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Learning Organization

김해동 | 2012.10.11 11:33 | 조회 9435

Organizational Learning Initiatives and Corporate Turnaround
-The Case of B. Braun in Asia Pacific-

Kim Hae-Dong  Yeong Lih Chyun Foong Soon Yau

 

 

[Abstract]

 

By using a case study approach, this paper aims to relate how a firm, based on the resourcebased view, recognized the strategic importance of its human resources which led to the implementation of various organizational learning initiatives to develop human competencies to turnaround the stagnant financial performance. This paper traces the organizational change
initiatives in B. Braun Company across the Asia region since 2006 under the new leadership. It demonstrated the commitment of leadership to develop a learning organization whereby performance management systems were aligned to promote the desired organizational culture which ultimately brings sustainability to the organization performance.

 

Ⅰ. Introduction

 

The current rapidly changing and challenging competitive landscape necessitates organizations to continuously learn adapt to enhance their chances of survival and sustain their performance in the long-term. For successful firms, their corporate strategies are often formulated to develop their internal strengths or resources to take advantage of the external opportunities. Therefore, a firm has to constantly develop the appropriate resources and capabilities for sustaining its competitive advantage, especially when faced with intense market competition and growing sophistication in its customer requirements. According to Grant (1991), inter-firm profit differentials arise from firms’ competitive advantages, rather than the consequences of industry
structure or the external environment.

Resources are sources of a firm’s capabilities, and it is the firm’s capabilities that create its competitive advantage. Creating capabilities, however, involve complex coordination of interactions between people and other resources, and organizational learning enables a firm to perfect such coordination through development of new skills and knowledge in the deployment of
its resources, including modifying and developing existing organizational processes and routines to enhance operational efficiency and productivity. As organizational learning often leads to development of new insights or knowledge, organizational problems are accordingly restructured and viewed from different perspectives to allow for a more holistic resolution of the problems(Argyris & Schon, 1978;Simon, 1969;Fiol & Lyles, 1985). Organizational learning also influences organizational culture as it helps to establish certain desired norms, values and behaviours over time that are shared by all members of the organization.

While the resource-based theory (RBT) (Barney, 1991;Grant, 1991;Peteraf, 1993) is often used for analyzing a firm’s resources and capabilities needed for creation and sustainenace of its competitive advantage, its focus tends to portray a static perspective of the strategic sources of capabilities for value creation (Smith, Vasudevan & Tanniru, 1996). Organizational learning, on the other hand, focuses on the process of building the necessary critical resources and capabilities
over time for innovations and creation of a firm’s competitive advantage. By using a case study approach, this paper aims to relate how a firm‘s recognition of the strategic importance of its human resource has led to implementation of various organizational learning initiatives as part of its new corporate strategy to develop human competency and capability to enhance and sustain its financial performance.

 

Ⅱ. Theory


2.1 Resources-Based Theory

According to the resources-based theory (Barney, 1991), a firm is consisted of a bundle of core competencies, capabilities and resources that are valuable, rare, difficult to imitate and non-substitutable. While most tangible or physical resources are easily imitable, it is not so for intangible resources and hence, intangible resources are often the strategic resources that play an
important role in creating and sustaining the firm’s competitive advantage. In addition to human resources, intangible resources include management systems, reward structure, corporate culture,organizational processes and routines, customer and supplier relationships, and it is the socially complex resources, such as a firm’s culture, interpersonal relationships among employees, the firm’s relationships with its customers and suppliers that make imitation of these strategic resources very difficult by competitors (Barney, 1986;Dierickx & Cool, 1989;Grant, 1991).
Productive activity is a consequence of interactions of teams of resources and capability is the capacity of a team of resources to perform some task or activity. The interactions of these resources enable the firm to achieve its strategic objectives, and potentially create and sustain competitive advantage for the firm. Top management (leadership) commitment is one of the most
important organizational factors crucial for effective coordination of interactions between organizational resources to achieve the corporate strategic objectives. The performance evaluation and reward system similarly plays an importance role in influencing formal and informal behaviour in a firm. In order for a firm to continuously innovate and create competitive advantage, experimenting and risk-taking behavior must be encouraged.
According to the framework for resource-based approach to strategy formulation (Grant 1991,p.115), a firm needs first identify their resources and capabilities, followed by appraisal of the potential of each resource and capability for formulation of the strategy that best exploits the firm’s resources and capabilities to sustain its competitive advantage, and finally, where resource
gaps exist, invest to upgrade the firm’s resource base.

2.2 Organizational Learning
Organizational learning is conceptualized in terms of processes such as knowledge acquisition,dissemination, retrieval and utilization. In order for an organization to change and adapt itself to the changing environment, the organization needs to go through the process of learning,unlearning and relearning. Organizational learning that does not lead to major change in policies
is adaptive learning, while generative learning involves creation of new paradigm and expands the capacity of the organization to establish its future (Senge, 1990).
Organizational learning aims to continuously improve decision outcome through better insights and knowledge of organizational problems for long-term survival, and it is a critical organizational capability for innovation and creativity. Unlike individuals, organizations do not have brains, but they have cognitive systems and memories that subsequently mold behaviours,beliefs and value systems of members of these organizations (Hedberg, 1981;Fiol & Lyles,1985). Hence, in addition to changing processes and routines to enhance operational efficiency,organizational learning influences organizational culture as the learning process can lead to restructuring of the broad beliefs and norms in the organization to those desired norms and behaviours that are shared by all members of the organization for attainment of the organizational strategic objectives. Internalization of the firm’s core values through organizational learning is,hence, an important component of the resource-based strategic framework in building and sustaining a firm’s competitive advantage.
Experience and learning effects are necessary for continuous improvement of a firm’s capabilities to sustain its superior performance. Competitive advantage is sustained either because of the firm’s possession of unique resources, such as patents and trademarks, that are not easily imitable or obtained or the firm is able to continuously improve its resource configuration by
changing the mix or redeployment of its socially complex resources to stay ahead of its competitors. Effective management of work teams enhances employee interactions and that promotes a climate of openness for effective communication and knowledge/experience sharing.

Ⅲ. Case Study


3.1 B. Braun Group of Companies
In medical healthcare industry, there are not many global companies that have 170 years history and a significant market presence worldwide, and yet can remain as family owned companies. Started as a pharmacy store in 1839, B. Braun is now a global medical device company based in Germany. Its current Chairman, Prof. Dr. H.C. Ludwig George Braun, is the 5th generation of the family.
This German multinational company is a leader in several therapeutic segments of the global medical device market. In 2009, it had 38,000 employees worldwide and recorded an annual turnover of Euro 4 billion. The company reinvested most of its earned profit to expand the business. The prudent financial management policy is evident in following comment by Lawler (2009, September 24):

“…the company grew even stronger during the global financial crisis and that “…[the company] although made Euro 185 million profit, it paid out less than a tenth of that to its shareholder. Little wonder that even in the downturn, banks have been knocking on its door”.
The top management of B. Braun re-invested substantially in its product innovation and production technology development as they are viewed as the company’s core competences critical for creation and sustaining its competitive advantage in the global market. For penetration into the global market, Prof. Dr. H.C. Ludwig George Braun prefers to setup overseas sales subsidiaries and these overseas subsidiaries are mostly managed by the locally recruited managers because he believes that local entrepreneurship is the best way to sustain the business growth. Unlike many other foreign parent companies, Prof. Dr. H.C. Ludwig George Braun trusts the local leadership. The company empowers the local managers and it does not impose extensive
corporate driven regulations on its overseas subsidiaries. Other than those related to product quality and investments, all policies and guidelines are locally established and implemented. The company cares for the well-being of its employees. Life-long employment is often a characteristic of the company and it can be attributed to the caring and a balanced family-work
work environment. The company has been given the best employer award for several times.

 

3.2 Challenges for B. Braun in Asia Pacific Region
In 1981, B. Braun established its first manufacturing facility in Malaysia and this marked its first venture into the Asia Pacific region. Subsequently, the company continued to expand by setting up other subsidiaries in all the major cities in the Asia Pacific region. B. Braun Malaysia was designated as the Asia Pacific regional headquarter led by a regional President to ensure
better coordination of the overall business operations in the Asia Pacific region. The manufacturing operations grew from less than 200 employees in 1981 to 4,700 as at the end of 2009. In 2006, the parent company named B. Braun Malaysia as the “Center of Excellence” for intravenous catheter portfolio and thereafter, the R&D was gradually transferred from Germany to
Malaysia.


3.2.1 Overview of the Asia Medical Device Market
The Asia Pacific region is known to be one of the fastest growing regions in terms of overall economic development and henceforth, with the greatest market potential. Specifically for the medical device and equipment market, one can easily see from the data presented by Espicom Business Intelligence in its The World Medical Markets Fact Book 2008 that although Asia
Pacific represented only 17% of the world medical device market volume of USD 188.2 billion in 2006, the forecasted market growth rate for Asia Pacific was 11.3% per annum which was significantly higher than the market growth rate of 7.1% per annum for the world medical device. The main contributing factor is the expected increasing healthcare expenditure to meet the fast
growing demand in countries like China, India, Indonesia, Vietnam and other emerging countries whereby the existing healthcare infrastructure is still largely insufficient.


3.2.2 KeyHighlights of B. Braun in Asia
Early market entry into the Asian market dated back in 1981 enabled B. Braun to have the first mover advantage. The company was relatively successful in the region until 1997 when the region was hit by the infamous Asian Financial Crisis. Similar to other companies, B. Braun’s business in Asia slowed down due to reduced demand. The crisis put a strain on the region’s
economies. The financial crisis was a litmus test for the fundamental strength of a company. Many companies vanished over night. Fortunately for B. Braun, although its business in Asia experienced slowed down, it was able to sustain its business without scaling down its operations.
One notable achievement was that while many manufacturing companies in Malaysia adopted severe cost cutting measures by laying off their workers, B. Braun Malaysia with its more than 4,700 workforce did not retrench even one single employee. Similarly, despite experiencing drastic financial losses and negative cash flow, B. Braun in Korea, where the country was most
severely hit by the crisis, was still able to retain its workforce. As a gesture of their trust for the company, the Korean employees voluntarily took a 30% pay cut to lighten the financial burden of the company, and the company returned the favour by repaying the amounts deducted back to the employee when the economy recovered! The company’s concern for the employee wellbeing
was most evident during this trying period.


3.2.3 Financial Performance Challenges
The post crisis period from 2000 onwards was a turning point for B. Braun in Asia. While the region economies regained the momentum of growth after 2000, B. Braun experienced stagnant sales growth in the Asia Pacific region during the period from 2000 to 2005, as shown in the Figure 1. The company was particularly concerned with the declining Profit-Before-Tax (PBT)
starting from 2002 onwards. The drop in PBT was evident from 2001 to 2002 and there was no sign of recovery in 2003.

 


The situation further worsened with a drastic dip of PBT in 2004. Various cost cutting and saving measures such as freeze hiring, reduced marketing expenditure, reduced price and others were introduced as attempts to stop profit decline. Such measures were, however, only effective to improve profit in the short term, but the sales remained stagnant. The big challenge for the top management of B. Braun in Asia then was how to instill a sense of urgency and ownership among its employees for the long-term financial well-being of the company.


3.2.4 Variation in Performance
As shown in Figure 2, there is great variation of sales growth performances across the Asia region for the period from 2003 to 2006. Countries like Korea and Indonesia seemed to perform consistently better than countries like Taiwan, Thailand and Malaysia although all these sales subsidiaries sell the same products. In the medical device market, the major competitors are
global companies such as Johnson & Johnson, Baxter, Beckon Dickinson, and Fresenius. To some extent, each country also has its own respective local producers. But, to the larger extent, the competitive landscape is not very much different from one country to another. Healthcare rules and regulations also could be different from one country to another, but the macro environment is essentially the same for all the market players. The internal comparative analysis ruled out the market environment as a key factor which impacts B. Braun’s diverse performance.

 


3.3 Journey of Change


3.3.1 The New Leadership

When the new regional President took over the helm in 2005, he noticed that B. Braun was a major market player in Korea and Indonesia, whereas its market share was small in Taiwan and Thailand in 2006. He ruled out the external market environment as the contributing factor for such variation in sales performance. Instead, he viewed the company’s competitive position in the
respective countries was the consequence of the local team’s competency.
In fact, a consulting firm was engaged in early 2005 to conduct a benchmark analysis of the competencies of the existing sales and marketing teams. The analysis benchmarked B. Braun’s sales and marketing competencies against those of the other pharmaceutical and medical device companies. The results indicated that the overall competencies of the sales and marketing teams were only mediocre. The marketing team significantly lacked strategic thinking and customer orientation, while the sales team was weak in leadership and the sense of competitiveness. In addition, the new regional President also noticed that the employee turnover rates in several regional offices were higher than the industry average. He found that almost 50% of the
participants in many regional product trainings and meetings which were conducted every two years were new. Since in-depth therapeutic knowledge and customer relationship are critical for success in this medical device business, he began to know the reason for the lack of consistent sales growth in many of these regional offices.
In the meantime, B. Braun in Germany saw the opportunity to position the company as the safe medical device supplier particularly in the area of intravenous access product range in 2006. B. Braun’s manufacturing site in Malaysia was instructed or designated by the head quarter in Germany as the Center of Excellence for the intravenous catheter portfolio. The development of the new devices not only demanded new product innovation but also innovation in production
technology to ensure cost competitiveness. This strategic move further put pressure on B. Braun management to hasten acquisition of new knowledge and skills by the local workforce to ensure the technology change would be a success in the shortest possible time.

 

3.3.2 Software as the Way to Go
The head quarter’s decision to designate B. Braun in Malaysia as the Center of Excellence for the intravenous catheter portfolio was a move to enable the company to exploit the immense growth potential in the fast growing healthcare market in the Asia region. The typical “hardware” for business growth, such as financial resources for acquisition of the latest machinery and
equipment, could be easily made available by the head quarter in view its strong financial strength. The key challenge for the regional President for the Asia Pacific region was to develop the required “software”-people competency. After a thorough in-depth analysis of the challenges faced by B. Braun in Asia Pacific, the top management of B. Braun in Asia Pacific recognized the existence of a people-competency gap, and unless this “software” was developed or strengthened, the return on the investments on the new “hardware” or technology would only remain short term and uncertain.


3.3.3 Learning Organization to Build Organizational Competency
In addressing the need to strengthen people competency, the company has devised a holistic change program called AP Winning Mechanism. The Model as shown in Figure 3 represents an overview of the framework. The company defines competency as consisting of three components-skills, knowledge and personal attitude. Among the 3 components, personal attitude was seen as the biggest challenge, but if this component could be handled well, the positive impact on the company’s performance would be long lasting. Personal attitude referred primarily to the mindset towards change. With the given sizeable work force and entrenched culture of stability, unless the mindset could be unlocked, otherwise all effort of change would yield minimum results.Senge (1990) highlights that the right mindset is the most critical factor for change success. Many other scholars concur and propose that the mindset problem can be overcome by establishing a culture that promotes learning among employees, and particularly employees at the managerial levels. Apart from the mindset challenge, the regional President identified two key competencies among other competencies that were regarded as strategically important, namely,leadership skill and environment agility or adaptability of the managers. Development of leadership skill is related to development of talent capability and that is consistent with the employee’s ability to learn and adapt or being agile in the fast changing market environment. Hence, the principles of Learning Organization by Peter Senge (1990) formed the guiding principles to systematically and continuously encouraging employees to enhance their knowledge. Organizational learning is seen as a critical organizational capability for product innovation and creativity to sustain B. Braun’s competitive position.
The top management of B. Braun Asia Pacific had to overcome the mindset problem and subsequently facilitate new knowledge acquisition and knowledge application to enhance organizational performance. With the learning culture well developed, the learning agility would become a strategic capability or a part of the DNA of the organization to create and sustain its
competitive advantage. Hence, initiatives to make Braun Asia Pacific a learning organization were introduced to build its strategic competencies. Since 2006, many initiatives had started and some of the key initiatives are discussed as follows.



 

3.3.4 Vision Setting
The management recognized that building employee competencies was a long process, and the company required to provide its employees a meaningful and purposeful vision to guide the company’s strategy alignment and direction. A 1-week workshop for the senior managers across the region was conducted to comprehensively review the historical development and future outlook of the business. At the end of the workshop, a common vision was established-“Serving
half of the world”. This vision was derived based on the following rationale. The market potential of the healthcare industry is a function of the population distribution. Asia Pacific region contributes 65% of the world population. Due to the still relatively low healthcare expenditure per capita, the sales of medical device in Asia was only 17% of global market sales. Hence, it would be a matter of time before the distribution of market sales would follow the world demographic distribution. The sales contribution of Asia Pacific to B. Braun group was only 11% in 2006. By setting “Serving half of the world” vision, it would mean that the Asia
Pacific region aimed to contribute 50% of sales in the B. Braun group. With that vision set, the challenge was how to get this vision cascaded down and become a “shared vision” in all levels of employees in the region. Apart from having a series of workshops and meetings to cascade the vision down to the lower levels, the management recognizes the importance of incorporating this vision into all learning initiatives undertaken by the company. Some of the initiatives to promote members’ discourse and learning are explained as below.

 

3.4 Structured Learning Program
The company launched a structured learning program by establishing the B. Braun Business School in 2006. The framework of B. Braun Business School is structured as in Figure 4 which are tailored to different level of employee group.


3.4.1 Asia Pacific Leadership Forum (APLF)
Top leaders play a significant role to foster a learning culture in an organization. In 2007, the Asia Pacific Leadership Forum (APLF) was initiated with the input from the senior management team in the region. The 3 to 4-day annual forum typically involves a lecture by an external professor, internal case review and group work. The participants are primarily country heads from the region and regional management team. Each forum focuses on a specific strategic issue faced by the organization. The program is designed in house by the regional management team so that the issues addressed during the forum are of common interests across the region. The forum ends with an action list for participants to implement in their respective countries. Best practices or failures are presented in the next forum.


3.4.2 Asia Pacific Management Excellence Program (APMEP)
A leadership development program named as APMEP was launched in 2006 to train the second tier managers on relevant leadership skills and to provide them with a broader view of business management. This first leadership program was originally designed in collaboration with a business professor of National University Singapore and was facilitated mainly by external
professors. The program provides managers training on a series of management topics, such as strategic management, financial management and change management.
The regional management team decided to revamp this leadership development program in 2008. Instead of having the 10-day program conducted in 2 modules, the program now runs for 10 days consecutively. This change was meant to foster a stronger bond among team members and to enhance team learning. Meanwhile, the curriculum was broadened but consistent with the “Winning Mechanism” framework, to include new topics such as leadership, strategic decision making process, organizational culture and business ethics. The major change was to shift from relying entirely on external trainers to having 80% of the program now being conducted by the internal trainers who are the senior leaders of the company. With the internal trainers, it was found that the interaction mode between participants and the trainer shifted from the lecture type to more dialogue style
whereby the interaction is no longer limited to between the trainer and the participant, but there are also more exchange of dialogues among participants. After the program, those participants with proven track records are assigned to new job positions in the region. They are then invited to share their experiences with the new batch of participants in the subsequent program.


3.4.3 Internal Trainer Development
According to Senge (1990), the leader’s role is to “teach” people throughout the organization to develop systematic understanding. To foster learning, the management team takes the lead to form the internal trainer pool. The internal trainers initially consisted of senior leaders in the company and later on expanded to second tier managers. Each internal trainer would first discuss with the regional President to determine a specific subject which would fit well into the overall B. Braun Business School program in the region. Then, the trainer would through his/her selfstudy and attending external training courses develop the appropriate training approach and materials. The trainer would first conduct a trial session with the regional management team before acting as a trainer in the official program like APMEP and Talent Pool. There were a total of 37 internal trainers covering various topics at the end of 2009. Many of the internal trainers found the training experience enriching as it often propels them to engage actively in continuous learning for self-development.
Each internal trainer is evaluated by participants and he/she is rewarded based on the scores obtained. The feedback evaluation is also given back to the trainer for self-improvement. Internal trainers who are senior managers have been generally evaluated well by the trainees. The involvement of internal trainers provides an opportunity for the employees (trainees) to know the senior managers better and to relate theory to practice much better, such as how to apply leadership development principles that is consistent with the company’s culture. Some participants would later seek advices from certain internal trainers and that subsequently would lead to informal mentor-mentee relationships. A concrete example of the tangible benefit from one of
the in-house training courses was the successful deal that the company was able inked for the acquisition of a neighboring factory for further expansion. During the “Negotiation & Influencing Skill” training session with the negotiation team, the key principles of negotiation were reviewed and the team jointly devised the strategy to approach the deal from a new perspective. To the joy of the negotiation team, the acquisition price was brought down significantly to save the company a sum of USD 2.5 million. The chairman was very pleased with the outcome and rewarded the team handsomely.

 

3.5 Team Learning
The company recognizes the importance of talented people working as team. Senge (1990, pp.220) warned that “[t]he world is full of teams of talented individuals who share a vision for a while, yet fail to learn.” Silo mentality was recognized as one of the key challenges. To overcome this challenge, the company has taken several initiatives to enhance team learning and break the silo mentality.


3.5.1 Talent Pool
The Talent Pool was firstly initiated in the manufacturing site in Malaysia to search for young talent in the company for succession planning and to use them to act as the change agent or special task force to bring improvement to the company. Members of the team, who are selected from different functional areas, have to learn together as a contributing team.
The selection of Talent Pool members is done rigorously through a 4-step assessment and filtering process. A pool of potential candidates is first nominated based on results of their performance review in the past 3 years. These nominated candidates are then required go through an online behavioral assessment and business reasoning assessment. Those who meet the
minimum criteria are subjected to a series of assessments of their critical thinking ability and decision making skills before the final endorsement by the management board. The Talent Pool is then made known to the whole company and the candidates have to go through an intensive 18-month structured program consisting of lectures, group work and special organizational
assignment. Upon completion of the 18-month program, those who are ready for new challenges are either promoted or assigned to a new role. From time to time, selected members of the talent pool form a special taskforce to work on certain project assigned by the management board. The task force is rewarded accordingly based on the outcome of the project. The Talent Pool approach is now adopted in several other Asia pacific subsidiaries.

3.5.2 Study Group
Study Group concept was incepted in 2005 specifically for B. Braun’s manufacturing plant in Malaysia with the main objectives to break down the silo mentality across departments and to involve the second tier experienced managers to spearhead the organization learning. The Study Group which consists of 6 to 8 members from various functional areas is led by a group leader who is the second tier manager. Each study group is to conduct an in-depth study of a given organizational issue to recommend areas for improvement. Upon endorsed by the management board, the Study Group can proceed to implement the proposals. Once the project is completed,it is documented as a case study and deposited in the company’s electronic database, the “eLibrary”. Many initiatives documented are the results of proposals from the Study Groups. Some members of the Study Group later become the internal trainers.

 

3.6 Enabling Conditions for Organizational Learning

3.6.1 Competency Based Recruitment Process
While more learning oriented initiatives are developed to enhance the human resource competence within the organization, the company is also actively recruiting new talents to inject new knowledge and skills into the company. The management recognized the needs to bring in new talents from time to time to fill the existing competency gap. Having analyzed the deficiencies of past recruitment practices and explored various options of recruitment methodology, the company decided to adopt the Harrison Assessments’ psychometric test and Hogan Business Reasoning Inventory to give additional dimensions to review candidates (see Figure 5).

Prior to a full scale implementation, an analysis of the effectiveness of the tool was performed internally to evaluate the relevance of the assessment results in predicting the actual performance. Table 1 shows the result of a simple analysis which indicates a positive relationship between the assessment score and the employee’s performance.

The new process of recruitment was subsequently introduced. Panel of interviewers consist of not only HR in charge and the hiring manager, but also interviewers from other functional areas are often invited to give independent view of the candidate. For senior manager position, the candidate has to make a case study presentation to the management team. The evaluation report
for each candidate is submitted to the regional management board for final review. Depending on the importance of the position, the regional management board decides on whether a final interview of the candidate is needed.
The assessment and evaluation methodology is now not only limited to new recruits, but also for internal appointment or promotion to the key position.

 

3.6.2 Performance Management and Reward Systems
The performance management and reward systems are divided into 2 categories:financial driven performance measurement via incentive scheme and competency development driven performance measurement via annual performance appraisal.
The incentive scheme linked to financial driven performance provides financial reward that ranges from 40% to 60% of the total salary compensation of an employee depending on his/her job function. For those employees directly involve in manufacturing, sales and marketing, their financial incentives would constitute a larger portion of their total salary compensation. The
primarily financial key performance indicators are sales, production cost and profits. To promote team performance, a minimum 15% of the employee’s overall performance is dependent on meeting his/her team performance target. The management views the incentive scheme as an immediate reward for the employee’s current performance. Every employee knows his/her performance target at the beginning of the year and is able to track his/her performance throughout the year from the online financial management reports.

The performance appraisal system, on the other hand, is used to reward competency development. The result of an employee’s annual performance appraisal determines how much annual salary adjustment he/she will get. In order to reinforce the change, the management has revamped the assessment criteria of the performance appraisal by aligning them with the new sets
of competencies crucial for creation and sustenance of the company’s competitive advantage. For example, to encourage managers to spearhead learning, each manager is assessed by whether his/her staff have met the targeted training hours and whether he/she is an in-house trainer. A major portion of a manager’s performance measurement is related to people development. Apart from the standard assessment criteria which contribute up to 70% of the total assessment, the balance 30% of the performance appraisal is dependent on projects jointly defined between the manager and his/her staff. The criteria for assessment of these projects are quality driven whereby the employees are encouraged to propose new initiatives that challenge the status quo of the company’s processes and systems, and such initiatives often promote generative learning.
Employee who takes initiatives to improve the existing processes and systems of the company is rewarded, and the rewards range from token of appreciation by the management to substantial huge monetary rewards, such as those given to the negotiation team which was able to save substantial amount of money for the company in its land acquisition.

 

3.6.3 Top Management Support and Determination in Learning
The regional President who took over the management in 2005 had played a crucial role in ensuring the success of the above-mentioned organizational initiatives. Recognizing the importance of the need to develop human competencies to enhance and sustain the company’s profitability, the regional President, who has vast experiences in sales and marketing, appointed himself as the Head of Regional Human Resource as soon as he took over the regional management in 2005. His commitment to develop B. Braun into a learning organization is evident from the earlier initiatives discussed.

The regional President had involved himself totally in defining the program for the APMEP and the final selection of the participants for each of the past years. He sat through the 10-day program every year without fail. During his business review with the country management team, the regional President gave priority to reviewing of the learning programs, employees’ survey results and reward systems. In late 2008 when the company was challenged by the global financial crisis and the headquarter had announced stringent cost measures such as freeze hiring, reduce internal meetings, the regional President insisted on continuing all learning programs such as APLF, APMEP and so on. All programs were conducted as per schedule. The members of regional management board are equally convinced with the approach. All of the management board members are active internal trainers.

 

Ⅳ. Conclusion


4.1 Outcome
Having implemented the organization learning initiatives over the past 5 years, the management of B. Braun in Asia is seeing a learning culture emerging in the group. Managers are more actively engaging their staff in dialogues and forums that promote learning. It becomes a common trend in the company to dedicate a knowledge session in most of the group meetings to frame issues discussed within a conceptual model or principle. This helps to achieve a greater understanding among the team members.
The active learning programs conducted regionally and locally have evidently improve employees’ competences, as evidenced by the increase of an average of 9% and 15% in the sales per headcount and profit per headcount in the region, respectively. The most significant achievement in productivity is the manufacturing plant in Malaysia as shown in Figure 6. PBT which reflects cost efficiency in manufacturing has been on an upward trend since 2007 and it achieved a record high in 2009. The sales and PBT for the Asia Pacific region are also on an upward trend as shown in Figure 1, and this is especially comforting to note that the PBT had shown a drastic improvement in 2009 despite the world economy was hit by the financial meltdown in the US.

The management’s ultimate objective is to have a self-generative organizational competency development whereby the employees could fully engage in and enjoy the process of learning in their work. When that is achieved, the performance of company will automatically improve. As such, an annual employee survey which consisted of 48 in-house designed questionnaire items was initiated in 2007 which has shown a gradual improvement of employee’s perception towards
the company (see Table 2).

4.2 Implications
The case on B. Braun in the Asia Pacific region demonstrates the essential ingredients for establishment of an effective learning organization that not only develop the critical human competencies to enable the company to expand its market share in the Asia Pacific region, but also transform the organizational culture from one whereby learning was often passive to one whereby employees are actively engaged in learning and knowledge sharing. The new regional President’s strong commitment to develop B. Braun into a learning organization is most evident from the various learning programs and initiatives introduced. The priority that he gives to the learning programs, employees’ survey results and reward systems at the business reviews with the
country management teams has signaled to all regional managers the importance of inculcating the learning culture for productivity enhancement. The reward system is similarly designed to encourage both attainment of short-term financial targets and competency development for long-term competitiveness. To ensure the appropriate competencies are developed, the assessment criteria of the performance appraisal are re-aligned to those sets of competencies crucial for creation and sustenance of the company’s competitive advantage. Managers are assessed on training hours given to their staffs and their involvement in knowledge sharing as in-house trainers. The use of in-house trainers has not only allowed knowledge sharing for more effective problem-solving, but more importantly the approach has led to an interaction mode that encourages more interpersonal exchanges and dialogues, and subsequent development of informal mentor-mentee relationship between the trainee and the trainer. The recruitment of managers to join the internal trainer pool has often forced these manager trainers to reflect on the adequacy of their current state of knowledge and the need for continuous life-long learning. The frequent
manager-staff discourse and the encouragement to employees constantly challenge the current status quo have promoted generative learning that expands the company’s capacity and capability for future value-creation.

The positive outcome arising from the various learning initiatives are encouraging for B.Braun. Nonetheless, the above mentioned initiatives to develop a learning organization were often challenged by the not-forthcoming immediate results. Although learning organization concepts and practices have been established more than a decade, examples of successful implementation of those concepts are not easily available. Garvin’s remark in 1993 indeed resonances the
difficulty faced by the management that “…despite the encouraging signs, the topic [Building a Learning Organization] in large part remains murky, confused, and difficult to penetrate” (Garvin,1993). One of the key reasons for the learning organization to take shape in B. Braun Asia Pacific is because the organization learning principles are in-line with the overall corporate
philosophy. B. Braun’s brand promise is “Sharing Expertise”. The company firmly believes that the success of the company is built upon the knowledge exchange between the company and the medical community. Making B. Braun in Asia Pacific a truly learning organization in a way is reinforcing the brand of B. Braun, hence, the journey will continue.

 

“본 게재논문에 대한 윤리적 문제는 전적으로 저자에게 책임이 있음을 확인함”

 

References


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Dierickx, I. & Cool, K. (1989). Asset stock accumulation and suatainability of competitive
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Grant, R.M. (1991). The resource-based theory of competitive advantage:Implications for strategy
formulation, California Management Review, Spring, 114-135.
Garvin, D.A. (1993). Building a learning organization. Harvard Business Review. Jul-Aug., 78-91.
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Hedberg, B. (1981). How organizations learn and unlearn? In P.C. Nyatronrn & W.H. Starbuck
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Lawler, A. (2009). European family firms in the recession:Dynasty and durability. The Economist.
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Miller, D. & Friesen, P.H. (1980). Momentum and revolution in organization adaption, Academy of
Management Journal, 23, 591-614.
Peteraf, M.A. (1993). The cornerstones of competitive advantage:A resource-based view. Strategic
Management Journal, 14, 179-191.
Senge, P.M. (1990). The firth discipline:The art and practice of the learning organization. New
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Simon, H.A. (1969). Sciences of the artificial. Cambridge, M.A:M.I.T. Press.
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