Does the corporate governance maximize shareholders wealth - Essay Example

? The Extent to which the ical Approach to Organisational Effectiveness Continues to be a Major Influence on Management Practice Today By ’s Name Student’s ID Number Module Title and Number Name of Professor/ Tutor Date of Submission The Extent to which the Classical Approach to Organisational Effectiveness Continues to be a Major Influence on Management Practice Today Introduction “The era of classical theory of organisation covers the period from 1900 to mid-1930s” (Alajloni, Almashaqba and Al-Qeed, 2010, p.60), concurrent with the industrial revolution (Baker and Branch, 2002). Pioneers of the classical theory of organisation include Taylor (1911), Fayol (1929), Weber (1947) and Follett (1941). The three main assumptions forming the basis of the classical theory include: an avoidance of conflict between employees and management through “formal, structured communication process, defined tasks, defined accountability, and formalized procedures and practices” (Alajloni et al., 2010, p.60); perspective of workers as being motivated only by money; and the concept of employees only as a means in the production process. On the other hand, in the competitive business environment of today, organisational effectiveness relies on different aspects of management such as leadership style, motivational factors, and dynamics with employees. Alajloni et al. (2010, p.60) argue that “the classical theory of organisation suffers superficiality, over simplification and lack of realism in terms of problems faced by competitive organisations”. Thesis Statement: The purpose of this paper is to determine the extent to which the classical approach to organisational effectiveness is still a key influence on management practice today, and the reasons for the same. Examples will be used to examine its influence in modern organisations. The context and influences driving organisational development and change management theory will be analysed. The Extent to which Classical Organisational Effectiveness Continues to Impact Contemporary Management Practices Burnes (2009) summarised the characteristics of the classic approach to include the specialisation of tasks, closely defined duties, responsibilities and technical methods, and a clear hierarchical structure with an emphasis on loyalty to the organisation and obedience to superiors. The classical approach to organisational effectiveness was mainly from a managerial viewpoint. Further, classical organisational effectiveness postulated that hard and efficient labour would ultimately reap rewards for management and employees, by increasing the performance outcomes of the organisation. Thus, by raising the productivity, higher profits would be accrued, which in turn would give rise to higher pay, and consequently improved worker satisfaction (Etzioni, 1964). Today’s concepts of effective organisations and management are related to past perspectives (Baker and Branch, 2002). The contemporary globalisation of business profoundly increases the level of competition in most industries. For example, Singapore aspires to lead the biotech industry, Korea’s Samsung and LG have become established worldwide as reputed brands, while Malaysia is a leader in chip manufacturing. “These new competitors have advantages that range from geography to high-skill, relatively low-wage workforces” (Lawler and Worley, 2011, p.4). The greatest changes in the recent decades relate to rapid developments in technology and telecommunications including the Internet, satellite TV, and cell phones linking most parts of the world, creating new business opportunities (Lawler and Worley, 2011). Significantly, the classical school developed universal principles applicable to all organisations in all situations. “The classical theorists conceived of organisations as mechanical devices to achieve oranisational goals and objectives” (Alajloni et al., 2010, p.60). Although classical organisational effectiveness has sustained through several changes in organisational management approaches, Alajloni et al. (2010) argue that modern organisations including both public and private sector enterprises are increasingly confronted with an environment unsuitable for organisational structures based on the classical theory of organisation. Organisational effectiveness has a history of innovative concepts. In the late 1950s and in the 1960s, after the goal approach, the systems model was developed. However, in the mid-1970s, organisational effectiveness gave rise to the new concept of multiple constituency models in the literature, with four approaches including the relativistic, power, social justice, and evolutionary. Each of these four perspectives is special to the effectiveness construct, and derives two generalisations from them, “value-based and time-specific nature of the effectiveness construct” (Zammuto, 1984, p.606). Organisational effectiveness is a unifying theme which is key to organisational management and design. The development of a universal theory has not been possible, however, the “components of a contingent behavioural theory of organisational effectiveness exist” (Lewin and Minton, 1986, p.532). After this theory is fully developed from a base of empirical research, it is expected to reflect the tradeoffs and paradoxes which form an intrinsic part of the complexity of real life organisations. It is also expected to be sufficiently inclusive to be potentially applicable to a wide range of organisations functioning over time in diverse environments (Lewin and Minton, 1986). Lewin and Minton (1986, p.532) outline a “mathematic-Data Envelopment Analysis (DEA)” which they believe “to be potentially useful for relating organisation designs to organisational effectiveness”. Organisational design changes often relate to the environmental changes faced by the organisation. Broad trends and demands are used to predict the future environments that an organisation is likely to confront. For example, the game company Electronic Arts “spends a lot of time and resources understanding how technologies, user interests, and social trends” (Lawler and Worley, 2011, p.29) will evolve over the next few years. The company then creates scenarios that depict future demands and opportunities. The classical concept of organisational effectiveness relating to organisational design, with businesses being built to be stable has evolved into contemporary businesses that are built to change (B2Change Model), state Lawler and Rowley (2011). The built to change theory is based on adaptation of the company to its changing environment. An example of a B2Change organisation is the 3MCorporation, with capabilities beyond its technical competencies. Its growth is mainly attributed to its capability for innovation and experimentation, through creation, development and marketing of Post-it notes and other products. Competencies and capabilities help in achieving competitive advantage and in creating value (Lawler and Rowley, 2011). Contemporary B2Change organisations employ orchestration to manage change, and skilfully coordinate activities, actions, strategic intent, and capabilities. According to Lawler and Rowley (2011), examples of forward-looking companies which distinctively excel at orchestration include PepsiCo, Intel, General Electrics and Microsoft. The ability to orchestrate change helps to conduct the change process successfully. Further, a company’s identity also plays an important part in achieving organisational effectiveness. Thus, Bancroft-Whitney, now a part of Thomson Publishing undertook a strategic change effort to address mediocre performance. The firm was found to have multiple personalities including production orientation, results-driven, market and customer driven, as well as sales and marketing driven. They worked on a clear, core identity for the company, by improving the clarity of internal communications, decision making in responding to a strong competitor, and prioritisation of resources to fulfill various functional demands (Lawler and Riley, 2011). Organisational Development and Change Management Theory In analysing the context and influences driving the development of organisation and change management theory, it is evident that classical perspectives of organisational effectiveness continue to play an important part in contemporary organisations. Kurt Lewin’s change management work from 1947 integrated confessional and counselling modes, and aimed to unfreeze worker attitudes before shifting them to a new approach and acceptance of change in working practices (Randall, 2004, p.19). This bottom-up approach allowed individuals within their working groups to come to terms with change. Implementing organisational change through strategic adjustments “helps to fine-tune current strategies and structures to achieve short-term results” (Lawler and Worley, 2011, p.10). The second type of change is strategic reorientation, which employs the alteration of an existing strategy and may involve the adoption of a new strategy, in response to environmental evolution. For example, in Hay Consultancy Services, strategic reorientation was carried out by shifting from job evaluation towards competency consulting. This change was carried out by introducing Hay’s existing products and services across the globe through “hiring new staff, opening new offices, creating new policies regarding worldwide pricing, and developing mechanisms to deliver consistent services in different countries” (Lawler and Worley, 2011, p.10). Unlike strategic reorientations when strategy may remain comparatively stable while organisational design is revised, transformational change creates basic changes in the organisation’s strategy, organisation design, and processes. Unisys exemplifies successful transformational change; the company was once a major mainframe manufacturer, and is now a supplier of IT services (Lawler and Worley, 2011). When an organisation faces a transformational change in the business model, and not just the introduction of a new strategy, it leads not only to new products, services, customers, but also to new competencies and capabilities. This is frequently “stimulated by a disruptive technology” (Lawler and Worley, 2011, p.10). An extreme example of this type of change management for improving organisational effectiveness is Enron’s conversion from a regulated pipeline company to a multibusiness energy financial trader. At British Petroleum, transformational change was implemented because of the exhaustible, limited supplies of oil and gas. Thus, the company employs a ‘green strategy’ based on solar, fuel cells, and other ‘alternative’ energy sources. Transformational change among existing organisations is relatively rare, fortunately, because usually a new organisation that does not have to change takes the lead because it gets the new business model right, from the beginning (Lawler and Worley, 2011). For example, Xerox developed and commercialised the copier, and similarly Southwest created the low cost air carrier market. Although Xerox built an early personal computer, it failed to establish a computer business; while the contemporary computer market is dominated by Dell and Hewlett-Packard which were not originally in the PC business. Further, Honeywell, an early entrant in the computing business, was not as quick in decision-making as the start-ups. This was because of Honeywell’s decision-making being required to support slow-moving businesses related to thermostats and airplane guidance systems, state Lawler and Worley (2011). Employees’ adaptation to change may be through modification of expectancies when change produces cognitive dissonance (Festinger, 1957), or undergoing a type of cognitive calculus (Lazarus and Folkman, 1984). For example, Poole and Van de Ven (2004) present the example of a coal-mining company in the United Kingdom, which was afflicted by decreased productivity and growing absenteeism. This was mainly because of the introduction of new equipment that changed the method of working from group-based labour to individualised, specialised work. A new approach to the work termed as socio-technical systems (STS) integrated the key social elements of the previous team work system, with the new technology. This method increased productivity and decreased absenteeism. Thus, organisational change includes and optimises both the social and technical aspects of employees’ work (Poole and Van de Ven, 2004). Isabella (1990) identifies a stepped process beginning with resistance, eventual acceptance, and finally internalisation of the new ways. Thus, these approaches also address the actor side of the debate, besides the structure. This mechanistic approach to organisational change forms a part of the classic approach to organisational effectiveness (Randall, 2004, p.19). The categories of organisational change include planned, unplanned, emergent and incremental/ quantum (Mills, Dye and Mills, 2009). The simplest theory of organisational change is the incremental model. The process involved the organisation of the production process before the change, the plan conceptualising the new method of production, a period of transition during which new procedures and equipment could be introduced, and the final new procedure reinforced by training and incentives, would replace the earlier system, and lead to the expected outcomes (Burnes, 2009). The management steps outlined by Fayol (1929) are similar to these change management steps also relating to problem solving schemas. According to Collins (1998), an example of a schematic change model includes the development of strategy, confirmation of top level support, use of project management support, identification of tasks, assignment of responsibilities, agreement of deadlines, initiation of action, monitoring, action to resolve problems, closing down, and communication of results (Randall, 2004). This system change based on a structured scheme process reflects the classical approach to organisational effectiveness. Conclusion It is evident that the main characteristics of the classic approach included the specialisation of tasks, closely defined duties, accountability, responsibilities and technical methods, and a distinct hierarchical organisational structure, with the management undertaking planning, organising, command, coordination and control. Further avoidance of conflict between employees and management was ensured by the pioneers of the classical theory of organisational effectiveness through implementing clear communication processes, and formal procedures and practices. Moreover, the classical approach considered employees as being motivated only by their compensation, workers as a part of the production processes, and organisations as mechanical devices to achieve the firm’s goals. On the other hand, classic principles of scientific management for organisational effectiveness are not fully suitable for contemporary forces of organisational change which aim to improve productivity through enhanced management-employee relations, meeting corporate social responsibility, and planning and achieving financial targets. However, to some extent, the classic approach is reflected in contemporary firms, as in avoiding conflicts within the organisation, although the hierarchical system is increasingly giving way to increased workers’ participation in organisational decision making, as well as the greater accountability and responsibilities bestowed on employees. This is encouraged through changing leadership styles to implement motivation, interpersonal communication with employees, and their empowerment. To successfully function in a constantly changing business environment, and to implement necessary changes, contemporary organisations are increasingly designed to incorporate change, rather than being built for stability. This B2Change approach helps to prevent resistance to change. Thus, firms “need to be built around practices that encourage change, not hinder it” (Lawler and Worley, 2011, p.3). Change management based on transformational change, problem solving schemas and systems approach reflects the classical method. It is concluded that the classical perspectives regarding organisational effectiveness and change management continue to prevail in contemporary organisations to some extent, while including strategic modifications to take into consideration the changing environment of today’s organisations. Bibliography Alajloni, M.M., Almashaqba, Z.M. and Al-Qeed, M.A. (2010). The classical theory of organisation and its relevance. International Research Journal of Finance and Economics, 41, pp.60-67. Baker, K.A. and Branch, K.M. (2002). Concepts underlying organisational effectiveness: Trends in the organisation and management science literature. In Management benchmark study. Office of Planning and Analysis, Department of Energy, USA. Chapter 1, pp.1-14. Burnes, B. (2009). Managing change: A strategic approach to organisational dynamics. Edition 5. London: Prentice Hall. Collins, D. (1998). Organisational change: Sociological perspectives. London: Routledge. Etzioni, A. (1964). Modern organisations. London: Prentice Hall. Fayol, H. (1929). General and industrial management. Geneva: International Management Institute Publications. Festinger, L. (1957). A theory of cognitive dissonance. New York: Harper Row. Follett, M.P. (1941). Collected works. New York: Harper Brothers. Isabella, L.A. (1990). Evolving interpretations as a change unfolds: How managers construe organisational events. Academy of Management Journal, 33 (1), pp.7-41. Lawler, E.E. and Worley, C.G. (2011). Built to change: How to achieve sustained organizational effectiveness. The United Kingdom: John Wiley and Sons. Lazarus, R.S. and Folkman, S. (1984). Stress, appraisal and coping. New York: Springer. Lewin, Y. and Minton, J.W. (1986). Determining organisational effectiveness: Another look, and an agenda for research. Management Science, 32 (5), pp.514-538. Mills, J.H., Dye, K. and Mills, A.J. (2009). Understanding organisational change. The United Kingdom: Taylor and Francis. Poole, M.S. and Van de Ven, A.H. (Eds). (2004). Handbook of organisational change and innovation. London: Oxford University Press. Randall, J. (2004). Managing change/ Changing managers. London: Routledge. Taylor, F.W. (1911). The principles of scientific management. New York: Harper. Weber, M. (1947). The theory of social and economic organisation. London: Oxford University Press. Zammuto, R.F. (1984). A comparison of multiple constituency models of organisational effectiveness. Academy of Management Review, 9 (4), pp.606-616. Read More