Factors of production Land Labor Capital and Entrepreneur
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The science of business activity says that there are four major factors of production: Land, Labor, Capital and Entrepreneur. The entrepreneur is ultimately responsible for organizing and allocating all other factors of production. When a business activity is set up, the resources are generally allocated according to functional departments namely Production, Marketing, Accounting and Finance, and Human Resource. The larger a firm, the more functional departments it is likely to have. What needs to be noted here is that the objective behind dividing the whole organization into departments is to ensure the efficient utilization of resources. In the older times, there was little concept of having a Human Resource department in organizations. However, as the field of management sciences evolved, the function of Human Resource began to attract attention and importance. This is because, a human resource, or employees in simple words, are as much of an important asset to an organization, as any other fixed resource. It is these human resources that come together to work and contribute towards the efficient management and utilization of all other resources and thus the efficiency of overall organization.
While larger firms have began to recognize the importance of it human resources, smaller firms still tend to ignore the fact that the efficiency if their human resource is an ultimate contributor to the efficiency of their organization. They tend to ignore the fact that the efficiency of human resource is directly related to human mind, which needs to be motivated in order to give the required results.
As the field of human resources began to gain importance, the subject began an important academic discipline and consequently attracted attention from academic researchers. This led to the emergence of a whole new discipline of organizational behavior. As simple as it seems, the field of organizational behavior involves many complexities and highlights how people, individual and groups act within an organization. It takes into account several factors that might affect that efficiency of the workforce, such as motivation, leadership, communication, managerial skills, conflict management, and most importantly, the overall organizational structure. When it comes to workforce management, out of all elements of organizational behavior, leadership has emerged as the most important one. This does not mean that all other elements have little importance. The reason why leadership is given more importance is that it is the leader who supervises, manages and deals with all other behavioral elements pertaining to his workforce.
While in larger organizations, the role of leadership can be taken up by departmental heads, supervisors and project heads, however, in smaller firms, the entrepreneur himself takes the role of a leader. It is his leadership skill that directly contributes to how motivated and efficient his workforce is going to be. Generally, despite of a much smaller workforce, the employees in smaller firms are found to be more mismanaged, inefficient and demotivated than those in larger firms. This is because the entrepreneur ignores the need of giving his workers, a sense of importance, and he tends to maintain a more autocratic leadership style. This often leads to demotivation and thus, inefficiency of work force. The same problem was faced by JayDee Consultancy, an accounting firm located in Nashville, TN.
JayDee Consultancy is a small accounting firm located in Nashville, TN. The firm deals in providing accounting and consultancy services to other businesses. JayDee Consultancy consists of mainly 3 associates. Two of the associates, Mr. John and Mr. David are partners in the firm with both having an investment of fifty percent each and therefore have an equally important role in decision making. The third associate, Mr. Robert is a Chartered Financial Analyst, and works in the firm as an advisor and consultant with respect to legal matters pertaining to investment consultancy, risk advisory, corporate law, accounting and taxation. Besides, Mr. Robert is the one who mainly deals with the customers and is working on the ground. The fact that Mr. Robert does not have any investment in the business and is working as an employee, makes him second to both Mr. John and Mr. David. Although he is not a partner in the firm in terms of investment, however, he is of immense importance due to his expertise in the field and his specialization in dealing with complicated legal matters. Mr. John is a Chartered Accountant while Mr. David is a Cost and Management Accountant; therefore both specialize in different fields of Accountancy.
The biggest problem with JayDee Associates is that the firm fails to have a clear organization structure that could clarify job descriptions, job specifications, and responsibilities and authorities of the three associate. Both Mr. John and Mr. David feel, that given their monetary investments in the business, they have the ultimate decision making authority in the firm. As a result, they both always end up in a conflict when it comes to decision making. Not only this, but they also tend to ignore the expertise, specialization and importance of Mr. Robert in their firm. The problem and its implication with respect to the overall organizational behavior of JayDee Associates is discussed as follows:
It is very important for any and every organization, be it large or small, to have a clear and well defined organizational structure. It is this organizational structure of the firm that defines the responsibilities, duties, and authorities of each individual within that organization (Robbins, 2003). A clear organizational structure also helps defining the corporate culture of the organization. An unclear organizational structure would mean a complete mismanagement of the human resource.
The problem with JayDee Consultancy is that it fails to have a clear organizational structure. Both Mr. John and Mr. Robert fail to respect and recognize the expertise and opinion of other associates, especially their employee. Mr. Robert finds it very hard when it comes to convincing the two partners that their decisions are in contradiction to what the accounting laws and standard say or what the customers require.
The role of unity holds a great importance in organizational behavior. Unity is categorized into Unity of Command and Unity of Direction. Unity of Command says that an employee must be taking orders, and should report to only one authority (Robbins, 2003). According to the concept of Unity of Direction, each objective must be synchronized with one single plan only (Robbins, 2003). If unity of command does not exists, it means that the subordinates will be left in confusion about whom they should take orders from, whose decisions they should abide by, and whom should they report to. This also results in communication gaps and misunderstanding of communicated information. On the other hand, if unity of direction is not existent, it would mean that the organization fails to adhere to one single plan. This will result in delayed, and in some cases, inaccurate or wrong decision making. Coordination related problems will also be common in such organizations.
Unfortunately, both these concepts of unity are virtually nonexistent in JayDee Consultancy. Both Mr. John and Mr. David want to keep the total control and authority to themselves. This leaves Mr. Robert in state of confusion about whom he should be listening to. Due to lack of unity of direction, the firm fails to make quick and accurate decisions as both the partners have their own plans to the targets. Furthermore, they often tend to ignore the suggestions and recommendations given by Mr. Robert.
Unity is also of significance in an organization because unity between top levels of management acts as a role model for employees working down the span of control to show unity which actually promotes team working. In this case, if Mr. David and Mr. John face conflicts with each other frequently
The theory of organizational behavior says that any individual in the organization must not give priority to his personal interest over the interest of organization. Giving priority to personal benefits would mean that organizational interest is being compromised. This problem is faced by JayDee Associates at a severe level. Both Mr. John and Mr. David want to keep the control in their own hands and they both ignore the fact that it is their individual skills integrated together that will help the firm to achieve its organizational. If each of them will work independent of each other, the demand of their services will experience a sharp demand
It is very important for an overall successful performance of an organization that its workforce, from top level to the lower level, is focused on the aims, objectives, and targets it wants to achieve. The first thing which is to be noted here is that this focus on targets means that the organization must be clear about what exactly does it want to achieve and in what time span. Without a clear sense of direction, the workforce, no matter how skilled it is, will always be left in confusion. Once clear and realistic targets are set, it must be ensured that each individual works in the best interest to achieve those targets without any deviance. The roadmap to achieve those goals must also clear and coordination and adherence to that plan must be ensured at all times by every individual. Coordination is where JayDee Associates fails. The lack of coordination among Mr. John, Mr. David and Mr. Robert leads to mismanagement and failure to achieve objectives. This also effects the efficiency of Mr. Robert, who on an individual level, tries his best to keep the organization on the path to success, but cannot do much because of the fact that the each of the two partners consider themselves too important to respect anybody else's recommendations and expertise.
As mentioned earlier, the field of human resource management has attracted immense academic and corporate attention over a period of time. This invited a lot of researchers to explore the subject. Considering the fact that the organizational behavior also deals with human psychology and sociology along with conventional corporate techniques, it attracted psychologists and sociologists to research about various methodologies involved in workforce management. This in turn led to a creation of whole new discipline of organizational behavior.
Leadership and Motivation
Pertaining to the management problems faced by JayDee Associates, there are two schools of thoughts that exist in general. The first school of thought suggests that leaders, especially in smaller organization, need to be more autocratic and a centralized form of corporate culture must be maintained. They argue that since there are less promotional chances in smaller firms, only those people work in small firms, whose ultimate goal is to earn money. Such workforce is only motivated by monetary benefits and therefore it is not of concern to them even if they are not involved in decision making process.
Lepper, Greene and Nisebett (as cited at ChangingMinds.org) argue that workers are motivated through tangible rewards. They show willingness to perform well if tangible. Especially monetary rewards are associated with the tasks they are delegated. This means, leaders need not use intrinsic approaches in order to motivate these workers. This further implies that such workers need not be involved in any kind of decision making process as their performance is directly related to the monetary incentives they earn.
Peter Ducker (1974) takes the previously discussed argument to another level, by arguing that monetary rewards are the ultimate role player in motivating any kind of workforce. They are so essential that no human relations, sense of achievement, level of importance, and decision making authority can compensate for monetary benefits. He argues that no matter how progressive the corporate world grows, trade unions and workforce are always known to pressurize employers for higher salaries and wages. He also claims that although self-motivation and other intrinsic elements are important in workforce motivation, however, they can only be triggered through monetary rewards that are which the employees work for.
The Monetary crowding out theory suggests that monetary rewards and punishments play a great role in strengthening or weakening a workers desire to perform efficiently. It implies that workers tend to be more inclined towards tasks that have greater scope of monetary or financial benefits. Similarly, they may agree to certain organizational decision because they fear that going against them may result in a monetary punishment for them for example, coming late to office may result in deduction in monthly salary.
Various other researchers have agreed that since workers work to earn high salaries and all other desires and wants can be fulfilled by money only, leaders need not take their input in any kind of decision making. They should simply transmit the instructions and associate monetary rewards and punishments to the completion of task in order to get required results.
Taylor also laid stress on the idea that workers only work for financial gains because all their wants are dependent on money. Therefore, they should be kept under constant supervision. He argues that if monetary benefits are subtracted from the incentive equation, and all other incentives are offered, then workers will not be willing to work.
There is another set of theorists who are completely against the first school of thought. These theorists argue that although money is an important motivational tool, however extrinsic rewards alone cannot fulfill the responsibility of motivating an individual to an extent that he gives the desired results. These theorists also argue that such workers need a sense of importance and achievement to perform well. Once their financial need is fulfilled they aspire for self actualization.
Lewin suggests that autocratic and dictatorial leadership style should only be used where there is little time for decision making. According to Lewin, being consistent with autocratic leadership style, kills the sense of creativity and innovation in the workforce and makes work monotonous and boring for them. This results in severe demotivation as workers work for the sake of getting the job done rather than gibing it their full energy to get the desired results.
Elton Mayo argued that satisfying intrinsic desires of workforce is more important in order to trigger their performance. Effective communication and strong relationship between employer and employees is essential to ensure full utilization of human resource. He claims that managers should ensure effective feedback once they have communicated their instructions and information, in order to achieve the desired results. Mayo's theory suggests that work force should be given more opportunities in the decision making process so that they get a sense of importance and belonging to the organization. The more the own their work, the better they will perform.
Maslow and Herzberg, both agree that it is more important to satisfy the psychological needs of workforce than financial needs. They both claim that financial needs are only one time desires and once they are satisfied they aspire to fulfill their psychological needs which go up to the extent of self actualization. They also claim that workers are more concerned of their job security and if they fear losing jobs, their efficiency will be sacrificed even if they will be paid lucrative salaries. They claim that leaders and managers must respect the self esteem of their workforce.
Herzberg's theory suggests that apart from fulfilling physiological and psychological needs, workers look for doing more varied and challenging tasks. They also get motivated when they are delegated tasks and are given more opportunities for decision making.
There is one other theory that creates balance in both these schools of thought. Douglas McGregor classifies workers into theory X and Theory Y. He claims that theory X worker's avoid working and are not intelligent enough to take initiatives. They are not ambitious. In order to get the desired results out of them, leaders and managers should attract them with financial incentives and maintain an autocratic style of leadership with them. On the other hand, Theory Y workers are self motivated. They look for challenging tasks that give them sense of achievement. They don't like to be directed and like to work on their own. Such workers are creative and original and should be dealt with a more democratic style of leadership. They should be given tasks where decision making is involved so that they feel like they are contributing to the organization in an important way.
Conflict management is another important aspect of organizational behavior that has attracted a lot of attention from researchers. It must be noted that team motivation and leadership and managerial crisis are not the only organizational crisis faced by JayDee Associates. Lack of conflict management is another important issue for the organization. In theory, there are five major ways of dealing with conflicts.
The collaborative approach states that a decision should be reached where the interests of both the conflicting parties is taken into account. Although this approach is ideal where relationships are to be strengthened, however, when applying this approach to organizational practices, it must be taken care of that the organization's interest must not be compromised in order to satisfy the personal interest of the respective conflicting parties. If a solution is worked out where the interests of both the conflicting parties are met but the interests and objectives of the organization are at stake, then such a solution must not be opted for.
Another approach is the compromising approach, which suggests that both the conflicting parties reach a neutral and an unbiased solution where individual concerns of both the conflicting parties is satisfied to some extent but not entirely. In an organizational perspective, this approach is more feasible as compared to its previous counterpart as both the conflicting parties compromise on some of their personal concerns in order to achieve common organizational objectives to which they both agree. Both the conflicting parties must let go their personal interest to an extent such that the organization's objectives are not compromised on.
The theory of accommodating suggests that one of the conflicting parties gives up to the other such that the conflict is resolved in harmony. This is only workable when one of the conflicting parties realizes that he is on the wrong side. This approach is rarely applicable in an organizational setting. It is also important that the party that is giving up on his side of the argument must be taken on board with the decision of the winning party. The winning party must ensure that there is no trust deficit in between the conflicting parties.
Competing theory of conflict management can be used where achieving goals are more important than personal interest and where prompt decision making is required. This theory is based on the idea that a person may use everything in his or her power in order to attain the desired results. This approach is only advisable to be used when a person is confident about the fact that he is on the right side of the argument. However, the use of power mean that power should be exercised in such a manner that other objective like workforce motivation should not be damaged.
Avoiding theory suggest that a conflict may be avoided by postponing the issue to be discussed at a later time or by side stepping from the conflict. The problem with this approach is that it only gives a temporary solution to the problem. Apart from this, postponing of important issues can not only delay the decision making process, but also can result in making things worse.
The five theories discussed earlier are generally used when solution is to be reached without the involvement of any third party. However if both the conflicting parties fail to reach a solution using any of the five strategies, then mediators and arbitrators can be used to reach a decision. These mediators and arbitrators are a third party that listen to the arguments and demands of both the conflicting parties and then make them reach an decision that not only is unbiased but also fulfills the requirement of common good. However, a drawback of this approach is that it can very time consuming and may delay the decision making process.
Amalgamating the leadership, motivation and conflict management theories discussed above two kinds of conclusions can be reached. One theory says that leaders should be autocratic and should not bother about taking inputs from their employees. Their employees are only concerned with financial gains and that is what they work for. Therefore, their opinions and suggestions do not matter to the organization. Furthermore, when it comes to conflict a leader must make sure that his interests are protected at best and he must do everything in his power to enforce his opinions.
On the flip side, a more liberal and broad set of theorists suggests that leaders should maintain a democratic style. Workers should be allowed to participate in the decision making process. Their opinions and suggestions must be respected and they should be given both intrinsic and extrinsic benefits to work. These theories suggest that it is important for managers to let the workforce have a clear sense of direction and their self esteem must be respected. When it comes to reaching a solution to a conflict, power must only be used where a manager is confident that he is on the right side of the argument. He must step aside or at least show flexibility if that is in the best interest of the organization as protecting the interest of the organization is more important than pursuit of one's personal benefits.
It should be noted that none of the two set of theories have conclusively been proven completely accurate or completely inaccurate. Both have been practically applied in various organizational settings and have produced that were in some cases extremely successful, while a complete failure in another cases. The success and/ or failure of any theory depends on how effectively it is applied along with the nature of the organization, its corporate culture and the psychology and personality of its employees.
In case of JayDee Associates, it is observed that Mr. Robert is an expert and professional worker who is ambitious and trying his best to produce good results for the betterment of the organization. His efficiency is only suffering at the hands of the stubbornness of his bosses. An ideal solution to this problem would be that both Mr. John and Mr. David should respect the fact that Mr. Robert is an expert in his own field and his opinions and recommendations must be respected. Even if the partner's feel that they cannot agree with Mr. Robert's suggestions as it goes against their objectives, they should lend an ear to what he says and then take a decision that best suits their organizational interest.
As far as the conflict between the partners themselves is concerned, the partners should keep the interests and objectives of the organization in the first place. If either of the partners realizes that he is at the wrong side, he should step aside. In other cases both partner's should have a dialogue in a peaceful setting so that the corporate environment of the organization is not disturbed.
JayDee Associates should make sure that their organization has a clear and well defined organizational structure. Authorities, responsibilities, and duties of each individual must be well defined. It must be made sure that Mr. Robert does not get confused with whose orders he should abide by and whom he should report to. It will also be more practical if both partners divide the decision making roles according to their own fields of expertise. Given that JayDee Associates is a small firm which not only has an advantage of a short chain of command but also has a narrow span of control, if the firm fixes up its problems related to worker motivation, communication gaps, leadership styles and conflict management, jayDee Associates will be on its road to success.
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