Taylorism and Needs Theory - Essay Example

Organizational Behavioural teaching of Taylorism and Needs Theory has contributed to the growing inequality of power and pay settlements offered to bankers and senior corporate executives on one hand and ordinary employees on the other". In this paper, we shall critically analyze the above statement and determine to what extent Taylorism and ‘Needs Theory’ has led to this widespread inequality. The most important factors that create inequality are greed, power and money. Although, policy choices and individual behaviour also leads to inequality but it has been primarily induced into the organisation system by the wealthy, powerful and influential people in the western society. The concept of distribution of ‘power and pay’ was first introduced by Frederick Winslow Taylor in the early twentieth century. According to him, the total planning and control of an organisation should be in the hands of the owner and the worker should simply perform as per the commands of the owner (Robbins and Coulter, 2006:58). He further added that this concept would lead to maximum productivity and maximum profits and therefore it was widely accepted all over the world. It still continues to be used today in big organizations and banks where senior level executives hold explicit power and enjoy exorbitant income in comparison to their employees (Kular et al, 2008). However, before the analysis, understanding the concept of Organizational Behaviour, Taylor’s ‘Scientific Management’ theory and the ‘Needs Theory’ in brief is deemed necessary. Organizational behaviour is a subject that is concerned with studying the actions of people at work. It focuses on the fact that managers need to understand the elements which influence how employees work. Also, a manager’s success depends upon how well he can manage employees’ behaviour and gets things done through them (Robbins and Coulter, 2006: 372). One of the first pioneers of organizational behaviour was Frederick Winslow Taylor who clearly defined the required behaviour and work of the owner and employees in an enterprise. He is called the father of the concept of ‘Scientific Management’ (often called “Taylorism”) in the workplace. At the time, when the Western countries were thinking what needed to be done to make enterprises more effective, Taylor came up with the theory of scientific management. He incorporated his concepts in his book, The Principles of Scientific Management (1911) which became a guide book for every manager in every company across the world especially UK and US. Soon ‘Taylorism’ spread to every corner from the workplaces to larger and bigger organizations and became one of the most acceptable patterns of working in the twentieth century (‘Frederick Winslow Taylor Criticism’, 2011). While working in a factory as an engineer, Taylor realized that workers lacked efficiency and wasted a lot of time. He started a series of time management studies and brought forward a system of work which would accomplish organizational goals efficiently without wastage of time. His theory consisted of four main principles – to determine the most efficient way to perform each task; assign work to every worker according to his capability; closely scrutinize each worker’s performance and empower the management for planning and control of the organization (Walonick, 1993). In other words, he suggested that it is the sole responsibility of the manager to make a complete plan of every single task that every single worker needs to accomplish and also plan the procedures and means to fulfil the task. According to him this system would lead to maximum profitability. Every single business house organized themselves according to the principles of ‘Taylorism’ and the top executives and managers were handed full control of the employees and the workplace, thereby curbing the independence of the employees (Pizzigati, 2004:159). The main objective of Taylor was to achieve maximum satisfaction and profit for the owners as well as to provide workers with better working conditions, increment in wages, and overall increase in the productivity of the organization. In this system, the top executives would have been fully satisfied because of increased production and high profits and at the same time employees would be able to enjoy higher salaries. However, Taylor’s theory has never been fully implemented. Even though top executives deny, it is true that they simply gave orders to employees which the latter needed to follow without any objection. ‘Taylorism’ was widely opposed by low level employees as the system was rigid and provided no room for flexibility. Although, the system was objected widely but it still continues today in the modern world and it gave rise to the system of ‘bureaucracy’ (Pizzigati, 2004:162). The concept of Taylor spread like wildfire after Second World War with managers shifting into the positions of top management. The result was reduction in the power and the role of the foreman in a bureaucratic organization and the formation of a new level in management – the middle management. According to some sociologists, bureaucracies exist and grow in enterprises which are organized in a hierarchy. They have compared a corporate organization with a steep pyramid where the workers sit at the base and the executives on the top. “The more the layers, the steeper the pyramid, that is, the greater the distance between actual workers and the ultimate corporate decision making authority” argued sociologists. This gap leads to inequality of power and wealth between the top level executives and employees (Pizzigati, 2004: 162). Another theory which has majorly contributed to the inequality of power and pay of the executives and the employees is the ‘Hierarchy of Needs Theory’ which was conceptualised by Abraham Maslow. He had perpetuated that every person has ‘needs’ which they want to fulfil and some needs are more important than the others. He defined that every person has five basic hierarchy needs – physiological needs, safety needs, social needs, esteem needs and self actualization needs. Physiological needs include all the needs a person requires for living – food, drink, shelter, sexual satisfaction and other physical requirements. Safety needs refer to safety and security from any kind of physical and emotional harm and this might include living in a safe area, medical insurance, job security and financial reserves. According to Maslow these are the lower level needs which should be fulfilled first, in order to recognize the necessity of fulfilling higher needs. The first higher need in the hierarchy is the social needs – the need to interact with others like making friends, the need to get accepted in a group, the need for affection and belongingness. Through esteem needs, Maslow meant the external and the internal motivational factors which affect a person. Internal factors include the need for self respect, autonomy and accomplishment and the external factors are the need for status and recognition. And lastly, self actualization needs refer to needs that arise from one’s desire to reach his full potential as a person (Robbins and Coulter, 2006: 423). According to Maslow, each level in the needs hierarchy must be fully satisfied before the next level is activated. This theory was meant to be applied in the workplace, where managers should seek to provide opportunities to workers to move up the hierarchy level. This theory also incorporates aspects of Taylorism that “people do need enough pay to provide enough to eat”. However, in reality it has been found that only a few people, that is, the senior level executives have reached the highest level of self actualization. Organizational barriers like bureaucracy and domination of executives have stopped workers from moving up the highest levels in terms of satisfaction of needs (Pirie, 2006). It is true to a great extent that inequality of power and pay settlement in the banking sector as well as big organizations is the result of Taylorism and the needs theory. Today, banking is going through a lot of technical changes which is proving detrimental for the economy. These changes are having a direct impact on the employment, salary and managerial aspects within the banking sector. It is evident that banks across UK have started incorporating the Taylorist method of Organisational behaviour in their workplace. Nowadays, banks are approaching more profitable channels of distribution to remain competitively ahead in the market (‘Abstract’, n.d). The Banking insurance and Finance Union (Bifu) has clearly stated that the introduction of cheque transactions, credit cards and new technologies like ATM’s, Mondex and Hub service system has led to centralization in the banking system and thereby loss of thousands of jobs within the industry. The use of cheques, imaging equipment, and Courtesy Amount Read (CAR) has increased the efficiency of cheque processing by 86% thereby leading to a rise in productivity by 50% in America, argued Bifu. Further it was found that with the use of imaging equipment and CAR the labour hours needed to process cheques has reduced by 36% from 7306 to 4445 hrs. Thus, the implementation of new technologies has reduced the need for workers and general bank managers. This can be explained further with the example of Barclay’s bank (‘Abstract’, n.d). The Barclay’s bank has introduced Taylor’s theory of centralization in its functioning. In other words, it has replaced all its branch management services with a central management service leading to loss of thousands of jobs. In place of branches it has introduced ATM’s, Mondex and other new technologies. Further, the top management executives in these banks have employed specialized staff who could perform only specific functions, have no scope of advancement and are paid a fixed remuneration. Thus, by creating such a labour force the senior executives have not only secured their positions but have captured total control of the functions of the banks in their hands. For instance, UK has introduced the Hub and satellite system of banking in its finance industry. In this system there is a central hub where the specialised lenders, training and administration managers are located. This central hub is connected to a satellite centre with various branches. The main satellite centre is handled by the old general managers with the branches functioning through central control without any managers. This system has led to complete centralization, broken the traditional hierarchy of career advancement of old general managers and made their work stagnant. Further, due to specialization, more trained higher level relief staffs are appointed and the job of general managers and other staffs has been reduced merely to marketing and customer service. Also, the employees are forced to work according to the commands of the senior executives. The control of the whole structure now rests in the hands of the top executives who also solely enjoy the increase in profits generated by increased productivity and specialization (‘Abstract’, n.d). “All pay is, ultimately, a function of power” stated Rick (in Dillow, 2011). In other words, income and wealth inequality arises mostly because of inequality of power, explained Dillow. According to a research in UK it was found that 60% of increase in overall income has accrued to the executives in the finance sector who form only 5% of the total working force of the country (Bell and Reenen, 2010). Another fact which comes to our notice is that the new technologies has been introduced by the bankers because of some needs – the need to maximise productivity, the need to maximise profits, and need to maintain a competitive edge over other banks. Thus, all the above steps have been undertaken by the top bankers to fulfil their various needs – needs which Maslow has explained in his theory of hierarchy of needs. Therefore, we can say that that the incorporation of Taylorist method and the Needs theory has contributed to the increased level of income disparity between the bankers and their employees to a great extent. Organisation behaviour is the main element which determines the procedure of the implementation of production technologies, the segmentation of labour force and the execution of power. Today, in all the major organisations, it is the executive manager who decides the behaviour of the organization, its strategies and cultures, thereby affecting the distribution of resources among their company’s workforce including the shareholders, board of directors, employees and the managers themselves. A Chief Executive Officer (CEO) plays the most crucial role in affecting pay discrepancy in his organization with his power and conception of control (Shin, 2008). A study of the Corporate Executives Salaries has revealed that the total compensation of corporate CEO’s is rising much faster than the compensation of workers at the other end of the pay scale. In the 1960’s an average CEO was paid 40 times as much as an average worker. However, in 2006 it was found that the salary of a CEO has increased to 364 times compare to a worker (‘An overview of Corporate Executive Salaries’, n.d). The growing income inequality has been created because of excessive remuneration accrued by top level executives out of greediness. They have been able to acquire so much wealth solely because of the enormous power given to them by companies following Taylorist method of work. The incentive payment system incorporated by Taylor suggested that executives and employees should be paid on the basis of performance and incentives should be given to them who perform well in order to motivate them. Further there should be penalty for negative performance. Today, with the advent of new technology, workers are able to produce increased goods and services but their salaries are not increased by the employers. Further, they are not given the amount of bonus they deserve to get. On the other hand, it has been seen that some executives received enormous pay even after failing to perform well. Moreover, they are also paid bonus and incentives. There is no penalty for them in case any decision taken by them goes wrong (Schwerin, n.d). Further, the senior level executives are paid bonus even for undeserving activities – activities which do not deserve any reward – like completing a merger or raising funds for a business. An article in the Financial times revealed that the Krafts Food’s CEO was given a 41% pay raise to 26.3 million dollars for displaying excellent leadership in the takeover of Cadbury, the UK chocolate company. Further, the undisputed power transferred into the hands of the executives encourages them to perform activities which are detrimental for the employees as well as the company as a whole. For instance, many executives cut down the maintenance costs or customer services in order to achieve the company’s financial goals. Also, they even deploy experienced high paid employees for their personal gains. The executives merely reduce the employees to the status of machines who functions according to their commands. Such steps are met with resistance from employees and create an environment within the enterprise that harms its functioning (Schwerin, n.d). By incorporating the methods of Taylorism in their organization, executives have gained total control over their employees. In this system, the workers are being treated as accessories to machines, their autonomy is removed and forced to work in a fixed environment with a fixed remuneration (Pizzigati, 2006:162). Also, some companies wrongly assume that a CEO’s decision solely contribute to the success or failure of an organization, so they delegate enormous power and pay handsome compensation to senior executives in order to maximise their profitability. These factors lead to a great deal of income disparity between the executives and the employees (Schwerin, n.d). During the 1980’s, Peter Ducker conceptualised the modern management theory which presented a new income maintenance dynamics. He suggested that executive pay should be limited in order to make hierarchies less attractive. He said that the executives should not be allowed more than 20 times the compensation of their workers. Some analysts suggested that the command and control rule should be ended in order to reduce the pay differences between the executives and the employees. The modern management system brought about a revolution with employees enjoying lot of freedom and power. This also reduced the disparity of income between top management and employees. However, this system couldn’t continue for long and was soon replaced with the Taylorist method by the executives in order to satisfy their personal needs. Conclusion Through our analysis we can conclude that the organisational behaviour of Taylorism and the ‘Needs theory’ had a huge influence on the income and power disparity of the top level executives on one hand and the employees on the other hand. However, it cannot be overlooked that there are various factors which might have increased this inequality like geography, ethnic, sexual and religious prejudices, transparency and corruption issues and education policies (Schwerin, n.d). Also, tax on income doesn’t see who has more money and who has less. It is applicable equally across people from different income groups thereby increasing the inequality. Further rent sharing has also contributed to the rise in disparity (Bell and Reenen, 2010). However the above factors have not contributed as much as the Taylorist method to the power and income disparity. The primary aim of the scientific management was to achieve maximum prosperity for the owners; provide workers with better facilities and wages, and the overall increase in the productivity of a company. However, in the Taylorist method, it was found that workers were being treated just as accessories to the machines, their creativity was removed and their pay was not satisfying at all. And even though top executives deny they simply follow the command and control rule on the employees and accrue maximum compensation to themselves even today. The ‘Needs theory’ of Maslow also had its advantages, one of them being that a person with the highest level of needs will regularly review his own work and his team’s progress so as to achieve common organizational goals. The amount of salary for such a person should not have meant only accumulation of wealth instead symbolises their progress and achievement. However it was revealed that such persons expect too much from their team and exert unnecessary power on them to achieve their goals. Such behaviour has a negative impact on the workers and discourages them from working hard. The senior executives’ main focus is on their personal accomplishment rather than helping their employees. Thus the needs theory only helped the top level managers in achieving a lot of success in the form of power and pay but made the future of the employees stagnant (Pirie,2006). The pay scale of the top level executives exceeds 364 times what their employees receive in UK. It is not at all justified and displays the greediness of the executives. The amount of power and pay enjoyed by the top management shows us a false picture of the executives. It is wrongly assumed that executives will only work for high salaries; their services result in superior company performances and the excessive incentives given to them is because of their undisputable contribution to the company rather excessive executives’ pay discourages employees from working hard and spreads biased cultural values. It leads to the creation of a society where the rich get richer and the poor poorer (Schwerin, n.d). This inequality of power and pay can only be reduced by discarding Taylorist theory and adopting a modern management theory which encourages the empowerment of the employees, reduces the pay gap substantially so that the organizational goals are achieved by the combined use of power and creativity of both of the executives and employees in the banking as well the corporate sector. The concept of the Needs theory should also be perpetuated in the right direction and the need of both the executives and the employees should be considered while taking important company decisions. Senior level executives and bankers must realise the fact that companies are part of a bigger community and they will only perform well when all the others associated with it are doing well. References ‘Abstract’ (n.d) Banking.pdf, [Online], Available: http://www.ukeducation.org.uk/UkeduFrames/Downloads/Banking.pdf [28 July 2011] ‘An overview of Corporate Executive Salaries’ (n.d) EBSCO host connection, [Online], Available: http://connection.ebscohost.com/businessfinances/executive-pay/overview-corporate-executive-salaries [28 July 2011] Bell, B. and Reenen, J.V. (2010) Centre for Economic performance: Banker’s pay and extreme wage inequality in the UK, [Online], Available: http://eprints.lse.ac.uk/28780/1/cepsp21.pdf [29 July 2011] Dillow, C. 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