The Organizational Learning System within UK Small Firms - Research Paper Example

The Organizational Learning System within UK Small Firms Introduction The economic theory is based on the assumption that market participants must follow rational decision-making process (Leonard & Biberman, 2007). People’s behaviour is influenced by the side of the brain that is dominant in controlling heir personal behaviour (Pereira, 1995). The left brain in the logical brain and the right brain is the intuitive brain. Differences in thinking are related to the hemispherical differences in the brain where sensing and thinking are left-hemisphere related and intuition and feeling right-hemisphere related (Sadler-Smith, 1999). Logical thinking process can be found in the left brain in most people while the right hemisphere operates in a more holistic way. Science has mapped out two distinct hemispheres of the brain providing details of each hemisphere. The educational system design the curriculum based on the assumption that business leaders are made in the left-brain mode (Mininni, 2006). Very few courses embrace the right-brained approach although both sides of the brain have their own distinct and diverse skill sets. Decision making is historically based on theory of subjective expected utility (SEU). The decision makers are expected to be rational and make reasoned choices based on the analysis of the risks and rewards of the situation (Leonard & Biberman, 2007). The risk factors are properly assessed and the decisions are made in a linear fashion. Strict rationality is left-brained thinking because the left hemisphere of the brain dominates rational thinking. The left brain controls the right side of the body and the right brain controls the left side of the body (Webster, 1994). The left brain is responsible for speech, linear, analytical and rational thinking while the right brain is conceptual and emotive. The four quadrants of the brain have been divided by Hermann (1988) as follows: According to this model there are four thinking preferences – two on the left side and two on the right side (Hermann, 1988). The left-brained decision-making process follows a sequential pattern – the problem is first defined, then the alternate solutions are generated and then follow the process of evaluation and selection (Leonard & Biberman, 2007). Then the decision is implemented and there is also a follow-up on the solution. This sequential approach can help the marketers to achieve creativity. The barrier to creativity in the left-brained approach arises because human beings have a tendency to constantly tell themselves that they are not creative (Michitti, 1997). A step-by-step approach links rational thinking with proven techniques to generate new ideas, and this is based on analytical capabilities. Drawing a fish-bone diagram helps to clearly identify the problem area and define the objectives. Mind mapping can help to brainstorm for new trends and observed changes. Even to generate new ideas, different techniques such as Lotus Blossom can be used. At each of the other stages also creativity can be inducted which can make the left-brained approach generate innovative ideas. However, Michitti’s idea of making the left-brained approach creative suggests that one has to move out of the rational and analytical approach. Because the left-brained approach is not found to be creative, the author urges to introduce creativity. Criticism of the left-brained approach The left brain is aligned with the militaristic model and the left-brained organizations focus on detail and control (Pereira, 1995). This permits only a partial view of the reality. The current business environment requires the ability to respond to changes as quickly as possible. For this a complete picture is required and holistic capability is essential which comes from the right brain. According to Mininni (2006) we are moving from an era of ‘left-brain’ dominance to an era where right-brained qualities are essential – inventiveness, empathy and meaning. Gone are the days when MBAs were preferred over MFA (Master of Fine Arts). Today the changed business environment needs an integrated approach where both sides of the brain have to be utilized. In all industries, initially the approach to learning was left-brained. Organizations relied on inputs, theories, systems thinking, process models, strategic planning methodologies, and syndicate work on case studies (DLO, 2006). This did increase knowledge and understanding but did not bring about any change in behaviour, did nothing to encourage team work or enable cultural change. The A and B quadrants as per the table I fall under the left-brained approach. There are differences among people as individuals demonstrate A, B, C or D brained tendencies. Moreover, because of the different thinking preferences, the overall concept becomes very confusing. Language indicates a bias in a specific quadrant. Language indicates that a manager is left-brained while a leader is right-brained. Thus the left-brained individuals see themselves as managers that are carrying out a clearly defined, rational and precise management of their staff. They are managers who can organize and direct their staff and monitor their performance. They are considered to be cold and calculating by the right-brained people. While the left brain conducts sequential activities while the right brain conducts holistic activities (Heilker, 2006). The left brain takes decision based on rationale and the procedure of activities is sequential. In the left-brained approach there is no tolerance of others’ opinion and direction are given in a severe and analytical tone. The left-brained individuals feel that the members of the audience are critical opponents. They do not entertain inquiries and they impeach ideas rather than tolerate the opinion of others. The left-brained analytical mode restricts the vision to that, which can be analyzed, measured or proved analytically (Kilroy & McKinley, 1997). However, if rational or linear thinking can be integrated with creative or non-linear thinking, then it can produce an extremely potent mix. There has to be a clear rational logic mixed with management intuition for overall success. Financial decision making is not always rational or analytical and many times it is difficult to predict decisions based on rationality (Leonard & Biberman, 2007). Moreover, with experience the managers know that activities do not follow the sequential pattern that is described as the left-brained approach. Very often lack of sufficient time or resources interfere with analytical problem solving. To improve upon the decision making, one has to think outside the box. Many experienced managers admit that they often have a gut feeling that guides them towards decisions and this cannot be based on any rational or analytical process. This means the managers have to fall back on their tacit knowledge gained through experience and they do not need to analyze the particulars of each situation. Tacit knowledge is important to learn, innovate and compete more effectively. Decisions are rarely made within a vacuum and the implications of decisions are rarely linear. By following only the logical, rational approach, human beings have been missing out on the feelings and intuition (Pereira, 1995). When the focus is on logic and rational, then achieving the production becomes the prime concern and it could also result in compromising on quality. However, if intuition and creativity are encouraged in an organization, the results could be entirely different. People would be willing to perform to their potential and even take risks. Since the left-brained organization or the right-brained organization is based on the human brain and its activities, it is the human element that the organizations need to focus on. Historically, management has followed the military model of human resource management which means hierarchical, viewing front-line staff as expendable resources and such an approach left no room for employee participation. In such an environment the responses to change are very slow. There are several layers of management to ensure that the front-line staff sticks to the directives. This stifles innovation and creativity and hence they are slow to respond to the market changes. In the current competitive environment the organization has to build the management of change into its very structure. There has to be change in the basic mindsets of the people and the management. People need to have “soft quality” that comprises of flexibility, quick response to changing market demands, decentralization and empowerment of people. Project management has been dominated by left-brained approaches. If something goes wrong in a project managed by a left-brained individual, then another, maybe more experienced, left-brained manager is entrusted to find solution to the problem. He would investigate and present the findings with left-brained solutions that the same problem is not repeated. Does this really solve the problem when the root cause remains unattended? Powerful issues such as fear of failure, sanction and ridicule or lack of skill in the left-brained people would force them to look for left-brained control systems. Webster (1994) finds that the stronger the request for training in tools and techniques, the greater the chances that the real problem lies elsewhere. The left-brained manager would prefer to utilize the time in the progressing the project instead of spending time out over beer with the team members. To the left-brained manager such time spent on interactions is a waste. The left-brained managers need balancing and understanding priorities. In a team situation if more people are involved, the performance expectation is higher and if there is process shortfall, they do not know how to recover. While experienced managers are necessary for project performance, committed workers are equally essential. This is not possible by adhering strictly to the left-brained approach and requires a whole-brained approach. Impact of the left-brained approach on strategic planning Strategic planning is a much debated term and is often confused with strategic thinking. Porter argues that strategic thinking is more analytical and not creative but Mintzberg believes that strategic thinking and strategic planning are both useful in the strategic management process (Heracleous, 1998). Strategic planning and strategic thinking are two distinct functions where strategic planning is analysis. Today it is not sufficient to have competitive advantage but the strategy adopted must focus on continuous improvement and adaptation. The ability to think strategic depends upon the interaction between the situation and the characteristics of the individual involved (Graetz, 2002). However, managers often become confused because the most successful strategies are visions and not plans. Thus strategic planning can spoil strategic thinking. For strategic planning the manager needs to collect data through insight, experiences or from the market. The data thus collected has to be synthesized and then define a vision which provides the direction for business (Whittingtton, 1996). Tools and techniques help the managers to make decisions and not people, contends Whittington. This suggests a left-brained approach where rational and analytical decisions govern. Data has to be analyzed through insight and experience and not merely through tools and techniques. This ‘insight’ is the right brained approach as has been found to be critical in many organizations. The planning function in organizations is done by two types of people – the analytic thinker (left-brained) and the creative thinker (right-brained). Organizations need both these types in the right proportion, according to Mintzberg (Sadler-Smith, 1999). Moreover, very few people are entirely left or right brained. All human beings use both sides of the brain although the degree of each side differs across individuals (Webster, 1994). Moreover, an individual may be strongly right-handed but with practice he can be equally competent as a left-handed individual. This has an impact on project management. Prahalad and Hamel (1990) examined how the Japanese achieved global dominance in technology-based industries by the mid-1990s (Eales-White, 2005). This was through the development and application of core competencies. Core competencies is defined as “the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies”. Core competencies provide potential access to a wide variety of markets, make significant contribution to the perceived customer benefits and the core competencies are difficult for the competitors to replicate. Honda could because of its core competency in power engineering move from motor cycles to cars and on to lawn mowers. They could also development markets that were unrelated in terms of customers, distribution channels and merchandising strategy. The core competencies could be developed because of the left-brained approach but Eales-While contends that this would not be possible without a whole-brained approach. The core competencies were developed over a long time which demonstrates a long-term vision of the company and this falls under the right-brained approach. Many other companies also that adopted the core competency approach to success, failed because they did not have the long-term vision (D-brain)and neither did they know that cultural norms have to be followed (C-brain). Merely focusing on the left-brained approach was the cause of failure. In today’s business environment a customer-centric approach is essential and this is relationship-management (C-brained) wherein lies the culture. Companies having a global supply chain need a combination of both the left-hand and the right-hand approach as it would add value to the final decision-making (Sodhi, 2003). The creative work of strategy formulation should be linked to the analytical, optimization-model approach that would result in a powerful synergy of the right-brained and the left-brained approach. Leading change is a right-brained activity while managing change is a left-brained activity (Whitlock, 2003). When an organization has its focus on strategic direction and undertakes strategic programming, then they are actually trying to manage change rather than take a different approach or direction. However, when values, mission and vision provide the direction, then real change is the driving force for the development of goals and objectives. Vision helps to develop strategies. SAS has demonstrated how forming the strategies around the corporate vision can bring it the desired outcome. Their aim in 1987 was that “members of the staff should be encouraged in their growth as complete human beings, socially and privately, and not merely as workers” (Pereira, 1995). With this is focus, the organization set up leisure facilities for its staff. They realized that to be successful, the airline depends on the creativity and the ideas of its staff. They gave importance to the human element and this could be done because they recognized that rigidity and rules do not bring in results that empowerment and encouragement can. Duty and pleasure should not have clear cut demarcation. If duty is executed with pleasure, it is no more a duty. When an employee enjoys work, he would never feel that he is working. South West airline too believes that the level of quality in an organization is directly related to the level of quality that each individual exhibits (Pereira, 1995). They hence hire people that are prepared to take risks and accept challenges. They provide leadership training and not management training because people should not be managed. Individual learning has to be encouraged to face the challenges of the business environment. Hierarchies have to be flattened and empowerment has to be given to the workers. Sony Corporation had designed a small portable recorder to be used by the reporters to record interviews (Chaston, Badger & Sadler-Smith, 1999). This was a left-brained approach where sequential planning and execution was implemented. Subsequently the engineers discovered flaws in the design and the unit could not record. The design engineers failed to find any potential commercial value of the product. They merely accepted the change without questioning or challenging the underlying assumptions. The development team only applied the past and knowledge and failed to find any solution to improvise on the unit design. When the founder was shown the flaws in the design, he found an innovative way to use the product. This innovation and creativity comes when one is not stuck to the past experiences and one is prepared to be flexible. The founder suggested that since the product produced an excellent sound quality, it could be used as a portable device to listen to music. This would not have been possible had the management too stuck to the left-brained approach and given up on the product. Strategies fail to show the desired results but creativity can infuse innovation. Gradually, because of their core competency in miniaturization, Sony Corporation developed everything from Sony Walkman to video cameras to notebook computers (HBR, 1992). In this case, the core competency was not because of their rational or analytical approach but because of their right-brain application which infused creativity and innovation. It could also be the intuition of the founder who discovered an innovative way to use the product. Core competencies and capabilities are two different but complementary dimensions for corporate strategy. Core competencies focus on the technological and production expertise while capabilities encompass the entire value chain (HBR, 1992). Honda had its core competency of its power engines but its capabilities included its expertise in dealer management and product realization. They did not follow the traditional sequence of planning, proving and execution. At Honda planning and proving are carried out simultaneously and these activities are separated from execution. This implies that their strategy is not to adhere to the left-brained approach as they keep conducting revision every few years. Electrolux, in the 1980s, had more than 20 brands in over 40 countries and because of various acquisitions the company had several overlapping companies. The business manager’s role at this juncture becomes important. He has to be a strategist, an architect of the assets and the coordination of transactions across national borders (Bartlett & Ghoshal, 1992). With a left-brained approach, Electrolux would not have been able to come out of the situation. Because of the intuition of the then business manager, he could recognize the need for a change in the overall strategy. He decided to integrate his dispersed business operations. He did not take any decision on his own based on the past performance and experience but instead he consulted the people at the national and international level and invited their views and opinions. The business manager found that the opinions of the local managers and the division staff members were important and would help towards a strategic decision. He responded with a flexible approach to national market fragmentation. He also tracked the product and the market trends across borders. But overall, he did not rely on his intuition or experience alone. He integrated the suggestions of the local mangers and the global managers for their input, expertise and opinions. Hence for successful strategies, left-brained approach is not sufficient. Whittington (1996) argues that the manager must be able to spot opportunities and attain a grasp of the situation. This competence develops through practical experience and stretches beyond the theoretical knowledge. A fresh recruit may know the theories through formal training but he would not have the competence that a manager with years of experience would have. This is what has been suggested by Eales-White (2005) that one should not try to introduce any of the learning after attending training and development programme. Learning should be introduced in a natural way for it to be accepted by the staff. Thus, this again confirms that merely knowing the tools and techniques that assist in decision making is not sufficient. Eales-White suggests a whole brained approach in which idea generation is separated from evaluation. There should be no criticism until evaluation has been conducted. While strategies may be made but during downturn, when organizations fail to achieve the economies of scale, they feel their strategies have not been innovative enough. Innovation is essential for a company when the market is slow and it also accelerates growth (Rigby, Gruver & Allen, 2009). This has been seen in the case of Honda which could achieve the position only because of its innovative strategy and General Motors could not make progress because of its left-brained approach. Apple keeps continuously introducing new products such as iPod, iTunes and the iPhone. The fashion industry is marked by shorter product life cycles and ever-changing customer preferences. Every fashion company has to reinvent its fashion line and products every season. They bring out fashion clothing and create consumer need and this makes the previous year’s fashion redundant. However, the fashion companies cannot thrive on a left-brained approach. Every fashion company has a right-brained individual that can bring out some new fashion to enable the company to keep attracting customers (Rigby, Gruver & Allen, 2009) At the same time, the brand CEO has to be left-brained who is adapt at business and can make decision based on hard-nosed analysis. Thus, the organization has a whole-brained approach as they can successfully generate and commercialize new concepts as an ongoing process. In fact, in every industry, there has to be a left-brained and a right-brained individual and both these together lead the company. To overcome the challenges, the corporate sector has to integrate their analytical and problem-solving techniques (Mininni, 2006). Today cultural diversity has become the order of the day in the corporations and dealing with cross-cultural communication is not possible with the left-brained approach. With a left-brain approach, an individual would meet another from a different culture after learning the nuances, their habits and what to take for the first meeting and how to greet etc, through bookish information or from an authentic source (Cindy, 2008). There are others who would presume that all come from his own culture and would continue to talk or behave as if all understand him. Both these approaches are wrong and what is required is a whole-brained approach. One should be open for the first meeting with a non-assumed quiet inner confidence. The right brain has to be in tune with the other person’s emotions while the left brain should be utilized to keep control over actions. Because of the drawbacks of the left-brained approach in strategy planning, organizations are adopting a new business model. Companies such as P&G have started designing the purchasing experience, the communication experience and the user experience (Mininni, 2006) Every component of the product is being designed. P&G has entered into a design-centric culture and they are able to develop meaningful customer experience. Companies such as Dell, Apple, Starbucks, Nokia, Samsung, and BMW have all embraced the design-centric philosophy and the evidence of success lies in each of these companies being leaders in their respective sectors. This culture has to pervade to every level of the workers and cannot be restricted to the top management. This creativity and innovative capability comes from the right brain and with this approach companies are able to realize the full potential of brand loyalty and brand equity. Conclusion Two distinct hemispheres of the brain have their own skills sets and make the individual function differently. While the left quadrant is more rational and analytical, the right brain is innovative and creative. Rational decision-making process comes from the left brain and the economic theory presumes that market participants must follow the rational decision-making process. The left-brained approach has of late come under criticism both in the field of marketing and in the area of project management. Thus we find that traditionally the left-brained approach worked but in the changed business environment it is no more possible to adhere to sequencing of activities. Strategic planning also requires a rethink as situation keeps changing. There is ample evidence of companies such as P&G that have shifted from the traditional approach towards a whole-brained approach. The changed business environment calls for an integrated approach where the analytical decision making of the left-brained individual has to be integrated with the creative abilities of the right-brained individual. The right-brained individual conducts holistic activities and the organizations require a holistic attitude and behaviour. The left-brained approach suggests that the vision is restricted to that which can be measured or analyzed or proved analytically. However, by following only the analytical approach, organizations have been missing out on the feelings and intuition. It kills creativity as the propensity to take risks is reduced. In fact very few people are fully left-brained or fully right-brained. Merely focusing on the left-brained approach of analysis and sequencing activities has become the major cause of failure of many projects. Whether it is the airline sector or the electronics, the fashion industry or the music sector, a mix of both the approaches is essential. A new business model is emerging which is the whole brained approach because it is increasingly being felt that an organization needs a mix of both the skill sets. References Bartlett, C.A., & Ghoshal, S. (1992). 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