Thursday, December 24, 2015

The 2016 Nigerian Budget: Analysis and Concerns

Like many Nigerians, I watched President Muhammadu Buhari deliver his 2016 budget presentation to the Nigerian national Assembly on Tuesday, December 22, 2016. Like I always do with many of these budget speeches every year, I printed out the full text the following day, Wednesday 23rd, so I can read and fully digest the fine details.

First, an N6.08tr budget in a period where the price of oil is selling below $40 a barrel is a bit ambitious; especially given the dwindling foreign reserves, and the lack of economic diversification expected when the price of oil was above $100. Though the president outlined some measures to streamline revenue collection, plug leakages, invest in diversification programs, education, social insurance, and infrastructure development, I am afraid that at the end of 2016, it might fall short of its goals, even with a zero-based budget system, unless most – if not all – of the leakages are plugged.
One of the steps outlined by the president towards economic diversification is import substitution and export promotion.  Import substitution requires domestic production of comparable or similar products to the ones domestic consumers import, not only in quality, but in quantity and efficiency. Where these are absent, consumers will revert to importation.  Export promotion, also, can only be successful if your product is desired by the intended export market, and it depends on the product meeting expected quality standards the export market is used to.  Where the expected quality standards falls short, Nigerian manufacturers will lose that export market.

It is common knowledge that Nigerian products still fall far short of acceptable standards of the local consuming public, and this limits the market base of these products to a category of the population which live below or within the poverty line. For those above this line, their preference for foreign goods remains insatiable. Therefore, for this twin policy to succeed, government must set an internationally-accepted standard that exceeds that of not just the Nigerian market, but the African market. This standard must surpass those accepted by the Nigerian Diaspora market.

One other important point touched on by the president was the broadening of Nigerian tax base so as to increase non-oil revenue.  The first step towards achieving this objective is to know the closest estimation of the labor force in Nigeria both in the public and private sectors. This will require creation of a comprehensive database of all working age adult in the country; an odious task in a country where data collection and storage is still in its infancy. This is where the National Identity Management Commission, the INEC, the Federal Road Safety Commission, and the National Population Commission will play a major role in collecting sifting, and sharing data among themselves and with the Office of Budget and Management. It is only with such information that the government can estimate the nation’s active labor force and formulate a successful national tax collection policy.

A successful implementation of zero-based budgeting, where expenses for each new period must be justified, can only work if the discipline exists among the various government agencies and ministries. How many of these agencies and ministries will overtly comply with a request for a thorough analysis of its functions to ascertain its needs and costs. Previous governments with such lofty ideas have been roundly defeated by elements within these same agencies with ulterior motives. To go with a zero-based budgeting system and expanded tax base are:
1.     1.  Government Integrated Financial Management Information System – a system designed to improve financial management in large organizations and governments. Ironically, this same system has been in existence since 2012 and could not curtail, let alone stop, the level of financial recklessness Nigeria witnessed in the last three years. There is, therefore, no assurance that things will be any different in 2016 and beyond.
2.   2.    Integrated Personnel Payroll Information System – again, a comprehensive database of all working-age Nigerian will aid in the effective implementation of an IPPIS program.  Like the GIFMIS, this software, or something like it, is already being used by some state and federal agencies in Nigeria for some time now. With a comprehensive database, and all the ministries and agencies employees incorporated into this system, it will not only improve the accuracy and ease of tax collection, it will greatly contribute towards elimination of the ghost worker problems in Nigeria. However, there always exist the tendency for some to cause mischief; so, government must remain aware and alert to the likelihood that someone can create a backdoor to this software for the purpose of financial mischief.

A private sector-led job creation policy, as outlined by the president, involves tax reduction for small businesses and providing subsidized funding for investors in the agriculture and solid mineral sectors. This again is a tricky policy; previous governments have employed this policy – especially in the solid minerals sector where many collected federal subsidies on the pretext of investing in solid minerals exploration and development, with little results. However, to achieve a better outcome, government must first formulate a strict policy that will include setting of performance goals and insisting on refunds of subsidy amounts where such goals are not met.  Tax incentives work better to achieve government objectives where they are graduated over a period of specific number of years or performance level.

Along the same policy of job creation, the budget proposed the training and deployment of 500,000 teachers with university degrees and NCE certificates. This, at least, will ensure that primary and secondary school students are taught by qualified teachers. However, one cannot expect to produce qualified teachers from a rotten education system. Half of Nigeria’s universities are nothing to write home about, and most of the graduates are more of theory experts lacking any practice. Essential amenities, including teaching materials, are lacking in almost all the universities. So, for the government to train half a million qualified teachers, it must first fix the tertiary institutions from which they will graduate. One program that is badly needed, and which worked effectively in the past, is the cooperative societies program.  If the government can successfully bring it back before its exit in 2019, it would have taken a huge step in saving many small businesses and communities from economic oblivion.

Two programs of concern, though, necessary and overdue, are the free feeding at primary school level and the provision of social services to the elderly and disabled who could not adequately fend for themselves.  This is a program that should have been implemented when the nation was swimming in oil revenue, but was ignored; to attempt to, or propose to, implement these programs at a time when the nation is in dire financial straits is going to be difficult, if not impossible. More worrisome is the proposal to partner with state and local governments in implementing this policy; these two levels of governments, especially the local governments, have not been known to be people-friendly in terms of providing social services. While they may be useful in collecting data on the proposed beneficiaries, they cannot be relied upon to deliver the benefits. Any federal social service program involving the state and local governments will be fraught with execution problems, or serve as conduits for siphoning public funds; the SURE-P program, as commendable in its minimal success as it is, was used by party and government officials as conduits for embezzling public funds.  Though a simple process as allowing the state and local governments to select qualified beneficiaries will still be corrupted, direct payments of emoluments into the beneficiaries’ bank accounts will reduce the level of fraud likely to arise in the implementation of this program.

Though many may see the payment of N5000 to unemployed graduates as a waste of money, one must not lose sight of the fact that such monies will be recycled into the economy through spending; where the beneficiaries choose to save their monies in the banks, it will only make excess funds available to the banks for lending, and this will reduce the borrowing rates for businesses who will need the capital. So, anyhow one looks at it, the economy benefits. Provision of free food to primary school students has been long overdue in Nigeria. The agriculture ministry, in collaboration with major corporations in the sector, nutrition experts, state governments, and distribution agencies, can easily coordinate the efforts to ensure a successful outcome of this program. Again, though it will present opportunities for abuse, it is still worth attempting.

The proposed investment in revival of vocational and technical institutions is a good idea. In industrialized nations like Germany – especially Germany – and the United States, the academic shift is towards technical and science education, and the avenue is community colleges and vocational schools. Associate degree holders in technical and vocational skills are already making more money in earnings than those with 4-year degrees from universities. Germany is the leader in engineering today not because of the number of university degreed employees, but because of its technical and vocational workforce.  While a degree in in liberal arts studies is still useful, it must be acknowledged that the industrialized world and some emerging economies are already moving away from it.
Finally, increasing the capital expenditure allocation to 30% of the budget, though a departure from the previous years, still falls short of what Nigeria needs to invest on infrastructure. No nation ever develops without infrastructure and power; without drastically reducing the exorbitant cost of moving people and goods from point A to point B, Nigeria will never develop out of a Third world classification. One hopes that, as the president promised, the capital expenditure allocation will continue to increase, as more loopholes and seepage systems are plugged around our national treasury.


All in all, this is a budget of promise and hope: the government promising, and the people of Nigeria hoping. If the government exhibits tremendous effort in keeping its promise, even with a partial success, the people will continue to hope. Where that effort is lacking, the hope will wane and the people will – again – clamor for change.

Friday, December 11, 2015

Effects of Migrant Workers on the Local Labor Market & Economy

The frustration on the face of the site supervisor is palpable; the project is running behind schedule and over-budget. His problem is the work ethics of the local labor force. To create temporary employment for the local youth population, the Ahoada local government in Rivers State had instructed the contractor handling a hospital project to employ auxiliary and non-technical labor from this specific pool. Therefore, daily labor like masonry, block molding, foundation work, and site clearing jobs were assigned to the local, mostly inexperienced, youths.
Miles away from Ahoada, at the construction site of a mini shopping mall in Ojodu at Ikeja, Lagos state, work is going on at a breakneck speed; temporary day laborers are dashing up and down the makeshift wooden stairs moving mixed concrete and cement up the second level for the decking, and the foreman can be heard from a quarter mile away bellowing orders and threats of dismissal to the panting mix of muscular and skeletal staff.
At a farmland in Arochukwu, Abia state three young men in their mid-twenties are gathering and setting fire to brushes as fast as possible, discussing among themselves in a dialect alien to the indigenous owner, though in Igbo language.  At a corner of the farm, an elderly woman is busy preparing meals for the young men. A couple of hundred yards  from the farm is another, much bigger, piece of farmland where an elderly couple, four young men and a girl, are busy doing the same things as the young men in the first farmland, except that the pace is much slower and the level of urgency was evident in its absence. The male adult spends much of his time sighing and urging the young men to pick up the pace.
At a soak-away construction site behind a newly-finished single family home at Afugiri village in Umuahia, two young men covered waist-high in red mud huddled in deep conversation; a third is on the phone while leaning on a shovel, while another walks to and fro a nearby stream fetching and emptying buckets of water into a drum. It is 11:00AM in the morning, and the freshly mixed cement and stone is beginning to cake under the hot sun; a half case of Gulder beer sits under a large mango tree, and  three empty bottles litter the work area, along with cigarette butts, while three other half-empty bottles sit in close proximity to the young laborers.
What is wrong with the different scenarios described, and how can they be explained? This is the question this commentary will attempt to address in an effort to explain the effects of migrant and transient workforce on the local labor markets and economies.

Decision-Making Powers & Flexibility
In the Ahoada example, contractual restrictions limited the recruitment of casual labor to a specific pool – the local unemployed youths; this reduced the power and flexibility of the contractor to source for cheaper and more qualified labor elsewhere, thereby creating a laisse-faire environment at the site. This attitude resulted in delays and cost overruns. The indigenous staff, immune from severe discipline – including termination –was lax in their work ethics. Oblivious, or in spite of, cost overruns, they view any delays in completing the project positively as extra paid workdays for them; so, there is no incentive to put in their best efforts since they cannot be replaced with outside labor.
Contrast this with the scenario at mini mall construction site in Ikeja where the contractor is under no such restrictions; majority of the day laborer are transported daily from outside communities as far as Surulere and Oshodi, and have no ties to the local community. Daily pay rates and targets are pre-negotiated, and expectations are communicated to everyone prior to arriving at the site. Therefore, desirous of a good day’s wage, and protective of their good work ethic, the laborers have no alternative than to put in their best efforts.
There exists a relationship between the two scenarios above and the two farmlands at Arochukwu. The young farmers at the first site are seasonal migrants from Afikpo in Ebony State who migrate in the local communities/villages during the farming season, with a long history of farming. They have no strong communal ties beyond their farming services for a moderate fee. To continuously attract job offers, they must offer their best services to their clients. The situation at the second farm, where a detectable level of laxity exists, is due to the close personal relationship between the owners and the workers. So, even though these men are contracted at the same going daily rate of N1000, their output is less than those of their counterparts from Afikpo; unfortunately, unlike in the first farm, the owners of the second farm are hesitant to exercise any form of discipline due to familial and communal ties to the workers.
What is going on at the single-family soak-away construction site is akin to the situation at the second farmland; the owner is closely related to the man filling the drums with water who serves as the project supervisor, and he has recruited his friends to construct the soak-away. This close relationship with the laborers erodes his authority to hire and fire; therefore, the project is expected to suffer delays and cost overruns. Preference for a migrant workforce in the community, which is in abundance from as far away as the Southwest and as close as South-south states of the federation, would have resulted in meeting project deadline and cost-savings.
Beyond the exemplary difference in work ethics between indigenous and migrant workers, there are several other effects migrant workers – transient and resident – have on their host communities. 

Effects on Labor Supply & wage Costs
1.       The availability of non-specialized migrant workers in any community results in an increase in available workforce in the local labor market, or increase in the supply of labor; this excess supply causes a depression or downward trend in the cost for labor, thereby creating a favorable buyers’ market. In the example of the Ahoada hospital, if the contractor had the flexibility to hire from outside the indigenous pool, he could have recruited from the migrant pool at a very low daily rate; thereby not only saving labor costs, but completing the project on time. The same applies to the second farm and the soak-away projects. The possible savings from labor costs could be re-invested in other construction materials, or in hiring additional labor.
2.       Apart from forcing a depression in labor costs, Migrant workers introduce new skills and innovative technology into the local labor force that may have been previously lacking; new blocking molding technology that could either doubles production quantity or uses less combination of cement and sand mix while retaining desired quality. New power tools that enhances speed and efficiency cutting, drilling, or scooping, leading to reduction in completion time and project costs.
3.       One major disadvantage of migrant workers in the community is the increase in unemployment among the local workforce. Migrant workers undercut the bargaining power of the local pool, and force them to accept the same daily wage as their guests, which is usually much lower than what they usually get without competition. This “encroachment”, initially, causes resentment towards the migrants and, in most cases, resulting in invasion and blockade of construction sites for extended periods of time. On the positive side, the presence of migrant workers could force a change in work ethics of the local labor force, and result in a healthy competition with the migrant workers. Therefore, it is safe to speculate that though in the short term, presence of migrant workers could have a negative impact on the local labor force; in the long run, their presences does effect a positive change in the work ethics of the local labor force, and the host community is the main beneficiary.

Social & Economic Impact
Migrant workers also introduce their cultures, customs, traditions, and habits into their host communities, resulting in a rise in new businesses catering specifically to these needs, either short or long-term. For example, a migrant Yoruba or Idoma community in faraway Okigwe, Ahoada, or Kazaure will have to source for their unique needs within the host business community; this desire to satisfy a need results in establishment of new businesses, or extension of existing ones, to accommodate these needs.  The increase in business activities results in increased tax revenue over time which is applied to improving social services like road, school and hospital repairs, culminating in the creation of more employment opportunities not only for the duration of the work season but, in most cases, for the long term. For example, the influx of Akwa-Ibom house helps to the Port Harcourt and Lagos metro areas led to an increase in the string of businesses catering to their specific needs - especially consumer goods - and forcing existing ones to diversify their product and service offerings. Altogether, the creation of new business and expansion of existing ones created more employment opportunities within and around impacted communities. This multiplier effect is recreated in many communities where large migrant workers exist.
Because most migrant workers are transient and leave their families behind in their native communities, they remit most of their earnings back home; therefore, they are not able to make substantial capital investments in the economies of their host communities. Their major investment is in consumer goods like food, clothing, daily hygiene needs, and rental accommodation which account for between 25 – 50% of their earnings. Depending on the type and extent of the economic activity – road and housing construction, farming, and/or harvesting – which could last anywhere from 3 to 18 months, most beneficiaries of migrant labor investments are landlords, restaurant and saloon owners, food vendors (or mama put), tailors, cobblers, and the local churches. Other beneficiaries include the local consumer markets, local clinics and pharmacy and, where available, prostitutes.

Cultural Benefits
For the few among the migrant workforce who have no family ties – wives and children – in their native towns, opportunities exist for inter-marriage and blending of different cultures and customs. This new relationship results not only in an increase in the local population over time, but also in making substantial investments in capital goods and property in the communities due to a reduction or outright elimination of remitted earnings.  Small, low capital businesses, like bicycle repair, vulcanizing, technology products repair services, cyber cafĂ©, carpentry services, and provision stores, are some of the favorite businesses of migrant workers. These small businesses create apprenticeship opportunities for the locals, and the competition with existing like businesses create a downward trend in cost thereby favoring the consuming public.
 Apart from the few listed benefits – low labor cost, improved work ethics, and introduction of new technology, improved efficiency, and increased business activities - of migrant workforce in host communities, they change the social, economic, and cultural dynamics of host communities, especially through inter-marriages and cultural affiliations. Though in the short-run, migrant workers face hostilities and suspicion from their host communities; eventually, with continued interactions, they are accepted and gradually assimilated in the community and this result in a mutually beneficial relationship in the long term.

Felix Oti

Arlington, Texas

Monday, August 24, 2015

Economics of Terrorism & Civil Wars

Some distinct features of almost every ISIS, Al-Qaeda, Al-Shabaab, and Boko Haram video are convoys of Toyota and other international brand trucks stretching for miles, All-Terrain vehicles, military-grade assault rifles like AK-47s and 49s, assorted models of AR 15s and M-16s, and heavy machine guns of the M 60 and M 134D caliber. Accompanying these guns are rows of ammunition clips and belts, shoulder grenade launchers, hand grenades, walkie-talkies or ham radios and other communication gears. All of these equipment run into hundreds of millions of dollars’ worth of business every year

Since almost all the terrorist organizations lack the capacity to manufacture these vehicles, weapons and their accessories, where and how do they acquire them, given the restrictions of the international community? This essay will explore the sources of these and other resources, the reason for their continued flow into the hands of the terrorists, and the economic and social benefits of terrorism activities and civil wars both within the immediate vicinity and the extended regions of the world.

Sources of Revenue
Terrorist and guerilla groups, like Boko Haram in Nigeria, Al-Shabaab in Somalia and parts of Kenya, Al-Qaeda in the Sahel region of Mali, Niger, and Chad, Joseph Kony’s Lord Resistance Army, the Taliban in Afghanistan and parts of Pakistan, and the Janjaweed in the Sudan, engage in market raids, sea piracy, kidnaping, human trafficking, and bank robberies to finance their organizations. Others, especially those based in the Congo like the Allied Democratic Front, Sudan, MEND in the Nigerian Niger Delta, and Somalia dabble into illegal mining of their nation’s natural resources and poaching of rhinos in the wildlife parks of neighboring countries of the Southeastern African region. Up north, the many guerilla groups, or rebels, specialize in human trafficking of desperate African migrants to Europe for both prostitution and menial labor.
While the jury is still out on all the sources of revenue for the newest and most vicious terror group in the world, ISIS, three sources are certain: illegal crude oil sales, bank raids in captured territories, and kidnapping for ransom. There are allegations that the organization collects all kinds of taxes from the residents of its controlled territories in parts of Iraq and Syria, but how much is still up for debate. However, the significant portion of its estimated $2m monthly revenue comes from crude oil and ransom from kidnapping. Rumors and videos of rehabilitated young women also point to arranged prostitution of teenagers. 

The Taliban is said to control the opium trade in most of Afghanistan and the Pakistani Northwest frontier province, and most of their over $300m annual revenue comes from the sale and distribution of this product around world. In addition to its involvement in the opium business, the Taliban is believed to be engaged in other legitimate businesses, including banking, using fronts to camouflage its real ownership.
All these natural resources find their ways into meeting the needs of consumers in the mainstream economies of nations across the continents of the world, where they support local and international business prop up their profits, local and city governments provide social services, and help provide basic needs of millions of families all over the world.

Why the continued availability?
Where there is demand, there is always supply. The truth is that terrorist organizations, guerilla, and rebel groups need weapons, communication gear, mobility, literature, food and other basic daily needs to sustain their course and make their case to the world, or their immediate locality. On the other side of the divide are legitimate and shadow companies who need the business to keep their companies afloat and in the black; employees who need to provide for their families; and governments who need the tax revenues to render social services to the people.
For example, suppose ISIS needs 40 Toyota Hilux trucks, preferred for its ruggedness and longevity in rough terrains, it is not likely to walk into a Toyota dealership or plant to place an order; also, a Toyota plant or dealership somewhere in Europe, on the verge of closing and laying off staff, would appreciate an order for 40 Toyota Hilux truck.  Procuring the 40 trucks will mean ISIS employing 40 drivers and service/repair personnel who will be able to sustain their families with whatever meager salaries the terror group pays them. Also, keeping the plant or dealership operational, and retaining the employees, will ensure a continued flow of tax revenues to the host community, and provision of livelihood for the families of these employees; in addition, parts manufacturers and distributors will have a reason to stay in business a little longer. Obviously, Toyota cannot sell directly to ISIS or any other terror group for that matter. So, how does one meet the needs of both the terror group and the automobile Plant/dealership? Through a network of middlemen, and legitimate firms as fronts scattered all over the world.

The same scenario applies to purchases of high caliber weaponry, armored personnel carriers, communication equipment, military uniforms, and maintaining an effective social media link through which they espouse their beliefs and doctrine geared towards recruiting members. After the fall of the former Soviet Union, especially because of the uncoordinated way the Union disintegrated, many of the Eastern European countries like Poland, Estonia, Lithuania, and Latvia, ended up with huge arsenal of military-grade weapons which ended up in the possession of rouge senior army officials who retired along with their cache; the same scenario played out in Romania, then East Germany, Georgia, and even within Russia itself. Eventually, the region was awash with weapons, leading to a huge unregulated private arms business. Gradually, state-sanctioned weapons manufacturers tapped into this market to dispose of their excess production, and oil the service and repairs segment of this business enterprise.

All of these mean job creation and re-training opportunities in different fields and professions for the large population of jobless youths in the countries of the former Soviet Union. Weapons repairs, cleaning, logistics, agency and middle men services, couriers, tailors and milliners, etc., all of which provide needed income for breadwinners to cater for their families, pay college tuitions, or smugglers for a passage to Western Europe. With strong demands from rebels and guerilla groups in Africa, Asia, and Central America, and terror organizations in the Middle East, a permanent stream of revenue flow to arms and related services dealers, and these revenues find their ways back to legitimate weapons manufacturing corporations in one way or the other. Thereby, adding to their profits and, by extension, to government coffers as tax revenues, just like those of the truck dealers and manufacturers.

Economic & Social Benefits
Terrorism provides opportunities to governments and companies for research and development in weapons technology like unmanned drones, stealth weapons, bunker busters, and image sensors; it provides opportunity for construction and reconstruction of infrastructure, like roads, bridges, air and sea ports, and railroads with modern and better construction technology and materials. It creates opportunities for provision of social services like, clean water, healthcare facilities, and electricity in rural communities destroyed by civil wars. For example, the destruction of most cities and villages in Syria and Iraq by both ISIS and allied forces has created opportunities for a construction boom in the region; the same applies in the Gaza strip and parts of Yemen, Libya and, most recently, Northeastern Nigeria.

All of these reconstruction projects, mostly funded by donors who benefit through dividing up the contracts among their countries’ companies, provide job opportunities not only for the immediate beneficiaries (Syria, Iraq, etc.) but also for the labor force in the donor countries. For example, suppose the US makes a $500m pledge or donation towards reconstructing a major street, hospital, university, or airport in Syria, the contract for most of the materials and technical expertise required for the project will be cornered by US companies. This will create jobs and generate tax revenues both in the US and Syria. The same arrangement applies to any and every country where such situations exist – like Iraq, Yemen, Afghanistan, and African countries in crisis.

Crisis situations also benefit non-governmental agencies, because they provide opportunities for these NGOs to generate revenue while providing needed services in affected communities. Typical example is the role of the Red Cross in Haiti which has come under fire recently. The Red Cross raised over $500m from donations to help with the 2010 Haiti earthquake; an estimated 35% of that amount is expected to go to its coffers for administrative purposes, while the remaining 65% will be used to rebuild certain institutions and infrastructure; this will create both permanent and temporary jobs for many Haitians, and provide vocational training for thousands more. Oxfam, Doctors Without Borders, World Vision, International Crisis Group, and many more, all use the opportunity provided by displacements (internal and external) to raise funds to stay in business.

In the African countries of the Congo, Darfur, Southern Sudan, Northeast Nigeria and, most recently, Burundi and Central African Republic where tribal conflicts and struggle for political dominance thrive, young educated but unemployed youths find income-earning opportunities within the existing crisis. A guide who leads the LRA poaching team to the wildlife reserves for rhino horns; the couriers who help transport the said horns to drop-off points for cleaning/processing, and the processors are all in it for the money. The teenagers who work the diamond and copper mines in the Congo; the rouge Nigerian army officers who sell weapons to Boko Haram; the lookouts who signal to the Janjaweed when the UN storage depots are most vulnerable for raids, and the women who provide accessory services, like cooking, cleaning, and localized counter-intelligence at the guerilla camps all have mouths to feed and roofs to maintain over their families’ heads.

Some other unintended economic benefits of social strife, which creates improved economic opportunities, are insecurity, disease, and death. The consequent danger of living or doing business in a terrorist or insecure environment, like Syria, Iraq, Gaza, Libya, Somalia, Nigeria, and Congo DR, requires the services of private security personnel. One tends to notice an increase in firms that engage in such services, either by wholly-indigenous efforts or establishment of branches in these areas by internationally recognized firms. South African private mercenaries, Blackwater, ACADEMI, Northridge Services Group, ICTS International, Prosegur, Knight Security, Rockwall Integrated, and Triple Canopy, all provide different levels of security services to companies, diplomats, government officials, politicians, and private individuals in crisis-torn regions of the world. While some of them may choose to import guards from their home base, others elect to recruit from within the host communities and nations, depending on the level of need and training required for the job. These recruits expect to be kitted and fitted out by their employers, thereby extending earning opportunities to local textile and security uniform providers, local linguists, janitorial service providers, and drycleaners.

Along with security and other forms of business already mentioned, one could add undertaker services. In every crisis situation, lives must be lost and the dead must be buried. These losses mean business opportunities for coffin makers, pastors for hire, professional mourners, burial planners, grave diggers, and other providers of services needed for proper burials. Where acts of genocide appear to have been carried out, like in Rwanda and, most recently, Central African Republic, investigations by the international organizations like the UNHCR, the International Criminal Court, African Union, EU, and/or Amnesty International also provide opportunities for revenue inflow into the affected communities, especially into the coffers of guides, interpreters, casual laborers, and the ever-hovering call girls and prostitutes who expect an increase in service requests from the visiting investigative teams, and poor girls who seize on the opportunity of foreign presence to get themselves pregnant as a means improving their living conditions. This practice was very evident during the Vietnamese and Korean wars which produced a large number of children with American soldiers as fathers. These children, by US law, automatically became US citizens; therefore guaranteeing them a better life than their mothers’
As illegal and condemnable as all these activities may be, they support a large number of economies in communities, states and nations all over the world; therefore, making it impossible for the global community to rid itself of terrorist activities, civil power struggles, and tribal and religious conflicts. Without these conflicts and the underground economy which it supports, the number of migrants across continents in search of much better opportunity than what obtains at home would be twice what it is today.

Economic Impact on Cities and Nations.
So far, the discussion has centered on the activities of terror and rebel groups, and the indirect benefits to international business communities, companies and their employees, and host communities. Next, we take a look at the direct economic and social impact of war against terrorism on nations, states, and cities.

Incidents of terror attacks in cities like what happened in Boston in April 15 of 2013 when the Tsarnaev brothers exploded home-made bombs along the marathon route, results in beefing up of security, engaging in manhunts for the perpetrators, and restrictions on movement which affects business activities. Extra and extended security provisions mean overtime for law enforcement agencies, and the compensation for the overtime has to be sourced from somewhere, meaning a reallocation of resources from other social service like libraries, parks, road repairs, and after-school activities usually subsidized by the state and governments. Though many cities make budget allocations for emergency security incidents, none ever knows what amount would be enough, or what nature the security breach will take. So, no amount of allocation in “peace” time is always adequate for “war” time.

Apart from the extra expenses needed for extra securities in communities like Aurora after the theater shootings, the Newtown school massacre of 2012, Oklahoma City bombing of 1995, the London terror attacks in 2005, the Paris terror attack in January 2015, and the 2013 Westgate mall attack in Nairobi, the drawn-out legal battles to bring the perpetrators to justice take their own economic tolls on city budgets; because almost all the terrorists’ defense tab is usually picked up by the government both in time and resources – including financial. For example, the legal cases for the Aurora theater shooter and the Boston Marathon bomber, which recently ended – barring any appeals –, have both dragged on for over two years, respectively. All kinds of forensic, investigative, and terrorist experts have to be compensated for their services. Heavy, and inconveniencing, daily security presence around the courts hamper business activities, sometimes leading to closure of business facilities around the premises until the trials are overs; this result in loss of tax revenues to the city. A good example is the heavy restriction of activities in New York during the trial of some of the 9/11 terrorists. The government, allegedly, spent about $10m to construct a security pavilion around the federal court house; money that could have been used for improving some of the dilapidated public schools in and around the city, or to hire more teachers and police officers.

In all terror-related activities, there is an economic windfall both for individuals, cities, and states, just as there are security risks. For law enforcement agents, overtime pay; for defense attorneys, revenues for the firm and huge annual bonuses for the attorney; for cities and states, refunds for security expenses, and increased  future security allocations from state and federal governments; and for roadside vendors, increased sales for the duration of these trials. All of these costs and revenues trickle down, in one way or another, through individuals, businesses, families, district, county, city and national activities, to impact the economies of the communities directly affected by the strife. For example, the increased presence of law enforcement agents in Ferguson, Missouri, for the duration of the Michael Brown riots, boosted the local economy through increased spending by the city and state governments.

In conclusion, while pointing out or enumeration certain economic benefits of terrorism and civil strife all over the world, it is instructive to reiterate that such benefits do not in any way accord legitimacy to such violent activities. It is equally important to emphasize that, regardless of the magnitude of such benefits, the collective suffering inflicted on the affected communities, states, and nations are immeasurable, and have much longer lasting effects on society. One does not need to go far to witness the devastating effects of these acts of terror and civil wars; Libya, Iraq, Afghanistan, Somalia and parts of Kenya, Syria, the Gaza Strip, Northeastern Nigeria Congo DR, and Yemen all provide a clear example.


However, we must acknowledge that there is always an economic structure that emerges from, and is fed by, terror activities, civil wars, and riots; those who directly and/or indirectly benefit from the existence of such environment will continue to create and encourage more of such situations around the world.

Thursday, August 13, 2015

The Role of Human Resources in Company Strategic Objectives

11.    Introduction
In many organizations, the Human Recourses department is always seen – and often, treated as a step-child; it is not regarded as an integral part of the company and, therefore, not included in the core decision-making arm of the firm. This paper will attempt to explain the importance of the Human Resources department in the achievement of a company’s strategic objective by defining human resource, explaining its various roles in a company, and connecting these roles with those of other departments in the company and, finally, linking these roles to the goals and objectives of the company

22.  Definitions
a.    Human Resources:
Investopedia defines Human Resources as “the company department charged with finding, screening, recruiting and training job applicants, as well as administering employee benefit programs”.
From Merriam-Webster we get: “a department within an organization that deals with the people who work for that organization
Finally, Entrepreneur magazine defined Human Resources as “the department or support system responsible for personnel sourcing & hiring, application tracking, skills development & tracking, benefits administration and compliance with associated government regulations”.
 “The human resource refers to the people whose knowledge, skills, and abilities are utilized to create and deliver the product and service. This resource is considered to be an organization’s greatest resource. This is due to the fact that an organization could not be managed or products and services created and delivered without the use of the KSAs of people. Technology and money are also required to achieve the goals of the organization, but these resources cannot be utilized without some assistance from people”. – Andrea Soberg, CHRP
The common trend in all these definitions of Human Resource is that they all used the word “department” – an arm of an organization.
b.    Strategic Objective:
Strategic objectives are operational tools used to provide guidance in the achievement of the vision and mission statements of an organization. It puts into motion the concepts and ideals contained in an organization’s mission statement.
According to Management expert, Peter Drucker, they fall into eight categories: market standing, innovation, human resources, financial resources, physical resources, productivity, social responsibility, and profit requirements.
Strategic objectives must be measurable, specific, realistic, and timely.
“An organizational strategy is the creation, implementation and evaluation of decisions within an organization that enables it to achieve its long-term and short- term objectives “ … Tasneem Hameed

33.    Role of Human Resources in a company:
Though the primary role of a human resources department in any organization is to hire, train, retain, and evaluate employees on a continuous basis, these processes are always done with the organization’s mission statement as a guiding light; the Human Resources department conducts these responsibilities based on the stated mission and vision of the company, and the talent and training required to achieve this mission.
The fact is that strategy is rarely developed without the consideration of human capital. Perhaps, more importantly, no strategic plan is successful without the successful recruitment, deployment and management of human capital”  (Role of HR in Strategic Planning - The Frelix Group).

a.    Hiring: The Human Resources department is responsible for supplying the staff needs of all the departments that make up the organization, based on information from the managers of these departments and forecasts based on senior management’s expansion and diversification plans. The hiring or recruiting process involves advertisement of job openings for both internal and external applicants. Based on the number of positions available, the Hr department will review applications and resumes and, from the information contained therein, match the skills of the applicant to the required qualifications for the available job openings.
According to Tasneem Hameed, the ability to attract and select human resource having the right knowledge, skills and attitude is an important function of HR
b.    Training: The next responsibility of the HR department, after the hiring process, is to train the new hires. The training process could be in-house or conferences and seminars, or classroom lectures. In most cases, it could be two-fold: (1) company-wide policies, goals, objectives and vision and, (2) their roles and responsibilities in the various departments they will be working in. The departmental part of the training process is most often conducted by the department managers, but in line with policies and procedures developed by the HR department, according to the strategic goals of the organization.
 Incorporated in this training process is the acquainting of the new employees with the organization’s facilities and amenities.
c.    Retraining: Regularly, employees apply for and moved to new opening within the organization. These new positions mean different responsibilities, require new skills, and access to restricted company information. To ensure that these employees are well-acquainted with the responsibilities and duties of their new positions, the HR department conducts retraining programs. The retraining could be done in-house or by an outside consulting firm; however, regardless of who conducts the training program, the curriculum will still be developed with the organization’s strategic goals in mind.
d.    Evaluating/Appraisal: Another responsibility of the HR department is performance evaluation of employees. While evaluations are performed to reward employees for hard work, it is also an opportunity for the HR department and senior management to review the overall performance of employees to determine whether these performances are still geared towards the achievement of the organization’s strategic goals. Departmental managers, based on criteria developed by the HR department, conducts the evaluation/appraisal process for employees in their immediate departments; the reports are then forwarded to senior managers for review and recommendations, after which senior management communicates their final compensation recommendations to the HR; thereby, completing a cycle that started from that department.
e.    Benefits Administration: The HR department is responsible for structuring a benefit/compensation package for employees based on skills, academic qualification, years of experience and responsibility within the organization, and comparable worth. Benefits include salaries, commissions, bonuses, incentive payments, profit-sharing, health insurance programs, employee retirement benefits and stock option programs. In structuring a benefit package, the Hr department also takes into consideration what other companies in the industry offer for the same sill and job levels. The department is responsible for reminding management and staff of important dates for expiration/renewal of some of the benefits.
f.     Regulations Compliance: Finally, the Human Resources department is responsible for ensuring that senior management is aware of government regulations; current changes in such regulations, and how the regulations affect the strategic goals of the organization. It is also responsible for disseminating such information like new labor laws, OSHA rules and regulations, immigration, and Equal Employment Opportunity Commission laws to employees. These could come in the form of seminars, handbooks.

44.    Relationship with other departments
A business is defined as an organized effort by a group of individuals to produce and sell for profit, the goods and services consumers want. To be able to do that successfully, every major business has to have a mission, vision, and a strategic objective on how to go about producing and providing the goods and services the consumer needs. The following four departments are key to every organizations success, and the Human Resources department plays a major role in ensuring that these departments function with the strategic objective in mind.
a.    Finance: The finance department is responsible for raising and managing the financial capital needed by the company for investment assets like buildings, production machines, operational vehicles and other big ticket items an organization might need to start and keep in business. It is also responsible for proper keeping of the accounts of the organization, and generating financial reports for both internal and external use. In order to effectively carry out its responsibilities, it must have the staff with the necessary skills; this is where the Human Resources play an important role. Working with the Finance department, the HR department recruits and trains the finance staff, in line with the needs of the finance department towards the achievement of the strategic objectives of the organization.
b.    Purchasing: Like the finance department, the purchasing department liaises with the HR department to recruit the right staff for its department. Also, like the finance department, the primary objective of the purchasing department is to conduct its services in line with the organization’s strategic objectives towards achieving its mission. Mindful of this, the department forward’s its staff and skills needs to the HR department which, in turn, recruits and trains the right employees to effectively carry out their duties in the Purchasing Department.
c.    Information technology: Every organization has an information technology system run by an executive-level manager who is responsible for making sure that it has the necessary tools in place to provide the required information the managers and employees need to make a decision. The management information system in any organization is designed in line with the strategic objectives of that organization; with that in mind, the Human Resources department has the responsibility to recruit and train the right people in the information requirements of the organization to fill the positions in the IT department. Once again, the role of the Human Resources department is critical in establishing an organization’s information system.
d.    Operations Management:  What is the role of the Human Resources department in the operations management of an organization? First, it is necessary to define operations management: this is an area of management that consists of all the activities involved in producing the goods and services the company offers to the consuming public. From the production manager to the assembly line staff; from the delivery drivers to the in-house equipment repair technician, the HR department is responsible for hiring, orientation and training of all of them. As usual, their roles towards achieving the strategic objectives of the organization are explained to them during the training process and reinforced, at least once a year, in refresher training.


55.    Human Resources Department & Strategic Objectives
So far, we have discussed the role of the HR department in an organization and its relationship with other core departments within the organization; going by these roles and relationships, one is hard pressed to believe some claims in articles researched for this paper that the HR department is not aligned with the strategic objectives of the organization. As rightly pointed out by Huselid, Jackson, & Schuler in their 1997 article, an organization’s people ultimately determine the effectiveness of strategy development, implementation, and subsequent competitive success. A strategic approach that is aligned with HR ensures that an organization’s employees, skills, and abilities contribute to the achievement of its business goals.
Considering that the HR department seems to, by its duties and responsibilities have its fingers in every organizational pie, it would be more accurate to say that the HR department is not only a player in the strategic objectives of the organization, but the main player.
The HR Role is to take the full responsibility for the alignment of employees’ skills and competencies with the strategic plan”: . . . . (Human Resource Role in Strategic Planning, Maxpeopleperform)
This, according to the article referenced above, could be achieved in the following ways:
1.   HR has to demonstrate that it is the respectful business partner for the strategic planning
2.   HR has to demonstrate that it understands the business of the organization
3.   Third, HR has to prove its understanding to modern HR Management trends
4.   Fourth, HR has to determine the art of connecting the strategic plan with the real business
HR must expand beyond administrative function and focus more on how it can support the organization in strategic planning and implementation. By increasing the competencies of HR personnel, the department will increase its credibility and be integrated into a strategic role. For that purpose measuring itself from a business perspective and by the value it brings an organization is the key to its elevation to the role of a strategic business partner. Once there is a clear understanding of how HR affects the bottom line from a business / and or strategic point of view, the role of the HR function in the overall success of the organization will become crystal clear (Tasneen Hameed, 2011)
It would seem that with the intimate involvement of HR in the assembly of the skills needed to execute the strategic objectives of the organization, the steps outlined in the above referenced articles are already being taken by the HR department. So, why is it still kept out of core decision-making team of the organization? Or, is it?

66.    Conclusion
The Human Resources has always had a seat at the decision-making table; it has always been, and remains, an integral part of strategic objectives of every organization. While a vision and mission statement could be formulated without HR department, an organization could not implement the needed strategy to achieve its mission and vision without its human resources department.
From the recruitment of mid-management to the warehouse staff across every department; organizing and implementing a training and re-training program geared towards achieving the strategic objectives, and role as the department responsible for ensuring organizational compliance with government rules and regulations, the HR department already has a seat at the executive table.
Just as anyone could dream up a company, product, marketing and distribution channels, one could equally dream up as many vision and  mission statements as possible; without the right people with the right skills, all the dreams and ideas will remain just that … dreams and ideas. Only the Human Resources department could provide the right personnel to turn dreams into reality, and in the process, add value to the organization.

References:
1.    The Strategic Objectives for Restructuring HR & Significance of Strategic Role for Future Leaders – Ali Muslim Bin Aqeel, Aamna Shakeel, Ali Naseer Awan
2.    The Link Between Strategic Planning & Human resource Planning – Andrea Soberg (CHRP) Trinity Western University, British Columbia.
3.    Human Resource Role in Strategic Planning – Maxpeopleperform, an Hr Consulting firm.
4.    HR Strategic Objectives – Ruth Mayhew, Demand Media
5.    The Role of HR in Strategic Planning – The Frelix Groups
6.    HR & Organizational Strategy – Steven V. Manderscheid, Ed.D
7.    Strategic Human Resource Management – John Bratton
8.    Importance of Human Resource Planning in Organizations – Nyamupachari Vareta, WHO, Brazzaville, Congo
9.    Aligning Human Resources & Strategic Plans – John P. Righeimer, Maverick Energy

10.  Organization Strategy & Human Resources – Tasneen Hameed

Friday, June 26, 2015

The Concept of Group Norms

Norms are ethics or principles shared by groups or teams, both formal and informal; they help to, among many other things, minimize individual differences, maintain and preserve group integrity, and are formed with respect to those things the group deem important and necessary to function. Norms tend to reflect group values, and become habitual of group members over a period of time. Norms can be adopted as a part of the group’s written by-laws or constitution to be handed out to members, or it they can implicitly evolve over a period of time. Though group members are supposed to conform to its norms, not every member will come on board; some members will attempt to alter or completely change group norms.

Some of the common group norms include:
1.       Dress codes at public functions like weddings, picnics, and community services
2.       Pledge of loyalty to the group both publicly and privately
3.       Wearing distinctive hairstyles, or shoals around the neck (e.g. gang members)
4.       Distinctive handshakes as a mark of identification of members in public.
5.       Seating arrangements at group meetings for group leaders and subordinates
6.       Allocation of time slots for member contributions during deliberations
7.       Norms for allocation of group resources, and evaluation of member performances, respectively.
8.       Avoidance foul languages and stereotyping at meetings and other group gatherings
9.       Mutual respect among members within and outside group circles
10.   Punctuality to group meetings and other events

Conformity to group norms shows belongingness, and must not be construed as an attempt to regulate every aspect of group interaction; rather, it should be seen as a vehicle for expression of group values. For example, male group members may be required to wear black suits and blue ties at weddings and red or cream evening gowns for women; khaki shorts and red t-shirts with the group logo in front at community service functions, or plaid shorts and brown polo shirts at company picnics.
Group norms, has its positives and negatives. Some of the positive norms include defending the organization and management in the face of criticism; conveying a positive public image about the organization by speaking well of it in public; praising management-employee relationship to help boost morale and encourage new employees to be loyal to the organization, and promotion of an atmosphere of openness and mutual trust and acceptance in the organization.

Some of the negative group norms include disparaging the organization and its management in public and to applicants, thereby warding off potential new employees; promoting a negative work ethics by discouraging members from putting their best efforts at work; constantly challenging and working against every rule and regulation of the organization, regardless of its intent and benefits; creating an atmosphere of mistrust between management and subordinates, between departments, and among employees.

Group norms are revisited on a regular basis, to acquaint new members of these norms and to reinforce them among the old members; also to review and, possibly, eliminate the ones that are no longer useful to the group. It is also necessary to revisit these norms to ascertain whether they help or hurt the group, especially when some members leave a group; because certain norms may not contribute to the progress of a group. At the end of the day, norms only work if group members do not have reservations about them; so, it is important that a group reach consensus over the list of norms before they are adopted and become operational

Conflicts
Whenever you have more than one person working together, conflicts are bound to crop up over differences in goals and perceptions which include limited resources, reward structures, different goals and time horizons, status incongruence, and inaccurate perceptions; work or group interdependence which includes pooled, sequential and reciprocal interdependence; and increased demand for specialists.  Conflicts can usher in positive change in organizations, improve performance situations, and offer new solutions to existing problems when it is at optimal level. When conflict is at a low level in an organization, it leads to poor performances; at a very high level, conflicts lead to chaos that is capable of threatening organizational performance.
Organizational conflicts could be cross-cultural – between individuals or groups separated by cultural boundaries; personality – one employee not liking another based on one thing or the other; intergroup – conflict of interest between competing groups. Conflicts could be functional – which is a positive thing for the organization, or dysfunctional – which negatively impacts the organization. Whichever form the conflict takes, managers must be in a constant anticipatory and prepared mode to handle such conflicts.

Functional Conflicts are healthy constructive disagreements between groups and individuals on how best to achieve a mutual goal; they support organizational goals, and improve performances. Functional conflicts can arise between an organization’s production and sales team over costs and revenues, respectively. While the production team may want to cut production and labor costs, the sales team with a goal to increase sales by a certain percentage point would want production to hire more people to increase output. Though increased production will generate sales revenue for the organization, the extra cost may be bad for the production team which may already be under orders to trim its annual operating cost. Eventually, the two departments will work out a mutual agreement that will meet their individual goals. Functional, or constructive conflicts, are usually aimed at ideas, principles, and processes. They result in a solution to a problem; increase the involvement of every member of the group, and results in stronger team cohesion.

Dysfunctional conflicts, on the other hand, are disputes and disagreements that hinder organizational performance. It generally involves members of a group or two or more groups unwilling to work together to solve a problem, and management must work to eliminate such conflicts because of its destructive impact on organizational performance. Continuing with our example of the production and sales departments; suppose the production team refuses to budge on sales request to increase output to boost sales revenue, especially where resources were not allocated for expansion of the production department or purchase of new equipment, sales will not have the needed extra products to sell to meet its revenue goals. It may even refuse to accept the fact that the cost of production expansion may be much higher than the projected revenue from sale of the extra products. In this case, we have a dysfunctional conflict which may extend beyond organizational or departmental goals to personal hatred between the groups leadership.

Dysfunctional conflicts destroy group morale, polarize the group, divert energy from value-added activities, and leave the problem unresolved. It diverts managers’ time away from business opportunities; it forces compromises that end up leaving someone paying for the solution – in most cases, customers; also, it increases stress in the work place. Inter-group dysfunctional conflicts can lead to increased group cohesion, a rise in autocratic leadership focus on activity, emphasis on group loyalty, distorted perception of group members’ self-importance, negative stereotyping of other groups, and decreased communication between members of the groups involved in the conflict.
Every conflict is different and will require a different approach in solving it. Some conflicts could be resolved through resolutions which include problem solving, setting superordinate goals that will require the cooperation of teams to achieve, expanding resources to accommodate more team members, avoiding the issue in conflict (this is akin to pushing the issue under the rug to resurface sometime down the road, and is not advised), and emphasizing the shared interest of both teams. Other methods include compromising, identifying a common enemy, and altering the human and structural variables. Other types of conflict could be solved through cross-cultural and group negotiations, which involve understanding the other side’s interests and knowing all available options. Finally, conflicts could be resolved through team building or stimulation which will require trust on both sides, management’s commitment. Also important is sharing information and  providing adequate and necessary training to members, involving unions in the process, communication, involvement of outside personnel,  altering organizational structures, and stimulating competition through incentives and rewards.

Group Norms and Conflicts
Sometimes, group norms can result in conflicts among members and dysfunction that could affect group focus on goals and objectives. Such norms as dress codes which some members may object to on religious and cultural reasons, can lead to disobedience of group norms. For example, in a cross-cultural group which may include members from the Middle East, Asia, and Africa with a tradition of wearing hijabs, sarongs, and dashiki, it will be difficult to impose or adopt a code of mostly western-oriented dresses at group meetings and functions; because these members of the group could find western dressing discomforting and against their religious and cultural beliefs.
Another group norm that could result in conflicts is where incompatible personalities exist in a group. The group leader may be autocratic and authoritarian in his or her leadership style, and this may rub some members the wrong way, especially those members who are not used to being dictated to, and who believe in decisions through consensus agreements. Members with a work or social background where decisions are reached following inputs from every member may not accept a situation where a group or team leader will insist on his/her way, or try to influence the final group decision in his or her favor. There is likely to be objections which, if not handled carefully, will result in conflicts.
Extreme time pressure is another group norm that could result in conflicts. Some groups may allocate times for members to make contributions in a discussion. Some members who feel they have a lot of contributions to make on an issue may not feel the allocated time is enough for them to fully express their views, and they are bound to register their objections. Again, if changes are made, conflict will be avoided. Where the group leadership chose’s to ignore these concerns, it could result in member nonparticipation which could result in dysfunctional conflicts that may see aggrieved members leaving the group.

Conclusion
Groups and teams are the modern trend in some major companies today, because it is easier, cheaper, less bureaucratic, and much quicker to get things accomplished. These groups could be formal or informal, and could be formed for the purpose of creating a new product, carrying out a major reorganization project, or setting up a branch in a foreign country. Groups have norms that help guide its proceedings and operations, and they are binding on most members. While some norms can strengthen group cohesion, others could lead to inter – or intra – group conflicts which may be beneficial or destructive to the organization, depending on how it is managed. Functional conflicts, at an optimal level, lead to overall improvements in various levels of an organization, while dysfunctional conflicts produce the opposite result. Just as functional conflict is capable of strengthening an organization; dysfunctional conflict is capable of destroying it, if not solved immediately. Managers must expect and recognize the existence of, and prepare on how to manage and solve, team conflicts. They must, also, be able to differentiate between functional and dysfunctional conflicts, so as to harness the benefits of a functional conflict.


  

References:
1.       The Development of Group Norms – Skillsyouneed.com
2.       Establishing Group Norms – Brushy Fork Institute (Karen West – 2010)
3.       Functional vs Dysfunctional Conflict in Organizations: Differences & Mediation – Jennifer Lombardo
4.       Organizational Behavior: Core Concepts – Angelo Kinicki
5.       Definition & Types of Team Conflict  (Mary Lewinson  - 2010)
6.       Managing Team Conflict – Cynthia Phillips
7.       Group Norms – Craig D. Parks (2011)

8.       Organizations: Behavior, Structures, Processes – J. L. Gibson, et al (14th Edition)