The Influence of Classical and Human Relations Approaches In Management Today - Case Study Example

A critical evaluation of the influence of classical and human relations approaches in management today Introduction Classical approaches to management and the human resources approach to management are quite different, with the classical approach akin to autocratic leadership that emphasizes rational decision-making and structuring the organisation so that employees function efficiently and productively (Sarker and Khan 2013). The human resources approach, however, views workers as a source of competitive advantage which is achieved by focusing on the construction of motivational strategies, achieving commitment through mutual trust, and where managers take on the role of leader rather than a stringent, efficiency-focused manager. With the HR approach, socio-psychological characteristics and needs of employees are considered as part of managerial approach, whilst the classical approach does not recognise socio-psychological characteristics of workers to be relevant to achieving productivity and efficiency goals in an organisational context. In today’s organisations, both classical and human resources approaches to management have some dimension of influence in how management tackles engagement with employees. Some contemporary organizations still prescribe the classical approach in order to provide outputs that are productive and aligned with strategic goals. In opposite accord, other organisations maintain a management ideology where employees are considered the most valuable assets to achieving competitive advantages and provide the capacity for the organization to accomplish long-run strategic goals. This essay explores the dynamics of the classical versus HR-based approach to management, utilising an explorative case study approach of Volkswagen and Google to determine how both approaches are still relevant and influential in what drives managerial philosophy in the modern organisation. Classical versus human resources approaches to management The classical approach is founded on the principles of scientific management, whereby the main managerial goal is to achieve economic efficiency and enhance employee productivity. Frederick Taylor is considered the father of scientific management who emphasised that achievement of productive outputs and internal economic efficiencies were best achieved through comprehensive training and development of workers to ensure that each employee is equipped with the fundamental skills and knowledge needed to produce high class work outputs. The classical approach maintains very formalised processes and procedures and asserts that maintaining a centralised hierarchy of managerial control is critical to achieving productive and efficient outputs. The establishment of formal rules and regulations underpins how managers are able to properly align job roles with operational activities to achieve profit, quality or even cost reduction expectations for the organisation. The classical approach views managerial activities as being logical and coherent strategies to improve the viability of organisational outputs as it relates to strategic intent. For instance, under this ideology, management science dictates that employee job roles and operational structure can be improved through the utilisation of quantitative statistics (Raduan, Jegak, Haslinda and Alimin 2009). The classical approach views workers activities and productive worker capacity as being scientifically quantifiable whereby job role activities and operational structure can be coordinated in a sensible methodology, much like an integrated system. The classical approach dictates that managers maintain higher levels of control over creation of job responsibilities and provides for more intensive oversight to ensure that employees are performing according to organisational expectations. The classical approach to management can be witnessed at the automotive company, Volkswagen, which sustains a more centralised business hierarchy and where the main focus of management is to improve productivity and guarantee economic efficiency in job role activities. Volkswagen believes that it can achieve efficient and productive outputs by enhancing the qualifications of its internal support workers with a strong emphasis on efficiency training. For instance, with a corporate objective of eliminating waste along the operational model, Volkswagen has devoted emphasis on constructing training packages that teach employees how to recognise and abolish waste of resources (Volkswagen 2011). This emphasis on efficiency enhancement illustrates a scientific approach to managing people whereby the organisation develops greater employee knowledge of proper resource allocation and utilisation to ensure that profitability goals are achieved. In the automotive industry, there are substantial pressures applied to companies like Volkswagen to monitor costs and enhance vehicle output quality (Ahrens 2006). In an environment where the external market is influential in determining the selling price of vehicles, the only rational methodology for improving profitability is cutting costs. Hence, managers at this organisation utilise the Six Sigma methodology, whereby quality of outputs and processes is the focus of continuous improvement to minimise variability in production and job role activities. This quality ideology views people and processes as being scientifically quantifiable and through the utilisation of scientific methods, such as Pareto Analyses, scatter diagrams, cost-benefit analyses, value stream mapping and axiomatic design, management is responsible for centralised data collection (Seimens 2012) of which the results dictate job role structuring, resource allocation strategies, and training requirements. These scientific methodologies underpin how management develops individual competencies with employees and determine how management structures operations to achieve superior quality and profitability. This illustrates how the classical approach to management is still relevant in the contemporary organisation. With Volkswagen’s main objective to enhance productivity, ensure quality of outputs, and achieve total efficiency throughout the value chain, managers view the entire organisation as a system which can be improved through scientific methodologies. This includes worker activity and job role expectations. For example, managers conduct analyses of production systems and data collected illustrates unproductive machine downtimes. Quantitative statistics illustrate that problems with maintenance team inefficiency has led to this phenomenon and now managers are charged with the task of improving maintenance practice to avoid production downtimes. Statistical data achieved through greater management visibility on the production floor provides the foundation for providing new training packages on maintenance efficiency or restructures job roles in order to meet production output expectations. Where classical approaches to management can also be witnessed is through Volkswagen’s utilisation of financial incentives to ensure employee commitment, an underpinning philosophy of the scientific management approach and Fayol’s contributions to effective management. Both Taylor and Fayol iterated that financial incentives contributed to higher worker productivity as fundamental management obligations. This classical approach maintains the perspective that employees will be committed to achieving organisational goals when properly motivated by the scientific distribution of appropriate economic compensation. In 2011, Volkswagen required more innovations as a means of improving quality and enhancing process efficiencies. Employees were invited to submit proposals about how to achieve these goals. Those who submitted quality ideas received financial bonuses for their contributions toward Six Sigma-related goals that were worth approximately EUR 32.7 million (Volkswagen 2011). Hence, through the promise of financial incentives for cooperation and collaboration, commitment toward achieving more economic efficiency and greater product quality was achieved. Milton Friedman, a renowned business strategist, maintains the viewpoint that the main objective of an organisation should be to increase profitability (Dunn 2010). Hence, the classical approach sees employees as a means to that end and establishes methodologies by which to ensure that commitment and dedication are engrained in employee values which, in turn, underpin productive and efficient work outputs. The classical approach, therefore, influences Volkswagen’s managerial philosophies since it is crucial that Volkswagen achieve operational efficiencies and manufacturer quality outputs that are aligned with production output deadlines. This business requires more managerial interventions and visibility in an environment that is constantly changing in order to better adapt to changing market situations. Therefore, providing employees with autonomy, which is part of the HR approach to management, would degrade the ability of the organisation to maintain managerial control over important operational activities that contribute most sufficiently to profit increases and to maintain a necessary reputation for quality. Fayol also believed that establishment of effective disciplinary systems drove compliance to productivity expectations mandated by management at the firm (Wren, Bedeian and Breeze 2002). With higher management visibility at Volkswagen, it establishes the foundation to ensure subordinate compliance in order to keep the organisation productive. Centralisation, furthermore, is one of the founding principles of Mintzberg’s theory of bureaucracy through which productivity-focused organisations can achieve their strategic goals. Whilst Weber challenged some aspects of bureaucracy, believing it could potentially serve to dehumanise workers, Volkswagen requires bureaucratic controls in order to sustain a culture with a focus on efficiency and productivity. This is a stark difference from the methodologies employed in more HR-focused organisations. In organisations that view employees as having needs and socio-psychological desires which serve as the foundation for organisational and job role commitment, the main objective is ensuring construction of dedicated human capital without the underpinning rationale for all management activity being productivity, efficiency, and cost savings. This human resource approach to management can be observed at Google. Google, much like Volkswagen, operates in a very competitive market where innovation of new services is critical to gaining profit and satisfying important revenue-producing consumers. Google believes that less managerial visibility and control is a contributor to employee motivation and provides a working environment that is conducive to autonomy and socialisation. Weber (2007) identifies that Google has offered flexible working hours, distributed ping-pong tables for employee use during business hours, and limits managerial supervision over workers. This autonomous structure with incentives to promote inter-group socialisation serves as the foundation for how Google is able to develop a team focus and enhance collaboration to identify innovative ideas beneficial for the sustainability of the business model. The human resources approach does not ignore the benefits of management considering the sociological and psychological needs of employees. Contemporary literature in the domain of psychology indicates that social belonging is one of the most fundamental, universal needs of humans (Baumeister and Leary 1995). Google managers, rather than attempting to scientifically structure the organisation to achieve efficiency and productivity, instead promotes a collaborative environment conducive to inherent human motivations and rejects control methodologies to gain subordinate commitment. Hence, there is an emphasis on transformational design as part of the HR approach to management whereby managers inspire workers through shared decision-making. This is the foundation of the HR approach to management, where social groups are influential in producing productive work outputs. This was supported by the Hawthorne studies that provided evidence that productivity is mediated by social factors (Levitt and List 2009). The results of the Hawthorne experiments and other studies conducted between the 1920s and 1930s provided evidence that it would be necessary for management to consider human needs and align them with job design to improve commitment and gain motivation. Hence, this served as the foundation for the HR approach which did not focus as substantially on coordinating the organisation systematically and controlling worker behaviour to achieve desired productivity. Instead, such as with Google, promotion and establishment of a social environment provided an emotionally-based type of commitment to producing team-based innovations by exploiting social dynamics that appealed to basic human desires. The Human Resources school of management also identifies that being part of the in-group influences productivity and also influences how well workers comply with managerial mandates. Managers prescribing to the HR approach to management will establish this camaraderie by gaining the trust of workers. Research shows that when trust is a variable that directly impacts worker performance; when trust increases, employees produce better productive outputs (Dirks 1999). Authenticity of relationships between management and employees that are founded on legitimate, mutual trust provide the foundation for desire to conduct reciprocal behaviours that are of benefit to both the employee and the manager (Starnes, Truhon and McCarthy 2010). At Google, managers exhibit this level of trust by providing workers with ample opportunities for self-management where there is minimal managerial presence and supervision over job activities. An empirical study conducted by Langfred and Moye (2004) found that autonomous work environments were directly related to performance improvements. This approach is a stark difference to the classical approach to management. Google adopted the HR model which recognises that employees want to have control over where, how and when they work (Koussia 2012). In fact, Haid (2011) asserts that managers should be considerate of providing opportunities for employees to maintain self-management opportunities to ensure that employees remain committed to achieving organisational goals. This illustrates how the HR approach to management has influenced the organisational structure of Google and the managerial ideologies that drive management direction. Google has absorbed many of the fundamental lessons that were provided by the Hawthorne Studies and other foundational research that illustrates performance and productivity can be achieved through non-scientific activities where employee emotions and the socio-psychological environment serve as variables as to whether an employee will effectively be committed and motivated. Yet another example of how the HR approach has influenced management practices can be observed at Air France-KLM, an aviation business that recently merged KLM and Air France that were independent businesses operating in France and The Netherlands. In the Netherlands, KLM had grown accustomed to having a decentralised business hierarchy where employees regularly expected participation and consultation as contributors to shared decision-making systems. Air France, however, was more centralized and employees were accustomed to power distance between themselves and management with minimal opportunities to contribute to decision-making. This was a product of the aristocratic monarchies that had long been in control over French government and shaped social and business culture (Communicaid 2009). Post-merger, Air France and KLM believed that consolidation of both cultures would be beneficial for providing the new firm with human capital advantages, enhancing teamwork and creating employee commitment. Kroon and Noorderhaven (2008) assert that one of the most fundamental needs of employees is to maximise their self-esteem, which is accomplished by making social comparisons to others within the organisation. Hence, at Air France-KLM, managers worked diligently to establish and promote a vision of equality without emphasising that one culture (either Dutch or French) was superior to others in order to enhance employee perceptions of in-group membership and achieve self-esteem. Psychology recognises that self-esteem serves as the foundation for self-actualisation, or the capacity for a person to achieve their greatest pinnacle of capability and accomplishment. Hence, the Air France-KLM case study illustrates how the human resources approach to management influences contemporary business practice. Where management could have maintained its ethnographic stance that the Air France culture was more productive and efficient by having more managerial control systems, instead managers realised that the social condition was highly relevant to whether employees would be productive and committed to achieving organisational goals. Job role meanings were enhanced by Air France adopting many of the same participative leadership principles that were successful at KLM and communicated a new focus for the newly-merged company related to equity and social cohesion. Conclusion The case study of Volkswagen illustrates how the influences of classical management ideology dictate managerial activity and policy at contemporary firms. Volkswagen operates in a highly saturated environment where cost, resource utilisation efficiencies, and quality are substantial needs to be competitive and profitable. Hence, employees are monitored and controlled to ensure they are meeting performance standards and a variety of quantitative statistics are utilised to structure the organisation to produce maximised productive outputs. Classical managerial philosophy dictates that this is effective and, when coupled with efficiency training and financial incentives, employees are better equipped and motivated to achieve desired organisational goals. At Volkswagen, management attempting to structure the organisation and job roles in a scientific, systematic fashion provides the firm with competitive advantages in a business environment demanding cost recognition and effective resource allocation. At Google and Air France-KLM, human capital is a major contributor to whether or not the organisation is competitive and profitable. Google utilises a more people-centric model of management that recognises the importance of social dynamics as variables dictating performance outcomes whilst Air France-KLM requires collaboration. To achieve this, the HR approach is more relevant and serves as a predictor of whether or not employees will be motivated or committed. Studies conducted in the 1920s and 1930s shed light that emotions and the socio-psychological characteristics of workers were fundamental in motivating higher performance. Google and Air France-KLM found relevancy and viability to the theory of HR-based management ideologies and incorporated a management philosophy that focused on autonomy, interpersonal relationship quality, and trust as fundamental advantages for the business model. Both the classical approach and the HR approach to management appear to have legitimate and valid constructs, but it would seem that the specific management strategy adopted by a firm is dependent on market conditions, strategic objectives of the organisation, and profitability objectives. Volkswagen, if adopting a more people-focused approach to management, would likely not achieve its quality-based and cost savings-based initiatives successfully since so much of this accomplishment is reliant on the scientific restructuring of operations and job roles needed to make Volkswagen profitable and its vehicles reliable. Google, however, which requires innovation in order to be competitive, is more reliant on collaboration and teamwork to identify opportunities for new service concepts. Hence, a strategy that considers how to build positive social dynamics is more relevant for successfully serving Google’s strategic agendas. References Ahrens, T. (2006). 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