General Administrative Theories are they relevant to managing Modern Global Organisations - Essay Example

General Administrative Theories are they relevant to managing Modern Global Organisations History reveals the apparent revolution of the orientationof employees with regards to their employment. The previous years would most likely be associated with the inherent propensity of corporations to focus their resources on manufacturing products that would generate as much income as they could afford. But looking at the status quo, it would seem as if the coming of the age of globalization has also affected this long-standing principle in the money-making industry. It would seem as if businesses around the world have shifted their focus from developing a wide-ranging set of products that would compete in the world market into strengthening their domestic resources. Most firms these days may be seen to have been concentrating on improving the quality and conditions of their workforce. In a way, it may be held that the business sector has moved from being ‘product conscious’ into becoming more ‘employee centred’. This paper argues that to be globally competitive, multinational companies ought to shift from an administrative stance to one that is more holistic and centered on its human resources. Ultimately, the effective management of people shall spell the difference between global success and failure. The paper initially defines the role of human resource management as a means of controlling the global enterprise. Next, it discusses several other theories, including the behavioral and contingency theories and the relationship of HR to business strategy as a means of control. There is further discussion on how human resources as a control may be leveraged on so that it may be clearly aligned with the strategies of the business as a whole. The paper thus lends support to the thesis that administrative theories may be obsolete or lacking as a framework for success for global corporations. While HRM was discussed as a control function, it actually goes beyond the usual productivity and output end goals to those which are more encompassing. This takes into consideration the development of the employee across all phases of the employee life cycle, including attraction of the right, critical talents, their development and motivation, and retention. Administrative theories have conventionally focused on productivity and profit. One of the most popular general administrative theorits has been Henri Fayol, who has emphasised positions (administration) more than their incumbents (administrators). In a nutshell, the following are some of the primary ideas which he has espoused: 1. Start at the top and reorganise the upper management echelons, including the Board of Directors. 2. Teach everybody in the organisation management theories and administrative thought 3. Eliminate as much red tape as possible in the organisation 4. Establish lines of lateral communication (http://faculty.ncwc.edu/toconnor/417/417lect04.htm). Another general administrative theorist, Max Weber, had similar ideas with those advocated by the scientific management paradigm. It has also focused on the idea of rationality. He has also expounded on the characteristics of a bureaucracy and the different forms of authority, which have been summarised below: Characteristics of Bureaucracy Forms of Authority 1. Rulification & routinization - effort-saving rules and equal treatment 2. Specific spheres of competence - clear division of labor, specialisation 3. The principle of hierarchy - leave no office uncontrolled 4. Expertise of office holders - managers to have technical training 5. Written record-keeping - everything to be recorded & filed, red tape 1. Charismatic - an appeal to emotions and affections, charisma 2. Traditional - the sanctification of tradition, habit 3. Rational-legal - valuation of something because it embodies an ultimate value or a disinterested, professional attitude of valuation toward a thing for its own sake (http://faculty.ncwc.edu/toconnor/417/417lect04.htm) How relevan are general administrative theories that have reinforced bureaucracy, productivity, and profit? Given the new and more stringent requirements of this age, it is imperative to focus on an equally noteworthy aspect of global business management: its human resources. A physical resource has often been held as the running force in most corporations (Pfeffer, 1994). Human Resource Management or HRM is one of the key methods by which managers keep hold of the actions of the people beneath them. This is also a way by which managers are able to control, at least in part, the behavior of the people to remain parallel to the interests of the firm (Goold and Quinn, 1990). Nowadays, business managers are beginning to recognise the need to consider the weight and importance of human resource (HR) function in determining the growth or downfall of any venture. These times, the way by which a human resource system follows is one path that would definitely spell out a big difference in the specific course that a corporation may take. After all, competition in the global sphere is fast approaching as the era of globalization is amidst many corporate dealings and endeavours. For this reason, it is important to note that the basic postulate of every competition is the people that mark its rules of undertaking. That is, the people appear to be the only truly sustainable source of competitive advantage (Reich, 1990). For that reason, a need to have an effective management of human capital is the ultimate determinant of total quality organisational performance. Instead of focusing on particular HR practices that are used in isolation, strategic human resource management (SHRM) researchers focus their research at finding bundles of HR practices that are implemented in combination. SHRM researchers have established the fact that managing the workforce, as a whole is more beneficial. Since that time, behavioural perspective has emerged as the leading paradigm in this field (Fisher, 1989; Schuler, 1989; Snell, 1992). According to behavioural perspective, different strategies require different behaviours and different HRM practices to elicit and reinforce those behaviours. This view of the link between strategy and HRM provides a clear explanation for why such management should be linked to strategy. To date, a growing body of empirical evidence supports this perspective (Schuler and Jackson, 1989). Over the years, HRM has evolved from a disjointed collection of employment practices. But one thing may characterise the said development, that is, control appears to be an important, even if sometimes neglected area of organisational development design. Previously, the construct of control has been used as a lens for combining HRM practices (Eisenhardt, 1985; Gupta and Govindarajan, 1991; Snell, 1992). A control perspective is consistent with the behavioural perspective in many ways such as, control systems mold the emergent behaviour (Snell, 1992). The contingency theory provides that a relationship exists between business strategy and HRM methods and that the type of business strategy a firm determines these HRM methods. Moreover, HRM methods assume that the companies that closely coordinate their business strategy and HRM practices achieve better performance than the companies that do not. It is surprising to note that there is an extensive research exploring the links between competitive strategy and HRM strategy (Bird and Beechler, 1995; Delery and Doty, 1996; Huselid, 1995; MacDuffie, 1995). However, one of the areas that needs more scrutiny, the link between HRM control and business strategy, and their effects on performance. An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage is often termed as a strategy. Strategies are considered as purposeful when they can be pertain to and be translated to actions to which they apply (Slevin and Covin, 1997). Business-level strategy is designed to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets (Dess et at., 1995). Therefore, a business-level strategy as a mirror of a firm’s true belief about where and how it has an advantage over its rivals. Most often, business strategies are primarily concerned with a firms industry position in relation to its competitors (Porter, 1985). The strategy types presented by Miles and Snow’s (1984) are often times referred to as the basic classifications of strategies as it involves defenders, prospectors, and analysers. Porter (1985), on the other hand, classified strategies into three generic types: cost leadership, differentiation, and focus. Yet, Schuler and Jackson (1987) regarded them as slightly different from those of Porter to classify business strategy into three types: cost-reduction, innovation, and quality-enhancement. Many scholars (Beaumont, 1993; Dowling and Schuler, 1990) have employed Schuler and Jacksons approach, and this study also adopted their method of classification for the following analysis. It has been argued that cost-reduction strategy involves enhancing competitiveness by lowering the prices of products or services, as claimed by Schuler and Jackson (1987), as it enhances production efficiency and reduces expenditures by adopting new technology, enlarging the scale of production, or re-engineering production processes, so that a firm can sell its products or services at a lower price in the market. While, innovation strategy emphasises the development of products or services that are unique or different from those of the competitors. Offering a new line of products in the market that are non-characteristic of the current trend is typical of this. Also, offering a line that typifies a quality that is superior to the current trend may definitely spell-out the success of quality-enhancement strategy. The Role of Human Resources A focus on firm-level issues related to managing people is typical of a SHRM research. The behavioural perspective, as espoused by Jackson et al, (1989) and Schuler and Jackson, (1987) is among the popular theoretical models used in the SHRM literature. This focuses on employee behaviour as the mediator between strategy and firm performance. This entails that corporate strategy is determined largely by the behaviour of the people that comprises the firm itself. It assumes that the purpose of various HRM practices is to elicit and control employee attitudes and behaviours. This means that, in the context of SHRM, these differences in role behaviours required by the organisations strategy require different HRM practices to elicit and reinforce those behaviours. All in all, there are three implications of behavioural perspective (Wright and McMahan, 1992). There are: first, that this theory is quite specific in relation to the hypothesised role behaviours required by different strategies; second, that studies should focus on the types of HRM practices, which are effective in eliciting these role behaviours, and; third, that the assumption of the behavioural perspective is that strategies lead to HRM practices that elicit employee role behaviours that lead to a number of outcomes that provide benefits to the firm. Due to the fact that HRM practices comprise the principal methods used to regulate performance, in totality, they actually manifest control. A control perspective is, therefore, consistent with behavioural perspective and may then be used in this study to integrate HRM practices. Any process that helps align the actions of individuals with the interests of their employing firm is referred to as control (Tannenbaum, 1968). A variety of typologies have been devised largely to determine and differentiate the control systems (Eisenhardt, 1985; Govindarajan and Fisher, 1990; Ouchi, 1980; Tannenbaum, 1968). The work of Snell (1992) and Snell and Youndt (1995) focused exclusively on bureaucratic mechanisms. This focus restricted the attention to formal HRM practices such as staffing, training, performance appraisal, and rewards. That is, this study combined them into control systems rather than examine particular HRM practices in isolation. According to Snell and Youndt (1995, p. 713), behaviour control is nothing more than that "responsibilities are standardised and imposed top-down with an overriding concern for procedures and methods. Employees are accountable for their actions, regardless of results. Appraisals are based on supervisor observation of behaviour. Feedback is used as a remedial too1." For that reason, it is interesting to note that behaviour control eliminates uncertainty and increases predictability by establishing a method or system of the transformation process (Ouchi, 1978; Ouchi and Maguire, 1975). By attempting to regulate action, this approach to HRM focuses on the issues such as reliability and efficiency. Behaviour control remains effective as long as the task environment stays stable and predictable over time. The agency theory states that when the behaviour of the agent is observed, a behaviour-based contract is optimal because the agents behaviours are the purchased commodity. This is the simple case of complete information. In the case of incomplete information, the principal can purchase information about the agents behaviours and reward those behaviours. Research shows that use of this approach relates positively to the completeness of information about cause-effect relations (Ouchi and Maguire, 1975; Snell, 1992). As a result, when dealing with performance, HRM based on behaviour control is positively related to firm performance when knowledge of cause-effect relations is complete (Snell and Youndt, 1995). "Mutually set performance targets’ defines an output control. Subordinate performance appraisals are based on the results they achieve, and monetary rewards are closely linked to performance outcomes (Snell and Youndt, 1995)." Linking personal interests with the achievement of organisational targets, is an approach to HRM that gives individuals discretion over the processes they use, but still provides incentives for outcomes that benefit the firm (Kerr, 1985). Firms tend to use output control more when standards of desirability are crystallised (Hofstede, 1978; Ouchi, 1977). As long as the firm has very clear, crystallised objectives, then an output orientation to HRM may elicit acceptable performance. In this instance, goals of the organisation can be specified via the control system. According to agency theory, in the case of incomplete information, the principal can reward the agent based on outcomes, surrogate measures for behaviours. Input control refers to "rigorous selection and training that help to socialise employees to ensure they have requisite abilities as well as understand and internalise the values and goals to the organisation. In this way they are likely to act in the interest of the firm on their own (Snell and Youndt, 1995)." Input control can help create goal equivalence among the organisation members by searching for and selecting people who fit the needs of the firm. When the approach to HRM is based on input control, performance is higher when standards of desirability are ambiguous (Snell and Youndt, 1995). Snell (1992) argued that one advantage of input control is that it helps in preventing performance problems. Careful staffing and training practices can prevent deficiencies that might be impossible to remedy later. However, the disadvantage is that it can only look into potentials and that input control may lead to a better performance when standards are ambiguous (Snell and Youndt, 1995). Conclusion Modern global organisations need to leverage on all facets of financials, customer, best business practice and human resources, if it shall be sustainable for the long haul. More importantly, it should be able to dedicate attention to its most important resource: its people. This paper has presented the ways in which administrative theories may be expanded to encompass not only the end goals of productivity and profit, but also of people development. It points out that the human resource function may also be used as a control measure, focusing on all facets of attracting the right talent through careful staffing and training practices, setting apt performance goals, and similar people development initiatives. 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