2.[10 18]influencing organisational behaviour through the application of learning theories

European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 3, No.11, 2011

1 | P a g ewww.iiste.org

External Reserves Management and Economic Development in Nigeria (1980-2008)

Alasan AbdulazeezB (Corresponding Author)

Dept. of Humanities and Social Sciences,

School of General Studies,

Federal Polytechnic, Auchi, P.M.B 13, Nigeria.

Tel: +2348038679900 E-mail: [email protected]

Shaib Ismail Omade

Dep. of Statistics,

School of Information and Communication Technology,

Federal Polytechnic, Auchi, P.M.B 13, Nigeria.

Tel: +2347032808765 E-mail: [email protected]

Abstract External reserves which are variously called International Reserves, Foreign Reserve or Foreign Exchange Reserves. In recent years, issues related to the management of external reserves have gained prominence, and reserves management practices have evolved rapidly. Effective management of foreign exchange reserves is one of the major macroeconomic objectives of countries like Nigeria. This is against the background of rapid rise and accumulated challenges currently facing many emerging economics, especially oil producing countries (CBN 2007). This paper examined the management of external reserves and economic development in Nigeria between1980-2008.The empirical result of the data analysis revealed that there is statistical significant relationship in the management of Nigerian external reserves. Hence, the need for an effective and efficient management of Nigeria’s external reserves is imperative and recommended that reserve management should seek to ensure that adequate reserves are available such that risks are controlled in a prudent manner and reasonable earnings are generated over the medium to long term on the funds invested. Keywords: External Reserves, Management, relationship, CBN, Macroeconomic variables 1.0 Introduction

In recent years, issues related to the management of external reserves have gained prominence, and reserves management practices have evolved rapidly. Effective management of foreign exchange reserves is one of the major macroeconomic objectives of countries like Nigeria. This is against the background of rapid rise and accumulated challenges currently facing many emerging economics, especially oil producing countries (CBN 2007). External reserves are variously called International Reserves, Foreign Reserve or Foreign Exchange Reserves. While there are several definitions of international reserves, the most widely accepted is the one proposed by the IMF in its Balance of Payments Manual, 5th edition. It defined international reserves as consisting of official public sector foreign assets that are readily available to, and controlled by the monetary authorities for direct financing of payment imbalances, and directly regulating the magnitude of such imbalances, through intervention in the exchange markets to affect the currency exchange rate and/or for other purposes (CBN 2007).

The level of external reserve in a country is influenced by external sector developments such as international trade transactions, exchange rate, external debt and other related external obligations. However, when foreign reserves are used for financing domestic foreign exchange needs they could exert pressures on the internal monetary environment. Thus, if a country’s trade volume increases, banks and other financial intermediaries may exert increasing pressure on her foreign reserves. This scenario calls for a continuous effort



by a country at effectively managing her foreign reserves to an optimum level that would sustain her numerous external commitments (CBN 1997). Foreign reserves management is the technique of optimizing a nation’s external resources to meet its economic needs. In Nigeria, the Central Bank has the sole responsibility of management of foreign reserves. The components of foreign reserves include monetary gold, reserve position at the International Monetary Fund (IMF), holding of special drawing right (SDRs) and foreign exchange which are convertible currencies of other countries (CBN 1997). 2.0 Review of Related Literatures

Aluko (2007), observed that External reserves has, in recent times, played significant role in the Nigeria economy. It has increased the level of money supply and therefore impact positively on the level of economic activities as more funds became available for investment in productive activities. Employment was in turn generated, output increased and consumption boosted. With their multiplier effects on the economy coupled with the efficient management of the financial resources, standard of living of the people improved considerably. Also, the contribution of the manufacturing sector to Gross Domestic Product (GDP), which has continued to dip, witnessed a boost. In a related study (Obaseki 2007) noted that the uses of external reserves cannot be over emphasized. Essentially, external obligations have to be settled in foreign exchange. Therefore, the stocks of reserves become important as a source of financing external imbalances. Other uses to which external reserves can be put are to intervene in the foreign exchange market, guide against unforeseen volatility and maintain natural wealth for future generations. Typically, the purpose of holding reserves is to allow the central bank an additional means to stabilize the issued currencies from shocks. In addition to meeting the transaction needs of countries, reserves are used as a precautionary purpose to provide a cushion to absorb unexpected shocks or a sharp deterioration in their terms of trade or to meet unexpected capital outflows, like the negotiated exit payment of the Paris Club Debt by Nigeria. Reserves are also used to manage the exchange rate through intervention in the foreign exchange market. Thus, the motives for holding adequate level of external reserves can therefore be summarized as the reasons why individuals hold money (CBN 2007). Sound foreign reserves management practices are important because they can increase a country’s overall resilience to shocks as the central bank will have the ability to respond effectively to financial crisis. Sound foreign reserves management can equally support but not substitute for sound macroeconomic management. Similarly, inappropriate economic policies can pose serious risks to the ability to manage foreign reserves. However, the process of foreign reserves management has spanned over the areas of risk management, securitization and the use of derivatives (Anifowose 1997). External reserves have impacted significantly on the development of Nigeria economy over the years. According to (Ojokwu 2007), Foreign Direct Investment (FDI) into the country increased from $42.4 million in 1997 to $540.17 million in 2002 at an exchange of ₦118 to a dollar, while the level of investment increased in 1999 from ₦4.24 billion to ₦63.74 billion in 2002. He added that employment increased from 4,093 in 1999 to 10,885 in 2002, while revenue allocation to States and Local Government Areas grew from ₦156.06 billion in 1999 to ₦44.074 billion at August 2004. The Federal Government has also made significant progress in the war against corruption. All these are indicative of progress economically. 2.1 Concept of External Reserves Prior to the inception of the Central Bank of Nigeria in 1959, the country formed part of the defunct West African Currency Board (WACB). In that period, management of external reserves posed little or no problems to the country because the manner in which the Board operated prevented such problems from arising. Optimal deployment of reserves then was really not an issue since Nigeria’s non-sterling earnings were deposited in London in exchange for credit entries in the sterling accounts maintained there (Aizenman 2005). Subsequently, the 1959 Act which established the Central Bank of Nigeria (CBN) required the Bank to hold external reserves solely in Gold and Sterling. With the amendment in 1962 of this Act, the Bank acquired the mandate to maintain the country’s foreign exchange reserves not only in sterling balance but also in non-sterling assets such as gold coin or bullion, bank balances, bills of exchange, government and government-guaranteed securities of countries other than Britain and treasury bills in other countries. The monetary options available to the country widened upon joining the International Monetary Fund (IMF) in 1961 to include many more assets (Yuguda 2003).



The problems of reserve management began during the periods of the First National Development Plan in 1962 to 1966 and the Nigerian Civil War of 1967 to 1970. In these periods, financing the plan and the war consumed a large portion of the country’s reserves. Also, the tempo in the foreign trade sector dropped, following the disruption of economic activities in the country. The problems became compounded immediately after the war in the wake of the Federal Government’s efforts to reconstruct and reactivate the war ravaged economy which continued to demand immense foreign exchange reserves. Because of the exigencies of this period, the CBN became committed to maintaining an ‘adequate’ level of external reserves (Olawoyin 2005). In a related development, (Odozi 2000) noted that in addition to the problem of depleting reserves; Nigeria faced a new scenario with reserve management. Following the admission into the organisation of Petroleum Exporting Countries (OPEC) in 1973 and the oil boom of the era, the problem of reserve management switched from that of ‘inadequate’ to that of ‘excess reserves’. This remained so until 1981 when the country was hit by the global economic recession that led to a consistent decline in her external reserves. In the light of this development, economic stabilisation measures revolving stringent exchange control, which ran from April 1982 to June, 1986 (when accretion to external reserves was low), were introduced. By the end of 1985, it was evident that the use of stringent economic controls was ineffective in restraining external reserves depletion. To this end, exchange and trade controls were discontinued in 1986, following the adoption of market based policy measures, the Structural Adjustment Programme (SAP) in July 1986. However, after more than seven years of liberation, government felt that the overall performance of the economy was unsatisfactory. Hence, in January 1994, some measures of control were re-introduced which saw the CBN as the sole custodian of foreign exchange and together with its designated agents, the avenues for foreign exchange important. Again the trade and exchange policies in 1994 failed to substantially achieve the desired objectives. The guided deregulation introduced in 1995, among other things, abolished the 1962 Exchange Control Act, in a bid to enhance the flow of capital and the reserves position of the country. Other measures aimed at boosting the external reserves included the introduction of an Autonomous Foreign Exchange Market (AFEM) for the purpose of trading in foreign currencies at market determined rates and further liberation of the foreign exchange system in 1997 and the trade and exchange regime in 1998.

The scope of this study covers external reserves management and its effects on economic development in Nigeria between the periods of 1980 – 2009. The study also looked into the problems associated with foreign reserves management as well as its relationship with gross domestic product (GDP). The other area covered is how best external reserves can be prudently managed for the overall benefit of Nigeria. The research was concluded with a theoretical framework adopted for the study.

2.3 Sources of Nigeria External Reserves Inflows Nigeria’s external reserves derive mainly from the proceeds of crude oil production and sales. Nigeria produces approximately 2,000,000 barrels per day of crude oil in joint venture with some international oil companies, notably Shell, Mobil, and Chevron. Out of this, Nigeria sells a predetermined proportion directly, while the joint venture partners sell the rest. The joint venture partners pay Petroleum Profit Tax to the Federal Government through the Federal Board of Inland Revenue (CBN 2007). The five categories of revenue from crude oil production and sales are: i) Sale of Nigeria’s Crude Oil Equity: The Nigerian National Petroleum Corporation (NNPC) has the

responsibility for the sale of Nigeria’s crude oil. Receipts from such sales are warehoused into our foreign accounts and constitute part of external reserves.

ii) Royalties: These are funds paid by oil companies to the nation arising from the commercial exploitation of Nigeria’s oil resources. The Petroleum Act of 1969 provides a percentage to be paid as loyalty on the chargeable value of the crude oil/petroleum spirit production in a particular period.

iii) Petroleum Profit Tax (PPT): This is the tax paid by oil companies on profit arising from their operations. A tax rate of 85% effective 1st April 1975 was specified by the Petroleum Profits Tax Act.

iv) Penalty for Gas Flaring, Rentals, Signature Bonuses: Foreign exchange is realized from penalties for gas flaring, rental payments from Oil Prospecting License (OPL), conversion to oil mining lease, oil exploration license, and concession block allocation. Also signature bonus (an amount payable at the signing of an agreement for the award of OPL as part of the validity process of oil contract agreement) is a source of foreign exchange.

v) Receipt from Gas Sales: Other sources of foreign exchange inflows include: Withholding Tax, Value Added Tax, Company Income Tax, Education Tax, and Rent/interests received from investments abroad personal home remittances.

vi) Export products from non oil sources agricultural produce, processed and semi-processed products, etc.



vii) Grants and other miscellaneous receipts (CBN, 2007). In Nigeria, over 85 percent of foreign exchange reserves is realized from the oil sector.

3.0 Statement of Research Problem

The importance of external reserves to any country cannot be overemphasized. It can be said to be the official public sector foreign assets controlled by the central bank of a country. The reserve position of Nigeria at any given time is a reflection of the circumstances prevailing in the international oil market (George 2007). The size of Nigeria’s external reserves has been fluctuating over the years. The stock of reserves which was US$7.47 billion at end of December 2003, increased by 127 percent to US$16.96 billion in 2004. It could finance 18.4 months of imports. The import cover was much higher than the West Africa Monetary Zone (WAMZ) minimum requirement of 6 months. See chart and table as appendage: From the foregoing, the researcher is of the opinion that external reserves generally have focused mainly on the concept, nature, sources, size, the foreign exchange disbursement and months such reserves could finance importation. Against this backdrop, this work sees the following as constituting the major statement of problem for this study. i. The non-utilization of Nigeria’s huge external reserves for the development of infrastructure/social

services ii. The poor management of the reserves which has, to a large extent affected the growth of the economy. 4.0 Objectives of the Study

The broad objective of this study is to examine the effects of external reserves management on economic development in Nigeria. The specific objectives are: i. To examine the relationship between external reserves and the explanatory variables. ii. To also examine the extent to which external reserves account for financial stability. 5.0 Hypotheses of the Study

In pursuance of the set objectives of this study, the following hypotheses were drawn for testing, where economic development is the dependent variable. i. There is no significant relationship between external reserves and the explanatory variables (Gross

domestic product, export oil, non-oil, import oil, non-import oil and political stability). ii. There is no significant relationship between external reserves and financial stability. 6.0 Relevance of the Study

The importance of the study cannot be over-emphasized. It is believed that this study will provide an appropriate framework for the analysis of foreign reserves management and its effects on economic development. Such a framework will help identify the key variables of foreign reserves management and its effects on the economy.

7.0 Model Specification

The study adopted the econometric model in evaluating the role of external reserves in the Nigeria economy. The econometric model used was to determine the relationship between external reserves and selected macroeconomic variables (gross domestic product, GDP, export oil, non-export oil, non-import oil, capital goods, non-capital goods and political stability) towards adopting a policy option. Evans and Egwakhe (2008) observed that external reserves were held with a view to making the economy more attractive to foreign investment, which would, in turn, improve the economic performance of the nation. Hence the expectation that external reserve has a relationship with the level of economic productivity captured by GDP and other variables. In their empirical investigation of the role of external reserves on the Nigerian economy, Evans and Egwakhe (2008), used the Ordinary Least Square (OLS) technique and adopted a model of the form:

( ) ( ) ( ) iiii eIaELnaaRLn +++= 210 (1)

Where :



Ln represents natural log transformation, i is time lag, R is ratio of external reserve to GDP, E is ratio of exports to GDP,I is ratio of imports to GDP, ei is error term and as are parameters.

Following the model of Evans and Egwakhe (2008), the researcher adopted their formulation with a little modification. That is, export was divided into oil export and non-oil export because they are the major components of export. Oil export constitutes about 90 percent and the other 10 percent is non-oil export. In the modification, import was also broken into two, that is, capital goods and non-capital goods because these are also the major components of import. In addition to the modification of Evans and Egwakhe (2008), GDP was included because it captures the level of economic activity. A dummy variable was also introduced as a proxy for political stability. It takes the values of O for stability and 1 for instability.

7.1 Variable Descriptions

The data collected are within a time frame of 1980 and 2009. It includes the following variables: EXTR – External Reserves, GDP – Gross Domestic Product, EXOIL – Export Oil, NEOIL – Non-Export Oil, NOILMP – Non-Oil Import, CPG – Capital Goods, NCPG – Non-Capital Goods, POLST – Political Stability.

7.2 Model Specification and Adoption One model was adopted in this study. That is, EXTR = f (GDP, EXOIL, NEOIL, NOILMP, CPG, NCPG, POLST) The model was adopted based on the formulation of Evans and Egwakhe (2008) and operationalized as: EXTR = βo + β1 GDP + β2 EXOIL + β3 NEOIL + β4 NOILMP + β5 CPG + β6 NCPG + β7 POLST + U 8.0 Research Methodology

This chapter specifically deals with the technique of enquiry underlying the study. Attention has been focused on source of data, model formulation and method of data analysis. 8.1 Source of Data Collection The data used in this study were mainly secondary data. They covered the period of (1986 – 2009) and were obtained from various sources, notably the Central Bank of Nigeria (CBN) annual reports (2007, 2008 and 2009), CBN statistical bulletin (2008, 2009 and 2010) and economic journals. Others were obtained from textbooks and the internet. 8.2 Data Analysis Techniques The technique used in this study is the Ordinary Least Square (OLS) estimation technique. The test instruments in the OLS are the T-statistics and F-test which were used to test the significance of variables and the overall significance of the regression respectively. Other test instruments also employed were the Durbin Watson test which was used to test the presence or absence of auto correlation between and among the explanatory variables and the adjusted R square used to test the percentage variation of the dependent and the independent variables. 8.3 Result of Empirical Analysis The estimate of the model

EXTR = 917401.8+0.661458GDP+0.202 EXOIL– 36.00NEOIL -0.012NOILIMP +141.67CPG – 500.6398 NCPG – 9562011.POLST (2)

From the OLS result, R2 = 0.66 which shows that there is high positive correlation among the variables at 66.1%. The adjusted R-squared = 0.548 implies that the co-efficient of determination indicated that the degree of analysis is accurate and the independent variables (GDP, EXOIL, NEOIL, NOILIMP, CPG, NCPG, and POLST) are capable of explaining the dependent variable (EXTR) by 54.8%, while 45.2% of the explanatory variable is captured or accounted for by error and other factors. The result of Durbin Watson (2.6065) revealed that there is no presence of serial autocorrelation, which means the model is good for policy evaluation. The individual analysis of the variables shows that the coefficient of β1 is 0.6615 which implies a positive relationship between the regressor variable, gross domestic variable, and the dependent variable, external reserves. It further implies that a unit change in gross domestic product brought about a 0.6615 change in external reserves.



The estimate of β2 is 0.20222. As expected, it shows a direct relationship between export oil and external reserves such that unit change in export oil resulted in 0.2022 changes in external reserves. -36.0074 is the estimated value of β3 which shows a negative relationship between non-oil export and external reserves. The implication is that a unit change in non-oil export resulted in a -36.0074 variation in external reserves. The estimate of β4

is -0.0126 which also signals an inverse relationship between non import and external reserves. What this signifies is that a -0.0126 change occurred as a result of a unit change in non-oil import. For β5, 141.6775 is estimated value. This shows a positive relationship between capital goods and external reserves. Impliedly, a unit change in capital goods resulted in a 141.6775 variation in external reserves. The coefficient of β6 is -500.6398. It demonstrates a negative relationship between non capital goods and external reserves. This further means that a change in non-capital goods brought about a negative change of -500.6398 in external reserves. For β7, -956201.1 is the coefficient. This shows an inverse relation between political stability and external reserves. Impliedly, a unit change in political stability resulted in a -956201.1 change in external reserves. The values of t-ratio for β1, β2, β3, β4, β5, β6 and β7 are 0.644, 0.145, -0.962, -0.036, 0.092, -0.349, and -0.770 respectively, while that of the statistical table at 5% level of significance is 2.056. Since the value of the T-ratio from the statistical table is greater than that which was calculated, it means that the estimates of β1 - β7 are statistically significant. We therefore reject Ho: β1 = 0, β2 = 0, β3 = 0, β4 = o, β5 = 0 β6 = 0, β7 = 0 and accept H1 : β1 ≠ 0, β2 ≠ 0, β3 ≠ 0, β4 ≠ o, β5 ≠ 0 β6 ≠ 0 and β7 ≠ 0. 9.0 The summary of findings is as follows:

i) The empirical analysis shows a positive relationship between external reserves and some explanatory variables. The variables include gross domestic product, export oil, and capital goods. These account for 54.8% variation in external reserves.

ii) The study has also shown that a negative relationship exist between external reserves and non-oil export, non-capital goods, non-import, and political stability.

iii) External reserve was also found to be negatively related to macroeconomic stability, hence the non-utilization of this reserve to provide social services and infrastructure.

10.0 Recommendations

The study has shown that there is a positive correlation between external reserves and the growth rate of GDP, EXOIL and CPG. It is therefore important for appropriate policy formulation and implementation of such policies to encourage and boost the growth rate of these variables.

Since there is a direct relationship between external reserves and GDP, the need to diversify the economic base and encourage agriculture becomes instructive. With this, our non oil export will be increased. This is because if we encourage agricultural production, it will not only guarantee food security, increase the nation’s GDP and foreign earnings, but it will generate employment and incomes thereby increasing the standard of living of the average Nigerian. If agriculture is encouraged, it will also act as a buffer to cushion shocks arising from the volatility as well as the instability in the international oil market.

From the empirical analysis, it was also observed that a positive relation exist between external reserves and EXOIL. It follows therefore that the downstream oil sector needs to be encouraged. To do this end, government should provide an enabling environment such that the mutilnationals are protected and youth restiveness in the Niger Delta nipped in the bud permanently.

Against the general consensus that a stable political climate encourages both local and foreign investment, our empirical result deviated from this by showing a negative relationship between political stability and external reserves. It is against the backdrop of this scenario that the researcher is of the opinion that our democracy should be practiced according to the rules and cost of governance drastically reduced.

Also, government should encourage and partner with the private sector. Such public/private sector partnership will reduce the unemployment scourge and consequently relax the political tension that has continuously characterized the political in recent times.



Furthermore, there should be deliberate and systematic effort to use part of the reserves for infrastructural development and save part of it for future generation as oil, which is the main source of this reserve accumulation is a wasting asset. This can be given impetus through an appropriate constitutional provision.

11.0 Conclusion

Over the years, the Nigerian economy has witnessed a lot of socio-economic and political challenges. These challenges notwithstanding, it is the researchers’ opinion that with determination and sincerity of purpose, we shall actualize the desired economic growth and development. The challenges may be daunting, but we have all it takes to face them squarely. In conclusion, the need for an effective and efficient management of Nigeria’s external reserves is imperative. This is because poor management of external reserves may put at risk other elements or components of national policy. For instance, an official exchange rate policy can cause severe economic damage. Hence, reserve management should seek to ensure that adequate reserves are available such that risks are controlled in a prudent manner and reasonable earnings are generated over the medium to long term on the funds invested.

Reference

Aluko, J. J. (2007). The Monetization of Nigeria’s Foreign Exchange Inflows. CBN Bullion. Vol. 31(2). Anifowose, O. K. (1997). Management of Foreign Exchange: A peep into the next decade”. CBN Bullion. Vol.

21, No. 4. Aizenman, J. (2005), International Reserves, UCSU and the NBER. Economic Journal vol. 3, No. 6. Central Bank of Nigeria (CBN), (2007). The Bullion: Building and Managing External Reserves for Economic

Development. Vol. 31, No. 2. CBN, (2007), Building and Managing External Reserves for Economic Development. The CBN Bullion. Vol. 31

No. 2. Evans, S.C.O and Egwakhe, A.J. (2008). External Reserves and the Nigerian Economy. Published in African

Journal of Business and Economic Research. Vol. 3 No. 2. George, O. (2007), External Reserves Management in Nigeria. The Bullion Publication of the CBN, Vol. 31 No.

2. April – June. IMF (2004), Guidelines for Foreign Exchange Reserve Management, IMF, Washington D.C. International Monetary Fund (2003), Guidelines for Foreign Exchange Reserve Management. IMF, June. Obaseki, P.J. (2007), Foreign Exchange Management in Nigeria. Past, Present and Future. CBN Economic and

Financial Review. Vol. 29, No. 1. Odozi, V. (2000), Foreign Exchange Management: The Role of CBN. CBN Bullion, vol. 10, No. 3 p 17 – 22. Olawoyin, G. A. (2007), Reserves Management in Nigeria. A paper presentation, CBN. Obaseki, P. J. (2007). Sources, Currency Composition and uses of External Reserves. CBN Bullion. Vol. 32 (2). Ojukwu, P. (2007). Nigeria External Reserves and Issues in Economic Development Strategies: The Guardian,

Wed. 9, p. 27. Yuguda, L. A. (2003). Management of External Reserves: 13th Annual Internal Auditors Conference, Central

Bank of Nigeria, Kaduna No. 27 – 30.



Appendix Fig. 1 Nigeria’s Stock of External Reserves Position (US$ Billion) 60 30 50 25 40 20 30 15 20 10 10 5 0 0 1992 1993 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: CBN Annual Report and Statement of Accounts (1997 – 2008) editions and CBN Statistical Bulletin, Vol. 16, Dec. 2008. Table1: Recent Trends in Nigeria’s External Reserves (1992 – 2008) Year Stock of

External Reserves (US$ Billion)

Percentage change in stock of reserves

Months of imports cover

External debt stock (US$ Billion)

Ratio of reserves/stock of external debts

1992 0.70 *** *** *** ***

1993 1.30 85.71 *** *** ***

1994 1.70 30.77 3.00 29.43 0.06

1995 1.40 -17.65 2.10 32.58 0.04

1996 4.10 192.90 7.60 28.06 0.15

1997 7.58 84.90 9.60 27.09 0.28

1998 7.10 -6.30 9.20 28.91 0.25

1999 5.50 -22.50 7.60 28.07 0.20

2000 9.90 80.00 13.60 28.27 0.35

Source: CBN Annual Report and Statement of Accounts (1997 – 2008) editions and CBN Statistical Bulletin, Vol. 16, Dec. 2008. *** Not available .

Mo

nth

s o

f Im

po

rts

Ext

ern

al R

ese

rve

s (U

S$ B

illio

n)



Table2: Result of Empirical Analysis The model specified in the study was estimated using the ordinary least square regression technique. The result obtained is summarized below: Regression Result of Model Variables Coefficient Standard Error T=Statistics Prob. GDP 0.661458 1.026505 0.644379 0.5263 EXOIL 0.202154 1.391980 0.145228 0.8859 NEOIL -36.00743 37.42813 -0.962042 0.3470 NOILIMP -0.012592 0.351806 -0.035793 0.9718 CPG 141.6775 1541.058 0.091935 0.9276 NCPG -500.6398 1432.677 -0.349444 0.7302 POLST -956201.1 1240965 -0.770530 0.4496 C 917401.8 1149267 0.798249 0.4337 R2 0.6612, R-2 0.5483, F-stat 5.8549, DW Stat. 2.6066 Source: SPSS Result Output



Influencing organisational behaviour through the application of learning theories

Kwasi Dartey-Baah (Corresponding Author)

Department of Organisation & Human Resource Management, University of Ghana Business School

P.O. Box LG78, Legon, Accra-Ghana, West Africa

Telephone: 00233209621292 Email: [email protected]

Kwesi Amponsah-Tawiah

Department of Organisation & Human Resource Management, University of Ghana Business School

P.O. Box LG78, Legon, Accra-Ghana, West Africa

Telephone: 00233546238672 Email: [email protected]

Abstract

Over the years, learning has been seen as an active and rewarding aspect of peoples’ personal and collective experiences. Learning is a feature of all human activities and defines humanity. As the business environment continually changes, organisations increasingly need innovative ideas to stay ahead of competition. Learning therefore is viewed as the key factor that underpins organisational competitiveness. It enables organisations to achieve a better balance between long-term effectiveness and short-term efficiency; hence, a focus on capturing

and sharing learning produces a wider range of solutions to organisational issues. Renowned psychologists have identified learning theories that thoroughly analyse the effect of learning on behaviours. Learning theories have therefore influenced a range of people management best practices. This paper seeks to analyse how organisational behaviour can be influenced through the application of these learning theories.

Keywords: Learning, organisational behaviour, organisational learning, learning theories.

1. Introduction The complexity of current business environments has imposed constantly changing settings in which organisations compete for survival. As a result, special emphasis is placed on acquiring, motivating and retaining quality human resources, since these initiatives are essential for the success of organisations. Moreover, as organisational success is tied to human resource innovations, it is increasingly obvious that all organisations whatever their size and business orientation, depend on the knowledge and expertise of their employees to create sustainable agility and competitive advantage.

To achieve this, organisations not only create enabling environment but also ensure that employees have the appropriate expertise to do the job. Learning clearly underpins this and as such to remain competitive in a business environment characterised with uncertainty and constant change, organisations’ ability to learn from the past and with a better understanding of what is required for the future is essential for their survival. Learning therefore influences organisational behaviour and vital for their relevance and success. Mullins (2010)

Most organisations often fail to capitalise on the collective learning ability of their people. Organisations that value the knowledge and experience of their staff and see that as central to their progress will value the role of learning in the work they do. Applying a range of learning concepts is the foundation for building and managing effective organisational learning. It must however be noted that organisational learning and learning organisations are similar learning concepts which are related to organisational setting but are very distinct in nature. This paper concentrates on the organisational learning concept and provides the analysis of how organisational behaviour can be influence through the application of learning theories.

1.1. Organisation

An organisation is a managed system designed and operated to achieve a specific set of objectives. Organisations can mean different things for those who use them and work in them, because for some, they are significant personal and social sources of money, physical resources; meaning, relevance, purpose and identity;

order and stability and for others it offers security, support and protection; status, prestige, self esteem and self-



confidence; power, authority and control (Huczynski and Buchanan, 2007).

According to Laudon and Laudon (2006), an organisation can be defined technically as a stable, formal social structure with internal rules and procedures that must abide by laws. They further defined an organisation from a behavioural perspective as a collection of rights, privileges, obligations and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution. In this behavioural view, people in organisations develop customary ways of working and they gain attachment to existing relationships. Organisations are thus social arrangements for the controlled performance of collective goals according to Huczynski and Buchanan (2007).

Mullins (2010) asserted that organisations are complex social systems that can be defined and studied in a number of ways. A significant approach to this perspective on the nature of organisations is provided by Morgan (1989). Through the use of metaphors, Morgan identified eight different ways of viewing organisations as machines, organisms, brains, cultures, political systems, psychic prisons, flux and transformation, and instruments of domination. According to Morgan, these contrasting metaphors help in the understanding of the complex nature of organisational life and the critical evaluation of organisational phenomena.

1.2 Organisational Behaviour

Organisational behaviour is the study of the structure, functioning and performance of organisations, and the behaviour of groups and individual within them Huczynski and Buchanan (2007). It is further defined by Griffin (1999) as a pattern of actions by the members of an organisation that directly or indirectly influences organisational effectiveness. He continued to outline the workplace behaviours to include performance behaviours, withdrawal behaviours and organisational citizenship. He further defined performance behaviours as the total set of work-related behaviours that the organisation expects the individual to display. On the other hand, absenteeism and high turnover rates constitute withdrawal behaviours in organisations. Additionally, Griffin (1999) referred to organisational citizenship as the behaviours of individuals that make a positive overall contribution to the organisation.

The purpose of organisational behaviour is to gain a greater understanding of those factors that influence individual and group dynamics in an organisational setting so that individuals and the groups and organisations to which they belong may become more efficient and effective. The study of organisational behaviour therefore seeks to integrate the insights of diversity, discipline and applying them to real-life problems and opportunities.

2. Factors that influence organisational behaviour

According to Mullin (2010), the main factors that influence the way individuals and groups in organisations behave can be listed as follows:

• Individual differences

• Organisational culture

• Information technology

• Organisational structure

• Organisational mission statement

• Learning

2.1 Individual Differences

According to Griffin (1999), as a starting point of understanding human behaviour in organisations, it is important to consider the basic nature of the relationship between individuals and organisations. This is essential in gaining the appreciation of the nature of individual differences which significantly influence organisational behaviour. This is emphasised by Mullins (2010) who advanced that the individual is a central feature of organisational behaviour whether they act in isolation or as part of a group.

Griffin (1999) further identified personality, attitudes, perception, diversity, multiculturalism and stress as the fundamental elements of individual behaviours in organisations. Where the needs of the individual and the organisational demands are incompatible, it can result in frustration and conflicts. It is therefore the task of management to integrate the individual and the organisations needs to provide a working environment that promotes the satisfaction of individual needs as well as the attainment of organisational goals (Mullins 2010).



2.2 Organisational Culture

Organisational culture plays a major role in shaping the behaviours in an organisation. It is a system of shared meaning within the internal environment of a business atmosphere. Griffin (1999) defined organisational culture as the set of values, beliefs, behaviours, customs, and attitudes that help members of organisation to understand what it stands for, how it does things, and what it considers important. Furthermore Griffin also noted that organisational culture determines the feel of the organisation. It is a powerful force that shapes the overall effectiveness and long-term success of the organisation (Popper and Lipshitz, 1998). It can also impact unfavourably on organisational behaviour creating barriers to change, diversity, mergers and acquisitions.

2.3 Information Technology

Information technology affects the behaviours of people in organisations. This impact can be positive or negative. According to Laudon and Laudon (2006), information technology improves individual efficiency and organisational excellence as a whole. However on the negative side, Griffin (1999) argued that information technology can lead to isolation as people do their job without physically interacting with others; and

redundancy as a number of peoples work are taken over by computers. Thus information systems change the organisational balance of rights, privileges, obligations, responsibilities and feelings that have been established over a long period of time.

2.4 Organisational Structure

The structure and design of organisations have implications for individual and group behaviours. As it has been rightly stated by Mullins (2010), behaviour is affected by patterns of organisational structure through which organisational processes are planned, directed and controlled. This means how job tasks are divided, grouped, and coordinated in an organisation can shape the behaviours and therefore very important cause of individual and group behaviours (Popper and Lipshitz, 1998). Hence, the decisions about structure are key to implementing strategy and may affect individual and group motivation and commitment in organisations.

2.5 Organisational Mission Statement

This refers to the core purpose of the organisation. According to Reeves (2006), the mission of the organisation can influence individual and group behaviours; performance; and self-initiative. The clarity and sincerity of this statement does not only motivate staff but also sets the service expectations for the customer (Perrin and Tavakoli, 1997). The culture created by the mission plays a key role in the effectiveness of employees and therefore, management must strive to embrace the core values of the statement so that others will inherently exhibit these values (Griffin, 1999).

2.6 Learning

Learning frequently occurs when an individual has to deal with a new situation. It is about developing new

skills, competencies and attitude to meet new situations. It is a change in behaviour that occurs as a result of

one’s interaction with the environment. Torrington, et al (2005) defined learning as the changed or new

behaviour resulting from new or reinterpreted knowledge that has been derived from an external or internal

experience. Learning is a powerful incentive for many employees to stick to certain organisations and has

significant impact on individual behaviour as it influences abilities, role perceptions and motivation.

Organisations can therefore influence these factors in their bid to promote and encourage learning initiatives. As

the Chartered Institute of Personnel Development (CIPD), UK put it, learning is a self-directed, work-based

process leading to increased adaptive capacity. (www.trainingjournal.com/content/cipd-sad-report). Accessed

10-11-2011. Torrington et al (2005) stated that there are a number of ways people learn and outlined the following as some of the effective means of work-related learning techniques:

• Action learning

• Coaching

• Mentoring

• Peer relationships

• Learning logs.

Honey and Mumford (1992) believed that there are different learning styles which suit different individuals and have drawn up a classification of four learning styles:



• Theorist – one who seeks to understand the underlying concepts of a situation and takes an intellectual approach based on logical argument;

• Reflector – one who observes situations, thinks about them and then choose how to react;

• Activist – one who likes to deal with practical problems and is not interested in theory; and

• Pragmatist – one who only value ideas if there is a direct link to problems.

Huczynski and Buchanan (2007) advanced that changes in behaviour can be measured or quantified using learning curves. A learning curve is a high learning concept which is valid for a wide range of situations. It is a diagrammatic presentation of the amount of learning in relation to time. At the beginning, it is natural that the rate of learning increases but levels off at a point indicating that maximum performance has been achieved and plateaus indicating flattening off in terms of the improvement.

An organisation which facilitates the learning of all it members and continually transform itself is refer to as a learning organisation (Peddler et al 1991). On the other hand, organisational learning is based on the detached observation of individual and collective learning processes in organisations (Torrington et al 2005). According to Torrington et al, although the learning organisation concept centre more on individual learning and self development, organisational learning is more than just the sum of individual learning in the organisation. It implies that it is only when an individual’s learning has an impact on and interrelates with others that organisation members learn together and gradually begin to change the way things are done.

The organisational learning approach is therefore critical to organisational success and is mainly focused on the process of collective learning whereas Easterby-Smith and Araujo (1999) cited that the study of learning organisations is focused on normative models for creating change in the direction of improved learning processes. They argued further that the literature on the learning organisation draws heavily on the concepts of organisational learning mechanisms and can be seen as a way of making the concept of organisational learning more concrete. The organisational learning mechanisms have been described as the structural and procedural arrangements that allow organisations to learn (Popper and Lipshitz 1998).

Organisational learning is therefore the process through which individuals and groups in an organisation develop shared values and knowledge based on past experiences. Organisations vary greatly in all aspects and therefore establishing an understanding of what influences organisational learning is extremely valuable. Lohman (2005) outlined initiative, positive personality traits, commitment to professional development, self-efficacy and love of learning as factors that influence the motivation for organisational learning. Conversely, an unsupportive organisational culture, unwillingness to participate, and lack of proximity with colleagues, negatively impacted organisational learning. Albert (2005) also found out that top management support and involvement of consultants also facilitate organisational learning.

An European study showed that lack of motivation; unclear roles; lack of confidence; insufficient learning

culture; lack of innovation and lack of resources negatively impacted organisational learning Sambrook and Stewart (2000). From the positive perspective, motivation, enthusiasm, involvement, clarity and understanding of role, increased responsibility, a developed learning culture, senior management support, and investment in human resources make a significant difference in organisational learning.

Garvin (1993) cited three critical factors that are essential for organisational learning in practice: meaning, management, and measurement. He advanced that for learning to be a meaningful organisational goal, it must be widely understood, have application to the work being performed, and be supported by the organisational leadership. Furthermore, Garvin reiterated that for an organisation to learn, a change must take place and newly gained knowledge must be intentional and managed. Learning practices and policies must therefore be the foundation of managed organisational learning. Garvin further suggested five basic practices that organisations can manage to enable organisational learning: systematic problem solving, experimentation, the use of demonstration projects, experiential learning, and learning from others on the outside (benchmarking). He added that measurements must effectively gauge the stages of organisational learning: cognitive, where members are exposed to new ideas or knowledge; behavioural changes, where members actually alter their

behaviour based on new learning; and finally, performance improvement, where behavioural changes lead to positive business results in safety, quality, market share, and profitability.

It can be seen that a learning culture play a significant role in the organisational learning process. Amabile (1998) pointed out the following management practices in creating an effective learning culture within an organisation: providing employees with challenges; freedom to innovate; providing the resources needed to

create new ideas; diversity of perspectives and backgrounds within groups; supervisor encouragement; and



organisational support. Barriers to learning according to Torrington, et al (2005) are identified as the culture of an organisation, risk of admitting failure, lack of incentive to change, internal competition, resistance to ideas and learning from other context. Clearly it is imperative for organisations competing in a rapidly changing world to have a continuous learning approach. The ability of individuals and groups to learn is therefore crucial to organisational success especially those organisations that are preoccupied with controlled performance.

3. Learning Theories

There are broadly four theoretical approaches to understanding the nature of learning. The subsequent discussions focuses on these theories and whilst there are no right or wrong theory, organisational behaviours often reflect the explicit or implicit acceptance of one or more of such theoretical perspectives.

3.1 Classical Conditioning theory

Classical conditioning theory discovered by Pavlov (1927) shows how a behaviour or response that is already established can become associated with a new stimulus. It is based on the premise that a physical event termed a stimulus that initially does not elicit a particular response gradually acquires the capacity to elicit that response as a result of repeated pairing with a stimulus that elicits a reaction. Despite the theoretical possibility of the widespread applicability of classical conditioning, most theorists agree that it represents only a very small part of total human learning. Skinner (1953), in particular, argued that classical conditioning explains only reflexive behaviours. These are the involuntary responses that are elicited by a stimulus. Skinner felt that the more complex human behaviours cannot be explained by classical conditioning alone and asserted that most human behaviour affects or operates on the environment. According to Skinner, the latter type of behaviour is learnt through operant conditioning.

3.2 Operant Conditioning theory

This learning theory states that people learn by continually looking for ways to achieve more positive reinforcement in terms of rewards and avoid negative reinforcement in terms of punishment (Skinner, 1953). Reinforcement is defined as a stimulus or event that affects the likelihood that an immediately preceding behaviour will be repeated. Besides reinforcement, punishment produces avoidance behaviour, which appears to weaken learning but not curtail it. It operates under the assumption that if behaviour can be learned, it can also be unlearned. Skinner (1953) has been associated with operant conditioning. He believes that our behaviours are influenced by our history of rewards and punishments. According to Skinner once actions have pleasant effects, then there is the likelihood that such actions will be repeated in the future. This suggests that any behaviour, in a particular context that is reinforced (rewarded) in some way will tend to be repeated in that context. However, if one’s actions have unpleasant effects (punishment), then one is less likely to repeat them in the future. According to this theory, behaviour is the function of its consequences. Skinner (1974) introduced the concept of shaping behaviour by selectively reinforcing desired pieces of behaviour. His experiment revealed that human behaviour is shaped by the environment, by past experiences in that environment and by the selective rewards and punishments that are received. He further argued that thinking, problem solving and acquisition of language are dependent on these simple conditioning processes (Skinner, 1954). Hence, operant conditioning has a great impact on human learning and it also explains much of organisational behaviour.

The classical and operant conditioning theories constitute the behavioural theories concentrating on changes in observable behaviours. The behaviourist psychologist like Pavlov and Skinner associated reward with certain behaviours in order to increase the display of such behaviours. The relevance of this for organisations may be seen for example in telesales training where employees are taught to follow a script and calls are listened to, to ensure that the script is followed. Reward or punishment follows depending on behaviour. The main problems of these behavioural theories are that they are manipulative and limited in nature.

3.3 Social learning theory

A lot of psychologists have been associated with this theory; notable among them are Albert Bandura, N. E.

Miller and J. C. Dollard. Social learning theory, also known as observational learning, state that people learn through observing others’ behaviour, attitudes, and outcomes of those behaviours Bandura, (1977). Furthermore, Bandura (1977) explained human behaviour in terms of continuous reciprocal interaction between cognitive, behavioural, and environmental influences. He believed that direct reinforcement could not account for all types of learning. The social learning theory added a social element, arguing that people can learn new information and behaviours by watching other people. He noted that external environmental reinforcement was not the only



factor to influence learning and behaviour but also intrinsic reinforcement such as pride, satisfaction, and a sense of accomplishment. In other words, this theory assumes learning to be a social activity that is based on one’s needs as a human being to fit in with others. In organisational setting, this happens naturally as workers learn to fit into the perceived organisational culture. Fitting here means that one can be accepted successfully into the organisation but does not necessarily mean the individual internalise and believe the way things are done in the organisation. Social learning theory therefore has a considerable relevance to organisational behaviour (Miller and Dollard, 1950) but its main limitation is that it ignores the role of choice for the individual.

3.4 Cognitive theory

Cognitive theory is based on an information processing approach and is basically concerned with what goes on in the learner’s mind. The cognitive theorist argued that the rewards and punishment that behavioural theorists call reinforcement, work in more complex ways than the conditioning theories suggested (Huczynski and Buchanan 2007). These authors claimed that in reinforcement, people are always aware about the results of the past behaviour; thus a feedback on how successful a behaviour has been. Huczynski and Buchanan further

stressed that knowledge is information which can be used to modify or maintain previous behaviour. Cognitive theory of learning is therefore not concerned with the relationship between stimuli and responses, but rather with the plans that people choose and the way they adopt to pursue and how these plans are modified by experience (Torrington et al 2005). Cognitive process assumes that people are conscious and active participants in how they learn. This theory is relevant in the contemporary managerial practices as many motivation theories such as Equity theory, Goal-Setting theory, and Expectancy theory which centre on the concept of cognition. Expectations, attributions and locus of control are all cognitive concepts requiring attention while motivating employees.

The strengths of the cognitive theory are:

• It stresses the importance of learner motivation and individual needs;

• It recognises the fact that the individual has control over what is learnt; and

• It identifies feedback as a vital aspect of learning.

The drawbacks of this theory on the other hand are that it assumes learning is neutral and unproblematic; and it is a purely rational approach that ignores emotions.

4. Influencing organisational behaviour through the application of learning theories

The behavioural approach (classical conditioning and operant conditioning theories) to learning has led to the development of a range of techniques generally describe as behaviour modifications which have effectively been applied to organisational settings. Behaviour modification is a general label for approaches to changing behaviour through the use of appropriate and timely reinforcement. This approach is based on the premise that people learn to repeat behaviours that have favourable consequences. It uses the principles of reinforcement (motivational strategies) to eliminate undesirable workplace behaviours and to increase the frequency of such desirable behaviours.

Effective motivational strategies can either be transactional or relational rewards. The transactional rewards are mostly in the form of pay increase and attractive benefits whereas the relational rewards are in the form of employee recognition, flexible work/life balance, positive working conditions, sense of achievement, employee empowerment and involvement in decision making, opportunities for personal growth and career advancement. All these motivational strategies drive employee satisfaction and commitment toward the achievement of organisational goals.

Suppose a manager want more assignment completed on time, and less submitted beyond the required deadline;

the manager may use positive reinforcement like compliment to reinforce this behaviour or use negative reinforcement (punishment/sanctions) like warning letter to deter undesirable behaviours. Smither (1988) cited a typical example of how this was applied in a factory in Mexico which suffered serious timekeeping problem;

15% of their workforce arrived late for work on regular basis. Management decided to reward good timekeeping by paying workers two pesos a day extra if they started work early. Lateness fell from 15% to 2%, at minimal additional cost to the company. In customer oriented organisations, a positive reinforcement can be used to create superior customer value; motivational strategy like recognition can greatly influence behaviours

positively as far as delighting customers is concerned.



Moreover, inappropriate behaviours in organisational setting can be punished directly by withholding rewards or by initiating disciplinary procedures. Punishment, be it perceived or real, is likely to cause feeling of resentment in the mind of the affected employee leading to apathy or psychological revenge. It is therefore not surprising that most organisations prefer to use reward management as means of positively controlling organisational behaviours.

It is however important that behaviour modification techniques are carefully planned to identify specific behavioural goals and particular procedures for reinforcing the behaviours that will achieve those goals. Where behaviour and appropriate reinforcement can be clearly identified and linked (example, if you wear your seat belt we will give you a prize) the techniques can be effective. Where this relationship is less clear (example, if you demonstrate commitment to the organisation we will consider you for promotion) the applicability of the technique is less certain. Behaviour modification techniques also involve clear communication of goals and expectations to employees in unambiguous terms.

Social learning theory can also be applied in organisational setting to influence organisational behaviour. A great deal of what is learnt about how to behave in organisations can be explained through the process of observational learning. For instance, a new staff acquires job skills by observing what an experienced employee does.

Organisations tend to have different standards concerning, for example, what counts for good work performance; familiarity in everyday social interactions at work; the appropriate amount of deference to show to

superiors, dress and appearance; and attitudes to work, colleagues, managers and customers. The newcomer has to learn these standards to be a successful and accepted member of the organisation. It is not enough just to learn the knowledge and skills required to perform work duties and responsibilities but to also acclimatise towards the accepted corporate culture. Individuals arrive in a new organisation with values, attitudes, beliefs and expectation that they have acquired elsewhere. The old way of doing things from previous organisations may have to be unlearned sometimes in order to learn the new ways of doing things in a new organization so the concept of learning is unavoidable in organisations.

Observational learning occurs in a very informal and unarticulated manner. For example, people who experience the norms and traditions of their organisations and who subsequently incorporate these into their own behaviour may be recognized as having learnt through observation. The new recruit often learns about the organisation by just being there. This is achieved by giving rewards such as encouragement, privilege and promotion for accepted behaviour; and on the other hand by punishments such as being sanctioned for undesirable behaviours.

Social learning on the other hand enhances the self-efficacy of the learner, where self- efficiency refers to a person’s belief that she has the ability and motivation to complete a task successfully. Social learning increases self-efficiency because people gain greater self-confidence after observing others perform task. Managers can shape employee behaviour by systematically reinforcing each successive step that moves the individual closer to the desired response. If an employee, for example, who has often been an hour late for work comes in only twenty minutes late, the boss can reinforce that improvement.

The main problem of organisational application of the social learning theory is that, because it is a natural social process and most often there is no clear financial or material benefit from investing in its operation, it may be difficult gaining management support and commitment.

Cognitive learning theory, which emphasised the informative and motivational function of feedback, can also be applied in an organisational setting to positively influence organisational behaviour as follows:

• Motivating organisational members to learn and with management establishing what the motives of organisational learning are, and clearly outlining the benefits. The motivational strategies may include a prestigious job title, career opportunities or the acquisition of a valued skill.

• Tasks to be learned should be divided into meaningful segments for which performance standards can be established. The more meaningful the task, the stronger the motivation to learn.

• Giving employees clear, frequent and appropriate feedback on their performance and progress. It is worth noting that intrinsic feedback is usually inadequate in organisational learning and therefore it is essential that management provide the relevant extrinsic feedback as well.

• Focus on rewarding appropriate behaviours since punishment does not tell employees what they are doing wrong or what they have to do to improve but rather punishment for poor work done is likely to instil dislike, distrust and hostility in affected employees and reduce their motivation for learning. The



effects of punishment are likely to be less predictable than those of reward. However, encouragement and recognition create feeling of confidence and competence that enhance motivation to learn.

• Concurrent feedback is more effective than delay feedback. Research into employee performance appraisal systems shows that delayed feedback is usually done casually and annually; in order words,

too little is done too late to be of any use in developing job knowledge, skills and performance. Supervisors therefore need to give frequent feedback in a helpful and considerate manner. It is not unreasonably to think that most workers would potentially respond positively to helpful, encouraging and motivating criticism than to no feedback at all.

5. Conclusion

From the above discussions, it can be deduced that learning theories can be applied in various ways to influence organisational behaviours positively. The role of management in organisational learning has been to encourage continuous and collective learning and subsequently transform them into desirable behaviours and processes to create a sustainable competitive advantage. Managers must therefore recognise the central role motivation plays in influencing the behaviour of individuals and groups in organisational settings and be familiar with the content and the cognitive motivational factors that drive employee satisfaction and commitment.

Key motivators such as employee recognition, work/life balance, empowerment and participation, advancement and growth, and sense of achievement can be used to reinforce desirable employee behaviours towards the attainment of organisational goals. However, managers need to be sure that the motivational strategies fulfil needs; otherwise they will have little value. Content theories of motivation suggest that different people have different needs at different times. These theories also warn against relying too heavily on financial rewards as a source of employee motivation.

To enable positive learning environment in organisations, the following approaches should be adopted:

• Organisations must foster conducive climate where workers are encouraged to learn and share knowledge acquired with others;

• The process of strategy formulation should be designed with learning in mind, and incorporate experimentation and feedback;

• Members of organisations should be encouraged and given the opportunity to contribute to policy making as part of the learning process. This way they own the policy outcome as this drives their motivation and commitment towards the achievement of the organisational goals;

• The implications for effective learning are that people react to problem situations in different ways and so there should be harmonisation between the learning methods and the learning styles;

• Managers should understand the psychological contract they establish with their employees and be fair and equitable. Furthermore, managers need to also realise that people may not be precisely matched with their jobs but still attempt to do as good a job as possible in optimising this relationship and recognise and appreciate the fact that every individual is unique. In addition in attempting to assess behaviour in organisations, the context/situation within which the behaviour occur must be considered because an individual who is satisfied and productive in one context may become dissatisfied and unproductive in another context.

References

ACCA (2003), “Managing People”, Foulks Lynch, Publications.

Albert, M. (2005), “Managing change: Creating a Learning Organisation focused on quality”, Problems and Perspectives in Management 1, 47-54.

Amabile, T. M. (1998), “How to kill creativity”, Harvard Business Review, 76(5), 76-87.

Bandura, A. (1977), “Social Learning Theory”, New York, General Learning Press.

Easterby-Smith, M & Araujo, L. (1999), “Organisational Learning: Current Debates and Opportunities’, In: M. Easterby-Smith, J. Burgoyne & L. Araujo (eds.) Organisational Learning and the Learning Organisation. London: Sage.

Garvin, D. A. (1993), “Building a learning organisation”, Harvard Business Review, 71(4), 78-91.



Griffin, R. W. (1999), “Management”, Houghton Mifflin Company, 6th Edition.

Honey, P. & Mumford, A. (1992), “The Manual of Learning Styles”, Honey Publications, 3rd Edition.

Huczynski, A. & Buchanan, D. (2007), “Organisational Behaviour”, Prentice Hall International.

Keller, F.S. (1969), “Learning: Reinforcement Theory”, New York, NY: Random House Inc.

Laudon, K.C. & Laudon J.P. (2006), “Management Information System: Managing the Digital Firm”, Pearson Education Inc, 10th Edition.

Lohman, M. C. (2005), “A survey of factors influencing the engagement of two professional groups in informal workplace learning activities”, Human Resource Development Quarterly, 16(4), 501-527.

Mayer, R. E. (2003). “Learning and instruction”, Upper Saddle River, NJ: Merril Prentice Hall.

Miller, N. E. & Dollard, J. C. (1950), “Personality and Psychotherapy”, McGraw-Hill

Morgan, G. (1989). “Creative organisation theory”, Sage Publications.

Mullins, L.J. (2010), “Management and Organisational Behaviour”, Pearson Education, 9th Edition.

Pavlov, I. P. (1927), “Conditioned Reflexes: An Investigation of the Physiological Activity of the Cerebral Cortex”, Translated and Edited by G. V. Anrep, Oxford University Press.

Peddler, M., Burgoyne, J, & Boydell, T. (1991), “The Learning Company”, McGraw-Hill.

Perrin, L. and Tavakoli, I.(1997), “Mission Impossible without Commitment”, Professional Manager, July; 14-15.

Popper, M. and Lipshitz, R. (1998), “Organisational learning: A cultural and structural approach to organisational learning”, Journal of Applied Behavioural Science, Vol. 34, pp161 – 178.

Reeves, C. (2006), “Making vision statements meaningful”, British Journal of Administrative Management, April/May 2006.

Sambrook, S. & Stewart, J. (2000). “Factors influencing learning in European learning oriented organisations: issues for management”, Journal of European Industrial Training, 24(2-4), 209-219.

Skinner, B.F. (1954), “The science of learning and the art of teaching”, Harvard Educational Review, 24(2), 86-97.

Skinner, B.F. (1953), “Science and Human Behaviour”, Macmillan.

Skinner, B.F. (1969), “Contingencies of Reinforcement: A Theoretical Analysis”, Englewood Cliffs, NJ: Prentice-Hall.

Skinner, B.F. (1974), “About Behaviourism”, Jonathan Cape.

Smither, R. D. (1988), “The Psychology of work and Human Performance”, Harper & Row.

Torrington, D., Hall, L., & Taylor, S. (2005), “Human Resource Management”, Pearson Education Limited, 6th Edition.

www.cipd.co.uk (Accessed 10-10-2011)

www.learning-theories.com (Accessed 15-10-2011)

www.trainingjournal.com/content/cipd-sad-report/ (Accessed 10-11-2011)

2.[10 18]influencing organisational behaviour through the application of learning theories

Economy & Finance

gross domestic product

international monetary fund

crude oil production

international oil market

human resource management

cbn statistical bulletin

nigerias external reserves

oil producing countries