Rationalization Techniques in Business - Coursework Example

Rationalization Techniques in Business

Introduction

The intensive competition and heightened complexities in the modern environment have resulted in the adoption of rationalization techniques by organizations. Organizational scientists have long noted that firms tend to adopt strategies that will mitigate the effects of uncertainties and enhance efficiency in their operations (Hiles, 2008). Turbulent environments, for example, those generated by rapid liberalization and intensive competition expose the firm to exogenous shocks. In response to these shocks, management responds by incorporating acts to displace uncertainty onto its workforce (Hiles, 2008). The adoption of a strategically flexible workforce and organizational structures including the use of ICT systems are all incorporated in a rationalization program for the purpose of cost-reduction. Currently, firms are driven by an ever increasing pressure to cut costs and increase efficiency. Today’s markets are customer oriented with an increasing number of consumers demanding for quality products/services. For the same reasons of efficiency, increased business value, cost reduction and lean production, organizations are incorporating various rationalizing techniques to ensure that the firm remains competitive in the market.

The rationalization concept refers to the reorganization of a firm to enhance its efficiency. In economics, the concept refers to strategies incorporated into the organization in an attempt to change the organization’s workflow. The approach involves the pursuit of cost-management efficiencies, heightened managerial control and practical application of knowledge to achieve the desired result (Casey, 2011). According to the League of Nations report on the Economic Conference, rationalization should aim simultaneously at securing maximum efficiency in the workforce with minimum effort, reduction in inefficiencies and minimization of wastes (Casey, 2011). In recent decades, growing concerns over the tyranny of the market, prevalent individualism and inequalities resulted in a more social framework for rationalization. Based on social theories, rationalization encompasses the transformation of the organization’s structures, culture, and practices to enhance efficiency in the organization, particularly the workforce. It is through the rationalization concept that theorists observe how organizations can become so fixated at realizing their goals that they end up with disastrous or unintended consequences, for example, the pressure to cut costs can result in job losses which may affect the employees’ income and life due to unemployment.

Several key principles govern the rationalization process. These principles based on Taylor’s frameworks include adopting systematic work methods. The principle states that all work should be subjected to systematic observation, measurement, analysis and tabulation thus enabling management to eliminate unnecessary elements (Hales, 2001). The systematic approach enabled complex work processes to be broken down and simplified for the basis of standardizing work, determining workflow, pay and utilizing machinery. The second principle involves a detailed division of labor, which focuses on the allocation of specific tasks to employees (Hales, 2001). The need for a skill to conceptualize and perform a broad range of tasks is replaced by the need for special dexterity to execute the task in question (Hales, 2001). The fourth principle of rationalized work in the organization revolves around the assumption that work is disutility which employees will avoid unless presented with a reasonable compensating reward or threatened with dismissal (Hales, 2001). Therefore, the fourth principle is based on the assumption that the relationship between the employee and employer is purely instrumental and low regarding involvement. The fifth principle argues that the pursuit of technical efficiency is both rational and beneficial in serving the interests of the employee and the employer (Hales, 2001). The five principles govern the features of rationalization incorporated in a firm resulted in an elaborate form of workflow, automation, and mechanization.

There are several key features of rationalization. First, the process involves a heightened managerial control and flexibility, linear intensification and efficiencies through bureaucracy, utilization of more ICT structures to increase more factors of production, particularly about workers, utilization of workers skill and employee arrangement (Casey, 2011). The process of rationalization not only encompasses cost-reduction measures but also on a variety of strategies in response to heightened competitiveness. Theorists such as the neo-rational organization theory (Casey, 2002), argue that the rationally contingent organizational approach enabled faster response to the rapidly shifting environmental institution. Also, the new organizational forms seek to alter the bureaucratic form of hierarchy to enable more flexible approaches to the network existing in the organization (Casey, 2011). Rationalization enables the firm to incorporate strategies for intensifying competition and enhancing cost control in the firm. Current organizations utilize various techniques such as mergers and acquisitions, downsizing, incorporation of TQM (Total Quality Management Practices), reform and restructuring techniques in a bid to enhance efficiency, minimize wastes and reduce costs in operation.

Classical Rationalization Process

The term rationalization is attributed to Max Weber’s thesis on “The Protestant Ethic and the Spirit of Capitalism.” According to Weber, rationalization involves the application of the most efficient means to achieve a set of goals. Weber’s examined the Western capitalist society and identified several form of rationality. First, there is instrumental rationality that involves adopting the best means to achieve a certain goal. There is also the value or substantive rationality that involves choosing actions that are consistent with value commitments (Ferrante, 2014). Weber adds conceptual rationality which involves the formation of increasingly precise and abstract concepts and formal rationality that involves the establishment of rules that influence behavior. In his writings, Weber claimed that rationalization occurs in all spheres of life leading to unintended consequences that constrain and dehumanizes the society. Rationalization goes hand in hand with modernity as the societal beliefs such as the respect for mysterious forces were replaced by instrumental-rational thought and action based on time and cost efficient means of achieving goals regardless of the consequences (Ferrante, 2014). Rationalization goes hand in hand with consumerism. Whereas rationalization ensures that the production of goods and services, consumerism, on the other hand, ensures that the society purchases the products produced. Weber believed that an organization driven by the rational authority would be more efficient and adaptable to change as its continuity is driven by the institutional frameworks of the firm rather than an individual. The institutional framework refers to bureaucracy and consists of written rules that ensure continuity.

During the industrialization era, the Taylor-Ford method identified the Principles of scientific management in rationalization. Fascinated by the efficiency of production, the theorists identified that the industrialization era resulted in the complete emancipation of man on the basis of a progressive and rational mode of production (Daft & Marcic, 2010). The model involves the assembly line system of operation with the intensive division of labor and bureaucratic structures. Based on the model, work involves repetitive actions and what makes work more productive is the incorporation of knowledge (Daft & Marcic, 2010). Rationalization provided the means, in which the firm would become more efficient, for example, through the intensive division of labor, improvement in machinery and the adoption of standard methods of working. The model proposed that employees should be trained and provided with incentives to enhance their efficiency. However, the method was subject to significant criticism as it failed to consider the social context and the worker’s needs.

Neo-Rationalization Process

Modern sociological theories identify labor as a service consisting of progressive rationalization and commodification. According to Habermas theory on rationalization, the society, through the emancipatory communicative act, becomes homogenized in sharing similar interests, values, and actions. Habermas’ concept of communication rationality argues that a person is rational if they have the ability to interpret the nature of their desires and feelings in the frameworks of cultural values. An individual with a rational attitude can respond to rising validity claims in the society thereby ensuring that their actions are accounted for (Appelrouth & Edles, 2008). Habermas’ theory is based on the assumption that the social movements in the environment prevent the colonization of the lifeworld and leads to the deformation of the public sphere. Unlike Weber, who argues that the society is rationalization is inevitable, and the society will have to endure the consequences of capitalism, Habermas takes on a different approach and identifies that the public sphere is deformed, thereby alienating the public from communicating the limitations prevalent in the society (Appelrouth & Edles, 2008). The theory states that public debate rarely occurs political and economic processes seem beyond the control of the public, thereby allowing political and economic interest groups to dominate the public sphere.

In practice, Habermas communication rationality advocates for democratic self-organization as the basis for ethically legitimate workplace governance. The theory advocates for workplace democracy where employees, employers and other key players such as trade unions are allowed to engage in dialogue in which the underlying issue is addressed jointly (Appelrouth & Edles, 2008). The major theme of the theory is communication which is identified as a key strategy in enhancing efficiency in the public sphere, organizational context, and other institutions.

In the modern world, the Taylor-Ford system has been replaced with neo-rationalization theories such as the McDonaldization due to the new forms or organizations present in the environment. The McDonaldization society, coined by George Ritzer (1993), refers to a society that is governed by rational modes of thought and scientific management. It is an amplification of Weber’s theory and argues that every facet of life exhibits different degrees of McDonaldization, for example, fast food restaurants have a high McDonaldization compared to educational institutions (Ritzer & Dean, 2015). The process of McDonaldization consists of various dimensions that include efficiency. Efficiency refers to the optimum method of getting from one point to the other. Efficiency ensures minimization of time and enhances the efficiency of operations. For example, the McDonald’s drive-in provides a time-saving way of getting from being hungry to being full. Calculability is another dimension that emphasizes the quantitative aspects of the products sold and the services offered (Ritzer & Dean, 2015). In McDonald, calculability refers to activities such as estimating portion, size, and cost. The third dimension is predictability that involves ensuring that the outcome of the process is known, for example, all consumers can predict that they are receiving the same service and product every time they purchase goods from McDonald. The last dimension, that is control, involves the standardization of employees and utilization of technologies to increase efficiency (Ritzer & Dean, 2015).

The phenomena of McDonaldization process is geared towards increasing efficiency, calculability, predictability, and control. Using the model of a fast-food restaurant, Ritzer argues that the present society is governed by the principles of the fast-food restaurant resulting in societal and cultural homogenization (Ritzer & Dean, 2015). The workforce is increasing substituted by technology resulting in de-skilling of the workforce as they are easily replaced. Arguably, the rationalization of the process can also lead to irrationality as a side effect of over-rationalized systems. For example, the constant training of the workforce can result in burnout. Currently, there are numerous studies citing the McDonaldization of other aspects of life and other industries such as the education industry. In a study by Hayes & Wynyard (2002), the researchers observe that the higher education is also a rationalized institution in which the students perceive themselves as consumers of education and educational institutions are the manufacturers and distributors and knowledge.

In the hospitality industry, low-budget motels and hotels have been franchised resulting in McDonaldization of various hotel chains. Companies such as Travelodge have been successful at cutting costs in the labor process by simply eliminating non-essential costs incurred when providing service. Through their no-frills offering techniques, for example, eliminating the provision of shampoos in its rooms and other commodities such as sweets, the company can eliminate costs (King & Lawley, 2013). In my personal experience, I have observed the no-frills approach in budget airlines. The airlines are significantly cheap due to the adoption of innovative practices such as increasing the number of seats and asking for fees for non-essential services. Currently, the hospitalization industry exhibits the characteristics identified by Ritzer’s McDonaldization process. First, there is mass commoditization of the industry as an increasing number of consumers demand for the consumption of experiences. Efficiency is increased through production lining, decoupling and incorporation of ICT systems at every stage of production (King & Lawley, 2013).

Due to the fragmentation of demand, there are various franchised hotels that consist of branded products or services that seek to satisfy the demands of the consumer. Room sizes of hotels have been customized, for example, depending on size, family, smoking or non-smoking rooms and based on other factors such as proximity to services (Mudue & Pirrie, 2012). Consumption is based on a standard brand image, mass production, marketing and meeting the needs of the fragmented market. Increasingly efficient franchise motels are well distributed and organized thus enabling consumers to purchase the experience easily. The activities and products have grown increasingly predictable such as the provision of a room. Calculability is characteristic of a rational society. Similarly, in hotels, the focus on quality has resulted in the identification of quantifiable measures which in many settings can involve the number of customers processed, the rating of the hotel and the profits realized. Furthermore, in there is increased industrialization in the service industry, for example in the back office. The replacement of human skill with technology enables the hotel industry to exert control over the workforce and the processes in the workplace and eliminates unpredictability (Mudue & Pirrie, 2012).

A Rationalized Organization

Given the general impersonality of large organizations, a rationalized organization seeks to enhance efficiency by incorporating cost-effective strategies, controlling the workforce and establishing relationships that will enhance efficiency. Considering the current inefficiency at the Junction Hotel, a rationalized approach is an effective approach that would enable the hotel to enhance its efficiency. Championed by Fayol, rationalization theorists advocate for the bureaucratic style model. This approach includes establishing rules and procedures that seek to centralize operations thus ensuring that the firm is orderly. At the Junction Hotel, the lack of a formal organization hinders efficiency resulting in a disorganized mess. This, in turn, encourages wastes regarding output utilized in the production of a service. Direct control is also inappropriate as it is difficult to control an organization that has grown (King & Lawley, 2013). A rationalized approach in a growing organization involves a more indirect impersonal control in which bureaucratic structures and procedures are set up to achieve an organization's aims.

Bureaucracy involves the establishment of a hierarchy structure with each level reporting above and commanding the level below. The hierarchy is represented in an organization chart with each position being identified as an office. Rules, policies and procedures are written down for management and employees to follow (King & Lawley, 2013). There is also documentation such as filing and reporting that enables the firm to keep an account of their costs, activities and workforce. Roles and relationships should be clearly defined in a rational organization, for example, a front-office manager should be in charge of the reception area and staff. Each position in the chart represents the responsibility of each office thereby making the running organization more straightforward.

Benefits of Rationalization

The major advantage of rationalization is that it enhances decision making. A highly rationalized decision making model involves managers or decision makers who clearly understand the goals of the organization. The managers know the specific preferences among the goals and can rank the goals in order of their importance (King & Lawley, 2013). Management can examine the alternative means for achieving goals and select the most appropriate of achieving their goals while ensuring that minimum resources are utilized in the attainment of the set goals. Because of the increasing size of an organization, decision making is delegated throughout the organization thereby facilitating control and enhancing profit maximization.

Rationalization facilitates communication. In a highly rationalized organization, the goals and values of the firm are integrated into the organization framework thereby facilitating change. Management has good communication skills that enable them to establish working relationships with the workforce that promotes teamwork and efficiency in operation. Through the adoption of latest technologies, communication systems are improved as management can engage with a diverse number of employees within the shortest time. ICT technologies also reduce communication costs due to improved systems and increased dispersion of knowledge across workers (Casey, 2011).

A highly rationalized organization can efficiently coordinate the activities within the organization. A company consisting of many departments can end up with numerous disputes that impede efficiency. However, a rationalized approach facilitates the co-ordination and control of workflow through the formalized structures. This enables management to ensure that there is a coordinated and collective approach to work for the purpose of achieving the organization's goals. Co-ordination ability is embedded in the organization structure of the firm enabling work processes to be run in a smooth and efficient manner (Casey, 2011).

Applying Rationalization Techniques at the Junction Hotel

One of the areas that require rationalization at the Junction Hotel is the establishment of a hierarchical structure. In the study, the hotel lacks an organization chart, and there is mismanagement. Direct control is inappropriate as management is overwhelmed by the sheer size of the workforce in the growing organization. Ideally, Junction Hotel can adopt a rationalized technique that involves the establishment of a hierarchical structure. For example, at the Front office, the firm can establish a front office manager who is tasked with the responsibility of the workforce in the reservations and telephone area. According to Fayol, bureaucracy provides technical efficiency as management adopts the bureaucratic element to control the workforce. Contemporary organizations take up a more flattened organization structure such as the matrix structure (King & Lawley, 2013). This approach ensures that there are heads of different departments and projects. Firms use hierarchies to facilitate planning, coordination, control, organization and commanding abilities thus ensuring operations flow efficiently.

Meeting the Needs of the Employees to enhance efficiency

When it comes to social organization, researchers such as Hawthrone argue that the rationalization perspective is focused on productivity and can, therefore, lead to boredom and alienation of the workforce. Hawthrone studies developed a systems approach that incorporated a more ‘open’ approach to work organizations (Ferrante, 2014). Hawthrone argues that the rational approach viewed organizations as consisting of input and output processes and is independent of the human subjects (Ferrante, 2014). The open-system model by Hawthrone examined how employee dissatisfaction that can result from repetitive work tasks can, in turn, impede efficiency. Resultantly, the model moves away from the behavioral and deterministic approach of ‘Taylorism’ towards a more mechanistic approach that considers the societal relations and needs of the workforce. Hawthrone’s research influenced other theorists such as Maslow’s (1954) hierarchy of needs as researchers realized that the workforce also has needs that must be satisfied to enhance their efficiency.

The aftermath of Hawthrone was the establishment of human relations approaches that seek to establish efficient employee relations and job satisfaction. This involves the incorporation of HR skills such as ‘expressive’ supervision, communication techniques, and knowledge of group dynamics amongst others. At the Junction Hotel, there is the need to establish an HR department that focuses on securing commitment and motivation of employees either through training to enhance employee skills (Knight & McCabe, 2003). Rather than taking the hierarchical approach of power, domination, and subjugation, the organization can take a more open approach in which collaborative bargaining with the employees to enhance efficiency. Through the adoption of effective motivation strategies, the organization can improve employee satisfaction thereby minimizing costs concerning high turnover rates.

Strengths and Weaknesses of the Rationalization Technique

Whereas rationalization techniques enable the firm to enhance efficiency and to minimize costs, there is significant concern over the dehumanization resulting from bureaucratic approaches. First, the rules and procedures incorporated by a firm may lead to excessive paperwork or ‘red tape,’ slowness in handling problems and rigidity in embracing change in light of the ever-changing demand in the market. Whereas Weber identifies the bureaucratic approach as an effective means to enhance efficiency, there are growing concerns that the approach is irrational in today’s complex environment. Currently, the increasing demands of the environment and internationalization of the firm demand a more flattened organization structure with teams conducting specialized duties to enhance efficiency.