Blogging about

The Bottom Line

Evan Davis gets to the heart of the big finance stories at The Bottom Line.

Traditional management practices are associated with an approach that emphases the monitoring, evaluation and control of organisational activities. Some people feel that this approach treats workers like children who need to be told what to do and that a more open approach treating workers as adults is more likely to draw out the best from staff.

Over the past several decades there have been competing trends - on the one hand to empower workers and, in theory at least, push more decisions down to the front-line, and on the other increasingly intrusive scrutiny of daily work. We know people are more likely to be happy when they have control over their actions suggesting that managers maybe be well advised to give employees as much freedom as they can over how they achieve their goals if not the goals themselves.

Quite a bit of research suggests that creative companies tend to have more open cultures where staff are able to challenge the received wisdom and do not feel obliged to look busy. In contrast non-creative climates are often much slower to react because committee-bound procedures slow the decision process and a 'do not rock the boat'/
'watch your back' culture inhibits the possibility of ideas for improvement being heard, let alone acted on. If your company is checking every last penny of your expenses be worried!

However, one size rarely fits all. National values also affect the expected style of the organisation culture. For example historically Chinese companies have run medium size organisations much more informally than their Western counterparts (who they view as somewhat hampered by procedure) whilst accepting that Western style governance practices are necessary for large enterprises.

Staff also differ in the extent to which they favour openness and guidance and this variation is related to the nature of the job they perform as well as personality. Those at the creative end of the spectrum, in research and development for example, tend to be motivated by job satisfaction and work much better if given maximum freedom to explore areas that interest them and follow their own hunches as to how best to move from an idea to a prototype. Further along the innovation process, in production for example, employees often prefer more direction with clear goals and milestone and can move more rapidly with group rather than individual incentives.

Find out more

For more on management style, organisational culture and innovation management around the world see the Open University Business School's Creativity, Innovation and Change course.

Do we need rules in the work place? Evan Davis ponders a workplace without rules

About the author

Jane Henry is an applied psychologist. She chairs the Open University Business School Creativity, Innovation and Change programme.

Subscribe to Jane Henry's posts

 

Blogging about

The Bottom Line

Evan Davis gets to the heart of the big finance stories at The Bottom Line.

Questions such as these have fascinated sociologists for more than a century. The German sociologist Max Weber identified what he described as the formal rationality of rule-based bureaucratic organizations - i.e. the predictability of organizational outcomes as a result of expertly trained people following established organisational rules as a key element of their increasing success.

These ideas and a series of studies led many organizational theorists to argue that the ‘bureaucratisation’ of our society was both increasing and inevitable. For example over 50 years ago, Alvin Gouldner carried out an extensive study of the below and above-ground management operations of a gypsum mine. His work suggested that there were a number of different types of bureaucracy:

• representative bureaucracy
• punishment-centred bureaucracy
• mock bureaucracy

Each of these exhibited different attitudes to rule-following.

Although in a mock bureaucracy a rule might exist, nobody paid much attention to it. Gouldner, writing of 50s America discussed the attitudes at the mine to the ‘no smoking’ rule. Despite a plethora of signs, one miner is quoted as saying

‘We can smoke as much as we want. When the fire inspector comes around, everybody is warned earlier… The Company doesn’t mind’.

This attitude was in stark contrast to that towards safety. Perhaps for reasons of enlightened self-interest, people here adhered closely to the rules. Safety systems supported by paperwork were devised and relevant statistics collated carefully. In the third bureaucratic type Gouldner identified, not following a rule resulted in direct punishment. Perhaps times have changed. Gouldner found who initiated the rules, whose values were enforced, explanation of why rules were ‘broken’ and how they affected peoples’ organizational status differed markedly between these three organizational types.

In mock bureaucracies, Gouldner found no-one paid much attention to the rules, there was little conflict between different interest groups and joint ‘rule-breaking’ served to reinforce community spirit.

In representative bureaucracies, however, everyone enforced the rules. This might create some tension, but, since there was general agreement on what the rules ought to be, there was little conflict. Indeed, there was a sense in which everyone pulled together to ensure that rules were followed.

The situation in punishment-centered bureaucracies, however, was rather different. Rules set by one group were evaded by others, tension and conflict were rife and rule-breaking led to punishment that reinforced the entrenched (and often negative) attitudes of one group about the other. So what, if any, lessons can be applied from these ideas and historical studies to the present day?

The ‘formal rationality’ described by Max Weber referred to procedures that determine, in numerical or legal terms, how the efficiency of bureaucratic rule-following can be measured. As Weber was at pains to point out, however, just because we can quantify and monitor something, doesn’t guarantee that the rules produce efficiency. Recent evidence- not least from the English National Health and police services - suggest that bureaucratic performance targets can become something of a self-fulfilling prophesy.

Targets may divert peoples’ attention away from other, perhaps more important, concerns. Rule-following and target-achievement can become displacement activities which become ends in themselves. This phenomenon is referred to as bureaucratic dysfunction.

Although there is a lot of quantitative data available about public sector performance, and as such, it provides an easy target, clearly dysfunctional behaviour is not a public sector preserve. Private sector investment bankers’ remuneration provides a topical, if now rather well-worn, example of just how badly wrong things can go for everyone if highly-motivated and talented people zealously apply particular rules.

Given the tumultuous economic and social changes such ‘rule-following’ has bought about, perhaps this is a good time to re-think whether or not tighter control is the only, or indeed the right, solution to achieving the sustainable and efficient socio-economic organisation of work.

Find out more

Do we need rules in the work place? Evan Davis ponders over a workplace without rules

Managing in the Workplace

Managing Performance and Change

Fundamentals of Senior Management

Strategic Human Resource Management

‘The Ideal Bureaucracy’ by Max Weber
in Organizations and human behaviour: A Book of Readings edited by Gerald Bell
Published by Prentice-Hall

Patterns of Industrial Bureaucracy by Alvin Gouldner
Published by Free Press

Control and Ideology in Organizations edited by Graeme Salaman and Kenneth Thompson
Published by The Open University Press

About the author

Caroline Emberson is a lecturer in retail management at The Open University Business School, having previously worked in the fashion and textiles industry. Caroline's research interests include managing in supply networks and the development of customer-responsive supply chains, in particular the use of business-to-business information systems.

Subscribe to Caroline Emberson's posts

 

Here’s a little two-part test for you. When was the last time you heard someone in your company or organisation talk about change? Changing strategies, changing business models, changing culture, changing attitudes... yada yada yada. I’ll bet it was recently and I’ll bet the time before that wasn’t too long ago either. Modern management philosophy seems obsessed with change. Now here’s the second part. If you have been around long enough, say five years or more, to look at what has actually changed in your organisation, how much real change do you see? Discount the superficial stuff like titles, organisation charts and so on. How much of the essence of what happens in your place, the good and the bad, has changed? If you work in an organisation that is typical of the ones I study, the answer is “Not that much really”. The French, as ever, have an expression for this. Plus ça change, plus la même. The more things change, the more they stay the same.

When I was a young graduate trainee, I sometimes wondered how it felt to be one of those senior guys who always talked about change. I imagined the feelings of power and authority and looked forward to the day I’d get there and would be able to put things right. . When I got reached that level, those memories seemed innocent and naïve as my dominant feeling, and those of my senior peers, was that of frustration. Everything we tried came to a fizzle, rather than a big bang. Why, I wondered, was it so difficult to get anything done? I got an echo of those frustrations just the other day when I read about Adair Turner, Chairman of the Financial Services Authority, was talking about changing the “bloated” and “socially useless” sector that he’s in charge of regulating. Now there’s a man with a change-management challenge.

all the good stuff is wrapped up in jargon

When I moved into academia, I was surprised and, to be honest, a little irritated that there existed a whole body of research that spoke directly to these frustrations of senior managers. Surprised because I considered myself a pretty well-read executive and irritated because if I’d known this stuff earlier it would have helped me get things done. The problem is, as with much management research, all the good stuff is wrapped up in jargon and published in journals that managers never get to read.

A good example of this hidden but useful work is institutional theory, generally acknowledged to be the creation of Selznick. In essence, this body of work describes organisations like the big banks as being confined by the values of their external environment. Dimaggio and Powell expanded on this, describing three sets of pressures: coercive (legal), normative (cultural) and mimetic (seeking to imitate). Their paper’s title “The Iron Cage Revisited” is a pretty good description of how many of my management colleagues felt. When I first read this work, the scales fell from my eyes. Some of the pressures were obvious in my job (e.g. coercive legal and regulatory pressures) but others only became understandable when I put my experience in the context of institutional theory. The hassle I had gotten from research and development, for example, or from the sales team, were obvious examples of normative pressures stemming from the sub-cultures of their professions. And mimetic pressures were clearly seen in all the pressure to adopt “industry best practice” that, whilst we justified it in rational terms, often seemed a senior management whim that we were forced to serve. This rationalisation of emotional whims is also discussed by the institutional theorists, who talk about “rationalised myths” as a way firms maintain “social legitimacy” in their business environment.

I now use institutional theory in my work trying to understand how firms compete. I’ve discovered that the jargon and journals aren’t the only reason this valuable knowledge isn’t used much by practising executives. The other reason is that they usually prefer simple, quick answers and institutional theory doesn’t do quick and simple easily. It needs thought and careful application. Take, for example, the question of how to reform the banks which, as I write, the G20 finance ministers are grappling with. If they understood institutional theory they would seek and answer that addressed the three sets of pressures that “cage” that market and make it act the way it does. But this sophisticated approach would be difficult and wouldn’t make for good, politically useful, sound-bites. So I predict they’ll take a simplistic approach and shout about bonuses, which is easy, politically popular and practically useless.

So, whilst I try not to have regrets, I do regret that that I’d not learnt about institutional theory earlier. It would have made me a more effective, and rather less frustrated, executive. Still, if you’re an executive reading this, there’s still time for you. Brave the jargon, throw out your suspicion of the academic and learn some more about institutional theory. Or of course you could create a rationalised myth for why you don’t. And stay in your iron cage.

Find out more

The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organisational Fields’
by P DiMaggio & W Powell
in American Sociology Review, 48

Leadership in Administration: A Sociological Interpretation
by P Selznick, published by Harper and Row

About the author

Dr Brian D Smith is a Visiting Research Fellow in The Open University’s Marketing and Strategy Research Unit. He is the author of over 100 books and articles and runs PragMedic, a specialist strategy consultancy.

Subscribe to Brian Smith's posts