A Managerial Perspective on Business in a Changing Environment
Introduction
In modern business, perhaps the broadest categorization possible of constituency groups is that of employers and employees. In the class employers are the owners of capital who are often either widely dispersed in the case of a public corporation or, alternatively, are somewhat removed from the day-to-day business operations as is common in private firms. Though removed from the operation, the owners of capital create a second hybridized classification of ‘professional managers’. Managers, from the perspective of the owners, are employees who are retained to seek the interests of the owners. However, from the perspective of the ‘regular’ employees, managers are viewed much as owners in that the employees are wont to believe that the managers are simply extensions of the owners.
This rudimentary understanding of the business is sufficient to begin to allow one to realize that, on many occasions, there is a bit of an adversarial relationship between the roles of the three categories of characters. This tension is caused by an inherent conflict between the three varied views of what’s best for me. Though this tension should not prematurely be characterized as hostile, the fact that cooperation is needed in order to fulfill at least a partially tri-mutual optimal scenario should not be overlooked. In these ‘negotiations’ for this scenario, it is the role of managers to negotiate and implement these multilateral pronouncements. This role of an intermediary is necessary in order to actually implement and coordinate the expectations of each constituency (Boatwright 2002, p. 42).
Defining Work: Social or Economic?
Though it may seem odd as the traditional lines have been drawn along the lines that work is something that one must do while anything else can be relegated into the other category of things that are optional. This paradigm is perhaps based on the idea that work is virtually a ‘bad word’. Whether this is a result of the fall of man in the Genesis account in which man is ’sentenced’ to work or perhaps simply the result of experience of the unpleasant task of being told to perform physically laborious or tedious tasks is likely irrelevant.
Admittedly, many employee-employer relationships may begin as a relationship that firmly grounded in the typical economic view of the situation, it can also be characterized as a relationship that has distinctive social aspects as well. For example, though economic relationships are typically negotiated explicitly ‘on-the-front-end’ of a relationship, many choices are made based upon perceptions of benefits that are, in the narrow sense, not explicitly defined in terms that one would recognize are being economic in nature (Whitener, Brodt, Korsgaard & Werner 1998, p. 515).
Fundamental to this view is the idea of social exchange which indicated that people have a tendency to view themselves as being in an exchange relationship with others. These others include organization and groups in addition to individuals (Dreher & Dougherty 2002, p. 41). Extended somewhat, the notion of a social contract is easily conjured for such relationships in which, in the mind of the beholder, are subject to some element of mutual obligation. These self-decried obligations could be viewed as a form of an innate impulse to form mutually beneficial cooperative relationships (Frederick & Wasieleski 2002, p. 283).
Such as social exchange relationships are moderated by an a apriori sense of social reciprocality as well as behaviors governed by what is labeled reciprocal altruism. The latter involves seemingly non-adaptive behaviors but, when viewed as a ‘norm setting’ and considered in the bigger picture, also work to further one’s own interest (Frederick & Wasieleski 2002, pp. 284, 289). It is not only through these means by which from the basis for the formation of social contracts but, more importantly, they represent enduring concepts by which all manner of human interaction is informally governed. Thus, while the relationship between employer and employee often begins as an economic process, it is heavily influenced by social constructs. In addition, the relationship plays itself out ‘both ways’.
More About Contracts
The idea that the relationship between the employee and the employer is aptly characterized as a contract is supported by the view that a firm can be essentially defined as a nexus of contracts (Boatwright 2002, p. 39; Parkinson 2003, p. 485). In this view, the relationships of and within the firm are considered to be intersections of interests that can be viewed as being contractual in nature.
This contracts perspective views the firm as a non-entity a intangible gathering much like a market: the business is the market, the vehicle for doing business rather than being the business. Proponents of this model indicate that the fundamental nature of the employee-employer relationship is based upon mutual voluntariness to enter into a specific ‘contractual relationship’ in there are not managers, per se, but rather, everyone manages their own contract. Further, in this employment relationship, only the ‘buyers and sellers’ may have moral obligations the marketplace, arguably by definition, cannot (Parkinson 2003, p. 485).
Seemingly in contrast with this economic view of the firm is the idea that a firm is best understood from the perspective that the relationships are not so much intersections of voluntary relationships but combinations that are best understood when viewed as a social process (Hendry 2001, p. 227). These relationships entail a measure of ethical responsibility for all, including the entity of the firm. While the debate may rage in academia, the likely truth, from a managerial perspective may well be that the views are not necessarily mutually exclusive. It seems to pass the reasonable test that a firm could be seen as the intersection of a combination of interests. Just as no one psychological model can fully explain all the normal or pathological elements of human behavior, it seems reasonable that organizational behavior would be as complex. Also salient is the notion that organizations are made of individual persons.
Whether one is an adherent of the nexus of contracts perspective of the social construct theory, that there are obligations is without question. One key constituency, the employees, also possesses an understanding based upon expressed or implied promises regarding the mutual obligations that exist at the core of the nexus (Rousseau 2004, p. 120). Termed the psychological contract, it is especially notable due the simple fact that it is the employee who is the ‘working end’ of what the marketplace perceives to be the contractual obligations of the firm. This contract is formed explicitly through items such as a formal contract, job description and performance plans and other means. This overt information only lays the ground work for the implicit ’signals’ by which an employee learns what is expected in terms of the company’s view of the relationships mutual obligations to one another. Thus, the psychological contract captures the ideas of fairness, trust, mutuality, obligation in the nutshell of the employee’s perspective. A key point to emphasize that the ‘contract’ is employee specific though it is likely that at a given firm (in a given department, etc.), that there will be many shared perceptions yet, in the end, it is an individual viewpoint.
Equity and Organizational Justice: How We Would Like Work to Be
The specific tenets held by the individual regarding the duties involved in the employer-employee relationship are react with the a priori sense of fairness that exists deep in our psyche. To define fairness, as a concept, is simply to say that it is based on the idea of roughly equal outputs for roughly equal inputs. A key component of this is that, like the formation of the psychological contract, it is based upon individual perceptions, that is, the relevant viewpoint is necessarily based on facts. While an awareness of the existence of the psychological contract is useful, a more thorough of the ‘elements’ of a violations is particularly useful. These elements involved in the consideration of fairness are well-expressed in the twin theories of equity and justice, two models are that are especially relevant to the manager in the workforce.
Firstly, as mentioned earlier, the perception of the ratio personal inputs and outputs and the perception of the comparative ratios for others are based upon Equity Theory. Based upon this theory, there is the assumption that people both desire and are actively willing to seek to maintain a sense of justice of the distribution of rewards. In addition, the concept of social comparison is relevant as additional or alternative means to evaluate the relative ratio of input to outcomes (Dreher & Dougherty 2002, p. 41). Depending on the context, a person will use what they perceive to be a referent other to assist in forming expectations and judgments in regards to their own rewards or punishments. In addition to comparing themselves to their own ideas about ‘fairness’ and their chosen referent others, employees also utilize procedural justice to form beliefs and subsequent behavior. Procedural justice is the process of a person or group forming beliefs about fairness based upon the stated or unstated policies and procedures of an organization (Dreher & Dougherty 2002, p. 44).
It may be that these systems are in conflict. For example, consider the organization that has a policy of no tardiness in which many employees consistently arrive just a few minutes late. On a given day, a certain employee found that some disciplinary action had been taken based upon their own 5-minute late arrival. In this case, though policy indicated one acceptable behavior, the group norm seemed to clearly indicate that this was not a violation the accepted social exchange relationship. With this in mind, it is likely that the employee would feel that they have been treated unfairly despite a written policy to the contrary. Situations such as these are often the bane of managers and serve as an example of an event that triggers both a violation of that particular employee’s psychological contract and a general doubt upon the credibility of management. With as much emphasis as possible, the idea of managers being the intermediary between the divergent agents, interests and the employee is reinforced by the finding that the most important factor in the shaping of the employer’s side of the psychological contract is the role that manager’s play (Rousseau 2004, p. 124).
The Manager: Managing, Motivating and Leading
At the heart of the firm is the manager. Caught between the heights of ownership and the troughs of the employee, the manager is faced with the challenge of somehow serving two masters and in the process serving his or her own needs. This challenge, according to Mintzberg, plays itself out in the fulfillment of ten basic roles in three larger ‘role categories’ (Greer & Plunkett 2000, pp. 14-15; Stanley 2002, pp. 14-15):
I. Interpersonal Role
1. Figurehead – This role is characterized by symbolic and official duties.
2. Leader – All activities involving organizationally subordinate employees.
3. Liaison – Most work involving working or communicating with external entities.
II. Informational Role
4. Monitor – Receives information from an array of sources.
5. Disseminator – Transmitting information, sometimes following analysis and interpretation from a number of sources.
6. Spokesman – Communicating to the world external of the firm.
III. Decisional Role
7. Entrepreneur – Searches for opportunities and initiates action.
8. Disturbance Handler – Administers ‘corrective action’ when circumstances warrant.
9. Resource Allocator – This involves many organizationally significant decisions with regard to establishing the how of conducting business operations.
10. Negotiator – Bargaining, representing and seeking the organization’s optimal outcome.
Regardless of the role that a manager is playing, they are doing so to fulfill their end of the mutual obligations that form the expectations of their role. Similar to Mintzberg’s characterization yet more broadly defined, is the idea that managers time is spent in essentially five activities: planning, organizing, staffing, monitoring or controlling (Stanley 2002, p. 13). While the manager is performing these roles and functions, the object of the activity, following equity theory is to control the ratio in inputs to outcomes. The difference between the manager and the employee is that the manager’s outcome is based upon their ability to achieve organizational goals through the labor of others. The manager is engaged in this continual quest to find and optimize the factor(s) by which organizational outcomes may be achieved more effectively or efficiently.
To achieve these outcomes, there are a number of means to do so including such methods as ‘command-and-control’ or other Tayloristic methods in which the worker contribution is not so very different than any other tool simply a means to an end. Utilizing the hybridized nexus of [social] contracts model, a manager is likely to have a very different perspective on how to best achieve each contracting parties best possible outcome. Such a view would recognize the inherent humanity of employees and a fundamental understanding that everyone must work together to achieve organizational goals. The idea of working together does not mean that everyone has the same function or that everyone’s contribution is equally valued by the firm. Rather, it simply acknowledges that there is a voluntary assumption of mutual obligation.
With this in mind, it is no wonder that the topic of motivation is one of the most intensely researched in the field of management. Though there are many divergent viewpoints on the subject to motivation, one on the most elemental frameworks is that of Expectancy Theory. Postulated by Vroom, expectancy theory elegantly states that motivation is a function of expectancy, instrumentality and valance of the potential stimulus. Expectancy is the degree to which the person believes they possess the ability to achieve a certain outcome. Instrumentality is the degree to which the person believes that if effort were to be expended and the goal achieved, then a certain outcome would occur. Valence is the degree to which a person desires a certain outcome that would result (Dessler 2001, p. 329; Dreher & Dougherty 2002, pp. 34-37; Nelson & Quick 2002, p. 151). Using these variables, one can construct the following basic assumption:
If a certain activity will lead to a reward that I greatly desire (valence), there is a very strong likelihood that I will behave a certain way if I believe that I can perform the task (expectancy) and I am certain that the reward will be given if I achieve it (expectancy).
To illustrate the power of these variables to motivate others, consider the diminished motivational effect if only the impact of just one of these variables were altered.
Using the foundation of expectancy theory from the perspective that employees are voluntary present for mutual gain, a manager has a powerful toolkit by which to begin to achieve results. Arguably, this now forms the basis for a transition from management to leadership. One cannot help but to reflect that often the two terms are used interchangeably yet differences beyond mere semantics exist. Perhaps the most telling difference is the observation that manager is a position or job title while leader is a organizational role (Leavitt 2005, p. 138). Also, even in the same position, individual differences are to be found within the context of the organization. For example, an organization may ‘grant’ authority but cannot do the same with leadership (Leavitt 2005, p. 136). The skills that an individual has or acquires in the course of employment reside with the individual. This can be contrasted against the managerial cliché of the keys which represent the authority one has (had) which are turned in on the ‘last day’. Similarly, an additional related difference between the two is that the role of manager is more often concerned with what should be achieved while a leader is more concerned with process or how an activity should be performed (Roberto 2005, p. 228).
If managers can be cast into perform five or ten different roles, it is only fitting that leaders also have some role description. Yet, following the line of semantic difference, leaders, rather that having specific roles, have been described as having one of three themes. These ‘characteristics’ are (Leavitt 2005, pp. 128-129):
- Transformation – The ability to effect change in people and, in turn, organizations.
- Persuasion – The ability to influence others to pursue some objective.
- Competence – Simply put, this is the ability to do a job.
Though it seems that being a ‘leader’ is preferable to being a ‘manager’, the two are not necessarily mutually exclusive categories. Indeed, though the manager’s authority is granted through the organization, the organization is also vitally important to the leader. Specifically, though we are sometimes led by the popular press to think that leaders are somehow external to the firm and also able to bring about ‘transformational’ change is simply not the case. Leaders are more often embedded into the culture of the organization in which they exist (Lakomski 2005, p. 51).
Organizations have Structure
The results that leaders and manager strive to achieve are done in the context of organizations. As noted early, these ‘intangible’ entities comprised of divergent but interests brought together under the auspices of creating value are the instruments by which managers [or leaders] lead [or manage] others to mutual goals. Hierarchies have seemingly existed since the beginning of time as a solution to achieve effective governance over large numbers of individuals. As an early example, consider the Biblical advice of Moses father-in-law, Jethro, that Moses ‘employ’ others in organized groups to facilitate decision making (Exodus). In the early 20th century, with the advancement of scientific management, the hierarchy as a dominant paradigm for organizational structure new life as it was a means to control the growing number of large companies.
In addition to meeting the needs of the purveyors of capital to govern the masses, the structure of hierarchies also satisfied the psychological needs of workers. Described be Leavitt as being psychological magnets, hierarchies provide people with an ‘employment solution’ so that they may earn a wage, opportunities to satisfy ego through advancement, a sense of security and predictability as well as a sense of social identity (Leavitt 2005, p. 49).
Despite this, there is substantial evidence that hierarchies are less than perfect characterized by some as being oppressive, inefficient and out of date. These assessment dovetails nicely with numerous studies that provide objective evidence indicating that smaller, leaner, flatter companies are likely to be more profitable (Leavitt 2005, pp. 22, 47-48). Akin to an elephant, hierarchies are, by nature, large. While this does present certain advantages in terms of resources and stability, in a rapidly changing market environment, such qualities can be a liability. While global economic changes and market demands affect all employees and consequently all firms, larger firms, as a consequence of having more people have more psychological inertia to overcome.
With this realization, managers find themselves tasked to overcome this ‘psychological inertia’ in firms of all sizes. This psychological inertia, in addition to the previously mentioned need to psychological stability and security, is also partly attributable to the shared values that construe a firm’s culture. This inertia of stability, in the wake of desired change, forms what can be construed as resistance (Dessler 2001, pp. 420, 423). Despite the ominous ‘us vs. them’ tone, this resistance is generally unconscious and thus not a deliberate attempt to ‘not change’ and is based upon either a lack of information, honest disagreement of the interpretation of factual matters, or is simple the resultant personal emotions (Lakomski 2005, p. 52; Dessler 2001, p. 423). This resistance stems from a number of causes including fear of the unknown, fear of loss, fear of failure, disruption of interpersonal relationships, personality conflicts as well as organizational politics and characteristics specific to the groups’ or individuals’ culture or values (Nelson & Quick 2002, p. 485).
Culture is the Independent Variable
In consideration of the managers implicit task to ‘continually adapt’ or perhaps under the explicit instructions to ‘change’[!], the key seems to be contained in the ability of a manager to overcome the individual and group psychological inertia against change. The importance of this task is sufficient that a number of researcher have identified a number of key activities that ease the assignment. First, prior to any so-called experimental intervention, is the necessary understanding the importance of a firm’s culture. In fact, using the analogy of experimental manipulation, culture has been deemed to be the independent variable. That is, by influencing the culture of the firm, any other variable is subordinate or dependent to this. Productivity, profitability, defects-per-million, turnover, etc. are all dependent variables subject to the ability of a manager to change the shared vision and values that direct them in how they perform their work (Lakomski 2005, pp. 41-42).
With this in mind and based upon the information presented earlier with regards to the employee and managerial perspectives, a number of strategies emerge as effective for facilitating positive change in organizations.
Conflict, Cooperation and Change
One key means is to begin to transform the organization, at least psychologically, from the traditional hierarchical means of management, i.e., command and control. First among these recommendations is to achieve excellence in employee communication (Nelson & Quick 2002, p. 485). Consider that in one employee survey, 39% of respondents indicated that management never share the reasoning behind decisions that impact employees (Higgins & Smith 2005, p. 92). Similarly, that 80% of American men felt that they were in the top 10% of all men when it came to athletic ability (Prewitt 2005, p. 102). Were firms to have more effective communications between management and employees, such outcomes that are likely to lead to breaches of the psychological contract as well as certain resistance to change would not be as likely to occur. One means by which managers can achieve better communications is through taking care to clarify expectations (Dressler 2001, p. 80). This is especially relevant to the often unstated expectations that can lead to a misunderstood or breached psychological contract.
Also emphasizing the ability of the manager to influence the independent variable of culture and the individual beliefs that construe it, research has identified key factors that are fundamental to the perception of trustworthiness: accurate information, explanations for decisions, and openness. Of these, accurate information has been identified as being the variable with the greatest influence on the belief that one’s supervisor can be trusted (Whitener, Brodt, Korsgaard & Werner 1998, p. 517). To put it bluntly, a key factor in establishing trust is to at least maintain the perception that one does not lie.
A second means by which culture change is eased through managerial action occurs through the increased widespread participation in at least some portion of the decision making process. By doing so, employees at least have the opportunity to voice concern, express agreement, consider options and, at the end of the day, be a part of the solution. By seeing themselves as part of the decision, there is a greater reluctance to abstain from active participation in the implementation of the ‘new’ processes (Nelson & Quick 2002, p. 488). As an added rationale for the involvement of employees, consider the logic of assembling a good team yet not wanting to hear the ideas that they contribute with the intent of process improvement (Roberto 2005, p.232).
A third means to ‘manage change’ is to provide an empathetic and supportive environment. Reluctance to change can often be attenuated through interventions such as active listening and general emotional support (Nelson & Quick 2002, p. 485). Simply behaving as though you fully expect them to succeed and providing time, training and the resources needed to perform can go a long way to establishing a culture in which the employees feel they are valuable members of a team rather than mere peon in the corporate hierarchy.
As stated earlier, change often creates both internal and external conflict yet it is also important to note that this conflict can be a source of strength. For example, consider the firm in which there is no conflict. Reminiscent of classic group think scenarios, such an environment is well suited for top-down poor decisions. This type of situation is especially to be guarded in hierarchical organizational structures in which there are often imbalances in power in relationships (Leavitt 2005, p. 161). Such an unhealthy balance has the potential to squelch information that is relevant. In fact, history has revealed occasionally disastrous consequences such as the United States Bay of Pigs invasion of Cuba and well as the space shuttle explosion. In many cases, such phenomena have resulted in breaches of ethical conduct as was the case in Enron.
The ‘imbalance of power’ problem mentioned above affects managers in particular as they have the power to both prevent and cause such issues based upon their interactions with employees for whom they are responsible. In particular, behaviors such as instructing employees to do whatever is necessary is ripe for causing a ethics issue. In addition, overlooking wrongdoing, playing favorites and any other behavior that could constitute an implicit organizational endorsement of an inappropriate activity (Dessler 2001, p. 75).
One way for a manager to achieve this balance between ‘conflict’ and ‘consensus’ is to foster an environment that values divergent thinking yet is can be characterized by a group norm of building agreement so that, at the end of the day, execution is facilitated (Roberto 2005, xi). This scenario presents a healthy level of tension that strives to avoid the dysfunctional levels of disagreement just as much as it seeks to stay away from situations in which there are correspondingly unhealthy levels of agreement. A key to achieve and sustain this potentially delicate balance is for managers, as indicated earlier, to focus on the process while the team of employees are actively involved in the crafting of the specific solution to be employed (Roberto 2005, 229).
Clearly, in the current business environment in which the only constant is change the role of managers and leaders becomes even more critical. Their competence and ability are the factors that separate a viable, going concern from an organization that wallows in inadequacies. Whether the specific challenge comes in the form of increasing globalization, technology developments, ethical issues or market driven factors, the organization that has the appropriate managers in the role of intermediary between what is and what will be is poised for success. This success will be characterized by the reconciliation of the diverse interests of owners and shareholders, employees, customers, suppliers and the managers themselves through a enabling of the dynamic tension distinctive of a healthy organization.
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