Employment relations - Essay Example

?Introduction Small firms have a small market share in any given economy and individual firm’s actions cannot significantly impact the entire industry or economy. Therefore, individual firms cannot significantly influence national or regional prices or quality. Most small firms are managed in a personalised way because owners are attached to them. Consequently, their personalised feelings attached to business make them active in all aspects of their business. According to Department for Business Innovation and Skills (2010), there are over 4,801,250 small business enterprises in the United Kingdom. Sections 382 and 465 of the United Kingdoms’ Company Act 2006 define small firms as business entities with zero to forty-nine employees, ?0-?6.5 million turnover and ?0-?3.26 million balance sheet total. Small businesses have their own challenges and benefits. According to The Times 100 (2011), two thirds of small business in the United Kingdom are owned and run by a single person (manager). This means that about two-thirds of the small firms in the United Kingdom are managed by owners. Furthermore, 90 percent of small firms employee six people and below. Managers may be owners or employees of an organisation and are responsible for overall performance of a firm. The key objective of a manager is to utilise assets, money, materials and human resources effectively and efficiently to achieve objectives (profit maximization) of a firm. This is achieved through well-coordinated human efforts. Therefore, he or she needs to set organizational goals and manage his or her staff well. To achieve firms’ objectives, managers apply different management styles as dictated by the nature of the business and personality. Some of the management styles applied by managers of small firms include autocratic, participative and situational management styles. Characteristics of small firms Every manager must understand the features of the firm he or she is managing to be in a position to positively influence its processes and outcome through application of appropriate management style. According to Moore (2008), small firms have distinctive features. First, managers are more of doers and less of managers. They work because they do not afford to employ more individuals to carry out certain duties on their behalf. Therefore, they are more action oriented and less analytical as compared to professional managers. Secondly, managers act as entrepreneurs. They scan the environment and take the risks of coming up with new ideas and implementing them. Thirdly, managers of small firms do not have adequate time allocated to planning. When they plan, plans are often postponed or neglected. Fourthly, small firms are made up of simple and highly informal organizational structure. This enables managers to make quick decisions. As a result, managers in small firms are more powerful and exert strong personal influence on firm’s operations and activities. The fifth characteristic of small firms is that most managers apply both autocratic and participative management approach. Sixth, small firms are vulnerable to failures caused by managerial inefficiencies because more power and authority are vested on one or few individuals. Seventh, small firms are more likely to face isolated financial and personnel constraints. The eighth characteristic is that small firms undergo growth and development phases. According to Storey (1994), inception, survival, growth, expansion and maturity phases are five phases of growth that small firms often undergo to grow to medium and to large firms. Each phase has its unique strengths, weaknesses, opportunities and threats. Most small firms are in the inception, survival and growth phases. Beyond, the three initial stages, firms may be classified as medium or small because they are likely to have more than fifty employees, over ?6.5 million turnover and more than ?3.26 million balance sheet total. Managing small firms: Is Small Beautiful? Appraisal of management styles in small firms Autocratic, participative and situational management styles are three dominant management styles that managers in small firms apply. However, the most dominant management style applied to small firms across the world is autocratic management style because of many reasons. First, most small firms are managed and run by owners who do not wish to relinquish control of their business. Secondly, the numbers of employees in small firms are few and do not have the bargaining power to coerce the managers to do as they wish. Thirdly, most employees of small firms are inexperienced and non-specialists. Therefore, they need a lot of direction on what they need to do and how they need to do it. Beyond the above characteristics of small firms, it is important to understand how autocratic leadership style impacts both the manager and entire firm. Autocratic management style Autocratic management style is one of the oldest management styles in the world. Pyramids in Egypt and the great wall in China were constructed under the watchful eyes of autocratic managers (leaders). Instructions were issued to workers who were forced to work. Autocratic managers are reluctant to share power. Their attitudes in small firms revolve around independence, control and autonomy. As a result, negotiation is out of their management menu. Any forms of employee empowerment or delegation are kept at minimum under autocratic management style. Autocratic managers have the tendency of slapping their doors and disapproving ideas, inquiries or suggestion of employees in advance, especially when it is against their own ideas or perceptions. The communication pattern involved in autocratic management style is top-down from a manager to the subordinates. Subordinates depend heavily on manager’s supervision to do and accomplish their tasks. Under autocratic management style, negative reinforcement is dominant. Autocratic managers use threats and punishment to control the behavior of employees (Piotrowski, 2001). To small firm managers, autocratic leadership style can be beautiful because it gives them unlimited power and control over subordinates and firm’s processes as a whole. Autocratic manager is in charge. He or she defines the problem, consider alternative solutions and choose what he or she perceives as the most appropriate with very little or no consultations with other employees of the small firm. As a tradition, most autocratic managers deny employee the opportunity to participate in decision making. The autocratic leader announces the solution to employees who are expected to accept and implement it exactly without question. The impact of autocratic management style to the small firms and employees is significant. In small firms, single or very few people (managers) decide who gets resources, where resources go and how resources are used. Chaston (2009) claimed that small firms have less decision makers and decision making is easy. This is because they do not have to arrange for meetings because he or she has the power and authority to make any decision in the firm. They hire and fire employees, manage resources as well as create, implement and enforce objectives and goals of the firm at their own discretion. If an autocratic manager is competent, experienced, knowledgeable and creative, the firm is likely benefit through to growth and development. This is because employees would be implementing proven ideas that have stood the test of time under the watchful eye of the most competent managers. Autocratic manager may succeed to retain full control of all business processes and meet firm’s objectives by causing fear and promoting discipline among the subordinate members of the firm. Consequently, the risk of employees inciting the others against the firm or managers is greatly reduced. In addition, work is normally completed within the stipulated time. Small firms are not in a position to employ highly skilled workers or tasks specialists. Therefore, they are more likely to resort to young and inexperienced workers who need more directives to perform their jobs appropriately. Klein (2010) claimed that young and in experienced workers need more direction because they cannot work on their own. To that point, autocratic leadership is effective and beautiful to both the firm and the manager. However, autocratic leadership in small firms can be devastating to the manager, employees and the firm. Managers in small firms perform all the functions of the firm. They allocate resources and negotiate contracts; lead the employees and manage conflicts; perform the role of figureheads and speak on behalf of the organisation; they also act as points of linkages and entrepreneurs; and finally, they monitor organisational activities among many other roles. According to Kusluvan (2003), autocratic managers may become barriers to firm’s growth and development. Stress levels of autocratic managers are high in small firms. Managing small firms is demanding because it involves a lot of work as most decisions are made by a single person (manager). Since autocratic manager has to make a lot of decisions, he or she does not have adequate time to concentrate on matters that matter most to the firm. In addition, he or she has little time for holidays if any and may not be able to vent off stress that build with overwork. Consequently, he or she may suffer from sensory overload and other occupational diseases. This may lead to poor judgment and absence at work on medical grounds. Poor judgment and absence at work can drive down a whole firm that relied heavily on him or her to make decisions. In the end, the manager will have himself or herself to blame for all the risks that occur to the firm on the basis of the decisions made. Furthermore, to autocratic managers, employees must be pushed and told what to do for the firm to achieve its best results. However, employees feel demoralised because they are treated like robots. They are always on the receiving end. In addition, employees will not feel part of the organization and this may affect quality of products and services in firm (Ramand and Edwards, 2003). Firms with autocratic managers record high levels of staff turnover. The employees in small firms under autocratic management style rule may not be empowered to take on current and future challenges in the firm. As a result, their potentials are not fully utilised. Participative management style Participative management style refers to a management style where the manager set organizational limits and relies heavily on contribution of employees. The managers provide authority and power to subordinates accompanied by responsibility and accountability. Management functions are delegated to employees of the small firm and the participative manager has more time to participate in other important activities of the firm. In addition, participative managers have time allocated to other important functions. Consequently, they can perform symbolic and ceremonial duties without significantly stopping firm’s activities. The symbolic and ceremonial duties include signing legal documents and greeting visitors. They also have time to monitor firm’s progress and undertake self development lessons that will help him or her perform better in the firm. Managers also act as points of linkages as well as disseminators in firms. Therefore, they need sufficient time to make phone calls, write and send mail as well as attend meetings. Participative management style provides them with enough time to prepare and respond to issues within and outside the firm as compared to autocratic management style. Participative managers are more likely to develop and nurture personal relationships with customers, employees and suppliers who are important to success of the firm as compared to autocratic managers. In addition, firms managed by participative leaders have high potential to grow faster because every contribution of the worker is considered. The potential of employees can be realised in this management approach and employees are always empowered. Participative managers are willing to motivate, train, counsel and coach employees because they want employees to be ready for various firms’ assignments at different levels. Rate of innovation in small firms is high with participative management style. The managers allow subordinates to initiate new ideas to improve existing process and procedures. They also delegate idea generation and development to subordinates and risks associated with decisions made are shared among the employees of the firm. Since the employees are involved in some decision making, his or her performance is improved and entire firm’s performance is also boasted. Participative management system is based on a compensation system, which allows employees to have a share in the business result. The main disadvantaged about participative management style is that decisions making may be long and slow process. This is because more people are involved in decision making and participative managers have to seek approval or report to many people before making decisions. The other disadvantage of participative management system in small firms is that some subordinates may decide to be incorporative and uncommitted. In addition, some errant employees can easily incite the others in this management style because they are not keenly watched and strictly disciplined by the manager. Situational management style Situational management style best suit small firms especially for handling different tasks. Situational manager is able to adapt to employees’ characteristics such as skills set, sex and age. Situational management style recommends that employees should be treated differently depending on the situation. This makes it mandatory for all managers to consider different developmental needs of subordinates based on competence, motivation and confidence. A manager adopts his or her situational management style to suit the prevailing condition to the firm. Incase a manager wants speedy turnaround, he or she may be authoritative and work will be done fast, and accordingly. When a situational manager travels, he or she can delegate some decisions to some of the subordinates. According to the situational management style, subordinate with low competence needs significant training and direction from the manager and autocratic or authoritative management style is appropriate. A subordinate with some competence but lacks motivation need external support via coaching to enable him or her complete the task completely. On the other hand, a subordinate with high competence but variable commitment requires participative management. Through participative management, the manager supports the subordinate in tasks that are less satisfying or where the subordinate lacks adequate confidence to undertake it. Finally, according to situational management, subordinates with high motivation and competency do not need autocratic or authoritative leaders. Therefore, a manager should delegate most or all the work to him or her. This is because too much follow-up can extremely de-motivate the person. For managers in small firms, this is one of the most appropriate management styles. However, it is difficult to find managers of this caliber, who can successful, apply different management styles. To some subordinates who do not understand the basis of the manager on application situational management style, they feel some form of discrimination and this can de-motivate them. Conclusion Two-thirds of small business in the United Kingdom are owned and run by single individuals while 90 percent employ six people and below. Small firms are made up of informal organisational structure. The managers in small firms are more action oriented, entrepreneurial and apply different types of managerial styles as they work towards achieving the objectives of the firm. In addition, small firms are also vulnerable to managerial and resource inadequacies. The three main managerial styles applied in small firms are autocratic, participative and situational management styles. There is no single management style that fits a small firm conclusively. However, for the firm to be highly successful, it is important for all managers to adapt to different management styles based on the prevailing circumstances. To autocratic managers, power and authority is everything. With power and authority firmly in their grip, they can influence employees and other firm’s stakeholders as they wish but employees are hurt in the process. Participative managerial style does not concentrate power and control under one person but is shared among subordinates. On the other hand, situational managerial style is applicable to small firms under which managers adapt their management styles on the basis of prevailing conditions. Management of small firms is beautiful and ugly at the same time. This is because every management style has its own benefits and challenges. However, the most appropriate is situational management style because it is adaptive. References Chaston, I 2009, Entrepreneurial Management in Small Firms, Sage Publications Ltd, USA. Department for Business Innovation and Skills 2010, Small and Medium-sized Enterprise Statistics for the UK and Regions, 10 April, 2011, . Klein, M, R 2010, The Architect's Guide to Small Firm Management: Making Chaos Work for Your Small Firm, John Wiley and Sons, USA. Kusluvan, S 2003,Managing employee attitudes and behaviors in the tourism and hospitality industry, Nova Publishers, Moore, W, C 2008, Managing Small Business, 14th edn, Cengage Learning EMEA New York. Piotrowski, MC 2001, Professional Practice for Interior Designers, 3 edn, Wiley-Interscience Storey, J, D 1994, Understanding the small business sector, Cengage Learning EMEA, New York Ram, M. and Edwards, P 2003, "Praising Caesar Not Burying Him: What We Know about Employment Relations in Small Firms." Work Employment Society, Volume 17(4): 719-730. The Times 100 2011,The importance of entrepreneurship in small businesses, 10 April, 2011, . Read More