers more than those with the smallest

salary, (b) management may also divide up the cost savings equally among the

employee categories, and (c) management can use the average salary level across

the employees after trimming off the extreme 5% (both largest and lowest) and

plug it into the formula as the ‘S’.

Regardless of the option used, it is important to note that there is some

negotiation with workers and adjustment be made before the time period within

which salary increment will be frozen be announced and implemented. When

management chooses to divide up the total cost savings by salary size of employee

categories and apply the formula it is likely that the timeframe will differ from

group to group. Management can adjust this by choosing either the modal or

median time, ‘t’, and recalculating the cost savings per group to ensure that the

sum of the cost savings per group cover the total organizational cost savings. The

following formula may be used to compute total savings per group using either the

modal or the median ‘t’ where applicable:

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Formula Box 3

After the determination of the timeframe, implementation of the plan

follows. The implementation of this system is quite straightforward. Tell

employees that from next budget year salary increments will be frozen for X

number of years as determined by the formula. Employees should also be

informed, however, that the formula will be adjusted as and when employees leave

the organization. Also, call on them to marshal all their strengths to help salvage

the organization because if it sinks all of you (management and employees) all sink

with it.

The next important step is monitoring organizational exits. I believe that if

the management so choose they can estimate the number of employees who will

want to leave within the timeframe required covering the cost savings so that

constant monitoring will not be necessary. However, my guess is that management

can base every calculation of the savings on estimates. It should, as a result, collect

information on the number of employees who leave the organization annually.

CS per group = n x {S (1 +S%)t – S}

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Formula Adjustment

Adjusting the formula is so important in that it will enable management to ensure

some distributional and procedural justice. It, for instance, makes sense for

management to reduce the number of years during which salary increment is to be

frozen if natural attrition cuts down the cost. As a result, management and

employee representatives must monitor natural attritions (both voluntary and

involuntary terminations) and new hires (or may even freeze new hiring). This

adjustment process is required in order to determine the magnitude of the cost

savings an employee group still has as outstanding since the commencement of the

process (implementation of Oppong plan). The total cost savings left is then

plugged into the Formula 1 as CS to determine the time left for the group to clear

its portion of the total cost savings needed. It is even possible that management can

forecast the internal supply of labour by using Markov analysis to estimate the

organizational exits likely to occur for the year.

Management and worker representatives should monitor both the entry and

exit of labour. The entry side will include the following:

Promotion to job category

New hires to job category

Demotion to job category

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The exit side will include:

Voluntary termination

Dismissals

Promotions from job category

Demotions from job category

Retirement

The net difference between entries to and exits from each job categories

must be added to the current number of employees in each job category. Thus, ‘n +

entries – exits’ must be plugged into the formula 3 as ‘n’ to estimate the cost

savings left after ‘t – x’ period has elapsed (where ‘n’ is the number of employees

in a given staff category at the beginning of the process and ‘x’ represents the

number years into the implementation of the process). The estimated cost savings

per group should be plugged into Formula 1 as ‘CS’ to determine the time left for

salary increment to be frozen for the job category. This process will create a

situation where the timeframe will differ from one job category to another. This

adjustment must be done at the end of each fiscal year and the CS per group and

total organization-wide cost savings left must be announced for the next fiscal

year.

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Summary of Formulae

Formula Box 4

Meaning of letters in the formulae:

t = timeframe within which salary increments will be frozen

CS = total cost savings required to salvage the firm to ensure survival

S = median (or mean) of current salary

S% = Salary increment percent

K = number of categories of employees

n = number of employees in each group

x = number years into the implementation of the process

Summary of Steps for Jointly Estimating the Timeframe

1. Estimate the CS per group for each job category.

2. Plug CS estimated in Step 1 and current or base salary for the job category

as S into Formula 1 to estimate t.

3. Repeat Steps 1 and 2 for the rest of the job categories to estimate the ts for

the rest of the job categories.

t = {Log(CS + S) – Log(S)}/ Log(1 + S%) ………………..……….….....(1)

CS per employee = (TCS/ K )/ n …………………………………...…....(2)

CS per group = n x {S (1 +S%)t – S}………………….............................(3)

Adjusted CS = (n + entries – exits) x {S (1 +S%)(t –x) – S}………………(4)

CS = (n + entries – exits) x {S (1 +S%)(t –x) – S} – S(exits – entries)…….(5)

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4. From Steps 2 and 3 identify the modal t if the modal t has a frequency of

more than 50% or the median t if the modal t has a frequency less than

50%.

5. Plug the t found in Step 4 into Formula 3 for each job category.

6. Determine the difference between the cost savings estimated in Steps 1 and

5.

7. If more than 50% of the differences are positive, then increase t until when

plugged into Formula 3 the difference equals zero.

8. If less than 50% of the differences are negative, then reduce t until when

plugged into Formula 3 the difference equals zero

9. The estimated t in either Step 7 or 8 where applicable is the timeframe

during which salary increment will be frozen to cover the total

organization-wide cost savings

Summary of Steps for the Adjustment Process

1. Determine the number of entries and exits for each job category, ‘a”.

2. Plug the estimates in Step 1 and number of years into the implementation as

‘a’ into Formula 4 to determine the adjusted CS if total entries exceed the

total exits or apply Formula 5 if the total exits exceed the total entries.

3. Subtract the estimate found in Step 2 to estimate the final adjusted CS.

4. Plug the final adjusted CS into Formula 1 to estimate the time left for the

implementation of the process.

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5. Announce the time left to employees.

6. Repeat Steps 1 to 6 at the end of each fiscal year.

Tips for implementation of Oppong Plan

1. Management should call a gathering of employees the CEO announces and

explains the timeframe to workers and both management and their

representatives should be prepared to answer each question asked. CEO

should tell the employees much he or she is to lose when salary increments

are frozen and if possible announce some voluntary cuts in compensation as

a way to cover the cost; such a move by the CEO will activate the

employees to work hard to increase their productivity.

2. Management should show great interest in the welfare of the employees and

present the situation to the employees as a threat to their organizational life

for both management and the employees by referring to unemployment

levels and possible loss of income and a need to work hard turn overcome.

3. Management should constitute a committee made of management and

representatives of employees chosen by the employees themselves. This

committee should handle all the stages of Oppong Plan.

4. There should be warm and open communication between management and

the employees regarding the state of financial status. A semiannual review

during which management sincerely shares information with employees

about the state of affairs is very important.

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5. In addition to the cost savings to be created by the implementation of

Oppong Plan, management and employees may decide to relinquish some

benefits. If such an option is chosen then management should subtract the

total savings from such an action from the total organization-wide cost

savings needed.

6. Management must restrain hew hiring during the implementation of Oppong

Plan; however, they must fill positions that the company has no internal

supply of well qualified employees. As a result, management should be

prepared to fire employees for cause. Management should ensure that total

exits exceed the total entries.

7. The implementation should be accompanied by job enlargement and

working longer hours. For this to be successful, management must declare a

state of emergency and encourage each to contribute something to help save

their livelihood.

Reference

Bernardin, H. J. (2003). Human Resource Management: An Experiential Approach (3rd ed.). New York, NY: McGraw-Hill Companies, Inc.

Meyer, M. W. (1997). Organizational decline and failure. In A. Sorge and M. Warner (Eds.), The IEBM Handbook of Organizational Behavior. London: International Thomson Business Press.