Modern Performance Management - Essay Example

Modern performance management studies emphasise that human beings in an organisation, are not predefined commodity resources with obligations totally controlled by contract, but are creative and social beings, that make contributions beyond "labour" to a society and to civilisation (Smith & Mazzin, 2004). Human resource managers need to look into the broader definition of the economic term, "human capital" to understand the real emotional, functional and psychological needs of an employee, failing which the organisation stands to lose competitiveness and productivity, and face irreversible decline in work culture (Smith & Mazzin, 2004). This paper aims to provide a reinforcement of the above school of thought, by examining the practical application of sound human resource management principles laid out in accordance with the theories outlined in MIT Sloan School of Management educator Douglas McGregor's classic work, 'The Human Side of Enterprise (1960)", in which he identified an approach of creating an environment within which employees are motivated by two theories, named by him as Theory X and Theory Y. He was the advocate of Theory Y, which is the practical application of Dr. Abraham Maslow's Humanistic School of Psychology, in another interrelated classic work, "A Theory of Human Motivation (1943)". The paper aims to seek the reasons why one theory prevails over another, as we take a look into the practical implications of the theories in actual examples from the corporate world. Conceptual background: Theory X and Theory Y are at the centre of the human motivation principles outlined in McGregor's work. These are the main postulates of both theories (McGregor, 1960): Theory X: In this theory, management assumes employees are inherently lazy and will avoid work if they can, basically taking a pessimistic view of their employees. A Theory X manager believes that his or her employees do not like to work, and would rather avoid responsibility and it is the manager's job to structure the work and energise the employees. The average human being likes to be directed, and mainly desires security above everything else. The main consequence being, that it leads to a more authoritarian style of management in the concerned company which may not favour the company's business interests in the longer run. Theory Y: In this theory, management assumes that employees are ambitious, self-motivated, eager to accept greater responsibility, and exercise self-control and self-direction, taking an optimistic view. It is believed that employees enjoy their mental and physical work activities, and thus desire to be imaginative and creative in their jobs, when given a chance. There is always an opportunity for greater productivity by giving employees the freedom to do their best. In no uncertain terms, a Theory Y manager would believe, given the right conditions, most people will want to do well at work and there is always a pool of unused creativity in the workforce. They believe that the satisfaction of doing a good job is a strong motivation in itself, and the ultimate goal of a sound HR professional is to remove the barriers that prevent workers from fully actualizing themselves. Modern critics argue that both theories are seldom used explicitly, in any organisation. It is common sense understanding, the theories per se represent unrealistic extremes. Most employers (and employees) fall somewhere relative to the extreme values, and hence, McGregor's theories give just a cursory glance to the bottom-line situation, and therefore, need further quantitative elaboration. Assessment tool: It is with this shortcoming in mind, that Alan Chapman developed an assessment tool for further evaluation of the exact location where a company's HR policies fall under the McGregor paradigm. The salient features of this tool is that it utilises an "X-Y theory questionnaire" to ascertain the precise status of the HR evaluation model (Businessballs.com, 2002). There are two questionnaires to be exact, where the assessor (in this case, the employee) is asked to supply his feedback based on a 5-point system, with the following specifications: 5 = always, 4 = mostly, 3 =often, 2 = occasionally, 1 = rarely, 0 = never. The first questionnaire assesses whether the situation and management style, falls under X or Y category. These are open ideas for questions gathered, as in this sample: 1)My boss asks me politely to do things, gives me reasons why and invites my suggestion. 2)I am given credit or praise when I do good work, or apply extra effort. 3)I call my boss and my boss's boss by their first names. 4)I am left to work without interference from my boss, but help is available when I want it. 5)I have regular meetings with my boss to discuss how I can improve and develop. The second questionnaire probes into whether the person prefers being managed in X or Y style, and questions sample may be: 1)I want to increase my responsibility. 2)I want to learn skills outside of my area of responsibility. 3)I like to be told what impact my work has on company's short-term and long-term goals. 4)I want to be incentivised and praised for working hard. These questionnaires are only indicative, and actual questions asked may vary depending upon the business environment in which the organisation operates. The results based on scale of 0-5 are added, and the cumulative score tells a lot on the workforce morale, and whether Theory X or Theory Y is applicable. For example, a 15 point questionnaire is based on the following evaluative criteria: 1)60-75: Strongly prefers Y style 2)45-59: Generally prefers Y style 3)16-44: Generally prefers X style 4)0-15: Strongly prefers X style. Maslow's theory: According to McGregor, these assumptions are based on social science research, and are quite separate attitudes. While Theory Y is difficult to put into practice on the shop-floor, it can be used efficiently in the managing of professionals and managers. Both theories capitalise on Abraham Maslow, the American psychologist's pyramid-shaped "hierarchy of needs" theory which renders itself as the starting point for considering business implementation of McGregor's postulates. The different layers in Maslow's pyramid (starting from base) are (Maslow, 1943): Physiological needs: Eating, sleeping, basic health and all bodily functions. Safety and security needs: Stable income, family, etc. Love and belonging needs: Friends, intimate partner, sense of community, etc. Esteem needs: Lower esteem needs includes respect from others in terms of attention, recognition, status. Higher esteem needs include self-respect, confidence, achievement, freedom and finally self-actualisation. A trained HR professional seeks to assess by screening the workforce through what is known as "Philosophy of the future" (Maslow, 1943), giving a sneak peek guide into which of these above needs are not being fulfilled. For qualitative justification, while McGregor's Theory X capitalises on the bottom three layers of Maslow's pyramid, Theory Y mainly focuses on the top layer; the very rationale of Theory Y is, that it works towards enhancing the employee's self-esteem, which can be by itself, more rewarding than money and is the most powerful tool to improve bottom-line productivity, keep employee morale high, and strengthen an employee's loyalty towards the organisation. Theory X plays on the "fears and insecurities" of employees, as covered in first three layers, but it is Theory Y that digs deep into bringing out the best in each worker by raising their morale (McGregor, 1960). Having now mentioned the critical appraisal tool to test whether Theory X or Theory Y, should form the course of action in HR management tactics, and the validity of Maslow's principles, it is important to flesh out details of the challenges faced by HR professionals, in implementing the theories into practice. Challenges for HR: Right from the Taylorism in the early 1900's, HR professionals have been placing emphasis on how leadership, cohesion and loyalty serve as critical components in organisational success. It is with this perspective in mind, that we have to identify the challenges beset in an organisation. For the sake of clear explanation, various steps in "practical" HR method of evaluation are being discussed (AMA, 2004): Goal-setting: The goals of an organisation may be: 1)Developing a product or service superior to competitors 2)Increasing market-share, sales volumes and profits 3)Improving productivity 4)Reducing the optimum level of operational efficiency 5)Reducing costs and eliminating waste. For most organisations, these goals are clear-cut, almost "written on stone" (AMA, 2004). Deviating from benchmarks set thus, doesn't sit easy with management, board of directors, investors and shareholders, whose happiness often means more, than the happiness of the employees. What this basically implies, in times of exigencies, market uncertainties, economic slowdowns and unanticipated competition, a company's priorities on implementing Theory Y on its workforce, faces aberrant adjustments that can lead to some drastic and painful measures, all for the overall benefit of the "larger picture", as HR professionals put it. These measures can be: 1)Larger percentage of employees in the wrong role than what their skill area is. 2)Lowered productivity at the expense of meeting company targets. 3)Transfers, lay-offs, retrenchments, disincentives, etc. Behavioural analysis: Another tool used by HR professionals, behavioural analysis patterns look deep into employees attitudes and reactions, and gauges their impact on the organisation's productivity. This encompasses both "rational" and "irrational" characteristics. Each person has a unique personality, that conflicts with any supposed Theory Y implementation for the larger good. E.g. a severe in-house training programme on quality management may not appeal to an employee, whose desire is to grow with the marketing team. There is always a scope for conflict of interests due to human behaviour, and that can upset a firm's plans to meet Theory Y. Mini case-study: In conclusion, it will be useful to compare and contrast two different organisations to consolidate our knowledge gains made so far. As discussed earlier, there is nothing called purely Theory X or purely Theory Y, but it all boils down to the degree, and intensity of approach used in real-life examples. In fact, present HR practice has prescribed an extension to McGregor's principles; Theory Z. Developed by William Ouchi of Japan in 1981, it explores the critical components of trust and subtlety to enhance productivity. It argues that by trusting an employee to create new ways to work and by giving him the power to integrate new ideas, the organisation provides a clear channel to enhancing the employee's self-esteem (Ouchi, 1981). GE is one such organisation. One of the oldest listed entities in the Stock Exchange, GE has stakes in a variety of businesses, and is the world's second largest company (Forbes, 2006). It ranks 7th among Fortune magazine's "America's Most Admired Companies" (CNN, 2006). The hallmark of GE's successful employee satisfaction levels, lies in the company's unique Six Sigma philosophy, which works towards eliminating the possibility of defects for any process. GE is among the few organisations, that have launched Six Sigma at every bottom-line level. The salient features of this model are (GE, 2006): 1)Building a competency model that helps identify candidates with the right mix of technical, team and leadership abilities. 2)Creating job descriptions that help the candidate precisely understand the position and expectations prior to signing to 3)Developing a retention strategy that helps Black Belts complete their rotation, and the organisation gets a sound return on its Training and Development. Also, with an enhanced Rewards and Recognition programme consistent with the pervasive Six Sigma culture, GE can be heralded as a success story with Theory Y application. In contrast, Theory X can be used to describe any typical authoritative enterprise, that doesn't really need growth, mainly due to entirely different set of objectives, even at the expense of promoting dissatisfaction among employees. It can be a call centre in India, where young graduates slave at high stress levels, in 4 x 4 cubicles, answering complaints of customers located in the USA and the UK, in what are known as "graveyard shifts" at night in India (CallcentersIndia, 2006). The management (All Fortune-500 companies) usually responds with a stick measure, whereby the call centre employee is under threat to be fired, or at least lose incentives in the face of the slightest mistake made. Attrition rates in Indian call centres are as high as 25%, with employees suffering from chronic stress and health disorders as unorganised work routines take a toll on their health. Despite severe criticism, Indian call centres are very popular with US and UK based clients, due to immense cost savings. Since employees can be quickly replaced with substitutes, management subscribes to the Theory X work culture, and is snug on results. Summary: The case study reflects the precise scenarios, in which an individual theory might work. The more important parameter in the study, is the critical appraisal tool used for Theory X or Theory Y evaluation. The ultimate aim of an organisation must always be to achieve higher scores for arriving at Theory Y satisfaction levels. References American Management Association (2004). Human Resource Concepts. 164-Lecture 4 Businessballs.com (2002). Alan Chapman's X-Y Theory Questionnaire. Downloaded 31 Oct 2006 from www.businessballs.com/mcgregorxytheorytest.pdf CallcentersIndia (2006). High Attrition Rates in Indian Call Centers. Retrieved 31 Oct 2006 from http://www.callcentersindia.com/displaynews.phpidnews=6 CNN (2006). Fortune 500 rankings list. Retrieved 31 Oct 2006 from http://money.cnn.com/magazines/fortune/fortune500/ Forbes (2006). World's biggest companies. Retrieved 31 Oct 2006 from http://www.forbes.com/forbes/ GE (2006). What is Six Sigma Retrieved 31 Oct 2006 from http://www.ge.com/en/company/companyinfo/quality/whatis.htm Maslow, A. (1943). A Theory of Human Motivation. Free Press, NY. McGregor, D. (1960). The Human Side of Enterprise. McGraw-Hill, NY. Ouchi, M. (1981). How American Management can Meet the Japanese Challenge. Free Press, NY. Smith, S.A., Mazzin, R.A. (2004). The HR Answer Book: An Indispensable Guide for Managers and Human Resource Professionals. American Management Association, NY. Read More