What functions does hierarchical control play in firms/organisations - Essay Example

?What functions does hierarchical control play in firms/organisations Introduction The development of organizational activities worldwide led to the introduction of a series of policies for their supervision; the alignment of these activities with the aims and the ethics of each organization had to be evaluated in order to ensure that they are based on the ethical principles and the cultural characteristics of the organization involved. Hierarchical control has been, traditionally, used in modern organizations in order to ensure the alignment of employees’ activities with the guidelines included in the organizational plans. However, through the decades, the above mode of organizational control had to be transformed in order to better respond to the organizational needs and the market trends. Current paper focuses on the presentation and the analysis of the potential functions of hierarchical control in the modern market; reference is made to the traditional functions of the specific mode of organizational control but also to its alterations under the pressure of the extensive changes in the structure and the rules of markets worldwide. It is concluded that the change of traditional hierarchical control modes has been unavoidable; however, this fact cannot guarantee the effectiveness of the new forms of organizational control. Rather, the traditional functions of hierarchical control have been found to be more supportive to the common organizational activities; their alteration has to be carefully planned and attempted taking into consideration whether the organizational environment – internal and external – can support such initiatives. 2. Hierarchical control in modern organizations – description and functions In order to understand the role of hierarchical control in modern organizations, it is necessary to identify its key characteristics – as developed in the context of social, economic or political environment, i.e. independently to the organizational framework. The term ‘hierarchy’ is used in order to describe a sequence of objects, principles or roles. Combined with the term ‘control’, hierarchy indicates the power of control on the activities performed by individuals or the use of principles as indicated by their functions (Mutch 2008, 37). In accordance with the above, hierarchical control has certain requirements: a) an order (hierarchy) needs to exist – referring to order of objects/ roles, b) the supervision of the objects/ roles has to be delegated to a particular person (controller); without the power of the controller to supervise the lower levels of the hierarchy there is no sense of hierarchical control, c) hierarchical control can perform better under certain organizational conditions, for instance in highly bureaucratic environment (Mutch 2008, 37). The development of hierarchical control in modern organizations is initiated for the achievement of a series of targets; in other words, hierarchical control serves specific organizational needs, a fact that leads to the assumption that the modes of hierarchical control across organizations can vary meeting the organizational needs and goals. The above fact is made clear in the study of Lammers (1979) where reference is made to the following function of hierarchical control: the development of complex financial functions. In accordance with Lammers (1979) organizations, which have to deal with financial functions, show ‘a higher intensity of hierarchical control’ (Lammers, 1979, 154) compared to those organizations that operate in different areas. In this context it is expected that the organizations operating in the manufacturing industry have less developed hierarchical control compared to the organizations of the financial services sector. The view of Lammers that hierarchical control is more valuable in the financial services sector may be criticized as for its relevance in the current market conditions. In the modern market, the operational activities of firms in various industries can be quite complex – as a result of the increase of complexity of technology used in the development of these activities; as a result, hierarchical control can have other functions, in addition to its involvement in the completion of financial projects. On the other hand, the view of Lammers can be justified – even for firms operating in current market – if taking into consideration the rules of bureaucracy – as applied on firms of different sectors. Such issue appears through the study of Peters (2001); in the above study it is noted that there are certain industrial activities that are developed better under a centralized form of governance – reference is made, for example, to the case of the accounting services, which are believed to operate more effectively in the context of a centralized control system (Peters 2001, 166). On the contrary, ‘sectors, like the police and the fire protection, need to be more dispersed’ (Peters 2001, 166); for this reason, a less centralized system should be used for their governance. In accordance with the above view, hierarchical control helps to control the operational activities of specific sectors, of those sectors that can perform well under a centralized system of governance, i.e. within conditions of highly developed bureaucracy. From a similar point of view, Noteboom (2009) emphasizes on the use of hierarchical control for supervising the activities of employees at different layers of the organizational hierarchy. However, it is noted that in the context of this role, hierarchical control has to face a severe challenge: the empathy developed because of the power of certain employees to monitor the activities of other employees working in the same or different organizational departments (Noteboom 2009, 79); in this context, hierarchical control is considered as having ‘a role in the organizational cognitive focus’ (Noteboom 2009, 79), in terms that efforts are made for understanding the criteria used for the evaluation of specific organizational activities, a fact that can lead to the improvement of performance of employees; under certain terms, the concentrate of powers within an organization, i.e. the development of an extremely powerful hierarchical control system can cause severe delays to the organizational performance increasing oppositions and conflicts across the organization. On the other hand, Halal (1998, 45) supports that the role and the functions of hierarchical control have been differentiated in the context of the modern market. The reason is that modern market is highly competitive, a fact that leads to the need for alteration of the role of employees within their organization; in accordance with Halal (1998) such trend is mainly developed in ‘internal market system, which require people to assume the role of entrepreneurs’ (Halal 1998, 45). The above view cannot lead to the assumption that organizational hierarchy has been eliminated in firms operating in markets internationally; however, it is noted that employment relationship had to be changed in order for the firms to become more competitive. Indeed, it has been proved – as noted in the study of Halal (1998) – that within less bureaucratic organizational environment (where hierarchical control is low) employees tend to feel more free to take initiatives; in this way, their productivity is increased resulting to the improvement of the organizational performance (Halal 1998, 45). It is in the context of the above process, that the traditional ‘paternalistic employment relationship’ (Halal 1998, 45) is replaced by a new employment relationship in which employees have a ‘self-employed’ role; at the next level, ‘work-ethics’ are replaced by ‘enterprise-ethics’, reflecting the new roles and obligations of employees within their organization (Halal 1998, 45). Under these terms, the functions of hierarchical control are reduced; in the new, de-centralized organizational environment, hierarchical control can be only as a tool for verifying the position of employees across the organization; the power of the supervisors to intervene directly in the development of employees’ tasks is significantly limited (Halal 1998, 45). The change in the traditional functions of hierarchical control within the modern organizations is also highlighted in the study of Pinchot et al. (1996); in the above study it is noted that organizations operating in the modern market are characterized by the existence of ‘intrapreneurial teams’ (Pinchot et al. 1996, 14). For this reason, it is suggested that the traditional forms of vertical communication within the organization should be eliminated (Pinchot et al 1996, 14). It is noted that the new functions of organizational control (a term that should be used instead of the term ‘hierarchical control’) would focus on the development of innovative ‘modes of connection between specialties, geographies and products’ (Pinchot et al 1996, 14). 3. Conclusion The modes of organizational control chosen by managers are depended on a series of factors; most commonly, managers use the conditions in the internal and the external organizational environment as a criterion for implementing a particular type of organizational control (Mutch 2008, 37); the skills of employees to respond to the requirements of a particular mode of organizational control are also likely to be taken into consideration when such mechanisms need to be established (McGee et al 1993, 67). The examination of the functions of hierarchical control within modern organizations revealed the following facts: a) hierarchical control is not indicated for current market conditions – where less bureaucratic forms of organizational structure are likely to exist, b) hierarchical control can lead to turbulences in the internal organizational environment – for instance, in the case of empathy as explained above, c) hierarchical control refers to the monitoring not only of the internal but also of the external organizational activities, for instance, to those activities referring to the relationship between the organization and its rivals and d) despite the oppositions developed regarding its value and its role in the modern market, hierarchical control is expected to be used in organizations which have not aligned their structure/ operational principles with the rules of the modern market. Moreover, it has been made clear that the value of hierarchical control for monitoring organizational activities cannot be doubted – taking into consideration the fact that the relevant plans can be alternated to more flexible ones, being closer to the modern forms of organizational control. References Halal, W. (1998) The new management: democracy and enterprise are transforming organizations, San Francisco, Berrett-Koehler Publishers Lammers, C. (1979) Organizations alike and unlike: international and interinstitutional studies in the sociology of organizations, London, Routledge McGee, J., Prusak, L., Pyburn, P. (1993) Managing information strategically, West Sussex, John Wiley and Sons Mutch, A. (2008) Managing information and knowledge in organizations: a literacy approach, Tampa, US, Taylor & Francis Nooteboom, B. (2009) A cognitive theory of the firm: learning, governance and dynamic capabilities, Cheltenham, UK, Edward Elgar Publishing Peters, G. (2001) The politics of bureaucracy, London, Routledge Pinchot, G., Pinchot, E. (1996) The intelligent organization: engaging the talent & initiative of everyone in the workplace, San Francisco, Berrett-Koehler Publishers Read More