‘Right’ Way to Measure Performance

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ACKNOWLEDGEMENT

This article was published in the New Straits Times on July 28, 2007
as a CIMA Business Talk article.

Reproduced here with permission from
The Chartered Institute of Management Accountants (CIMA Malaysia).
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Many firms are using wrong performance measures, many of which they incorrectly term as key performance indicators (KPIs). In my experience, few firms monitor their KPIs because they haven't explored what a KPI actually is.

Let me explain what a KPI is by telling a story about former British Airways chairman, Lord King, who hired a group of consultants in the 1980s to deterrnine the key measures that he should focus on to turn around his ailing company. They told him that there was one critical success factor: the timely arrival and departure of aircraft. I imagine that he was’t impressed since everyone in the industry knew this fact. But the consultants pointed out that this was where the firm's KPIs lay and proposed that he should concentrate on late flights. So, King agreed to be notified whenever a BA service was delayed by more than a couple of hours. It wasn't long before BA jets had a reputation for leaving on time.

The importance of the “timely arrival and departure of aircraft” critical success factor can be seen by the impact of delayed flights on all six perspectives of the following balanced scorecard:

• Financial – Increased outgoings, including airport surcharges and costs of overnight accommodation for seriously delayed passengers
• Customer – Dissatisfaction among delayed passengers and those people meeting them at their destination – they’re potential customers
• Environment / community – Increased carbon emisions from aircraft using extra fuel to circle airports after missing their landing slots
• Learning and growth – A negative impact on staff development, as employees would tend to replicate the behaviour that had caused the delays
• Internal processes – An adverse effect on aircraft servicing schedules
• Employee satisfaction – Increased stress for staff who have to deal with unhappy passengers

KPIs represent a set of measures focusing on those aspects of performance that are most crucial for the continued success of an organisation. There are only a few in any one firm and as the BA story shows, have a profound impact if they are monitored constantly at the top.

A few KPIs can be measured weekly, but most should be measured daily or even hourly. Measuring them monthly is closing the stable door well after the horse has bolted. Most organisational measures are very much indicators of what happened in the past month or quarter. These are not KPIs. That's why a half-yearly customer satisfaction survey can never be a KPI. Some firms conduct customer surveys daily. In their case, there could be a couple of KPIs within the satisfaction measures.

All good KPIs that I’ve come across have commanded the attention of the chief executive, who would contact the people responsible for them daily. And a KPI is deep enough in the organisation that it can be tied down to an individual. Return on capital employed has never been a KPI since it cannot be attributed to one manager.

A good KPI will affect most of the critical success factors and more than one aspect of an organisation's balanced scorecard. When the boss focuses on the KPI and everyone follows suit, the firm wins on several fronts.

My research in this area has led me to conclude that there are three types of performance measures:

• Key result indicators (KRIs) that tell the board how managers have performed in terms of a critical success factor or perspective of the balanced scorecard
• Performance indicators (PIs) that tell staff and managers what to; and
• KPIs that tell staff and managers what to do to increase performance dramatically

Robert Kaplan and David Norton recommend that forms should have no more than 20 KPIs. Jeremy Hope and Robin Fraser suggest fewer than 10. I think that there should be about 10 KRIs, up to 80 PIs and about 10 KPIs.

The common feature of KRIs is that they are the result of many actions. They give a clear picture of whether a firm is moving in the right direction and the progress it is making towards planned goals – that’s the role of PIs and KPIs. KRIs that have often been mistaken for KPIs include customer satisfaction or profitability, employee satisfaction, net profit before tax, and return on capital employed.

An organisation should have a governance report comprising up to 10 measures providing KRIs for the board, plus a balanced scorecard comprising up to 20 measures – a mix of PIs and KPIs – for the management team.

While they are, by definition, not key to the business, PIs are crucial for teams to align their daily activities with the organisation's strategic aims. They complement KPIs and are shown with them on the balanced scorecards of the organisation and its divisions, departments and teams.

PIs can include profitability of the top 10 per cent of customers, net profit on key product lines, and number of employees participating in the staff suggestion scheme.

KRIs replaces outcome measures, which typically consider activity over months or quarters. PIs and KPIs are now characterised as past, current or future measures. An example of a past measure would be the number of flights last week that were delayed. A current measure would be the continually updated tally of delayed flights. A future measure would be the number of initiatives to be started in the next month to target problems causing delays to flights. You will find that true KPIs in your organisation are either current or future measures.

Written by David Parmenter. For more information, please contact The Chartered Institute of Management Accountants (CIMA) Malaysia at Tel: +603 – 7723 0230 or e-mail: kualalumpur@cimaglobal.com Website: http://www.cimaglobal.com

Chen Ming-fa's note - Recommended readings:

Parmenter, David. (2007). Key Performance Indicators: Developing, Implementing, and Using Winning KPIs. Hoboken, NJ: John Wiley & Sons

Alexander, Jack. (2007). Performance Dashboards and Analysis for Value Creation. Hoboken, NJ: John Wiley & Sons

Paladino, Bob. (2007). Five Key Principles of Corporate Performance Management. Hoboken, NJ: John Wiley & Sons

Eckerson, Wayne W. (2006). Performance Dashboards: Measuring, Monitoring, and Managing Your Business. Hoboken, NJ: John Wiley & Sons

Malaysian Copyright Protection of Online Materials

I. Introduction

We have been living in the digital information age -- the age of the Internet, for some time now. For most people, the World Wide Web or simply the Web, is a norm in their daily lives at work, in business and in personal communications.

Most businesses or companies today already own a “Web presence" i.e. they have developed and published a Web site about their business or company. Such Web sites are regularly maintained or updated with the latest information, for e.g. a public listed company may publish their latest audited or unaudited financial results on their Web site such as Petroliam Nasional Bhd (PETRONAS).

As time passes, we tend to take all these online materials or information for granted. Well, it is there posted up for the public, for the world to see and read. So, what is wrong with copying the information wholesale or portions of it as it is?

All the online materials we see, read or come across are created with copyright laws in mind. Can any person just “copy and paste” from materials published online (or from printed media) belonging to other people without authorisation or the owners’ consent or even a citation or acknowledgement?

As an example, for a business or company or an individual who wishes to develop, publish and maintain a Web site, two major copyright issues exist:

• To protect all the contents, materials (e.g. audio and video tracks, images and pictures) and links of its Web site from copyright infringement; and


• To ensure that all or any of the contents, materials and links used or reference to in its Web pages are not infringing on another owner’s copyright

Copyright law is a branch of intellectual property law along with trademarks, patents and industrial designs. I will discuss the protection and rights provided for by copyright laws in general, with references to Malaysia’s copyright law -- the Copyright Act 1987 and the Copyright (Amendment) Act 1997, amendments made to update the Act in relation to online content and materials.

II. Copyright Laws and Copyright Protection

1.0 What is copyright protection?

Copyright laws provide protection to authors of “original works” against unauthorised use, duplication, reproduction, alteration, transmission, distribution and passing off as another’s original work.

If copyright is infringed, the copyright law provides for legal remedies and restitution against the copyright infringer or offender.

2.0 What can be copyright protected?

“Original works” in material form of qualified authors are copyright protected. This means that in order for a work to enjoy copyright protection, it needs to meet certain eligibility criteria:

1. It is an original work -- The nature of originality in copyright laws does not mean that the work must be an expression of original ideas, but rather the expression of thought not copied from another source
   


2. The work must be written down, recorded or otherwise reduced to material form
   


3. The author is a qualified person -- Since laws involve jurisdictions, a “qualified person” can be generally defined as a person recognized by the copyright law jurisdiction. For e.g., in Malaysia’s copyright laws, a qualified person is defined as:

“(a) In relation to an individual, means a person who is a citizen of, or a permanent resident in, Malaysia; and

(b) In relation to a body corporate, means a body corporate established in Malaysia and constituted or vested with legal personality under the laws of Malaysia.”

[Source: Malaysia Copyright Act 1987, Section 3: Interpretation.]

Original works recognized by copyright laws for copyright protection includes:

• Literary works


• Musical works


• Artistic works


• Films


• Sound recordings


• Broadcasts


• Published editions


• Derivative works e.g. typographical translation, adaptation or arrangement of works eligible for copyright


• Collection of works eligible for copyright, but must be selected and arranged in such a way that the resulting work becomes an original intellectual creation

3.0 Copyright protection for online materials

There is no real difference between traditional copyright and electronic copyright. The distinction lies in the way the electronic or online material has to be decoded or read and used by the user.

Works that are published or transmitted in electronic format or medium e.g. CD-ROMs, Web pages of Web sites or portals, online databases, computer programs or software, etc are copyright protected as their printed or traditional medium equivalents.

Online materials can generally be categorized into three major groups:

3.1 Electronic information

Electronic information is information that has been converted into electronic form for the purposes of transmission, decoding and manipulation, storage, publishing and displaying on or from digital media or in cyberspace, mainly via Web browsers and computer programs in tangible and specific form or function.

Therefore, the contents and multimedia materials we see and read on all Web pages, Web sites or portals are copyrightable materials. Reports, charts, graphs, and other data attached to electronic mails and easily sent across cyberspace from one party to another may be copyright materials, and copyright may be violated.

The computer industry’s most famous copyright infringement case is the Napster case of downloading and sharing copyright music files in digital form.

In RIAA v. Napster, Inc., it was held that Napster did not copy or distribute the digital music files, but the users who were allegedly committing the direct infringement by downloading, copying and sharing the digital music files. [Ryan, 2002, p. 495]

However, Napster was found guilty of both contributory and vicarious infringement. The plaintiffs claimed that Napster’s facilitation of the identifying and downloading of the files constituted contributory infringement.

The plaintiffs also claimed that Napster had the ability to control the activity by allowing or filtering out the files, and had also gained financially from advertising revenue based upon the number of “hits” or “visits”, which constituted vicarious infringement.

3.2 Computer programs and computer software

Copyright treats computer programs or software as a literary work. Actually a software product can be distinguished from the computer program since a software product may be made up of different copyright works.

For e.g., a software product usually consists of:

• A designed packaging box


• A printed user guide or manual


• Diagrams, graphs, charts, artwork, screen displays, images in the user guide or manual


• Sounds and sound recordings


• Video and animation; and


• The encrypted or compiled computer codes that makes up the computer program, stored in a CD-ROM or floppy disk

The creator of the computer program i.e. the programmer is recognized as the owner of the work unless the programmer is an employee and created the program as part of the job responsibility, in which case the copyright of the program automatically belongs to the employer, or the programmer has assigned the copyright to another party.

Copyright protection is extended to the computer codes written in a computer language as a literary work. Hence, copying in part or in whole is not permitted without the copyright owner’s consent. If another programmer is able to reverse engineer the computer codes of a computer program to study or examine the method of operation of the concept, and later independently write new computer codes to perform similar operations, then there is no copyright infringement.

This has led to several countries e.g. the United States and Japan, extending patent protection in addition to copyright protection for computer programs. Patent protection additionally provides the owner an exclusive right to make, use and sell the invention for a statutory period of time.

In Diamond v. Diehr, 450 U.S. 175, 185 (1981), the United States Supreme Court granted patent protection to the computer program that contained a mathematical algorithm as a step in process. It was held that the computer program was patentable because it was not merely a procedure for solving a mathematical formula. [Ferrera, 2004, p. 115]

3.3 Databases

A database is a collection of independent works, data or other materials that are arranged in a systematic or methodical way and individually accessible by electronic, digital or other means to provide meaningful or valuable information. For e.g. telephone and street directories, customer mailing lists, photographs, customer credit card information, bill of materials, inventory data.

Advances in information and communication technologies have increased the use and value of databases enormously and highlighted the need for high security and the importance of protecting databases from unauthorized access, usage, copying and manipulation or modification.

Copyright exist in databases as literary works by virtue of the selection and arrangement in the compilation of the data.

4.0 Exclusive rights of copyright owners

Copyright owners have the following exclusive rights over their copyrighted works. These exclusive rights enable the copyright owners to exercise legal authority to control the use of their copyrighted works by others.

4.1 Reproduction right

Is the right to copy, duplicate, transcribe or imitate the copyrighted work in fixed form. In MAI Systems Corp. v. Peak Computer, Inc., 1991 F.2d. 511 (9th Cir. 1993), it was held that computer software downloaded into a computer’s RAM memory by the defendant to be used to diagnose computer problems was sufficiently permanent and fixed to have infringed on copyright. [Ferrera, 2004, p. 91]

Unauthorised scanning of any copyrighted work into a digital file and then using it on a Web site constitutes copyright infringement.

Two other technology issues exist which relates to reproduction i.e. framing and caching. Framing, which allows a Web site visitor “to view the framed site while the site owner’s proprietary material is displayed next to linked third party material in the same window” may constitute copyright infringement.

Caching is the technology used to copy a part of or all of the contents of a Web page for indefinite storage to facilitate quick access to the Web page in future. This is known as “proxy caching”, and tantamount to copyright infringement because the copyright owner’s right to reproduce is exercised. Hence, the copyright owner’s consent is required.

4.2 Modification right or derivative works right

Is the right to modify copyrighted work to create new work. Most Web site designers or developers tend to study other Web site designs to evaluate and select the best or latest features to incorporate into their Web site. In so doing, the Web site designers may easily infringe copyright by producing a derivative work.

In Lewis Galoob Toys, Inc. v. Nintendo, Inc., 964 F.2d. 965 (9th Cir. 1962), it was held that the “Game Genie” device that altered Nintendo’s videogame cartridges by enhancing the audiovisual displays without incorporating the original work in any permanent form did not create a derivative work. [Ferrera, 2004, p. 93]

4.3 Distribution right

Is the right to distribute i.e. sell, rent or lease copies of the copyrighted work. For e.g. the unauthorized printing or photocopying of textbooks for sale to students at a lower price or given free to students is an act of copyright infringement because the distribution right of the copyright owner is exercised.

In Marobie-Fl. Inc. v. National Association of Fire Equipment Distributors, 983 F. Supp. 1167 (N.D. Ill.), the court held that it was an infringement of copyright because unauthorized copies of the plaintiff’s electronic clipart files were placed on the defendant’s Web site for downloading by any Internet user. [Ferrera, 2004, p. 92]

Another aspect of the distribution right related to online materials is the practice of linking to other Web sites. Generally, the linking to the home page of another’s Web site by way of the Universal Resource Locator (URL) address is not an act of unauthorized distribution or copying within copyright laws. However, it is in the best interests of all parties involved to verify the Terms of Use found in other Web sites that may contain a clause prohibiting linking without expressed consent.

4.4 Public performance and public display rights

Public performance (e.g. recite, play, act, dance) and public display (e.g. show, exhibit, transmit directly or by way of film, slides, photography, television, projection, electronic medium, etc) is defined by copyright law as the performance and/or display of copyrighted work in a place open to or accessible to the public or semi-public, for e.g. a shopping mall, a museum, an art gallery, the lobby of an office building.

The Internet or cyberspace is a public place as any person in the world with Internet access can visit cyberspace.

In Columbia Pictures, Ind. v. Aveco, Inc., 800 F.2d. 59 (3rd Cir. 1986), the court held that the copyright owner’s public performance and public display rights were violated when the defendant improperly authorized the public performance of movies by renting videotapes and allowed customers to see the tapes in viewing rooms opened to the public. [Ferrera, 2004, p. 94]

The court also arrived at a similar decision of copyright infringement in Michaels v. Internet Entertainment Group, Inc., 5 F. Supp. 2d. 823 (C.D. Cal. 1998) where “making videotape footage available over the Internet without authorization and posting unauthorized copies of electronic clip art on Web pages violate the copyright owner’s exclusive statutory right of public display”. [Ferrera, 2004, p. 94]

5.0 Copyright infringement and legal remedies

As explained in the previous section, if one or more exclusive rights of the copyright owner is exercised by another without the consent of the copyright owner, it is an infringement of copyright.

The Malaysia Copyright Act 1987 defines copyright infringement as:

“(1) Copyright is infringed by any person who does, or causes any other person to do, without the licence of the owner of the copyright, an act the doing of which is controlled by copyright under this Act.

(2) Copyright is infringed by any person who, without the consent or licence of the owner of the copyright, imports an article into Malaysia for the purpose of --

(a) selling, letting for hire, or by way of trade, offering or exposing for sale or hire, the article;

(b) distributing the article --

(i) for the purpose of trade; or

(ii) for any other purpose to an extent that it will affect prejudicially the owner of the copyright; or

(c) by way of trade, exhibiting the article in public,

where he knows or ought reasonably to know that the making of the article was carried out without the consent or licence of the owner of the copyright.

(3) Copyright is infringed by any person who circumvents or causes any other person to circumvent any effective technological measures that are used by authors in connection with the exercise of their rights under this Act and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.

(4) Copyright is infringed by any person who knowingly performs any of the following acts knowing or having reasonable grounds to know that it will induce, enable, facilitate or conceal an infringement of any right under this Act:

(a) the removal or alteration of any electronic rights management information without authority;

(b) the distribution, importation for distribution or communication to the public, without authority, of works or copies of works knowing that electronic rights management information has been removed or altered without authority.

(5) For the purpose of subsection (4) and section 41, "rights management information" means information which identifies the works, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public.”

[Source: Malaysia Copyright Act 1987, Section 36: Infringements.]

Furthermore, in copyright infringement, “either the whole or a substantial part of the copyrighted work must be copied for the copying to amount to infringement”.

The originality of the part or parts taken must be proven in order to establish that a substantial part or parts had been copied. In Spectravest, Inc. v. Aperknit Ltd. (1998) FSR 161, it was held that “to determine liability, one should identify the part taken and separate from the defendant’s work and find out that originality of the part taken. It should also be shown that the defendant’s object in taking and using the part concerned is the same as that of the plaintiff’s, and the part taken is used by the defendant in a way which interferes with the sales of the original or competes with it”. [Colston, 1999, p.227]

For online materials, copyright infringement may involve the Internet Service Provider (ISP) if the ISP had facilitated the infringement. An ISP may be held liable for direct, vicarious or contributory infringement.

If an ISP had exercised the reproduction rights of the copyright owner without consent, the ISP may be guilty of direct infringement. If an ISP had financially gained from the infringement by another party and had the right to control and supervise the infringement, the ISP may be guilty of vicarious infringement.

Finally, if an ISP is found to have knowledge of the infringing activity and intentionally participated in it, the ISP may be guilty of contributory infringement.

Legal remedy or relief against copyright infringement generally takes the form of fines or penalties and/or imprisonment upon conviction.

Section 41 of the Malaysia Copyright Act 1987 provides for fines ranging from Ringgit ten thousand to five hundred thousand, and/or imprisonment ranging from three to twenty years.

III. International Copyright Treaties

The relationship and effects between cyberspace and legal jurisdiction is not a straightforward subject. A Web site hosted in Kuala Lumpur, Malaysia can be accessed or visited by any person in the world who has Internet access. Then, do courts in other countries have jurisdiction over copyright matters of the Web site of the Malaysian company? What happens when country A’s copyright laws differ from country B’s, or country A has inadequate copyright laws?

In order to achieve and provide an international minimum accepted copyright protection and recognition, and for the advancement of uniform copyright laws, several international treaties dealing with copyright exists:

• Berne Convention for the Protection of Literary and Artistic Works


• General Agreement on Tariffs and Trade (GATT), which includes the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)


• Universal Copyright Convention


• International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (Rome Convention)


• Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms (Geneva Convention)


• World Intellectual Property Organisation (WIPO) Copyright Treaty


• WIPO Performances and Phonograms Treaty

[Source: www.WIPO.int/copyright, www.WTO.org, www.UNESCO.org]

Many countries, including Malaysia, are members to the above treaties, but not all countries have signed or ratified all the terms of the treaties for implementation in the respective countries’ copyright laws.

However, by being a member of international copyright treaties, a country must legislate to achieve a minimum standard of copyright protection. In most cases, a country must also give copyright protection to materials from other member countries.

IV. Conclusion

Copyright law has not been made ineffective with the evolution of technology. Although the pace of digital technologies; related convergence of text, audio, video, images and animation; and “push” in terms of their application gaining influence in cyberspace is taking place at an unprecedented speed, past notions about copyright have been modified and will continue to be modified to encompass the cyberspace and new technologies.

In addition to major legislative changes and international cooperation to provide protection for online materials, novel business models, new protection technologies and even education in copyright laws may help make legislation more effective.

References:

Baumer, David & Poindexter, J. C. (2002). Cyberlaw and E-Commerce. New York, NY: McGraw-Hill

Colston, Catherine. (1999). Principles of Intellectual Property Law. London: Cavendish Publishing Ltd

Ferrera, Gerald R., Lichtenstein, Stephen D., Reder, Margo E.K., Bird, Robert C. & Schiano, William T. (2004). Cyberlaw: Text and Cases. Mason, Ohio: Thomson South-Western

Laws of Malaysia, Act 332: Copyright Act 1987 (incorporating latest amendment – Act A1139/2002). Kuala Lumpur: Malaysian Law Publishers

Litman, J. (1996). “Copyright law and electronic access to information.” First Monday, Vol. 1 No. 4 www.firstmonday.org/issues/issue4/litman

Ryan, Timothy J. (2002). "Infringement.com: RIAA v. Napster and the War against Online Music Piracy." Arizona Law Review, Vol. 44 (2), p. 495 http://www.law.arizona.edu/Journals/ALR/ALR2002/vol442/Ryan_FINAL.pdf

Wienard, P. (1998). "Copyright in electronic information." www.farrer.co.uk/bulletins/ip/copyrigh.shtml

Better Performance Measurement

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ACKNOWLEDGEMENT

This article was published in the New Straits Times on January 15, 2005
as a CIMA Business Talk article.

Reproduced here with permission from
The Chartered Institute of Management Accountants (CIMA Malaysia).
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The processes used in designing, implementing, using and updating your performance measurement system are crucial to its success.

Most of the literature on performance measurement has focused on frameworks such as the balanced scorecard or the performance prism. Although these frameworks suggest the dimensions of what a business should measure, they do not say what they should measure. For this you need a management process so that you can translate your business objectives into meaningful measures, which are used throughout the organisation.

Over the last 10 years, members of the Cranfield Centre for Business Performance, UK, have been sponsored by the Engineering and Physical Science Research Council to look at the processes for designing, implementing, using and updating performance measurement systems. Here are some of the key findings.

Designing Measures

Designing performance measurement systems is all about deciding which measures to select and which to ignore. The principle behind the balanced scorecard and performance prism is that the number of measures should be limited to give clarity to what the organisation is trying to achieve. This first process is all about selecting the key objectives for the organisation over the next period and designing appropriate measures to track improvements.

When management teams do this together, they find that it clarifies their thinking on what is important. Having a debate refines thinking and makes each manager's beliefs about how the organisation works explicit. This process is beneficial even if the measurement process does not progress further.

Ideally the output should be two-fold – a “success map” and a set of performance measures.

The success map should show all the key objectives for the organisation over the next period on a single sheet of paper. They are linked showing the main cause and effect relationships between objectives. This map is an extremely good communication tool both for the management team and for communicating objectives throughout the organisation.

The second aspect is the design of the performance measures. Measures drive behaviour, so it is important to translate the objectives into appropriate ones, paying attention to precisely how they are calculated.

Implementing Measures

The implementation of the performance measurement system needs to be considered as a process in its own right. Many companies have failed to recognise this and adopted a very laid back approach. They are then surprised when the implementation does not happen. Besides all the political problems with implementing a new measurement system, the sheer logistical problems of collecting the data, putting it in the right format and distributing the material to those that need it in the organisation takes more time and effort than most organisations allow.

Project planning and allocating resources are critical here; so is the need to be persistent and hold regular follow-up meetings to monitor progress, as many people in the organisation may be hoping the whole project will go away.

Implementation takes time – for the information to be collected, the new programmes to be written and the surveys to be designed and implemented.

Using Measures

The whole reason for designing and implementing a performance measurement system is to use the measures in the organisation to manage the business. The measures should:

• Establish position – identifying current levels of performance


• Communicate direction – telling everyone what the organisation is trying to achieve


• Influence behaviour – so that people take note of the performance measures in everything they do


• Stimulate action – so that people automatically take action when the performance is not moving in the expected direction


• Facilitate learning – so that people get feedback from the performance measures and learn from their experiences

The ideal use of measures occurs when individuals act on the measures themselves without prompting or supervision. Performance measurement is not about reporting what is happening up through the organisation, although many organisations use the system for just this purpose.

Refreshing Measures

Finally, the measurement system needs to be refreshed. This should happen either when the external environment changes and the organisation needs to adapt, or when the measures become tired.

If the external environment changes, the organisation will face new challenges. These challenges can result in a change of direction and emphasis. Changing the measures is a good way of signalling that things will have to be done differently in the future.

Measures should also be changed when they become tired. New measures stimulate behaviour but, after time, people get used to them and find ways of achieving the numbers without the system actually working better. It is therefore useful to review and refresh the measurement system on a regular basis to make sure that this does not become the norm.

Written by Mike Bourne. He is a director of Cranfield Centre of Business Performance, United Kingdom. This article first appeared in Insight, an online newsletter for management accountants published by The Chartered Institute of Management Accountants (CIMA). Insight is accessible at www.cimaglobal.com/newsletters.

The Makings of a Good Boss

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Dedicated to:

Scott A. Millington (of Australia)
– A good leader and a good boss

Best wishes in all your future endeavours!
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“If you command wisely, you’ll be obeyed cheerfully.” ¹
-- Thomas Fuller

How does a person in an organisational structure with people manager responsibilities become a good boss? What does that person do that makes him ² being judged a good boss by subordinates? The questions are simple to ask, but the answers may not immediately come to mind.

To be able to effectively manage people, people managers require leadership skills. So, do good leaders make good bosses? Let us first consider leaders and leadership.

I. What do Leaders do?

In any organisation, meetings, discussions and decision making are common daily activities. However, after plans are discussed and agreed, “…nothing is going to happen unless the leader’s teammates and subordinates want to move in the direction that’s been set. Making sure that happens is a big part of what leaders do.” says Gary Dessler [2001, p. 291]

Thus, leaders exhibit leadership, and leadership can be defined as, “influencing others to work willingly toward achieving objectives.” [Dessler, 2001, p. 291]

An enhanced definition of leadership is, “…the ability of leaders in organisations to lead people to achieve organisation goals and at the same time, create happy customers and employees.” [Tan, 2007, p. 62]

II. Leaders and Employee Motivation

Leaders fill many roles, and one of the many key challenges faced by leaders is employee motivation.

Motivation can be defined as “the forces acting upon or within a person that cause that person to expend effort to behave in a specific, goal-directed manner.” [Lewis et al, 2004, p. 460]

The process of motivation is complicated. However, leaders are particularly concerned about the relationship between motivation and performance i.e. what motivational approaches to take that would maximize performance? There is no singular approach or solution.

An understanding of the different approaches to motivation helps leaders to better understand and improve their interaction with their subordinates in order to strive for higher performance as a team.

1.0 The Needs-based Approach

Needs-based approach deals with “the factors within a person that energize, direct or stop behaviour.” [Lewis et al, 2004, p. 461]

1.1 Maslow’s Hierarchy of Needs

In 1943, Abraham Maslow, in his psychology paper A Theory of Human Motivation identified that a person has five fundamental needs – physiological, security, affiliation, esteem, and self-actualisation.

Physiological and security needs are categorised as lower-order needs and are typically satisfied externally, while affiliation, esteem and self-actualisation are categorised as higher-order needs which are typically satisfied internally.

Physiological needs
Physiological needs represent people’s basic needs such as food, water, and shelter. In the work environment, people with physiological needs are simply motivated by being able to own a job to meet basic necessities irrespective of the type of job they do, preserving their comfort level and avoidance of job pressure.

Security needs
People with security needs value a safe physical and emotional environment. Such people can be motivated by job security, grievance procedures, health insurance, fringe benefits and retirement plans.

Affiliation needs
Affiliation needs become important to people once their physiological and security needs are satisfied. People can be motivated by affiliation needs when they see their work as a means for developing interpersonal relationships and social networking.

Esteem needs
People with esteem needs are driven by personal feelings of achievement, recognition, respect and prestige. Such people can be motivated by developing their pride in their work and by rewards and recognition of their contribution to the organisation.

Self-actualisation needs
People with self-actualisation needs seek self-fulfillment and opportunities to achieve their full potential. Leaders can motivate such people by providing opportunities for them to lead special projects or assignments that capitalize on their strong self-drive and unique skills.

1.2 Herzberg’s Two-factor Model

In the early 1960’s, Frederick Herzberg developed the two-factor model, also known as the motivation-hygiene theory, after discovering that job satisfaction and job dissatisfaction are independent of each other.

Motivator factors
According to Lewis et al, motivator factors relates to what a person actually do in their job and are associated with the person’s positive feelings about the job. Examples of motivator factors are the work itself, recognition, advancement, sense of achievement and responsibilities.

Hygiene factors
In contrast, hygiene factors such as company policies, administration, salary, and working conditions, relates to the work environment and are associated with the person’s negative feelings about the job. [2004, p. 464]

However, while motivator factors are typically considered and rated more important than hygiene factors by most people, it is yet to be proven beyond any doubts that motivator factors will increase work motivation for all people. Nevertheless, the initial step in motivating employees begins with addressing employee dissatisfaction.

Also, there are two contemporary issues with Herzberg’s two-factor model i.e. the on-going debate about the relationships between job satisfaction and performance, and the model’s classification of salary or pay as a hygiene factor – which means that salary is not a motivating factor.

On the relationships between job satisfaction and performance, researchers have shown:

• Job satisfaction causes job performance
• Job performance causes job satisfaction
• No relationship between job satisfaction and job performance

Thus, leaders or people managers should not adopt a simple cause-and-effect approach to the relationships between job satisfaction and performance.

Researchers have also shown that as society develops, societal and economic values changes, and money can become a very strong motivating factor.

1.3 Acquired-needs Model

The acquired-needs model is based on the cultural background and the life experiences people gain and learn from. The model identifies three important needs in the work environment – need for achievement, power, and affiliation. People with a strong need will respond to motivation to satisfy that need.

Need for achievement
People with a need for achievement are typically high achievers who are driven to excel, take on challenging tasks, and strive for excellence. Such people are motivated by challenging tasks with high but achievable goals which can be broken down to provide them relatively immediate progress feedback.

Need for power
Need for power involves either personal power or institutional power. People have a need for power in order to influence and control their work environment. People needing personal power seek to dominate others in order to determine and control other people’s work outcomes. People with a need for institutional power seek to solve problems and advance organisational goals.

Need for affiliation
People with a need for affiliation are attracted to establish friendly and close interpersonal relationships, and enjoy working with other people.

Leaders should realize that people with a high need for achievement do not necessarily make good team players as they prefer to set their own goals and seek immediate performance feedback within a timeline that may be overly stressful for co-workers. However, in management succession planning and employee development, employees with a relatively balanced mix of a high need for achievement, institutional power, and affiliation may be potential future leaders in an organisation.

2.0 The Process Approach

The Process approach deals with the understanding of the cognitive processes within a person that influences his behaviour.

2.1 Expectancy Model

The expectancy model of motivation is based on three basic individual perceptions:

• Effort will lead to performance
• Rewards are attached to performance
• The rewards are valuable to the individual

Expectancy
This relates to a person’s belief that if a certain level of effort is expended, a certain level of performance will be achieved i.e. the relationship between effort and performance

Instrumentality
This is the next stage of perception or belief that when a specific level of performance is achieved, it will lead to a desired outcome.

Valence
Valence represents the value attached by a person to the outcome or rewards obtained.

Leaders should understand that the model seeks to explain that when people are given choices, they will select the choice that has the potential to give them the greatest reward i.e. the reward that they value most.

Thus, when applying motivation, it should be aligned to the person’s perceptions of what rewards are most important to them so that they willingly expend effort to achieve the performance desired by both subordinates and management.

2.2 Equity (or Fairness) Model

Researchers have found that feelings of equity or inequity in the workplace are a major factor of job satisfaction or dissatisfaction among employees.

According to Lewis et al, “the equity model focuses on an individual’s feelings about how fairly he or she is treated in comparison with others.” [2004, p. 468]

The model says that people will compare the ratio of their contributions to their rewards against that of co-workers. If they perceive inequality then one of the following actions may be taken:

• Increase or decrease their work inputs to their perceived equity level, for e.g. if a person feels that he is underpaid, he may reduce his efforts by working shorter hours, decline more responsibility or work
• Psychologically distort comparison, for e.g. a person may distort how hard he has been working or how much he has been contributing to the organisation or increase the perception of importance of his job
• Change the person he is comparing to, for e.g. comparing one’s contribution to that of a lesser performing co-worker
• Change outcomes or rewards to gain equity, for e.g. by joining the company union that typically champions for increased welfare, pay, and better working conditions without the increase in employee inputs
• Leave the situation, for e.g. request for a transfer, or quit the job. This is usually the last resort when the employee feels that no other solution exists

Leaders need to be aware that their subordinates’ perception is an important factor in the equity theory of motivation. Perception of inequity is determined solely by a person’s interpretation and feelings of a given situation. For e.g. management may think that every employee will be happy with the annual pay increase or bonuses paid, but researchers have found that this is not the case. Some employees may feel that the rewards received do not equate to their past contributions and sacrifices.

Thus, leaders need to be aware of the existence of feelings of inequity among his subordinates, and to act to ensure that they feel equitably treated. One of several solutions is to establish regular one-to-one performance reviews to provide feedback, guidance and corrective measures. No employee appreciates being told only at the end of the year in the annual review that he has not been performing up to management expectations.

2.3 Goal Setting

“Goal setting as a motivation model is a process of increasing efficiency and effectiveness by specifying the desired outcomes toward which individuals, groups, departments, and organisation should work,” says Lewis et al.

“The major purposes of goal setting are:

• To guide and direct behaviour toward overall organisational goals and strategies
• To provide challenges and standards against which the individual can be assessed
• To define what is important and provide a framework for planning” [2004, p. 469]

In order for goal setting to be successful, leaders should follow the SMART rule – the goal must be:

• Specific or clear
• Measurable and not ambiguous
• Achievable
• Results-orientated
• Time-related i.e. have a reasonable time-frame for attainment

2.4 Reinforcement Theory or Behaviour Modification

The reinforcement theory is based on the concept that people will repeat behaviours that are rewarded and not behaviours that are punished.

Hence, leaders can motivate subordinates to strive for higher performance by reinforcing behaviours that support organisational goals

Positive reinforcement
Positive reinforcement is the application of a positive or rewarding action resulting from a desired behaviour, for e.g. accolades for a task well done, marketing excellence award for securing several difficult accounts, merit bonus for reducing significant costs for the company by successfully implementing new process improvements.

Negative reinforcement
Negative reinforcement promotes a desired behaviour by allowing escape from an undesirable consequence, for e.g. a 2 months suspension of driving license for driving through a red or stop light, getting penalised for clocking in late by more than 30 minutes.

Extinction
Extinction is the withdrawal of positive rewards or benefits for undesirable behaviour, for e.g. a slacking employee fails to receive his year-end bonus.

Punishment
Punishment is the application of a negative action for undesirable behaviour, for e.g. a reduction in the monthly entertainment allowance of a sales representative who is not achieving his sales quotas, a 2 weeks suspension without pay for being rude to a customer.

Leaders should take note that the formal application of reinforcement theory is also known as behaviour modification. Of late, critics have charged that behaviour modification is manipulative, tampers with human rights and freedom, and is unethical as the importance of corporate governance and corporate social responsibilities increases.

Furthermore, the use of punishment may cause unwanted consequences such as emotional harm, negative stress, and negative side effects, for e.g. fear, revenge.

3.0 Other Contemporary Motivational Approaches

3.1 Participative Management

Participative management involves all the activities where subordinates share a significant degree of responsibilities and decision-making with their supervisors, immediate managers or team leaders.

Participative management can increase job satisfaction and job performance by promoting a sense of appreciation and respect, acceptance and trust, and supports several key areas of Maslow’s hierarchy of needs, Herzberg’s two-factor theory, acquired-needs, expectancy, and equity models.

3.2 Rewarding Team Performance

Today, all if not, most organisations stress on team work or team contributions. Thus, it is also important to reward for team performance by rewarding the team members not as individuals but for each of their contribution to the collective performance of the team.

3.3 Money as a Motivating Factor

Research on money as a motivating factor is of particular interest to many organisations.

Money can be a motivator when:

• It is desired by the employee
• It is perceived as a means to acquire other things that is wanted or needed
• It is symbolic e.g. a measure of achievement or recognition
• A significant amount of money is clearly awarded for the desired behaviour or outcome

Money is not a motivator when:

• The desired productive behaviour is not defined
• The productive behaviour is poorly measured or there is no measurement
• The amount of money is too small to be appreciated
• It is perceived as an entitlement, for e.g. an overdue raise

III. Leaders and the Twelve ‘I’s of Leadership

In Practicing the ‘I’s of Leadership and Makings of a Good Leader, Dr. Victor Tan writes that it is important for leaders to master and practice the twelve ‘I’s of leadership in order to increase their leadership ability to motivate subordinates to achieve organisation goals, and at the same time, make them happy. With happy employees interacting with customers, in turn, customers can become happy with the higher level of attention and service quality they receive. [2007a, p. 62] [2007b, p. 64]

The twelve ‘I’s of leadership are:

1. Inspire
   It is important for a leader to be able to inspire his subordinates to strive for greater heights. Unmotivated employees will under-perform. Thus, leaders need to be able to inspire unmotivated employees to become passionate about their work and contribution.



2. Illuminate
   Tackling issues and solving problems are part of everyday activities in the work environment. However, some issues and problems can be more difficult than others. A capable leader will be able to provide illumination to his subordinates to overcome the difficulties.



3. Illustrate
   A good leader is able to communicate clearly with his subordinates. To be able to also provide illustrations in his communications will greatly improve his subordinates’ understanding of what is required to be achieved.



4. Involve
   The motivational approach of participative management is based on the foundation of involvement. Good leaders recognize the need to involve their subordinates in tasks and projects, and to solicit their opinions and ideas in order to gain their commitment and support.



5. Innovate
   Organisations today face greater competition and global challenges. In order for organisations to survive and achieve continuous profitable growth, effective leaders need to be able to motivate subordinates to introduce new ideas and processes i.e. develop an innovation culture.



6. Impart
   Good leaders realize the importance and effectiveness of empowerment and coaching versus the outdated command and control approach to management. Thus, good leaders develop their subordinates by imparting their knowledge and experience to the extent that their subordinates can work independently of them. When their subordinates become as good as them, those subordinates become ready to take on bigger and more important roles in the organisation.



7. Influence
   The power of leadership is not derived from great authority but from the degree of influence a leader has over others to get things done. The importance to focus on the circle of influence is well expounded by Stephen R. Covey in The 7 Habits of Highly Effective People. “The wider the circle of influence a leader has, the more effective he is in leading people towards achieving organisational goals.” [Tan, 2007, p. 64]



8. Initiate
   “The only thing that is constant is change.” Does this statement sound familiar? Great leaders are not pro status quo but are effective change catalysts. The history of mankind is filled with great leaders who changed things. Capable leaders in an organisation recognizes the importance of initiating change instead of waiting for things to happen, and also knows how to involve their subordinates in initiating change.



9. Inquire
   “Great leaders are inquisitive by nature”, says Dr. Victor Tan. [2007, p. 64] Capable leaders will always inquire about things in an organisation, for e.g. what is the basis of the sales forecast? What is the cause of the delta between actual results and planned? Why are employees exhibiting low morale lately? How do we motivate employees of different background and levels of experience? By asking, leaders seek to improve the organisation, and thus the long-term welfare and productivity of employees.



10. Improve
    Complacency exists in every organisation and it becomes a great challenge for successful organisations to consistently achieve high performance. Good leaders need to be aware of and take action to reduce the complacency of subordinates. Good leaders must know how to motivate subordinates to continuously improve. Recognition of subordinates’ critical contributions or achievements and rewards needs to be given to reinforce the behaviour of continuous improvement.



11. Implement
    In Makings of a Good Leader, Dr. Victor Tan says, “The value of leadership lies in getting people to implement ideas, suggestions or plans. No amount of analysis, strategizing or planning will make a company great if leaders do not get people to implement things.” [2007, p. 64]



12. Inculcate ³
    Good leaders are able to encourage subordinates to think for themselves, self-motivate and strive for improvements and innovation. This can be achieved by inculcating a sense of continuous learning, probing problems, and process improvement among employees. [Wee, 2008, p. 1]

IV. Conclusion

A good leader knows why employee motivation is important, and will be able to motivate his subordinates in a positive and productive way. In turn, highly motivated subordinates become happy in meeting their work challenges and committed to strive to achieve the extraordinary.

According to Dr. Victor Tan, “The art of leadership lies not in firing people, but in firing up the enthusiasm of people to rise over the occasion and outperform their normal selves to achieve the extraordinary.” [2007, p. 62]

In the eyes of subordinates, a good leader makes a good boss.

¹ Goodman, Ted. (1997). The Forbes Book of Business Quotations: 14,173 Thoughts on the Business of Life. Black Dog & Leventhal Publishers

² All references to the masculine him / he / his, applies equally to the feminine her / she / hers

³ “Inculcate” was added to the ‘I’s of leadership by this author/blogger Chen Ming-fa

References:

Abell, Derek F. (1997). “Business is changing fast and so is the art of leading it” in Bickerstaffe, George. (Editor), Financial Times Mastering Management, p. 516 – 519. London, England: Pitman Publishing

Dessler, Gary. (2001). Management: Leading People and Organizations in the 21st Century. (2nd Edition). Upper Saddle River, NJ: Prentice Hall

Lewis, Pamela S., Goodman, Stephen H. & Fandt, Patricia M. (2004). Management: Challenges for Tomorrow’s Leaders. (4th Edition). Mason, OH: Thomson South Western

Robbins, Stephen P. & Coulter, Mary. (2003). Management. (7th Edition). Upper Saddle River, NJ: Prentice Hall

Tan, Victor S.L. (2007, December 1). “Practising the ‘I’s of leadership.” New Straits Times; p. 62

Tan, Victor S.L. (2007, December 8). “Makings of a good leader.” New Straits Times; p. 64

Useem, Michael. (1997). “Do leaders make a difference?” in Bickerstaffe, George. (Editor), Financial Times Mastering Management, p. 520 – 523. London, England: Pitman Publishing

Wee, David. (2008, July 26). “Don’t Tell Your Staff What to Do.” The Star; Metro Classifieds Central, p. 1

Wood, Jack D. (1997). “What makes a leader?” in Bickerstaffe, George. (Editor), Financial Times Mastering Management, p. 506 – 511. London, England: Pitman Publishing

Wood, Jack D. (1997). “The two sides of leadership” in Bickerstaffe, George. (Editor), Financial Times Mastering Management, p. 511 – 515. London, England: Pitman Publishing

Revisiting Globalisation

I. Introduction

“US has lost 400,000 IT jobs”, “India wants WTO protection from ban on outsourcing”, “WTO plays down fear of IT offshoring” and “Outsourcing to affect 4.1m jobs by 2008” are some of the headlines we have been reading in the local newspapers and foreign news since 2004.

If these are the results of globalisation, surely it must be bad. Thus, should we resist globalisation at all costs? Before we attempt to answer this question, we need to have a better understanding of what is globalisation.

Globalisation means different things to different people around the world. It also affects different people, communities or nations of the world in different ways.

II. What is Globalisation?

Globalisation is a term that has been receiving some bad publicity. It has created fear, uncertainty and doubts in both developed and developing countries. Globalisation has resulted in individuals, in certain industries, in certain countries to lose their jobs.

The supporters of globalisation see it as the integration of economic, political and cultural systems across the world. Opponents of globalisation see it as the Americanization of world culture and U.S. dominance of world affairs via economics.

The supporters consider it to be a force for economic growth, prosperity and democratic freedom. The opponents consider it to be a force for environmental devastation, exploitation of developing countries, and the suppression of human rights.

However, the sure thing is that globalisation involves trade liberalisation. To the multi-national corporations (MNCs), globalisation is about how they continue to grow by reaching new markets and leveraging resources around the world to provide customers everywhere with great value, and shareholders with increasing returns on investments.

Hence, globalisation is about creating value on a macro scale. Since the values can be economic, political, societal and cultural in nature, different countries or nations view globalisation differently in relation to their respective values.

In the 19th century, the Chinese considered the arrival and influence of the Westerners e.g. the British, Portuguese, Spaniards and French for trade as bad for China, which later lead to the Opium Wars (1839 – 1842 and 1856 – 1860), and saw Hong Kong ceded to Britain until 1997.

Today, China’s values towards international trade and economics have changed. Together with India, they represent the top two emerging markets in the world.

Thus, globalisation is not totally new, as international trade has been in existence since man traveled the globe for e.g. Marco Polo and the Silk Road.

Thus, I can define globalisation as the acceleration and intensification of interaction and integration amongst the people, companies, and government of different nations via international trade and management.

III. Key Characteristics and Drivers of Globalisation

1.0 The key characteristics of globalisation are:

• Liberalisation of international trade


• Growth of foreign direct investments (FDI)


• Large cross-border financial flows


• Introduction of new technology

The above characteristics coupled with changes in economic and political decisions have contributed to increased competition in global markets, thus creating the enabling conditions for globalisation.

1.1 Liberalisation of international trade

International trade has expanded rapidly in the last two decades. Since the 1970's, it has grown significantly faster than the world gross domestic product (GDP) as shown in Figure 1.

Furthermore, in the 1980's the extent of trade liberalisation, especially in developing countries began to accelerate (Figure 2).

However, the trade expansion was not uniform across all countries, as the industrialised countries and a group of twelve developing countries gained the most (Figure 3).

1.2 Growth of FDI

Since the 1980's, FDI also grew rapidly, both absolutely and as a percentage of GDP as shown in the previous Figure 1 and in the following Figure 4.

The number of countries adopting liberalisation measures towards attracting FDI also increased (Figure 5).

However, despite the rapid growth of FDI flows to developing countries, the investments remain concentrated in about ten countries (Figure 6).

1.3 Large cross-border financial flows

The past two decades also witnessed the rapid integration of financial markets. Although the Bretton Woods system of closed capital accounts and fixed exchange rates collapsed in the early 1970's, it was not until the early 1980's that saw increased capital flows among industrialised countries.

Financial liberalisation took place in the late 1980's with increased investments in the equity markets of developed countries by investment funds, increased bank lending to the corporate sector and short-term speculative flows especially into the currency markets, and increased lending through the international bond market.

1.4 Introduction of new technology

Industrialised countries are the source of technological revolution that facilitated globalisation. The introduction of new technology changed the international competitive landscape by making knowledge an important factor of production.

Thus, the knowledge intensive and high-tech industries are the fastest growing sectors of the global economy today, and successful economic development requires countries to be able to enter and compete in these sectors. The countries must invest in education, training and the diffusion of knowledge.

2.0 The key drivers of globalisation are:

• Increasing competitive landscape: Cost and resource maximisation


• Increased adoption of information and communication technology (ICT)


• International customers


• Governments striving for greater economic growth

2.1 Increasing competitive landscape: Cost and resource maximisation

As discussed above, the liberalisation of trade, the increased FDI and cross-border financial flows, and the introduction of new technology had created the enabling conditions for globalisation.

The conditions in turn caused increased global competition among companies involved in international trade, especially the MNCs, and created the need for global business strategies, and cost and resource maximisation remains the critical factors of economic value creation.

Thus, the MNCs look towards the following to maintain their global competitiveness:

• The different locations or countries and costs of raw materials and skilled labour


• Building and maintaining economies of scale


• A developed telecommunications infrastructure


• Transportation i.e. logistics efficiency


• Outsourcing capabilities


• Tax benefits

2.2 Increased adoption of ICT

Rapid developments in ICT contributed to the acceleration of globalisation. The introduction of Internet technology and proliferation of the World Wide Web spearheaded the adoption of electronic commerce technology.

Third generation enterprise resource planning (ERP) solutions utilizing Internet and electronic commerce technology further made information, resource management and decision making easier, faster and more accurate and efficient across international boundaries.

2.3 International customers

Customers in the global market having common needs favour globalisation, and through globalisation, firms or producers/suppliers reach customers in the global market.

2.4 Governments striving for greater economic growth

Governments are also the catalysts for globalisation. Changes in or the regulation and de-regulation of trade and economic policies favouring international trade, and attracting FDI will support globalisation.

The need to ensure that the home country’s products meet international technical standards, for e.g. ISO and other regulatory compliance standards promotes globalisation.

The promotion of the home country’s products at international trade fairs and the creation of grants and funding for business expansion, ICT adoption and skills development to meet global competition encourages globalisation.

IV. Competitive Advantage of MNCs

Globalisation is constantly being driven by MNCs, initially with local competition when they began corporate life, then growing regional, and finally global in their quest to create, sustain and maximise economic value from scarce resources.

In order to be successful, a company needs to develop and sustain competitive advantage. A company needs to conduct regular environmental scanning or audits using proven methodologies such as Porter's Five Forces to evaluate and sustain their competitive advantage for continuous profitable growth.

Competitive advantage can be developed from proper and careful strategic planning, execution and continued development of a company's resources and processes. The efficient and effective acquisition and utilisation of resources coupled with the company's unique capabilities can create distinctive or core competencies that are difficult for competitors to emulate.

Further adoption of one of two industry-wide strategies or focus segment strategy (Porter’s Three Generic Strategies), can enable a company to create and maintain value creation. As the company grows and expand, the strategies take on a global perspective i.e. the company evolves into a company with globalisation intentions i.e. an MNC.

V. Competitive Advantage of Nations

Globalisation does not only depend on companies adopting global strategies. In the preceding two sections, I discussed that governments also act as a driver or catalyst of globalisation.

Since governments are the custodians and managers of nations, how can I expand on the government factor in relation to their countries in the subject of globalisation?

Michael Porter argues that every country can develop and possess competitive advantage. [Porter, 1990]

Porter used a diamond-shaped diagram as the basis of a framework to illustrate the determinants of a nation’s competitive advantage. The diamond shape represents the national playing field that each country establishes for their industries.

The four points of the diamond affect four aspects of national competitive advantage:

• The availability of resources and skilled labour


• Information that companies uses to decide which opportunities to pursue with the available resources and skills


• The goals of the companies


• The pressure on companies to innovate and invest

1.0 Demand Conditions

When the market for a particular product is larger locally than in foreign markets, the local companies devote more attention to that product than do the foreign companies, leading to competitive advantage when the local firms begin exporting the product. Thus, a more demanding local market leads to a national advantage that enables local companies to anticipate global trends.

1.2 Firms’ Strategy, Structure and Rivalry

Local conditions affect a company's strategy, for e.g. German companies tend to be hierarchical. Italian companies tend to be smaller and are run more like extended families. Such strategies and structures help to determine in which types of industries a nation’s companies will excel.

In Porter’s Five Forces model, low rivalry made an industry attractive. While a company prefers less rivalry, in the long term, more local rivalry is better as it puts pressure on companies to innovate and improve. More local rivalry results in less global rivalry.

1.3 Factor Endowments

A country creates its own important factors such as skilled resources and technological base. Local disadvantages in factors of production force innovation. Adverse conditions such as skilled labour shortages or scarce raw materials forces companies to develop other methods i.e. to innovate, and this leads to a national advantage.

1.4 Related and Supporting Industries

When local supporting industries are competitive, companies enjoy more cost effective and innovative inputs. This effect is further strengthened when the suppliers are also strong global competitors.

Thus, countries that are more competitive are more conducive to globalisation and can better attract FDI.

VI. The Effects of Globalisation on World Regions

The effects of globalisation on world regions are as follows:

VII. The Benefits and Costs of Globalisation to Different Sectors of Society

The benefits and costs of globalisation to different sectors of society are as follows:

VIII. Conclusion

I can draw the following conclusions:

1. Globalisation has increased the flow of money, goods, services, people and jobs across national boundaries


2. The trend of globalisation continues to accelerate


3. Globalisation requires an environment of geopolitical stability and a macroeconomic system to enable growth


4. The full impact of globalisation goes beyond national trade surpluses and deficits


5. Globalisation has tremendously impacted demand and supply with trade liberalisation


6. Globalisation has also resulted in the displacement of jobs, and certain communities have had significant environmental impact


7. The debate on globalisation and its impact is still ongoing

References:

Chang, Ha-Joon. (2003). Globalisation, Economic Development and the Role of the State. London, England: Zed Books

David, Fred R. (2005). Strategic Management: Concepts and Cases. (10th Edition). Upper Saddle River, NJ: Pearson Prentice-Hall

Gupta, Anil K. & Westney, D. Eleanor. (Editors). (2003). Smart Globalization: Designing Global Strategies, Creating Global Networks. San Francisco, CA: Jossey-Bass / John Wiley & Sons, Inc

Hodgetts, Richard M., Luthans, Fred & Doh, Jonathan P. (2006). International Management: Culture, Strategy, and Behavior. (6th Edition). New York, NY: McGraw-Hill / Irwin

India wants WTO protection from ban on outsourcing. (2005, June 7). Star InTech, p. 27

Outsourcing to affect 4.1m jobs by 2008. (2005, July 19). Star InTech, p. 29

Porter, Michael E. (1990). The Competitive Advantage of Nations. New York, NY: The Free Press

Rothenberg, Laurence E. (2003). "The Three Tensions of Globalization." [Electronic Version]. Globalization 101, No. 176, 2002 – 2003

Stiglitz, Jospeh E. (2003). Globalisation and its Discontents. New York, NY: WW Norton & Company

US has lost 400,000 IT jobs. (2004, September 21). Star InTech, p. 36

WTO plays down fear of IT offshoring. (2005, July 5). Star InTech, p. 27

Performance Measurement

**************************************************************************************
ACKNOWLEDGEMENT

This article was published in the New Straits Times on August 30, 2003
as a CIMA Business Talk article.

Reproduced here with permission from
The Chartered Institute of Management Accountants (CIMA Malaysia).
***************************************************************************************

The future of performance measurement is all about planning not reviews, answers not data, and “managing through measurement”.

Management’s obsession with measurement grows unbounded. The latest data from Gartner, the US-based research organisation, suggests that over 70 per cent of large US firms had adopted the balanced scorecard by the end of 2001. The recent Enron scandal has provoked a flurry of debate about corporate reporting, disclosure and the use of creative accounting practices to smooth income and earnings statements.

The software industry is also playing a significant role in driving the measurement agenda forward. There are now over 40 vendors worldwide that offer performance reporting solutions. Some of these performance reporting solutions are little more than glorified spreadsheets, while others enable executives to access immense amounts of data. The problem with many of the software reporting packages on the market today is that all they offer is data – not information or insight.

The problem is that too much is being measured. Executives are obsessed with quantification. They want everything described in numerical terms – customer satisfaction, customer loyalty, customer profitability, brand value, employee satisfaction, supplier performance, health and safety, efficiency, productivity, innovation, new product development, etc. This is becoming such a significant issue that some executives are now questioning what value they get from their organisation’s measurement systems. These questions become even more frantic when they think about how much their organisation's measurement systems cost them to run.

Recent research completed by members of the Centre for Business Performance at Cranfield School of Management, UK, found that Ford spent 0.7 per cent of sales, or USD1.2 billion annually on budgeting. Surprisingly the vast majority of executives have no real idea how much they are spending on measurement.

Everyone knows they are spending a lot, but no one knows how much. Just because you spend a lot on something does not mean that it is not worthwhile. However, organisations should think carefully about how they can best use their measurement systems to ensure that they deliver maximum value.

Broaden the agenda

Significant effort has been devoted to improving measurement methodologies. People have developed new methods of measuring financial performance and new frameworks to balance financial and non-financial measures. Research has focused on how to design and apply such methodologies and frameworks. These topics are important, but as we enhance our understanding of them, we need to broaden the agenda and ask: how do we make measurement pay?

More specifically we should do the following:

• Think in terms of performance planning not performance reviews
  
• In most organisations, measurement forms the basis of performance reviews, which are historic or backward looking in nature and – either implicitly or explicitly – designed to put people on the defensive

Why, in performance reviews, do people spend most of their time justifying why performance is as it is? They come to the review armed to the teeth with excuses about why they are where they are. For example: “We are only at 70 per cent of our target because our suppliers let us down, or our competitors have introduced a new product."

Such discussions are irrelevant, or at least relatively unimportant in comparison with focusing on how we are going to get to where we want to be.

Discussions about how we are going to get to where we want to be are not performance reviews. They are performance planning sessions. They require executive teams to understand the reasons why performance is as it is, and then focus on how they are going to make progress.

Ask for answers not for data

Why do people get sucked into performance reviews rather than performance planning sessions? A significant reason is that far too often the meetings themselves are structured as performance reviews. Far too often we simply present raw performance data to executives and expect them to analyse it there and then.

You would never conduct a scientific experiment that way. You never make a presentation to an audience without first analysing the data and understanding the messages it contains. Yet far too often that is what we do in performance reviews. We give people figures on profitability by customer segment, on absenteeism levels, on productivity. But nobody has been through the data and extracted the insights from it in advance.

David Coles, managing director of DHL UK used an excellent phrase to describe this in a recent presentation “numerical crosswords”.

He explained how his board used to spend all of their time at performance reviews trying to join up the pieces of the numerical jigsaw that they were presented with. Directors would look at a performance report and try to draw spurious correlations between different events to offer explanations for unusual observations.

When they realised this was what they were doing, DHL UK changed the structure of their board meetings, and defined specific questions that they wanted to be answered.

They now ask their performance analysts to come to the board meeting, armed not with raw data or excuses, but presentations that address questions of concern to the board.

The board’s role is to probe the quality of the analysis and, once they are comfortable with it, decide what they are going to do to move performance in the desired direction.

In changing the structure of their board meetings, DHL UK has eliminated the defensive behaviours associated with performance reviews and encouraged the creative dialogue associated with planning.

Build the capability of performance analysts

In adopting this new structure and format, DHL recognised that they had to upgrade the skills of their performance analysts. These performance analysts need to be able to manipulate performance data, interpret it, and present it in a way that engages and provides insight to others.

Research at the Centre for Business Performance has resulted in a concept called the Performance Planning Value Chain, which encapsulates a systematic process for extracting insights from performance data.

The analogy underpinning the Performance Planning Value Chain is of a journalist. When writing a story, a journalist is very careful to identify the “hook” that will capture the reader's attention. Rarely do we do this with performance reports.

This issue becomes even more important when the focus of measurement is shifted to systems not functions. Organisations consist of complex interdependencies. Marketing relies on operations. Operations rely on human resources, etc. Yet when it comes to measurement, we often ignore these interdependencies. Marketing looks at the marketing and customer satisfaction data. Human resources look at the people data, etc. It is as if we have functionalised measurement, just as we have functionalised everything else in organisations.

Yet the functionalisation of measurement is a mistake. Each part of an organisation affects others, so we have to recognise this interaction if we are to get the most from our measurement data. It should give us the big picture. This requires us to equip performance analysts with the skills to cope with this complexity.

Written by Andy Neely. The writer is director of Centre for Business Performance, Cranfield School of Management, United Kingdom. This article first appeared in Insight, an online newsletter for management accountants published by The Chartered Institute of Management Accountants (CIMA). Insight is accessible at www.cimaglobal.com/newsletters.

Adequacy of Malaysia's Cyberlaws to Address Cybercrimes and Cybertorts

I. Introduction

Since the birth of the 21st century, cybercrime has increasingly become recognized as a problem that requires the attention of governments, law enforcement authorities and legal systems of leading Asia Pacific countries. The explosive growth of the Internet and adoption of digital technologies for electronic commerce, electronic data interchange and electronic communication needs in the Asia Pacific region has also brought about an increase in cybercrimes.

Advanced countries in the West with highly developed information and communication technology infrastructures are also forced to constantly review the adequacy of their legal systems to deal with cybercrime. Other countries in South East Asia, such as Singapore, Thailand, and Malaysia, developing their information and communication technology system from a less advanced base are similarly forced to review the adequacy of their existing legal systems.

Existing criminal law, supported with commercial and intellectual property protection law may already inhibit a range of cyberspace misconduct. However, gaps and inadequacies of existing traditional laws necessitate the consideration and introduction of more specific laws to address cybercrime.

II. What is Cybercrime?

In Grabosky & Smith (1998), the following categories of crime were found to be emerging in the digital age:

• Illegal telecommunications interception (e.g. hacking, cracking, data manipulation)


• Electronic vandalism


• Electronic terrorism (e.g. viruses, denial-of-service attacks, spamming)


• Theft of data and communications services


• Telecommunications and associated intellectual property piracy


• Electronic distribution of pornography


• Electronic fraud (e.g. phishing)


• Electronic funds transfer crime


• Money laundering

Collectively, these crimes are referred to as “cybercrimes”.

How serious or damaging is cybercrime? Warren & Streeter (2005) reported that, “the Internet has become a non-stop source of crime stories. The Bank of America revealed it lost computer tapes containing financial data on 1.2 million federal workers, including US senators, and British police recently charged 28 people with involvement in a sophisticated identity fraud racket that swindled almost 2 million pounds from more than 100 private bank accounts.” “The US Federal Trade Commission revealed last year that 10 million US citizens had fallen victim to identity theft at a total cost of USD 50 billion, and that 2 million people were conned by phishing attacks.”

Phishing [Sullivan, 2004, p.24], first detected in 1996, has exploded in the last two years because it is easy to produce and easy to fall for. Fraudsters send fake or spoof e-mail to bank customers to obtain their logins and passwords or to trick them into visiting fake banking websites.

On the home front, cybercrime rate is on the rise [Rising cybercrime, 2004, p.2]. Chia Kwang Chye, former deputy minister of internal security said, “117 cases involving MYR451,000 in losses were taken to court, under the Communications and Multimedia Act 1998” for the period of January to September 2004, compared to 35 cases in 2003.

Chia also said that 857 cases were charged in court in 2003 under the Computer Crimes Act 1997, with loses totaling MYR2.9 million, while 355 cases were brought to court from January to September 2004.

In its first quarter 2004 report, the Malaysian Computer Emergency Response Team (MyCERT) said that, “Internet vandals went wild early this year defacing hundreds of Malaysian websites, with public sector sites the main victims.” [Sharif, 2004, p.3] The following charts A to E provide some statistics.

While some of these crimes can be prosecuted to a certain extend with the combination of existing criminal, commercial and intellectual property laws, the experience of many jurisdictions is that additional legislation is often required to address these Internet, computer systems and electronic communication related crimes.

III. What is Cybertort?

Before I embark on defining “cybertort”, let us first understand what is defined as a tort. “A tort is a wrong. It can be a spoken wrong or an act (action), or a nonaction (carelessness) that is wrong, with injury inflicted on a person or property.” [Baumer & Poindexter, 2002, p.119]

Thus, there is tortious liability when a tort is committed, and I can define tortious liability as, “Tortious liability arises from the breach of a duty primarily fixed by the law; this duty is towards persons generally and its breach is redressable by an action for unliquidated damages.” [Lee, 2001, p.189]

Torts include issues such as:

• Trepass to a person


• Trespass to land


• Trespass to nuisance


• Trespass to goods


• Negligence


• Defamation

The tort most relevant to cyberspace is defamation. Defamation may be defined as, “Oral or written statements that wrongfully harm a person’s reputation.” [Ferrera et al, 2004, p.345] Defamation committed orally is known as slander, and defamation committed in writing is known as libel.

Therefore, torts committed in cyberspace (or the Internet and/or the World Wide Web) are known as cybertorts. Defamation can easily be committed in the cyberspace via e-mails or electronic mails, articles or postings in Weblogs, messages and/or videos in social networking sites such as YouTube, Facebook, etc.

The legal remedy or suit against defamation requires several elements of proof such as:

• A false statement of fact, not opinion, about the plaintiff


• The publication of the false statement without a privilege to do so


• Intentional or due to negligence


• Damages – actual and/or presumed suffered by the plaintiff

IV. The Cyberlaws of Malaysia

With the arrival of the digital economy or knowledge economy as embraced by Malaysia, and the birth of the Multimedia Super Corridor (MSC), new laws introduced in 1997 covering computer crimes, digital signature, telemedicine, copyright were promoted by the MSC’s custodian – the Multimedia Development Corporation as a package of cyberlaws.

The cyberlaws are:

i) The Computer Crimes Act 1997

This Act provides law enforcers with a framework that defines illegal access, interception, and use of computers and information; standards for service providers; and outlines potential penalties for infractions.

ii) The Digital Signature Act 1997

Regulates the legal recognition and authentication of the originator of electronic document. This Act enables businesses and the community to use electronic signatures instead of their hand-written counterparts in legal and business transactions.

iii) The Telemedicine Act 1997

This Act empowers medical practitioners to provide medical services from remote locations using electronic medical data and prescription standards, in the knowledge that their treatment will be covered under insurance schemes. However, this Act is yet to be implemented.

iv) The Copyright (Amendment) Act 1997

This Act gives multimedia developers full intellectual property protection through the on-line registration of works, licensing, and royalty collection. Especially, the Act reinforces an author's work cannot be presented as the work of another, by adding a provision that the work must be identified as created by the author.

It was also decided that a regulatory body entrusted with the role to implement and promote the national objectives of the Malaysian Government for the communications and multimedia sector was needed. Hence, in 1998, another two acts were passed.

v) The Malaysian Communication and Multimedia Commission Act 1998

Provide for the establishment of the Malaysian Communications and Multimedia Commission (MCMC), a single regulatory body for an emerging and converging communications and multimedia industry. This Act gives the MCMC the power among other things, to supervise and regulate communications and multimedia activities in Malaysia and to enforce the relevant laws.

vi) The Communication and Multimedia Act 1998

The most significant legislation brought into force on April 1, 1999. This legislation provides the policy and regulatory framework for convergence of the telecommunications, broadcasting and computer industries. The Act is based on the basic principles of transparency and clarity; more competition and less regulation; bias towards generic rules; regulatory forbearances; emphasis on process rather than content; administrative and sector transparency; and industry self-regulation.

In addition, the government is also in the process of formulating another legislation presently called the Personal Data Protection Bill [Surin, 2003b, p.16-18]. This law will provide assurance of privacy of personal data. It will address the issues of collection, processing, maintenance and utilization of personal data.

The above cyberlaws serve two central purposes:

• To bolster intellectual property rights; and


• To create the right environment for the multimedia industry and for online transactions or electronic commerce to thrive in a continuously and increasingly competitive business environment

V. Adequacy of Legislation

In general, countries can be categorised according to whether they have:

1. Basic criminal and commercial laws


2. A developed system of intellectual property laws


3. Legislation directed specifically at computers and electronic commerce

Malaysia may be observed to fall within one or more of these categories, mostly satisfying the second category and having made some progress towards the third. Whether the existing legal system in any country can adequately address cybercrime depends on the precise scope and interaction of its criminal, commercial, intellectual property and computer-related laws.

The rapid development of information and communication technology and emerging electronic commerce pose challenges for the existing laws of Malaysia. Some key challenges created by the Internet or cyberspace in the enactment of statutes and development of the common law includes the identification of legal entities in cyberspace, the need to protect privacy and the issue of digital signatures that require close regulation.

1.0 Absence of Territorial Borders in Cyberspace

The jurisdiction of courts is based on the concept of territoriality. While we may call “cyberspace” in the singular, it is however, not a singular or distinct “place” but made up of many virtual locations constituting several business models from the real world that are recreated in computer-mediated communication infrastructures. Cyberspace crosses geographical and jurisdictional boundaries as we know it due to the cost, ease and speed of electronic transmission on the Internet that is almost entirely independent of physical location.

A major challenge for the law is created by the cross-boundary nature of cyberspace or in other words, its borderless nature. In relation to law, Johnson and Post (1996) outlined some cross-border issues:

• The power of local governments to assert control over online behaviour


• The effects of online behaviour on individuals or things


• The legitimacy of the efforts of a local sovereign to enforce rules applicable to global phenomena


• The ability of physical location to give notification of which set of rules apply for any given situation. Regional or national regulation by market authorities and other self-regulatory organisations are clearly less than satisfactory for the internationally active cross-border Internet

Hence, new legislation able to address cyberspace issues such as accountability and governance; proper usage, orderly conduct, structure and development; and cybercrime became very important due to the undermining of the feasibility and legitimacy of applying laws based on geographic boundaries.

Malaysia’s cyberlaws, as outlined in the previous section, governs the behaviour, content, business transactions, privacy, defamation, contracts, and intellectual property rights in a cyberspace environment, committed within and outside of Malaysia.

The Communication and Multimedia Act 1998, Section 4: Territorial and extra-territorial application provides for:

(1) This Act and its subsidiary legislation apply both within and outside Malaysia.

(2) Notwithstanding subsection (1), this Act and its subsidiary legislation shall apply to any person beyond the geographical limits 6f Malaysia and her territorial waters if such person –
(a) is a licensee under this Act; or
(b) provides or will provide relevant facilities or services under this Act in a place within Malaysia.

The Computer Crimes Act 1997, Section 9: Territorial scope of offences under this Act provides for:

(1) The provisions of this Act shall, in relation to any person, whatever his nationality or citizenship, have effect outside as well as within Malaysia, and where an offence under this Act is committed by any person in any place outside Malaysia, he may be dealt with in respect of such offence as if it was committed at any place within Malaysia.

(2) For the purposes of subsection (1), this Act shall apply if, for the offence in question, the computer, program or data was in Malaysia or capable of being connected to or sent to or used by or with a computer in Malaysia at the material time.

2.0 Computer and Computer-related Offence Provisions

The following Tables A and B presents a comparative analysis of computer and computer-related offence provisions available in Malaysia.

Computer and data offences

From the above, arguably, Malaysia can be considered as having a quite respectable segregation or classification of computer offences.

Computer-related offences

Although fraud and forgery can be prosecuted under the commercial and criminal laws whether committed using a computer or by more traditional paper-based means, it is good for Malaysia to have specific fraud and forgery offences addressed in the main computer crime legislation.

Ancillary liability

While not in the main computer crime law, computer child pornography, and copyright and related-rights are addressed in the Communications and Multimedia Act 1998 and Copyright (Amendment) Act 1997 respectively, which are collectively a part of Malaysia’s cyberlaws.

Special enforcement units

Recognising the highly specialised knowledge and skills required for investigation and evidence gathering in relation to cybercrime, some countries have moved towards setting up specialised computer crime units within their law enforcement agencies, for e.g.

• HITEC (HI-tech crime Technical Expert Center) established to act as a “cyberpolice force” by the National Police Agency of Japan
  http://www.npa.go.jp/cyber/english/policy/hightech_prog.htm
  http://www.npa.go.jp/english/index.htm


• Korean National Police Agency’s Cyber Terrorism Response Center and recently announced General Investigation Center of Computer Crimes under the Prosecutor-General’s Office

In this aspect, Malaysia does not yet have a specialist cybercrime law enforcement unit, thus cybercrimes are referred to the traditional Commercial Crimes department of the police force.

Forfeiture and/or Restitution

Apart from the imposition of terms of imprisonment and fines, cybercrime legislation can empower courts to order the forfeiture of equipment used and/or assets acquired, or to require restitution to victims. For e.g., in Taiwan there is a statutory maximum for damages that can be awarded to injured persons under the Computer Processing Personal Information Protection Law. In the Philippines, maximum penalties imposed for hacking or cracking under the Electronic Commerce Act are commensurate to the damage incurred.

In Malaysia, forfeiture and/or restitution is not clearly defined in the cyberlaws and usually falls back upon existing commercial and criminal laws.

Undercover Surveillance/Search and Seizure

Standard search and seizure powers for the investigation of criminal offences may not extend to the investigation of computer data or the interception and covert surveillance of electronic transmissions such as e-mail. Cybercrime legislation in Malaysia should provide for expanding the range of investigatory powers available to law enforcement.

International Agreements

There are currently no international agreements on the scale of United Nations conventions or treaties (e.g. for international trade, there is the World Trade Organisation) in relation to cybercrimes that Malaysia can actively participate in and/or contribute to. Such a platform can provide excellent benefits to Malaysia in formulating and advancing cyberlaws.

3.0 Prohibition on Provision of Offensive Content

Offensive content includes but not limited to pornography, indecent or unsuitable content for children, objectionable content, and defamatory articles and/or statements

The Communications and Multimedia Act 1998 provides legislation against offensive content and the Malaysian Communications and Multimedia Commission (MCMC) is thus empowered to act against offensive content by way of written requests to Internet Service Providers (ISPs) to take action against offensive content.

The following Tables C, D-1, D-2 and E summarises the relevant sections of the Act.

4.0 Intellectual Property Rights Offence Provisions

There is considerable overlap between cybercrime laws and intellectual property laws. For e.g., computer hardware may constitute a patentable invention, a registered design, or be protected under legislation relating to electronic circuit layouts. Computer software may similarly be protected under copyright law, and likewise with data and information transmitted or stored on files.

The following Table F shows the intellectual property rights offence provisions available in Malaysia.

Offence Classification

The classification of intellectual property laws into patents, trademarks, designs, copyright and computer circuit layouts is fairly standard, and it is somewhat worrisome that in Malaysia, most of the intellectual property rights legislation does not recognise infringement as a criminal offence other than those provided for under the Copyright Act 1987 and Copyright (Amendment) Act 1997.

Computer Software

Unauthorised duplication of computer software (except to make a back-up copy for personal use) is an infringement under Malaysia copyright laws. The Copyright Act 1987 was amended to give multimedia developers full intellectual property protection through the on-line registration of works, licensing, and royalty collection. The Amendment Act reinforces an author's work cannot be presented as the work of another, by adding a provision that the work must be identified as created by the author.

Optical Disc Piracy

Very few Asia-Pacific countries or jurisdictions have laws explicitly relating to optical disc piracy. A good example is Hong Kong’s Prevention of Copyright Piracy Ordinance, which prohibits the manufacture of optical discs without a valid licence, punishable by a fine of HK$500,000 and imprisonment for two years on a first conviction; and HK$1,000,000 and four years imprisonment on a subsequent conviction.

Malaysia’s Optical Discs Act 2000 came into force on September 15, 2000. Section 26 provides for:

Section 26. Penalty.
(1) Any person who commits an offence under Part III except under section 15 shall on conviction be liable –

(a) if such person is a body corporate, to a fine not exceeding five hundred thousand ringgit, and for a second or subsequent offence to a fine not exceeding one million ringgit; or

(b) if such person is not a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both, and for a second or subsequent offence to a fine not exceeding five hundred thousand ringgit or to imprisonment for a term not exceeding six years or both.

(2) Where a person being a director, manager, secretary or other similar officer of a body corporate is guilty of an offence under subsection (1) by virtue of section 30, he shall on conviction be liable to the penalty provided for in paragraph (1) (b).

Circumvention of Technological Protection Measures

Offence provisions in relation to the circumvention of technological protection measures such as encryption devices, user identification and electronic rights management information regimes are already introduced in leading Asia-Pacific countries such as Singapore, Australia, Hong Kong, South Korea and Japan.

In this area, Malaysia is also not trailing. The Copyright (Amendment) Act 1997 provides for fines of up to MYR250,000 and/or imprisonment for up to three years for the first offence, or MYR500,000 and/or five years for subsequent offences.

International Agreements

International agreements for the protection of industrial and intellectual property date back over 100 years. Malaysia is a member or signatory of the following main instruments administered by the World Intellectual Property Organisation (WIPO), and the United Nations Educational, Scientific and Cultural Organisation (UNESCO).

• Paris Convention for the Protection of Industrial Property 1883 (Malaysia’s membership: January 1989)
• Berne Convention for the Protection of Literary and Artistic Works 1886 (Malaysia’s membership: October 1990)
• Convention establishing the World Intellectual Property Organisation 1970 (Malaysia’s membership: January 1989)
• Agreement on Trade-related Aspects of Intellectual Property Rights 1994 (Malaysia membership: January 1995)

Sources:
WIPO http://www.wipo.int/treaties/en/
UNESCO http://www.unesco.org
WTO http://www.wto.org)

VI. Conclusion

Cybercrime legislation in Malaysia is still in the early stages of development, and exhibits overlap with general criminal, commercial and intellectual property laws. This is not surprising given the different historical, social and political contexts and needs within which these laws have evolved, and the differing levels of technological development compared to other countries.

However, it is a fact that cybercrime knows no national borders and, as a result, defences against the threats increasingly posed to computer and information infrastructures can only be as strong as the weaker links in the chain. Therefore, it is important for Malaysia to continually assess the adequacy of the cyberlaws and, where deficiencies can be identified, to reform those laws appropriately and quickly.

Therefore, it was a let down when Datuk Dr. Rais Yatim, former minister in the Prime Minister’s department, announced at the third MSC International Cyberlaws Conference held from March 2 to 3, 2004 that the three draft cyberlaws, namely the Personal Data Protection Act, Electronic Transactions Act and the Electronic Government Activities Act will be delayed [Khalid & Moreira, 2004, p.3].

“The first would regulate the collection, possession, processing and use of personal data, and ensure there are adequate measures for the security, privacy and handling of personal information. It aims to raise public confidence in conducting electronic transactions without their privacy being violated.”

“The Electronic Transactions Act is primarily targeted at boosting e-commerce by providing legal recognition of electronic transactions, including e-commerce transactions.”

“The Electronic Government Activities Act seeks to establish common protocols for electronic interaction between the Government and the public.”

Thus, these draft legislation are important additions to Malaysia’s cyberlaws and any further delays will eventually become detrimental for Malaysia to competitively position herself in an increasingly globalising economy. (The Malaysian government had released a draft version of the proposed Personal Data Protection Act for public comment in November 2000.)

Lawyer Wong Shiou Sien, a speaker at the conference, argued, “Despite being among the first countries in the world to introduce cyberlaws, Malaysia cannot afford to remain at a standstill. New developments in technology, products, and services related to wireless content will keep raising new legal and regulatory issues.” [Khalid & Moreira, 2004, p.2]

While there is no single model to be emulated in this process, guidance can be gained from legislation in force in countries or jurisdictions with longer experience of the threat, management and prosecution of cybercrimes, and the promotion of the effective and efficient use of cyberspace to increase the competitive advantage of our nation Malaysia.

References:

MyCERT statistics http://www.mycert.org.my/en/index.html

Computer Crimes Act 1997
Digital Signature Act 1997
Communication and Multimedia Act 1997
Malaysian Communication and Multimedia Commission Act 1997
Telemedicine Act 1997
Copyright Act 1987
Copyright (Amendment) Act 1997
Patents Act 1983
Trademarks Act 1976
Industrial Designs Act 1990
Optical Discs Act 2000
Layout-Designs of Integrated Circuits Act 2000

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