Managers as Powerful and Privileged Individuals - MG Rover - Essay Example

Managers Are Increasingly Recognised As Powerful And Privileged Individuals Who Are Not Always Held Accountable For Their Actions. Should This Power Be Regulated As times change and managerial responsibilities evolve in a dynamic corporate scenario, managers working in both authoritative and participative management systems perform in varied ways. However one aspect that is seen to remain unchanging is the recognition of managers as all powerful people who come with special privileges and need to be always looked up on. These managers have immense powers to turn systems, but with all this power do they have the responsibility too Real time cases show that varied organizations have given plenty of power to their managers, many privileges, but have not held them accountable for their actions. One such living example is the case of MG Rover, a Britain based car company that has suffered the consequences. It is time, we learn our lessons, and along with the wings of power, render the reins of responsibility. Background information on MG Rover MG Rover, apparently the last British owned mass-producer of cars in the British motor industry was established in the year 2000 by the merger of MG and Rover from BMW. At that point of time, BMW sold, rather abandoned Rover at throwaway prices. They offered an interest free loan of 427 million, repayable by 2049 to those who were willing to take it. Along with this, the buyer would be left with 350 million worth of unsold cars along with the alluring cash dowry of 112 million. This made Phoenix interested in the deal and enter the arena. The Phoenix consortium comprised of British businessmen and was headed by John Towers, former Rovers executive. They bought the company for 10, and emerged as saviors for Rover at that point of time. The organization showed a downfall as it exchanged hands, but deals like the purchase of the Qvale of Italy in 2001 went on. It collaborated with Tata, India in 2002 and also launched MG SV and SV-R in 2003, followed by launch of Rover CityRover. During its peak, the company employed approximately 170,000 workers. In the year 2004, the organization entered into talks with the Shanghai Automotive Industry Corporation (SAIC). A collaborative deal that was negotiated between the two companies fell through in the year 2005, forcing MG Rover into insolvency. The company entered into administration in April 2005. Because of the company's failure, 6000 workers lost their jobs and thousands of jobs in related sectors of the supply chain were threatened. Not just this, the entire economy of West Midlands suffered a blow because of the mistakes made by a handful of people. Where what went wrong The reasons why MG Rover failed were many. The car company, as it exchanged hands was almost always in troubled waters. One reason why Rover lost its brand value goes to over 25 years ago, where the cars were not as high quality. Even though efforts to improve quality were made, the brand image of a lower quality had already been built. The management was myopic in its approach and overlooked the real opportunities. Also the British public did not support the car much, as they preferred to buy foreign brands over the Britain based MG Rover. Many experts also feel that had the government rendered a timely response, much could have been saved. In May 2000, the Blair government had praised the Phoenix for its efforts for taking big risks. They had also promised everything that could be possibly done to save the company. But the response was not as timely as it could have been. The government has now however come up with the 150 million package, where workers are being paid the amount, to stay at home. However had action been taken four years ago, and the firm been nationalized, probably workers could have been paid much more in compensation. It is also an important lesson for the present government on choosing the right leaders/ managers for an organization. However actual disaster was with the management and its operations. For four years, the company had been owned by the Phoenix Consortium, a group that has made much from the disaster. Power and authority had been placed in a few hands and those who were supposed to be responsible were not accountable. While workers and the car company suffered, this group of four had made 40 million in four years as pay and perks. Pension funds that would benefit these top line managers and their families were arranged worth 16.5 million, even in times when the workers' pension fund of 67 million is in deficit. If this was not enough, the responsible leaders also took charge of the lucrative car financing operation in MG Rover, which currently shows 10.3 million of retained profits on its books. Valuable assets were transferred from Rover to Phoenix, further weakening the dying organization and capitalism razed the company down to rubble. And as the finances of the company suggest huge amounts ranging between 200 million to 554 million to be misappropriated, it is time to look and learn lessons. It is time to control power and authority with accountability and take action. The problem as can be seen was not mainly with Britain or with British workers. The real issues were seen to exist with the top people, who lead the company in the wrong direction due to selfish greed and stupidity. And that is the aspect that we need to understand, analyze, explore answers and control. Startling similarities While all impacts have not been as disastrous as the MG Rover, today there are varied organizations that have given their managers power and perks, without responsibility. The corporate scandals, we fear, are many and are making headlines every other day. There is constant news and updates on organizations that are being accused with the violation of business ethics. While we talk of decentralization and a flat system of operations in organization, unbridled power is still given to the top handful of people. While the autocratic mode of operation works in a few cases, the results are more often than not disastrous. Of course, these managers have a list of responsibilities on their job profile, but then there is no one to regulate and control their moves. Today is the time for a more social hierarchy where the right managers are elected and most importantly monitored by the right people. Today is the time for more ethical leadership and we need to know how. Understanding the diverse roles of managers With the rising complexity in organizational structures, probably the obvious first step would be to evaluate the evolving roles of managers in today's business scenario. In the senior level, the diverse roles of the leaders can be classified as under, Decision making roles: At the senior level, perhaps the most important and impacting role is that of decision making. the decisions made and the choices taken at this stage are significant and more often than not have long lasting impact. These decisions usually revolve around negotiations with other organizations (as in the case of MG Rover's negotiations with SAIC and with other companies), improvement or decisions on change and when and how they should happen, handling business disturbances and finally deciding on the how's and why's of resource allocation. The last element involves looking into the aspects of whether the basic system of work is in place and what would be required over and above that. Role on processing information: Top level managers also play a major role on how and when, which kind of information is processed. This could mean acting as spokespersons for the organization, monitoring the information that is being transferred and disseminating the information to the right people and groups. Social role: As head of an organization, top managers play the role of leaders or pioneers in the society. They showcase their leadership and status as heads and take charge of various legal, inspirational and ceremonial duties that must be done. Also, they liaison with others, and these activities assist in decision making and information processing activities. Besides the above roles, as per Fayol, managers also play the roles (at macro levels) of forecasting and planning activities, organizing work, maintaining levels of work among work personnel, bringing the team together for a synergetic effect through team building activities, controlling or regulating the organization and keep a check that everything that an organization undertakes conforms with policy and practices. Main factors why wrong managers cause disasters As we read through the diverse and complex roles today's managers play, it becomes clearer that non conformance to the proper roles of a manger leads to disasters. There can be various situations where external factors act and the manager's response to the action causes a disaster. The main factors however may be classified as under. Capitalism Capitalism emerged and thrived in Britain since the 17th century and allowed the capitalist to have high degree of control in the business venture. While under this form of working, capital must help to benefit and finance those people who use money most efficiently, often the case is not so. Also along with autocratic leadership that is unknowingly in place in many organizations top leaders have unbridled power on taking important decisions and making business choices. With the power of position awarded and wrong influences, often top businessmen make unhealthy and unethical choices. As organizations evolve in a more social setup, the need of the hour may be a democratic way of method, where the organization is run by the people and for the people. The powers Top managers often have on their side the power of position that enables them to get things done. The source of power is personal and gives managers to exert their influence on subordinates often outside the realm of authority. The manner in which the senior leader exerts power can be classified as legitimate power, coercive power, reward power, referent power, expert power and information power. For example, legitimate power comes from the position in the hierarchy and gives the freedom to promote or demote employees, a decision that needs to be accepted. Coercive power is based on fear and the ability of the leader to subdue his employees into doing undesirable work. While this works on fear, reward power works when people are motivated towards working by rewards, praise or benefits. Referent power comes into play when a leader has desirable qualities making him well respected among colleagues. Expert power comes from expertise in a key work area; information power comes from persuasiveness based on certain communication. Different managers use one or a combination of the above to exert their influence. If these powers are used for the good of the organization and help to promote its vision and mission, they benefit the company and its people. If the case is not so, the company fails like MG Rover. The activity trap This may be another reason why top managers make expensive mistakes. Managers at the top line have a range of roles to play, which makes their work fragmented and wide ranged. At that level the workload that arises on a daily basis, ranges from the trivial to the important (often on an 80:20 ratio) and managers tend to work on issues that are current, well defined and urgent. There is a preference towards current information, while routine reports are put on the backseat. Scheduled meetings eat into a lot of the time and verbal communication is preferred over written communication and dealing with subordinates on direct requests takes up much time. As managers do more of crisis-management rather than actual thinking and planning, they slowly spiral into an activity trap that bodes ill effects for the company. Unethical attitudes Inspite of codes of business ethics being put in place, various programmes on business ethics being made, departments on business ethics being established and hundreds resources on the issue being available, it is true that many organizations still do not take ethical business decisions. Selfish interests dominate and instead of thinking for the good of the organization, managers think of the good for themselves. Instead of working within the framework of policies and regulations, they fit the organization's policies and regulations into their framework of thinking. Unethical work practices also arise when top managers set up unrealistic goals, business objectives and deadlines and are unable to meet them. Low morale and ignorance often pushed people towards unethical behaviour. Managerial revolutions As organization structures and challenges change, and petty managerialisms are seen, managerial revolutions1 that make radical changes in the positive direction are not only natural, but also inevitable and important. The first such change has been the evolution of the important and specific role of a manager in a hierarchy. After this specialized designation, the second revolution has been the emergence of professional management as the main method of organizational control. Finally the third revolution has been that of increasing participation among various organizational members, both internal and external. Perhaps one such managerial revolution was brought across by Margaret Thatcher. The Iron Lady, as she was known among contemporaries, was Britain's first woman Prime Minister from 1979 to the year 1990. She bought sweeping changes into the system and took a tough stand on various issues. Her Thatcherism led to new ways of operating business. The power of the Unions was significantly decreased. She also enforced right-wing politics, gave a greater scope to the free markets and made efforts towards privatization. She consistently worked towards improving public management and probably the main reforms were the scrutinies on departmental operations, lasting reforms made to structures and systems of departments, structural reorganizations and the creation of agencies. The Rayner scrutinies were small and intensive scrutinies that were undertaken first in the civil service by Sir Derek Reiner. These scrutinies reviewed select policy areas within a department with the key objective of efficiency and savings. In February 1988, the Thatcher government also launched the "Next Steps' programme, reforms that were aimed to transform the public sector and to streamline the efforts of the Central Government. Efforts towards the transformation of the public sector were made by providing services through market-like arrangements which were managed by people with the required resources and authority and for which they are accountable. Finally agencies were set up as unifunctional and performance based entities that were necessary for public good and were fully accountable for their activities. Many other managerial revolutions, like the right to manage are also ongoing and changing the way businesses work better. Solutions for making top management more accountable But what is the solution in a situation where top of the line management abuses power for its own good. Management of organizations that are not progressing well need to seek new directions. One could be of seeking government assistance through law and control. Of course, the decision on how to manage or take risks cannot be completely placed in the hands of the government which may make mistakes. Here are a few courses of action that may be undertaken. These could prove revolutionary examples on how businesses can emerge from difficult and testing circumstances. Functioning as a cooperative In the example of MG Rover, probably the best course of action would be to make the company workers run the organization as a cooperative. While this system does not look much different from a commercial system, here management is set up and governed by the people who are a part of the organization. In such a situation, these workers would be empowered to elect their own representative. They are also encouraged to pool resources and share costs. This would lead to the end of a capitalist way of managing and probably lead to a more conducive social method of management. Finally in a case as desperate as MG Rover, it may provide the much needed respite to employees who are now jobless. It could open a new and path breaking socialistic way of management. It would empower them to work towards long term goals and short term targets and improvise products due to stress of the competition in the industry. One other way of organizing for a social change could be through direct action organizing. Direct action organizing Direct action organizing may prove to be a powerful method to bring various people in an organization together to work for a common goal. Also an organization structured in this manner makes not just itself but also all its entities powerful. As per the principles of DAO, People in an organization must be motivated by keeping their self-interest in mind. This has to be done by winning real, immediate and concrete improvements in their lives. Short term issue goals strengthen organizations and empower them to work for bigger purposes. Developing a sense of power among team members through examples in self confidence and organizing. As the organization members takes decisions and works together to solve problems, people feel confident to tackle bigger problems and take bigger decisions. Altering the relations of power. When a highly motivated and powerful organization exists, the relations of power are automatically altered. Thus when the top management takes decisions, it is left with no other choice but to consult its members about decisions. Such democratic institutions automatically help the entire system to work better. Centralized decentralization As the diverse roles of senior manager are invaluable, it is safe to say that centralization is a must for any organization and often occurs as part of a natural process. However efforts towards decentralization must be made so that more people are delegated power and responsibility. As the hierarchy becomes flatter and power shifts to various people rather than a select few, more people become accountable and issues such as MG Rover become rare. However complete decentralization is not possible and thus the aim should be towards a frequently monitored, or centralized decentralization. This means that while most activities are delegated to people who are accountable, the entire system is monitored centrally for coordination among departments. This monitoring then again can be done by a panel of experts elected by the people who make the organization. Establishing ethical work conditions "Judgement demands high moral character, therefore, a good leader should possess and infuse into those around him courage to accept responsibility. The best safeguard against abuse of authority and weakness on the part of a higher manager is personal integrity and particularly high moral character of such a manager ..... this integrity, is conferred neither by election nor ownership. "2. While organizations fail due to the wrong moves, one must remember that it has been the unethical attitudes of an individual or a group of people that has led this to happen. To ensure that people in an organization work ethically, departments must be established and progress must be monitored. Organization employees must also be educated on the aspects of business ethics. Before taking any business decision, top managers must be made to think along the guidelines of Is the move legal. The legality of an aspect must not be ignored and business leaders must be more informed and educated about the laws that govern their actions. Whether the move justifies the policy framework of the organization. All organizations are governed by rules, regulations and procedures that have been put in place for the smooth operation of the company. If the move that is planned for an organization does not sit well with the policy framework, it is time to revise the action. Does the business move justify itself morally. Finally top decision makers must also analyse whether the intended business move not just matches the law and company framework in letters but also in meaning. One must consider the outcome of the move, and whether it would be able to deliver what it is morally meant to deliver. Besides these options, stringent laws and regulations that are clearly understood by the organization heads and employees can also go a long way in controlling the way an organization responds to business challenges. It is also important that the government participates in the process of governing businesses and setting up laws that encourage good practices. This is essential because if more organizations fail, more people would lack jobs and the standard of living for many would go down notches. This would put the government in a crisis when working towards the social development of the nation. During the period of the 1960's, Lord Stokes of British Leyland had proudly stated, 'We don't make cars, we make money.' The company he headed failed miserably, and the main reason for the failure was his attitude. Any organization succeeds only when it delivers value to the customer, and this happens only when the top managers are as responsible as they are powerful. Various sweeping changes or managerial revolutions are constantly underway as organizations and dynamic leaders move in step with changing systems and organizational dynamics. References used: http://www.marxist.com/Europe/britain_rover_history250405.htm http://flag.blackened.net/revolt/anarchism/writers/anarcho/work/rover.html http://ethics.georgesmay.com/knowing_ethics.htm http://www.bola.biz/mintzberg/mintzberg2.html Organizing for social change, Jackie Kendall http://www.biogs.com/famous/thatchermargaret.html http://govinfo.library.unt.edu/npr/initiati/21cent/nextstep.html http://telecollege.dcccd.edu/mgmt1374/book_contents/3organizing/pwr_auth/power.htm Read More