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In the present era organisations are regarded as open systems that are subjected to great deal of change. Managing organisation is about effectively managing this change both internally within the organisation and simultaneously managing changes in the external environment that affect businesses. The Human capital is an essential resource and nurturing this element is a primary activity for most organisational leaders in the present generation. In this report we shall critically discuss how behavioral aspects become driving factors within a company and the ways managers employ to manage these factors for the successful performance of the company as well as managing change.
This report comprehensively identifies few factors as the key elements that drive effective organisational performance. These factors are "leadership", "motivation", "knowledge management", and finally "strategic human resource management". We shall be looking at these aspects individually through different case studies and peer reviewed journal articles and also analyse the different theories involved to manage these factors.
In the later part of this report we shall have a look at the way organisations manage change through effective management. The different factors discussed in the first part will be used as a tool to resolve issues pertaining to changes within organisations.
Leadership is the ability to influence a group toward the achievement of goals. The source of influence may be formal, provided by managerial rank in an organization. Non-sanctioned leadership is the ability to influence that arises from outside of the formal structure of the organization. (Robbins 2006)
For most organisations, in the present generation, leadership is equivalent to management. However those who are able to sight the difference between these two elements have gained a sustainable competitive advantage over others. Managers are more of implementers who carry out day to day responsibilities. Whereas leaders are people who think strategically of the future, in other words leaders shape the future.
Leaders are of two types, transactional leaders are those who guide or motivate their followers in the direction of established goals by clarifying role and task requirements, whereas transformational leaders are those who provide individualized consideration and intellectual stimulation, and who possess charisma.
The process of leadership involves three major components, firstly the leader, secondly the employees and finally the organisational culture. If the relationship between these three components is not compatible then leadership will fail in the long run and so will the team eventually (Hollander, 1978). We would primarily focus on the first component in reference to the other two.
A leader must have certain beliefs and perceptions about employees and teams. Thus the key to being a successful leader is that the leader should understand that employees are the most valuable assets of the company. Managers who think of leadership strategically must make employees believe the fact that they can individually grow, learn and have the capability to lead in future. Thus successful leaders are the once who involve organisational employees intricately as a part of decision making.
Leaders must always embrace the Wallenda factor, which states that one should always concentrate on succeeding and accomplishing a job rather than think of failing. The Wellenda factor has been named after the great tightrope walker Karl Wallenda. Karl Wallenda was getting ready for his most challenging stunt of his life. And for 3 months prior to his greatest tightrope walk all he could think about was falling, instead of concentrating on the task at hand, walking the tightrope. So as a result of his perception that he was going to fall he started doing things and portraying the feeling to his wife and coworkers that he was going to fall and not make it. For instance, he checked and personally supervised the construction of his tightrope for the first time. Something he never did. He was not concentrating on succeeding but failing, and as a result he fell (Bennis & Nanus, 1997).
In modern day organisations leaders must have the ability to share power and control with the team. The ability to give up control and act as a team player, thereby learning to depend upon the team is the most task for any leader. Most leaders believe that giving up control means losing power and becoming a lassie-faire leader. In fact leaders can earn more legitimate power by giving more responsibilities and control on employees. Legitimate power is the ability to get work done through respect and trust gained from employees. For example leaders in leading IT companies like Microsoft and Infosys has accomplished organisational effectiveness through legitimate power. Bill Gates and Narayan Murthy have shown confidence and infested responsibility in their employees over the years and that is the reason why today their respective organisations are doing immensely well even after their taking a back seat. On the opposite hand lots of companies fail since leaders use the threat of punishment to make employees do their task. Such power is called coercive power.
Leadership is about "doing the right things", unlike a manager who concentrates on "doing things right" (Cangemi, Kowalski & Khan, 1998, p.13). In other words leadership is about bringing in organisational effectiveness whereas management is about maintaining efficiency within an organisation. Hence in order to succeed in the future one of the key essences of leadership is about taking risk. Some of the transformational leaders who have been able to turn their businesses profitably are great risk takers as well. A classic example to this fact is Sir Richard Branson. In 1986 when Branson took a risk to launch the airline business Virgin Atlantic, many thought that for a media and music record producing company like Virgin, the plan of launching an airline business is overambitious. However over the years Branson through his charismatic leadership has developed and nurtured Virgin Atlantic to be a profitable brand. The risk taken by him gradually transformed into a vision for the organisation and therefore became a reason of immense success.
Finally leaders must clearly define the vision, goals and objectives of an organisation, and must see to it that goals of individuals and smaller teams are aligned with the goals of the organisation. Every leader must be able to answer the key questions of Peter Drucker, i.e. "What is our business? Who is our customer? What does the customer buy? What will our business be? What should our business be?" (Cangemi, Kowalski & Khan, 1998, p.20).
The second most important factor in context of organisational behaviour that creates effectiveness is motivation of employees. At this point let us refer to the example of Barclays PLC's acquisition of Lehman Brothers in September 2008 (Lambe 2008). When Barclays took over Lehman brothers, it was observed that the employees of Lehman Brothers, who were performing before the integration process, became non-performing after the acquisition took place. The major issue was that employees were not motivated. Following the integration process, most of the existing Lehman staffs were not quite sure as to what their role was in the new organisation. The motivation of employees is critical in an organisation as it is directly related to their job satisfaction.Â This should be managed proactively, properly, and effectively.Â For example, for an employee that is fifteen minutes coming back from break, it would be important to understand the reasons for the lateness, and communicate it clearly to the employee the expectation from him in terms of the promptness back into the office after the lunch break.Â
Motivation in other words leads to organisational commitment. In most organisations managers use the traditional models of motivation in order to motivate their employees towards greater organisational commitment and in-turn gain greater organisational effectiveness. Some managers, who use Maslow's hierarchy of needs (1943) in order to motivate employees, tend to keep employees motivated by giving them more esteem. Such managers generally use methods like giving more responsibility to employees and promoting them to higher levels of the organisation. Research has also shown that meeting employees to their basic needs does not mean that employees are motivated. This can be linked to Herzberg's two factor theory (1959) which shows that employees have basic needs called hygiene needs. Meeting such needs does not cause satisfaction but only is only a mean of preventing dissatisfaction. Such factors include salaries, working condition and organisation strategy, etc. Factors that lead to motivation are the positive factors. These factors include achievement, personal development, job satisfaction and recognition. Improving these factors can provide employees; job satisfaction. Herzberg (1959) concluded that organisations should aim to motivate employees through job satisfaction, rather than reward or pressure.
The most practical motivational models that are followed in recent times are the equity model and the goal setting theory. Through the goal setting theory it is stated that those employees who know their objectives properly are more committed to their work. According to a report of Business Innovation and Skills (BIS, 2009), it has been revealed that in UK, it has been reported to most small business owners that only 25% had clear objectives stated. The rest did not have their objectives clearly laid down and as a result of which did not feel committed towards their job. At this point it is also important to consider the equity model. Managers who believe in monetary motivation should consider what is perceived to be equitable by an employee. Monetary rewards should be linked to the level of input of individual employees.
After the recessionary phase, many companies cannot afford to spend much on monetary benefits. Hence the common practice in recent days is Internal Marketing. Internal Marketing as defined by Parasuram and Berry, 1991 as the process of attracting, improving and maintaining company's employees in positions that ensure the maximum and efficient usage of their work capabilities, and a motivation system that allows satisfaction both in terms of material needs and professional aspirations. Through this concept employees are treated as customers and jobs as products within the organisation, (Sasser and Arbeit, 1976, Berry 1991). Thus motivation or rather employee satisfaction is used as a marketing tool to satisfy employees. Research shows that across the world companies have been involved across varied number of sporting activities to motivate their employees. Often employees are given recognition on the fact that they represent their organisation at sporting events and that they can win accolades for the company. This causes a high level of organisational commitment amongst employees. For example the Air India Pvt. Ltd., the oldest company in the Indian Airline industry has a national level football team and it recognizes talent amongst employees who can play good football. Employees who represent their football team at the national level have also been given a proactive role in decision making of their departments. This has caused better organisational effectiveness. It has also been found that certain individuals are motivated through socialization. If employees are given the opportunity to intermingle amongst each other outside working premises, then their comfort level within the organisation increases, therefore allowing them to stay more committed towards work.
1.2.1 Lack of Motivation acting as an obstacle to organisational effectiveness and steps taken to rectify it:
At this point let us consider the case of Citibank's Information System department. Following the Wall Street crash in 2008, when most of the companies were undertaking major cost cutting steps, this department also decided to undergo major cost cutting by laying-off 25% of its employees. The "survivors" who were retained were no more motivated towards work. To overcome this problem, the company decided to set up a community club, through which employees could regularly socialize with each other. The results were evident in the perspective that lesser complaints from clients were registered and softwares developed had lesser defects. Thus socialization was used as a motivational tool by the company.
Another tool that modern day organisations use to achieve high level of organisational effectiveness is knowledge management. Over the last decade most organisations across the world have identified knowledge to be an intangible asset and therefore organisations look to preserve knowledge within the organisational boundaries and in-turn preserve their competencies. Knowledge is of two types, explicit knowledge is codified, structured and accessible while tacit knowledge is that which is of crude, inert and external. It is generally of semiconscious and unconscious nature and is contained in peoples' mind and body. According to Polanyi it is very difficult to introduce tacit knowledge in a discourse, it is incommunicable by language. It is thus important to tap tacit knowledge within the organisation.
At this point let us consider the case of crystal manufacturing in Alpha enterprise; a glass manufacturing company (A.Ait Razouk et al. /Strategic Human Resource Management and Tacit Knowledge Management). Crystal manufacturing is mainly centered on know-how which corresponds to tacit knowledge that is difficult to transmit and requires implementation of complex learning mechanism and effective action levers such as Strategic Human Resource Management. Another major issue of the company was the ageing population. Most of the senior technicians and designers were either on the verge of retirement or taking voluntary retirement. Hence, preserving knowledge became a major issue for the management. Hence senior employees were collaborated with the recruitment and training and development teams. This allowed the company to bring together all the tacit knowledge from senior employees and enrich the new employees to develop quicker expertise.
Another industry wherein organisations work to preserve tacit knowledge is the pharmaceutical industry. A study of selected pharmaceutical companies in Iran (Mahaboudi and Ananthan, 2010) shows the implementation of a KM cycle.
The most important factor for the effective implementation of the above knowledge management cycle is culture followed by technology and training. The model validates the fact that if industries tend to concentrate on optimum utilization of knowledge then they should encourage employees to adapt to the cultural change. Although technology plays an important role in effective implementation of KM, without attention to the cultural and organizational context in which people are working, technology, alone, may not be able to stimulate the creation and dissemination of knowledge, and implementation of KM. (M. Mahaboudi and B.R.Ananthan).
1.3.1 Ineffective Knowledge Management acting as an obstacle to effective management:
In this context the decline of ICICI bank is an example of ineffective knowledge management. When the company was established in India, it became the number one Indian Bank in terms of consumer banking and retail products. However in the last three to four years, with many of the senior level executives leaving the company, there were no new products that were introduced. The existing products and services of the bank continued to look very generic and also customer service was another aspect which fell short of standards. The major reason identified was that with senior employees leaving the company, there was almost negligible level of knowledge sharing. Hence new employees were not groomed properly.
1.4 Strategic Human Resource Management:
Most industries across the world believe that a strategic approach to human resource management involves the design and implementation of internally consistent policies and practices that ensures the firms human capital and in turn contributes to the achievements of business activities. (Baird & Meshoulam 1988; Jackson and Schuler 1995, 1997). Human capital involves employees' collective knowledge, skills and capabilities.
Strategic human resource management includes a wide plethora of activities. The ones that will be focused upon in this context comprises of recruitment of employees, training and development, managing employee performances through various appraisal techniques and finally succession planning.
Considering the case of Novartis Pharmaceuticals we find that the company employs fresh graduates with biological knowledge in its technical department. The company's recruitment process involves a workshop wherein the candidates are exposed to a real life picture of the internal processes of the research units. Through this the selection process becomes more realistic, since it shows how potential are candidates in handling issues during their work.
In developing countries like India wherein the labour intensive industries like information technology is booming, companies are investing more and more on training and development. For example Infosys which has emerged as one of the prominent IT companies has a state of art infrastructure located at Mysore. Newly recruited employees are given accommodation to stay and an environment wherein they meet their mentors at any time of the day. Employees are also given relaxation facilities such as playing different types of sports and watching motivational movies within the Infosys campus; as quoted by Narayan Murthy (founder of the company) "At Infosys we learn with fun".
Managing employee performance is another important aspect of strategic human resource management. Different organisations use different forms of appraisal techniques in order to review the performances of their employees. Most of these techniques have a balance of both quantitative and qualitative interpretation. Some service industries use the score card technique for reviewing performances.
Below is an abbreviated example showing selected HR practices and outcomes aimed at implementing the competitive strategy, "To use superior guest services to differentiate the Hotel Paris properties and thus increase the length of stays and the return rate of guests and thus boost revenues and profitability"
(Desseler.G ; Human Resource Management; Ch-10; Prentice Hall Publications; 2006)
The most commonly used recent technique is the 360 degree technique of performance appraisal. Through this method a peer review technique is used wherein every employee gets a realistic feedback from fellow colleagues in the department.
1.4.1 Ineffective Human Resource Management is an obstacle to organisational effectiveness:
Through the various case studies discussed in this report we find that most of the organisational problems are due to ineffective human resource management. For example in the case of Barclay's integration with Lehman Brothers' the integration process was so much hurried upon that the Lehman staffs never felt a part of the new organisation, this lead to conflicts within the organisation and inefficiency in their performances.
Human Resource also plays a proactive part in determining the compensation of employees. Many a times human resource managers fail to evaluate the proper salary and incentive scheme for employees. Thus it has often been found that underpayment and overpayment both lead to inferior outputs.
2. Managing Organisational Change:
Business environment is a dynamic one, hence for organisations to continue working in a profitable manner it is necessary that organisations should change their activities. Also a business should not focus on adapting to the dynamic environment, but it should bring into alignment its core competencies to shape the environment (Peter Drucker 1973). In both instances the organisational human capital undergoes the stress of change. Thus the key to success in the dynamic business environment is managing these changes. Once again at this point let us consider the case of Barclay's PLC integration with Lehman Brothers. One of the major issues that were critical in the integration of the business was the culture of the two organisations. Barclays PLC which was predominantly an organisation based in the Europe had a different way of handling issues than that of Lehman Brothers which was an American organisation. Most of the Lehman staff after the integration phase did not stay with the new company since they were not treated with the same importance with which they were treated prior to the integration process. As the key 'surviving' entity, Barclays has an advantage as its culture would have the dominant base.Â In order to minimise the conflicts in the integration of the businesses, Barclays can effectively "manage and control conflicts through the allocation of rewards and resources" (Schein, 1992; cited from Fischer, 2008).Â Hence we find that effective management gives a positive pathway in managing change,
Change can also come about in an organisation through the implementation of a new process. Often the implementation of a new technology can bring about a change, and managing this change is a part of the management. A survey of 2001 showed that almost 87% of SME's in the USA were planning to use Computer Integrated Manufacturing. Most of the companies were shoeing improved performance (Morris and Morris 1994) in terms of reduced lead time and unit cost, increased productivity and better capacity utilization (Jaikumar 1986, Voss 1988, Goldhar and Lei 1994). The most important first step to the successful implementation of CIM is training and development of employees and acclimatizing them to the new technology (Gunasekaran 1997). Top management plays a proactive part in identifying the proper talents within the company. These individuals are then trained so that the implementation of CIM becomes successful. The model below illustrates further the role of organisational and human behaviour in the implementation of CIM in SME's.
(Gunasekaran et.al 2001)
Again, in the case of Citibank's IS department, we have seen that there was a high degree of employee layoff as a major step of cost cutting. From a team of 150 employees there were 25% layoffs. The remaining employees had a "survivor" approach. They were de-motivated at work. An external change triggered a major change in the organisational beliefs and attitude. As a corrective measure the company created a training and development team. They also formed a community club that allowed existing employees to socialize and in turn make a healthier work culture. Thus we see that how effective management was the key to organisational success.
Having a look at the above factors and the aspect of change management, one can find that management is definitely one of the key elements to establish sustainable organisational effectiveness; however management cannot be sufficient if it is not coordinated and complied with the above factors. It is the crux for a manager to understand that organisational success is solely dependent upon nurturing of human capital and capabilities. Hence all managers should have a holistic approach towards organisational behaviour.
As established in a research by Mark Ramsay, 2006 that most SME organisations are nowadays looking to form self managed teams in order to reduce the complexity of organisational hierarchy. The success and failure of these teams depend upon the effectiveness of leadership. Although large multinational corporations still try to strengthen their managerial capabilities, they aim at making their top management think of strategic leadership continuously so that they drive the organisation ahead. Thus we can see that one of the prime criteria of becoming one of the top managers in a large organisation is possessing characteristics of a transformational leader.
Effective management should very importantly use the basic tools of motivation, knowledge management and strategic human resource management. A manager should have the capability of identifying the basic needs of his/her employees and try empathizing with them. This in turn would give them a roadmap to plot what should be the appropriate mannerism of motivating employees. As already discussed that management should follow the golden thumb rule "Motivation leads to organisational commitment and organisational commitment leads to higher profitability".
Knowledge has been identified as the most necessary intangible asset that must be preserved. The experiential knowledge (tacit), is something that management should be able to identify continuously and tap within organisational boundaries. In this era of advanced technology facilities such as e-learning and intranet are being used regularly to tap and spread tacit knowledge within organisational boundaries.
Strategic human resource management is nowadays used as the roadmap for a profitable future. Human Resource Management is no longer about only recruiting proper people and deciding their compensation packages, but it has transcended to nurturing existing organisational talent, binding people together and identifying future leaders within the organisation.
Last but not the least; we have seen that in the dynamic business environment, how management should be used as a proactive tool to overcome the effects of change. At the current situation when the global financial markets are at crisis, most successful companies across the world is using management to reduce cost, improve quality, increase productivity and efficiency and therefore validating the fact that management is indeed the cornerstone to organisational effectiveness and organisational success.