Investigate the failure of the privatization of the financial intermediaries (financial institutions) with patterns of organizational development

اقتصاد پولی مالی

Article 8, Volume 22, Issue 10, January 2016   

Document Type: پژوهشی

DOI: 10.22067/pm.v22i10.34865

Authors

Hossein Takroosta^* ; Alireza Khorakian

Abstract

Privatization is an important process in organizational change. If properly implemented, it will lead to good economic growth; for this reason, it is known as the economic engine (Pheko, 2013). If not implemented properly, or if implemented neglectfully, it will lead to undesirable results. Therefore, privatization is an important issue in the economic development of countries and ignoring it causes irreparable damages to the body of society (Zahedi, 2012) & Mirkamali). On the other hand, the main causes of privatization failure in financial institutions are lack of attention to the prerequisites of the privatization process (Al-Omran& Al-Omran, 2011), dimensions of privatization (Waigama, 2008), and types of privatizations (Clifford, 1993).
Theoretical Framework
Privatization was raised for the first time in the theories of classical economists (Waigama, 2008). It refers to the change of control or ownership from the public system to the private system (Al-Omran, et al., 2011; Mirzade, Shahbazi, & Javahery, 2009).
Privatization is the most important component of the world economy in the 21st century (Sawagvudcharee, 2012). Therefore, prescribing privatization programs for developing countries is the only way to treat their sick governmental economy (Mirzade, et al, 2008; Lashkari, et al., 2009).
Privatization goals include: transforming the economy to a dynamic, competitive and developmental economy and reducing the government tenure (Ram, 2012); increasing international competition (Clifford, 1993), deregulating and improving productivity (Abdel Shahid, 2002) , reducing the scope of direct jurisdiction of government in the economy (Waigama, 2008; Clifford, 1993), increasing the capacity and entrepreneurial skills and the economic enterprises efficiency (Pheko, 2013; Clifford, 1993), capital market the development (Waigama, 2008; Clifford, 1993) and gaining access to new technology and foreign markets (Clifford, 1993).
Privatization occurs in five states: privatization of responsibilities, i.e., removing the monitoring role of government from a specific part; privatization of ownership, i.e., transferring the majority or minority shares to the private sector; privatization of operations, i.e., cooperation between government and private companies (Mirzade, et al, 2009); and -tickle downs to the poorest, i.e., the development of public infrastructure, helping public companies through investments and tenders by contractors (Pheko, 2013).
In organizational change, noteworthy models are : the force field analysis (Kurt Lewin, 1951), System Analysis (Likert, 1967), the six box model (Weisbord, 1976), the adaptation analysis of organization model (Nadler & Nachmn, 1977), the 7S framework (McKenzie, 1981), TPS framework (Tichy, 1983), high-performance planning (Nelson & Brown, 1984), recognizing individual and group behavior (Harrison, 1987), and Burk-litwin model (1982). Among these models, Burk-litwin-is the most comprehensive model of organizational change (Pheko, 2013).
Research Methodology
This study is practical in terms of its nature and goal, and is descriptive in terms of data collection as well as a survey and a libarary-based one. 323 questionnaires were distributed among the staff of privatized banks and the analysis was done based on the 323 questionnaires. 7 variables were applied for hypothesis testing. To measure the dimentions of Burk-litwin model, standardized questionnaire (Zhibin, 2004) was used and the variables of return on assets ratio (ROA) and return on equity ratio (ROE) were measured for private banks of Saman, Parsian, Pasargad, Eqtesad Novin and privatized banks of Tejarat, Saderat, and Mellat.
Conclusion
The results showed that 7 dimensions of Burk-litwin model, i.e., change in leadership, culture, structure, strategy, management, policy and decsion making, and motivation were used less in privatized financial institutions. This result is consistent with works of Proskat (1978), Mills and Snow (1978), Gordon (1985), Chandler (1962), Mills at al. (1978), Trigo and Zimerman (1980), and Bagheri, et al. (2011).
Furthermore, the results of this study are in line with the results of studies by Joyce and Slocom (1984), Ouchi (1977), and Galbraith (1977) that examine the dimensions of structure, atmosphere, management practices, systems and job requirements; Schneider (1980) and Schneider and Bourne (1985) that examine the dimensions of management practices and dominated atmosphere; Hammer (1988), Zuboff (1988), Jordan (1986), Ezazi, et al. (2011), and Mirkamali, et al. (2012) that examine the dimensions of systems, atmosphere, management practices, individual needs and values.
Among the dimensions of financial institutions, management dimension was at the lowest level. Therefore, the management aspect has more effect on privatized financial institutions than other factors. The culture dimension has less effect on financial ratios of privatized financial institutions than other factors. Not using the dimensions of Burk-litwin model decreases the return on assets ratio (ROA) in the privatized financial institutions rather than initially private institutions. Moreover, not using dimensions of Burk-litwin model reduces the return on equity ratio (ROE) for privatized financial institutions rather than initially private institutions, and not using dimensions of Burk-litwin model increases the ratio of public, administrative and organizational cost to the total cost of company in the privatized financial institutions rather than initially private institutions.
Management dimension is at the lowest level among the dimensions of Burk- litwin; thus, this factor has more effect on financial ratios of privatized institutions than other factors. It is suggested that managers of financial institutions acquire expertise education, and skills for the successful implementation of privatization. To train skilled staff, we should empowerthem with a high commitment to change through trust-building, capacity-building and accountability in their organizations, and to providethem with a culture that is open to organizational change. Given the importance of the organizational change, in order to survive in the current extensive competitive scene and with regard to the high potential of the country for research in this area, it is suggested that the causes of success and failure for the phenomenon of organizational change be scrutinized in other organizations, so that, the reliability of the results of this research can be tested in other cases.

Keywords

Organizational development; Privatization; Financial Institutions

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