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Organization Development (OD) As A Strategic Management Tool in Developing Economies: The Case of Vietnam

April 2, 2006

By Dietrichsen, Pierre

Abstract

Earlier research has highlighted the sensitive cultural dimension of the OD process when applied in Asian organizations. Subsequent research in East Asian organizations, particularly in Greater China, and the developments in OD practices in India, Singapore, and the Philippines, suggest that wisely applied OD processes, and a suitably adapted OD philosophy may not only benefit specific enterprises, but may also impact on the future function of the organization economically transitionally, such as China and Vietnam. This study reports on a pilot project conducted in Vietnam to evaluate the state of OD. The findings of the study, although of a preliminary nature, clearly indicate that OD is underdeveloped as a profession, that OD processes are utilized to a limited extent in enterprises, and that there is a limited awareness of the profession and OD as a management tool. The author identifies several avenues and approaches to increase OD awareness, expand the use of OD, and promote OD as a executive development focus.

Introduction

Organizations are facing an increasingly complex and rapidly changing operational environment. In order to remain competitive and effective, businesses inevitably need to adjust their strategy, structure, systems, and organizational behavior. The typical life cycle of organizations, particularly businesses, indicate that those that do not adapt, will not be able to sustain adequate performance to be able to survive in the long run. The ability to manage dynamic change is a key challenge faced by leading managers, particularly in Asia. These economies experience remarkable economic growth and enterprises, as well as governmental organizations, and are under pressure to make managerial, social, and political adjustments.

Fundamentally, Organization Development (OD), is a process of applying behavioral science to an organization’s systems, structure, and processes to promote organizational effectiveness through change, i.e., to be able to maintain solid organizational performance and prosper. This process may be in response to rapid and significant changes in the external operating environment of the organization, or it may be as a result of an assessment by the organization that it needs to enhance its organizational performance to be able to achieve its objectives. OD as process has been used successfully in countless organizations in developed countries to selfdiagnose organizational shortcomings, to develop interventions and change programs aimed at fundamental organizational renewal, and to promote and ensure high performance. But, is that also the case in developing economies?

This paper examines the nature of OD in developing economies, particularly selected countries in Asia. It also reports on a pilot study undertaken in Vietnam. It is argued that Asia is the new frontier for the OD profession, not only to expand the application of OD processes in businesses but also to involve the OD profession in shaping the “contemporary” Asian organization.

Background

Golembiewski argues that one of the constraints faced by OD practitioners in non-traditional OD societies outside North America and Europe, is the value-laden nature of OD. Interventions in organizations by OD practitioners and managers are perceived to be culturally biased, or threatening to Asian employees. He argues that OD could adapt its tools, and Western-based behavioral science assumptions, to adopt a more differentiated perspective suited to inter alia Asia (Golembiowski,1993). Research by Sun (2000) in Chinese state enterprises, and by Lau and Ngo (2001) in multinational enterprises operating in China, Hong Kong and elsewhere in the East Asia region, suggests that OD can be successfully applied when Western and Eastern perspectives are suitably adapted to environmental (cultural) conditions, and to the situation of the particular enterprise. According to Lau and Ngo, organizational reform, in its broad sense is an ongoing and much needed phenomenon in China, and provides challenging and unique opportunities to cross-culturally apply OD and related change methodologies. Dynamic leadership and change management competencies also need to be developed and implemented.

In India, OD has developed from a mostly academic exercise to a process recognized as a management tool (Rao & Vijayalakshmi, 2000). The Centre for Organization Development, for example, is active in consultancy and executive development. OD is also considered a tool to assist with institution building in non-profit organizations and non-governmental organizations, and to promote gender equality (www.indianngos.com ; www.codhyd.org). India should be of particular interest to the OD profession for a number of historical and contemporary reasons. Indian business society is largely English- speaking, they have had a British-founded education, and the business sector is innovative and dynamic. Recent economic developments since policy changes in the mid-1990s have enabled India to expand and globalize rapidly, develop a dynamic and reputable Information Technology sector, and diversify industry successfully into areas such as pharmaceuticals and manufacturing. With a population of more than one billion and a fast-growing economy, linked to a high level of skills and education, India is an area where OD as a profession can expand its influence and application. Although much smaller, Singapore is another Asian country where language, education levels, skills availability, and business culture provide an OD-friendly environment.

There is a long history of business and cultural links between the Philippines and Western countries. Language and business culture are sufficiently similar, despite some different Asian uses of influence and power, which provides a basic platform for OD expansion. However, disruptive events, and sporadically stagnant economic conditions, linked to peculiar national social and political phenomena, have made it a difficult and complex operational environment, not only for foreign businesses in but also for domestic enterprises. OD as profession is present as a partner in human resources management consultancies, the Philippine Society for Training and Development, and other private organizations such as the Organizational Change Consultancy International (OCCI) (www.filipinolinks.com). It remains a country with considerable potential for OD growth.

Organization Development in Vietnam

The primary purpose of this paper is to report on an assessment of the OD profession in Vietnam, relate the findings to opportunities for OD engagement in Vietnam, and to discuss ways in which OD could be used as a management tool in Vietnam and similar developing countries.

Vietnam has experienced steady economic growth, between 8 and 10% per year in GDP, over the last decade. A substantial proportion of this GDP growth can be ascribed to foreign direct investment (FDI) which has brought capital, entrepreneurship and know-how to the country in the form of joint venture companies, and wholly owned foreign companies. The relative success of these companies in establishing profitable manufacturing ventures and very successful export oriented operations have influenced Vietnamese State Owned Enterprises (SOE); these are still very prevalent in manufacturing and services, to commercialize and equitize organizational structures, and to adapt on approach to business with sustainable commercial operations. These commercialization and equitization processes, supported by a relatively enabling and increasingly business-friendly legislative and bureaucratic environments, have had a substantial impact on the way enterprises approach the future, i.e., there is an awareness for businesses to modernize and change to be able to compete and survive.

A pilot research project, comprizing six main areas, was conducted:

(i) A short questionnaire was sent to 670 firms (members of the American and European Chambers of Commerce in Vietnam);

(ii) An analysis was undertaken of all organizations registered in Vietnam as consultancies. Based on registers and directories, the OD involvement of 148 firms was evaluated;

(iii) A training needs analysis was initiated in 2004 on behalf of a training center at the National University of Vietnam to determine potential needs for executive development, OD training, and change management short courses in Vietnamese firms, particularly among the considerable number of State Owned Enterprises (SOEs). Questionnaires were sent to 500 SOEs and private firms registered with the Vietnam Chamber of Commerce and Industry (VCCI);

(iv) A two-day executive development workshop was arranged at the same center which presented a short course in OD, and change management skills (on August 18, 2004) as a pilot study to evaluate the feasibility of establishing regular executive training courses. Participants were invited from SOEs and government departments/ ministries.

(v) Forty non-governmental organizations (NGOs) listed in the Directory of NGOs were reviewed, surveyed by questionnaire, and consulted to establish the extent of OD intervention

(vi) Newspaper and business journal advertisements, fo\r training and development courses, were observed since June 2003 to determine the extent of OD coverage in course work.

Results

The findings of these six research activities revealed a largely disappointing picture. Fundamentally, OD is not practiced in the country.

(a) The survey of 670 medium and large companies found that OD occupies a minor position in organizational structure and strategy. The following were the questions posed, after an introduction about OD and its context. The results from responses are noted in brackets:

* Does your company have an OD practitioner on its staff? (81% No)

* Has you company used an OD consultant (e.g., to facilitate change)? (87% No)

* Has your company used a management consultant (e.g., for restructuring)? (94% No)

* Do you perceive a need for an OD process in your company? (50%Yes)

* Do you foresee a need to change, reorganize, or redesign the company? (56%Yes)

There survey results indicate that for a majority of respondents:

(i) there is no OD practitioner on the staff of the firm, and

(ii) the firm had not used OD or management consultancy processes.

(b) In the review of 148 firms classified as consultants, it appears that OD plays a minor role. The following are the primary areas of consultancy activities identified on websites, listed in directories, or clarified during telephonic verification:

* Auditing (45%), finance (25%), investment (55%), legal services (30%);

* Business & strategic management (41%), marketing & market research (31%);

* Information Technology (5.4%);

* Human Resource (HR) management (23%), HR development (28%);

* Organization Development (3.34%);

The five consultancies indicated that they are engaged in OD or have OD as secondary activity after the primary areas of HR and management consultancy. It is nevertheless significant that the combined percentages of “business and strategic management” and “HR”, areas traditionally related to OD, represent a high degree of potential OD involvement. (The sum of the percentages should not be used as there is some overlap between primary and secondary foci.)

(c) The survey to initiate a training needs analysis resulted in an insignificant response rate of approximately six percent. Despite a series of telephonic ‘reminders’, the response rate remained very low. Qualitatively, responses noted that there is some awareness of the need for executive development, but that it takes a low priority in the allocation of financial and other resources. Furthermore, during follow-up telephone calls, the observation regarding the reticence to reveal information, reported above, was confirmed.

(d) The two-day executive development workshop on training in change management and organization development skills gave rise to two principal observations. During the process of inviting officials and SOE employees to attend the workshop, the feedback revealed that there was an awareness of “change management” as an area of business, but that “organization development” as a discipline or profession was largely unknown. Feedback from attendees at the workshop, which included a significant proportion of persons engaged in post-graduate business studies (MBA), confirmed that instruction in OD is largely neglected.

(e) The review of 40 non-governmental organizations (NGOs), using directory analysis, questionnaires, and follow-up telephone calls, did not reveal any statistically significant results. However, qualitative feedback indicated that “institutional building” or “institutional development” and “capacity building” are areas of focus. Institutional development, as practiced by these NGOs, includes some OD activities. The aim is not the development of the NGO itself but rather the incorporation of a program to develop civic and community organizations, i.e., the targets and goals of the NGO’s activities. The general aim is to develop broad institutions, such as primary health care, good governance, or administrative reform. More specific aims, which relate to the charter or policy of each individual NGO, involve the development of specific institutions (e.g., rural schools in the education field) and organizations (e.g., a training center for disadvantaged children). These are frequently supported by capacity building programs (technical, administrative and management training). OD diagnostic and intervention tools are commonly implemented, and it can be concluded that this is an important area in which OD processes can be applied in a constructive fashion.

(f) Observation of advertisements, over a period of two years, indicates that executive development and business/management training can be classified into three main groups, a) business and management training courses of short duration areprovided by foreign training institutions (e.g., from Singapore and Thailand) which have established local joint ventures or subsidiaries; b) such training is increasingly, but still to a lesser extent, provided commercially by local training institutions which are expanding progressively; c) foreign high profile motivational speakers, trainers, and “gurus” have started aggressively exploiting the relatively small local training1 market, occasionally with the assistance of a local host. The areas where in these training courses are predominantly focused are marketing, sales techniques, HR management, project management, investment and finance, and office administration skills.

Concluding Observations

It can be concluded that OD, as a profession and as a discipline, appears to be relatively unknown both in practice and training, in Vietnam. The scope of this study and the findings of this pilot project are, however, not representative enough to provide statistically significant information, about the presence of OD practitioners in firms, or the number of managers and OD-related professionals (e.g., in HRM) who may have studied OD or have received some OD training. The preliminary evidence suggests that these may also be limited. There may be some foreign trained OD staff members attached to multinational companies, but two factors suggest that the actual number may be rather small. First, local government regulations restrict the number of foreign staff members that foreign companies may employ in its local offices, thus limiting companies to key country managers and critical operations staff, such as engineers or quality control technicians. second, two articles published by the current author in the Vietnam HR magazine in 2003/4 on OD processes in medium and small businesses, elicited no reactions from OD practitioners; only managers responded favorable to OD constucts and issues.

Despite this rather bleak picture of OD in, Vietnam, the country has tremendous potential for OD process application, and for the development of OD as a profession. A number of business characteristics of present-day Vietnam supports this assertion:

* Against the background of rapid economic development over the last eight years, Vietnam is expected, and is actively working towards a sustained GDP growth of more than seven percent per year.

* Expected accession to the WTO in 2006 will envigorate Vietnam’s economy substantially, and should also lead to a relaxation of current business restrictions which may have a limiting impact on foreign investment, such as foreign exchange control.

* Increasing foreign investment is based on legislative changes about wholly foreignowned company ownership and the allocation of land for development.

* Equitization/privatization of state owned enterprises is quietly making progress, creating scope for substantial restructuring of small, medium, and large enterprises, and sparking fundamental renewal of firms in manufacturing and service industries.

* Economic growth targets, job creation goals, and a young increasingly skilled labor force will maintain pressure on Vietnamese enterprises to achieve high performance and foster organizational reform (as foreseen for China).

These factors will provide challenges and opportunities for OD practitioners, worldwide. How can this occur?

* Foreign OD firms can work to find local partners and establish appropriate working partnerships to develop OD practices to fill the “OD” gap.

* Foreign firms taking an equity stake in former SOEs and can appoint OD practitioners to facilitate mergers and restructuring (e.g., short term contracts).

* Tertiary educational institutions and private executive development firms can present course work in Vietnam to train local OD practitioners (initially working along side experienced OD consultants).

* Chambers of Commerce and other Organized business’ could become involved in appointing an OD practitioner to act as consultant to local enterprises in transition.

* Groups of foreign firms can collaborate to appoint an OD practitioner to act as advisor, consultant, and change agent to lead and manage change in local partners undergoing restructuring.

* Individual multinational enterprises can encourage in-house practitioners, from subsidiaries or head offices, to train and coach OD practitioners, lead real-life diagnostic efforts, and OD interventions.

In the broader business context, these preliminary findings also suggest that there may be value in conducting more comprehensive research in Vietnamese enterprises, such as assessing enterprise competitiveness, productivity, and general organizational performance. These are factors which affect the economy and businesses in several ways, such as the level of FDI, profitability expectations, enterprise adaptability, and new business survival. These, in turn, impact economic indicators such as industrial development, employment, GDP growth, and long-term economic prosperity.

Finally, OD has matured in the USA and Europe to the extent that develping countries can profit from extant knowledge in the field. The real issue is: can OD expand its frontiers in culturally dive\rse geographic regions?

The ability to manage dynamic change is a key challenge faced by leading managers, particularly in Asia.

It is argued that Asia is the new frontier for the OD profession, not only to expand the application of OD processes in businesses but also to involve the OD profession in shaping the “contemporary” Asian organization.

Golembiewski argues that one of the constraints faced by OD practitioners in non-traditional OD societies outside North America and Europe, is the value-laden nature of OD.

The primary purpose of this paper is to report on an assessment of the OD profession in Vietnam, relate the findings to opportunities for OD engagement in Vietnam, and to discuss ways in which OD could be used as a management tool in Vietnam and similar developing countries.

Fundamentally, OD is not practiced in the country.

It can be concluded that OD, as a profession and as a discipline, appears to be relatively unknown both in practice and training, in Vietnam.

In the broader business context, these preliminary findings also suggest that there may be value in conducting more comprehensive research in Vietnamese enterprises, such as assessing enterprise competitiveness, productivity, and general organizational performance.

References

American Chamber of Commerce in Vietnam (2005). Membership directory.

Golembiewski, R.T. (1993). Organizational development in the Third World: Values. closeness of fit and culture-boundedness. International Journal of Public Administration, 16 (11): 1667 – 1691.

Lau, C.M., & Ngo H.Y. (2001). Organization development and firm performance: A comparison of multinational and local firms. Journal of International Business Studies, 32, 95.

Rao, T.V. & Vijayalakshmi, M. (2000). Organization development in India. Organization Development Journal, 18(1), 51- 63.

Sun J. (2000). Organization development and change in Chinese state-owned enterprises: A human resource perspective. Leadership and Organization Development Journal, 21(8), 379 -389.

The European Chamber of Commerce in Vietnam (2004) Membership directory.

Vietnam NGO Directory (2004 – 2005). VUFO NGO Resource Centre, Hanoi.

www.codhyd.org

www. filipinolinks .com

www.indianngos.com

Pierre Dietrichsen, RODP

Pierre Dietrichsen (RODP) is lecturing at the RJVIIT International University, Vietnam in organizational behavior and management, with special interest in organizational analysis. He is a doctoral candidate in business management with a focus on organization development strategy. He has worked as diplomat, ambassador, and management consultant.

Contact Information

Pierre Dietrichsen, RODP

Hanoi Lake View no 64

28 Thanh Nien Road

Hanoi, Vietnam

E-mail: dietrichsen@vnn.vn

Tel: ++84-904186149

Fax/tel: ++844-7162298

Copyright O. D. Institute Spring 2006




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