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Key Topics: - Structural options - Line and staff relationships - Building and leading teams - Understanding motivation - Managing people effectively - Directors' roles - Handling change Organizational behavior, usually shortened to OB, is the whole rather amorphous area that deals with people, why they behave the way they do and how to create and manage an organization that can achieve the goals set for the business. As one cynical CEO summarized the task: 'to get people to do what I want them to do because they want to do it'.
The single most prevalent reason for a strategy failing lies in its implementation; the analysis and planning behind a proposed course of action are rarely the root of the problem. That is more likely to lie in the selection of the people to implement strategy, their management, motivation, rewards and the way in which they are organized and led. Stated like that, it sounds a fairly simple task. Just work your way through those headings and any MBA worth their salt should be able to get the desired results. Unfortunately, people both individually and collectively are rarely malleable and infinitely variable in their likely responses to situations.
The famous German military strategist Moltke's statement that 'No campaign plan survives first contact with the enemy' applies here if the word enemy is replaced by organization.
However, by understanding and applying a number of principles and concepts on the typical MBA syllabus you can improve an organization's chances of achieving its objectives. Strategy vs structure, people and systems This is the 'which came first' question akin to that of the chicken and the egg. Unless you are starting up an organization on a greenfield site with no people other than yourself and only a pile of cash, every business situation involves some compromise between the ideal and the possible when it comes to people and structures.
The theory is clear. An organization's strategy, itself a product of its business environment, determines the shape of the organization's structure, the sort of people it will employ and how they will be managed, controlled and rewarded. But in the real world the business environment is constantly changing as the economy fluctuates, competitors come and go, and consumer needs, desires and aspirations alter. In any event a business is limited in its freedom of action. However violent and essential a change in strategy, a business will rarely be free to hire and fire staff at will simply to change direction. The exception is in the case of a complete closure or withdrawal from an activity such as that of Marks & Spencer's controversial closure of its French outlets in 2001. This move was considered vital to the survival of the whole business and despite May Day protests in France the company's shares rose 7 per cent on the announcement.
Figure below is a useful aid to understanding how to approach OB. The concentric circles are a metaphor to remind us of the circular nature of subject. You can't just tackle one area without having an impact on others. FIGURE: A framework for understanding organizational behaviour
Structures – the options Just as the skeleton is the structure that holds a body together, a business too has its framework. The goal of any framework is to provide some boundaries while at the same time allowing the whole 'body' flexibility to respond in order to go about its business. While human bodies keep a very similar skeleton to the one they start out with, a business has a number of very different organizational structures to choose from. Also, it is unlikely that any one structure will be appropriate throughout an organization's life.
For an organization a structure has to perform the following functions: - show who is responsible for what and to whom; - define roles and responsibilities; - establish communication and control mechanisms; - lay out the ground rules for cooperation between all parts of the organization; - set out the hierarchy of authority, power and decision making. There are two major building blocks used in shaping an organization's structure beyond the level of the individual: the organizational chart and team composition.
Pictorial methods of describing how organizations work have been around for centuries. Both the Roman and Prussian armies had descriptions of their hierarchical structures and the latter incorporated line and staff relationships.
There is also some evidence that the ancient Egyptians documented their methods for organizing and dividing workers on major projects such as the pyramids.
However, Daniel C McCallum is generally credited with developing the first systematic set of organizational charts in 1855, to organize railroad building on an efficient basis. The trigger for his innovation was the discovery that the building costs per mile of track did not drop with the length of line being built, contrary to logic. The inefficiencies were being caused by poor organization. Basic hierarchical organization This simple structure has every member or part of the organization reporting in to one person (Figure below). It works well when the organization is small, decisions are simple or routine and communications are easy. FIGURE: Basic hierarchical organization chart
This basic structure can be based around one of several groupings, including: - functions such as marketing or manufacturing; - geography such as country or region; - product; - customer or market segment such as trade, consumers, new accounts or key accounts. Span of control The number of people a manager can have reporting to them in a hierarchy is governed by the span of control. Few people reporting and the span of control is termed as narrow, and more as wide.
A narrow span of control means that any one manager has fewer people reporting to them, so communications should be better and control easier. However, as the organization grows, that usually means creating more and more layers of management, so negating any earlier efficiency.
A wide span of control, also known as a flat management structure, involves having many people or units reporting to one person. This usually means having fewer layers of management, but it does call for a greater level of skill from those doing the managing. The nature of the tasks being carried out by subordinates will limit the capacity to run a flat organization. For example, a regional manager responsible for identical units such as branches of a supermarket chain, supported by good and well-developed control systems, may be able to have 10 or more direct reports. But if the organization comprises very different types of unit, for example retail outlets, central bakeries, garages, factories, accounts departments and sales teams, the ability of any one manager to handle that diversity will be limited. A further factor to take into account is the skill level of both managers and managed. A higher-skilled workforce can operate with a wider span of control as they will need less supervision and a higher-skilled manager can control a greater number of staff. Line and staff organization One way to keep an organization structure flat as the enterprise gets bigger and more complex is to introduce staff functions that take over some of the common duties of unit managers. For example, a production manager could probably handle their own recruitment, selection and training of staff while they have a dozen or so people in their domain. Once that expands to hundreds, and if growth is also impacting on other management areas such as sales and marketing, then it may be more efficient to create a specialist HR unit to support the line managers. Staff positions support line managers by providing knowledge and expertise but the buck ultimately stops with the line manager.
Three types of authority are created in a line and staff organization, so alongside some efficiencies lies the possibility for conflict: - Line authority goes down the chain of command, giving those further up the right and responsibility to instruct those below them to carry out specific tasks. - Staff authority is the right and responsibility to advise line managers in certain areas. For example, an HR staffer will advise a line manager on redundancy terms, conditions of employment and disciplinary issues. - Functional authority or limited line authority gives a staff person the ultimate sanction over particular functions such as safety or financial reporting. There are possibilities for conflict in the relationship between line and staff but these can be minimized in two ways. In the first instance staff report to their own superiors who have line authority over them. Second, line and staff personnel can be organized into teams with shared goals and objectives (Figure below). FIGURE: Line and staff organization chart Functional organization In a functional organization (Figure below) the staff and line managers all report to a common senior manager. This places more of a burden on senior management who have a wider span of control and a greater variety of tasks for which to take responsibility. However, this structure concentrates all responsibility in one person and so minimizes the area for conflict. It may also deny an organization the high level of expertise that comes with having a professional staff function. For example, this would leave the onus for being fully conversant with current employment law on a production manager, rather than giving them access to staff advice. They can, of course, read up on the law themselves, but that is not quite as good as having it as a part of an everyday skill and experience base. FIGURE: Functional organization chart Matrix organization A matrix organization gives two people line authority for interlocking areas of responsibility. In Figure below you can see that a manager is responsible for sales of product group 1 in both Europe and Asia. However, a manager is also responsible for the sales of all product groups within their continent.
FIGURE: Matrix organization chart The aim of a matrix structure is to ensure that all key areas in an organization have a line manager responsible for championing them. There is still the possibility for conflict of interest. For example, the person responsible for a product group may try to get more attention for their product in a particular market than it really warrants. In theory, the managers in matrix organizations are senior enough to iron out their differences. That is not always the case in practice and in such cases their mutual boss has to resolve the issue. Strategic business unit (SBU) SBUs (Figure below) are in effect separate enterprises with full responsibility for their own profit or loss. They may themselves be organized in any one of the above structures. If they don't have their own specialist staff function, they may buy it in from the parent company when required. This maintains the concept of full profit accountability. FIGURE: Strategic business unit organization chart
SBUs are further divided into those that simply have control over current revenue and expenditure and those 'investment centres' that can make capital expenditure decisions such as setting up a new plant, investing in research and development or buying up competitors. Succession planning No general would fight a battle without having a reserve force ready to plug gaps that appear in the front line or are caused by casualties in key staff. Perhaps the most spectacular military example was the rapid deployment of Montgomery to head the 8th Army when Churchill's own preferred candidate, 'Strafer' Gott, was killed flying back to Cairo. For business and other organizations this reserve is usually limited to the process of identifying future potential leaders to fill key positions when staff leave or are themselves promoted. A subsidiary but nonetheless important role of any organization chart is to facilitate this planning. Elements to consider in this area include: - broadening existing managers' competences by lateral moves in the organization; - training and development across a wider skill base than is required for current roles; - having a database of outsiders who can rapidly be approached by head hunters (specialist recruitment consultants) when the need arises. Teams Teams are the component parts of a business's structure and their effective creation and operation are a key way to get exceptional results from an organization. A group of people, even if they work together, are not necessarily a team. Look at Figure below, which compares some of the characteristics of a sports team with those of a random collection of people that meet for a game. You can see immediately what needs to be done to weld people into a team.
FIGURE: Groups are not the same as teams
Successful teams have certain features in common. They all have strong and effective leadership; clear objectives; appropriate resources; the ability to communicate freely throughout the organization; the authority to act quickly on decisions; a good balance of team members; the ability to work collectively; and a size appropriate to the task. Team types Teams can be made up of anything from 5 to 20 people. Anything above 20 is usually too unwieldy and will take up more resources than an organization can afford to devote to one aspect of the business.
Business teams: These are a group of people tasked with managing functions and achieving specific results over the longer term. In this example there are three of these, covering sales, administration and warehouse/dispatch. So, for example, the sales team is expected to meet sales targets and the dispatch team to get goods to customers on time. In practice, every firm will have its own definition of business functions.
Project teams: These are often cross-functional, made up of people from different areas. These can be assembled for any period of time to look at a particular project. In this example we have assumed that each of these teams has been asked to look at how each function could be made more efficient. The value of having someone from other functions in these teams is to ensure that too parochial a view is not taken. Taskforce teams: This is a short-term body put together quickly to look at one narrow issue or specific problem. For example, if you proposed changing your working hours a taskforce could look at the implications for everyone inside and outside the firm and report back. Then a decision based on the best information, provided by people most affected by the change, can be made. Team roles However talented the soloists are in an organization, in the end it is orchestras that make enough 'noise' to make things happen. But teams don't just occur naturally. The presumption that people are going to work together is usually a mistake. Chaos is more likely than teamwork. Cultures in businesses have very different pedigrees and can pull the organization in very different directions. Take one successful new internet business for example, where people came from financial services, retail and more recently technology. The company's roots were in financial services. Their competitors were banks and brokerage firms and their employees had moved around the sector in search of the ultimate accolade, to become a vice-president. The focus was inwards towards 'hierarchy and title'. Their second cohort of employees came from retailing, the staff of their one-time expanding branch network. For retailers the focus is outwards towards the customer. Their success was measured in the market and the best salespeople had the greatest respect and power. The third group, and the most recent, was the technologists. For these people success was measured by technical expertise. Titles were irrelevant and their main concern was for the completion of the project. Their loyalty was not to the hierarchy but to the principles of the project itself, and to their team.
Putting people with disparate cultures into teams because of their particular professional or job skills may not be effective. If the team is to function effectively, the balance of behavioural styles has to mesh too. These are the key roles identified by Meredith Belbin while a Research Fellow at Cranfield (www.belbin.com), which need to be taken if a team is to work effectively (there are other methods of categorizing team roles): - Chairman/team leader. Stable, dominant, extrovert. Concentrates on objectives. Does not originate ideas. Focuses people on what they do best. - Plant. Dominant, high IQ, introvert. A 'scatterer of seeds' who originates ideas. Misses out on detail. Thrustful but easily offended. - Resource investigator. Stable, dominant, extrovert and sociable. Lots of contacts with the outside word. Strong on networks. Salesperson/diplomat/liaison officer. Not an original thinker. - Shaper. Anxious, dominant, extrovert. Emotional and impulsive. Quick to challenge and to respond to a challenge. Unites ideas, objectives and possibilities. Competitive. Intolerant of woolliness and vagueness. - Company worker. Stable, controlled. A practical organizer. Can be inflexible but likely to adapt to established systems. Not an innovator. - Monitor evaluator. High IQ, stable, introvert. Goes in for measured analysis, not innovation. Unambiguous and often lacking enthusiasm. But solid and dependable. - Team worker. Stable, extrovert, but not really dominant. Much concerned with individuals' needs. Builds on others' ideas. Cools things down when tempers fray. - Finisher. Anxious introvert. Worries over what could go wrong. Permanent sense of urgency. Preoccupied with order. Concerned with 'following through'. Building and running a team These are the five essential elements to establishing and running effective teams. Balanced team roles You have to start building a team by recognizing that people are different. Every team member must not only have their 'technical' skills such as being an accountant or salesperson. They must also have a valuable team role. Experts in team behaviour have identified the key team profiles that are essential if a team is to function well. Any one person may perform more than one of these roles. But if too many people are competing to perform one of the roles, or one or more of these roles are neglected, the team will be unbalanced. They will perform in much the same way as a car does when a cylinder misfires. Shared vision and goal It is essential that the team has ownership of its own measurable and clearly defined goals. This means involving the team in business planning. It also means keeping the communications channels open as the business grows. The founding team knew clearly what they were trying to achieve and as they probably shared an office they shared information as they worked. But as the group gets larger and new people join, it will become necessary to help the informal communication systems to work better. Briefing meetings, social events and bulletin boards are all ways to get teams together and keep them facing the right way. Have a shared language To be a member of a business team, people have to have a reasonable grasp of the language of business. It's not much use extolling people to improve return on capital employed or reduce debtor days if they have only the haziest notion of what those terms mean, why they matter or how they can influence the results. So you need to develop rounded business skills across all the core team members through continuous training, development and coaching. Compatible personalities While having different Belbin team profiles is important, it is equally vital to have a team who can get on with one another. They have to be able to listen to and respect other people's ideas and views. They need to support and trust one another. They need to be able to accept conflict as a healthy reality and work through it to a successful outcome. Good leadership First-class leadership is perhaps the most important characteristic that distinguishes winning teams from the also-rans. However good the constituent parts, without leadership a team rapidly disintegrates into a rabble bound by little but a pay cheque.
The board of directors One team stands apart from all the others within an organization – the board of directors, usually reduced to the title 'the board'. Directors in major or public companies have a role outside of that of simply heading up a function such as production, sales or marketing, though they may perform one of those functions too. There is often confusion as to where the ultimate power rests in a company; with the directors or the shareholders. In private companies they are often one and the same body but in public companies, even where family ties remain, they are distinct and separate. In law a company is an entity separate from both its shareholders and directors. According to a company's articles of association, some powers are exercised by directors, while certain other powers may be reserved for the shareholders and exercised at a general meeting. If the powers of management are vested in the directors, then they and they alone can exercise these powers. The only way in which shareholders can control the exercise of powers by directors is by altering the articles, or by refusing to re-elect the directors of whose actions they disapprove.
Some of a director's duties, responsibilities and potential liabilities are: - To act in good faith in the interests of the company; this includes carrying out duties diligently and honestly. - Not to carry on the business of the company with intent to defraud creditors or for any fraudulent purpose. - Not knowingly to allow the company to trade while insolvent; directors who do so may have to pay for the debts incurred by the company while insolvent. - Not to deceive shareholders and to appoint auditors to oversee the accounting records. - To have regard for the interests of employees in general. - To comply with the requirements of the Companies Acts, such as providing what is needed in accounting records or filing accounts. Composition of the board The board is made up of two types of directors, internal and external, and typically the board would exercise major decisions through a number of committees: - Internal directors: Usually headed up by a chairman who runs board meetings, a CEO (chief executive officer) or managing director who runs the operating business and a number of other directors. - External directors: Known as non-executive directors, they are usually people of stature and experience who can act as both a source of wise independent advice and a check on any wilder elements on a board. Financial Times Non-Executive Directors' Club (www.non-execs.com) provides more information on the role of non-executive director, as well as being a potential source of appointments in smaller companies that might appeal to an ambitious, risk-happy MBA. - Committees: The main board committees are those that oversee remuneration (particularly for directors), auditing, social responsibility (and 'green' matters), mergers and acquisitions, and regulatory affairs. People If structures are the skeleton of an organization, people are its blood and guts. Douglas McGregor, a founding faculty member of MIT's Sloan School of Management, began his management classic The Human Side of Enterprise, published in 1960, with the question: 'What are your assumptions (implicit as well as explicit) about the most effective way to manage people?' This seemingly simple question led to a fundamental revolution in management thinking. McGregor went on to claim: 'The effectiveness of organizations could be at least doubled if managers could discover how to tap into the unrealized potential present in their workforces.' Finding the right people, keeping them onside, motivating, managing and rewarding them are the defining distinctions between the most successful organizations and the mediocre. Over the past 30 years or so, organizations have acquired centralized HR (human resources) departments whose purpose is to facilitate people issues, as they often quaintly term their work. McGregor anticipated their arrival with this pithy quote: It is one of the favourite pastimes of management to decide, from within their professional ivory tower, what help the field organization needs and then to design and develop programs for meeting these needs. Then it becomes necessary to get the field organization to accept the help provided. This is normally the role of the Change Manager; to implement the change that no-one asked for or wants. None of this is to suggest that HR departments can't contribute to helping with 'people issues'. It's just that people issues are too important to exclude their immediate superiors from. At the very least, MBA skills include a sound grasp of the key tasks that the HR department is charged with performing. Recruitment and selection Taking on new employees is often a more expensive exercise than buying a major item of machinery or a heavy goods vehicle. If that sounds improbable, just check out the figures; the advertising for a middle-ranking executive on a salary of, say, £40,000 may well cost £6,000. If they are taken on using a recruitment consultant you can expect a bill of around a fifth of the first year's pay (£8,000 ($12,500/€9,000)). Three days' interviewing, psychometric testing, preparing a contract of employment, perhaps paying a share of the new employee's removal expenses will bring the total bill up to around £20,000 ($31,700/€22,500). If you get the wrong candidate, and there is a good chance of that happening if you fail with any element of the recruitment process, then you may have to double that figure. Then, of course, there is the cost of not getting the job done that you were recruiting for in the first place.
These are the key stages in the recruitment process.
CASE STUDY - IKEA Furniture company IKEA was founded by Ingvar Kamprad when he was just 17, having cut his teeth on selling matches to his nearby neighbours at the age of five, followed by a spell selling flower seeds, greeting cards, Christmas decorations and eventually furniture. IKEA targets young, white-collar workers as its prime customer segment, selling through 235 stores in more than 30 countries. Kamprad, an entrepreneur from the Småland province in southern Sweden offers home furnishing products of good function and design at prices young people can afford. He achieves this by using simple cost-cutting solutions that do not affect the quality of the products. IKEA's entry into the international arena was not without its problems. Its launch in the US market hit a cultural barrier from the outset. IKEA does not give employees job titles or precise job descriptions. This arises from the founder's no-nonsense personal culture. Worth £16 billion, Kamprad is the world's seventh richest man, but lives frugally, in keeping with the functional nature of the IKEA brand. He lives in a bungalow, flies easyJet and drives a 15-year-old Volvo. When he arrived at a gala dinner recently to collect a business award, the security guard turned him away because they saw him getting off a bus. He and his wife Margaretha are often seen dining in cheap restaurants. He does his food shopping in the afternoon when prices are lower and even then haggles prices down.
Many of IKEA's new recruits in the United States quit after a few months because there was a gulf between the company's values and the culture and expectations of US employees, who were used to clear roles and responsibilities. The ensuing high turnover rate forced IKEA to review its selection criteria. Rather than just going for candidates with the best qualifications and experience the recruiters highlighted IKEA's culture and values, so letting those applicants who were going to be uncomfortable in that environment elect to withdraw early in the process. This saved the company the cost of high staff turnover and prevented the company from being saddled with a hire and fire reputation. Writing the job description Often employers draw up the job description after they have found the candidate. This is a mistake; having it from the outset narrows down your search for suitable candidates, focuses you on specific search methods and gives you a valid reason for declining unwelcome job requests from colleagues and friends. In any event you have to give employees a contract of employment when you take them on and the job description makes this task much easier. Include the following in a job description: - the title, such as area sales manager, management accountant or product manager; - the knowledge, skills and experience you expect them to have or acquire; - the main duties, responsibilities and measurable outputs expected; - the work location and general conditions, such as hours to be worked, lunch breaks and paid holiday arrangements; - the pay structure and rewards; - who the employee will report to. The University of Oxford's personnel services (www.admin.ox.ac.uk/personnel/recruit/recruitproc/planapprove/ jobdesc) has detailed guidance on writing a job description. Where you find great employees There are many ways to find employees; for finding great employees the choices are more limited.
Research at Cranfield revealed some alarming statistics.
First, nearly two-thirds of all first appointments failed and the employee left within a year, having been unsatisfactory.
Second, there were marked differences in the success rate that appear to be dependent on the way in which employees are looked for.
Employing an agency or consultant This is the least popular, most expensive and most successful recruitment method. Only one in fifteen private firms do so for their early appointments, but when they do they are three times more likely to get the right person. The larger the business the more likely they are to take external advice in recruitment. The reasons for success are, in part, the value added by the agency or consultant in helping get the job description and pay package right; and the fact that they have already pre-interviewed prospective employees before they put them forward. These organizations can help here: - Job Centre Plus (www.gov.uk/jobcentre-plus-help-for-recruiters > Need to fill a job?) is a free government-funded service to help UK firms fill full- or part-time vacancies at home or overseas. They can offer advice on recruitment and selection methods, local and trade pay rates, training, contracts of employment and, importantly, can offer interview facilities in some of their national network of offices, which can be useful if you are recruiting away from your home base. - The Recruitment & Employment Confederation (www.rec.uk.com/employer > Choosing an Agency) is the professional association that supports and represents over 8,000 recruitment agencies and 6,000 recruitment professionals. As well as advice on choosing an agent, there is a mass of information on employment law and a directory of members listed by business sector and geographic area. Advertising in the press: You have a large number of options when it comes to press advertising. Local papers are good for generally available skills and where the pay is such that people expect to live close to where they work. National papers are much more expensive but attract a wider pool of people with a cross-section of skills, including those not necessarily available locally. Trade and specialist papers and magazines are useful if it is essential that your applicant has a specific qualification, say in accountancy or computing. The goal of a job advertisement is not just to generate responses from suitably qualified applicants, but also to screen out applicants who are clearly unqualified. If you make the job sound more attractive than it really is and are too vague about the sort of person you are looking for, you could end up with hundreds of applicants.
You need to consider the following elements when writing the job advertisement: - Headline: This is usually the job title, perhaps with some pertinent embellishment. For example, Dynamic sales person required. - Job information: This is a line or two about the general duties and responsibilities of the job. - Organization information: Always include something explaining what you do and where you do it. - Qualifications: Specify any qualifications and experience that are required. You can qualify some aspects of this by saying that a particular skill would be useful but is not essential. - Response method: Tell applicants how to reply and what information to provide. Try to include something about your business culture in the advertisement. One firm puts its advertisements sideways on, so applicants have to turn the paper round to read them. They claim that this lets people see that they want people who look at things in unconventional ways to apply and that they are not a run-of-the-mill firm that works like any other firm. Using an active rather than a passive voice will give your advertisement a sense of buzz and enthusiasm. You can find all the local and national newspapers listed at Newspapers.com (www.newspapers.com). From the individual newspaper web link homepage you will find a signpost to 'Advertising' and from there you can find the readership demographics and advertising rate. For example, for the Metro (www.metro.co.uk > Advertising.metro.co.uk > Who reads us?). Using the internet -Nearly a quarter of all jobs are filled using job boards, a website where employees and employers can get together much along the lines of a dating agency. The internet's advantages are speed, cost and reach. You can get your job offer in front of thousands of candidates in seconds. The fees are usually modest, often less than regional paper job adverts, and in some cases, such as with webrecruit.co.uk (www.webrecruit.co.uk), though the fee is a relatively high £595 ($933/€670), they will reimburse you if they can't fill your job. Services through job boards range from passive, where employers and employees just find each other, to the proactive, where online candidate databases are searched and suitable candidates are made aware of your vacancy. whatjobsite.com (www.whatjobsite.com > Jobsite Directory) has a search facility that lets you look for the job boards by country and region and that are most suited to the job on offer and the industry you are in. Using your network Organizations of every size and shape use contacts and networks when they are recruiting. This route is favoured because it is cheap, informal and can be pursued without the bother of writing a job description, which can in effect be infinitely varied to suit the candidates that may surface. Public sector bodies and many public companies are obliged either by law or convention to advertise vacancies, but that in no way inhibits drawing a potential candidate's attention to the opportunity. Unfortunately, the statistics indicate that two out of five appointments made in this way fail within six months and the business is back in the recruiting game again. The reasons for this being an unsatisfactory route lie somewhere in the absence of rigour that the approach encourages; only if you can take a thorough approach and be sure of a genuine reason why someone would want to recommend someone to you should you recruit in this way. Hiring people Once you have candidates for your vacancy, the next task is to interview, select and appoint. If you have done your homework the chances are that you will have a dozen or more applicants, too many to interview, so this process is somewhat like a funnel, narrowing down until you have your ideal candidate appointed. Selecting a candidate -You need to find at least two and ideally three people who could fill your vacancy to a standard that you would be happy with; this gives you contrast, which is always helpful in clarifying your ideas on the job; and a reserve in case the first candidate drops by the wayside or turns you down. The stages in making your selection are as follows: - Make a shortlist of the three or four candidates that best suit the criteria set out in your job definition. - Interview each candidate, ideally on the same day so all the information is fresh in your mind. Plan your questions in advance but be sure to let them do most of the talking. Use your questions to plug any gaps in your knowledge about the candidate. Monster (www.hiring.monster.co.uk > Resource Centre > Recruiting and hiring advice) has a useful set of interview questions to ask, with some guidance on how to get the best out of the process. - Use tests to assess aptitude and knowledge if the job is a senior one such as accountant or sales manager. You can find a test to measure almost any aspect of a candidate's skills, attitude, aptitude and almost anything else you care to name. Thousands of the most successful companies use them and claim to get better candidates and higher staff retention than they would otherwise achieve. Tests cost from £10 a candidate from companies such as Central Test (www.centraltest.co.uk); the British Psychological Society (www.bps.org.uk) and The Chartered Institute of Personnel and Development (www.cipd.co.uk) list various types of test, their purpose and how to use them and interpret results. Two tests most MBAs will come across both at business school and in job and promotion interviews that can be used in staff selection are the following:
The 16PF (Personality Factor) Questionnaire Developed in 1949 by Raymond Cattell who set out to measure the whole of human personality using a structure questionnaire assessed against a normative sample reflecting current census statistics on sex, age and race. The scores enable employers, among others, to predict human behaviour. The 16PF Questionnaire measures levels of: Warmth; Reasoning; Emotional stability; Dominance; Liveliness; Rule consciousness; Social boldness; Sensitivity; Vigilance; Abstractedness; Privateness; Apprehensiveness; Openness to change; Self-reliance; Perfectionism and Tension.
The Myers-Briggs Type Indicator (www.myersbriggs.org) -This is a personality inventory, based on the psychological types described by C G Jung, explaining how seemingly random variations in behaviour are actually normal, and due to basic differences in the ways people choose to use their perception and judgement. Developed by Katharine Briggs and her daughter, Isabel Myers, who initially created the indicator during the Second World War to help women working in industry for the first time find the sort of wartime jobs where they would best fit in. The Indicator uses a battery of questions to identify how a person fits in with the 16 distinctive personality types that result from the interactions among preferences in these four areas: - The world: Do you prefer to focus on the outer world (Extraversion – E) or on your own inner world (Introversion – I)? - Information: Do you prefer to focus on the basic information you take in (Sensing – S) or do you prefer to interpret and add meaning (Intuition – N)? - Decisions: When making decisions, do you prefer to look first at logic and consistency (Thinking – T) or look first at the people and circumstances (Feeling – F)? - Structure: In dealing with events, do you prefer to get things decided (Judging – J) or do you like to keep an open mind to new information (Perceiving – P)? Making job offers Having found the ideal candidate, the next step is to get them hired and happy to work for you. However well the interview may have gone, resist making a job offer on the spot. Both you and the candidate need to sleep on it, giving you both the chance to discuss with your partners and consider what has come out of the interviews. Take up references Always take up references before offering the job. Use both the telephone and a written reference and check that any necessary qualifications are valid. This may take a little time and effort, but is essential as a protection against unsuitable or dishonest applicants. Put the offer in writing While you may make the job offer on the telephone, face-to-face or in an e-mail, always follow up with a written offer. The offer should contain all the important conditions of the job, salary, location, hours, holiday, work, responsibilities, targets and the all-important start date. This in effect will be the backbone of the contract of employment you will have to provide shortly after they start working for you. Make them welcome When a new employee joins you, be on hand to meet them, show them the ropes and introduce them to anyone else they are likely to come into contact with. This is crucial if they are going to work in your home alongside you, and these introductions should extend to your spouse, even if they don't work in the business, your children, pets, the postman and neighbours. They also need to know about the practical aspects of working for you; where they can eat inside and out, coffee making and any equipment they will be working with. If they will be in your home when it is otherwise empty then they need to know where the fuses are and whom to contact if, say, the internet or telephone goes down. Dealing with unsuccessful candidates By the very nature of the recruitment task, the person appointed is just the tip of a big iceberg of applicants and interviewees. These people have to be responded to, advising them that they do not have the job. For your first reserve list, those who you may call on if the appointment goes wrong for any reason, it is worth taking particular care with your reply. Here you can emphasize the strength of their application but that the background of another candidate was closer to your needs. You don't have to go into details as to specifically why a particular candidate got the job and they did not. Aside from exuding professionalism and being plain good manners, the job-hunting world is big and deep and at some stage you and your organization will be fishing there again. Motivation As a subject for serious study motivation is a relatively new 'science'. Thomas Hobbes, a 17th-century English philosopher, suggested that human nature could best be understood as self-interested cooperation. He claimed that motivation could be summarized as choices revolving around pain or pleasure. Sigmund Freud was equally frugal in suggesting only two basic needs: the life and the death instinct. These ideas were the first to seriously challenge the time-honoured 'carrot and stick' method of motivation that pervaded every aspect of organizational life, from armies at war to weavers in Britain working through the Industrial Revolution. The first hint, in the business world, that there might be more to motivation than rewards and redundancy came with Harvard Business School professor Elton Mayo's renowned Hawthorne Studies. These were conducted between 1927 and 1932 at the Western Electric Hawthorne Works in Chicago. Starting out to see what effect illumination had on productivity, Mayo moved on to see how fatigue and monotony fitted into the equation by varying rest breaks, temperature, humidity and work hours, even providing a free meal at one point. Working with a team of six women, Mayo changed every parameter he could think of, including increasing and decreasing working hours and rest breaks; finally he returned to the original conditions. Every change resulted in an improvement in productivity, except when two 10-minute pauses morning and afternoon were expanded to six 5-minute pauses. These frequent work pauses, they felt, upset their work rhythm. Mayo's conclusion was that showing 'someone upstairs cares', engendering a sense of ownership and responsibility were important motivators that could be harnessed by management. After Mayo came a flurry of theories on motivation. William McDougall in his book The Energies of Men (1932, published by Methuen) listed 18 basic needs that he referred to as instincts (eg curiosity, self-assertions, submission). H A Murray, assistant director of the Harvard Psychological Clinic, catalogued 20 core psychological needs, including achievement, affiliation and power. The motivation theories most studied and applied by business school graduates are those espoused by Maslow and these below. Theory X and Theory Y Douglas McGregor, an American social psychologist who taught at two top schools, Harvard and the Massachusetts Institute of Technology (MIT), developed these theories to try to explain the assumptions about human behaviour that underlies management action.
Theory 'X' makes the following assumptions: - The average person has an inherent dislike of work and will avoid it if possible. So management needs to put emphasis on productivity, incentive schemes and the idea of a 'fair day's work'. - Because of this dislike of work, most people must be coerced, controlled, directed and threatened with punishment to get them to achieve the company's goals. - People prefer to be directed, want to avoid responsibility, have little ambition and really want a secure life above all. But, while Theory 'X' does explain some human behaviour, it does not provide a framework for understanding behaviour in the best businesses. McGregor, and others, have proposed an alternative. Theory 'Y' has as its basis the belief that: - Physical or mental effort at work is as natural as either rest or play. Under the right conditions, hard work can be a source of great satisfaction. Under the wrong conditions it can be a drudge, which will inspire little effort and less thought from those forced to participate. - Once committed to a goal, most people at work are capable of a high degree of self-management. - Job satisfaction and personal recognition are the highest 'rewards' that can be given, and will result in the greatest level of commitment to the task in hand. - Under the right conditions, most people will accept responsibility and even welcome more of it. - Few people in business are being 'used' to anything like their capacity. Neither are they contributing creatively towards solving problems. A typical Theory-X boss is likely to keep away from their employees as much as possible. However small the business, for example, they may make sure that they have an office to themselves, and its door is kept tightly shut. Contact with others will be confined to giving instructions about work and complaining about poor performance. A Theory-Y approach will involve collaborating over decisions rather than issuing orders, and sharing feedback so that everyone can learn from both success and failures, rather than just reprimanding when things go wrong. Hygiene and motivation theory Frederick Hertzberg, professor of psychology at Case Western Reserve University in Cleveland, United States, discovered that distinctly separate factors were the cause of job satisfaction and job dissatisfaction. His research revealed that five factors stood out as strong determinants of job satisfaction. Motivators - Achievement: People want to succeed, so if you can set goals that people can reach and better, they will be much more satisfied than if they are constantly missing targets. - Recognition: Everyone likes their hard work to be acknowledged. Not everyone wants that recognition made in the same way, however. - Responsibility: People like the opportunity to take responsibility for their own work and for the whole task. This helps them grow as individuals. - Advancement: Promotion or at any rate progress are key motivators. In a small firm, providing career prospects for key staff can be a fundamental reason for growth. - The attractiveness of work itself (job interest): There is no reason why a job should be dull. You need to make people's jobs interesting and give them a say in how their work is done. That will encourage new ideas on how things can be done better. When the reasons for dissatisfaction were analysed they were found to be concerned with a different range of factors. Hygiene factors - Company policy: Rules, formal and informal, such as start and finish times, meal breaks, dress code. - Supervision: To what extent are employees allowed to get on with the job, or do people have someone looking over their shoulders all day? - Administration: Do things work well, or is paperwork in a muddle and supplies always come in late? - Salary: Are employees getting at least the going rate and benefits comparable with others? - Working conditions: Are people expected to work in substandard conditions with poor equipment and little job security? - Interpersonal relationships: Is the atmosphere in work good or are people at daggers drawn? Hertzberg called these causes of dissatisfaction 'hygiene factors'. He reasoned that the lack of hygiene will cause disease, but the presence of hygienic conditions will not, of itself, produce good health. So the lack of adequate 'job hygiene' will cause dissatisfaction but hygienic conditions alone will not bring about job satisfaction; to do that you have to work on the determinants of job satisfaction.
Other theories of motivation There are a plethora of theories of how to motivate people at work and elsewhere. (See the partial list below.) As the subject has matured, researchers have segmented the market into ever-smaller sub-topics, for example focusing on certain subgroups, difficult people for example; or special situations such as after a merger or closure of part of a business. - Achievement motivation theory (Atkinson, 1964) - Action-outcome expectancy (Heckhausen, 1991) - Attributional theory of achievement motivation (Weiner, 1972) - Cognitive dissonance theory (Festinger, 1957) - Effectance motivation (White, 1959; Harter, 1978a) - Expectancy times value theory (Vroom, 1964) - Goal-setting theory (Locke, 1968) - Intrinsic motivation (Deci, 1975) - Learned helplessness theory (Seligman, 1975) - Neuro-linguistic programming – NLP (Bandler and Grinder, 1976) - Reactance theory (Brehm, 1966) - Self-efficacy theory (Bandura, 1977) The guiding principle for all motivation practice is that people respond to a much wider range of stimulations other than life and death, fear and greed or stick and carrot. This article in the Journal of American Academy of Business, entitled 'A Review of Employee Motivation Theories and their Implications for Employee Retention within Organizations' provides a useful backdrop for MBA students (www.academia-research.com/filecache/instr/a/_/665402_a_review_of_employee_ motivation_theories_and_their_implications.pdf). Leadership However great the employees are, unless a business has effective leadership nothing of great value can be made to happen. While the boss may have a pretty clear idea of what the business is all about and what makes it special and different, it may not be so clear to those who work further down. Employees often just keep their heads down and get on with the task in hand. While that's a useful trait, it is not sufficient to make a business a great place to work. To make that happen, the boss has to have a precise idea of where the business is heading and use their leadership skills to achieve results. Vision A vision is about stretching the organization's reach beyond its grasp. Few now can see how the vision can be achieved, but can see that it would be great if it could be done. Microsoft's vision of a computer in every home, formed when few offices had one, is one example of a vision that has nearly been reached. As a mission statement in 1990 it might have raised a wry smile. After all, it was only a few decades before then that IBM had estimated the entire world demand for its computers as seven! NASDAQ, the entrepreneurs' stock market, has as its vision: To build the world's first truly global securities market. 'A world-wide market of markets built on a world-wide network of network linking pools of liquidity and connecting investors from all over the world thus assuring the best possible price for securities at the lowest possible costs.' That certainly points to beyond the horizon envisaged by business today. Having a vision will make it easier to get employees to buy into a long-term commitment to a business – they will see that they could have career opportunities and progression in an organization that knows where it is going. Mission A mission is a direction statement, intended to focus your attention on the essentials that encapsulate your specific competence(s) in relation to the market/customers you plan to serve. First, the mission should be narrow enough to give direction and guidance to everyone in the business. This concentration is the key to business success because it is only by focusing on specific needs that a small business can differentiate itself from its larger competitors. Nothing kills off a business faster than trying to do too many different things too soon. Second, the mission should open up a large enough market to allow the business to grow and realize its potential. You can always add a bit on later.
In summary, the mission statement should explain: - what business you are in and your purpose; - what you want to achieve over the next one to three years, ie your strategic goal; - how, ie your ethics, values and standards. Above all, mission statements must be realistic, achievable – and brief. Objectives The milestones on the way to realizing the vision and mission are measured by the achievement of business objectives. These objectives 'cascade' through the organization from the top, where they are measures of profit, through to measures such as output, quality, reject rates, absenteeism and so forth. Objective setting is a primary process in which clear performance measures are agreed with every employee. The achievement of specific objectives is the ultimate measure of effective leadership. Values A business faces tough choices every day and the bigger it gets, the greater the number of people responsible for setting out what you ultimately stand for – profits alone, or principled profits. Defining your values will make it possible for everyone working for you to know how to behave in any situation. Southwest Airlines, the first and arguably the best low cost airline has cultivated a reputation for being the 'nice' airline. A past CEO, James Parker, tells a story that sums up their values: 'we want people to consistently do the right thing because they want to.' One evening flight landed in Detroit and all the passengers, bar one, a young girl, disembarked. She should have got off at Chicago, an earlier stop, but failed to do so. Despite this being the night before Thanksgiving, the pilot and crew knew that they had to get the passenger back to her anxious parents. Without asking for company permission they just took off and returned the girl to her correct destination. They knew what should be done, regardless of the additional cost and inconvenience, and just got on with it. Toys 'R' Us have what they call their 'R' Values:
CASE STUDY At Toys 'R' Us, Inc, we believe that by being rapid, real, reliable and responsible, we will best serve our customers, employees, shareholders, communities and kids! Rapid: We believe that speed is a reflection of our culture. Our team is focused and clear with common, user-friendly processes and solutions; fast and urgent in decision-making and speed-to-market; and quick in adapting to change. Real: Our team is urgent, sincere, authentic, helpful to work with and confident. We are 'Playing to Win!' Reliable: Being reliable means working as a team so everything can move faster. We are a company that is dependable, and we produce what we promise. Responsible: We believe that honesty, integrity and compassion are the foundation upon which we work together and conduct our business. Keeping kids safe is a cornerstone of the brand.
As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honouring our commitments, providing results, and striving for the highest quality. Management Leadership and management are not the same thing, but you need both. A leader challenges the status quo, while a manager accepts it as a constraint. A boss usually has to be both a leader and a manager. Dozens of catchy titles such as bottom-up, top-down, management by objectives and crisis management have been used to describe the many and various theories as to how to manage. American engineer Frederick Winslow Taylor (circa 1911), who is credited with coining the phrase 'time is money', was one of the pioneers of the search for the 'one best way' to execute such basic managerial functions as selection, promotion, compensation, training and production. Taylor was followed by Henri Fayol (1919), a successful managing director of a mining French company, who developed what he called the 14 Principles of Management, recognizing that his list was neither exhaustive nor universally applicable. He also set out what he saw as the five primary functions of a manager.
Nearly a decade later, Luther Gulick, an American, and Lydnall Urwick, a founder of the British management consultancy profession, expanded Fayol's list to seven executive management activities summarized by the acronym POSDCORB: - Planning: determine objectives in advance and the methods to achieve them. - Organizing: establish a structure of authority for all work. - Staffing: recruit, hire and train workers; maintain favourable working conditions. - Directing: make decisions, issue orders and directives. - Coordinating: interrelate all sectors of the organization. - Reporting: inform hierarchy through reports, records and inspections. - Budgeting: depend on fiscal planning, accounting and control. By 1973 Canadian academic Henry Mintzberg, now professor of organizations at INSEAD in France, had further expanded the manager's tasks and responsibilities into 10 areas: - Figurehead: performs ceremonial and symbolic duties as head of the organization. - Leader: fosters a proper work atmosphere and motivates and develops subordinates. - Liaison: develops and maintains a network of external contacts to gather information. - Monitor: gathers internal and external information relevant to the organization. - Disseminator: passes factual and value-based information to subordinates. - Spokesperson: communicates to the outside world on performance and policies. - Entrepreneur: designs and initiates change in the organization. - Disturbance handler: deals with unexpected events and operational breakdowns. - Resource allocator: controls and authorizes the use of organizational resources. - Negotiator: intermediates with other organizations and individuals. All of these attempts at formulating an overarching and universal approach to arriving at a single best definition of the role of management foundered on the limitations of the information flow from the front line upwards. Two management theorists, Tom Peters and Nancy Austin, suggest that managers in effective companies get the information they need by getting out of their offices and talking with people – employees, suppliers, other managers, and customers. They coined the approach as 'management by walking around', or 'MBWA' (Peters and Austin, 1985). Today, the view of the role of a manager is best described as being contingent on the internal and external circumstances they find themselves in. Expanded into the rather grandiose title of 'contingency theory', its exponent Fred Fiedler, a business and management psychologist at the University of Washington, first introduced what he called the contingency modelling of leadership in 1967. Management styles and processes Despite the near-universal acceptance that there are no absolutes in management, the search for a tool or technique for helping managers understand and improve on their role as a manager goes on. These are some of the more practical of those attempts. The Management Grid Robert R Blake and Jane Srygley Mouton, who worked together at the psychology department of the University of Texas during the 1950s and 1960s, developed the 'Managerial Grid' as a framework for understanding managerial styles. Their grid (see Figure below) had two dimensions, concern for task and concern for people, with management styles being described by their position on the grid: - Country Club operates on the belief that as long as the people are happy the results will follow. - Produce or Perish states that we are only here to deliver results. It's an authoritarian style that subjugates people and their concerns to getting tasks performed at all costs. This is very much a Theory X (see above) method of operating. - Impoverished Manager is equally disinterested in both output and people. - Team Manager has a parallel concern for people and results. This is considered the optimal role. - Middle of the Road is an attempt to balance the concern for output with a parallel concern for people. In compromising, neither of the competing needs is met satisfactorily. This style can also occur when a manager alternates between putting people first at one stage then if results aren't coming through swinging the other way: this is known as the Pendulum approach to management. FIGURE: The management grid
Your position on the grid is arrived at by answering a battery of questions that can be obtained from www.leadership-and-motivation-training.com/support-files/blake-mouton-questionnaire.pdf. Management by objectives Peter Drucker first described this system in his book, The Practice of Management (1954). Drucker's proposition was that managers should sidestep what he called the 'activity trap' where managers got involved in the minutiae of day-to-day activities and set them SMART objectives: - Specific – relate to specific tasks and activities, not general statements about improvements. - Measurable – it should be possible to assess whether or not they have been achieved. - Attainable – it should be possible for the employee to achieve the desired outcome. - Realistic – within the employee's current or planned-for capability. - Timed – to be achieved by a specific date. Objectives, Drucker claimed, should cascade throughout the organization, interlocking so that the overall business objectives would be achieved. Value-based management The value-based management (VBM) model is the management approach that goes a stage beyond objectives and introduces the idea that organizations are run consistently for long-term shareholder value. That doesn't mean ignoring other stakeholder groups.
The three guiding principles of VBM are: - Creating value: actively seeking ways to increase or generate maximum long-term value. - Managing for value: colleagues, customers, community and shareholders. - Measuring value: validating that long-term real value has been created by using appropriate financial techniques such as discounted cash flow . Balanced scorecard The balanced scorecard (Figure below ), developed by Robert Kaplan and David Norton and published in a Harvard Business Review article in 1992, is a management process that sets out to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. Its uniqueness was to add non-financial performance measures to traditional financial targets to give managers and directors a more 'balanced' view of organizational performance. Although Kaplan and Norton are credited with coining the phrase, the idea of a balanced scorecard originated with General Electric's work on performance measurement reporting in the 1950s and the work of French process engineers (who created the Tableau de Bord – literally, a 'dashboard' of performance measures) in the early part of the 20th century. FIGURE: The balanced scorecard Four perspectives are included in the management process, which in effect extends the range of management by objectives and value-based management into areas beyond purely financial target setting. A number of objectives, measures, targets and initiatives can be set to achieve specific key performance indicators (KPIs) for each perspective in terms of: - Financial: These include KPIs for return on investment, cash flow, profit margins and shareholder value. - Customer: Here the KPIs can be for customer retention rates, satisfaction levels, referrals and complaints. - Internal business processes: These can include stock turn, accident rates, defects in production, reduction in the number of processes and improvements in communications. - Learning and growth: Employee turnover, morale levels, training and development achievements and internal promotions vs new recruits are all KPIs to use here. The four perspectives are linked by a double feedback loop whose purpose is to ensure that KPIs are not in conflict with one another. For example, if customer satisfaction could be achieved by improving delivery times, achieving that by, say, increasing stock levels might conflict with a financial target of improving return on capital employed. (See this refresher on financial ratios.) Delegation: the essential management skill To be effective an MBA needs to acquire for themselves and engender in their own management team the ability to delegate, also known as the art of getting things done your way by people who are happy to do so. Delegation is the tool that frees up your time for higher tasks – strategic planning, for example. Also, no organization can grow, and from a career perspective no MBA can move up, until someone else is in place to fill their role; delegation is a key tool in developing staff to be ready to take on more responsibility. Done effectively, delegation is also highly motivating. Look back to both the Hawthorne experiment and Hertzberg's hygiene factors described earlier in this guide to remind yourself why.
The theoretical framework MBAs are most likely to come across that gives guidance on delegation is that espoused by R Tannenbaum and W H Schmidt, published in the Harvard Business Review in May/June 1973, in an article entitled 'How to choose a leadership pattern' (Figure below ). The thinking behind their ideas was to give managers a way to see how to choose the most appropriate managerial style or use of authority, ranging from boss-centred (task) to subordinate-centred (relationship) dependent on their and their team's capacity for delegation. For example, a manager with weak communication skills, leading an untrained team in an organization with poor or inadequate control systems, will not be able to move far along the continuum. FIGURE: The leadership continuum – Tannebaum, Schmidt
Eight steps to successful delegation Delegation is difficult and most people experience a loss of control or a fear that the people they are delegating to are not really capable of doing the task well. These natural fears and concerns have to be understood and managed if delegation is to succeed. These eight steps improve the prospects for success in delegation: - Decide what tasks to delegate and, equally importantly, what not to: Routine jobs can usually be passed on with little difficulty but other areas may involve training people up. Confidential or disciplinary work, tasks with strategic or legal and regulatory implications, are not likely candidates. - Don't just select unpopular and tedious tasks to dump on others. Pass on worthwhile work that will genuinely widen experience and skills. - Choose who to delegate to: Ideally someone with the right skill set, who is not already overloaded and who is likely to stay around long enough for the organization to gain from the experience too. - Discuss the changes with the person concerned, get their commitment and then let everyone in the relevant part of the organization know about the change in role and why. - The subordinate concerned must be given the authority to do the job and to make independent decisions. - Follow up soon and review frequently to make sure the tasks delegated are being done satisfactorily and that no other work is suffering. - Reward appropriately for a successful delegation. - Communicate the success to the team to reinforce the value of taking on additional responsibilities, personal development and the opportunities for career progression. Systems If the structure is the skeleton and people are the blood and guts, systems are the rules and procedures that enable an organization to function effectively and to prepare itself for the changes ahead. Rewards While money is more a hygiene factor than a motivator, people come to work to get paid and if they achieve great results they expect great rewards. There is no single aspect of an employee's life more susceptible to gripes and complaints than pay. So how can you make sure that doesn't happen in your organization? - First, make sure you are paying at least the going rate for the job in the area. Don't think you are getting a bargain if you get an employee to work for less than that figure; if they do, either they are not good at their job, a poor time keeper or have some other disability that you will find out about later; or they are good and when they find out they will feel cheated and leave. The easiest way to find the going rate is to look at advertisements for similar jobs in your area or visit PayScale (www.payscale.com > EMPLOYERS) where you can get accurate real-time information on pay scales. - Include an element of incentive for achieving measurable goals. This could be commission, perhaps the easiest reward system, but it really only works for those directly involved in selling. Or a bonus for successful performance, usually paid in a lump sum related as closely as possible to the results obtained. The Chartered Institute of Personnel and Development (www.cipd.co.uk) gives further guidance on a comprehensive range of reward options. - Benefits in kind are a form of compensation that is not part of basic pay and that isn't tied directly to their performance. Pension, working conditions, being allowed to wear casual dress, on-site childcare, personal development training, company product discounts, flexible hours, telecommuting and fitness facilities are all on the list of benefits that are on offer in certain jobs today. There may be tax implications on benefits in kind. - Team awards can be used to engender better teamwork. Where money is involved it should be spent on things of value to the team. It could be an evening out, or any other social event. It could also be used to buy a business asset that's nice to have but could not really be justified on business grounds, for example a dedicated photocopier. Appraisals An appraisal is almost certainly an MBA's first point of contact with an organization's systems and the most likely one to cause dissatisfaction and frustration. Although supposedly not about blame, reward or even praise, that's how it ends up. Its output is a personal development plan to help everyone perform better and be able to achieve career goals. There are plenty of standard appraisal systems and procedures; many are little more than a tick boxes and rating process; others are built around buzzwords such as '360 degree appraisals', meaning that staff below and above as well as peers have an input into the process.
There are really only four ground rules for successful appraisals: - The appraisal needs to be seen as an open two-way discussion between people who work together, rather than simply a boss/subordinate relationship, and prepared for in advance. Discussion should be focused on achievements, areas for improvement, overall performance, training and development, and career expectations and not salary (that's for a separate occasion). - It should be results oriented rather than personality oriented. The appraisal interview starts with a review against objectives and finishes by setting objectives for the next period. - Appraisals should be regular and timely. At least annually, perhaps more frequent in periods of rapid change. New employees should be appraised in their first three months. - Sufficient time should be allowed and the appraisal needs to be carried out free from interruptions. The DEVA Workforce Development Toolkit developed by the Learning + Skills Council County Durham (www.workforcedevelopment.org.uk) aims to help employers create a realistic and effective, action-based training plan – getting the best out of training investment, for both appraiser and appraisee. Development If an organization is only as effective as the people it employs, it follows that the money invested in developing them and improving their skills should translate into improved results for the business as a whole. The statistics support the argument that money spent wisely on development pays dividends, so as a task it forms a major part of the human resources department's workload.
Two acronyms an MBA will find useful to pump-prime any development plan are the following. KSAs (Knowledge, skills and attitudes) Development programmes have learning objectives in each of these three areas and all three aspects need to be addressed for development to have the greatest impact: - Knowledge, described as perception, learning and reasoning. Would it was as simple as that, but the HR and learning gurus have subdivided that into: declarative knowledge or factual information; procedural knowledge, that is, understanding how and when to apply the facts; and strategic knowledge, used in planning and evaluating. - Skills are concerned with a proficiency level, for example in using a software application such as Excel, making a presentation, operating equipment, closing a sale or negotiating a deal. - Attitudes are the positive, negative or neutral feelings arising out of opinions and beliefs concerning actions that affect motivation levels, which in turn influence a person's behaviour. TNA (Training needs analysis) This process identifies the gap between the skills an organization needs to achieve its strategic and tactical goals and the skills employees currently have. Employee surveys, management observations, customer comments and appraisal are all among the tools used to gather information to identify training needs. (See Figure below.) FIGURE: Training needs analysis worksheet Organizations have a wide repertory of tools to apply to ensure that people are developed. Governments have an interest in encouraging training and often provide information on where training programmes are being run as well as offering grants to help with the costs. These should be explored at the outset, as any financial assistance can sweeten the budgetary pill. The main options in terms of learning methods are: - On-the-job coaching and mentoring: This is where people learn from someone more experienced how a job should be done. The advantages are that it is free and involves no time away from work. It should also be directly related to an individual's training needs. However, it is only as good as the coach and if they are untrained you could end up simply replicating poor working standards. - In-house classroom training: This is the most traditional and familiar form of training. Some, or all, of your employees gather in a 'classroom' either on your premises or in a local hotel. You hire in a trainer or use one of your own experienced staff. This method provides plenty of opportunity for group interaction and the instructor can motivate the class and pay some attention to individual needs. The disadvantages, particularly if it is held away from your premises, are that you incur large costs that are more to do with hospitality than training, it is time consuming and it may be difficult to release a large enough number of employees at the same time to achieve economies of scale. - Public courses: These are less expensive than running a training programme in a hotel. You can also select different courses for different employees and so tailor the training more precisely to their needs. Most public courses are generic and the other attendees are more likely to come from big business or even the public sector. So, much of what is covered may be of little direct relevance to your business and quality can be patchy. - Interactive distance learning: This kind of training can be delivered by a combination of traditional training materials, teleconferencing, internet and e-mail discussions. You miss out on the personal contact, but the costs are much lower than traditional training. - Off-the-shelf training programmes: These come in packaged kits, which may consist of a training manual, video or a CD ROM. Once again the cost is lower than for face-to-face training, but you miss out on a professional trainer's input. - Universities and colleges: Many universities and business schools now offer programmes tailored for the needs of the organization. Professional instructors who understand the needs of small firms deliver these. They are relatively expensive but can often be very effective. - Business games, case studies and simulation exercises: A business game is virtually mandatory at some stage while taking an MBA. The game is constructed as a model, usually though not always software based, to simulate an entire company or industry or a particular functional area. They allow trainees working in teams to see how their decisions and actions influence a bigger picture. Outward Bound activities are also popular MBA development tools, using hazardous remote environments to create opportunities for conflict, leadership and the prospects of cohesion. These are also popular as elements in the management selection process. Preparing for development To make sure you get the best out of investment in development, follow these guidelines: - Introduce a routine that ensures all employees attending training are briefed at least a week beforehand on what to expect and what is expected of them. - Ensure that all employees discuss with their manager or supervisor what they got out of the training programme – in particular, did it meet both their expectations. This should take place no later than a week after the programme. - Managers should check within a month and then again at regular intervals to see whether skills have been improved, and that those skills are being put into practice. - Evaluate the costs and benefits of your training and development plans, arriving at financial ratio such as return on investment, and use this information to help set next year's training budget. Managing change The story told in business schools to illustrate the dangers of ignoring the need for change is that of the hypothetical frog dropped into a pot of boiling water. The immediate impact of a radically different environment spurs the frog into action, leaping out of the pot. The same frog placed in the same pot, but where the initial temperature is much lower, will happily allow itself to be boiled to death, failing to recognize the danger if the process is slow enough. The first task of a leader, therefore, is to define an organization's purpose and direction. This inevitably means changing those in response to changing circumstances. Why change is necessary The need for change comes from two main directions: either a new impetus from outside or inside the organization; or from the natural evolution of the organization itself. Impetus-driven change These are the primary sources of the impetus for change that disturb the equilibrium of an organization: - New management: This doesn't always trigger change but the temptation to tamper with even the best of organizations is usually too much for a 'new broom'. The person appointed almost invariably will want to put their stamp on strategy and structure; if all was really so hunky-dory, why appoint them in the first place? - Competitor behaviour: This can be either new entrants or existing players changing the dynamics in your markets by competing with better products, lower prices or smarter operations. - Technology: Changes here can hit whole business sectors. For example, the advent initially of online DVD services and more recently of broadband delivery has profoundly changed the environment for the retail video rental business. - Economic, political or legal environment: These include such factors as: business cycles altering demand levels radically; changes of government with consequent shifts in expenditure and taxation; and regulatory changes such as those affecting the tobacco industry and its ability to promote its wares. Natural evolution Organizations are in some ways like living organisms and have a natural progression from birth through childhood, adolescence, adulthood, senility and death. Some stages in the process for an organization are easily recognizable. All have a start and finish date and though their life span varies, for businesses at least, the average is around 35 to 38 years. Some last much longer; there is a small club for businesses who have been around for over 250 years. (Japan's 1,400-year-old Kongo Gumi may be the oldest business enterprise, but guns (Beretta), banking (Rothschild) and booze (the Gekkeikan brewery founded in 1627) also feature strongly (see 'Business history').) The phases of growth Larry Greiner, a Harvard professor, identified the key phases an organization has to go through in its path to maturity. (See Figure below ) Churchill and Lewis (Churchill, N C and Lewis, V L (1983) 'The Five Stages of Small Business Growth', Harvard Business Review, May/June) refined this for small businesses. FIGURE: The five phases of growth SOURCE: L E Greiner, Harvard Business Review, July/August 1972.
Each phase of growth calls for a different approach to managing the organization. Sometimes strong leadership is required; at others a more consultative approach is appropriate. Some phases call for more systems and procedures, some for more cooperation between staff. Often leaders believe that taking on another salesperson, a few hundred thousand square metres of space or another bank loan can solve the problems of growing up. This approach is rather like suggesting that the transition from infancy to adulthood could be accomplished by nothing more significant than providing larger clothes. Managing the process Because change is inevitable and unpredictable in its consequences doesn't mean that it can't be managed as a process. These are the stages in managing change: - Tell them why: Change is better accepted when people are given a compelling business reason. Few bankers would question the need for change after the 2008 debacles at Bear Stearns, SocGen and Northern Rock. - Make it manageable: Even when people accept what needs to be done, the change may just be too big for anyone to handle. Breaking it down into manageable bits can help overcome this. - Take a shared approach: Involve people early, asking them to join you in managing change, and give key participants some say in shaping the change right from the start. This will reduce the feeling that change is being imposed and more brains will be brought to bear on the problem. - Reward success early: Flag up successes as quickly as possible. Don't wait for the year-end or the appraisal cycle. This will inspire confidence and keep the change process on track. - Expect resistance: Kurt Lewin, a German-born professor at the Massachusetts Institute of Technology (MIT), was one of the first researchers to study group dynamics and how change can be best effected in organizations. In 1943 in an article entitled 'Defining the Field at a Given Time' published in the Psychological Review, Lewin described what is now known as Force Field Analysis. This is a tool (see Figure below ) that you can use to anticipate resistance to change and plan to overcome it. - Recognize that change takes longer than expected: Three researchers (Adams, J, Hayes, J and Hopson, B) explained in Transition: Understanding and Managing Personal Change (1976, Martin Robinson, London) the six stages that people go through when experiencing change and hence the reason the process takes so long. The stages are: immobilization or shock, disbelief, depression, acceptance of reality, testing out the new situation, rationalizing why it's happening and then final acceptance. Most major changes make things worse before they make them better. More often than not, the immediate impact of change is a decrease in productivity as people struggle to cope with new ways of working while they move up their own learning curve. The doubters will gloat and even the change champions may waver. But the greatest danger now is pulling the plug on the plan and either adopting a new plan or reverting to the status quo. To prevent this 'disappointment' it is vital both to set realistic goals for the change period and to anticipate the time lag between change and results. FIGURE: Force field analysis template Monitoring staff morale One way both to identify the need for change and to keep track of progress while implementing changes is to carry out regular surveys of employee attitudes, opinions and feelings. HR-Survey (www.hr-survey.com > Employee Opinions) and Custom Insight (www.custominsight.com > View Samples > Sample employee satisfaction survey) provide fast, simple and easy-to-use software to carry out and analyse Human Resources surveys. They both have a range of examples of surveys that you can see and try before you buy, which, who knows, might just be enough to stimulate your thinking. Culture Culture is the defining issue for HR management in international business. A company operating with most of its key employees born, educated and domiciled in one country or region can reasonably expect to build its HR strategy in terms of recruitment, motivation and management within the scope of a single dominant culture.
Geert Hofstede, a sometime Visiting Professor at INSEAD Business School in Fontainebleau near Paris, France, and a Fellow of the Academy of Management, conducted research with IBM starting in the 1960s, to survey and analyse information about the cultures from some 70 countries. His definition of culture derived from social anthropology and refers to the way people think, feel and act. Hofstede defined it as 'the collective programming of the mind distinguishing the members of one group or category of people from another'. The 'category' can refer to nations, regions within or across nations, ethnicities, religions, occupations, organizations or genders. A simpler definition he offers is 'the unwritten rules of the social game'. He identified four main dimensions of a nation's culture that the international business person needs to come to grips with to understand culture: - Power distance: a high power distance ranking indicates a society with inequalities of power and wealth, and where significant upward mobility of its citizens is not possible. A low power distance ranking indicates that the society promotes equality and opportunity for everyone. - Individualism versus collectivism: a high individualism ranking indicates that individuality and individual rights are paramount within the society, encouraging the forming of a large number of loose relationships. A low individualism ranking typifies societies of a more collectivistic nature, which have close ties between individuals and everyone takes responsibility. - Uncertainty avoidance: a high uncertainty avoidance ranking indicates that a country has a low tolerance for uncertainty and ambiguity, necessitating a rule-orientated society. A low uncertainty avoidance country is less rule-orientated, more readily accepts change, and takes more and greater risks. - Masculinity versus femininity: a high masculinity ranking indicates that the country experiences a high degree of gender differentiation, with females being controlled by male domination. A low masculinity ranking indicates that the country has a low level of differentiation and discrimination between genders; females and males are treated equally in society. Hofstede's scores for his dimension study, a portion of which is shown in Table below reveal a clear difference between, say, the United States where individualism is highly rated and Japan where teams are more important. France and the United Kingdom are at opposite ends of the spectrum when it comes to the potential for upward mobility. TABLE: Selected country scores for Hofstede's culture dimensions
Hofstede's is not the only system used to get a measure of cultural difference. SH Schwartz who studied at Columbia University has developed the SVI (Schwartz Value Inventory) studying 10 value categories (http://changingminds.org/explanations/values/schwartz_ http://changingminds.org/explanations/culture/trompenaars_culture. htm). MBAs should have at least a nodding acquaintance with all three of these international culture analysis tools. Why understanding culture matters Cultural norms vary greatly from country to country. An American, British or German executive kept cooling their heels waiting for a Spaniard or South American to show up for an appointment may feel irritated. Time matters more to the former group, while the latter may feel completing a discussion more important than the consequences of cutting it short. In the Western world time has a more precise definition than in Arab or Mediterranean cultures. People accept differences in power in very different ways. In China the meaning has to be inferred or implied while Americans use direct language. It's not that one culture is evasive and the other rude; that's just the way they are. If you are working in the international arena having an appreciation of these differences is vital to successful business relationships. What determines culture? Culture is shaped by a number of factors, of which the following are generally accepted as the most important: - Religion: these are beliefs shared about leading a particular way of life considered to be 'good'. - Language: both verbal and non-verbal language – facial expressions and hand gestures and the like are a further defining way in which a culture is shaped and groups of people are bound together. - Education: the extent and depth of a country's education plays its part in cultural development. From an international business perspective the availability of well-educated customers or employees presents important opportunities or challenges.
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