Consider the following newspaper headlines: “PM says GPL commercial losses embarrassing”; “Power company forecasts $11B shortfall this year”; “Chand urges expert help to save sugar industry”; and “Sugar industry turnaround ‘far from reality’”. It does not take much for the average person to realize how deep-seated are managerial and operational problems facing these two state-owned entities.
I have today decided to write on the subject of the above caption because of its relevance to the way we manage the affairs of the State in general, and state and private sector institutions in particular. For some, this may be just a refresher but it may have important lessons for policy-makers.
Concept of an organisation
Of the various definitions of an organisation, the one propounded by Herbert Simon perhaps captures the essence of what an organisation is. He stated that an organization is a system of inter-related behaviour of a certain group of people. Packard in a speech to his employees in 1960 about the meaning of core purpose asserted that:
“…a group of people get together and exist as an institution we call a company so that they are able to accomplish something collectively that we could not accomplish separately – they make a contribution to society……the underlying drives come largely from a desire to do something else: to make a product, to give a service – generally to do something which is of value.”
It is the collective action in pursuit of those common objectives or goals that is the distinguishing feature of an organisation.
Historical development of management practices
The management of organisations has traditionally been concerned with the structure, functioning and performance as well as the behaviour of individuals and groups of people within them. The study of organisational management effectively commenced with the need to improve productivity in the aftermath of World War I. The classical school of thought emphasized the organisation as an entity and the nature of the work that had to be performed. There was little consideration for the welfare and well-being of workers who were viewed as being in a work environment for economic reasons only. The emphasis was on the tasks to be performed and how productivity could be improved.
The principal advocate of this approach was Frederic Taylor who considered work as a special science involving a thorough analysis and design of tasks in such a manner that the precise movements of the workers could be synchronized with the operations, thereby enhancing productivity. One recalls his famous experiments at the Bethlehem Steel Works where the workforce was reduced from 500 to 140 through the redesign of the work. It is for this reason that the term “scientific management” was used and the concept of specialization originated. It involved the breaking of tasks into discrete portions with each worker specializing in one aspect only.
While Taylor’s approach concentrated on specific tasks to be performed, Max Weber was looking at organizations as a whole and considering the best way they could be run to ensure orderliness and a high degree of efficiency. As a result of Weber’s work, the concept of a bureaucracy emerged whereby an organisation was viewed as a rational entity with formal rules, a hierarchical structure and a chain of command. Other contributors to the scientific school of thought include Barnard, Fayol and Urwick.
The next stage in the development of organizational management began with the work of Elton Mayo in what was described as the human relations school of thought. This approach augmented the classical approach by factoring in consideration of the human element into the work environment. Social relationships and feelings of belongingness were considered important for enhancing productivity. While the classical school of thought focused on individual performance, the human relations school emphasised teamwork, employee participation, group decision-making and delegation of authority, among others. The Hawthorne experiments in 1933 showed clearly how social considerations, as opposed to physical ones, could improve productivity.
Another notable contributor to the human relations school of thought was Abraham Maslow who asserted that human needs are hierarchical, from the basic need for food, clothing and housing, to that of self-esteem and self-realisation. If some way could be found to satisfy these needs, productivity could be improved. Douglas McGregor also made an important contribution when he identified two main models of leadership, the work-centred Theory X and the employee-centred Theory Y. In the 1950s, the Tavistock Institute tried to combine the classical and human relations approaches by viewing organizations as socio-technical systems. Joan Woodward further developed this concept in the 1960s through a series of coal-mining studies.
The third stage in the development of organizational management relates to the systems approach. This approach was advocated in response to concerns that organizations were gradually losing their wholeness, and their goals were somewhat becoming blurred. The straight and logical image of organizations appeared unsuitable as organizations were becoming more and more complex in an environment that has become very competitive and uncertain. The systems theory allowed communication across disciplines. A system is viewed as an interrelated set of elements that function as a whole. They are various subsystems that can be considered in terms of inputs, transformations processes, outputs and feedback. In addition, organizations were viewed as natural or biological systems that can adapt to various internal and external influences.
The systems theory gradually emerged into the contingency theory which recognises that organizations exist in uncertain and turbulent times. No one approach is likely to describe how an organization is to be administered and how it should interact with its environment. Management styles will therefore have to vary from organization to organization in response to both internal and external factors.
Current thinking on management
Most of today’s organizations tend to adopt managerial practices that are associated with the industrial economy with hierarchical structures, chain of command and formal rules. However, organizations have become more knowledge-based and therefore there is a mismatch in managerial practices. Manville and Ober observed that “we are in a knowledge economy, but our managerial governance systems are stuck in the industrial era. It’s time for a whole new model”.
Drucker echoed similar sentiments when he stated that the typical large business of the 21st century will have half the
levels of management and one-third the managers of its counterpart today. Such management practice will resemble that of a symphony orchestra, a university or a hospital that are run by specialists. His statement is based on the rapid advances in information technology and the widespread use of the Internet which make communication with the top faster and easier, thereby rendering some of the layers of management redundant. He made reference to one of America’s leading defence contractors who, by asking the questions about the source of information, the form it was in and how it flowed, was able to realize that as many as 6 out of a total of 14 layers of management appeared redundant.
Employees of a knowledge-based organisation are considered its greatest assets. For example, it is the IT group of 1,000 employees that gives Microsoft its competitive advantage over its rivals. Quinn, Anderson and Finkelstein argued that the success of today’s organization lies more on its intellectual and systems capabilities rather than on its physical assets. Manville and Ober asserted that in today’s knowledge economy, the core assets lie in the intelligence, understanding, skills, and experience of employees. They suggested that professional intellect can create value by inverting the traditional hierarchical structure and by creating self-organizing networks. They advocated the use of “spider’s web” to solve problems that are beyond the capability of one professional. It is a form of a self-organising network that brings people together to solve a complex problem and is disbanded as soon as the task is accomplished. They also cited the case of NovaCare, one of the fastest growing health-care companies in the US, where the organizational structure provides support to the professionals. Instead of giving orders, the former line managers are now removing barriers, expediting resources, conducting studies, and acting as consultants. In fact, line managers become staff people.
It is necessary for professional intellect to be organized so as to encourage the creation of new knowledge and sharing it throughout the organisation. The creative energies of employees need to be garnered and directed towards organizational goals. Innovation and the use of initiative need to be encouraged and so is the ability to challenge old ways of doing things. There should be no fear of making mistakes, for every mistake genuinely made is part of a learning process and is a stepping stone to success. Divergent views need be encouraged in the hope that at some point convergence takes place for the overall benefit of the organisation.
Leonard and Straus asserted that innovation takes place when different ideas, perceptions and ways of processing and judging information collide. When these are harnessed in a productive way, “creative abrasion” is achieved and the organization benefits. However, managers who dislike conflict and value their own approach, hire and reward people like themselves in terms of interests, thinking and training. In this “comfortable clone syndrome”, no innovation takes place. Success at achieving creative abrasion largely depends on the attitude of supervisors and their willingness to cultivate divergent views. Subordinates also have a role to play in engaging in constructive criticisms rather than criticizing for the sake of criticisms or for personal reasons.
To be continued
