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AIM OF THE REPORT
In today`s competitive business world innovation plays a vital role which decides the growth of the company and makes the company stand alone from their competitors. The main aim of the report is to analyze and understand the important and key management areas in an innovative organization and analyze what the two companies W.L. Gore and Semco has been doing different in relation to these key management areas and to critically consider the relationship between the management actions identified and the organizations characteristics in the two cases indicating the benefits and limitations of adopting such management practices in other organizations.
The major features of an innovative organization
There are four main key actions which a manager can take to make the organization more innovative.
1) Tackling the problems differently:
All organization has the same motive as to run the business in a successful way, but in todays competitive business world it is made necessary to run the business in an innovative manner like Gore and Semco to stand alone ahead of other companies.
Traditionally manager solves a problem if he or she knows about it. He or she will never accept any solution given by others because of ego problems in psychological perspective. They try to impress other by showing they know the real concern of the problem (HAPM, n.d). Hence, here power matters. If manager is more powerful, staffs have to listen. But when it comes to innovative management, problem solving is done by consulting fellow staffs. Problem solving is mostly carried through brain storming sessions with the team members. Today, many organizations conduct knowledge management courses. Skilled and knowledgeable workforce is an asset for an organization.
2) Cutting down the hierarchy
Communication in traditional management approach exhibits vertical communication coming down from the top strategic managers to subordinates (Jackson, 2000: p.114). Organizations that follow traditional which is also called mechanist approach may have long hierarchies. As a result information flow will take a longer time and also this may affect the reliability of information received. On the other hand the innovative modern organizations have more flat hierarchies, where information flows easily between individuals.
In an innovative management, hierarchy is cut down to minimum. Instead of five supervisors or managers, management will have two. Also most of the decisions should be given to the staffs themselves. There should be direct communications between staff and supervisor without including middle person.
To create an innovative organization, everyone in the organization needs to feel responsible for helping to produce the organization's real results. Formal hierarchy will brings different sorts of thinking in staffs. For e.g. "That's the boss's job. So he is the boss". Some might also think "I can give this to him because he is under me"(Govleaders, 1995).
Employees will keep ideas among themselves if they feel the differences in hierarchy. Some might also think because of the long hierarchy, their ideas will be rejected or even made fun off.
3) Decision making
Decision making is the processes and systems by which strategic decisions are taken in the organization. Internal organization decision making becomes the centre of attention and stakeholders and leaders receive less emphasis (Rabin et al, 2000: p.549).
In the traditional approach, decisions once made are considered closed issues for the moment as the process moves to the new step. The usage of such formal procedures have the advantage of a well-defined process that all participants can follow and know what to expect. At the end of each cycle of the decision making process the organization will have an in depth understanding of the problem from the evaluation stage (Rabin et al, 2000: p.549).
Traditional management paradigm considers employees as a commodity to be bought, exploited to the maximum, and discarded when not necessary.
In an innovative approach to decision making decisions are made incrementally, allowing feedback to occur during the process instead of only at the end, hence providing greater flexibility to the decision maker (Rabin et al, 2000: p.549).
Innovative management approach to decision making is that the managers often involve subordinates and encourage them in giving their view point when making decisions. Hence employees feel more valued and trusted by their managers which in turn not only motivates employees but also increases employee morale. This is not seen in the traditional approach to decision making as the manager often makes the decision alone and dictates to subordinates.
Innovative management paradigm considers people as the "natural resource and capital asset" of the organization as well as one of the most important sources of competitive advantage.
One of the most important problems that the management of any organization faces is how to coordinate and control employees, operations and systems in a way that lead to creating and developing a successful organization. If such mechanisms does not operate in an organization there is no coordination and control, thus no organization or performance. Therefore management control is considered as one of the key functions of management (Holistic approach to performance management -HAPM, n.d).Generally management involves, what employees and business units of an organization are expected to do, criteria against which the performance of their activities is to be assessed (performance management), and the feedback of information about what had taken place.In this perspective a management's choice of which control strategy to use is dependent upon the operating situation and with what will be best to motivate employees to carry out their tasks in the manner desired by the organization (Child, 1994: p.140).
From a behavioral perspective management control is viewed as a process and not as a set of tools and techniques. In other words implementing a managerial control mechanism in an organization can impact employee behavior (HAPM, n.d).
According to the mechanistic view of organizational control, classical management theories suggest that control is one of the basic functions of management that goes along other management activities such as planning, organizing, commanding and staffing. In other words the control is a mechanism which ensures managers that plans and targets will be achieved (HAPM, n.d).
Tough rules, procedures, performance measures, objectives and other control mechanisms were main reasons for the barriers to innovation.(Dabila,2000).In contrast the new innovative paradigms that view organizations as living beings (John Gattorna) that has fewer rules, fluid structures, and high levels of communication were seen as more flexible and able to grab innovative opportunities more easily (Burns and Stalker, 1961).
However, Burns and Stalker argue that different business environments require different management systems in organizations. Some business environments are most suitable for a mechanistic structure, others for an innovative organismic (living) structure. The mechanistic traditional approach to management is most suitable for relatively stable environments. However, this structure is not suitable for times of rapid technological and market change. This is because the mechanistic structure is not capable to keep phase with the demand of large scale research and development and the new relationships with the market required under these conditions (Jackson, 2000: p.114).
It is argued that in innovative approach, management is seen more independent, less formal task and employee duties are constantly reviewed. Innovative approach does not have fixed goals like traditional approach. Goals are changeable according to customer demands, attitude (HAPM, n.d).
The purpose of process improvement is to eliminate the root causes of performance deficiencies in processes that already exist in the organization. These performance deficiencies may be causing real problems for the organization, or may be preventing it from working as efficiently and effectively as it could. To eliminate these deficiencies a five-step approach is used.
Innovative Management Techniques of Gore and Semco
W.L. GORE AND ASSOCIATES, Inc.
W. L. Gore & Associates, Inc was founded in 1958. It is a privately-held company headquartered in Newark, Delaware, USA. Gore has built a worldwide reputation for ethics and integrity in its dealings with customers, suppliers, and employees, and for taking a long-term view when assessing business situations for more than 50 years now. The company has around 9000 employees that they call associates and is locates in 30 courtiers. Right from the start Gore has been a team-based, flat lattice organization that favored personal initiative. There are neither traditionalÂ organizational charts nor any chains of command. Gore encourages hands on innovation within the organization.
Decision making in W.L. Gore and Associates, Inc.
Gore Company does not have a formal hierarchy and everyone is a leader of their own. However, associates of the organization may propose objectives and activities and then seek agreement and team consensus on objectives (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
This is a clear example of the innovative approach to management where the manager first consults subordinates before reaching the final decision.
Hierarchy in Gore
The company has direct face to face communication between everyone. The organization nurtures a culture of innovation and creativity, therefore takes into account the viewpoints of all employees (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
Decision making in Gore
Gore Company does not have a formal hierarchy and everyone is a leader of their own. However, associates of the organization may propose objectives and activities and then seek agreement and team consensus on objectives (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010). This is a clear example of the innovative approach to management where the manager first consults subordinates before reaching the final decision.
Management Control in Gore
Company did not have any hierarchy as such. Company demanded from its employees to follow the basic ethical procedures in doing business and refrain from illegal activities in the organization. With the relaxed management style, company was doing well. According to Bill Gore having a formal management approach may hinder creativity of employees (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
One of the management control mechanisms that the organization use is when recruiting employees. The company used a 'Sponsor' program, in training and measuring employee performance. The sponsor will measure the new employee's performance, and help in motivating and training the employee. The company was not only seen as not been managed, but also as not having any form of structure. Bill Gore referred to this structure as a lattice structure (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
Gore case indicates one of the innovative managements where employees are given the freedom to their work by their own. The company believed that the implementation of such kind of management control has a greater influence in innovation, thus leading to successful organizational performance.
SEMCO S.A, founded by Antonio Semler in 1912, was traditionally managed industrial equipment company. SEMCO is located in Sao Paulo, Brazil. Richard Semler, instituted an employee-friendly and employee empowered management system. SEMCO S.A, manufactures pumps used to empty oil tankers, high volume industrial dish washers, cooling units for air conditioners and various types of industrial mixers for the food industry (Maresco,P & York,C, 2005).
SEMCO was originally founded in 1984 as an entity positioned to provide engineering services and management support to the Department of Defence. The entire business base consisted of government contracts, many of which were set-aside for small business and small minority-owned business concerns. As a result of the expanding business base and the growing number of military acquisition programs during the mid-to-late 1980s, SEMCO continued to grow and diversify (SEMCO, 2010).
Problem solving in SEMCO S.A
At SEMCO S.A., workers set their own production quotas. Employees decide among themselves the best time to come to work. Employees redesign products they make, their work environments, and even formulate their own marketing plans (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
Managers run their units with unheard of freedom and determine business strategies without interference from top management. Each division in the company is allowed to set their own salary structure. All financial information is discussed openly and freely. If employees need assistance in making sense of the financials classes are held to assist them in understanding the meaning of the numbers. There are reception desks but no receptionists. There are no secretaries or personal assistants. There are no executive dining rooms and no personalized parking spaces (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
Hierarchy in SEMCO S.A
SEMCO does not use a formal organizational chart. The underlying assumption is that workers who know and agree with the objectives of their organization will align themselves into teams necessary to maximize their chances of achieving the team's desired goals. One outcome at SEMCO was the quick elimination of nine layers of management. These positions were determined to have had their genesis in the perceived need for more control that arose at various times in the company's history. Once added to the organization chart, they apparently justified their long-term existence solely by playing on fears of imminent structural collapse if they were removed (Maresco,P & York,C, 2005).
Decision making in SEMCO S.A
SEMCO managers and workers together make decisions; not just the chairman. One of Ricardo Semler's first undertakings was to throw out all the rules. He reduced the layers of management from twelve to three and reduced the "corporate" staff by more than 75%.
At SEMCO the standard policy is to have no policy. For those whose job requires travel there are no travel restrictions other than using your head. There are no departments, no rules, and no audits. The entire budget system has been simplified. What Semler did was to strip away the blind authoritarianism that diminishes productivity. Workers are self-governing and self-managing. In fact, workers have, in most cases, mastered several jobs (Maresco,P & York,C, 2005).
Management Control in SEMCO S.A
According to Richard Semler, strategic planning and vision are the often barriers to success. In group of six counsellors, all take a six-month turn as acting CEO. Meetings are optional and those who attend make decisions and those who not have to live with it. Designs and specifications are shared. Person who knows more about the subject will chair the meeting (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).
Second principle being, the person who claims the responsibility will be given the task. Third, profit sharing for employees and success-oriented compensation for satellite enterprises will spread responsibility across the SEMCO map (Cited in Innovation Module Course Notes (Unpublished), University of Wales, Newport, 2010).