Richard Pettinger

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Management
A Concise Introduction

Richard Pettinger
Principal Teaching Fellow (Reader) in Management Education
University College London

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© Richard Pettinger 2012

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For Rebecca
 Contents

Listop figures Cid, Cables. snce sets, ater te eee aa Ee Re eT 1c x

Preface Mn LE PR I aN RR cysfn Pe xi
ACKNOWIEd SOTROIIS.. <cesSc orl ween tee ce eee ace ee XV1

Part 1: The foundations of management.................... i

INE
OU UCLION cs Saco eco et te co ee 3
IprocuChrOnpetA etl. be Saale deus wis" ae i ee 3
Manarement tesearcn and literatiite. 2.4.02 <a ae 13
The continuing professionalization of management ....................... 14
Corie list anise. ces Oy ae alin ere ate aie ines series 0s eR aa ai Pe 16
Organizations, managers and the environment ................ 19
Jrtroduetiou: ter geen eer ree we ees be Ua oe 19
The nattire-ofthevenymonurente a gee oF enact. ox ye ee eee 20
Analysing-the environ enlge gaat ese cc s6l shee geen ee Ze
Environmental analysscant. ery wee ome cep ees. 20. Ee eee a
Setting priorities “aims and: objectivesi. 9) o. - w act oa eee ec ee 15)
Organizational'considetationgeye" 1.52 gee oa ot
Management:style wr. .cyynn. asso ante iets tan ono habe cre comet ee a 307
Conc Wists aay oer teeters ee 5 od So eg ere eee ee ee 4]
Managing in a changing environment .......................... 45
Introductions ee, ie. ee OS en eee eee 45
Thevdtivetorm Chances: v0. crt agen «a.ciretcct ares. tree meas eter nee ee eee 47
Barrierssto-eifectave"qnanse © ..0.. 1) 0. oxe ee. ok ae 48
Changing eultnresand stractares® 4st) aon Ome ee ee o2
Change tatalyst andtchange agent... -.. ocean cs eee 34
Changing attitudes and approaches to quality, value and expectations ...... a5)
Current managenaliassues* 5. t-cccen cso s.8 eu ee Sith
Conehasions, 206 Sec fos ete ie tite cred een ae 61
Kthicsand. corporate covernance;.),. 4000 ne ee 65
Tntrodipetionty: 4s. caue yes hese ee ces en 65
Sra Weall 3,ocsce Beemgs oho ig canes eee a ae 69
Relationships with employees: (yn... cosas aera 70
Moans atid ends 2%. sc. 5. ee os beter ete eee er ie
Standards of conduct-and! behaviour /.<509-. ree ee 73
Managing shareholders’ interests .....2) eae ee (@
Managing statt interests %1... «<v\1e enna aetna ancien 74-
Managing other stakeholder interests ...........................! ere 74
Probity and integrity <1 <2. 2 sees ee ee W
Mona ging dishonestyrAen ttaden, segenadth at Sidi euate tide MAM. oe 76
Rewards for top and senior management .............. 000 000eeeceeeeee-
0 ih
COnClUSIONS Sr iat tn car nA ney Sytner isbaton. ea habost aretha a9 $1U

Thepracticeof management wl oo) ee ee 83

MEPOCHCHOne Bon coe FePestann seater tanto mere ere Stee Re ee ee 83
Pressures on organizations and managers.....................2-+-0-+0e0- 34.
SMstalvealoilityn meee te eR Nee) Ae Pe ei ane eee eae 86
Envaronmentalspressures:..1.. «7.1.78 ae aa th Ue OA 87
Resourcesand resoureinpe asses aq. i02n 70 banc cane oe eet oe 88
Ese) (ULC "Ais hehe 0c, Pe A eae Oe Reet ee TET LON Ce, oA, 89
Performance manazement im <1. 20.5... 2 eben Tuer eat ne 91)
Conclusions........ RY eet Se tek rie onl sles aaNet lpn a apna 0 Gok 97

Part2:)Management'and peopleys) oe ean eee, 99

CULECE etree sce ta ae een Fcc ees eld Be Oe uh eR eeeOr ie 101
Introduction:eqess wun £ sper acct Peyote, poh nye o oun ret ome OR 5 101
DefinitionsoL culitites 5 met paved is. ae eon a eee 102
Developing an understanding of organization culture .................... 106
Pressutesonro ganization cultures 544) ee
... 109
Othenaspectsot orvanizational culturereortnjen. ain oe is
Culture management and attention to culture .........05. meee. 116
Gonelusi6ns ts a5 acy crore. ate errs emcees Wie ta gene eee, 5G, NZ
(ommunicatiotiws.s cemetet de ee e ee as:
ARETOCUIC EGU ec pied cree co. ea 622 nia gerd ota AER Oe re 119
Communication stractutinw ie sane ee tee ek ieee tear tee ae 120
Channels oiconmnitiicatons.. 1... eo oe et: oe eee 121
Communication policies andeprorities)..t)0.- a. s st ee en ee 123
Principlesomeliective communications...) . 82 ...-ep ee ene ee 124
INON-Vetbal communiCalon yeas ee cone ni a ag a tee ah ale es 126
anid ers AN DIOCKAGCS 8h icy eed Joli s,5 oda soo Len RE ee 128
Orcanizattonal (OxiCity io od 5 cersicotc wc «oes sd caste AO ee 131
INSSELLIVEN CSS UE CRs can one ai 2. cei net 27.) cya ee ae 3 132
Nevotlationcts:samee. 1 atl eo Mrs Retr hn ak ee ee BA oe 133
Conclusions peters. fee rh: eee Nye hyface shoreen ns beak i. ee
Management influence, power and conflict ................... 139
IADEOCIIG LOL e mera Kee REM en tgs Sinn eae eho eC eee en eee 139
Sources. of power anduniuence: sins, Sie POSE) EU ER EET. aed 140
Centres ompower im onganlzallOnS.e-caq cc. ee het iho. cn es 23 142
Orearnzationals WOlltlce emer eee, ied okey, 8s ey MAS ona 145
We TeelOn sears te sy eer as do eh oe ND RU MALE oe 149
Nistcestolpower-and miuence,, \7.. Bandera rrisdetice on toselilinthh: ox. 150
Oreanizational intesrihy and toxicity. sesetidn haucme deus rat de edness. :Bell
Contlict sine peiee tne Peete fe es hye inlertuase Ball eee. ox 153
@ontlicumianace micnite et tee eal! 4s ute ccnh ame oes 155
Conclisioncss eee aren Herts nee Flare. be ee epee 156
PIMIATLCcOUrCenmamaCCMeNt 7 tin 4.2. ok EU ue 159
[AEC ACEI a eR 8c co, cede hee oa 159
 HR ‘strategies. 2:sccss.c4 wens o aster beei en ght eee eee eh a ea 160
HR. and employmentlawese et pees Se ite etre 162
@
s1uau0) The principle of equality’and fanness.. 20.0... Pane a 162
Attraction, recruitment and retentions 4g eae ee ee eee ee 166
Maintenance factors in human resource management..........--...----- 169
Employee relavions 1c. = <cus.5 oe eee ree ea Li
Conclusions hc isc eon hd che 2 tne a eg igs
10 Leadership and management... =... gee eee 179
[nitrodltnetionse. is. peticein. ose ec eR 22 Lio'=
Leadership in: Practices, secs pis: fos nace ces a pe eR 180
Trans andicharactéristies,..5. 000. <<) ce ee a oe 182
Keadershipisty les! oe .-cus sar eee ate A A he 183
Contingency approachés.\:, J... i.) ofan <2 hin ot ee an ee 187
Meéastres of sticcess and failige mane eee ie ee ee a 192
Gonclustonse...so-nekenan tides iors octet: Siemens a ees as Oo ae ie 195

Part 3: Strategy, policy, direction and priorities.......... 197

11 Strategy, policy and.direction taal area s
ah peleyalh 199
|FivaKe8 L5(e)4(6) ern MRNA UR ee ek ot neo et Marae 199
Corefoundationsand.genericistratezies ye at eeteeee FO 200
The development of strategy, policy and direction .....................-. 201
Thejoundations, of organization sttalesynne <0. 4- ee ee 205
Corevand-peripheraliactivities..,. 25: sas eee ee ee 206
Strate ros foetal litera let MMe ws Ls Rom ee 207
Sirabegie approaches. crag Scenic eee nk. oer Co sen, a eee 208
Measurementiand evalwation,.... <> ocecds 4. suhies scene eee eee Zs
mp lementationol Stabey cos cs eae ts ree 214
Conclusions es scout a1 .eyereh 5) eee eer son, del es a 216
12 Marketing: «4:2. 0 Prstnw anaes Sn ondeetiearor eee decent 219
IntroduGtiOnin. nese ae ee epig PSD J ike 0 RO Io ee 219
Marketing strateg1s) cc coe cciscin eee ere ny seen Oe eR 222
DO PNNSNIT
ALS OMe erga Mam least hee gah vcs ht Sinan ee 223
Marketitig mines a ocssigt x.acc.acedgy ene coco ies Gaal. ee Zoe
Marketing research and development s< 2... sae. oo... oS ee 234+
Publiewelations: «2% mccerert no Berchet becrake wun. & Salus Pier ea vennce ate cell 235
Conielistong pF ci e a ohclastic. i STR Bs es he ear Ree a 236
13 Managing operations and projectsmsatin Ieeqoeea: lean 239
Introductions .icriacua to wee e eae Pee an Tee ae bo 239
DQ CANON opespeaas caperarssnscrnh ea ovens ae cc Rie ee 242
Health: and saleby sxclre iene vhnidety cladotes ener anne ean ee 244
Quality of working environment... 62eun een eee ee ene ee 245
scales. of production and outpub,... Seine Ae, Swen, Meee ne 247
Managing the supply sidéw, ce.satciee ancien ae ete ee 250
Goto... decseisteesns Topee-apsamatnneacaitds-s Gaede hassel ee een 202
The complexity of operations and project management................... 254
GomGlUs1Ons. 4, on.» 25s46 oi Sead Seats ee ee 250
14 Financial and quantitative aspects of management............ 259
TCROUE (OnE eet. Gee eed etn nae | eas se ipa 3: 259
dhe’content ot fmancialimanagement... =. Sue neeHRe only... 260 sua
Uhe-context-of tmancial management emer a ... eeneaias 8 261
PC COUIMESS oa Foerster aaah ta ie cane ae Aad trie Daren, Uk emi er ep 261
Identification and management of costs ........0.00 ......0
ccc cece eeeee. 263
Pinancjal-perlormancemanagements.. 0. 4)... 4.0.00. Ae 204
Bite Sete vaste.) ka S.c karen oma” 8/5) 0.0 oy. <9 SiR eaN Neth eee GN 204
Mesets and lnabilitiess &. 4gs:ehere yoo. c eae Re ee 266
Value and:valtiations ).*4) tnt -eiivala Seon rel um tue corer toy 267
Investment appraisal 2. austse a Teele RoR DOMINOS mete ©. 0 2a
Other numerical datas g . ey ccc ae. ee ele Ln Lee eee ee 274
Decision iia kinins Race ns as ant coe, MSM, one DUS)
COnCIISIONS 6 a rr ae Deen eee ee ae AE EL ec eS 276
15 Organizational and managerial performance................. 9
Inatrod Wetton Sh .UG cA. 0 osc Meee aiTT Me Thee ae metre aerial Le coer 219
Prerequisites for successful and effective performance................... 280
Components of successful performance... 2.0. i isus se veroed is... 281
The practice of performance measurement and assessment............... 285
latornation Seems (ths Mare ee sem ae Baas TEE 286
Resporsilorliiieseg \ 1) 5 ete EA cele celcas a pee eee en D2 oe: 287
Priomivéssaimetandiebyectives: tulund 405 a PIN eee Ao 289
Assessinent ane pid gemiontiyniys Syeee mes mers Serie le bite way ale. oe. ag)|
CONCIISIONISE UNE UE Uhr 2 aya ty cS ST ee eet he: 294,

Part 4: Enduring priorities in management............... 297

16 Take hae Sierras VS SAAN Gs ow Sack ies ali eagle oe de 299
lnitracdiictionmmmmner peer trees tmnt a Nil eek til mee Foe eee meas Pea 299
Riskerciic: CEWakCome pee Pee nee secon, tage WN.Sn eer rnc BAG ee 300
iiiterimabColloctiymerme re Wie ot ncn oo he 2c acter th eae Ree 301
terials colleiverrsetact cba 2 5c 2 eens ce Me ca oc Re eee RN te 302
Strate cicmisk-mallacenient: sate Oro 2° keer 5 ks he a ee 302
Factors outside the control of the organization ..............-.++.+4++05- 307
Operational approaches to risk management.......................-..-. 307
TATA DUSYA le Sane Repco a eee aR ese CRO S Ce wn vent 310
A Dp lyin Carlee MANA SEMEN ca a. h corte ee coving Roca Ana anate ne: ol2
Othemaspetis OL risk managements «ce inca te yada este as eee os. LO.
Coc LUSION eSNee eA engage een eS MS Ae ee eek Henne 5S Slt
17 Management-and Mouvatlone. ss, ..52. eee
on L450s: eo 321]
LntVOCU CHO eectar Voom eee Lee Be crigcee cs abba gira aie df 5VAll
MWonkplace mOtl Vall Olly mmeiA en rg etoile RE aak pls aa Bae
VIOLET AULT CITT COTIULYCo MAU aM ates et ey Ho Td ays)
Motivations coaleramd amDIONS er ee co gees He as fig Reggie we PEs we 3 324
NESVOR titeaties OleIMobny allOlemmra test geet hl ele gar heen x SE Seen 327 «
The psychological partnership and contract..............-....+-.+++++..337
Motivation, incentives and money... 2... 2. ee ese eee +s vn OOS
COP OUNRSRSY, ee ree eee 1)
 18 50-00 eeee 343
Management on a daily basis...................-
Tinto hoi ne Mee ne eens aan bagstxtery omeect nce oe eo 343
S1UaIUO>)
@ The managerial rolee.<'). 020.750; Meena, i et A ee nee re 343
Attitudés:and: values. 2.00 227.0, eae Le Pe Trea tree 344,
« Managing. by walking about. ene te ese 2 eee eee ar 346
Wait Arnie 5. <.s,<casea.cd URINE Oe Re came AAR OS TREN neve cane 347
COTO ees o'8. Reh ee a a ITE NE RSS en era 348
‘Timeimaragenient. Glue cee per ee ee ee 390
Interpersonalskills. co. x..c.ciGencctvre sero enee ka are el ots 351
Setting. and maintaming standatds:.~. 2... 2..seee eee OA 393
Continuows pertormance assessient ....... 2. see ee ee 304
Survavalkandelfectiveness:......0 coo a> cata as eee ee: 354
C1 WARSI OTS taco a acest oe ae aceoe ceee 356
19° Management developinent=. 05.
ee ee 359
Introductiont:: «1; DOPE Ae Le eee SE Eee ee ee ee Signe)
The-professionalization of management... 0.11... ). 0 seen nee Pee 362
Professionsat... let nvr ig Pinal aa, Sere SE, i) APs ee 3: 304
The:body-of expertise 27.« 0.3. ere gee Uae Maree Oe SUERTE en 305
Different approaches to management development ...................... 367 °
Managemient.qualifications:.< fas... hs Surtees age re tee 368
Organizational and environmental expertise ....................-+....-- 370
Management development and product and service enhancement ......... ot2
The use and value of management development activities................ ato"
Continuous’ protesstonalidevelopmient.. ... =... 0... .a ee eet 376°
SUCCESSION and transtOrmation twa. 5 eno: oe een ee oe ee 377
Costs and ben elites ease eet Gor were Goulet eed eee i ee 378
Coriclusions rs Paces ee ee Ne ek eek i ate een alles oh ee 379
20 Managing in a global and international environment.......... 381
IntrOCUICHiON sr. es a eed ergo aon noe enon ca Be ee ee 381
Thefoundations of globalization... 0660 6s eee 382
Globalhinilence. = ices Seis Oe ae vant anes ate ee Re eee 383
Thevaxts-of elobalizationz 4:29 ideas ee ee ee CO
Resources, expertise, capability and willingness ........................ 387
Noproaches-tdrelobaligation: cc at na074 tr core. oe eee eee eee 389
Domintancesand:dependente er, -.<7.<.5.. 68-04) e ee eee 394
Culture and behiaviouiterac cae ocercens ce eee ee 395
Responsibility and accountability «see... eee eee ooV
Global:managementthinkings Avaaaeen. ©. 02s ne oo eee 397
Global and international leadership. ............2...... Renee eee yess 398
Conclusionssts saris < new cannw < nol Ae Oe, RO ee eo 399
21 Managing for the present and future..........00.)/2._— 401
Introduction Arrant iA WA ake des oho t a eels ann 401
The present and evolving nature of the environment..................... 402
Thewise’and valuieof technology. acuec.: 2 ate eee 404,
Thetise and value-of the intemiet.eysn.<- ee . 405
Developing professional and expert practice............................ 407
GhESUVICY fico oa TE ee ce a: 407
Clarity of purpose and directions ..4.4.-. ae 408
Core and peripheral business activities 1...0.......0.002 cgecece eas: 409
Dommnantstakeholdendtives (vas eer eo nO. Mn ee ee... 409
Economic and social demands and pressures ...................... 00-0. 410 sau
Investinentererre <u cee BER ee Art ee Mee AR UCR Ae mao OF et 410
Mercere and dak coversawe am iat, oak ne eee ee 412
Sie tures rancecUltUTes pra Maman cei (Meee) ec eee 413
Management and organization development............................- 415
Conc Wisin srry. ienscen eevee Mp ery iis os Lo 4,oate teen Ae 416

Barto sSummary sheets eater 2) s.0. nse ee 419

Chapter introduction saree eps mre at iene cca 2) eee 420
Chapter 2 Organizations, managers and the environment................. 420
Chapter 3 Managing in a changing environment......................... 421
Chapter 4 Ethics and corporate governance..../..............0..0..004. 421
Chapters [he practice of management jay mcuni Woes ee 422
Chars terG Carl fulte taper easter ten Ae este ny ete ee eee ee 423
Chapters Coninuguea longa m eee. a Ae eee ere opm a ieee ee 423
Chapter 8 Management influence, power and conflict.................... 424
Chapter O-umaneresourcemanacement ig)-ci..aludn autos to 424
Chapter 10 Leadership and management............:.........0..00.05. 425 ~
Chanter sSiratevy policy and directioni..1..5 6a Wass e sceeias oe 425
Chapter 2 Marketing oqo. tccent occ Se ae 426
Chapter 13 Managing operations and projects........................05. 426 -
Chapter 14 Financial and quantitative aspects of management............ 427
Chapter 15 Organizational and managerial performance. ................. 428
ChapteglG is kmese re arnt ear dn es ene en ae ere ees 428
Chapter 17 Management and motivation... ........4¢.0c¢e.4e)seuas ds 0 429
Chapterl3 Managementon a daily basis,.....2 . jbacleevoae ume ee 430
Chapter 19 Management development 0.0.6. 2.404. 1 nba hehe
000 Ue Pos 430
Chapter 20 Managing in a global and international environment .......... 431
Chapter 2 Manacine for the present.and futute.7: 2... 30.50 ee ee 432

Biv UO STOP <n PULLCTMCA OM £0\ ele Akt SE OR eee, te AL 433

DRE aah COC cs ie on as ig CAS La LEVER TIES OTR A rer 439
 List of figures and tables

Figures
Zeal S WiOlpanalystsa ne ten ae Ce ee Lee ce 24
2.2 The components-of-a competitor analysicuaac 44a 2 aaah 2 as 29
2: Thesloyalivemiairixe «2.02 cat Sbeeeeneaey Sieh nees fete oats ee AS ss 55 ao
24 oThetoundations of managementsivlesanewm 22.0; oy es as) ae eee ee Al
35. PoUiniree7ine—tWanstorming —telree zie... ieee eee wee ee 53
Sietorcemmelel anal ySisa ihspe ee Se i ae ay i 93
4.1 Decision-making model including ethical considerations .................. 80
Gre The, cultural Web™ wets oer ttre nk facta are ga kh cunt eee 1
(1 Channels of commuticatotigics aan iateutiet come Sa i232
(2 Consultatton process followme adecisiow7 1m. awiee. ee 123
io Mlhemegotiating proceserene etree ey et at LE ARSON 2 SO 136
3) Factors relating to-thercentres ol pOweP—1<. 4.0.4 at Ve eee 143
LOS) Leadership. spectrunins....-.c..AW IRE OC, Oe eee ke 185
LOs2 The manageriaborides: 2) ui0. 20 TAU RD IA ee Repent fae 186
10.3 W.J. Reddin: Leadership and management behaviour.................... 188
LOA A eTNVeLSe PV RAUUG, cee tiie! coos ee Ratt eet ae Pa ee 191
11.1 Source and development of organization strategy........................ 203
11.2 Pre-evaluation of strategy, policy and direction ......................... 209
L133. The implementation otstratecy... 40) scssc.. ce ne See eae)
11.4 The monitoring, review and evaluation of strategy and direction .......... 216
12. “the sBoston Grow mietlix catecce si ahaa adakccs xis ee eee tee Zoe
122. Product liteeycles< ewer ot wce ae hee 2 a oa Oe 233
I>.) Project and operational trade-offs... «.c:0s:..+
s+ eencs ous eee eee 240
14.1 Profit and loss account and balance sheet example....................-. 262
14.2 Cost—benefit analysis for a proposed motorway scheme ................-. Zi
LSsL establishing prrovities ryvs 1-<sca ee em se ae 292
UD SRI A os one5 dts eta 2c cA a ee ee 329
L7.2. Auiowarchiy: Of MEG o,saty rece esa eevee eee ne eee ee eee)
17.3 Teostactor: theory ninigae! yasr4.onc soe eee eee oneseen
17.4 The relationship between pay and performance...................: ee doo
19.1 The environmental-managerial expertise mix........................... 370
20.1 The chain approach to global and international management ............ 383
Zz iievaxis-approachtolglobalization™. ..sare. an tare el ana enone: 386

Tables
sain
Sa|q
pure
Jo
1s
9.1 Human resource management summary........................-.0-0 0. 176
LOM sheadership andimanagementistylesi.: (sac: 6¢Jou. 0) ser inn ee 184
Li? Managerial demotivators and motivators 5.4) ee ee 341
WOM ROosisrandibenehts et sade el myee eats ue ale carne eck eee: ae
 Preface

The economic, social and political turbulence that exists in the world has created
great uncertainty both in countries and regions, and also in business and public
service organizations in all sectors and localities. The collapse and bankruptcy
(moral, as well as financial) of organizations in the political, financial and energy
sectors in the recent past has called into question and examined in minute detail the
conduct and expertise of those who held top, senior and key positions. The conse-
quent pressure on financial and other resources now means that those responsible for
leading, directing and managing organizations for the future have to be able to get
higher levels of effective performance out of a greatly diminished resource base.
The ability to lead and direct people, and to create and sustain organizations that
are capable of survival and effectiveness, has therefore never been so great. The key
priority is to know and understand the expertise that is required of those who are to
lead and direct — to manage — the organizations of the future.
This in turn requires that ‘management’ is recognized, understood and valued as:

e having a defined, agreed and accepted body of knowledge, understanding and

expertise;
e having a professional and expert standpoint that commits those who find
themselves in positions of responsibility, authority, influence and accountability
to particular levels of conduct, behaviour and performance;
e making the critical difference between organization success and failure, and
knowing and understanding all those factors that contribute.

If this position is adopted, some things start to become clear. It is clear that the
effective and successful practice of management is founded in knowledge and
understanding of the environment; of how companies and organizations behave and
operate; of products, services and markets; of finances and investment. It is clear
that those in positions of authority and responsibility have to be able to serve (and in
many cases, reconcile) the legitimate, divergent and often conflicting demands
placed on them by their constituents and stakeholders. It is also clear that all
organizational activity is founded on a fundamentally competitive basis — that at any
given moment there is competition for products and services, competition for staff
and their expertise, competition for customer and client bases. There is competition
also between staff for opportunities and promotions, competition between organiza-
tions and departments for resources, competition between regions for jobs and work
and the prosperity that goes with it. JdPJO
There is therefore a drive towards. the professionalization and professionalism of
management. In many cases, those who would quite rightly hold to account those in
positions of authority responsible for medical errors, would themselves be horrified if
they were to be made accountable for their actions just because they were managers.
This in itself is enough to define the need for a clear body of knowledge, understanding
and expertise that all managers ought to have before being allowed to practise.
So there has to be a different approach. The drive has to be towards defining
management in professional terms, with its own clear body of expertise, ideally with
some kind of core pre-qualification that is demanded before anyone can be placed in
any position where they have authority, responsibility and accountability for their
actions; and for their impact on the very future of organizations and therefore other
people’s lives.
However much one may know about the law or medicine, those aspiring to practise
have to have qualifications in order to do so. This therefore needs to be the same with
management. It is not enough to have people placed in managerial positions — posi-
tions of leadership, power, authority and influence — without qualifications, simply
because they seek progression and advancement, or because organizational history
and trends require that people are promoted to management rather than having the
necessary expertise to practise.
It is clear finally, that all of this takes place in an ever-changing economic, political
and social environment, and one that is increasingly technologically driven. All of
this brings clear commitments, as well as expertise, that ought to be the foundation of
professional management practice.
The core of management is defined as:

e using and consuming resources effectively and in the pursuit of stated aims and
objectives;
e achieving things through and for people;
e delivering performance and making a profit;
e coping with change and uncertainty.

This has to be delivered in the context of what is possible and feasible within the
existing and developing environment. It has to be delivered both for the immediate,
and also for the long term. There is a great variety of courses and education available
in management; and this means that there is a collective recognition that manage-
ment needs to be taught and learned, as well as applied. This in turn means that the
principles and foundations of management can be taught and learned — they do not
just appear or materialize.
This book is therefore presented as a foundation stone for management education,
covering the range of skills, knowledge, attitudes, behaviour and expertise required
 of all those who aspire to positions of responsibility, authority and accountability. The
@
axed book is targeted at:

those on undergraduate and postgraduate business and management courses:

those on post-experience, certificate and diploma courses in supervisory and
management studies;
those on programmes of professional study in areas where there is an ever-
increasing demand for managerial, as well as professional, expertise (for example
computer science, engineering, architecture);
those on specific practice development programmes (for example Chartered
Institute of Personnel and Development, Chartered Management Institute,
Chartered Institute of Marketing, Institute of Administrative Management) which
again require a foundation, knowledge and understanding of the principles and
practice of management as part of their programmes.

The book is divided into four parts:

The foundations of management, setting out the main principles of effective

management and the context in which these principles have to be taught, learned
and applied effectively.
Management and organizational behaviour, covering the foundations of collective and
individual behaviour and the skills, qualities and expertise necessary to know and
understand how and why people behave in particular ways in organized settings.
Management and business, covering the strategic and operational aspects of
management, including the context in which business practice is established and
the nature of marketing, financial and other performance.
The practice of management, bringing everything together so as to be able to
learn and understand how knowledge and expertise are implemented effectively.

Icons
Icons are used throughout the book in order to be able to indicate the source of some
of the complexities, and also to provide points for reflection along the way. These
icons are:

best practice indicating standards, levels and applications of what is

understood to be the highest form of practice (at least at
present).

just a minute designed to ensure that there are regular pauses for
reflection throughout the text.

expert view quoting from those who are either authoritative or,
demonstrably successful in their field.

Kiv
point of view eS in which either an alternative or complementary point of
i i . . . . .

view is presented, which again should be used as a point of Bd

reflection.
an
true story is)
~
illustrating good and bad organizational and managerial
mo,
Ny

practice in the context in which it is delivered.

(lan F
in brief @ at the end of each chapter, there is a series of ‘In brief ...’
- points, again as points of reflection and reference.

KV
 Acknowledgements

As always, a great number of people have contributed to this work, and it would have
been impossible to complete it without their help and support. The comments of those
who reviewed the manuscript have helped very greatly with the content. | am very
erateful to Ursula Gavin and Ceri Griffiths at Palgrave Macmillan for their enormous
patience and support over the entire period of the work and to Bryony Allen and
everyone at Aardvark Editorial for their efforts in making this work into something we
can all be very proud of. I have, as always, had great support from all the staff and
students of the Department of Management Science and Innovation at UCL. Finally, I
am very grateful to Paul Griseri, Hasna Chakir, Roger Cartwright, Mike Hutton, Ken
Batchelor, Keith Sanders, Jamie Pollock, Jia Jia Ye, Pamela Sekhon, Ram Ahronov
and Stephen Gruneberg for everything — over what is now very many years!

Richard Pettinger
UnIversity COLLEGE LONDON
May 2012

Every effort has been made to trace all the copyright holders, but if any have been
inadvertently overlooked the publishers will be pleased to make the necessary
arrangements at the first opportunity.

Xvi
 PART

The foundations
Of management

he principles, practices, profession and discipline of management have evolved into

an evermore apparent body of knowledge, understanding, expertise and skills which
have to be taught and learned, and which must be capable of application in whatever
situation aspiring and practising managers find themselves.
The purpose of this part is therefore to identify and illustrate the foundations on
which leadership, executive and managerial expertise is built, and which is capable
of being delivered effectively. In order to be fully effective, the key priorities of profit,
working with and for people, and delivering results have to be known and understood,
and these are addressed by way of introduction in the first chapter.
The rest of Part One deals with the other key issues that form the foundations of
effective management. It is essential to know and understand the nature of the envi-
ronment, and of all the factors present. How to understand, analyse and evaluate the
environment is dealt with in detail in Chapter 2. The nature of change and its effects
on all aspects of organizational and managerial practice are addressed in Chapter 3.
The nature of ethics and standards, and the need to be able to address questions of
conduct, behaviour and performance are addressed in Chapter 4. At the end of Part
One, Chapter 5 deals with management in practice — an introduction to how the rela-
tionships between what it is necessary to know and understand, and what it is neces-
sary to be able to do, begin to interrelate.
Additionally, the content of Part One forms the foundations for the material
covered in Parts Two and Three; and these then interrelate to form the foundations for
the material covered in Part Four.
 Introduction
gle you don’t like,
trust, respect and‘
value peopleand
— their contribution

In this chapter:
what management is
the complex disciplines and expertise of management
developments in management expertise
the professionalization of management

Introduction
‘Management is a body of knowledge, skills and expertise that must be applied in
ways demanded by the particular organization in which the individual manager is
working; and in ways demanded also by the particular environment in which activi-
ties are conducted. The knowledge, skills and expertise required are as follows:

achieving things through people;

achieving things for people;
making a profit and delivering performance;
using scarce resources; and planning, organizing, controlling and accounting for
resources;
improving and developing products, services, service and processes;
coping with change and uncertainty.

Management is conducted in organizations; and organizations operate in their

environment. Organizations may be described as: ‘systems of inter-dependent human
beings’ (Pugh and Hickson, 1996); a ‘joint function of human characteristics, the task
to be accomplished and its environment’ (Simon, 1967). Organizations are therefore
 combinations of resources brought together for stated purposes. Organizations have
their own life, direction, permanence and identity; and are energized by people, and
their expertise, skills, talents and commitment.

Achieving things through people

Achieving things through people is a key priority because no managerial activity
quauaseuRW
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suOepUNOJ
JO takes place in isolation from staff and their expertise. People’s capabilities have to be
harnessed in ways that are of value to the organization; and their willingness to work
has also to be engaged. This part of inanagement expertise is therefore to engage,
energize and harmonize the organization’s staff in pursuit of the stated goals, targets,
aims and objectives. To do this effectively requires a knowledge and understanding of
organizational, collective and individual human behaviour, with especial reference to
how people act and react in particular situations and circumstances; and how people
act and react in response to crises, emergencies and change.

a Think about any organization from which you have had bad service; and then decide: was
wa
a
be¥) this because the staff were incapable of giving good service or unwilling to give good
3.
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service? The answer is almost invariably the latter!
a
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oO)
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‘If you don't like, trust, respect and value people and their contribution you should not be
AS]
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oa a manager: — T. Peters (1992)
Ss
®
=
‘In the Virgin organisation, the staff come first. Only by having top quality, committed and
motivated staff can you deliver the company performance that we ask for’ — R. Branson
(1998)
‘Truly professional staff require the minimum of supervision and the maximum autonomy
in order to carry out their jobs for lasting effective performance’ — C.B. Handy (1993)

‘If you want to get the best out of your staff, you have to promote and provide full and
genuine equality of opportunity and treatment’ — R.M. Kanter (1985)

Achieving things for people

Achieving things for people, in particular meeting and responding to the legitimate
demands and expectations of customers, suppliers and shareholders, is the next key
priority. Each of these groups has particular requirements of every organization.
These requirements must be satisfied or the customers will go elsewhere, suppliers
will seek other outlets for their materials, and backers will seek alternative organiza-
tions and ventures in which to put their funds.
 =

Customers require confidence in the products and services on offer, and that their
demands for quality, durability and volumes of products and services are met.
Customers expect to be able to return to the company or organization for product and
uons
service upgrades, maintenance and repairs. The implication is therefore that successful
organizations are managed for the long term as well as to give immediate satisfaction.
Suppliers require steady and assured volumes of business; and so they will gravi-
tate towards those organizations that deliver this. Again, the clear implication is the
need to be confident that organizations being supplied will remain in existence over
the long term.
Shareholders require assured levels of returns, both in share values and also in
dividend repayments, as a prerequisite to investment; otherwise they will move their
investments elsewhere. Overall therefore, achieving things for people is based on
perceptions and understanding of expectations, assurance and permanence which,
together with the delivery of good quality products and services, all add up to imme-
diate and enduring confidence. Confidence in managerial terms is hard to define more
precisely. The presence, knowledge and understanding of confidence is an absolute
priority in achieving things for people; and it is also the case that, where confidence
is lost or not fully assured, organization decline quickly sets in.

mo)
oS
Stakeholders and management
=Cat
2) 7
oO A stakeholder is anyone who has a particular interest in any aspect of the organization.
=
®
= Stakeholders include:

e shareholders, backers, financiers, and financial institutions and their representatives;

e stock markets, stock brokers and financial advisers;
e organization directors and shareholders’ representatives;
e public service organization governors and those charged with responsibility for gaining
finance and backing for public ventures and enterprises;
e the organization's functional directors, managers, staff and their representatives;
e suppliers and distributors;
e customers, clients and end-users;
e industrial and commercial markets;
e the communities in which activities take place;
e the media, business, financial and management journalists and media analysts;
e pressure groups, lobbies and vested interests.

Organizations inevitably have dominant stakeholders — those whose interests must be

served above all else; or more insidiously, those whose interests are served as a priority,
whether or not this is the correct course of action for the particular organization.
The financial interest is invariably found as a dominant stakeholder. The best organiza-
tions also place their staff, suppliers and customers at this level. It is also true that any
 group that has cause to raise legitimate concerns about organizations and their activities
should be treated as a dominant stakeholder until the issues have been addressed.
Serious problems can arise when the interests of the dominant stakeholders are served
in spite of conflicting or divergent concerns from less influential sources.
The key lesson is, therefore, knowing and understanding which interest is being served
at a particular time. It is additionally essential to know and understand whether specific
juawaseuelW
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Jo interests are being served at the expense of others, or whether every interest is being
served as far as possible. Whichever line is taken, there are opportunities and consequences
that are certain to affect overall organization performance, and also the ways and means
by which performance is delivered.
Achieving things for people, and balancing these interests, is therefore a major manage-
ment issue at all times.
@

Making a profit
All managers must ‘make a profit’. ‘Profit’ needs to be defined by all organizations and
their managers in their own terms. This definition requires attention to the following.

e Surplus of income over expenditure. A version of this is calculated, by law, for all
organizations on an annual (and increasingly half-year and quarterly) basis. The
managerial discipline additionally requires knowledge and understanding of
product and service surpluses and losses on an individual basis; and ‘individual’
means surpluses and losses per location and per customer, as well as per product
and service unit, product and service cluster and in terms of overall output.
e Increasing organizational reputation and confidence, as the result of the ways in
which products and services are delivered, as well as attention to absolute
expectations in meeting product and service volume and quality demands.
Increasing reputation and confidence feeds people’s expectations and perceptions
of products and services; and increasing quality and demand for products and
services feeds reputation and confidence.
e Costs, cost-effectiveness and cost efficiency. There is a key organizational and
managerial issue here, in that efficient and effective cost management can lead to
a much greater income margin per product and service. The problem lies where
cost management is the only, or overwhelming, driving force towards profit; and
this can then go seriously wrong.

aa
fe
o
Frozen fish
wva

S
iS) Helmont Ltd is a fish processing and cannery company located at Walsall, West Midlands,
UK. Until recently, it took its supplies of fresh and frozen fish from Ocean Going Trawlers
 =

Ltd, a fishing fleet based in Liverpool. Helmont Ltd was a very successful and profitable
company that supplied to all the main brands, including John West, Bird’s Eye and Ross.
uoho
Helmont also supplied fresh, frozen, canned and processed fish products to the super-
market chains for sale under their own brand names.
Following new quota arrangements introduced by the EU, the prices of the landed fish
catches in the UK rose by 10%. Accordingly, Helmont decided to look around for alterna-
tive supplies. After extensive research, the company found that the port and fishing fleet of
Cadiz, Spain, were prepared to supply it with the volumes of fish and the regularity of
deliveries required. Helmontunilaterally cancelled the contract with Ocean Going Trawlers
of Liverpool and took up with Cadiz. The catch prices in Cadiz were 53% lower than those
from Liverpool; and the full cost, including transport, worked out at 38% cheaper than the
Liverpool supplies.
The key lesson is that there is a simple cost advantage, and this is apparent to all.
However, Helmont's previous suppliers were barely 100 miles away, and it was therefore
much easier to manage any difficulties if things did go wrong. The new suppliers would be
over 1,000 miles away; and consequently, there was a much greater propensity for things to
go wrong. All of this, in practice, has to be paid for out of the cost advantages.
This venture failed because everything that could go wrong did go wrong. Refrigeration
units on the lorries broke down. There were strikes and disputes involving the border
authorities between France and Spain with the result that the lorries were held up on their
journeys (in spite of the fact that the EU is notionally an open market, the Spanish in partic
ular retain an active border presence). There were hold-ups at the Channel ports in Northern
France. The lorries were then faced with the problems of negotiating the overcrowded UK
motorway network, in particular the M25 around London and the M6 through the West
Midlands, before they could get back to the company’s headquarters and factory.
Helmont tried to reschedule deliveries to meet its own new limitations, and to ensure
that the customers would remain satisfied. However, the customers — the branded goods
and the supermarket own brands — had contracted with Helmont in good faith, and now
did their best to hold them to the agreement. In order to remain viable, Hel mont now had to
return to Ocean Going Trawlers in Liverpool and to do their best to renegotiate the contract.
This they did, but the conditions in the contract were now to be very much more onerous.
Clearly, not every cost-saving exercise goes wrong; and all managers at all times need to
be actively managing their costs and maximizing and optimizing their resources. However,
it is essential that the full context and range of issues are addressed. Simply to concentrate
on one priority at the expense of all others is invariably a recipe for disaster.

e The ‘profit’ delivered by public service organizations is a function of the speed,

effectiveness and completeness of service delivery, as well as the ability to stick
within financial and other resource constraints. The profit delivered by public
 services is also, in practice, a function of the ability to respond to political
directives, raise funds from external sources (for example hospitals selling flowers
and books for the patients and other relatives), and develop their services
according to particular local and environmental needs (for example schools
providing evening classes, sports clubs and playgroups outside normal hours).
e The ‘profit’ delivered by not-for-profit organizations and charities is a function
of the extent to which they can, and do, raise the levels of funding and
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resources required to serve the particular client bases. As above, not-for-
profit work ultimately takes place in a competitive environment; and
consequently those responsible for the management of foundations and
charities have to arrive at a clear view as to whether they are competing with
other charities (for example ‘If people give to me, they will not give to
others’); or whether people will give anyway (for example competing for
customers’ disposable income overall).

oO
oO
As required by law, Sony always produces quarterly and annual financial results. In the
wn
ao
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= company annual reports however, as well as attending to immediate issues, Sony always
©
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makes clear its long-term prospects, performance and intentions; and this is to underline
oO
the fact that its priority is long-term viability and existence.

‘Making a profit’ requires delivering the performance that is demanded; and

performance can only be delivered in relation to purpose, aims and objectives. If the
purpose, aims and objectives are not clearly stated then it is not possible to evaluate
anything for success, failure, achievement or otherwise.
‘Performance’ is covered in detail in Chapter 15. At this stage, however, it is essen-
tial to recognize that establishing the basis, boundaries and context of performance is a
key management task and a core plank of managerial expertise. It is also a collective
and organizational discipline, and needs to be addressed in full detail, to include:

e financial performance and targets;

e production, productivity and service output targets and aims:
e staff performance;
e market performance and standing;
e reputation management and development;
e new product and service development;
e new market development;
e long and short-term planning;
e risk assessment and evaluation.

Too many organizations and managers concentrate solely on the financial figures and
targets without recognizing the impact of each of the above. '
 Using scarce resources
Managers are required to organize, prioritize, use and consume — and produce a
return on — those resources that are placed at their disposal. All resources are ulti- uono
()
mately finite; and, even where resources are plentiful and assured for the present and
foreseeable future, they should be used and consumed as efficiently and as effectively
as possible. This gives a lead to every organizational and managerial activity that
everything is valued; it establishes a discipline for the use and consumption of the
scarcer and more valuable resources; and it is also the case that even plentiful
resources can, and do, become expensive (for example oil in the 1960s, 1970s and
early 21st century).
Organization production, service and information technology, property, premises
and equipment are resources with capital and operational values. Each represents a
part of the total organizational investment, and the returns required and demanded
must be known, understood and accepted. Organizations and their managers need to
know, understand and be clear about the need for all technology and equipment, the
returns required, and whether circumstances might change and affect the nature,
levels and spread of returns.
Staff expertise, willingness and commitment are the primary organizational
resources. Expertise and commitment are both required; neither is effective in isola-
tion from the other. Organizations that have expertise and commitment, targeted at
known, understood and agreed priorities, outperform those that do not. Organizations
that have expertise but no commitment lose staff to other organizations where there is
a greater sense of overall purpose; and these organizations tend to retain staff because
of their commitment to themselves and their own individual interests, rather than to
the organization and its products and services.

oO
Manchester United Football Club has always sought to attract good players who want to
m
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it
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play for it. The club has only sought to attract the very top players if this commitment
=
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fa)
[sah
could always be demonstrated. And as soon as the commitment begins to waver, the club
fa)
oO
moves the players on. For example in January 2012, the club sold Ravel Morrison, described
as one of the best players of his generation: the club nevertheless found itself unable to
deal with Morrison's erratic and sometimes difficult behaviour.

Improvement
Everything that is done in organizations and by people is capable of improvement.
Customers, clients and product and service users expect improved and enhanced
quality and volumes of what they require and demand. Staff expect improved wages,
salaries, and terms and conditions of employment; improvements in the quality of
their working environment and working relationships; and improved opportunities
 and interest in their jobs and careers. Shareholders expect improved returns on their
investments, and will seek to invest in organizations that promise or give a clear
understanding of improvements in these areas.
Meeting the requirements and demand for improvement is a fundamental human
desire, as well as a priority placed on organizations and managers. The consequence is
therefore that managers must know and understand the full range of activities carried
out in their domain, how these activities interact with each other; and from this, seek to
quawiaseuelu
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suojepunoj
jo
improve processes, attitudes and behaviour, as well as products, services and outputs.

Coping with change and uncertainty

Coping with change and uncertainty requires a full and detached knowledge and
understanding of the organization; its products and services; its staff and their priori-
ties, hopes, fears and expectations. It also requires a full and detailed knowledge and
understanding of the external, economic, social, political and operating environment,
and of the forces that are present within it. It is essential to know and understand, and
be able to respond to, the effects of the following.

e Natural disasters including earthquakes, floods and drought. While it is never

possible to predict the precise dates or locations in which these will happen, it is
absolutely certain that each will occur at some time; and so the key is to be
prepared and able to respond when they do occur.
e Terrorist attacks. And again, while it is not possible to predict when and where
these will happen, it is certain that they will occur and so, again, it is essential to
be able to respond at these times.
e Economic crises brought on by, for example, stock market crashes; runs on
particular currencies (and upward valuations of others); oil crises (as above);
energy shortages.
e Political crises and uncertainties, which are at their most visible in war-torn
regions of the world, but which can occur anywhere (for example the sudden
uprisings across the Middle East in early 2011; the formation in the UK of the
first ever peacetime coalition government in 2010).
e Market crises brought about by losses in consumer, wholesaler and investor
confidence; and which are increasingly set to be brought about as the result of
macro-market choices to invest either in India or China, or in Western Europe,
North America and Japan, but not both.
e Market and activity shifts brought about by the availability of expertise and
technology in different parts of the world. Some of the recent effects have been to
seek the movement of manufacturing activities from Western to Central and
astern Europe, as well as the Far East; and the outsourcing of specific activities
to parts of Asia and Central America because of the (perceived) lower labour and
technology costs in those regions. *

10
 =

The above are all macro issues affecting the activities, operations, effectiveness — and
performance — of organizations when they do occur. This is not to say that each will
occur, or occur on a regular basis. It is for managers to know, understand and be able
uolo
to respond when they do.
Ata micro level, the ability to respond depends on the overall efficiency and effec-
tiveness of product and service delivery, and of organizational processes, attitudes,
values and behaviour. For example:

e A competitor’s new technology may render that of other organizations obsolete; or

it may appear to do so; or it may not do so (however attractive it may look at first
sight). The need therefore is to be able to take a fully informed view as to whether
or not the competitor’s technology requires that all other organizations in the
sector replace their technology, rather than jumping to the conclusion that it does.
e A new entrant to a particular market may gain immediate share, and cause concern
among existing players. Whether the new player sustains and develops the market
for itself is very much up to the ability of the existing players to respond.

Change and uncertainty remain constant features in the employment of staff. The
stability, commitment and engagement of the staff and workforce can only be assured
so far, however good the wages, terms and conditions, and managerial and supervisory
style and relations. The key issues for all organizations to be aware of as employers of
staff are: the effects of new employers (especially large employers) moving into the
area; the effects of large employers leaving the area; increases in demand for rela-
tively mobile staff (for example professionally qualified people) elsewhere; and
gaining and losing road, rail and air infrastructure and transport connections.
Alongside this, it is essential for managers to know and understand every aspect of
the bond between organization and staff, and to be fully aware of the strengths, and
especially the shortcomings, present. Organizations and their managers must know
and understand that, in some cases, individuals will move on for their own reasons.
Organizations and their managers must also know and understand that if there are
demonstrable known and understood weaknesses in the bond between employer and
employee, they ultimately have a clear choice to make between remedying these
issues, or managing the constant problems each time they arise.

= It is necessary to remember always that when people say ‘they hate their job, this is invari-
wn
ably not the case — in practice, they either dislike or distrust their manager, or their work
ao
f<¥)

3.
=) colleagues; or else they see no future for themselves at the organization.
=
=
a)

A summary of the foundations of management in this way clearly illustrates the

range of skills, knowledge, understanding and expertise involved. For those who
aspire to be truly expert managers, delivering effective products and services in
whatever organization and circumstances they may find themselves, there is no

11
 substitute for acquiring and developing this range of skills, knowledge, understanding
and expertise. The sheer complexity has driven others to seek quick, easy and
assured solutions to problems, development, enhancement and improvement through
the adoption of faddish approaches.

42)
Q.
Fashions and fads
=a
&
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e)
Ss The opposite to the rigour of developing expertise and a body of knowledge is to take a
=
a
=
prescriptive and simplistic approach. ‘Fashions and fads’ is a useful way of describing direc-
tive, prescriptive and simplistic approaches to management issues and problems. Some
current issues are as follows.

e Job evaluation: the analysis of job and work activities according to present criteria in
order to rank them in importance, status, values and place on the pay scale. In
practice, job evaluation tends to be rigid, inconsistent and divisive.
e Business process re-engineering (BPR): attention to administration, supervision
and procedures for the purposes of simplicity, clarification and speed of operation. The
premise is that these improvements are always possible. In practice, BPR tends to be
applied prescriptively to all functions without reference to organizational effectiveness
or wider aspects of operations.
e Business analytics: at its best, business analytics requires that every issue is ‘blitzed’
with data and information from as many sources as possible and then evaluated from
all points of view so that decisions and initiatives are all substantiated at all stages. At
its worst, it becomes another consultant-led ‘numbers speak for themselves’ driver of
expedient and short-term fixes for problems that managers would rather not have to
take responsibility for themselves.
e Total quality management (TQM): attention to every aspect of organizational
practice in pursuit of continuous improvement, the highest possibile standards of
practice, products, services and customer service. In practice, TQM tends to be
prescriptive in approach and dominated by paperwork and administration systems
rather than attention to products and customers.
e Right first time, every time: this rolls easily off the tongue/pen; it is a direct
contradiction of the view that everything can be improved. It is also a denial of
humanity — after all, everyone makes mistakes!
¢ Benchmarking: benchmarks set standards of activity against which other activities
can be compared and rated; benchmarking also applies to placing people on salary
scales, activity scales, job importance scales and other matters to do with status. In
practice, it is usually rigid, inconsistent and divisive. Some organizations also seek to
benchmark their salaries, terms and conditions against other employers; while this is
useful knowledge to have, ultimately all organizations have to be able to stand alone
and independently.

12
 {ut

e Virtual organization: organization structures based on technology rather than

physical presence. A useful concept that tends to get drowned, either by cost-cutting
UONI
or technological processes; or conventional, adversarial supervision.
e Outsourcing: especially the practice of outsourcing manufacturing, production and
service delivery activities to locations in Central America, the Pacific Islands, South-East
Asia, and the Indian subcontinent. The driving force behind this form of outsourcing is
to take advantage of the reduced labour costs, and less stringent labour laws present in
these locations. The downside of this form of overt cost saving is that it is a lot harder
to manage and resolve problems and issues when they do arise in a rural location
thousands of miles away, than if the same problems and issues do arise on the spot.

The major contribution of each (and all fashions and fads) is to broaden the debate on
management issues, and to get people thinking about progress and improvement. Their
weakness Is apparent when they are grasped as perfection, the absolute truth, and instant
solutions to all-round management problems.

Management research and literature

There is a great range of management research and literature, including textbooks,
how-to books, personal and organizational histories, professional and commercial
journals and periodicals, computer-based packages, databases, leaflets, checklists;
and also university and commercial research programmes, monographs and learned
papers. This can be broken down as follows.

e Some of it is intellectually extremely challenging. The ability, both to understand

and to be an effective practitioner also in certain aspects of the managerial
sphere, requires a high degree of intellectual capacity, higher education and a
basic grasp of some mathematical and economic theories as well as behavioural
and operational matters.
e Some of it addresses precise or defined issues that have a direct bearing on the
business sphere. This is especially true of the areas of leadership, motivation,
perception, and the formation of attitudes, standards and values which have both
their own body of knowledge in their own right, and which then require
translation into particular managerial situations in different ways.
e Some of it dwells heavily on empirical research, case histories and anecdotal
examples. This enables studies of the relationships between variables in given
situations to be undertaken and assimilated, and ‘what if?’ and other hypothetical
discussions to take place in relation to real events of the past, but in overtly ‘safe’
situations at present. The body of the general knowledge and experience of the
manager is thus developed and extended, as are his critical faculty, awareness
and overall view of the sphere.

15
 e Some of it illustrates particular successes and failures; this is especially true of
the swelling array of books produced by successful business people. The lessons
to be drawn here are often in the mind of the reader. Such books tend to reinforce
certain aspects only of the whole managerial sphere. They provide a very useful
library of what has worked in practice for comparison against a theoretical or
academic base, although one by-product of this has been to create and develop a
faddish approach.
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e Some of it illustrates the amount of attention to detail and sheer hard work that is
required of anyone who wishes to become a manager (and/or business leader or
entrepreneur). Television series such as Dragons’ Den and Undercover Boss are
primarily entertainment, though behind the pictures presented they do show how
hard it is to become and remain successful.

Over the years, management research and literature has concentrated heavily on
all aspects of organizational and managerial performance, and the skills, knowledge
and expertise required of those placed in management positions and responsibilities.
To date however, there remains no firm, understood and agreed body of knowledge,
skills or expertise; nor, as above, are there any qualifications required of those who
come into managerial and executive positions as a condition of appointment.

The continuing professionalization of management

The continuing professionalization of management has led to attempts to classify the
disciplines involved, as well as to crystallize the body of skills, knowledge and exper-
tise required. This has led in turn to the rise of summary classifications, as follows.

The reflective practitioner

The ‘reflective practitioner’ approach emphasizes the ability to think things through,
and to know and understand why things turned out in particular ways. This requires
analytical and evaluative capabilities and expertise, as well as a detailed and
comprehensive body of knowledge and understanding so that for any given set of
circumstances, a detailed and precise critique can be conducted.

The thinking performer

The ‘thinking performer’ approach is an attempt to summarize the expertise required
under the following headings:

e personal drive and effectiveness, which requires individuals to set out their
own personal as well as professional objectives;
¢ people management and leadership, requiring capabilities in the management
and leadership of people and the expertise that goes with it;
=

14
 =

¢ business knowledge and understanding, of the specific needs and wants of

whatever organization is being served at the time;
e professional and ethical competence, and a commitment to serve the standards
UuOn
of all professional bodies of which the individual is a member;
¢ continuing learning, a discipline required of all those in the traditional
professions of law and medicine; and a personal commitment of anyone who
aspires to excellence in any field at all:
e analytical and creative/intuitive thinking, to develop the capability to evaluate
any situation, proposal, venture or initiative, and to be able to implement what is
intended in the particular given set of circumstances;
¢ customer focus, a commitment to serve to the best of one’s ability all those who
seek to take advantage of the particular professional and expert capability;
e strategic capability, the capability to see the wider interests and ranges of
issues, as well as being able to respond to specific requests;
e communication, persuasion and interpersonal skills, and this includes
active listening as well as the ability to communicate actively, early, positively
and with integrity.

The excellent performer

The excellent performance perspective requires that managers adopt the personal as
well as occupational (professional) commitment identified above; the key is knowing
and understanding what to commit to. Peters and Waterman (1982) identified a series
of timeless and universal elements as follows:

e a belief in being the best;

e a belief in the importance of the staff and individuals as well as in their
contribution to the organization;
e a belief in, and obsession with, quality and service;
e a belief that organization members should innovate and have their creative
capacities harnessed;
e a belief in the importance of excellent communication among all staff;
e a belief in the concept of simultaneous loose—tight properties — measures of
control that allow for operational flexibility;
e a belief in the continuous cycle of development;
e anda recognition that there is always room for improvement;
e attention to detail — the necessity to ensure that whatever the excellence of the
strategic vision, it must always be carefully and accurately carried out;
e a belief in the importance of economic growth and profit motive;
e abelief in action rather than procedures and processes;
e abelief and commitment to constant innovation and improvement in products,
services, service, working practice and staff capabilities;
e a belief and commitment to the core business of the organization.

15
 These factors ought to indicate points of priority and concentration for any manager
in all organizations, regardless of location, size and activities. The question of mana-
gerial professionalization and expert management development is considered in full
detail in Chapter 19.

Management and leadership

&
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managers at all levels are required to inspire and generate loyalty, enthusiasm and
commitment among their staff, and this is clearly a leadership priority (see also
Chapter 10). On the other hand, many organizational leaders, inspirational and expert
though they are, clearly need senior, middle and functional managers to implement
organization strategy, policy, direction and priorities.

Be}
oF
Management as common sense
=
=
fe)
or Rosabeth Moss Kanter, the then Dean of the Harvard Business School, was interviewed by
=.
Q
= Tom Mangold for the BBC Business Matters television series. She was asked to consider
the view that all of this was ‘just common sense’. Rosabeth Moss Kanter replied:

‘Sense, yes. It all sounds intuitively right, and there is plenty of evidence that where
these managerial characteristics are in place, organizations perform well, and remain
profitable. Common ~ that is a different question. If this “sense” was truly “common’,
then we would not have the organizational, managerial, economic and social crises
that we have today.

Source: BBC (1998) ‘They Did It Their Way’ — Business Matters.

These kinds of approaches have reinforced the crystallization of ‘the professionaliza-

tion of management’, which may be summarized as having and developing proficiency
and commitment in the basic body of knowledge, skills, expertise and understanding,
as above. Many professional managerial bodies now run their own certificate and
diploma level qualifications, management education schemes, foundation programmes
and introductory courses so that those who seek to join them and to practise in their
name are known and understood to have an agreed level of competence; and this also
applies to many organization-based management training schemes.

Conclusions
The overall purpose here has been to illustrate the complexity, range and scale of the
subject matter that is to be considered, the widely differing standpoints from which it
has been tackled, and the progression of it as a field of study. The balance of the

16
 —s
material quoted reflects the particular concern with it over the period since 1945 and
its emergence as an area critical to both business and economic success, and also the
wider prosperity of society at large.
UOHIN
It is not at all an exhaustive coverage. However, it does attempt to itemize major
staging posts and fields of inquiry, and to illustrate the variety of studies that have
been undertaken. Each study indicated addresses different parts of the business and
management sphere. Each makes its own particular contribution to the whole field;
none provides a comprehensive coverage of it. What is clear, however, is that it is an
ever-broadening sphere. The work illustrated here demonstrates just how far this has
developed and the variety of approaches that have been taken in the pursuit of this.
There is no doubt that there has been a shift in approach to regard management as
an occupation in its own right. What has been less certain is what the actual composi-
tion of this occupation and profession is. This chapter has attempted to illustrate the
basis of this and to introduce some of the major concepts, studies and ideas that have
contributed to the state of its development.
Some more specific conclusions can also be drawn from this material. Manage-
ment direction and leadership are separate from the functions, operations and activi-
ties of the organization. Ability to generate confidence, loyalty, trust and faith of all
those in the organization is essential. It is necessary to establish the identity of a
common purpose to which everybody in the organization can aspire and to which all
the resources of the organization are concentrated. People must be rewarded in
response to the efforts that they put into the achievement of the organization’s
purposes. Both the organization and its managers must have knowledge of, and ability
to operate in, the chosen environment and to influence this as far as they possibly
can. Within particular constraints, organizations establish their own ways of working,
cultural norms, procedures and practices, as part of the process of making effective
their daily operations. There is the recognition that business and managerial practice
takes place in what is both a global and turbulent environment. The ability to operate
within this is critical to continuity and success.
It is additionally critical to note that much of the pressure that exists on and in
companies and organizations at present has arisen (and continues to arise) because of
the lack of managerial expertise and an understanding of what makes companies and
organizations effective and profitable, and how to get staff to do the right things at the
right time. The banking and political crises of the period since 2008 arose because of
decisions taken by leaders and managers; these crises did not cause themselves to
happen. There have therefore to be other ways of doing things, that ensure enduring
viability and profitability in the present and evolving environment; and this has to be
a major challenge for those who are to lead, direct and manage organizations in all
sectors and locations for the future.
This represents the context in which the rest of the book is written. It enables a
broad understanding of where the current state of the management art/science/

17
 profession is drawn and where the current matters of importance and concern within
it lie. It also indicates the range and complexity of the qualities, expertise and
capacities required of all leaders and managers, whatever the size, structure, location
or activities of their organization may be.

= e Understanding the full range and complexity of the skills, knowledge, expertise,
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attitudes, behaviour and experience that goes into ‘management is essential.
=

e There is a responsibility on individuals who seek to become professional managers to

develop their own knowledge, skills and understanding in each of the areas indicated.
e A major part of management is about organizing and involving people, and their
capabilities and commitment; and so it is essential to understand human behaviour in
as much detail as possible.
e In terms of companies and organizations, the key management priority is long-term
profitability and viability; and so managers need to know and understand every
element that contributes to this profitability and viability in particular situations.

Further reading
Branson, R. (1998) Losing My Virginity. Virgin Books.
Drucker, P. (1999) Management Challenges for the Twenty First Century. HarperCollins.
Hammer, M. and Champy, J. (1996) Reengineering the Corporation. Harvard.
Handy, C. (1993) Understanding Organizations (4th edn). Penguin.
Kanter, R.M. (1990) The Change Masters. Free Press.
Peters, T. (1992) Liberation Management. Pan.
Peters, T. and Waterman, R. (1982) In Search of Excellence. Harper and Row.
Pettinger, R. (2007) Introduction to Management (4th edn). Palgrave Macmillan.
Pugh, D. and Hickson, D. (1996) Writers on Organizations. Penguin Business.
Simon, H. (1967) Organizations. Harper and Row.

18
 Organizations,
? Managers
and the
environment

In this chapter
e the nature of the business and managerial environment and its complexities
e assessing the different aspects of the environment
e using analytical tools and techniques
e using the results of the analyses

Introduction
Everything in business and management takes place within its environment; nothing
ever happens in isolation. Everything that happens affects the organization and the
ways it is managed, and the ways in which managers have to act, react and respond.
The environment, and everything that goes on within it, provides opportunities for
exploitation; and also provides constraints within which companies and organizations
have to be able to operate effectively. Consequently every manager needs to be an
expert in the environment overall, and especially the parts of it that directly affect
their areas of responsibility and accountability.
The environment in which organizations operate, and in which managers have to
manage, is ever-changing and complex. New organizations enter particular markets
and activities; existing players take their activities elsewhere. Regulations and
statutes change. Energy and commodity prices change. Each of these factors brings
pressures under which companies and organizations and their managers have to be
effective and successful. It is therefore essential that all managers learn as much as
they possibly can about the environment. The purpose ofthis chapter is therefore to

19
 indicate the main areas that have to be learned, and the ways in which this know-
ledge and understanding are acquired.

The nature of the environment

As above, in order to stand any chance of being successful, managers have to be
able to operate within the constraints and complexities present. It is therefore
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essential to know and understand the forces within the environment as a whole, and
to be able to assess and evaluate these forces in detail, in the context of the given
organization, its products and services, and markets served and in response to
stakeholder demands and interests.
The environment in which organizations and managers have to operate may be
summarized under the headings of:

e external factors;
e the immediate environment;
e internal factors.

External factors
The external factors and forces that have to be understood are the economic, social,
political and legal constraints that form the basis of the wider overall operating envi-
ronment. These forces include: the present and evolving nature of the trading envi-
ronment; the nature of competition and rivalry; and whether the given markets are
expanding, stagnant or contracting. This has to be seen in the further context of: infla-
tion and interest rates, and currency exchange rates; wider volumes of economic
activity; political stability and/or volatility; degrees of confidence in the trading envi-
ronment; and the ways in which political, financial and economic interests manage
change and develop each of these elements.
Economic forces are directly affected by the actions of government and the central
banking system through the use of interest rate and currency valuation policies,
changes in rates of taxation, and specific initiatives such as regional development.
Wider social issues refer to: the mobility of population; availability or scarcity
of skills and expertise; pay and reward levels in given sectors; and the volumes of
jobs and occupations available. This is related to and influences: absolute levels
of prosperity; and relative levels of prosperity by occupation and location. And
this additionally influences the capability and willingness to spend money on
goods and services.
The population structure and demographics have to be considered, and it is usual
to evaluate this through reference to: age structures; cultural and social issues; and
the wider general expectations and perceptions of what the society ought to provide.
Social issues are additionally affected by taxation levels as above, and related also to

20
 the capability and willingness of the population to pay taxes, and compulsory and
near-compulsory charges for public services and utilities.
Legal issues refer to the present state of the law and to envisaged changes in the
law. Of particular present concern to organizations and managers are: the ever-greater
protections for staff at work; and strengthening health and safety legislation, including
the possibility of introducing corporate manslaughter for negligence at disasters.
Other areas of present and enduring concern relate to advertising and marketing; the
materials used in production and packaging; and strengthening demands for accurate
descriptions of products and services.
The other parts of the external environment that require continued assessment and
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consideration are: technology, information and telecommunications infrastructures;
the strengths, opportunities and constraints of the transport and distribution networks
and infrastructure; and the energy charges that arise as the direct consequence of
having to use these infrastructures.

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Knowing and understanding the environment means keeping up to date with everything
oO
that is happening in the business world. As well as informing your own managerial know-
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ledge and practice, this is part of acontinuing professional commitment.

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The immediate environment

Knowing and understanding the immediate economic, social, political and legal
environment requires taking the wider concerns, as above, and relating them
directly to the location or locations where activities are taking place. Particular
priorities are:

e availability of staff skills and expertise;

e property and transport prices in the particular localities;
e competitive demands for staff skills and expertise from others in the area;
e competition for supplies and the distribution network in the immediate area;
e the quality of the energy, transport and telecommunications infrastructure in the
immediate area;
e specific issues concerning replacement, maintenance and upgrades of all
organizational technology, equipment, expertise and resources.

There is additionally the question of the overall aura or climate of the organiza-
tion and its industrial or commercial sector, which can, and does, affect the capa-
bility of organizations to attract and retain staff and expertise. In many cases, this
capability is not so much a function of competition for staff and expertise from
other organizations, but rather a wider malaise within the sector that cannot easily
be remedied.

21
 aoy
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Attracting and retaining staff in the NHS
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S
In its primary functions of medical care, sickness and emergency treatment, and overall
SS
healthcare provision, the UK National Health Service (NHS) continues to experience diff-
culties in attracting, recruiting and retaining staff to work in its core professions of medi-
cine, surgery and nursing. These problems have been caused in part by depressed levels of
salary, which has resulted in nursing and junior medical staff not being able to afford to
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buy property, and partly by the extremely stressful working conditions that are generated
by staff shortages and lack of medical technology resources.
The problems have been compounded by continued restructurings in the NHS overall,
and by the consequent pressures on local managers as the result of having to constantly
change their aims and objectives to meet the latest rounds of political targets.
The net result is that for individual hospitals and other health service facilities in many
areas, it is impossible to attract any staff at all to train or work in these professions. Local
managers have therefore to find alternative solutions to the particular problems.
The wider lesson for all managers and students of management is to know and under-
stand the fact that these extreme constraints can apply within any sector, and to use
whatever influence they have to structure work as effectively as possible within these
extreme constraints. It is additionally the case that anyone working within these constraints
will always have operational problems, whatever the location or nature of the organiza-
tional and operating environment.

Internal factors
The internal environment of the organization is a reflection of its capability and will-
ingness to operate within the wider external and immediate forces present; to create
effective working relationships and conditions; and to deliver products and services
whatever the constraints. Priorities for managers include the capability and willing-
ness to:

¢ improve cost bases so as to be able to remain effective at times of rising energy

and fuel costs, interest and transaction rates, and budget constraints;
e respond to changes in employment, production and service law while keeping
disruption to a minimum;
e respond to the arrival of new employers into the area;
e respond to new competitors and entrants into the sector;
e fill any gaps left by competitors leaving the sector.

The professional management discipline required is therefore to know and under-

stand where the pressures and forces are likely to come from, where the information
that supports this is available from, and how to use it. This then«defines the

22
 N

conditions that are needed within organizations, departments, divisions and functions
that enable the required responses to be made. It is therefore in turn necessary to be
able to conduct each of the following activities:

e analyse the environment:

e set effective priorities and targets;
e take effective decisions, and create effective series of decisions:
e form the basis for an effective management style;
e understand the wider constraints of the limitations present.

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Analysing the environment
In order to analyse the environment effectively, it is essential to be able to identify,
separate out and classify the forces and factors that are present. The information
required needs to be gathered from wherever it might be available or found. All
managers therefore need to know and understand where information can be found;
and this will include access to public, industry, national, regional and local databases
that cover every aspect of organization activities. Market, product, service, techno-
logical and customer knowledge is required. Matters such as access to staff and
expertise, and pay and reward levels, have to be understood. The activities of
competitors and alternatives have to be assessed and evaluated. Possibilities of
changes to the law and regulations and their effects have to be known and understood.
Financial data has to be available and current. So managers and organizations need
to be able to gain access to any sources where comprehensive and reliable data in
these areas is held; and they also have to be able to open up and use effectively their
own primary data and information sources.

Environmental analyses
The environmental analyses required are:

e SWOT analysis;
e PESTLE analysis;
e Five Forces (industry analysis);
e competitor analysis;
e customer and client analysis.

Each of these analyses is conducted to ensure that as much knowledge and under-
standing as possible is gained about every aspect of the organization, and that its
competitive and general environment and operating pressures are clearly understood.
The detail of each of the analyses used now follows.

23
 Strengths, weaknesses, opportunities, threats: SWOT analysis
The purpose of SWOT analysis is to help organizations learn, clarify issues, and
identify preferred and likely directions (see Figure 2.1).

Model STRENGTHS | WEAKNESSES

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THREATS | OPPORTUNITIES

The method by which the ideas are generated and compartmentalized is a creative
group discussion, OS, ‘brainstorming. The end result of this is a list of items under
each heading.
From this a full discussion and development of the idea is concluded.
There are no ‘holds’ or ‘taboos’ in a SWOT analysis: the purpose is to be creative,
not restrictive. Once everything is in front of people, evaluations and judgements
can then be made.

Figure 2.1 SWOT anaiysis

In this activity, issues are raised, highlighted and categorized under four headings:

e Strengths: the things that the organization and its staff are good at and do well;
that they are effective at; that they are well known for; that make money; that
generate business, and reputation.
e Weaknesses: the things they are bad at, or do badly; that they are ineffective at;
that they are notorious for; that make losses; that cause hardships, disputes,
grievances and complaints; that should generate business, but do not. This aspect
requires a degree of candour.
e Opportunities: the directions that they could profitably go in for the future that
may arise because of strengths or the elimination of weaknesses.
e Threats: from competitors; from strikes and disputes; from resource and revenue
losses; from failing to maximize opportunities or build on successes; this also
includes matters over which the organization has no control.

Opportunities and threats are representations of the external environment and its
forces. The information thus raised and presented is then developed, researched or
investigated further. It can be done for all business and managerial activities, and to

24
 address wider global and strategic issues. It is an effective means of gathering and
categorizing information, of illustrating or illuminating particular matters, and for
_ gathering or articulating a lot of information and ideas very quickly.

iS
Whenever you do carry out a SWOT analysis, it is essential to make sure that nothing is
wn |
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~ prejudged. Once everything is out (however wild and wacky some of the things may be),
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judgement and prioritization come later.
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PESTLE analysis
The purpose of PESTLE analysis is also to help organizations learn, but the material
arising is much more concerned with the analysis of the wider strategic situation and
the organization in its environment.

e Political: the internal political systems, sources of power and influence, key
groups of workers, key departments, key managers and executives; externally, it
considers particular considerations in the establishment of markets, by-products,
location, ethics, and values.
e Economic: the financial structure, objectives and constraints (for example
budgets and budgeting systems) at the place of work; externally this considers the
market position, levels of economic activity, and commercial prospects and
potential of the products and services offered.
e Social: the social systems at the workplace, departmental and functional
structures, work organization and working methods; externally this considers the
relationship between the organization and its environment in terms of the nature
and social acceptability of its products and services, its marketing, and the regard
with which it is held in the community.
e Technological: the organization’s technology, and the uses to which it is put, and
the potential uses of it; and the technology that is potentially available to the
organization and others operating in the given sector.
e Legal: the need to work within statutory and regulatory constraints; the ability to
respond to changes in the law or statutory obligations; the ability also to influence
changes in the law and regulations, and the ways in which these are introduced.
e Environmental: the ability to work effectively within the constraints of the
environment; the ability to respond to macro and micro environmental pressures;
the ability to understand the effects of operations and activities on the
environment; the ability to manage particular ‘environmental’ elements,
especially waste and effluent management, noise and light pollution, energy and
other resource usage.

25
 Again, the information thus raised can be further analysed and evaluated. It estab-
lishes in more detail the wider background against which particular product or
service initiatives are to take place; and raises wider issues or concerns that may in
turn require more detailed resource and analysis.

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The SPECTACLES approach
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= For the specific purposes of developing the discipline of analysing the environment in full,
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and to ensure the maximum completeness of coverage, Cartwright (2001) proposes the
SPECTACLES approach.
Cartwright stated that it was not enough to limit consideration to political, economic,
social and technological issues (the PEST elements); and so the wider view required was
developed under the acronym SPECTACLES:

Social: changes in society and societal trends; demographic trends and influences.
Political: political processes and structures; lobbying; the political institutions of the
UK and EU; the political pressures brought about as the result of, for example, the
Social Charter, market regulation.
Economic: referring especially to sources of finance; stock markets; inflation; interest
rates; government and EU economic policy; local, regional, national and global
economies.
Cultural: international and national cultures; regional cultures; local cultures;
organizational cultures; cultural clashes; culture changes, cultural pressures on business
and organizational activities.
Technological: understanding the technological needs of business; technological
pressures; the relationship between technology and work patterns; the need to invest
in technology; communications; e-commerce; technology and manufacturing;
technology and bioengineering; technological potential.
Aesthetic: communications; marketing and promotion; image; fashion; organizational
body language; public relations.
Customer: consumerism; the importance of analysing customer and client bases;
customer needs and wants; customer care; anticipating future customer requirements;
customer behaviour.
Legal: sources of law; codes of practice; legal pressures; product liability; service liability;
health and safety; employment law; competition legislation; European legal pressures;
and whistle-blowing.
Environmental: responsibilities to the planet; responsibilities to communities;
pollution; waste management; farming activities; genetic engineering: cost-benefit
analyses; legal pressures.
Sectoral: competition; cartels, monopolies and oligopolies; competitive forces;
cooperation within sectors; differentiation; and segmentation.

26
 Cartwright states that his intention is:

‘to widen the scope of analysis that needs to be carried out in order to include a more
detailed consideration of the environment and culture within which an organization
must operate, the customer base, competition within the sector, and the aesthetic
implications, both physical and behavioural, of the organization and its external oper-
ating environment.

This approach requires managers to take a detailed look at every aspect of their opera-
tions within their particular environment and niche. It requires managers to understand
SIaBeU
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42
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fully the broadest range of environmental constraints within which they have to conduct
effective operations. It is also much more likely to raise specific, precise, detailed — and
often uncomfortable — questions that many managers (especially senior managers) would
rather not have to address.

Industry structure or five forces analysis

Industry structure analysis is based on evaluating and analysing ‘five elemental
forces of competition’, drawing on the framework developed by Michael Porter (1980),
who defined the five forces as follows:

1 The industry competitors: the nature and extent of rivalry among those
organizations currently operating in the field and the implications of this for the
future (for example reduced profit margins where price wars occur; reduction in
capacity where there is over-provision).
2 Suppliers: the extent to which they dominate the sector through the supply of a
key, critical or rare component; their ability to integrate forwards into the market
itself; the range of choice of suppliers available; and the ability to use alternative
supplies; the overall bargaining position of the suppliers.
3 Buyers: the extent to which they dominate the sector either because they
purchase high volumes from it, or because they control the final outlet of the
product in question; their ability to integrate backwards into the market itself; the
number and type of operators in the buyer group; and the ability to generate and
supply alternative buyers; the overall bargaining position of buyers.
4 Potential entrants: the extent to which organizations operating in other sectors
have product, service, technology and staff capacities to gain entry to the sector in
question; and the extent and nature of the entry barriers that surround the sector.
5 Substitutes: the extent to which the organization’s product is a matter of choice
on the part of the buyer; the extent to which equivalent benefits can be gained
from a product that is similar, but not the same.

27
 It has subsequently become clear that there are other forces that ought also to be
considered, as follows.

The threat of regulation: the threat of regulation and legal changes can have
major effects on the costs of activities. Examples include regulations concerning:
product contents (a major current issue for the food industry); service delivery (of
continuing concern for the low cost airline industry): employment practice (the
need to actively address the conduct, behaviour and performance of recalcitrant
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employees without having to pay the costs of employment tribunals).
The threat of deregulation: allowing others into what have hitherto been
restricted and enclosed areas, bounded by regulations, in which the operating
companies have been able to establish dominant positions because of their
capabilities in working within the bounds of the regulations.
The threat of re-entry: re-entry is an issue where (often) large and dominant
companies re-enter markets that they have allowed to lie dormant for a period.
Examples are: supermarkets going back into clothing and hardware (challenging the
clothing and hardware specialist companies); low cost generic medicines (challenging
small and specialist pharmacies); and banks reopening estate agency chains (creating
competition for existing specialist estate agencies and real estate businesses).
The threat of technology: the main threat from technology is the potential for
inventions that can and do destabilize the whole existing ways of working and cost
bases of particular sectors. For example, production technology has
revolutionized the clothing and textiles industries both in terms of the ability to
produce new designs en masse quickly, and also in terms of where production can
be located. Elsewhere, surgery that required major interventions can now be
carried out using lasers or keyhole techniques.
The purpose here is to understand the nature and strength of all of the above as
forces prevalent in particular sectors; and especially to understand which are the
dominant forces, and the consequent effects on organizational and managerial prac-
tice. For example, if an organization is dependent upon a single key supplier, this
clearly becomes the dominant force; or if the organization’s core products and serv-
ices are only valuable until something else can be substituted, then this too becomes
a dominant force. Five forces analyses and evaluations should be carried out on a
continuous basis, especially where it is known and understood that there is a large
range of potential entrants and substitutes, or where the supply side is volatile.

Always make sure that you have analysed and evaluated the strength of all the forces. Even
where you have come to the conclusion that one force is dominant, make sure that you
do not underestimate the strength of the others. It is also essential always to keep an open
asn{
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ainuiuu mind on potential threats and changes: the potential for regulation/deregulation; the
potential for substitution and the creation of alternatives; the potential for changes on the
supply side or in customer behaviour.

28
Competitor analysis
Competitor analysis involves an assessment and evaluation of the other players in the
field. It considers the initiatives that they may themselves take to promote their own
strategic advantage and also to measure their likely responses to such initiatives on
the part of the organization in question (see Figure 2.2).

What drives the competitor What the competitor is

CORPORATE STRATEGY doing and can do
At all levels of management CURRENT BUSINESS
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and in multiple dimensions STRATEGY
How the business is
«4 Ss currently competing

| COMPETITOR PROFILE
e competitor satished

moves or strategy |
he competitor make?
the competitor —
Inerable? -
| What wil provoke the greatest _|
| and most effective retaliation.
_ by the competitor?

ASSUMPTIONS CAPABILITIES
Held about itself Both strengths and
and the industry weaknesses

Figure 2.2 The components of a competitor analysis

The components of a competitor analysis are:

e the strategy of the competitor, its driving and restraining forces;

e its current business operations, capacities, strengths and capabilities;
e the assumptions held about both the competitor and the industry itself;
e a detailed profile of the competitor, its current satisfaction with its current
position; its likely moves and responses to moves; its position in the market; its
under- or overcapacity.

This constitutes a detailed discussion to be devised and conducted by sectoral, corpo-

rate, strategy specialists and experts and to be used as the basis on which both offensive
and defensive strategic moves are made. Presentation to an organization’s top manage-
ment and directorate will normally be limited to the matters arising, the results of anal-
ysis, the conclusions and recommendations drawn from a detailed competitor analysis.

29
 Customer and client analysis
The purpose of conducting customer and client analyses is to ensure that the busi-
ness or public service relationship is considered from the point of view of customers,
clients, consumers and end-users. It should form a major component of strategic
analysis. This is necessary in order to:
test assumptions and received wisdom concerning the attitudes of customers and
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ensure that these assumptions are not taken as absolute fact;
assess the extent to which organizational direction is based on generally
favourable responses and attitudes, rather than real customer and client demands;
ensure that customer behaviour is not taken for granted.
In order to build up as much understanding as possible, it is necessary to make
detailed enquiries along the following lines:
Why do customers and clients use us/why do they not use us?
Why have customers and clients increased/decreased the value or volume of
_business that they conduct with us?
Why have customers started using us/stopped using us?
Where does our product or service come in the customer's order of priority? Do
we serve wants or needs?
What causes customers to use us/what causes customers not to use us?
Under what circumstances would customers use us inore/use us less? Under what
circumstances would customers increase/decrease the value and volume of their
business with us?
What are the alternatives available to customers if they do not do business with us?
What do competitors provide that is better than us? What do competitors provide
that is worse than us?
Why do customers use us/why do customers use our competitors?
These are direct and precise questions, requiring accurate answers. In particular, if
the answer to any question is either available in general terms only, or is simply not
known, then lines of inquiry should be opened as a matter of urgency.
Once accurate answers are produced as above, it is then possible to understand
and classify customers and clients as:

Apostles: apostles demonstrate ultra-loyalty. The apostle is delighted with the

service or product, and delighted to be associated in any way with the particular
organization. They identify very strongly with the organization and its products and
services. Apostles carry out part of the marketing function for the organization.
They are highly loyal and delighted, and they tell their friends and relations.
Loyalists: loyalists form the key important component of any customer base. All
organizations need to be able to accurately identify where their loyalist customer

30
 base lies, and to ensure that this is maintained, preserved and developed where
possible. The ability to satisfy loyal customers on a long-term basis lies at the
core of all enduring commercial success.
e Mercenaries: mercenaries are the hardest customers to deal with as they are
basically a-loyal. They tend to go for the cheapest or most convenient option.
They are difficult to deal with because they may well be satisfied but are not
loyal. Or they may demonstrate product loyalty but brand a-loyalty; or brand
loyalty but supplier a-loyalty. They may well move from brand to brand or
supplier to supplier. If asked why they moved, the answer may be in terms of cost
or convenience, but it may well be just a desire for change.
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e Hostages: hostages are the individuals that make up ‘captive markets’. Hostages
are overwhelmingly the customer base of public utilities, public services, and
public transport. Hostages are also found in isolated communities where, for
example, there is only one convenient shop, garage, pub or restaurant.
e Defectors and terrorists: these are customers who once used a particular
organization, but now do not do so. Defectors may move from a position of loyalty
simply because there is now a much better or more convenient alternative source
of supply; or they may move because they are actively dissatisfied with what has
previously been on offer, but have simply said nothing about it.

59} Terrorists
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about it. Cartwright (2001) states that:

‘Many of those who appear on consumer affairs television programmes have been
previous apostles. On being let down, they have no problem in letting the world
know about it.

To this list others may be added:

e Browsers and window-shoppers: those who have a general interest in what

particular organizations have to offer, and who may make unconsidered
occasional purchases from time to time.
e Passing trade: in which particular customers and clients find themselves
confronted with something that they are interested in purchasing by chance.
e Convenience customers and clients: who use a particular organization purely
because of its overwhelming convenience to them on their own terms. This is
especially important in the case of business to business activities, when
organizations become the clients of suppliers purely because of the quality of
relationship between themselves and the suppliers’ representatives.
 no)
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e Passive loyalists: those who think very highly of particular organizations, but who
seldom or never use their products and services.
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only use those organizations once, or very, very infrequently (this is an especial
problem in the luxury goods and services industries, and also in the medium, high and
top quality holiday package industry).
Passive apostles: customers and clients who always used to use an organization, its
products and services, but who do so no longer — either because they have ceased in
their need for it, or because it is no longer convenient to get to. They nevertheless
continue to praise the organization, often years after they have last used it (for
example, this was an especial problem in the decline of Marks & Spencer: everyone
who the company asked concerning the reasons for declines in sales continued to
speak very highly of the company as an entity, and so the problems of product sales
were never addressed).
Loyal mercenaries: customers who come to an organization for the first time as
mercenaries may be translated into loyalists as long as the product or service quality
can be demonstrated. This was the basis on which the Japanese car and electrical
goods manufacturers built their industrial base in the UK, USA and Western Europe in
the 1970s and 1980s. Customers and clients had no particular affinity for the Japanese
(indeed many still had vivid memories of brutal treatment at the hands of the Japanese
military during the Second World War). Nevertheless, when the product and service
quality was demonstrated, they were persuaded to change their buying habits.
Anticipatory terrorists: this is an enduring present problem for those needing to
avail thernselves of public services. Because of media coverage that gives the
overwhelming impression of the decline in quality of healthcare, education and social
services in the UK, clients of these services use them on the basis that they are going
to receive poor quality service, badly delivered. They therefore tend to look for the bad
rather than the good in the service; and this gives rise to a culture of client complaint
and compensation. So far, the strategic management of these services has not begun
to address this issue.

The outcome of looking at customers and clients in these ways ought to be a full under-
standing of the perspective from which particular groups come to do business with the
organization.
e

32
 It is therefore clearly essential that organizations and their managers analyse their
customer and client bases and behaviour in as much detail as possible. The outcome
needs to be a clear understanding of where and why customers and clients come to
particular organizations; and why they start to cease coming and change their atti-
tudes and behaviour. It is then possible to plot particular customer and client bases
on a loyalty matrix (see Figure 2.3).

High Hostage (pseudo-loyal) Apostle (supra-loyal) -

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LOYALTY |
Defector (de-loyal) Mercenary (a-loyal)

Low Terrorist (anti-loyal)

Low SATISFACTION High

Figure 2.3 The loyalty matrix

Customer and client analysis is a key management priority. It is also more complex
than organizational or environmental analysis because it requires time, energy and
resources to be consumed in understanding the precise nature and requirements of
those with whom the organization is to do business. It therefore becomes very easy to
neglect this, to take customer and client attitudes on trust, or to understand them in
general terms only. Specific points of inquiry are required, as follows, in order to
establish precise understanding of:

e the price that customers/clients are willing to pay for particular products and
services;
e the value and quality that they expect from particular products and services;
e making products and services as convenient as possible to the customer and
client bases served;
e length, frequency and intensity of usage;
e depreciation/appreciation and re-sale aspects;
e inaintenance, repair, replacement and upgrade elements;
e personal feelings of esteem and worth that accrue from ownership and usage;
e fashionable and faddish elements (especially important in clothing, cars,
computers and furniture);
e feelings of exclusivity, luxury, desirability;
e returns on financial and emotional investment;
e particular demands and requirements of individual customers.

35
 Much ofthis is therefore clearly subjective. Purchases made by different customers
of the same item, for the same purpose, for the same price may result in widely
differing levels of satisfaction. Customers and clients may be prepared to go to one
organizational location for a given set of purposes, but not others. Customers and
clients may also be persuaded to use (or stop using) an organization or location when
it is known, perceived or believed to be in their interests to do so.

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In order to celebrate effectively the 2nd Millennium of Christianity in the year 2000, the
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Millennium Dome was conceived by the UK government in 1994. The Millennium Dome
was to be built on a former naval site on the south bank of the River Thames at Greenwich,
south-east London. As well as celebrating 2000 years of Christianity, the Millennium Dome
would provide an exhibition and demonstration of everything that was best about the
British way of life.
The project failed. The visitor numbers (projections were estimated at 30,000 per day
every day for the year 2000) never materialized; the quality of the exhibitions and presenta-
tions was variable; and transport access and egress was never fully resolved.
From the point of view of analysing the environment in this way, the best that could be
said for the project was: the micro-environmental issue was addressed because it meant
that the pollution present on the site had to be cleared up before the Dome could be
built; and from an aesthetic point of view, the Dome was a particularly distinctive design.
From every other point of view, there were shortcomings however. Society had
changed, and people would only visit such an exhibition if it was both of a high quality,
and also convenient for them to do so. The political issues, especially in terms of who was
to take responsibility, were never fully evaluated; nor were the economic questions of cost;
or the cultural, aesthetic and customer demands for the quality and variety of actual pres-
entation and exhibition content. Wider environmental and sectoral demands in terms of
the quality of the transport infrastructure, or specific questions of what constitutes ‘a good
day out’ for those visiting London were not addressed. It was additionally the case that the
Millennium Dome was located many miles from the majority of tourist attractions, the
rest of which are in central London.
It was not until 2005 that a commercially viable use was found for the site. The Dome
was renamed the O2 Arena, and for the first time now had a clear purpose in life -— a
concert, entertainment and events venue. Over the period since 2005, the venue has been
extremely successful in terms ofattracting top performance from all branches of entertain-
ment to perform there and in generating the large numbers of customers necessary to
make these events successful.
A full customer analysis would have concluded that the original Millennium Dome
would never have been viable; and that, given an active purpose to go to the site for
particular events, the venue could have been made successful in those terms. *

34
Setting priorities, aims and objectives
A full understanding and analysis of the environment, and classification of the pres-
sures and constraints present, establishes the context in which priorities, aims and
objectives are set. Establishing effective and achievable priorities, aims and objec-
tives is the foundation for measuring and assessing all aspects of organizational and
managerial performance.
Drucker (1996) summarized this as ‘management by objectives’. To be fully effec-
tive, management by objectives required the establishment of specific targets and
priorities that were capable of achievement within the constraints of the operating,
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competitive and wider environment. This clarity of approach, and attention to the envi-
ronment, was essential, whether establishing overarching goals and targets for organiza-
tions as a whole, or whether establishing specific achievements and results desired and
demanded of particular departments, divisions, functions, groups and individuals.
Within these constraints, the establishment of priorities, aims and objectives,
concentrates on the following:

e key tasks, key results and performance standards;

e work improvement plans, setting key tasks against action plans, target dates and
intended outcomes;
e regular performance reviews based on participation;
e attention to future directions, as well as assessment of the present;
e previewing and reviewing the potential of staff, products, services and inventions.

For each of these to be effective, management information systems are required; and
these have to be kept fully up to date at all times. Information has additionally to be
capable of delivery in ways that are useable by those who have to take decisions for
the future; and again, this refers to both those at the top of organizations and also
those with specific responsibilities at more junior levels.
Establishing priorities, aims and objectives in this context enables the tangible and
high profile aspects of organizational performance to be addressed. These areas are:

e market standing, reputation and position;

e sales performance;
e innovation, enterprise, pioneering, research and development;
e productivity and output levels;
e assessments of resource utilization: premises, technology, capital goods and
equipment, expertise and the human resource.

Assessing these areas in this context ought to lead additionally to developing the
capability of addressing and assessing the less tangible areas of organizational cohe-
sion and performance: managerial performance and development; staff performance
and attitudes; and the nature of responsibility and accountability towards the public
and the wider environment.

35
 Approaching priorities, aims and objectives in these ways gives a basis for the
judgement of likely overall profitability and effectiveness; and also for assessing the
value and actual profitability and effectiveness of activities presently in hand.
To be fully effective, attention is necessary in each area. While the balance
clearly varies between organizations, neglect in any one area is likely to weaken
the whole. Setting priorities, aims and objectives additionally has the purpose of
ensuring that the organization is not blinded by extremes of performance in one
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area to the detriment of the others. For example, excellent sales performance may
lead to feelings of complacency and lack of attention to the need for new products,
or to any assessment of potential declines in sales, should environmental circum-
stances change.
Simon (1967) further highlighted the difficulties of establishing effective priori-
ties, aims and objectives within the constraints of the environment; and these
constraints were related to the capability of the organization to deliver sustained
levels of excellent performance within the changing nature of the operating and
competitive environment.
Simon identified three levels of performance:

e excellent: sustained high achievement, output and quality, leading to high levels
of profit, effectiveness and satisfaction, but in reality achieved by very few
organizations;
e unsatisfactory: low levels of achievement, unacceptable to stakeholders, and
leading to losses, inefficiency, ineffectiveness and dissatisfaction;
e satisfactory: achieved by most organizations most of the time, satisfactory
performance requires producing acceptable levels of output, volume and quality,
leading to enduringly acceptable — and therefore satisfactory — levels of profit and
effectiveness.

Simon found that the drive for satisfactory performance was influenced by a lack of
capability in predicting future pressures within the environment; and a lack of capa-
bility additionally in being able to respond effectively to changes in these pressures.
Simon found that in many organizations and industries, there existed therefore a
consensus that satisfactory performance represented an acceptable level of achieve-
ment; that in practice, the top priority of senior managers was to ensure that satisfac-
tory levels of performance were achieved. Simon also found that this approach was a
major influence on decision-making processes.

Sy
( )

ayJ
Whatever the strength of performance, you should always look for areas where improve-
ments can be made. If it appears that no improvements can be made, then make sure that
you can say why; and make sure that you keep coming back to the area just to make sure
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that no improvements are possible at some time in the future.

36
Organizational considerations
The organizations that have to operate within the environment, and whose managers
are responsible for taking and implementing decisions, have to be considered from a
variety of different points of view. Organizations have legal status, a presumption of
permanence, and a presumption that they will deliver the products and services stated.
The legal status of organizations refers to their constitution and composition. The
main forms of legal status are:

Commercial organizations: sole traders, partnerships, private limited

companies, and public limited companies (ple). Each of these organization forms Siase
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may additionally be: local, regional, national, international and global; part of a
joint or multi-venture; a specialist subsidiary; or an organization constituted for
the purposes of single project delivery, after which it is disbanded.
Friendly or mutual society or cooperative: in which the profits and rewards
are shared among members.
Charities and not-for-profit organizations: charities and not-for-profit
organizations raise funds for particular purposes and are normally constituted for
stated purposes and with a clear financial base that depends on raising money
from particular sources (including small individual public donations).
Public bodies and public corporations: these organizations are the institutions
of central, regional and local government functions that normally have the remit
of providing essential public services, providing for civil and military defence,
and maintaining the desired and anticipated quality of life on the part of the
nation, region or part of society concerned.
Non-governmental organizations: non-governmental organizations are autonomous
entities funded by government and constituted for a particular purpose; this includes
the constitution of bodies for the independent regulation of specific activities.
Churches and other religious foundations: this includes charities that are
funded by donations and other receipts for stated purposes; and these funds are
then distributed in the areas with which the charity is concerned.
Transnational organizations: transnational organizations include the United
Nations (UN), World Health Organization (WHO), and International Monetary Fund
(IMF). These and other bodies have a general influence on the ways in which
organizations operate and interact with their environment; and may, from time to
time, make specific pronouncements, recommendations and interventions in given
locations, affecting directly the activities of other organizations in those areas.

It is essential to note that the legal status of organizations can, and does, change.
Governments privatize public services; commercial organizations undertake merger
and takeover activities, and open and close subsidiaries. Changes of legal status can,
and do, also occur as the result of changes in international, corporate and company law.

37
 Beneficiaries
The beneficiaries of an organization are those people for whom the organization is
especially constituted, and whose interests it seeks to serve.
The primary beneficiaries of an organization are normally its staff, customers,
clients, shareholders and suppliers.
The ultimate beneficiaries of an organization may also be the staff, customers,
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managers and (in public services) powerful political interests use organizations in prac-
tice for their own ends. Powerful and influential figures and groups tend to disrupt the
effectiveness of organizations in the interests of pursuing their own position and reputa-
tion. Short-term shareholder drives disrupt the long-term effectiveness of commercial
organizations; political ambitions disrupt the enduring effectiveness of public services.
Changing beneficiaries occurs when organizations change their status. Newly priva-
tized public services have suddenly to run under the financial regimes of the new
owners; and a proportion of the funds raised will be redistributed in the form of share
dividends, rather than going straight back into the services. Mergers and takeovers
mean that staff, customers, shareholders and suppliers of the previous organizations
have to get used to new ways in which they are to be dealt with, and any, or all, of these
groups may cease to benefit from the new organization (though these groups are also
often replaced by new beneficiaries who find the new organization attractive to them).
Non-beneficiaries are present where organizations do not deliver what they state
that they will deliver; and where customers and clients do not receive the products
and services expected and anticipated. Attention to non-beneficiaries is a prime
concern when changing or varying the quality, range and coverage of all public serv-
ices; and in ensuring that customers continue to receive adequate quality of supplies
following the privatization of infrastructure and essential commodities of life, espe-
cially water, gas, electricity, heating and lighting.

Management style
The nature of the operating environment, the priorities identified and established,
decision-making processes, and the legal status of the organization all impact heavily
on the management style of the organization. Effective delivery of products and serv-
ices 1s dependent upon managerial expertise, capability and willingness to operate
within these constraints; and this leads to the design and emergence of preferred
approaches to staff, workloads, priorities and decision-making.
In this context, the key to an effective management style is founded in the chosen
approach to the staff of the organization. This approach is normally one of the following:

e Unitary: in which the aims, objectives, hopes, fears, aspirations and ambitions
of the individual must be harmonized and integrated with those of the
 organization — and where necessary subordinated so that the overall purpose of
the organization remains the main driving force.
e Pluralist: in which the organization recognizes the divergence and often
conflicting aims, objectives and drives of the people who work for it.
Organizations that take this view normally include opportunities for personal
and professional (as well as organizational) fulfilment. The basis is that by
recognizing this divergence and attending to all needs, organization needs will
be satisfied.
e Radical: in which it is recognized that there can be no long-term productive
effort and harmony unless everyone involved is given a substantial and
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meaningful stake in the organization. This used to be regarded as the Marxist
approach, and has therefore fallen into some disrepute. However, many
organizations take the view that by offering staff substantial shareholdings in the
company for which they work, or substantial profit-sharing arrangements, they
therefore engage the direct interest of the staff in their own future and economic
prosperity. For example, John Lewis, the department store, divides 15% of its
retained profits between its staff; Semco divides 23% of its retained profits among
its staff.
e Mutual: normally founded on the abolition of status and rank in favour of
occupational and organizational effectiveness; however, this normally only works
where there is full openness and availability of information, knowledge of
activities and understanding of the value of every contribution.
e Cooperative: in which the organization establishes a psychological and
behavioural basis of partnership and involvement based on the value of the
contribution that everyone is to make.
e Confrontational: an adversarial approach to staff. This is based, at best, on the
recognition that harmony of objectives is impossible, leading to the creation of
systems and processes for the containment and management of conflict. At worst,
it is based on mistrust and coercion, often stemming from a lack of genuine value
placed on staff.

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never to lose those strengths in the pursuit of other things.

Psychological contract
Organizations may be viewed from the nature of the psychological contract that they
engage in with their staff. This is the result of implications and expectations that arise
as the result of the given organizational, occupational, professional and personal
 relationships in specific situations. They vary between all organizations and situa-
tions, and may be summarized as:

e Coercive: whereby the relationship between organization and staff, and also
organization and customer, is founded on a negative. An example of this is
prison — the prisoners are there against their will. It is also present where
sections of the community are forced or pressurized into using a monopoly or
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telecommunication, petrol and fuel. It also can be present in institutions such
as schools and colleges where the children or students attend because they are
required to do so by the society.
e Alienative: whereby the relationship between staff and organization is negative.
This has traditionally applied to large and sophisticated organizations and
especially to those staff working on production lines and in administrative
hierarchies where they have no, or very little, control over the quality and output
of work.
e Remunerative: whereby the relationship between staff and organization is
clearly drawn in terms of money in return for efforts and attendance. It is
normally to be found as the dominant feature where there is also a low level of
mutual identity between staff and organization.
e Calculative: whereby the staff have a low commitment to organization goals
and a high commitment to current levels of earning and satisfaction — it is
again a key feature of the wage—work bargain for production and
administrative staff. For those with high levels of professional and technical
expertise, the calculative relationship is based on the ability to practise, the
need to find an employer and outlet for those skills and individual drives to
serve and become expert.
e Normative: whereby the individual commitment to organizational purpose is
very high. This is found in religious organizations, political parties and trade
unions. It is also increasingly found in some business organizations when a
normative (that is, committed quarrel) approach is taken to the wage—work
bargain as well as the economic. It is effective as long as the wage—work
bargain itself is sound and the organization accepts a range of obligations and
responsibilities to ensure that it is maintained.
e Internalized: whereby individual and collective commitment to organization
purpose, activities, attitudes and values is unquestioning.

Viewing organizations from a variety of positions in these ways indicates the back-
ground against which aims and objectives are to be drawn up. It also indicates the
source of some of the limitations and constraints that have to be taken into account
when considering the capabilities of organizations and the nature and relationship of
these with the purposes that are to be pursued. |

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ne) It is also essential to understand the psychological contract from the point of view of the
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ox
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® organization at the present and evolving stage of its life. This then ought to give a clear
=
indication of the sorts of staff, personalities and capabilities that can be attracted to work.
It also gives a clear indication of where the sources of collective and individual staff moti-
vation and commitment truly lie (see also Chapter 17).

This also gives rise to conflicting and divergent aims and objectives as those with
managerial responsibility either seek to reconcile these divergences, or else prioritize
SIsBeUR
|WJUIWIU
‘SUONe
PU
B42
some (often their own interests rather than those of the organization) at the expense of
others (see Figure 2.4).

Psychological contract Legal status

Approach to staff . Primary and other beneficiaries

Environmental pressures

L
Figure 2.4 The foundations of management style

Conclusions
As no organization exists in isolation from its environment, the nature and extent of
the relationship and interactions must be considered. Organizations are subject to a
variety of economic, legal, social and ethical pressures which they must be capable of
accommodating if they are to operate effectively. In some cases, there are strong reli-
gious and cultural effects, and local traditions that must be capable of effective
harmonization also. More specifically, organizations need access to workforces,

M1
 suppliers, distributors, customers and clients; and to technology, equipment and
financial resources.
It is clearly essential that organizations, and their managers, understand the envi-
ronmental pressures and constraints under which they have to operate. It is also clear
that this is an extremely complex process, requiring time, energy, resources and
commitment. Because of this, this aspect of managerial understanding is often not
considered at all, or else not attended to in full. The position is further complicated
quawiaseue
&
ey]
suoiepunoj
JO
when this part of management expertise is summarized as follows.

e There is clearly no best way to organize; as the environment changes so systems,

aims and objectives must be flexible and responsive.
e The environment changes in both predictable and unpredictable ways; it changes
in ways that can be controlled and influenced and in ways that cannot be
controlled and influenced. The problem for managers lies in the extent of their
understanding of their environment, and in their ability to anticipate the
unexpected by building systems that are capable of accommodating these
pressures.
e Because of the nature of the relationship with the environment, organizations
need to spend time on external issues, assessing and understanding the
environment, and the changes and turbulence within it.
e Decision-making processes have to be both structured and effective within the
context and environment in which they are undertaken. No decision can be taken
in isolation from either internal or external pressures.
e Each input process/output cycle changes the nature of the organization’s social
and technical resources, presenting an opportunity to strive for optimization and
improvement.

Above all, the environment is dynamic and not static or rigid, allowing for limitless
opportunities for change to occur: investment in environmental adaptation and trans-
formation are as essential to success as investments in capital, equipment and
staffing. The more complex and turbulent the environment, the more essential this
form of investment becomes.
Environmental, technological, market and competitive pressures, as well as social
changes, are the primary causes and inspiration for organizational improvement,
development, enhancement and change.
Social, legal and ethical constraints constitute the main limitations placed on the
activities of organizations. These require that specific approaches are adopted to all
aspects of activities in order to meet standards prescribed by law or laid down by the
prevailing values and morals of society.
The purpose of this chapter has been to summarize and indicate the various forms
of organization, the different points of view from which they may be considered and
the wider context in which they operate. No organization operates in isolation from, or

42
 without reference to, its environment. The environment provides staff, customers,
resources, technology and equipment; and also confidence and expectations — the
context in which successful and effective activities take place.

=
e The ability to analyse the environment in full is critical. This is a key part of business
eye
=
@
5)
and management teaching, and ought to translate into professional practice.
e When assessing organizational and managerial priorities, you need to be clear what is
driving them; and if it is anything other than enduring levels of performance, you need
to be prepared for problems.
e When evaluating the psychological contract between employees and organization, it is |S
‘SUOIIR
SidBeU
PUR
dUI
JUSWU

essential to be aware of the strengths and weaknesses — and you need to have ideas
about removing the weaknesses if at all possible.
e When evaluating the management style of an organization, you need to be aware of
why it exists and whether it works; and if does work, you need to know why; and if it
does not work, you need to know why also with a view to making improvements.
e In overall terms, you need to be aware of the extent to which all interests are being
served, and what improvements ought to be made to ensure that the expectations of
everyone are being met.

Further reading
Cartwright, R. (2000) Mastering Customer Relations. Palgrave Macmillan.
Cartwright, R. (2001) Mastering the Business Environment. Palgrave Macmillan.
Christensen, C. et al. (1987) Business Policy. Irwin.
Drucker, P. (1996) The Practice of Management. Heinemann.
Porter, M. (1980) Competitive Strategy. Free Press.
Simon, S. (1967) Organizations. Harper and Row.
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 Managing in
5 achanging
environment

In this chapter
e the nature of change and how it affects organizations and their managers
e identifying priorities and drives and restraints for change
e change as a process
e the nature of changes in organizational practices and activities

Introduction
As stated in Chapter 1, a key managerial task and expertise is to be able to operate
effectively within the constraints of a changing environment. Social, economic and
political changes in society over the recent past have deeply affected the manage-
ment of organizations. These changes may be summarized as:

e Technological: affecting all social, economic and business activities; rendering

many occupations obsolete and creating new ones; and opening up new spheres of
activity, bringing travel, transport, distribution, telecommunication, industry,
goods and services on to a global scale; the development of fledgling virtual
industries; the development by companies of virtual activities.
e Social: the changing of people’s lives, from the fundamentals of life expectancy and
lifestyle choice, to the ability to buy and possess items; to travel; to be educated; to
receive ever-increasing standards of healthcare, personal insurance and
information; to be fed; to enjoy increased standards of social security and stability,
increased leisure time and choice of leisure pursuits; and all commensurate with
increases in disposable income and purchasing power, and choices of purchase.

45
 ao)
ie)
Changing demographics
==)
Qoh In many parts of the world, the fundamental structure of society is being radically affected
by changes and movements within the population. The migration of people from areas
=.
@
=
where there is no work to those places where they can find employment is a major political
issue. In other parts of the world, the issue of ageing population has also to be addressed.
uaWeseueU
&
a4,
suoepuNo)
JO
Elsewhere still, the great expansion of youthful population means that there is the pressure
to provide work in those areas.
Whichever of these issues has to be faced in particular locations, it produces a major
impact on the particular environment, and therefore a critical pressure for organizations
working in those locations.

e Economie: pressures to change and develop are brought about by the ability of
organizations to locate production and service delivery functions in the locations
of their choice based on their own priorities (especially cost reduction); the
opportunities to develop markets in hitherto unfamiliar locations; and the
opportunity to recruit staff from an international pool. Economic change also
refers to fluctuations in currency exchange rates, interest rates and inflation rates;
and these in turn are reinforced again by the ability of organizations to trade with
those whom they choose, anywhere in the world.
e Macro-political: the creation of trading biocs and superstates (the EU), and the
expansion of hitherto national currencies to become the currency of choice
elsewhere (for example the US dollar is now the currency of choice in Ecuador).
These and similar moves have led some countries to be able to advance and
enhance their political influence with a clear implication that there is a
commercial advantage to be gained for their own organizations, and therefore
their own domestic economies.
e Macro-organizational: the ability of organizations to locate their activities
wherever they choose. This has led, for example, to the practice of outsoureing
particular activities to areas where technology and expert labour are cheap and
plentiful; and to establishing flexible patterns of employment so that those who
work with technology can do so wherever they happen to be at a given time; and
the creation of transnational and global organizations, able to shift priorities and
volumes of activity wherever they may be demanded (and able to remove them
very quickly from areas where they are suddenly not demanded).
e Eco-political: resulting in changes in all governmental forms; the state of flux
and expansion of the EU, and the adoption of supranational laws and directives,
and the single market; the emergence of Russia as an economic power; the emer-
gence of Brazil, North and South Africa, and the Middle East as spheres of

46
 political and economic influence; the rapid expansion of China and India as
dominant spheres of economic, and therefore political, influence; the potential for
the rest of Africa, Central and South America to develop along similar lines.
e Environmental: pressures on organizations to manage, maximize and optimize
their use of resources so that waste and effluent are kept to an absolute minimum
and can be disposed of effectively and without lasting effect on the environment;
pressures on organizations to manage their transport and distribution activities so
that these are as energy and environmentally efficient as possible; wider questions
BUIBUB
BUIBeU
JUaWU
&Ul
(w)
of the use, availability and sourcing of scarce resources.
e Expectational: the development and enhancement of people’s expectations as
the result of their increased ability to gain access to products and services from
all over the world; what was previously acceptable is now very often superseded
by the presence and availability of substitutes and alternatives from a much wider
range of organizations.

In order to achieve the degrees of permanence, order and stability essential for the
sustenance of long-term commercially viable products and services, and effective
public services, the turbulent and changing environment has to be accommodated.
The result is that pressures on managers for change, development, enhancement and
improvement come from the following sources:

e the changing nature of markets, and their size, scope, scale and location;
e the changing nature of technology, combined with the ability to locate it and use it
effectively anywhere in the world;
e the changing nature of work patterns, again in relation to the ability to locate and
source workforces anywhere in the world;
e the drive to maximize the return on investment on indigenous and domestic
workforces through the creation and implementation of flexible and
non-traditional patterns of work;
e the changing nature of competition, recognizing that competitive pressures,
products and services can come from any organization, anywhere in the world.

= You should always remember that change is a process as well as a series of events. Any
w
a
pe) change that is made now will affect the ways in which things are done in the future, and
3.
> provide opportunities (and constraints) for future activities and initiatives.
S
ao
a)

The drive for change

The main drive for change is concerned with maximizing and optimizing returns on
investment. This in turn requires that organizations get a greater return on the

47
 investment that they make in premises, technology and expertise in the pursuit of
producing and delivering effective products and services. This has to be delivered in
the context of changes in the economic, social and political environment as above;
and within the constraints of the changing nature of market demands, and the pres-
sures to produce and deliver public and other services.
The drive for change has also to be seen in competitive terms; meaning that even
excellent and high performing organizations will lose their edge if they do not
quaaseuelu
&
a4,
sudiepUNoJ
JO
constantly adapt and develop, and so leave themselves at the mercy of those that do.
Effective managerial approaches to change have to be seen, above all, in terms of
recognizing and addressing the barriers to change that exist everywhere.

Barriers to effective change

When addressing either the need to change, or the barriers to change, it is essential
to be able to present what is proposed in terms of:

change — from what — to what — when — where — how — why?

If any of these elements is not clearly addressed, barriers to change are certain to
exist. Barriers to effective change, and the ability to respond to organizational,
environmental and market pressures, may be classified as either operational or
behavioural.

Operational barriers
e Location: this is a barrier when, for whatever reason, it becomes impossible for
the organization to continue to operate in its current premises. Relocation has
consequences for the resettlement of families, retraining and organization
development. Even where the new premises are close by, it may affect access,
work and attendance patterns. For greater distances, the consequences of
widespread disruption have to be addressed. As well as personal consequences,
this includes attention to organization culture and structure.
e Tradition: this is a problem where there has been a long history of successful
work in specific, well-understood and widely accepted ways. This may be
underlined where a whole community has grown up around a particular
industry or organization and where this is a major provider of employment and
prosperity (for example coal mining, iron and steel, shipbuilding, engineering).
If this has been steady for long periods, there are strong perceptions of stability
and permanence.
e Success (and perceived success): if the organization is known or perceived to be
successful in its current ways of doing things then there is a resistance based on:
‘Why change something that works?’ This is especially true if there is.a long

48
 history of stability and prosperity. It is often very difficult in these circumstances
to get workforces to accept that technology, ways of working and the products
themselves are coming to the end of their useful life.
e Failure: this is a barrier to change where a given state of affairs has been allowed
to persist for some time. The view is often taken — by both organizations and the
staff concerned — that this is ‘one of those things’, a necessary part of being
involved in a given set of activities. Resistance occurs when someone determines
to do something about it — again, upsetting an overtly comfortable and orderly
BUIBUB
BUISeUR
IUdLUU
eUl
(es)
status quo.

iS You should always remember that success and failure are value judgements to a greater or
a
© | lesser extent. The only way to at least begin to rationalize success and failure is to assess
3.
=)
=a what was achieved against what was intended.
o)
@
e Technology: this is a barrier for many reasons. It is often the driving force
behind jobs, tasks, occupations and activities. Their disruption causes trauma to
those affected by the consequent need for job and occupation change, retraining,
redeployment — and often redundancy. Technological changes may also cause
relocation to more suitable premises. Technological change in turn causes
changes to work patterns and methods. It has been one of the driving forces
behind the increase in both home working, where employees can be provided
with all the equipment necessary to work without the need to come together at
the employer’s premises, and part-time working where the demands for
maximization on investment in technology and increases in customer bases have
led to extended opening and operational hours. Technological change disrupts
standard and understood patterns of behaviour and interaction; and this can lead
to changes and loss of identity with work groups and colleagues. It has led to
flexible working, away from traditional job titles, restrictive practices and
demarcation. Technological change has also disrupted traditions of
representation and membership of trade unions, and professional and
occupational bodies. Some jobs and occupations have become obsolete, others
have been created, and others still have changed out of all recognition from their
traditions and expectations.
e Vested interests: changes are resisted by those who are, or who perceive
themselves to be, at risk of obsolescence or loss of influence. Vested interests are
found in all work and occupational areas. They include senior managers
threatened with loss of functional authority; operational staff faced with
occupational obsolescence; people in support functions no longer considered
necessary; and those on promotional and career paths for whom the current order
represents a clear and guaranteed passage to increased prosperity and influence.

49
 GO) Lobbies and vested interests
Q.
>a
&le) Lobby groups and vested interests are present in all organizations, and in relation to the
environment in which activities are carried out. Lobbies and vested interests have to be
=
a
=
managed whatever the present state of the particular organization. It is essential to recog-
nize the nature and extent of the influence of lobbies and vested interests, and where,
when, why and how they are able to exert this influence. The main lobbies and vested
juawaseuelU
&®
a4]
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JO
interests that have to be managed within a changing environment are:

e Management groups: as stated in the text above, especially where their own interests
and priorities are threatened.
e Trade unions: especially when faced with loss of influence in workforce representation.
e Shareholders’ representatives, stockbrokers and other financial interests: when,
for example, a change of ownership or direction is muted or strongly indicated.
e Customer, consumer and environmental groups.
e Overmighty and over-influential individuals, groups, departments, divisions and
functions: especially where organizational restructuring or changes of direction mean
that this influence is to be diluted or lost.
e Environmental lobbies: concerned with the effect of activities or proposed activities
on the quality of the environment; examples include — the effect of construction
blight when road-building schemes are considered; the ability to dispose effectively of
toxic waste and effluent; concerns for environmental blight brought about by noise,
lighting and dust.
e Managing the media: especially the ability to respond effectively to questions raised,
both legitimately and otherwise.

The lesson here is that these groups each expect to have their concerns addressed. In most
cases, the concerns raised are legitimate even if delivered from a biased or partial point of
view. Those responsible for managing in a changing environment need to understand this. It
is additionally the case that the ability to respond to concerns raised by such groups meets
their expectations; the inability to respond to the concerns raised by such groups, on the
other hand, calls into question the strength, probity and integrity of what is proposed.
@
e Managerial: the managerial barrier is a consequence of ‘the divorce of
organization, ownership and control’ (Marx, 1867, cited in Harvey, 2010), where
there is a divergence between the organization’s best interests and need for long-
term survival, and the needs of individuals and groups of managers to preserve
their own positions. Existing patterns of supervision may again provide both
general order and certainty, and specific career and promotion paths.
e Bureaucracy: the bureaucracy barrier occurs where patterns of order and control
have grown up over long periods in the recording and supervision of aetivities and

50
 in the structuring of organizational functions. The problem is worst where the
bureaucracy is large and complex, and a significant part of the total range of
activities.
e Redundancy and redeployment: this is referred to above. It is a barrier in its
own right because in the current context any proposed change carries redundancy
and redeployment as possibilities, and because it has so often been a
consequence of other changes.

BUIBURY
BUIBEU
JUBWIUO
eUl
“&
OR
You should never make people redundant except as a last resort. Reducing the size of the
io)
Ww
ao
ue)
=
workforce is superficially attractive and gives the impression of change and progress. You
oo
ia)
feats
fa)
need always to ensure that redundancies are only carried out when everything else has
oO
been considered.

Behavioural barriers
The main behavioural barriers are as follows.

e ‘It cannot be done’: this is a barrier to both confidence and understanding, and
is based on a lack of true, full and accurate information concerning the matters
that the organization is proposing.
e ‘There is no alternative’: this comes in two forms. First, it is adopted by the
workforce and interest groups in and around it (for example trade unions) that have
a vested interest in the maintenance of the status quo either because it is familiar,
or because any change will result in loss of influence. This is especially true where
business has been conducted in an effective and productive steady-state for a long
period of time. The other side of this is where directorates and managers adopt this
as the one and only explanation for a change that is to take place. Conducted in
isolation, ‘there is no alternative’ simply becomes a challenge for others to think of
alternatives. The matter requires explanation and communication in order to
demonstrate to all those affected that alternatives have indeed been considered and
that what is now proposed represents the chosen strategic direction.
e Lack of clarity: if organizations have not sorted out the basis of the changes that
are proposed, neither staff nor customers will go along with them with any degree
of confidence or understanding; aims and objectives must be clearly understood
as the prerequisite to successful and effective change, and communicated to those
concerned in their own language.
e Fear and anxiety: these are human responses to concepts and situations that are
unknown or uncertain. They are the initial response (or part of it) to any change
that is proposed; and if allowed to get out of hand, can become an exercise in the
devising and promulgation of hypothetical scenarios that could, in certain
circumstances, become problems on the changing landscape. Not only does this
 constitute a waste of organizational resources and a diversion from actual
purposes, but such interaction among the staff feeds on itself, generating
negativity and unnecessary internal turbulence.
e Perfection: at the point at which change is proposed suddenly everything concerning
the status quo becomes ‘perfect’. Anything that is proposed as an alternative has
therefore to address this barrier. It is another manifestation of familiarity and comfort,
and faced with the loss of this, such elements become highly worthwhile to retain.
quawadeuelu
&
a4]
suolepuNno)
JO
Each of the barriers indicated above in practice comes about if one of the change —
from what — to what — when — where — how — why? factors is not present. In prac-
tice, people are willing to change if it is made clear to them that they have to do so
and if, as far as possible, it is made in their interests to do so.
For all barriers, the main issue is to avoid leaving a vacuum. Organizations have
therefore to understand where the proposed changes are to lead and what their conse-
quences are. Early communication is essential for the benefit of all concerned. The
best employers give every opportunity to their workforce to be a part of their future
before casting around outside for new staff and expertise.
In most cases most of these barriers, operational or behavioural, are present. The
influence of each barrier depends upon the particular situation, the nature and extent
of the changes to be made, and whether they are strategic, operational, locational,
attitudinal, structural or cultural. Whichever is present, the keys to effective and
sustainable progress are:

e integrity, directness and clarity of what is proposed;

e clarity of purpose, strategy, direction and priority, easily understood by all affected;
e clarity of communication, and this includes sustaining the directness of
communication over the period of change;
e clear monitoring, review and evaluation processes, so that problems and teething
troubles are addressed as soon as they become apparent;
¢ consultation, counselling and support for individuals and groups that know,
believe or perceive themselves to be most at risk from particular changes;
e acapacily for addressing specific problems, issues, quirks and anomalies as these
become apparent.

Changing cultures and structures

Effective, lasting and operationally successful change is achieved only if attitudes,
values and beliefs are addressed and the same universal importance placed on
change as on operational and technological factors. They all impinge on each other:
for example, the introduction of an automated production line leads to new job
requirements, which leads to new job descriptions, which leads to new ways of
working, which leads to revised staff handbooks and work agreements — and so on.

52
 Consequently, attempts to introduce an operational change in isolation (for what-
ever reason — and a common one in the UK used to be trade union pressure) simply
result in the old stance being conducted less effectively on the new machine. While
there may be a short-term gain in terms of expediency in the avoidance of a labour
dispute; in the longer term, both operation and production will suffer.
It has to be recognized that what is currently in place is undesirable for a variety of
reasons. The desired state of affairs must be articulated; and a strategic approach
adopted to ensure that the required conclusion is reached.
BUIsURY
BUIBeUR
eJuawuU
Ul
There are two standard approaches:

e Unfreezing-transforming-refreezing (see Figure 3.1). It is important to recognize

that the idea of ‘refreezing’ incorporates aptitudes of flexibility, dynamism and
responsiveness. It is essential to note also that the statement of ‘refreezing’ ought to
directly address the ‘change — to what?’ element of the overall process.
e Force field analysis (see Figure 3.2). This is where the forces that drive change
and those that restrain it are separated out. The drivers are then energized and
pushed on; the restrainers are either removed, neutralized or else re-energized in
ways productive to the required outcome. Effective force field analyses deal in
detail with the elements of ‘change — from what — when — where — how — why?’

UNFREEZING TRANSFORMING REFREEZING

— consultation — introduction of new — the new becomes the

— high quality open technology, work steady-state and familiar
information patterns, products, — note the danger of
— getting people used to services, attitudes becoming rigid or set anew
the idea

Figure 3.1 Unfreezing—transforming—refreezing

DRIVING FORCES RESTRAINING FORCES

ad tpaceces

ee oe fj

od Gee

a ed

To be reinforced and strengthened To be addressed individually;

via consultation; Communication; answer concerns; identify
high quality open information vested interests

Figure 3.2 Force field analysis

55
 The key problems with both the unfreezing/refreezing and the force field
approaches are that:

e the history of organization development indicates that structures are easier to put
in place than they are to change, dismantle or rearrange;
e the need for change, as we have seen, may neither be apparent nor recognized;
e the structure has often provided a career progression path through the
quatuadeuelu
&
a4,
suoNepuno)
jo organization that has been one of the attractions of working in it and staying in it.

Change catalyst and change agent

In response to the pressures, drives and constraints outlined above, organizations
create their own opportunities for change, development and improvement. These
approaches may be:

e structured and strategic, in which clear catalysts and agents are sought for
something that is already to be implemented:
e opportunistic, in which the senior managers of an organization are sufficiently
expert to take advantage of opportunities when they do present themselves, and to
engage in wider programmes of change;
e adhoc, in which changes, developments and enhancements are conducted in
isolation from the overall purpose and direction of the organization.

Whichever is chosen, the change process must be capable of being summarized as:

e ‘Change — from what — to what — when — where — how — why?’

e ‘Is this possible or feasible in the given state of the organization and its
environment?’
e ‘Are there any possible or potential circumstances or conditions which may
change or arise which will prevent what we want to achieve from occurring?”

The catalyst for change may be an event or series of events; or a person or group.
Whichever it is, the outcome is that for whatever reason, it is agreed that the present
state of affairs is no longer adequate. Progress of some sort has therefore to be made,
and so the organization has to be galvanized into action.
The change agent is the person who galvanizes the organization into action, and
sees through what is proposed to its conclusion. The change agent may be the person
who has decided that things do have to progress; or they may be someone who is
either given the job to see things through, or else brought in from outside. Outsiders
may be experts taken on to the payroll for the given purpose. Additionally, many
organizations use management and specialist consulting firms as catalysts and agents
of change; though it is vital to be absolutely clear about what the consultants are
there to achieve. -

54
 on
If you do bring in change agents and catalysts from outside, make sure that they clearly
io)
A)
ao
4)
understand the brief that you have given them. Failure to do so can cause lasting damage
=

and so make sure that when you do bring in outsiders, effective communications with
e¥)
(a)
cea
(a
oO
everyone continue to be maintained.

Changing attitudes and approaches to quality, value and

expectations BUISURY
BuIBeUR
JUSWUO
eBUI

Whatever the purpose or catalyst for change, the priority is the ability of the organiza-
tion and its managers and agents of change to concentrate on quality, value and
expectations in all areas. All organization stakeholders have presumptions of the
quality and value that they are to gain from the organization, and expectations that
their own collective and individual aims and objectives will be met.
Customers expect improved ranges and quality of products and services. Share-
holders and backers expect improved share values, returns on investment, and divi-
dend payments. Staff expect better pay and rewards, and greater opportunities for
recognition and advancement.
It is important to note that these expectations are not always delivered. Quick fix
approaches that have the purpose of increasing share values in the short term (for
example outsourcing of functions) very often settle back to previous levels as the
particular matter becomes institutionalized (and in some cases, operational prob-
lems start to emerge). Rebranded and redesigned products and services have to
deliver additional benefits of value to the customers, otherwise they will be
dismissed as fashionable, faddish or transient only, not suitable to the enduring
needs and wants. Staff restructuring rarely delivers increased opportunities or
rewards for staff; indeed, most staff expect that restructuring will lead to job and
opportunity losses, and reduced career paths. Meeting the demands of quality, value
and expectations in managing within a changing environment requires that the
following priorities are addressed by the change agent, leader or director if the
above concerns are to be met.

e Obsession with customer satisfaction, in terms both of the products or

services offered, and the ways in which they are delivered by the organization.
This must cover the whole process from the acceptance of orders, through
delivery and dispatch, to after-sales service. In many cases, this is instrumental
in the generation of repeat business. There is thus a strong element of long-term
investment inherent in any true genuine approach and attitude that has quality
at its core.
e Obsession with staff excellence, in terms of their expertise, skills and
knowledge. This must be underpinned, however, by a commitment to them that

55
 ensures that they are instilled with the attitudes necessary to deliver this
expertise in the ways in which the organization and its customers require. They
must be paid and rewarded adequately. They must have their expectations and
aspirations accommodated in the intention and pursuit of excellence. Again, this
is regarded as a long-term mutual investment and commitment between staff and
organization. It is not regarded as a purely instrumental or functional approach, or
concept of employment.
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e Obsession with constant improvement, the recognition that each and every
aspect of the organization, its products and services, its practices, procedures and
operations can be made to work better and more effectively in the pursuit of
quality and excellence. Levels of investment in production methods and
capacities, standards and life span of production plants and equipment will also
be the subject of this commitment. Only the best equipment will do: that which
has all the attributes required to meet the output levels required in terms of
speed, reliability, perfection, regularity and universality.
The maintenance of operations at a continuing high quality level is under-
pinned by both procedures and processes. The procedures include inspection,
random sampling, testing and monitoring of products as they come off the
line, and of the lines themselves during planned maintenance periods. The
processes reflect the concept of continued improvement and must include
work improvements and quality improvement groups addressing both product
and production methods.

aS
(cc
Dutton Engineering Ltd
(a)
wn
a
ie}
= Dutton Engineering Ltd employs 600 staff in the design, manufacturing and delivery of
SS
plastic and metal office furniture and equipment, specialist parts for the motor car
industry, and components for the aircraft industry.
Some years ago, faced with ever-increasing staff, employment, manufacturing and
energy costs, the company’s majority shareholder and managing director, Ken Lewis,
undertook a total restructuring.
He organized the production crews into autonomous work teams. As well as being
responsible for the output of their particular products, production crews would now set
their own targets, work schedules, and quality assurance processes. Production crews
would be responsible for the attraction, recruitment and retention of new staff as and
when they were required. Production crews would ensure that their own paperwork
was accurate, answering directly to Mr Lewis and the board of directors in case of errors
and omissions.
Production would be scaled back so as to manufacture only in response to orders.
Orders were still required to be turned around within timescales demanded by customers.

56
The emphasis here was to ensure that sales teams concentrated on existing Customers,
with the purpose of generating repeat business, and on potential customers who were
reassessed as being very likely or strongly likely to place orders.
Payroll was outsourced to a specialist firm. This cost the company a small monthly sum
and prevented the need for employing up to four clerical staff to process time sheets, shift
and productivity payments. These responsibilities were additionally handed to the produc
tion crews and sales teams.
Staff were shifted from regular daily patterns of work to a system of ‘annualized hours’ BUISUR
(UI)
BUIBeU
JUaWU
e&Ul

in which staff were responsible for attending at work, and being able and willing to do so
at times of heavy workload pressures. This was to ensure that the priority of meeting dead-
lines was absolute.
Over the next four years, business volumes doubled. Over the four years after that,
business volumes doubled again. Staff productivity bonuses averaged 50% of total salary
over the period. Additionally, faults and rejects fell by 85%.
All of this was achieved in response to the increases in costs and market constraints, as
above. By concentrating on quality, value and expectations — and in particular ensuring
that staff expectations were addressed — product quality, service levels and customer
satisfaction were assured.

Current managerial issues

Those responsible for managing within the constraints of a changing environment
have to be able to deal with the following.

Technological advance
Technological advance brings possibilities in terms of increased opportunities for
production, quality and durability; speed and flexibility of response to customer
demands; and the capability to organize and develop workforces in ways that were
simply not possible beforehand.
Additionally, organizations have been under both operational and cultural pres-
sures to develop e-business and internet activities wherever they can. There is a
widely held perception that not to have a website or internet activity is demeaning to
the particular organization.

Investment
The best organizations are increasingly taking the view that much greater atten-
tion to investment is required. Investment in technology is viewed as a continued
commitment, together with the need to change technology, overnight almost, if and

57
 when radically new approaches are invented. Investment in the production and main-
tenance of high quality staff is a prerequisite to long-term and continued customer
service and satisfaction, and therefore, to long-term organizational well-being.

co) Investment
ie)
5)
a
e.
ie) The apocryphal tale is toid of two groups of managers, one British and one Japanese, who
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each ran a production line employing 20 people.
A machine was invented that could do the work of this line but which needed only
one person to operate it. The British managers went home with heavy hearts because they
knew they would have to make 19 people redundant.
The Japanese managers went home with glad hearts because they were going to get 20
new machines; they were going to expand output by a factor of 20; all the staff were going
to get retraining and a fresh place of work; and they would not be adding to the wage bill.
The lesson for managers is that, however an opportunity is exploited, is very much a
matter of individual choice. Neither of the above approaches is right or wrong except in
the capability of the particular organizations to recognize investment as an opportunity
and ensure that it is maximized, whichever line is taken.

Culture, attitudes and values

The best organizations and their managers are increasingly taking advantage of the
changing environment to ensure their staff adopt distinctive ways of doing things that:

e support the organization’s own distinctive and considered view of how it should
conduct its affairs;
e are capable of accommodating the differing, and often conflicting, interests of the
employees;
e transcend local cultural pressures, meaning that both products and the ways in
which they are produced and offered must be of a fundamental integrity so that
they are acceptable wherever business is conducted;
e create a basis of long-term mutual commitment serving the interests of the
organization, its customers, the wider community and its staff;
e generate experience and expertise in managing across cultures, sectors, markets
and locations.

This is all supported by continuous and effective communication, staff involve-

ment and development activities. It is pointless to expect staff to do things in partic-
ular ways if they are not supported. Additionally, effective support and communication
feed organizational activities and practices, and performance effectiveness, so that
the whole becomes an ever-upward spiral of improvement and development.

58
 Strategy
The Dutton Engineering example (see above) ought to give an indication of the oppor-
tunity to use change to develop greater clarity, awareness and understanding in the
strategic aspects of business and management. This in turn makes it easier for all
staff to acquire the following capabilities and expertise:

e reconciling a range of conflicting pressures;

e learning global and general lessons from successes and failures;
BUIsUe
SUIBeU
fwJUSWI
eUl
¢ investment and commitment to the long term in terms of technology, markets,
customers and employees;
e flexibility and responsiveness in the immediate term in the face of changing
customer demands;
e generating staff loyalty and commitment through a determination to invest in their
long-term future. This above all, means attention to training and development. It
constitutes a mutual and continuous obligation. The view is also increasingly
taken that long-term customer satisfaction can only be achieved through a
commitment to staff excellence.

Flexible patterns and methods of work

This is based on a combination of the demand to maximize and optimize investment
in production and other technology, together with changing patterns of customer
requirements. This has led, for example, to longer factory, shop, office, public and
private facility opening hours, based in turn on the recognition that customers will
use organization services when it suits them. As organizations have extended their
activity times, so they have found that extra customers have come to them and also
that there is a great demand for short hours and other forms of part-time working and
job opportunities on the part of employees and potential employees.

or
Those working on flexible and non-standard patterns of work need effective supervision
io)
4
wn
and so management and supervisory patterns and priorities need to be adjusted and
2
3)
(a)
a.
changed. Those on flexible and non-standard patterns of work also need to have their own
fa)
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clear and positive identity with the organization if there is to be any chance of getting
effective work out of them.

Ethics
There is a realization that there is a much greater propensity for consumers to use
organizations in which they have confidence and which they can trust. This is based
on the expectation of a long-term and continuously satisfactory relationship; and on
the knowledge that, if this is not forthcoming with one organization, it can be found

59
 with many others. There is also a much greater demand for work and staff relation-
ships based on honesty and integrity rather than bureaucracy, barriers, procedures —
and in many cases duplicity. If an organization promises lifetime job security, then its
first duty is to remain in being for that lifetime — and to do this, it must take a view of
itself based on integrity rather than expediency.

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Concern for the environment
This is a matter of universal, political, economic and social priority at present; and is
likely to become more extreme in the future. It has direct implications for business
and managers. It is also plainly related to the investment concept detailed above. It
affects ultimately all aspects of the business sphere. Globally, there is a balance that
must be struck between developing economic and business activities in order to
support the short-term needs of a world population that is expanding at a great rate
(the population of the city of Cairo goes up by 1 million every seven months, for
example) and preserving the world so that it may support life and a quality of life
further into the future.
At an organization level there is a necessity to consider the effect of operations on
the environment in relation to all business aspects. Marketing policies and activi-
ties, for example, may demand levels of packaging to preserve the product, to
demonstrate it to its best possible advantage and to meet public and sectoral expec-
tations. On the other hand, both the packaging itself and the technology used to
produce it may be consumptive of resources themselves and also create high levels
of pollution or waste. Production and operations and the technology related to this
also create drains on the world’s resources. They create waste and eftluent that also
have to be managed and disposed of. Human resource policies in certain parts of the
business sphere (for example the UK) provide high quality, prestige cars to go with
particular occupations; these cars are very often resource-intensive in production
and highly consumptive of fuel.
The net result is that strategies and policies for managing the environment have to
be devised globally, sectorally and organizationally. This requires organizations and
their managers to place the environment at, or near, the top of their list of priorities. It
requires them to take a much wider view of the true cost of operations. Related
activities may therefore include reorientation of marketing and product presentation
and a parallel re-education along these lines as part of the total strategy aimed at
changing customer expectations in this way (and reconciling this with the positive,
persuasive wider marketing activities). It also requires organizations to take a longer-
term view of production processes. The approach required is that which relates both
to responsibility for, and the adoption of, procedures and practices that truly address
the problems of the disposal of waste and effluent and for which organization provi-
sion must be made in strategic, operational and investment terms.
The changing nature of public services
The restructuring of municipal, public and health services requires a mention here,
as do the related concepts and realities of service level agreements and arrangements
(we have made reference above to the privatization which often accompanies these).
The strategic conception relates to the stated need to revitalize and regenerate these
services, to restructure them, to improve the quality and effectiveness of their
management and to make them more efficient. This is all based on the premise that it
can be achieved only if the organizations responsible are freed from bureaucratic, SUIBUB
fo)
BUISeU
JUIWU
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state or other authority control. Managers will in turn be free to conduct, provide and
order these services in the ways in which their expertise directs. This is of especial
importance when the nature of these services is considered — they are the primary,
critical, health, social and education activities that are evermore in demand, ever-
expanding and the object of ever-higher social and public expectations. The same
thinking has been applied to public utilities and strategic state industries. In the UK,
gas, electricity, water, transport and telecommunications and some research have all
been privatized or transferred from government to shareholder ownership. Others,
especially postal services, are set to follow in the near future.

Conclusions
All the factors and issues raised in this chapter concentrate on the drive for business
and organizational quality, effectiveness and excellence. They reflect the fact that
these constitute the major concerns of the business sphere in the last decade of the
20th century; and moving forward into the 21st century. They are further underlined
by the relationship that is drawn between the existence of these qualities in organiza-
tions and the success, effectiveness, growth and profitability of them, which are
considered to arise from the fact that either they operate in these ways or that they
exhibit these qualities.
The greatest mistake that anyone could make however, is to believe that they
constitute an end in themselves; that, once achieved, an organization is guaranteed
permanence and eternal profitability. This is not so. At their highest level (and if one
is offering or preaching perfection) these concepts represent threads and strands that
ought to run through the core of any organization or undertaking; they constitute a
standard of ethic, aura, belief and pride in the organization that are increasingly
recognized as the sound foundations on which business success must be built. They
also represent the obsession with top quality of products and services, the central
position of the customer in the activities of any undertaking and the critical impor-
tance of this. Such foundations require constant attention and maintenance as do the
organizations, their structures, cultures and practices which are built on them. This is
also the basis from which the next developments of the business and management

61
 sphere, and of managerial expertise, are to come. It has taken the composition of the
expertise and reality of management that is currently recognized thousands of years
to develop this far; and this includes the globalization of experience and practice.
The ability to operate effectively, and respond to pressures within the changing
environment is a critical part of management expertise (see also above, Chapter 1).
Products and services have to be capable of effective delivery whatever the present and
envisaged constraints of the environment, and, as well as maintaining a steady-state,
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opportunities for business development and advancement have also to be created.
The processes, qualities and expertise of business and management outlined here
and their interaction and interrelationship both among themselves and with the wider
business sphere and environment are having great and lasting effects on business
practices. The transformation effected is to generate the creative and energetic aspect
in the business sphere and to develop the nature and level of expertise in as many
ways as possible. Management is thus no longer a straitjacketed or bureaucratic
process; above all, it is not the equivalent of administration. Both business and
maiagement are ever-developing concepts, phenomena and realities. Their progress
and transformation are limited only by the capacities and capabilities of those who
work in them in whatever sector or aspect.
Finally, these constitute global and universal activities and it follows from this
that good practice is good practice wherever it is found. It is evermore evident that
this is so and that any true expertise, whenever it is found and from wherever it is
drawn, provides an increase both in understanding and in the fund of knowledge,
skills and capabilities of the expert manager. Above all, the professional and expert
manager has to bring to his chosen profession a willingness, openness and capacity
to learn and develop; a preparedness to draw lessons from wherever they may
become apparent and to assimilate these lessons in regard to his own expertise. This
covers the whole spectrum of business and managerial activity with opportunities
afforded in all sectors across the whole world. This is the scale and scope of the
range and potential offered to the truly expert manager. The whole field therefore
opens up opportunities that are truly exciting, challenging and adventurous for
anybody who wishes to take advantage of them and who has the qualities, capacities
and personal attributes to do so.

= e Always remember that change is a process; and the summary ‘change — from what —
Sy
a
7)Ts to what — when — where — how — why?’ needs always to be kept at the forefront of
everyone's mind.
e Change processes and activities need to address the needs of everyone. Even where
some people are to be disadvantaged as the result, they still need to know and
understand (and hopefully accept, if not always agree with) why things are being done.
Tae

62
e The use of change agents and catalysts, including bringing in outsiders, is valuable in
many sets of circumstances. However, it is essential that they stick to their brief; and
where this needs to be broadened, full consultation with everyone involved is required.
e Where technological change is envisaged, it is essential to know and understand the
benefits that the new technology is to bring. The driving force of all technological
change needs to be enhanced operational effectiveness and efficiency.
e It is essential that all change keeps organizational priorities and operational issues at
the forefront. Clear aims and objectives are required when proposing change and these BUIBUe
BUIBeU
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must be kept at the forefront of everything that subsequently occurs.

Further reading
Burnes, B. (2007) Managing Change. FTPitman.
Drennan, D. (1992) Transforming Company Culture. McGraw Hill.
Gratton, L. (2000) Living Strategy. FTPitman.
Harvey, D. (2010) A Companion to Marx’s Capital. Verso.
Lewin, K. (1951) Field Theory in Social Science. Harper and Row.
Williams, A., Dobson, P. and Walters, M. (2000) Managing Change Successfully. Thomson.

63
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 Ethics and 64
corporate
governance
“The best
organizations and
‘managers deal
continuously and —
openly with

In this chapter
e the nature and content of business and management ethics
e the relationship between ethics and profitability, viability and effectiveness
e setting and maintaining standards of conduct, behaviour and performance
e the nature of corporate governance and corporate social responsibility

introduction
Ethics and corporate governance have come to prominence in business and manage-
ment for a range of reasons. The result of the continuing professionalization of
management, and aspiration to professional status, means that codes of conduct and
practice are required in absolute terms. Organizational concentration on the short-
term financial aspects of their performance, and refusal or inability to recognize the
legitimacy and contribution of other interests and stakeholders have meant that
resources have been wasted, investments failed, and initiatives have not delivered
what was expected of them. High profile corporate scandals have brought into focus
at least what top and senior managers ought not to be doing. The result of all this has
been the establishment of an organizational leadership and managerial priority in
attending to the wider context of what is being done, and how it is being done. In turn,
this means that there is now sharp focus on:

e the ethics of business and management; and

e the governance of companies and organizations in all sectors.

65
 Companies and organizations are required to establish clear policies and standards of
practice in reporting how they conduct their affairs and arrive at summary financial
performance. The salaries and remuneration packages of top, senior and key execu-
tives must now be published and justified. Statements of organization product,
service, share and brand values must now be capable ofjustification. Specific activi-
ties, especially those that generate risk or hazard, must now be fully justified.
Ethics in management is concerned with those parts of organizational, operational,
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occupational and professional conduct that relate to absolute standards and moral
principles. Corporate governance is concerned with establishing and implementing
the principles and practices by which organizations are to be directed and operated;
and this includes attention to culture, conduct, behaviour and performance, as well
as to financial, operational and strategic substance and transparency. Establishing
standards of conduct requires reference to questions of what is right and wrong in
absolute terms; the desired ends and outcomes; and the ways and means by which the
ends and outcomes are achieved.

@
‘Business ethics applies ethical reasoning to business situations and activities. It is based
x
ne}
og on a combination of distributive justice — that is, the issuing of rewards for contribution
a
a
=
to organization goals and values; and ordinary common decency — an absolute judge-
=
ment that is placed on all activities’ Sternberg (1995) say

In order to deliver all this, a full understanding of business and management

ethics and corporate governance is required in the following areas:

e long-term organizational survival, profitability and prosperity; and an

understanding of the strategic and operational elements necessary to deliver and
assure this;
e enduring relationships with key stakeholders;
e attention to the external environment;
e the nature of working, professional and personal relationships;
e attention to the quality of working life;
¢ compliance with the law, and working with auditors, regulators and statutory
bodies to ensure that compliance is active and positive;
e establishing the basis on which everyone is to be treated equally and fairly in the
context of organizational practice and activities;
e establishing where specific responsibility and accountability lie;
e establishing where overali responsibility and accountability lie:
e establishing the basis on which staff are to be paid and rewarded;
e establishing the basis on which shareholders and backers are to receive returns
on their investment;
¢ working effectively within the constraints of social, cultural and religious customs.
 Understanding the nature of ethics and corporate governance is therefore a major
management discipline. It is essential to know and understand these elements, both
in absolute professional terms, and also as they relate to particular organizations in
their environment.

@
De
nS)
Ethics and corporate governance
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Sy
Taking what is written above as a basis for high and absolute standards of conduct, behav-
a
= iour and performance, the basis of understanding can be further developed.

Adams, Hamil and Carruthers (2001): identify a series of factors and elements as meas-
ures against which the performance of organizations could be measured in ethical terms.
These factors are:

e the nature of business (Adams, Hamil and Carruthers identify contentious industries
such as tobacco, alcohol, chemicals, armaments);
e the quality, integrity, availability and use of information;
@ participation, consultation, employment relationships, the recognition oftrade unions,
means and methods of representation;
e relationships with emerging economies and markets, and relations with developed
economies and markets;
e marketing and selling initiatives — and again, with reference to contentious products
and services as above;
e connections with governments — especially where these were considered to be
undesirable or where the regime in question was considered to be unethical itself.

Connections with government of course change when regimes, political parties and indi-
vidual leaders change. In practice, it is much easier to engage with regimes that are
suddenly ‘good’ than to disengage with regimes and governments that suddenly become
‘bad’. The opposite approach is to place the onus on individual managers.

According to Drucker (1995):

‘The more successfully the manager does their work, the greater will be the integrity
required. For under new technology the impact on the business of decisions, time span
and risks will be so serious as to require that each manager put the common good of
the enterprise above self-interest. Their impact on the people in the enterprise will be
so decisive as to demand that the manager put genuine principles above expediency.
And the impact on the economy will be so far reaching that society itself will hold
managers responsible. Indeed, the new tasks demand that the manager of tomorrow
root every action and decision in the bedrock of principles so that they lead, not only
through knowledge, competence and skill, but also through vision, courage, responsi-
bility and integrity.’

67
 Payne and Pugh (2001): identified the relationship between the absolute standards of
the organization and its ‘climate’. They stated that: ‘Climate is a total concept applying to
the organization as a whole or some definable department or subsystem within it.’ There
are four main aspects:

e degrees of autonomy given to particular individuals, groups, departments, divisions

and functions;
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e the degree of structure or flexibility imposed on work positions;
e the reward orientation, in terms of both individual satisfaction and overall
organizational achievement;
e the degree of consideration, warmth and support; the human aspects of staff—
management relationships. O

In particular organizations, locations and sets of circumstances there are addi-

tional specific issues to be considered:

e compliance with the law (as above), and compliance with specific local laws,
habits, customs and ways of working;
e general approaches and attitudes to staff and customers;
e general approaches and attitudes to all stakeholders;
e establishment of attitudes to the communities in which they operate;
e establishment of attitudes to environmental issues;
e establishment of business relationships with suppliers and markets;
e being clear about approaches to product testing, especially where this involves
the use of animals;
e being clear about product testing, especially where the outcomes are not fully
known, understood or evaluated.

aar
Ge
Genetically modified (GM) crops
a)
awal
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=!
Scientists believe that they have found ways to improve the quality and durability of agri-
S=
cultural crops through modifying the genes of the particular plants. This has caused
extensive political, social and media debate and argument — on the one hand, recognizing
the need to enhance global food production; on the other, many concerns about long-
term damage to the food, agricultural, and environmental infrastructure have been voiced.
The key problem here is lack of openness, quality and integrity of information. The
companies responsible for producing genetically modified crops have found tliemselves
under attack from powerful consumer and environmental lobbies, and have therefore
retreated within themselves, concentrating on their existing markets and those that they
are able to dominate, rather than opening up a higher quality of debate. Politicians, while
recognizing the need to enhance quality and volume of food production, have
 equivocated on the environmental issues. Environmental lobbies have sought to simplify
the debate into a single issue — the general rights and wrongs of ‘tampering with nature’
The net result is an entrenchment of position — resulting in a hysterical and ill-informed
exchange of views, arguments and insults. The chief sufferers of this are the public at large,
who to date have not been told the true merits and demerits of each part of the case.

There is clearly no common agreement on what constitutes an absolute body of QDULU

92e1O
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knowledge and expertise in the area of business and managerial ethics. Some useful
initial conclusions may however be drawn.

e It is essential to take a long-term view, as well as having to satisfy immediate

interests and demands.
e Absolute standards are required relating to organizational policies, aims and
objectives.
e Common standards of equity, equality, honesty and integrity are required; and if
they are not established, they will, de facto, emerge anyway.
e There is a relationship between organization standards and integrity, the delivery
of performance, and the distribution of rewards.
e There are key relationships between means and ends, and actions and motives.
e Identifying and establishing where conflicts of interest lie, and the reasons for
their existence, is also an essential task.

It ought to be clear also that establishing particular standards of conduct, behav-

iour and performance is a critical function of organizational and managerial stability,
integrity and assuredness, and a clear point of reference for stakeholders, the envi-
ronment and markets served.

=
One of the key values of ethics and clear standards is that you help to remove people's
uncertainties. In relation to the material covered above, for example, if you have set clear
wv
o
~

3.
=a standards, then you will remove some of the uncertainties that you might have to face in
oc
Gal
oO
dealing with contentious political regimes or controversial commercial activities such as
genetically modified foods.

Survival
Survival therefore becomes the main ethical duty of the organization to its staff,
customers, communities and other stakeholders. For this to happen over the long
term, a long-term view must be taken of all that this means. For business and compa-
nies, profits must be made — over the long term; for public services, this means
effectiveness — over the long term. This is the basis on which confidence and an
enduring and continuous positive relationship with customers (or service users) is
 built and developed. This is also the only ground on which an effective and satisfac-
tory organization for the staff is to be created.
Short-term views, expediency, the need for triumphs - all detract from this. Espe-
cially, there is a serious problem in this area with some public services. For example,
the output of education can take 15-20 years to become apparent. Health and social
services have similar extreme long-term requirements and commitments. Yet those
responsible for their direction (both service chiefs and cabinet ministers) need to be
quatuaseuetu
&suonepuno)
Jo
a4,
able to show instant results to be presented before the electorate or before the selec-
tion panel for their next job.
This is not wholly confined to services. For example, pressures from bankers and
other financial backers in some sectors (especially loan makers) lead to companies
being forced or strongly encouraged to sell assets during lean periods in order to keep
up repayments or show a superficial cash surplus over the immediate period. This
happens, for example, with the civil engineering and construction industries when-
ever there are declines in work brought on by recession and general loss of confi-
dence. Pressure is placed on the companies to generate short-term cash through the
sale of assets especially land banks. The consequence is that long-term survival is
threatened because these assets will not be present when any upturn in confidence
and activity comes about.
However, this again has to be balanced with matters of general confidence and
expectation. If backers expect to see a series of short-term positive results then these
have to be produced, especially if backing may be withdrawn if they are not forthcoming
or do not meet expectations. This implies re-educating backers into the long-term view.
It also means seeking out others who are disposed to take the long-term view.

oR
The best organizations and managers deal continuously and openly with all stakeholders,
oO
meeting with them, discussing and debating priorities and other issues, identifying prob-
wn
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=

lems, and providing comprehensive and clear information.

fa8)
ia)
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Relationships with employees

This refers to the nature of participation and involvement, and the point of view from
which this is approached. Basic integrity in employee relations (ER) stems from the
view taken of the employees, their reasons for working in the organization, their
reasons for being hired to work in the organization and the absolute levels of esteem
in which they are held.
Confrontational or adversarial styles of ER are always founded on mistrust and
reinforced by offensive and defensive positions adopted by the two sides concerning
particular issues. The phrase ‘the two sides’ confirms and underlines this! Resources
are consumed in this way to the detriment both of organization performance and also of
resource utilization — those used in these ways cannot be put to better use elsewhere.

70
ast
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resource management departments and functions. In this context, an especial problem

concerns those that have responsibility for ER.
These companies and organizations hire ER specialists to devise policies for the effective
management of staff and resolution of conflict, and to resolve problems when they arise.
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Serious organizational problems can, and do, arise when these ER specialists are
rewarded on the basis of the problems that they solve. If emphasis is placed on the ability
of ER specialists to solve problems, then they will find problems to solve.
For example, a large London radio station was going through a period of extensive
restructuring. Two programme-producing departments were required to restructure their
workforce, terms and conditions of employment and hours of work. The manager of one
of these departments saw the problem early and, by engaging in extensive consultation
and discussion with the staff, all problems were avoided, and the matter was resolved
smoothly and without any disputes.
The manager of the other department did nothing about the matter until the weekend
before the changes were due to take place. In the period immediately preceding this
weekend, staff morale plummeted, and there was an increase in the number of disputes
and grievances. Accordingly, the mariager commanded all of the staff to attend a weekend
briefing, consultation, and crisis resolution session immediately before the changes were
due to take place. The matters were resolved at this weekend meeting.
The radio station's senior management, who were well familiar with the situation and
the mounting crisis, looked on with admiration as, at the end of the weekend, all of the
staff trooped out and announced themselves satisfied with the new arrangement. Because
of his crisis management skills, the particular manager was rewarded. The manager who
had tackled the problems early received no reward or recognition for the ways in which
she had managed the situation. Not only was the approach of the radio station unethical,
it was also inadequate — failing to recognize how members of staff were conducting them-
selves, and how they ought to be recognized and rewarded.

Adversarial ER is therefore normally unethical. On the other hand, greater or full

participation and involvement is only ethical if the point of view adopted is itself
honest — if a genuine view of respect and identity is taken. This is apparent — or not —
in the continuity and enduring nature of this relationship. It is underlined by the
volume, quality and relevance of information made available to staff, the means by
which problems are addressed and resolved, the prevalence of equality of treatment
and opportunity, and the development of staff. It also refers to the level of atten-
tion paid to setting standards to which employees are to conform and the reasoning
and logic behind this process. It covers all aspects of the traditional personnel
area — recruitment and selection, induction, performance appraisal, pay and reward,

M1
 promotion and other opportunities for development and advancement. Above all,
at its core, lies equality of treatment for everyone; and this is a legal as well as an
ethical and human demand.

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Means and ends

Crimes are not annulled by altruistic motives even though they may arouse human
sympathy. For example, where a hungry person robs a rich person just so that they
can eat, a crime is still committed. Robin Hood was a robber, whether or not he gave
the proceeds of his robberies to the poor. The sale of cocaine on the urban streets of
Europe and North America is wrong even if it provides the means of economic
survival to the people of South America.
This applies to organization practices also. If a manager dismisses an employee to
make an example of him, and if the employee did not deserve dismissal, then a wrong
act is committed even if it brings the remaining staff into line. If the organization
secures its long-term future through gaining a contract by offering a bribe to a major
customer, then a wrong act is commuted. In each of these cases in practice, stated
ends are very unlikely to be secured anyway because there is no integrity in the rela-
tionship. In the first case, the staff will look for other ways of falling out of line (but
without risking further dismissals); in the second case, the corruption may come to
light and the relationship be called into question or cancelled as the result.
Organizations must recognize and resolve conflicts of interest. The first step lies in
acknowledging their legitimacy and certainty. From this, measures can be taken to
ensure their resolution, which benefits the long-term future of all concerned. Conflicts
of interest arise between all organization stakeholders; and between individuals
within, and between, departments and divisions. These conflicts may be based on
divergence of aims and objectives, as well as on general professional and expertise
disagreements as to the best interests of the organization (as well as matters of
infighting and operational and personality clashes).
The ethical approach is bound up in an integrity and visibility of management
style and working relationships, and the early recognition of operational, professional
and personal problems. These are then addressed when they arise and before they are
allowed to fester and become a part of organization folklore. What is to happen as the
result of these matters arising can then be transmitted early, and it can be demon-
strated why this is in the best interests of the organization.

72
 @
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=
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typically enhance long-term owner value. They do so in many ways. Chief of these is obvi-
ating the difficulties of operating without them. Stakeholders who doubt the good faith of
companies and organizations, or of their colleagues, are more likely to spend time in
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protecting their own backs than in performing their functions. Time, resources and energy
that could be spent more productively and rewardingly are consequently diverted to basic
self-preservation with a direct opportunity cost to the business. Decent treatment, in
contrast, permits and encourages stakeholders to get on with the job, and to conduct
business effectively and profitably.
The costs of disregarding ordinary decency and distributive justice are far-reaching. In a
business characterized by lying, cheating and stealing, this illusion of low morale typically
replaces initiative and enthusiasm; teamwork becomes difficult at best, and long-term
commitments counterproductive. When exertions on behalf of a business are rejected or
penalized, rather than encouraged and rewarded, they are unlikely to be repeated. Distribu-
tive justice and a modicum of decency are therefore essential for any business to operate.
Without them, the best business is unlikely to attract the best people or their best efforts.
But when they are respected, the business will normally be characterized, not only by
responsibility and integrity, but by maximum long-term owner value.
Source: Sternberg (1995).

Standards of conduct and behaviour

Top and senior managers set the standards for the conduct and behaviour of the
organization as a whole; and functional managers, section heads and supervisors do
the same for their own people. The immediate issues are that:

e if top management set lax standards, there is ultimately little point in those lower
down the organization trying to set high standards;
e if top management set high standards, then the extent to which these are absolute
in practice is a direct reflection of what happens when those lower down the
organization allow standards to slip.

Managing shareholders’ interests

The priority in managing shareholders’ interests is communication. Shareholders and
their representatives need to know and understand the nature of returns on offer; the
conditions under which returns are possible; and the changes in conditions likely to
affect these returns. This is so that shareholders, and their representatives, know and
 understand where top management are taking the organization, and why, in terms of
financial returns. It also provides shareholders, and their representatives, with a key
point of reference in their dealings with top management; and ultimately, if they do not
like what top management are doing, shareholders’ representatives will replace them.

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The best organizations recognize that the shareholder's interest is not the only one that
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Managing staff interests

EU and other regulations on equality of treatment, working time, wage levels and
consultation have caused all organizations to take a much broader view of their
responsibilities to their staff. The overall effect has been to demand a much greater
knowledge and transparency about pay, and terms and conditions of employment; and
this has led in turn to a greatly increased propensity to make claims to courts and
tribunals when collective and individual pay, and terms and conditions are known or
believed to be wrong for some reason. Defending claims is expensive, stressful and
time consuming. This can, and does, lead to wider adverse publicity; and this can,
and does, lead to loss of confidence in the integrity of the organization as a whole.

Managing other stakeholder interests

Top and senior managers have a clear commitment to all those who come into
contact with the organization, especially those whose immediate and future well-
being is at stake.
Suppliers and contractors, especially those whose existence depends on large,
understood and regular volumes of work from the particular organization, have a
moral, as well as commercial, right to be told of immediate and potential plans for the
future. In particular, they are entitled to know of any plans to restructure the supply
side, or take key or critical orders elsewhere.
Top and senior management have a responsibility to ensure that products and
services produced and delivered are of value to the particular markets and communi-
lies served. This responsibility is a combination of providing work for people; keeping
the environment clean and tidy; and managing waste and effluent.
Managing waste and effluent itself is a specific corporate responsibility and falls
into the following categories:

e ensuring safe dispersal of everyday rubbish, for example paper, packaging, food
and canteen waste;

74
 ensuring safe management of production processes that produce particular
hazards, toxins and otherwise dangerous effluent;
ensuring in so far as is reasonably practicable that noise, heat, light and dust
pollution, and fumes from transport fleets are kept to a minimum;
ensuring that confidential waste in the form of staff, customer and supply records
is disposed of with absolute security.

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Probity and integrity
It follows directly from all of the above points that setting, and maintaining, absolute
standards of probity and integrity comes from the top of the organization. Probity and
integrity in corporate governance are concerned with the ways in which responsibili-
ties and obligations are identified, accepted, met and discharged.
There is again a clear choice open to top and senior managers; and again, which-
ever is chosen, this becomes de facto an active choice with direct consequences for
the future conduct of the organization. The choices are as follows.

Setting standards which are fully transparent, open and honest, and which can
stand detailed scrutiny from any quarter. In theory, this is the ideal position. In
practice, the culture, behaviour patterns, norms, values and past history of the
organization may simply not allow for this to happen. It may also not be
acceptable to powerful and influential groups and individuals, shareholders and
other stakeholders.
Full and active compliance with the law and wider sets of responsibilities and
obligations. This involves using the full range of communication and consultation
processes to deal with all stakeholder groups in answering questions about
conduct and performance as accurately and comprehensively as possible.
Passive compliance, in which standards are set to comply with the law and other
regulations and statutory instruments.
Sectoral compliance, in which top managers discharge their obligations to the
perceived and understood standards of openness, or otherwise, that prevail in the
rest of the sector.
Stretching the rules, which may be necessary from the point of view of meeting
shareholder and stakeholder expectations in responses to crises and emergencies;
or which, again, may reflect the norms and cultural perceptions of how matters are
conducted in the given sector.
Criminal intent, in which top and senior managers conspire among themselves to
break the rules in order to gain advantages, either for themselves or for a
particular group of stakeholders or, rarely, for the organization as a whole.

5
 Managing dishonesty
In theory, the standards of probity and integrity chosen reflect the fact, belief and
perception that ‘either the organization is honest or it is not’. In practice, within the
cultural constraints and the nature of organization conduct indicated above, it is
rarely that simple. However, the active choice of a position and the consequences
are absolutes.
quawiaseuewu
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Jo A key test of the strength and integrity of corporate governance, and of the top and
senior managers responsible, is the response to dishonesty. Dishonesty potentially
exists in all areas of human activity, and organizational and managerial practices are
no different.
Dishonesty in organizations is potentially present everywhere. This potential
covers macro-organizational issues relating to misrepresentation of assets, finances,
performance and profitability; through to micro issues concerning the fiddling of time
sheets, expenses and the use of the phone and internet access for private matters, to
petty pilfering.
Again, there is a clear absolute; and again, there are certain to be cultural issues
and practices. For example:

e if an organization truly reports the absolute volatility of markets, this may cause
total collapse in confidence, leading to loss of shareholder backing and customer
bases;
e if an organization is fully open about staffing difficulties, this may lead to the best
staff seeking jobs elsewhere, thereby compounding the problem;
e if an organization fully admits to flaws in production, service and information
technology, then this again leads to questions about confidence and security.

At the micro level, if organizations spend time and resources on petty pilfering and
fiddles, this too has to be conducted in such ways so as not to be counterproductive,
while at the same time ensuring that the required standards are upheld. For example:

¢ most organizations take an absolute view of their staff who download internet
material on political extremism, pornography, incitement to terrorism and
violence;
e pilfering and fiddles can be managed out by ensuring that expenses are
reimbursed on the production of receipts only.

At the micro level, the largest single issue arises from known, believed and
perceived inequalities of treatment when seeking to enforce individual and collective
honesty and conformity; and these problems occur when staff in some departments,
divisions and functions, and above all, different ranks and status, are seen to get
away with things that would not be tolerated elsewhere.

76
 (ars
The best organizations and managers recognize that it is impossible to be ‘a little bit
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Rewards for top and senior management

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Wilkinson (1996) stated that the greater the divide in rewards between those at the
top and bottom of particular societies, the greater the instability of those societies.
This applies equally to organizations: the greater the divide between the highest and
lowest salaries, the greater the likelihood that the organization is underperforming,
unstable or at risk in terms of its ability to sell products and services on a long-term
and enduring basis.
The issue of pay and rewards for top and senior managers again centres on the
combination of perception and transparency referred to above. The law concerning
the publication of annual reports demands that the salaries and rewards of directors
are published; this does not, however, apply to those in top and senior executive and
general management positions. It is therefore entirely at the organization’s discretion
as to whether it chooses to publish further information in this area.
There is the question of what top managers, directors and senior executives ought
to be paid, and are being rewarded for; and again, this becomes a de facto acceptance
and discharge of responsibility in practice. The options are:

e integrative rewards based on the ability to satisfy the demands of all stakeholders;
e distributive rewards based on the ability to satisfy one group of stakeholders but not
all. This relates invariably to the ability to satisfy the financial interest delivering
enhanced share values, earnings per share and assured dividend values.

Each position is in turn a reflection of why the top and senior management were
appointed, and the extent to which they have any discretion in varying their brief.
There are additional questions of timescales, outcomes and results to be factored in.

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A chief executive officer (CEO) was brought in to complete the restructuring of a giant
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multinational pharmaceutical company. This company was one of the largest pharmaceu-
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tical companies in the world. However, following a spate of mergers and acquisitions,
productivity, profit margins and turnover were now being affected by virtue of the fact that
there existed no common standards for producing and delivering products and services.
The new CEO was appointed on a salary of £900,000 per annum. In addition he was
given share options to the value of £2 million; and was promised a bonus of £1 million
each year that productivity, turnover and profit rose by more than 10%.
 Recognizing the difficulties, the new CEO managed to negotiate for himself aseverance
payment of £22 million should things not work out, and the Board dismiss him. At no
stage did the Board of Directors of this company ever give a rationale for the structuring of
the salary package, or for the high volume of the severance package. It also appeared that
they had not considered that the new CEO would be much better rewarded for failure
than for success.
quatwiaseuerlu
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ey] This case emphasizes the need for specific expertise, understanding and involvement
on the part of everyone concerned with the ordering and direction of all organizations.
It is not enough simply to ‘pay the market rate’; indeed, the use of the phrase ‘the market
rate’ is seldom backed up with hard data, comparisons or rationale. In the most extreme of
cases, this general and insubstantial approach reinforces any perceptions that those at the
top of organizations are being overpaid for passive rather than active involvement.
@
The structure of rewards is also critical. The pay of top and senior managers is
normally based on a combination of salary, bonuses and share options; and it is
increasingly usual to provide a pension and a severance payment. Severance
payments are often controversial. As well as paying rewards for failure, there is also
the issue of change in status or ownership of the organization. The severance payment
may be so high as to make it in the overriding interests of top managers to engineer a
takeover or change of status in order to work themselves out of a job. If payments are
made for results, there is the question of standpoints to be addressed: what results,
who decides on the achievements, and how much is to be paid?
At the core are the needs and wants of the organization’s stakeholders, customers
and staff; and there is again the issue of how the results are delivered, as well as the
results themselves. For example:

e Short-term share advantages can normally be bought by outsoureing or

contracting out specific functions, thereby reducing the ratio of payroll as a
percentage of capital employed.
e Short-term market advantages can be bought or indicated as the result of product
and service flooding and dumping.
¢ Short-term stock market interest can be bought as the result of engaging top
brand consultants such as McKinsey or Bain.

Each of these eventualities has to be considered in terms of what is right for the
long-term future of the organization, as well as addressing the immediate financial
concern. Each has a critical bearing on the ways in which top and senior managers
are going to conduct themselves, and the objectives that they are going to pursue.

78
Conclusions
The ethical approach is not altruistic or charitable, but rather a key concept of effec-
tive long-term organizational and business performance. The commitment to the staff
is absolutely positive. This does not mean any guarantee of lifetime employment. It
does mean recognizing obligations and ensuring that staff, in turn, acknowledge their
obligations. These obligations are to develop, participate and be involved; to be flex-
ible, dynamic and responsive. The commitment of the staff to organization, and SDUPUI
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organization to staff, is mutual and based on high levels of involvement and participa-
tion. A genuinely open approach to the establishment, development and implementa-
tion of absolute ethical standards, and transparency in corporate governance, requires
the full involvement in all aspects of organizational development, and extensive and
open consultations with all those affected when looking at the strategy and operations
(see Figure 4.1).
This also extends to problem areas — especially the handling of discipline, griev-
ance and dismissal issues, and redundancy and redeployment — and the continuity of
this commitment when these matters have to be addressed.
Organizations must structure decision-making processes in ways that consider the
range and legitimacy of ethical pressures. This also means understanding where the
greater good and the true interests of the organization lie, and adopting realistic steps
in the pursuit of this. An ethical assessment will consider the position of staff, the
nature and interrelationship of activities, product and service ranges, mixes and
balances, relationships with the community and the environment.
Organizations are not families, friendly societies or clubs. By setting their own
values and standards and relating these to long-term effectiveness, they become
distinctive. They are almost certain to be at variance from those that are, and would
be, held by natural families and clubs. Problems that arise are clouded therefore,
where the organization does indeed perceive itself to be ‘a big happy family’. Families
are able to forgive prodigal children; organizations may not be able to afford to do so,
however, if they are to maintain long-term standards, or if substantial damage has
been done to customer relations for example. Organizations exist to provide effective
products and services for customers, while families and clubs exist to provide comfort,
society and warmth. These elements are by-products, they are not the core.
Organizations are not obliged to provide employment at all except in so far as they
need the work carrying out. They will select and hire people for this on the basis of
capabilities and qualities. They have no obligation to take staff from the ranks of the
unemployed (though they may choose to do so). They have no obligation to locate for
all eternity in particular areas (though again they may choose to do so).
Organizations that pursue high ethical standards are not religious institutions, nor
do they have any obligation to reflect any prevailing local traditions, values, customs,
prejudices — or religion.

79
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 Japanese organizations setting up in the UK were, and remain, successful precisely
because of this. Rather than trying to integrate their activities with the traditions of
their locations, they brought very distinctive and positive values with which people
who came to work for them were required to identify.
Organizations must distinguish between right and wrong. Lying, cheating, stealing,
bribery and corruption are always wrong and can never be ethically justified.
This has to be set in the context of the ways in which business is conducted in certain
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sectors and parts of the world. If a contract is only to be secured by offering a bribe, the
relationship is corrupted and based on contempt. If and when prevailing views change,
the total relationship between organization and customer is likely to be called into ques-
tion and any scandal or adverse publicity that emerges invariably affects confidence. It is
in any case extremely stressful for individuals to have to work in this way or indeed to
connive or conspire to any overt wrongdoing (though this may clearly be accommodated if
the organization institutionalizes such matters, protects individuals who are caught or
accepts responsibility for every outcome).
The ethical approach to organization and managerial activities is adult and assertive;
it is not soft, religious or moral. It takes the view that continuous and long-term exist-
ence is the main duty of organizations to their staff, customers, suppliers, community
and environment.
Above all, this requires a fundamental shift in corporate attitudes away from the short
term or expedient, from the instant approach to returns, from the needs of the influential
figures, and from wasteful and inefficient budgeting control and production systems. This is
to be replaced by active participation and involvement by all in each of the areas indicated
in the pursuit of effectiveness and success. It requires placing a value on everyone with
whom the organization comes into contact — above all, staff, customers, backers, suppliers
and communities. Organizations are only sustainable in the long term if adequate and
continuous investment is made in technology, staff and staff development; research and
development into new products and services; and in constantly improving and updating
products, services, processes, systems and practices. This in turn is made most effective
where everything is done with clearly stated aims, objectives, priorities, opportunities and
consequences, and where these are understood, adopted and valued by everyone concerned.
There is a direct relationship between organization success and organizational and
managerial attitudes to the elements indicated in this chapter. High profile and notorious
organizational failures — for example BCCI and Maxwell — have demonstrated the conse-
quences of this lack of basic integrity. Inefficiencies of some public services — for example
health, education and social services — arise from a combination of imposing short-term
and expedient priorities on long-term, enduring and socially valuable services which
chiefly arise through the dominant pressures of key players and political drives.
Conversely, the results achieved by organizations that do adopt high absolute standards
clearly indicate the levels of sustainable achievement possible, whatever the industrial,
commercial or public sector considered.

81
 = It is essential to set, maintain and develop clear and absolute standards of integrity,
Or
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because it is wrong not to do so. Organizations that set clear and absolute standards
have a much greater clarity about other things, including strategy and operational
effectiveness.
e Whenever information is offered, it needs to be as complete and transparent as
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a4, possible. You should never say: ‘We cannot disclose that’ without going on to
explain why.
e Organizations and managers that do work in contentious and controversial
circumstances and industries need to be able to justify why they do so. This
justification needs to be based in a fully ethical and transparent approach.
e Formal reporting mechanisms need to be suitable for the organization and its
purposes. Within that constraint, the data and information produced must be
transparent and complete.
e Interms of ethics, conduct, behaviour, performance and standards, it is essential to
relate ‘perfection’ to the reality of what exists and occurs at the moment; and to use
the ideal standards as a vehicle for driving improvements.

Further reading
Adams, R., Hamil, S. and Carruthers, J. (2001) Changing Corporate Values. Sage.
Crane, A. and Matten, D. (2010) Business Ethics: Managing Corporate Citizenship in the Age of
Globalisation. Oxford University Press.
Drucker, P. (1995) The Frontiers of Management. Sage.
Griseri, P. and Seppala, N. (2010) Business Ethics and Corporate Social Responsibility. Cengage.
Harvard Business Review (2002) HBR on Ethics. Harvard.
Johnson, G., Scholes, K. and Whittington, R. (2009) Exploring Corporate Strategy. Prentice Hall.
Payne, D. and Pugh, D. (2001) Managing in a Corporate Environment. Penguin.
Sternberg, E. (1995) Just Business. Warner.
Wilkinson, R. (1996) Unhealthy Societies. Routledge.

82
 The |
practice of
management

In this chapter
e translating knowledge and understanding into effective practice and expertise
e working with pressures and under pressure
e working with scarce, finite and limited resources
e delivering performance in practice

introduction
The final key foundation of effective management is the ability to put into practice,
and relate to practice, every aspect of the skills, knowledge, understanding and expe-
rience that any professional and committed manager must have. This means that it is
necessary to be able to apply whatever is required according to the demands of the
particular situation and organization; and this in turn, reinforces and underlines the
need for a full professional commitment to gaining as much skill, knowledge, under-
standing and expertise as possible so that effective actions are always taken.

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Ernest Turley
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Ernest Turley used to run Bynoe Construction Ltd, a medium-sized building company in south-
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east England. He started work at the company at the age of 16 as a labourer, and subsequently
took an apprenticeship and qualified as a carpenter. He worked his way up through the
company, becoming chief executive and chairman at the age of 47. For the next 35 years he ran
the company, growing it from revenues of £2 million to £95 million over the period.
 For the whole of his period as chief executive and chairman, there were never any layoffs
or redundancies, despite going through three major building and construction recessions.
For the 35-year period also, Mr Turley used to attend a professional, managerial, trade or
general gathering or meeting at least once a week. He stated the reason for this as follows:

‘All | ever wanted from any of these meetings was one idea that | could take back to
luawiaseueRW
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JO Bynoe and use. If |could do this, my time was well spent. | would listen to people
from any, and all, walks of life — they didn’t have to be in building. | listened to how
people from retail, hospitals, haulage and local government organized their work,
managed their people, controlled their stocks and schedules. Some of the stories
horrified me — and then | realized of course that | and some of our managers could
easily behave and act like this. So — both good and bad — | got knowledge and ideas
from each meeting that | went to.

And | always made sure that everyone else got to things whenever they could — not
once a week, but certainly regularly.’

Mr Turley retired at the age of 82, leaving a full order book for the company, and an
average profit margin of 15% achieved over his period as chief executive.
The practice of effective and successful management is founded on always looking for
new ideas, knowledge and understanding that can be learned and applied. Additionally,
with this approach comes a wider knowledge and understanding of how people think and
behave, as well as knowing what it takes to run and develop an effective organization that
is capable of performing in any, and all, sets of circumstances.

Pressures on organizations and managers

Any manager who aspires to be an effective practitioner has to know and under-
stand the pressures under which they have to be able to operate. At the core of this
is knowing and understanding the nature of the organization and where its priori-
ties lie; and once this is understood, managers must have sufficient knowledge and
understanding to be able to deliver their expertise in the ways required in order to
meet the demands placed upon them. It is vital also to be able to reconcile the
pressures from different sources. It is essential that managers are able to evaluate
the true strength and nature of the pressures they face, and to establish the partic-
ular source. In all cases, managers must be able to respond to pressures; in many
cases, the best managers, having evaluated the pressures, either resist or defy
them. For example:

e if you can complete a project on time but only if you overspend — if you stick to
your budget you will be late completing;

84
 e if you have to lose a member of staff, and you have a known troublemaker or
slacker;
e if your budget is suddenly cut meaning that you cannot do everything that is
demanded of you;
e if one of your suppliers or distributors goes bankrupt;

what do you do?

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The answers, of course, vary between organizations and situations. However, if you
have a full professional and expert knowledge and understanding, you are much more
likely to be able to propose, get agreement on, and implement the solutions that the
particular situation actually demands. This is much better than guessing at the
answer, or else imposing a solution that someone else has proposed or demanded.

a=
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British Airways
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vn
a
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s During one of its periods of difficulties, British Airways (BA) found itself facing declining
SS

passenger numbers, uncertainties in the fuel markets, and rising premises’ costs and
charges. BA called in McKinsey’s, the management consultants, who proposed:

e a 10% cut in staff;

e areduction in services offered from Gatwick;
e promotion of the premium-rate, first-class and business-class services.

BA duly and uncritically implemented all of this. However, there were consequences.
The reduction in services from Gatwick led to a further decline in ticket sales, though
these did pick up subsequently when the flights were re-established at London Heathrow.
Sales of first and business-class tickets continued to decline except on long-haul routes
where they remained steady (but did not increase). The company took a one-off charge of
£150 million in order to pay for the costs associated with the staff reductions; the staff
were offered three years’ salary by way of a severance payment and many took this offer.
None of this directly addressed the problems of declining sales and rising fuel costs. It
was not until two years later that the company engaged in a major sales drive, targeted at
customers that were likely to use BA, and revenues started to rise.
The company also at this stage finally negotiated and agreed flexible fuel contracts in
order to drive this cost down and keep it manageable and more or less controllable.
While BA did finally take control of the situation, it could have done so much
earlier had it concentrated on the core issues rather than coming belatedly to them. It
could also have engaged in staff reductions alongside addressing these core problems.
Finally, had BA taken a critical rather than responsive approach to the proposals from
McKinsey’s, it would have had its own rationale rather than somebody else’s for doing
the things that it did.

85
 Sustainability
Sustainability in management has a variety of meanings, referring to the ability to:
sustain the organization for the long term;
e sustain and develop successful and effective product and service ranges;
e sustain and develop an organization that people are committed to and want to
work for;
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e sustain and maintain the confidence of backers, suppliers, customers and markets
served;
e sustain effective resource usage both immediately and also for the long term.
So this part of sustainability depends heavily on knowing and understanding the
nature and effectiveness of the organization as an entity, and where the pressures exist,
and what to do to ensure that these pressures remain capable of being accommodated.
This part of sustainability also depends on ensuring that product and service
quality remains acceptable and valuable to markets, customers and clients, and
knowing what steps to take when problems do become apparent.
Sustainability also means keeping a regular dialogue with backers and share-
holders to ensure that they remain supportive of, and confident in, what is being done.
Sustainability also has an environmental management connotation as follows:
e keeping waste and effluent to a minimum;
e disposing of waste and effluent in ways that are not simply moving the problem
elsewhere;
e sustaining and improving energy and resource usage so that the best possible
returns are generated from these factors;
e developing new facilities and practices that contribute to resource maximization
and optimization;
e using and developing energy-efficient technologies and manufaviuring and service
delivery processes that, again, optimize and maximize the use of resources.
The approach to sustaining the organization as an entity, and developing activities
that are known, believed and perceived to be environmentally friendly, as well as
effective in business terms, ought to be complementary to each other. Effective
resource management ought to complement the demands placed on the environment;
and the demands of the environment ought to drive managers towards using resources
effectively. To do this from both points of view is certain to become a major factor in
the control and management of costs.

The best organizations make absolutely plain the relationship between effective resource
management, the demands placed on the environment and business effectiveness. It is a simple
lesson, and it ought to be clear to everyone that ifyou do reduce waste then you become more
cost-effective, improving performance as well as reducing environmental impact,
 al

Environmental pressures
As with sustainability, ‘environmental pressures’ has a diverse set of meanings.
On the one hand, ‘environmental pressures’ refers to the capability to understand
and operate within all the pressures and forces considered in Chapter 2. Effective
managerial practice requires that managers fully know and understand the pressures,
drives and constraints that exist in their particular situation, and can operate effec- jualu
aade
jo
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tively within them.
On the other hand, ‘environmental pressures’ refers to those factors concerned with:

e waste and effluent management and dispersal as above;

e fuel and energy usage;
e the use of materials that are known, believed and perceived to be damaging to
the environment, for example plastics, polystyrene, some chemicals and oil and
fossil fuels;
e the nature and value of the transport used;
e the energy that is consumed by technology;
e the energy that is consumed through production, manufacturing and service
delivery processes.

As stated above, concentrating on these issues is a strong commercial as well as

altruistic drive. It ought to be that organizations and managers concentrate on these
aspects because it is cost-effective, even if they are not persuaded of the more altru-
istic issues. Additionally, a key part of sustainability, managing the ‘environmental
pressures’ and resource management needs in any case to be driven by getting the
most out of every part of organizational practice. This in turn is much more likely to
ensure that organizations can sustain themselves for the long term rather than having
to keep a constant eye on resource costs on a daily basis, and based on unit and
individual consumption. Organizations need to have systems and processes that they
know and understand to be as efficient and effective as possible in order to build the
firmest possible foundation for resource management (see also below). There is also a
wide perception that being ‘environmentally friendly’ carries a primary commercial
advantage in marketing and customer relations terms — people prefer to do business
with environmentally friendly companies. This position is attractive to some organi-
zations and managers, consisting of producing, packing and delivering products in
ways deemed to be environmentally friendly; or producing and delivering products
and services that are deemed to be environmentally friendly in themselves. There are
also assumptions that such products and services can carry higher prices, as
customers are willing to pay more for something that somehow benefits the environ-
ment. Much of this is nebulous and subjective, depending on the definition of ‘envi-
ronmentally friendly’ that is used. It is also essential that any specific claims of
environmental-friendliness are evidence-based and can be sustained.

87
 Resource and resourcing issues
As indicated above, the questions of sustaining and managing within environmental
pressures and constraints are heavily driven by the nature of the resources used and
the effectiveness of resource management. Resource usage varies between, and
within, organizations. However, there are some key questions to address:

e energy usage;
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e product and service delivery;
e transport costs;

e production, manufacturing and technological issues;

e the creation and disposal of waste and effluent.

Effective management practice in each of these areas is driven by a combination

of managerial knowledge and understanding of what is needed to ensure sustainable
and profitable activities. It also ought to be driven by attention to costs. However,
neither is enough in isolation from the other: it is not possible to have production
limited by over-attention to cost; nor can resources be used effectively, however rich
an organization may be, without some kind of attention to cost.

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=
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= detrimental to organization performance. For example, one national retail bank fitted
out its London offices with top quality furniture, luxury carpets, the very best in canteen
and other staff facilities. The staff were extremely well paid and enjoyed a large range of
fringe benefits.
And yet the performance of the company was mediocre in terms of the norms of the
sector; and it was one of the first and worst to suffer in the banking crisis of 2008 and
onwards, recording massive losses and requiring an extensive government bailout.
When asked what went wrong, there were the usual rational answers from staff and
management about investing in the wrong markets, and spending too much on assets
that turned out to be toxic. However, many members of staff additionally referred to
the luxury and opulence of the surroundings; they were simply unable to believe that
anything could possibly go wrong in any organization that was equipped and fitted
out in this way. Others referred to the clear extravagance of the office facilities and
fittings as corporate self-indulgence; while others still, stated that of course this had to
be paid for out of commercial activities. None of these responses gives any indication
of a positive attitude or commitment to performance driven by the opulence of the
surroundings; indeed, as stated above, there is a clear indication of a detrimental effect
on performance.
 The effectiveness of resource management practice depends on the capability of
individual managers to assess what they need and how it is to be used. There are clear
priorities in ensuring that the balance between adequacy and profligacy (an inadequacy)
is reached, and that in so far as is reasonably practicable, the organization’s people and
processes are given everything that they need to do the work demanded, to the quality
and volume required. Special attention is needed in terms of sustainability and environ-
ment management without compromising the effectiveness and efficiency of operations Juawa
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and activities. Special attention is also required when investing in technology.

Technology
Technology here refers to any, or all, of the following:

e production, manufacturing and service delivery technology;

© computer systems and information technology;
e mobile technology that may be used by staff;
e internet access;
e hardware and software;
e transport and distribution requirements.

Effective managerial practice demands a full knowledge and understanding of:

e what technology is required, and why;

e how much it will cost to install, what the returns on this ought to be, and what
they are envisaged to be;
e how long its useful life is likely to be;
e whether to replace it or upgrade it when the time comes;
e how user-friendly it is;
e staff training implications;
e where overall value is added and lost to the business as the result of using it.

It is essential that all managers are technologically knowledgeable. Managers do

not need to be technological experts or technologically proficient; they do need to
know and understand how technology works, its impact on the organization overall,
the different activities and processes that are carried out, and the costs incurred.
Technology has also to be examined and approved for quality assurance, security
and reliability, and for the ease (or otherwise) of getting maintenance, upgrades and
servicing. Technology needs to be examined for:

e compatibility with existing operating systems and the ability to integrate different
technologies with each other;
e compatibility with other key systems, especially those of suppliers and
distributors, partners in joint ventures, outsource providers, and remote
organization locations and staff.
 Managing technology effectively is one of those activities that is (or ought to be)
not noticed all the time that everything is running smoothly. The only times that
anyone notices or comments on technology are when it crashes, breaks down or fails
to operate for some reason.
However, part of the practice of managing technology effectively is to keep an eye
on how it does work, whether or not it is delivering what it promised, how much it
costs, and its speed and effectiveness of operations. For this part of managerial prac-
Jo
quatuedeuelu
&ey,
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tice to be effective, it is essential to have as above:

e clear costs and benefits known and understood:

e clear purpose in installing and operating it;
e clear targets for production, service delivery and data processing that it is
supposed to deliver;
e clearly indicated maintenance, replacement and upgrade schedules.

Additionally, it is essential to have in place a write-off schedule. No technology

lasts forever, and while no organization should be constantly disrupting things by
changing technology too often, the time comes when everything becomes uncompeti-
tive and needs replacing.
Finally, the technology itself ought always to be seen in the light of its contribu-
tion to the organization; it should never be seen in terms purely of its prestige,
fashionability, isolated capacity, ‘flash’, or in isolation from the contribution that it
needs to make.
For example:

e Anairline spent £30 million installing alleged state-of-the-art baggage handling

technology at one of its locations only to find that the new system could only cope
with luggage under laboratory conditions; it could not cope with real flight arrivals
and the peaks and troughs in activity.
e The UK NHS spent £14 billion on trying to create a national patient database
only to find that while the data could indeed be stored, it could not be retrieved
safely or securely.
e A university spent £6 million on re-equipping all its staff and laboratories with
branded and fashionable Perspex PCs only to find that the operating systems
installed in the new PCs were not compatible with existing databases, e-mail
systems or file stores.
e A multinational manufacturer installed revolutionary production technology
for a new line of soaps and detergents only to find that this had to be
operated in isolation from everything else in the organization. The new
system had to be loaded manually as existing automated operational systems
were incompatible.
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Clearly, to get the practice of technology management wrong is expensive and very
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damaging to the organization and its processes and activities. So it is essential that all
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managers know and understand fully the systems and equipment that exist in their
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domain, and that any technology is examined from these points of view in advance of it
being installed.
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Performance management
Performance management is dealt with in full detail in Chapter 15. At this stage
however, it is essential to be clear about the following.
It is only possible to manage and assess performance against specific targets, aims
and objectives. It is no use stating performance measures in terms of such phrases as:
‘as much as possible’, ‘as soon as possible’, or ‘as quickly as possible’. Of course,
everyone will want to do this; but the target needs to be expressed precisely; so that
these phrases need to be translated as for example: ‘a hundred items per hour’, ‘by
Friday night’, or ‘by 12 o’clock’. This gives everyone involved a clear point of refer-
ence to work to, and also a measure of success and achievement — or failure.
Performance management is therefore a key management discipline as well as
being an essential part of effective managerial practice. The practice of effective
performance management demands that managers get to know and understand:

their staff, their hopes, fears and aspirations;

the nature of work, what it is that is required and how it is to be done;
the demands and priorities placed on their own domain and how and why these
integrate with other organization activities;
the absolute standards of conduct, behaviour and performance required:
how performance can be improved and developed;
the financial aspects and targets, and how these are to be delivered.

In practice, performance management cannot be seen in isolation from everything

else; it has to be integrated. Everything about the organization ought to be designed
and implemented in order to create the conditions in which the desired levels of
conduct, behaviour and performance are possible and achievable. So, for example:

there is no use in requiring that staff are fully engaged if there is a distant or
adversarial management style;
there is no use in asking staff to work as hard as possible if managers clearly do not;
it is bad practice to ask staff to work in ways that managers do not;
it is also bad practice to sanction and punish staff for poor performance if the criteria
by which performance is assessed are not made clear and agreed with everyone.

91
 In order to achieve all this, it is therefore essential that managers are visible and
accessible. It is very difficult te manage performance effectively unless individual
managers are themselves fully engaged and involved. Visibility and involvement
additionally help greatly to create the conditions in which high levels of performance
are achievable. Managers and staff know each other. Managers see for themselves
(rather than hear or perceive) what is going on. Problems and issues can be raised
and addressed early rather than being left until they are serious. Mutual confidence
quatuaseueu
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between staff and managers is therefore built and enhanced all the time that this
visibility, accessibility and engagement are present. On the other hand, mutual confi-
dence is diluted as managers become less visible, accessible and apparently engaged.

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Managing by walking about
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=.}
Peters and Waterman (1982) stated that the basis of active engagement was based on
®
= what they called ‘Managing By Walking About (MBWA)’ Peters and Waterman used the
example of the Walton family, the founders and owners of Walmart (Asda in the Uk), the
largest supermarket chain in the world, and their practice of visiting every store at least
once a year. While the company was growing, the Walton family stated that this was critical
to success and achievement, and a key condition for keeping the staff fully engaged. Peters
and Waterman tell the story that on one occasion, Walmart staff at a regional depot were
loading up lorries for deliveries late at night, when someone approached them with coffee
and doughnuts. When one member of staff asked the individual who he was, he replied: ‘|
am Sam, Sam Walton. | own the company, and | do my best to get around to see as many
of our people as | possibly can’
Of course, if you are going to take this kind of approach then it has to be followed
through by all managers. It therefore becomes an obligation to ensure that other levels of
management follow this practice becoming as fully engaged as they possibly can. Some
companies and organizations now write this into managerial tasks, duties and priorities,
and managers are assessed on this part of their practice as well as their ability to deliver the
performance required.

Source: Peters aiid Waterman (1982).

Effective management in practice and the ability of ‘management’, as well as managers,

to be visible, accessible and engaged therefore clearly depends on adopting expertise to
the nature of present day organizations. This means creating management structures and
priorities, and developing the practical expertise required, to be effective in:

¢ managing across cultures, national boundaries and timescales;

¢ managing remote and flexible workers and activities;
e addressing the issues raised by virtual organizations;
e addressing and managing diversity.

92
 Managing across cultures
The advance of globalization and internationalization of organizations, business and
activities has produced the need for a reappraisal of much that has hitherto been
regarded as standard and effective management practice. To the expertise involved in
strategic, operational and functional management must now be added knowledge,
understanding and acceptance of cultural differences — how people think, believe,
quawa
aided
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behave, act and react in different parts of the world. This in turn involves knowing
and understanding the habits, norms, customs and patterns of behaviour in different
places, and recognizing that these have to be accommodated and worked with when
seeking to open up new ventures and activities elsewhere in the world.
The demand for this managerial approach and practical expertise is not new.
Countries have been investing in, and creating, national and political empires for
thousands of years; and companies and organizations have followed suit, working
across cultures for at least the past three centuries. This aspect was however brought
into sharp and enduring present day focus when Japanese manufacturing companies
started to open up overseas operations, first in the US and Europe, and subsequently
elsewhere in the world. They brought with them:

e standards of staff management;

e assurance of employment;
e high levels of pay in return for high levels and quality of work;
e staff training and development for all;
e investment in communities as well as work facilities that transcended the local
standards and expectations of these places, wherever they chose to locate.

What was being offered was a set of standards, practices and attention to both
performance and also the locality, that were absolute enough to meet the demands of
any community or workforce anywhere in the world.
Not all organizations can (or probably should) behave like this. However, the need
for a clarity of purpose, together with a clearly stated and agreed attitude to different
locations in the world is absolute.

wor
Wherever you locate in the world, it is essential always to be clear about why you have
© |
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gone there. If you have gone simply to exploit cheap labour and technology, and fully
mal
deregulated working conditions, then the least that you can do is be honest about this.
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Managing across boundaries and timescales

Alongside the need for cultural knowledge and understanding is the need to address
logistical problems created by time and distance. Without adding too much to the

93
 expense and overhead of the organization overall, managerial structures (and
managers) are required as follows:

e to enable quick and efficient decision-making processes wherever in the world

decisions are required;
e problem-solving capabilities wherever in the world problems occur;
e the ability to access remote and distant locations when required;

juatwieseurlu
&ay]
suojepunoy
Jo e the ability to engage in profitable and effective activity wherever the organization
establishes itself.

Beyond this, the organization and its managers need to take a continuous and
business-oriented view of why they are involved in particular locations. As long as
activities contribute to overall organizational and business performance and profita-
bility, there is no problem of course. Additionally organizations engage in peripheral
ventures in remote locations (for example buying up supply and distribution compa-
nies) to ensure the strength of the core business; and they engage in project work and
joint ventures in order to gain footholds in particular locations, or to test the water for
future prospects. The key is that when all this happens in practice, it is driven by
business performance and can be justified in these terms.

Managing remote workers

Alongside managing organizations in remote locations exists the need to manage
remote workers. “Remote workers’ are those who work on standard or flexible patterns
of work spent wholly or partly away from the organization’s premises.
People working in these ways need the same adequacy and effectiveness of
management and supervision as those who turn up to a given location each day. The
means of engaging with remote workers (and also ensuring that they stay engaged)
has therefore to be found and this is so that they:

e do not become detached or alienated from the organization during extended

periods of absence;
e are kept informed of the strengths and weaknesses of their own performance and
contribution;
e can have problems and issues addressed whenever and wherever necessary:
e get the same opportunities for promotion, development, enhancement and
advancement as everyone else.

One part of practical management in these circumstances therefore demands that

channels of communication and opportunities to meet are kept open and flexible.
Clearly the ability to use mobile phone, computer, laptop and blackberry technology
is critical. Clearly also, these tools are effective but limited and this reinforces the
need for face-to-face contact wherever possible. Wherever face-to-face contact can
take place, time needs to be set aside for gossip and general chatter as well as

94
 Ww
addressing substantial organizational and operational priorities. It is also essential
(whether managing remote workers or remote locations) that when crises and emer-
gencies do occur, the organization and its managers have the means to get someone in
authority to the spot as soon as possible so as to be able to address what has happened
with full contextual knowledge and understanding.

Virtual organizations juawa

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Virtual organizations are those that exist wholly or mainly by virtue of the capability
of computer technology and IT to support them and give them life. Virtual organiza-
tions therefore exist in every aspect of standard organizations, except for the size and
structure of the physical premises that would otherwise be necessary.
Some virtual organizations are de facto a form of federation in which parts of
existing organizations come together for projects, ventures and steady-state activities.
In all forms, virtual organizations exist for a particular venture and may then be
disbanded; or they may continue for the very long term, delivering products, services
and service exactly like any other.
In practice, management and supervision of activities in virtual organizations and
federations have to be repositioned so as to be able to:

¢ maintain an active involvement in performance issues;

e ensure that finances, resources and other assets are used to best advantage and
kept under control;
e ensure that cost, income and profit control are maintained;
e ensure that problems and issues can be addressed wherever they arise;
e ensure that crises and emergencies are notified early and tackled quickly and
effectively.

The virtual organization has therefore to be supported by management practice

that is suitable. Engagement and involvement have to be maintained, and this has to
include regular physical meetings of everyone involved, as well as the continued use
of mobile communication technology. Resources have to be committed therefore to
ensure that people can get to face-to-face meetings, and that they have whatever
technology is necessary to ensure that the virtual relationship remains effective.

If you create a virtual organization, then it is essential to ensure that this is done for the
benefit of the whole business and all its stakeholders. Virtual organizations look attractive
because they imply that there is no need for expensive premises. However, as with every-
isa
annseid
ysaq
thing, if you go in purely for the purposes of cost-cutting, you will inevitably gain unlooked
for expenses elsewhere.

95
 Managing diversity
Managing diversity is about recognizing and addressing the sheer range of individuals
and their differences, and creating standards and patterns of management that can
accommodate these differences. This has to take place at the same time as creating,
developing and maintaining a cohesive workforce, work ethic, and standards of
conduct, behaviour and performance that deliver everything expected of the organi-
quatwaseuelu
&ey]
suoiepunoj
Jo zation and its staff.
Diversity is normally understood to be a human resource (HR) term, and is referred
to in Chapter 9 in that context. The practice of management, however, demands that
full account is taken of the influence of technology, training, development, present
experience, locations, patterns of work and the nature of work in addition to the more
HR-oriented aspects of cultural and social background, language and dialect, gender,
disability and age.
Effective management in this area must also refer to the nature and use of tech-
nology, the qualifications needed to use it, and how this affects both jobs and occupa-
tions themselves, and also patterns and locations of work and organizations.

Creativity
The effective practice of management demands creativity. The body of skills, know-
ledge, attitudes, behaviour and expertise that is increasingly coming to be recognized
as the foundations of professional managerial practice has to be learned and applied.
From this, it has to be developed so as to he capable of being used effectively in any
situation that arises. Creativity in management is demanded in many different activi-
ties as follows:

e product design and development;

e the creation of expert and high quality service delivery;
e marketing, advertising and promotional activities;
e problem-solving and addressing staffing issues;
¢ motivating and engaging staff;
e building and developing excellent and effective work teams.

Creativity therefore permeates all the best organizations and is a key feature of
effective expert and professional management practice. In order to be fully crea-
tive (and effective) in each of the above areas, a body of skills, knowledge, exper-
tise and understanding is required so that the creative aspect that is brought to
bear on any, or all, of the above areas, comes from a very strong basis of profes-
sional assurance. Indeed, in many cases, the creativity required arises directly
from this expertise. At its lowest common denominator, creativity simply means
ensuring that each issue is addressed effectively with a view to resolving or devel-
oping whatever is demanded.
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All managers need to have a creative faculty, bringing their skills, knowledge and expertise
a
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to new situations, and positioning it so that whatever is necessary is addressed effectively.
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However, just because something is creative does not mean that it is good; creativity itself
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needs to be harnessed to the purposes ofthe organization and situation.

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Conclusions
The purpose of this chapter has been to introduce and explain the major areas for the
development of expert management practice, and to address as concisely as possible
the key features that have to be taken into account. These areas and features are
themselves diverse and complex; and at first sight do not necessarily appear
connected in any way. However, there are three key connections.

e It is impossible to be an expert practising manager unless all of these elements

and features are known, understood and recognized for their influence both within
the organization, and also elsewhere.
e Staff and organizations expect managers to know and understand the effects of all
these features and elements in their own domain.
e These features do not in fact exist in isolation from each other. For example, a
virtual organization may make something sustainable due to the capability to
reduce premises’ costs to an absolute minimum; managing across cultures and the
need for further knowledge and understanding of what happens elsewhere in the
world may enhance standards of management, conduct, behaviour and
performance in existing organization locations; creating a sustainable and
environmentally friendly organization may cause managers to fundamentally
reappraise how resources are sourced and used across all activities.

There are therefore elements to be learned and applied. As these elements are
studied, anyone taking a professional approach will see the need to learn more about
them, recognizing that they form the basis of critical areas of skills, knowledge and
expertise that anyone who aspires to be an effective and expert manager must have.
In broad terms, these areas can be broken down into:

e how things are done, and the learning and application of the behavioural aspects
of organizations: culture, values and attitudes; team, group and individual
behaviour; politics and conflict in organizations; human resource management
(HRM); and leadership; and these areas form the basis of coverage of Part Two of
this book;
e why things are done and the learning and application of how to formulate and
implement strategy, policy, direction and priorities; marketing; managing

97
 operations and projects; finance; and organizational and collective and individual
performance; and these areas form the basis of coverage of Part Three of the book;
e the enduring managerial priorities of: risk; motivation; managing and reconciling
the daily issues and pressures; and developing effective managerial practice and
expertise; and these form the areas of coverage of Part Four of the book.

=)
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e The drive of putting skills, knowledge, understanding and expertise into practice and
or
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delivering performance ought to be at the core of all managerial practice.
e The ability to know and understand external and internal pressures in particular
situations and respond effectively to these is a key management priority and expertise.
e The need to know and understand technology and its capabilities in terms of what it
can do for the organization and particular functions is (or ought to be) the driving
force for all technological development and installation.
e Knowledge and understanding of a variety of organizational forms is essential in terms
of what it takes to be effective in different situations.
e It is essential to recognize that managerial practice can always be improved; nothing
will remain adequate or effective forever.

Further reading
Groschl, S. (2011) Diversity in the Workplace. Gower.
Hancock, M. and Zahawi, N. (2011) Masters of Nothing. Biteback Publishers.
Lessem, R. (1987) Intrapreneurship. Wildwood.
Peters, T. (1989) Thriving on Chaos. Pan.
Peters, T. and Waterman, R. (1982) In Search ofExcellence. Harper and Row.
Ross Sorkin, A. (2009) Too Big to Fail. Penguin.
 PART

Management
and people

f organizations are composed of people, then it is essential that all those in manage-
rial positions know and understand how people behave. Managers need to know and
understand the influences that cause behaviour to be modified and changed; and how
people, think, behave and react when faced with the variety and complexity of situa-
tions present, or potentially present, in organized business and managerial settings.
The context for knowing and understanding collective and individual behaviour is
capable of simple introduction. For example:

e if you prefer to work in a positive, cheerful and productive setting, then it is likely
that most people will want to do so also;
e if you prefer to be treated with honesty and integrity, then it is likely that most
people prefer this also;
e if you prefer an interesting and varied working life and career, then it is likely
that most people prefer this also;
e if you expect to be treated fairly and equally, free from discrimination and
harassment, then it is likely that most people will expect this also.

A key to learning and developing an understanding of collective and individual

behaviour is therefore empathy. A lack of empathy or humanity is always present
when top and senior managers find themselves having to explain why organizations
have wasted resources on ill-considered ventures; when they have to make layoffs; or
when they have to explain a fundamental organizational ineptitude or failure. This
lack of empathy arises from a fundamental inability or willingness to recognize the
legitimate concerns that everyone has when particular situations arise.
 Understanding collective and individual behaviour from the point of view of everyone
involved is essential. Understanding behaviour from the point of view of personal,
professional and occupational commitment additionally requires giving a clear refer-
ence point for the range of likely, possible and potential outcomes when dealing with
any situation in which people are involved.
a|doad
iuaweseue—=y
&pue Understanding collective and individual behaviour is not easy. However, it is
possible to gain a good understanding of how most people behave in most situations;
and this then forms the foundations of expertise in this particular area of management.
Part Two breaks down the nature of collective and individual behaviour so as to be
able to provide points of reference in developing expertise in this field. Chapter 6 covers
the basis of organization culture and the patterns of behaviour and attitudes that exist,
and that have to be modified and developed. Chapter 7 deals with the critical nature of
communication and, especially, the barriers and blockages that prevent effective
communications from taking place, leading inevitably to conflict and dysfunction.
Organizational politics and the positive and negative effects of the ways in which
people behave, either when standards are not set, or because of emergent behavioural
patterns, are dealt with in Chapter 8.
The specific aspects of human resource management, and the professional and
managerial knowledge and understanding required are covered in Chapter 9. Chapter
10 examines the critical nature of leadership expertise, and the extent to which it is
required by all those in managerial positions. This chapter identifies specific traits,
qualities, styles and expertise, and how these are applied in practice.

100
 4 _ ‘The culture of
an organization is
the basis for
its management
style!

Culture

In this chapter
e understanding the patterns of behaviour that underpin corporate life and
activities
e developing the required organization culture
e making the culture work in relation to the nature of activities carried out
e establishing the basis for setting the required standards of behaviour and
performance

Introduction
The culture of an organization is the basis for its management style, and the indi-
vidual and collective attitudes, values, patterns of behaviour, customs, norms and
habits. It is therefore essential that the required ways in which people are expected to
behave are clearly established and accepted by all concerned. Distinctive standards
of attitudes, behaviour and performance must be established and agreed, rather than
allowed to emerge; and where attitudes and behaviour are legally, socially and
morally unacceptable, they need to be stamped out.
All organizations have different collective and individual attitudes, values and
patterns of behaviour. It is essential to recognize the influence of size, structure and
location of the organization as a major influence on its culture. The following issues
also influence culture, attitudes, values and behaviour.

e Technology influences work arrangements and groupings, physical layout and the
nature of the people employed.

101
 e Structure and hierarchy influence personal and professional interactions, personal
and professional ambitions and aspirations.
e Status, and how it is accorded and recognized, especially in terms of rank,
position in hierarchy, personality, achievements.
e Trappings and badges, especially cars, healthcare, fashionable computers and
iuawieseue—=
ajdoad
&pue technology.
e Rules, regulations and systems influence attitudes and behaviour (positive or
negative) depending on how they are drawn up.
e Leadership provides the key point of identity for everyone else, and from which
people establish their own perceptions of the organization’s general standards.
e Management style influences the general feelings of well-being (positive or
negative) of everyone else, and sets standards of attitudes and behaviour as well
as performance.
e Managerial demands and the ways in which these are made, and their influence
on attitudes, behaviour and performance.
e Hierarchical and divisional relations and interactions influence the nature of
performance, attention to achievement and the value placed on achievements;
this also applies to functional activities.

=
w
‘| cannot necessarily define organization culture. But | know it, feel it, and begin to under-
o
bev)
stand it, every time | visit a company or institution’ — Tom Peters (1986) The World Turned
3.
Upside Down. Channel 4.
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Definitions of culture
Organization culture and the patterns of collective and individual behaviour that arise
are noi easy to define. Nevertheless, there have been many studies that have attempted
to evaluate the collective attitudes, values, behaviour and performance of organizations,
and how people interact with each other in their working lives. The major studies are:

e Handy and Harrison, and cultural definitions;

e Deal and Kennedy, and culture profiles;
e Hofstede, and cultural dimensions.

Handy and Harrison

Handy and Harrison (Handy, 1993; Harrison, 1995) defined organization culture in
terms of the dominant force, factor or personality present as follows.

¢ Power culture: power culture exists where the one key relationship is between
each member of staff and the individual who wields power and influence. Power

102
 cultures depend upon the figure at the centre — the source of power — for their
well-being. Everyone else draws their strength, influence and confidence from the
ann
relationship with this person. The relationship is normally terminated when there
is a loss of confidence in the person who holds power.
The main problem with power cultures is growth. As the organization grows
and diversifies, it becomes difficult for the person at the centre to sustain
continued high levels of influence. There is also the problem of permanence, of
what happens when the person at the centre of power passes out of the organiza-
tion. Where this individual has been totally dominant, a void is normally left
when they leave.
e People/person culture: people/person culture exists for the people who work in
it. Examples include research groups, university departments, family firms, and
companies started by groups of friends where the first coming together is
generated by those involved rather than the production of products and services.
The key relationship is therefore between the people involved and what binds
them is their common interest. Hierarchies may subsequently evolve, but these
too will be driven by the common interest, at least in the first place.
e Task cultures: task cultures are to be found in project teams, marketing groups
and service-oriented organizations. In task cultures, the emphases are on getting
the job completed, keeping customers and clients satisfied and responding to, and
identifying, new market opportunities. Such cultures are flexible, adaptable and
dynamic. Problems arise, however, when the rules, regulations and norms are not
drawn tightly enough; and this leads to duplication of effort, and staff and
individual conflict even though this may be as the result of professional rather
than personal disagreement.
e Role cultures: role cultures are found where organizations have gained a
combination of size, permanence and departmentalization, and where the
ordering of activities and the preservation of knowledge, experience and
stability are essential.
The key relationships are based on authority, rank and status. Role cultures
operate most effectively where the wider environment is steady and a degree of
certainty can be envisaged. In times of great change, the best role cultures develop
through the use of their own rule books; for others it may be more difficult.

Deal and Kennedy

Deal and Kennedy (2000) defined organization culture in terms of risk taking; indi-
vidual and collective behaviour; and collective and individual habits. The classifica-
tions were as follows.

e Tough guy/macho: tough guy/macho cultures operate in fast moving industries

and sectors. Examples of tough guy/macho cultures include banking and finance,

103
 stock market trading and commodities and other brokerages. The collective
yn)
~uew
&
®
propensity to take risks is very high. Collectively also, the staff are very
fashionable. Staff tend to be individualistic, concentrating on their own
performance as a contributor to that of the collective good, rather than on the
collective good in the first place. Tough guy cultures are particularly effective
a|doad
iuat
pure when crises occur, or when products and services have to be delivered in the very
short term. Tough guy cultures tend not to learn from past mistakes.
Work hard/play hard: work hard/play hard cultures operate in fast moving
industries also. Work hard/play hard cultures exist in high technology and cutting
edge design and development work (Google is widely perceived to have a ‘work
hard/play hard’ culture). The overwhelming positive element of work hard/play hard
cultures is the positive attitude. Those in work hard/play hard cultures expect short-
term results and continued recognition for a steady stream of successes. Work hard/
play hard cultures are present where there is an enduring commitment to hard work
and continuous collective achievement. In work hard/play hard cultures, staff
members will tend to socialize as a group, as well as work together.
Bet your company: bet your company cultures tend to be found in expert,
professional and top quality organizations; and also in industries such as oil and
aerospace. Bet your company cultures tend towards high levels of risk taking, partly
on the basis that they have been successful over long periods of time; and partly also
on the basis that this success can induce a perception of complacency. Bet your
company cultures have a strong respect for authority, and tend to be ordered in terms
of rank, hierarchy and departmentalization. Older members of a bet your company
culture serve as mentors for the younger ones so that the culture is preserved.
Process cultures: process cultures are to be found in banks, insurance
companies, pharmaceuticals, financial services, and government departments.
Those working in process cultures tend to be cautious and protective of their own
position. Risk taking is low and never undertaken without firsi establishing that
there is a procedure to be followed. The great advantage of process cultures is
their attention to detail and their willingness to follow procedures, and to bring
order and systems to the place of work.

Hofstede
Hofstede (1980, 2004) studied the workforce of IBM in its operations in over 40
different countries. This work enabled Hofstede to identify both national cultures that
were present, and also how the presence of national characteristics affected the
organization culture of IBM. Hofstede identified five dimensions of national cultures
as follows.

e Power/distance: the extent to which power and influence is distributed across

the society; the unevenness of power and influence depending on organizational

104
 position; the extent to which this distribution was acceptable to the members of
the society. Hofstede also referred to the physical and psychological distance that
&anyn
exists between people, and the sources of power and influence.
e Uncertainty avoidance: this reflects the extent to which people prefer order and
certainty, or can cope with uncertainty and ambiguity. It also reflects the extent to
which they feel comfortable or threatened by the presence or absence of
uncertainty, both in the short term and also as an enduring factor of working life
and wider social aspects of the particular location.
e Individualism/collectivism: this reflects the extent to which individuals are
expected to take care of themselves; or the extent to which individuals expect to
take care of themselves. Individualism/collectivism also reflects the extent to
which a common good, clearly defined set of goals and organizational direction
can be accepted.
e Masculinity/femininity: this reflects the distinction between masculine values —
the acquisition of money, wealth, fortune, success, ambition, possessions, reputation
and recognition — and the ‘feminine’ values of sensitivity, care, concern, attention to
the needs of others, quality of life; the value, importance and mix, and the
prevalence of each.
e Long-term orientation/short-term orientation: this is a reflection of the values
held in particular societies, professions and occupational groups. Values
associated with long-term orientation include thrift, perseverance and career
development; values associated with short-term orientation include respecting
traditions and habits, fulfilling social, as well as workplace, obligations, and
protecting and developing one’s reputation.

The great contribution of these, and other, studies of organizational, national and
social culture is to begin to classify and present points of reference that give everyone
a start in understanding the components and content of organization culture.
The weakness of each of the approaches is that they necessarily tend to generalize.
For each of the definitions, it is possible to find a counter-argument. For those who
work in anything but the smallest of organizations, it is possible to find elements of
many, if not all, of the above statements and classifications. Within bureaucratic
organizations, it is commonplace to find people who are very task and customer
driven; within dynamic and go-ahead organizations, it is nevertheless possible to find
people who do everything by the rule book.
Additionally, and most crucially, many would argue that there is no such thing as
national culture. For example, people living in the west of England would regard
themselves as being very different to those from the north, south or east; and people
living in the west of London perceive themselves to have very different customs and
habits to those living in the east. Without a doubt, these differences exist in every
part of the world.

105
 Os
io)
The key contribution that these studies and definitions of organization and national
culture make is to begin developing an expert understanding of organizational, collective
Wa)
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and individual behaviour. It is only a start; it needs to be the basis for further study and
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evaluation. Adopting these approaches to organizational and collective culture and behav-
iuawaseuew
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Developing an understanding of organization culture

As stated above, using the Handy and Harrison, Deal and Kennedy, and Hofstede
studies is a useful point of reference and a basis on which to build knowledge, under-
standing and expertise. In order to develop this knowledge, understanding and
expertise within particular organizations, locations and situations, the following have
to be understood and evaluated.

e History and tradition: the origins of the organization; the aims and objectives of
the first owners and managers, and their philosophy and values; the value in
which these are currently held; the ways in which they have developed.
e Nature of activities: historical and traditional, and also current and envisaged;
this includes reference to the general siate of success and effectiveness; the
balance of activities — steady-state, innovative, crisis.
e Technology: the relationship between technology and the workforce, work
design, organization and structure; levels of technological stability and change;
levels of expertise, stability and change.
e Alienative factors: those factors that cause a form of psychological distance or
alienation to develop between organizations and their staff. Psychological barriers
include: rank, status, hierarchy, dress codes; and they all influence the ways in
which those working at the company behave and perform. Alienation occurs as
the result of technology usage in a variety of ways, including:
¢ remote workers do not meet with other colleagues and co-workers on a regular
basis;
¢ e-mail rather than face-to-face communications become the norm and the basis
for establishing patterns of behaviour and activity;
¢ mobile and computer technology means that people are able to work according
to their own individual schedules rather than those that are uniform or imposed
by the organization.
e Past, present and future: the importance of the past in relation to current and
proposed activities; special pressures (especially struggles and glories) of the
past; the extent to which the organization ‘is living’ in the past, present or future,
and the pressures and constraints that are brought about as the result.

106
 e Purposes, priorities and attention: in relation to performance, staff, customers,
the community and environment; and to progress and development.
AMIN
w
¢ Size: and the degrees of formalization and structure that this brings. Larger
organizations are much more likely to have a proliferation of divisions,
supervisory structures, reporting relationships, rules, processes and procedures
tending to cause communication difficulties, interdepartmental rivalries and
problems with coordination and control.
e Location: geographical location, the constraints and opportunities afforded
through choosing to be in, for example, urban centres, edge of town or rural areas.
Location has to be considered also from the point of view of the impact of multi-
site locations, geographical spread, and the physical distances that exist between
the different locations; and the physical distances that exist between different
activities and the head offices. The question of location also includes recognizing
and considering prevailing local, national and sectoral traditions and values.
Location has also to be seen from the twin points of view of:
e needing to have a point of reference for summarizing and understanding and
evaluating the culture of a locality;
e recognizing that it is impossible to make sweeping generalizations about
culture.
e Leadership and management style: the stance adopted by the organization in
managing and supervising its people; the stance people require of their managers
and supervisors; the general relationships between people and organization and
the nature of superior—subordinate relations.

When all these factors are combined together then the elements of organization
culture are in place; and the result may be that organization culture is:

e designed or emergent;
e strong or weak;
e positive or negative;
e cohesive or fragmented.

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It is especially important that culture is designed, shaped and reinforced by those in top
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and senior positions. This involves setting standards of attitudes, values, behaviour and
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performance to which everyone is required to subscribe as a condition of employment.

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Policies and procedures are produced so that everyone knows where they stand; and these
oO

are enforced when attitudes, behaviour, commitment and performance fall short in any
way. Organizations with strong, positive and designed cultures are not all things to all
people; and this needs to be made clear at recruitment and selection processes.

107
 A designed culture is essential if organizational conduct, behaviour and perform-
ance are to be optimized over the long term. This means that managers have to take
active steps to ensure that they determine and implement the required standards,
conduct, patterns of behaviour and human and professional/occupational interac-
tions. If organization culture is allowed to emerge, the result is that people think,
iuawueseue—=
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&pue believe, behave and act according to their own priorities, and the pressures of their
peers; and this leads to the tendency to pursue their own agenda.
Organizations that allow this to happen succeed only if the aims and objectives of
the staff, and interest groups, coincide absolutely with their own. When this happens,
staff set their own informal procedures and sanctions; and it is a short step from this
to bullying and victimization. Organizations faced with emergent cultures invariably
have staffing problems of some kind. When this happens, the characteristics of
culture have to be identified and tackled.

mo} Characteristics of culture

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Both in designing culture, and also in response to remedying the problems of emergent
SS,
® cultures, attention needs to be paid to each of the following areas to ensure that culture
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becomes strong, cohesive, positive, inclusive and designed. Culture has the following char-
acteristics, and Is:

Learned — rather than genetic or biological.

Shared — members of groups and organization share culture.
Continuous — cumulative in its development and passed on from one generation to
the next.
Symbolic — based on the human capacity to symbolize, to use one thing to represent
another.
Integrated — a change in one area will lead to a change in another.
Adaptive — based on human qualities of adaptability, creativity, innovation and
imagination.
Regular — when participants interact with each other, they use common language
terminology and recognized and accepted forms of behaviour.
Norms — distinctive standards of behaviour; the ways in which people interact with
each other; relationships between, and within, ranks and hierarchies; the general
patterns of behaviour, familiarity, habits, dress and speech.
Dominant values — advocated by the organization and expected by participants.
Philosophy — policies concerning beliefs and standards of performance, attitude,
behaviour and conduct. Organizational philosophy gives the cornerstone for
establishing what is rewarded, punished and sanctioned.
Rules — the formal rules that underline the constitution of the organization; the
informal rules that govern the interaction of individuals on a daily basis. The rules and
procedures enforce what is rewarded; and especially, what is punished and sanctioned.

108
 ¢ Organizational climate — conveyed by the physical appearance and layout of the
ainyj
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organization, and reinforced through the ways in which staff interact with each other
and with the outside world.

Each of these characteristics is additionally a point of inquiry and potential inhuence when
managers seek to change, develop and enhance organization culture overall.

Pressures on organization culture

Pressures on organization culture exist both inside and also outside the organization.
Organizations must respect the attitudes, values and ethics of the places where busi-
ness is to be conducted; and this includes reference to social and religious customs.
External social and cultural prejudices may also have to be taken into account.

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Human prejudices
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os It is Important to recognize that ‘prejudice’ — the subjective and unfounded attitudes
Ss,
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= adopted towards particular people, products and services — is a fact of human existence
and behaviour. Most prejudices are harmless. For example, people who choose only to
wear blue clothing are exhibiting a form of prejudice, as are those who always vote for a
particular political party. Supporting a football club is a form of prejudice, as is always using
the same supermarket for grocery shopping.
However, prejudices against particular members of the community are abhorrent and
unacceptable in organizations. As well as being illegal, it is repugnant to treat people with
ess respect on the grounds of: gender; race; disability; membership of a trade union/non-
membership of a trade union; spent convictions from a previous criminal conviction. It is
ethically and morally abhorrent to treat people differently and with less respect on the
grounds of: age; sexual orientation; marital status; physical appearance; the way they speak;
the place in which they tive. It is both abhorrent and also illegal to allow bullying, victimiza-
tion, harassment, and physical and verbal assaults.
Organizations that allow repugnant forms of prejudice invariably suffer from low
morale, and declining levels of output. Organization cultures become weak and divided as
people gang up on the particular oppressed individual or group; and as those who are
being oppressed seek the means to fight back.

Local working practices and customs, expectations of hours of work and ways of
working all have to be considered. In some places, activities close down for several
hours during the day; in others people expect to start and finish work early. In some
cases also, people are expected to socialize outside working hours as a condition of
their employment.

109
 a
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Nissan UK
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Headquarters’ staff at Nissan UK in north-east England used to meet regularly on

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Thursday and Friday evenings. This was expected by the company on the basis that:
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meeting in a social atmosphere encouraged personal and professional understanding;

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iuauieseuey=y
&pue and it additionally gave the opportunity to sort out organizational problems away from
the pressures of work.
One member of staff objected to this. This person, a woman in her early thirties,
considered that her work commitment ended when she left the office. She had other
priorities in her life, and especially had to return home early in the evening in order to feed
her children.
Nissan first encouraged her to participate; then when this did not work, she was disci-
plined. The woman complained to ACAS and then to the UK employment tribunal
system. Nissan initially defended the case; however, at the point at which the case was to
be heard, the company proposed a settlement which was acceptable to all.

Physical distance affects culture and cohesion. The inability to see and meet with
others, for example when work is being carried out in a foreign or remote location
from the main organization leading to the structuring and ordering of tasks and activi-
ties, affects relationships between the staff at the location, and relationships between
the location and head office. It also affects decision-making processes, and the atti-
tudes and approaches to local problems and issues. Those in remote locations, and
especially the person with overall responsibility and control, are likely to experience
feelings of isolation from time to time and this may need to be supported if overall
effectiveness of that part of the organization is to be sustained.

me}
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Flexible working
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co Maintaining a collective corporate identity is an enduring problem for those managers
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responsible for flexible and non-standard patterns of work. Whether these are related to
irregular hours, working in remote locations or telecommuting, the core need is to ensure
that everybody is instilled with collective, cohesive and positive attitudes and values in
their relationship with the organization.
It is therefore a priority for managers faced with these issues to ensure that they visit
and meet with their staff as often as possible; and where this is not possible, to ensure that
they speak to them on the telephone. This is preferable to regular e-mails; and where
e-mails are used, important and urgent issues must always be followed up with telephone
calls, and meetings where possible.
Additionally, where flexible staff do attend at the organization's headquarters or
premises, they must be given the opportunity to meet and socialize with their colleagues
so that a personal, as well as occupational, identity is developed.

110
 Psychological distance has also to be managed. Psychological distance is likely to
exist as a feature of physical distance even if there is a full range of electronic and
anny
a
telecommunications available. Psychological distance is also present to a greater or
lesser extent between the organization and the communities in which it works; and the
interaction of organizational attitudes, standards and values with those of the localities
must also be considered. The relationship with the community has also to be considered
from the point of view of the economic contribution made by the organization in the
provision of work. This is a responsibility for all organizations; it is a critical responsi-
bility when the organization is the largest single or dominant employer in the area.

Legal and ethical pressures

All organizations have to work within the laws of their locations. Laws exert pressure
on production methods, waste disposal, health and safety, marketing and selling,
contractual arrangement, staff management, human resources, industrial relations
and equality (or otherwise) of opportunity and access, community relations, organiza-
tional and professional insurance, and the reporting of results; and each of these in
turn affects the behaviour and priority of the organization.
Pressures are compounded when the organization operates in many countries and
under diverse legal codes. Balances have to be found in these cases to ensure that, as
far as possible, everyone who works for the organization does so on terms that tran-
scend the varying legal constraints. Organizations are therefore obliged to set abso-
lute standards that more than meet particular legal minima. Moreover, the phrase ‘we
comply with the law’ invariably gives the message that ‘the only reason that we set
these standards is because we have to’ and that the organization has therefore been
pressured into these standards rather than achieving them because it believes that
they are right. It calls into question not just the organization’s attitude to the law, but
also its wider general attitudes, values and standards.
Ethical pressures arise from the nature of work carried out and from the standards
and customs of the communities in which the organization operates. There are also
general ethical pressures on many activities concerned that are covered by the law.
Again, the ideal response of any organization is to put itself beyond reproach so
that these pressures are accommodated, leaving the way clear for developing produc-
tive and harmonious relationships with all concerned.

Internal pressures
The internal pressures on organization culture and collective attitudes and behaviour
are as follows.

e The interaction between the desired culture and the organization’s structures and
systems. Serious misfit between these leads to stress and frustration and also to
customer dissatisfaction and staff demotivation.

111
 e The expectations and aspirations of staff, and the extent to which these are
realistic and can be satisfied within the organization. This becomes a serious
issue when the nature of organization changes and prevailing expectations can no
longer be accommodated. Problems also arise when the organization makes
promises that it cannot keep.
ajdoad
iuaueseurew
&pue e Management and supervisory style, and the extent to which this is supportive,
suitable to the purpose and generally acceptable to the staff.
e The qualities and expertise of the staff, and the extent to which this divides their
loyalties. Many staff groups have professional and trade union memberships,
continuous professional development requirements and career expectations, as
well as holding down positions and carrying out tasks within organizations. In
many cases — and especially when general dissatisfaction is present — people tend
to take refuge in their profession or occupation, or their trade union.
e Technology and the extent to which it impacts on the ways in which work is
designed, structured and carried out.
e Working customs, traditions and practices including restrictive practices, work
divisions, specialization and allocation, unionization and other means of
representation; and the attitudes and approaches adopted by both organization and
staff towards each other — flexible and cooperative, adversarial, degrees of openness.
e The extent to which continuity of employment is feasible; or conversely,
uncertainties around future prospects for work and employment. This includes
degrees of flexibility, the extent and prevalence of employee and skills
development, learning subcultures and the wider attitude of both staff and
organization to this. It also affects reward packages.
e Internal approaches and attitudes to the legal and ethical issues indicated; the
extent of genuine commitment to equality of opportunity and access for all staff,
whether or not different grades have different values placed on them; standards of
dealings with staff, customers, communities, suppliers and distributors.
e The presence of pride and commitment in the organization, its work and its
reputation; standards of general well-being; the extent of mutual respect.
¢ Communication methods and systems, the nature of language used, the presence/
absence of hidden agenda.
e Physical and psychological distance between functions, departments, divisions
and positions in the organization and its hierarchies.

Joint ventures
Organizations involved in joint ventures normally create a company or entity with
its own distinctive identity for the duration of the project. This is to generate
positive feelings of commitment towards the matter in hand and override the view
that would otherwise remain on the part of those involved that they continue to be

112
a part of their old organization. A fragmented and disordered — and negative —
approach and identity would thus otherwise ensue. By creating the separate and
(a)
ainyjnd
new identity, the negative is overcome and a distinctive focal point for the work
in hand is established.

Mergers and takeovers

Mergers and takeovers are normally extremely attractive from the point of view of
generating short-term share price advantages. Almost invariably however, less
attention is paid to how the newly merged organization is to operate in the future. In
particular, staff coming from the previously independent organizations have to be
steered and guided through the transition period in which the culture, values, atti-
tudes and identity with the previous organization are translated into a new and
positive identity with what now exists. This is not always easy to achieve; and it is
rarely considered by those steering mergers and takeovers. Failure to do so however,
means that people will constantly hark back to the good old days before the merger
or takeover; and they become even slower to accept and internalize new ways of
working, colleagues from other organizations involved, and new patterns of behav-
iour and ways of working that now have to be followed.

Other aspects of organizational culture

Other features of organizational culture may be distinguished. One way of looking at
these features is as a web in which each strand or loop both feeds off, and also
strengthens, all the others (see Figure 6.1).

Power
structures

Formal
structures

Figure 6.1 The cultural web

115
 e Relationships with the environment: including the ways in which the
organization copes with uncertainty and turbulence; the ways by which the
organization seeks to influence the environment; the extent to which it behaves
proactively or reactively.
e History and tradition: the extent to which the organization’s histories and
juawaseuey)
a|doad
(y)
pure traditions are a barrier or a facilitator of progress; the extent to which the
organization values and worships its past histories and traditions; key influences
on current activities and beliefs; the position of key interest groups — for example
trade unions.
e Power structures and the internal relationship balance: the mixture and
effectiveness of power, status, hierarchy, authority, responsibility, individualism,
group cohesion; the general relationship mixture of task and social development.
e Control mechanisms: and how control is exercised over particular groups, and
over the organization as a whole; the extent to which some groups have preferred
status and the reasons for this; how resources are controlled and allocated.

Ss
8 it is essential to look at the inherent strength and integrity of each aspect of organization
culture in order to assess it for integrity; and also to assess it for effectiveness.
For those in managerial positions where there is a lack of integrity or effectiveness, these
andeid
1s9q
ought to be points ofattention in the development of the individual and collective behav-
iour required.
@
e Rites and rituals: these are the punctuation marks of organization operations.
They include: pay negotiations; internal and external job application means and
methods; disciplinary, grievance and dismissal procedures; rewards; individual,
group, departmental and divisional publicity; training and development activities;
parties and celebrations; key appointments and dismissals; socialization and
integration of people into new roles, activities and responsibilities.

It is essential to recognize the effects on people's comfort when rites, rituals, routines and
habits are disrupted. If people are asked to change their times or location of work, they are
also being asked to change patterns of behaviour with which they have come to be
isnf
e
ainuiw
extremely comfortable. Whenever you ask people to change their location or hours of
work, remember to ensure that, in so far as is reasonably practicable, you are able to
accommodate their existing routines and habits.
@
e Routines and habits: these are the formal, semi-formal and informal ways of
working and interaction that people generate for themselves (or which the
organization generates for them) to make comfortable the non-operational aspects
of working life. They develop around the absolutes — attendance times, work
requirements, authority and reporting relationships — and include regular

114
 meetings, regular tasks, forms of address between members of the organization
and groups, pay days, holidays and some trainee development activities.
ainyn
e Badges and status symbols: these are the marks of esteem conferred by
organizations on their people. They are a combination of location — near to or
away from the corridors of power for example; possessions — cars, technology,
personal departments; job titles — reflecting a combination of ability, influence
and occupation; and position in the hierarchy pecking order.

The effects of rites, rituals, routines, habits, badges and status symbols all lie in
the value that the organization places on them and the value in which they are held
by the members of staff. There is no point in offering anything, or in undertaking any
form of cultural activity, if a negligible or negative response is received. In general
therefore, these forms of culture development both anticipate people’s expectations
and seek to reinforce them and to meet them.

Stories, myths and legends

All organizations have their fund of stories, myths and legends. The nature and
content of these represents and reflects the current state of organizational culture and
well-being.

aSe
(‘S
Stories, myths and legends: Examples
oO
wv
e ‘| knew I'd made a mistake, and | knew that the senior consultant was in a towering
(sait
ie)
=
ia)

rage. | could hear him coming. So | borrowed a patient's dressing gown, wrapped it
Wn

around me so that my uniform was not showing, and sat on a commode next to one
of the beds until he had gone’ Staff Nurse, south-eastern general hospital (2000), on
inter-professional relations.

e ‘We took an incredible risk going into the airline business. Richard Branson
(1998), keeping up the adventurous image of the Virgin Group; in fact the venture
was meticulously planned and the subject of extensive investment before Virgin
Atlantic ever flew.

e ‘McKinsey consultants used to be brilliant, creative and interesting — they were

eccentrics. Now they all look the same, say the same, and have the same thing to
offer — whether or not this is what the client requires’ Tom Peters (2000) Masters of
the Universe, Channel 4, on the development of McKinsey Management
Consultants since his departure.

e ‘Everybody is harking back to the good old days. They speak and reminisce fondly of
bygone times, a golden era — in fact, an era that never was. John Major (1998).

115
 Culture management and attention to culture
Both the actual culture and the perceived ideal are subject to constant development.
With this in mind, the best organizations therefore pay this constant attention. There
are some basic assumptions here.
People can, and do, change if it is in their interests to do so. People resist when
iuatuaseue—=
a|doad
&pue
they perceive or understand that it is not in their interests to do so. All changes in
standards and behaviour therefore need to be presented as being in the best interests
of those affected; and where this is not the case, people still need to know and under-
stand clearly what is to be expected of them so that they can then choose whether or
not to remain with the organization.
Culture can be changed and developed. There are too many examples where
this has happened to think otherwise. Nissan UK transformed a population of
ex-miners, shipbuilders and steelworkers into the most productive and effective
car company in the UK. Toyota at Derby is following suit with former railway staff.
British Airways transformed a bureaucratic nationalized monopoly into a customer-
oriented multinational corporation. British Steel transformed itself from a loss-
making national corporation, riddled with demarcation and restrictive practices,
to a profitable, effective and flexible operator before being sold on to the Dutch
Chorus Group.
Culture should be changed and developed. The constant development of opera-
tions, technology, markets, customer bases and the capabilities of the human resource
make this inevitable also. Current ways of working and equipment; and current skills,
knowledge and qualities serve current needs only. The future is based around the
developments and innovations that are to take place in each of these areas. Therefore,
the culture must itself develop in order that these can be accommodated.
Culture change can be long and costly, especially where people resist. It is
certainly true that where stability has existed for a long while, it is traumatic at
first — and therefore costly in terms of people’s feelings and possibly also in terms
of current morale. It is made easier for the future if new qualities and attitudes of
flexibility, dynamism and responsiveness are included in the new form and if this
is reinforced through ensuring that people understand that the old ways are now
neither effective nor viable.
Culture change need not take forever. Indeed, people who are told that there are to
be lengthy periods of turbulence lose interest and motivation. The reality of change
and development can be quickly conveyed through critical incidents — for example
the gain or loss of a major order; the collapse of a large firm in the sector; the entry of
a new player into the sector; radical technological advances; and so on. Once this is
understood, the attitudes, behaviour and orientation of the staff are given emphases
in particular direction, and the general positioning of their aspirations, hopes and
fears is changed.

116
 Conclusions
je
ainynd
Effective organization cultures are positive and designed rather than emergent. They
must be capable of gaining commitment to purpose, to the ways in which this is
pursued and to the standards adopted by everyone. Cultures are a summary and
reflection of the aims, objectives, and values held. Where neither is apparent,
different groups and individuals form their own aims and objectives and adopt their
own values; and where these are at variance with overall purpose, or negative in some
way, they are dysfunctional and may become destructive.

ic
x
ae
Excellence and culture
®g
au
=
In the view of Peters and Waterman (1982):
®
=
‘Without exception the dominance and coherence of culture proved to be an essential
quality of the “excellent” companies [the 62 American companies studied by Peters and
Waterman]. Moreover, the stronger the culture, and the more it was directed to the
market place, the less need there was for policy manuals, organization charts or detailed
procedures and rules. In these companies, people way down the line know what they are
supposed to do in most situations because the handful of guiding values is crystal clear’

For this to be effective, a strong mutual sense of loyalty and acceptance between
organization and people is essential. Employees exert positive effort on behalf of the
organization, making a personal as well as professional or occupational commitment.
The reverse of this — the organization’s commitment to its people — is also essential. A
strong sense of identity towards the organization and its purposes and values is required;
and this happens when these purposes and values are clear and positive. Any commit-
ment made by people to organizations (or anything else) is voluntary and personal — and
can be changed or withdrawn. The best organizations produce cultures that are capable
of generating this. They create the desire among their people to join, remain with and
progress, recognizing their mutuality of interest and the benefits available to everyone.
The conclusion of this is an organization culture that has the following elements.

e A positive aura, one to which people can subscribe and identify with confidence,
pride, feelings of well-being; which in turn encourages positive views of the
organization and its work; and positive and harmonious working relationships.
e Shared values and standards, capable of being adopted and followed by all
concerned; this includes attention to high standards of integrity and morality;
mutual concern and interest; and equity and equality.
e High levels of individuality, identity, motivation and commitment; high levels of
group identity and mutual respect and regard.
e Organization and management style that is supportive of everyone involved
(whatever the style, whether autocratic or participative) and that concentrates on

117
 results and output, effectiveness and quality of performance, and also on the
development and improvement of the people.
e Regular flows of high quality information that reflect high levels of respect and
esteem for the people on the part of the organization.

Again, these can provide a useful point of reference for those concerned with the
iuswiaseuey—y
ajdoed
&pue
general well-being of the organization when it becomes apparent that things are
going wrong.
Much of this is clearly concerned with setting high standards and creating a positive
general environment and background. This is to be seen in the context that where these
elements are either not present or not attended to, or where the converse is present —
negative aura, one to which people do not subscribe, lack of shared values, unsupported
management style, for example — there is no identity or common purpose. People seek
refuge in groups or in their profession or technical expertise. Absenteeism and turnover
increases, performance declines. There becomes an ever-greater concentration on self,
on individual performance, often at the expense of the performance of the organization.
Interpersonal and inter-group relationships also suffer.
Both the positive and the negative feed from each other. Striving for a positive and
ideal culture tends to reinforce the high levels of value placed on the staff and the
more general matters of honesty and integrity. Similarly, allowing the negative to
persist tends to mean that relationships will get worse, aims and objectives become
evermore fragmented or clouded, organization purpose evermore obscured.

33 e Organization culture reflects the desired standards of conduct, behaviour and

Sy
=.
io)
St
performance required. It is essential therefore to understand culture from the point of
view of ensuring that the standards are as required.
e Organization culture is deeply embedded in collective and individual behaviour.
e Studies of organization and national culture are a useful starting point for
understanding the complexities. However, it is essential that all managers use this
knowledge as the basis on which to build their own expert understanding of collective
and individual behaviour.
e Culture can be changed and developed (and in many cases, needs to be changed and
developed). It is essential to ensure that, as with all change, people will only change if
they understand that it is in their own best interests to do so.

Further reading
Deal, T. and Kennedy, A. (2000) Corporate Cultures. Perseus.
Handy, C. (1993) Understanding Organizations (4th edn). Penguin.
Harrison, R. (1995) Collected Papers. McGraw Hill.
Hofstede, G. (1980, 2004) Culture’s Consequences. Sage.
Hofstede, G. (2005) Cultures and Organizations. Sage.
Peters, T. and Waterman, R. (1982) In Search ofExcellence. Harper and Row.
Williams, A., Dobson, P. and Walters, M. (1990) Changing Culture. CIPD. ™

118
 7
Communication
‘Effec tive
u
a
Gi

fun fany
organization.’

In this chapter
e the value of excellent and effective communications; and the cost of bad
communications
e tools and techniques for the management and implementation of effective
communications
e the specific concern of communication toxicity and its effects on the
viability of organizations
e delivering effective interpersonal communications and negotiations

introduction
Effective communication is vital for the successful functioning of any organization.
All organizations normally establish formal mechanisms and processes of vertical
and lateral lines or channels of communication to provide the means by which infor-
mation — facts, ideas, proposals, emotions, feelings, opinions and problems — can be
exchanged. They also normally create integrating activities such as groups, commit-
tees and other meetings, and the means of consultation and participation to improve
the all-round quality and understanding of this information.
Effective communication is based on: volumes, quality and integrity of informa-
tion; the integrity of information systems; the ways in which information is exchanged,
presented and delivered; and the overall integrity of the wider situation.
Communications and information feed the quality of all human and operational
relations in organizations. Good communications underline good relations and

119
 enhance the general quality of working life, motivation and morale. Bad and inade-
quate communications lead to frustration, loss of trust, alienation, fragmentation, and
lack of identity and unity.

Communication structuring
iuawaseuey—y
ajdoad
&pue
Communications may be:

One-way: information presented to particular target audiences that does not seek,
or allow for, responses. General information may be presented on websites or in the
media. Advertising is also generally one-way communication, although it does
seek to build and reinforce product, service and brand awareness and identity.
Two-way: two-way communication is the ability to engage in active and
productive discussion, consultation, participation and involvement. Two-way
communication is the basis of all effective staff management and employee
relations, as well as customer, client and supplier liaison, and dealings with
shareholders and backers.
Downward: some downward communication is essential because overall
standards and direction have to be communicated from those responsible, to those
who have to carry things out. Written rules, procedures and handbooks also
require the backing and support of top managers. To be effective, downward
communication requires active participation and consultation.
Upward: upward channels of communications are those that provide access to top
management for the rest of staff. Thei: effectiveness is enhanced or limited by:
¢ organization culture that sets the boundaries of openness, integrity and honesty;
e physical and psychological distance between top managers and the rest of the
organization;
e attitudes of top managers to the rest of the staff.
Lateral: between different professional and occupational groups and locations,
departinents, divisions and functions. In many cases, this is especially hard to
manage because of in-built and historic barriers that exist between:
e primary functions and head office staff;
¢ professional staff and their managers;
¢ organizational managers and backers;
e senior and junior staff;
e different departments, divisions and functions.
Spoken: effective spoken communication exists everywhere. The effectiveness or
otherwise is driven by fundamental organization integrity, the nature of working
relationships, and the openness, or otherwise, with which people deal with each
other. Problems arise with spoken communication when people know, believe or
perceive that they have been told that something is to happen, only to find out

120
 subsequently that what was stated (or understood to have been stated) is not in
fact going to happen.
e Written: effective communication is underpinned by written documents, and by
policies, procedures and practices governing standards of attitudes, behaviour &)
UONED
and performance; the management of conflict and specific issues such as
customer, client and supplier management, public relations and other aspects of
organization presentation.

Channels of communications
Channels of communication may be formal, institutional or informal:

e Formal: the hierarchies, systems, procedures and committee structures

established to underpin management style and organization effectiveness (see
Figure 7.1).
e Institutional: less formal channels that nevertheless carry both validity and
influence — for example professional, occupational and managerial cluster groups,
work improvement groups, quality circles. Institutional communications include
consultation, participation and involvement activities; committee work; and
meetings (see below).
e Informal: ad hoc gatherings, scribbled notes and the grapevine.

S
wf
The cascade effect
ao
© §
Cascades are attractive to hierarchies. Those at the top delude themselves that cascades
3.
Si
ec |
a
work as effective communication mechanisms. Cascades take their name from the appear-
@
ance caused by pouring champagne into the top glass of apyramid of glasses. The pouring
is continued until the wine overflows and eventually fills all the glasses of the pyramid (see
Figure 7.1). The effect of this — both for champagne and for communication — is the same.
The quality of both is lost and there is a good measure of wastage by the time the bottom
of the pyramid is reached.

72)
Grapevine
Q.
ait
oO)
oO.
All organizations have a grapevine — consisting of gossip, half-formed opinions and general
=.
® chatter about the present state of affairs.
=
It is an important indicator of general organizational well-being. If the grapevine Is
concerned with personal gossip and the mythical activities of individuals, all is more likely
to be well than if the primary topic of conversation is the future state of the organization,
uncertainty over job and work security, and spreading of rumours about redundancies.

121
 SIMPLE

Information flows to Central person can Good performance

Centralized central person perform task alone

iusweseue=
ajdoad
&
pue Information flows all No one person has Grapevine poor
Decentralized around the network all the required performance
information

COMPLEX

Information flows to Central person Poor performance

Centralized central person becomes saturated

DC)
>
Information flows all No one person Good performance
Decentralized around the network becomes saturated
FDEP
oe Sl

Information flows No one person Poor performance

Hierarchical up and down has all required on large/long
|information hierarchies
I
Val
Information flows Depends on quality Tends to lead to
Briefing SK |from briefer to group | of briefer good performance

Key figure is at ‘neck’ Filtration and Leads to performance

Hourglass ~~ limitation required by the ‘neck’
—

Information flows Distortions at 1, 2, 3 Poor understanding

Chains 1 along chain likely; poor
motivation, morale
2
Slow movement of
3 information

Information cascade Dilution at every Loss of quality |

Cascade V V eg. briefing groups stage
=e
WW
Note the comments in the right-hand column — and especially the fact that very few of the methods used lead to good
communication performance,

Figure 7.1 Channels of communication

122
Communication policies and priorities
Communication policies are based on the extent to which organizations and their
managers are prepared to engage in consultation, participation and effective
uoner
NS
committee work. '

Consultation, participation and involvement

Organizations consult with their staff on the implementation of decisions and poli-
cies. The purpose is to ensure that everyone understands what is required of them,
and why, and to give them a full understanding of a particular situation. It also reflects
the need for mutual confidence and unity of purpose among everyone in the organiz-
ation. Effective consultation, participation and involvement also help to ensure that
what is proposed has been well thought out and tested, as well as providing a means
for information exchange and staff input (see Figure 7.2).

Model

Decision Review decision D f

at — ate O
taken if desirable j
implementation

Review consultation
Briefing, process
notices —
newsletters

v Formal review and

commissioning of
Meetings and
consultations any further activities
(including with necessary
recognized unions) |
Counselling and support
for groups and individuals
affected

Figure 7.2 Consultation process following a decision

Genuine consultation also helps to ensure that any flaws in decision-making proc-
esses or the implementation of particular proposals may be raised. However well or
thoroughly an issue has been overtly thought through, it must be capable of wide
general scrutiny and examination.

Committees
Committees are constituted for a variety of reasons. From the point of view of commu-
nication, it is essential that they enhance both the quality and value rather than act as

123
 a blockage. To ensure this, the purpose, scheduling, size, composition, agenda, control
and recording must be managed. The ultimate test of the value of any committee is its
output. If this is not forthcoming, then alternative means should be found to tackle the
issues that the committee or committee system is supposed to face.
Committees may be used to render inert something that is threatening to a partic-
iuawieseue—=
ajdoad
&pue ular vested interest. They are used to filter and edit information. They are used to
draw the teeth of lobbies or pressure groups — and to advance particular desired
points of view. In many cases, there is a pecking order. Committee membership may
be subject to patronage or favour. Membership of certain committees is often the
mark of status or achievement.
Committees should therefore be constituted for a purpose, and when this purpose
is satisfied, they should be disbanded. They satisfy human needs of association,
belonging, participating and contributing; and it is important that they do this in the
context of advancing the total quality and effectiveness of the organization.

Meetings
Meetings are constituted for a variety of reasons. From the point of view of communi-
cation, it is essential that they have clearly stated agenda and time schedules; and in
many cases, people are required to attend fully informed and with a direct and
expected contribution in mind.
Meetings become ineffective when there is a lack of agenda or clearly stated
purpose. When this happens, people find excuses for not attending, or else send one
of their junior staff instead. The overall effect is to lose the opportunity for informa-
tion exchange; and in many cases, this leads also to a lack of value placed on those
activities that the meetings are supposed to address.

Principles of effective communication

Communication is at its most effective when it is delivered face to face, allowing for
discussions and questions. Effective communication is underpinned by written docu-
ments, rules and procedures as above. It is additionally normally the case that core
messages at least have to be repeated many times (this is a key lesson from brand
building, and product and service awareness from the advertising industry).

vat
If you are unsure of the need to repeat messages many times, try to imagine going for a
wa
ao
se)
week without seeing a Coca-Cola or McDonald's logo, advertisement or product. These,
3
=
and of course many other companies, are global icons universally recognized. And yet —
ic
they continue to broadcast and advertise themselves. Repeating messages universally and
a
oO

regularly is a major lesson in communication for everyone.

124
 e Language: of sender, receiver, and anyone else who may read or listen to it. The
greater the clarity of language, the greater the likelihood that what is transmitted
will be received and understood; and the reverse — when language is not clear —
always dilutes effectiveness. It also leads to feelings that things are being hidden (St)
UOIDI
or not stated fully.
e Conciseness: in which everything that needs saying is done so simply and
directly. This is not to be confused with lack of full coverage or leaving things out.
e Precision: language that addresses points directly reinforces total confidence in
the communication. Language that is not direct tends to reinforce any feelings
that may be present of dishonesty or mistrust.

Language barriers
Forms of words and phraseology are used extensively to give off coded messages and to
reinforce the real agenda that is being followed. Examples include:
JO
|
1UIOd
MalA
4

e With greatest respect, | respect your views, |am sure that you/he/she is a person of great
integrity = you are wrong, you are talking rubbish, | don’t value you at all.
e We will take all steps, we are doing everything possible, we are complying with the law, we
are complying with specific regulations = we are doing as little as possible in the
circumstances, we are doing the least we can get away with in the circumstances, you
cannot touch us.
e We do not have the resources/money/staff/equipment = we do not want to do it, we
are not going to do it.

e The positive/negative balance: people respond much more actively to positive

communications. Where negative messages have to be transmitted, these should
be done with the same clarity and precision; at least then bad news is quickly,
clearly and completely understood.

The selection of the correct media is essential and many communications go wrong
because the wrong choice is made. The basic rules are:

3S
aonoeid
3saq
e Say what needs to be said; write what needs to be written; make best use of all the
senses of those affected and media available.
e Say what needs to be said and confirm this in writing.
e Operate on a fundamental basis of openness, honesty, integrity and trust in terms of
access to, and provision of, information.
e Use e-mails and written documentation as far as possible only for giving and
exchanging general information, or to reinforce what has already been said.

125
 Non-verbal communication
Non-verbal communication gives an impression of people to others without saying or
writing anything. It additionally reinforces what is being said or written. It also tends
to give the real message — the non-verbal message is usually much stronger. The main
ajdoad
iuaweseuey=)
&pure
components that must be understood are as follows.

Appearance: this includes age, gender, hair, face, body shape and size, height,
bearing, national and racial characteristics, clothing and accessories. Each of
these items, and their combined effect, has great implications for: interviewing,
public images, creating impressions, advertising public relations, salesmanship,
presentation, design, brand, marque, layout, comfort and familiarity.
Manner: indicating behaviour, emotion, stress, comfort formality/informality,
acceptability/unacceptability, respect/disrespect.
Expression: expression, especially facial expression, becomes the focus of
attention and that is where people concentrate most of their attention.
Eye contact: regular eye contact demonstrates interest, trust, concern, affection
and sympathy. The depth of expression in the eyes generates deeper perception of
feelings — anger, sorrow, love, hatred, joy.
Pose: this is either static or active, relaxed, calm, agitated, nervous or stressful. It
reinforces the overall impression conveyed. Different parts of the body, especially
arms and legs — are used for expression, emphasis, protection and shield.
Clothing: especially in work situations, clothing provides an instant summary of
people. A technician is instantly recognized by their overalls; the police and
traffic wardens by their distinctive uniforms; and so on. Many organizations whose
staff deal regularly and consistently with the public insist either on a dress code
or the wearing of a uniform — it helps to reinforce organizational image and the
trust and confidence of the public.
Touch: touch reinforces a wide range of perceptions. For example, consider the
difference between different people’s handshakes and the impressions that these
convey. Touching also reinforces role and sex stereotypes — the chairman/
chairwoman banging their fist on the desk; the woman meticulously arranging
her clothes.
Body movement: this may be purely functional and fulfilling certain
requirements — for example cleaning the car. Movements may be exaggerated,
conveying anger or high emotions; languid, conveying comfort, ease or indolence;
or sharp and staccato, conveying forcefulness and emphasis.

Body movement is extremely hard to control. Whatever you are saying, and however you
49)
Q
== may be saying it, your body movement will invariably give away your true feelings.
CA
{e)
<
In particular, if you are not telling the truth, or not telling the full truth, or have a funda-
ig?)
= mentally unpleasant or negative message to deliver, you will almost invariably.start moving

126
your feet. If you are standing, you shift your weight from foot to foot if you sitting, your
feet will also move.
Those responsible for presidential briefings at the White House learned this while
Nwuone
Ronald Reagan was president. Even Reagan, a trained actor, could not prevent this from
happening. The White House advisers therefore made sure that, unless the message being
delivered was truly straightforward, all briefings took place from behind a full-length
lectern so that the effects of body movement on the message were minimized.

e Position: this reinforces formality/informality; dominance/dependency;

superiority/ subordination. People use position to enhance feelings of control and
influence. For example, people may face each other across a large desk — this
conveys a sense of security and defence to the person whose desk it is and a
barrier to be crossed by the other.
e Props and settings: props and settings are used to reinforce impressions of
status, position, dominance and formality. They are designed to ensure that
whatever happens does so to the greatest possible advantage of the instigator.
They either reinforce or complement perceptions and expectations; or else they
contrast perceptions and expectations so that the person coming into the situation
is impressed for whatever reason.
e Discrepancy: this occurs where the body conveys one message while the spoken
or written conveys others.
e Social factors: people are conditioned into having preconceived ideas and
general expectations of particular situations. For example, people do not generally
attend promotion panels or job interviews unshaven or dressed informally. There
is no rationale for this other than the expectations of society and the general
requirement to conform.
e The other senses: other aspects of non-verbal communication include: the use of
scent and fragrance; the use of colour and coordination of colours; matters of
social and ethical importance and expectation; design and use of materials.
e Listening: listening is both active and passive. Passive listening may be no more
than awareness of background noise; it may also be limited to a general awareness
of what is going on. Active listening requires taking a dynamic interest in what is
being received. While the message is received through the ears, it is reinforced
through eye contact, body movement, and pose and through the reception of any
non-verbal signals that are given by the speaker.
e Reinforcement: non-verbal communication tends to reinforce: relative and
absolute measures of status, value, importance and achievement; relative and
absolute measures of authority, power and influence; confidence and well-being;
and psychological barriers.

127
 Barriers and blockages
Communication barriers and blockages arise through accident, negligence or design.
Barriers arise by accident where the choice of language, timing or method of commu-
nication is wrong despite the best of intentions. In these cases, those involved ought
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simply to step back from the situation and rectify it as quickly as possible.
Negligence is where barriers and blockages are allowed to arise by default. In
such cases, communication dysfunctions are either not acknowledged; or if they are
acknowledged, are nevertheless not tackled.
It is very much the case, however, that people within organizations create barriers
and blockages in order to further their own ends.
In the worst cases, information becomes a commodity to be bought and sold, to be
corrupted, skewed and filtered in the pursuit of the sectoral interest in question. This
is endemic throughout the mid to upper echelons of the military, civil and public
service institutions, multinational companies and other multi-site organizations with
large and complex head office institutions where an active and negative form of real-
politik exists.
Within this context the following barriers are identified.

e Departmental, divisional, hierarchical and functional boundaries: the

problem is compounded when expertise or information held by people in one
department is used as a bargaining chip, or else filtered out in their own interests.
e Language: use of bureaucratic and imprecise phrases acts both as a barrier to
effective communication, and also as fuel to the fires of any inherent discontent.
e Distance, both physical and psychological: physical distance acts as a barrier
when people working away from particular locations simply do not receive
information. The filtering, editing and presentation of information also reinforces
any other psychological barriers (for example status, hierarchy, modes of address)
that may be present. Also some managers put up physical barriers between
themselves and the rest of the world in the form of secretaries, switchboards, and
information filtering systems.
e Trappings: trappings reinforce rank, status and position; and they also reinforce
(positively and negatively) behaviour. For example, the manager who has a
genuinely open-door policy always props the door open unless otherwise occupied
(and so the open door is the trapping). Trappings that put up barriers or give off a
negative or even fearful message include: expensive furniture; office location (for
example top managers are always on the top floor). Some people also cultivate
aggression and temper as trappings in order to manage their own position within
the organization.
¢ Control mechanisms: where requests for specific information (for example
output figures and costs) are requested in forms that are either inappropriate or
which may be taken and used for purposes other than that for which they were

128
 originally produced. The problem is compounded when those who are required to
produce such information do not fully understand the purposes or standpoint from
which it is being requested.
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2.
The need to know
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‘The need to know’ barrier occurs where organizations decide that information is to be
=
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individuals. It is a process of limiting the availability of information. On the face of it, there
is some sense in this — most organizations have far too much information to issue for any
one person to understand, analyse and internalize.
The barrier arises from the reasoning behind ‘the need to know’ As long as this is for
Operational reasons, it is sound. Otherwise, the message given is one of:

e a lack of capability to understand what is being said and especially that the
organization (or an individual superior) does not think or believe that the subordinate
has this capability;
e lack of value or different levels of value placed on different groups of staff, especially
those who are excluded from the ‘need to know’ list;
@ access: in order to be privy to certain information it is necessary to have reached a
particular level of the organization. Communication therefore becomes a trapping of
personal status and importance;
e general disrespect: operation of this form of approach to the giving of information
gives off an overall view of lack of respect to those affected;
e psychological distance: again, this emphasizes the differences and divisions that exist in
organizations and between its functions, departments, divisions and individuals.

Operating a ‘need to know’ approach also leads to distortions in the presentational style
and use of information media. What is issued is for the purposes of the issuer rather than
the receiver, emphasizing their distance and supremacy rather than imparting valuable and
useful information.
More generally, any restriction on information leads to reductions in the capabilities of
those who need to take decisions and make judgements. Even if operated from the highest
and most positive standpoint, this approach is restricting in this way.
@
e Confidentiality: which becomes a barrier when it is used as a means of attracting
or acquiring status rather than for operational effectiveness. Confidentiality
should normally be limited to people’s personnel files, technological advances,
marketing initiatives and research, development and pioneering inventions.
e Lack of visibility or access: which leads to feelings and perceptions that
problems and issues cannot quickly be resolved.

129
 e Information systems: combinations of communications, people and technology
all have imperfections and therefore the potential to be a blockage or barrier.
Information technology especially acts as a barrier where there is a lack of
training for the staff, a lack of full understanding of the system’s capabilities,
where there are different and incompatible systems and formats present, and
ajdoad
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e E-mail: e-mail is now more or less universally used as a means of information
exchange — and communication. E-mail acts as a barrier to communication when
it is the only means used. It is essential that e-mail exchanges do not become a
substitute for face-to-face communication or telephone discussions.

All barriers and blockages to effective communications should be seen in terms of

the nature of work and activities within the organization. The greater the intrinsic
interest in the work, the greater the volume of reasons that the staff have for being
there, and thus the greater the likelihood that effective communications will exist.
Where work is boring and alienating there is normally a more general background of
lack of respect and trust. Problems are compounded where there are extensive and
complex rule and regulation books and committee management structures: where
meetings are structured and undisciplined; and where those with influence, power
and authority choose the communication media that suits them best rather than the
organization as whole.

12
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Use of media
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12) Those with influence, power and authority choose the communication media that
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they believe they can use to best advantage, regardless of whether that is what the
situation requires.
This is especially true of political debate. For example, one party persists with the view
that ‘not enough resources or priority is being given to a particular area’ (for example
roads, education, health, social services and social security). The other party counters this
by saying that ‘more resources are being spent in the given area than ever before’,
This is reinforced by the production of statistics, again for the individual ends being
pursued. On the question of health, for example, one party will say that ‘waiting lists for
treatment are longer than ever. The other counters with ‘we are treating more patients
than ever before’ Each produces statistics to back up its point of view.
The result is a stalemate. It is compounded by the overwhelming impression given that:

e there are only two possible points of view to hold — the one or the other indicated; and
e aligning others to either point of view is dependent upon their own vested interest,
personal and political preference and conviction.

150
 Si

These distorted forms of debate and discussion take place in all organizations from time
to time. The protagonists either take refuge in their own vested interest, seeking statistics
to underpin it; or else produce counter-arguments to the opposing point of view. No
uoNe
productive debate and discussion takes’ place. This dissipates any feelings of shared
commitment and involvement, reinforcing the differences between various departments,
divisions, functions, groups and individuals. It is compounded where one view is seen to be
that of the organization as a whole; or where the protagonist gains advantage or favour as
the result of holding or presenting a particular point of view.

Organizational toxicity
Organizational toxicity and toxic communications exist in organizations that have
themselves become dishonest or corrupted for some reason. Essentially, all organiza-
tions have communication agenda as follows:

stated and primary, where what is said is precisely what happens;

secondary and hidden, in which messages are given out dishonestly, using lack of
clarity to distort and undermine what is being said.

Secondary and hidden agenda are forms of organizational toxicity. Toxic communi-
cations demotivate and demoralize staff, and ultimately dissipate the volume and
quality of organizational effort and effectiveness. In these cases, clusters of staff
debate endlessly the general state of the organization. High levels of disciplinary
problems and grievances exist. There are complicated and duplicated sets of rules
and procedures. The problem is reinforced by physical and psychological distance,
and remoteness between managers and their staff.
The results are as follows:

Blame and scapegoat: the organization finds individuals to carry the can for its
corporate failings. Sales departments get the blame for falling profits. Personnel
get the blame for disputes and grievances. Individuals are blamed for specific
failures (for example the failure of a particular promotion campaign; the failure of
work restructuring). They are often also named in this respect and their failure
publicized around the organization. A more insidious version exists whereby the
scapegoating is not official but is allowed to get around the grapevine and the
organization does nothing to deny the rumours or rehabilitate any individuals that
are so named.
Communication as a weapon: communications are targeted so as to cause
maximum damage to particular individuals, groups, departments and divisions.
This reinforces any culture or perception of blame and scapegoating that may be
present. Information is fed, both officially and unofficially, into the hands of

131
 powerful and influential groups and individuals in the hope and expectation that
this will be used to the detriment of the departments or individuals targeted.
e Secrets: secrets are used as bargaining chips, and as forms of corporate or
institutional blackmail, again with the purposes of getting powerful and influential
groups and individuals to come round to a particular way of thinking.
ajdoad
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at their disposal to reinforce the fact, belief and perception of their excellence
and infallibility.

The result of this is that those who wish to wield any influence have to become
toxic communicators. Toxic communicators take active responsibility for, and become
actively involved in, corrupting communications and information for their own ends.
It is clear from the above, that once an organization and its practices are corrupted
in these ways, this quickly becomes the organization’s way of life. It is a short step
from this to concentrating the whole of collective and individual efforts on fighting
internal battles rather than tending to products and services.

Assertiveness
Assertiveness and assertive communications arise from the point of view that anything
can only be effective if it is well thought oui, its effects understood in advance, and
that the message is delivered clearly and directly to the recipients.
Assertiveness and assertive communications seek to deliver honest, complete,
clear and direct messages as follows:

e Language: clear, simple and direct; easy to understand and respond to on the
part of the hearer or receiver; the words used are unambiguous and
straightforward; request and demands are made in a clear and precise manner
and with sound reasons.
e Aims and objectives: precise and clear; considered in advance; recognizing the
effect that the message is likely to have on the recipient.
e Delivery: ina clear and steady tone of voice, or where written, in a well
presented and easy to read format. The use of voice is always even, neither too
loud nor too soft, and does not involve shouting, threatening or abuse.
e Persistence and determination: where problems or issues are raised by the
recipient, the sender sticks to their message, aims and objectives; they do not
become side-tracked; they answer any problems that are raised without diverting
from the main purpose.
e Positive and negative: the general thrust of the message is always clear and
apparent; this does not vary, whether the overall tone is positive or negative. This
approach is especially important in handling general staff problems — especially
matters concerning grievances and discipline.

132
 e Face and eyes: the head is held up. There is plenty of eye contact and steadiness
of gaze. The delivery is reinforced with positive movements that relate to what is
being said (for example smiles, laughter, nodding, encouragement; or a straight
face when something has gone wrong). (Si)
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¢ Other non-verbal aspects: the bodyis upright; hands and arms are open (in
order to encourage positive response and productive transaction; there is no
fidgeting or shuffling; there are no threatening gestures or table thumping; or
displays of other forms of behaviour.

ne}
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Use and value of assertive communications
a=
°oF Assertive communications are designed to ensure clarity and integrity of message, as
=.
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= stated in the text above. Assertive communications are additionally designed to neutralize
the following behaviour.

e Aggressive: characterized by shouting, swearing, table thumping, arguments (cross

transaction). The matter in hand is lost as the aggressor strives to impose their point of
view. Winning the argument becomes everything.
e Hostile: where the main emphasis is on the personalization of the matters in hand.
Often also characterized by shouting and table thumping, the outcome is normally a
personal attack (sometimes in public) on an individual or group.
e Submissive: characterized by saying or doing anything that the other party wants so
that they will finish the argument or transaction and remove themselves.
e Inconsistent: characterized by according people different levels of quality and
value, having different standards for individuals and groups. This also extends to
treating the same individual or group in different ways according to mood or the
environment for example.
e Non-assertive: characterized by the inability of the individual to put their message
across. This is either because they are not sure what to put across, or else have not
used the correct words or media.
@

If you have the capability and expertise to be an expert assertive communicator, it gives
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o you a huge advantage in all your dealings with everyone. It is essential however, that you
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go into every situation knowing and understanding what you are talking about, what the
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intended outcomes are, and the kinds of questions that you are likely to be asked. @

Negotiations
Effective negotiation requires the application of communication skills in addressing
and resolving individual and collective problems. It requires undertaking discussions

135
 with a view to establishing agreements; and arranging and delivering those terms of
agreement. All managers should be able to do this. The keys initially are:

knowing what you want from the situation, and the requirements of the others
involved;
knowing what you do not want from the situation, and what others involved also
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do not want;
knowing what is acceptable and unacceptable, both to yourself, and also to the
other parties.

The elements of successful negotiations are based on having the authority to make
and deliver the agreements; paying attention to detail; having the resources to deliver
and implement the agreements; attention to the ability of everyone concerned to make
sure that it continues to work. It is also to consider:

the question of setting precedents — implications for future dealings along

similar lines;
internal and external pressures — especially pressures from subordinates,
superiors and backers;
the opportunities and consequences of agreeing to something: and the
opportunities and consequences of not making an agreement:
what is open to negotiation and what is not.

The negotiating process has three key elements:

Substance: the matter in hand.

Process: how it is to be addressed and resolved.
Presentation: how the end result is to be perceived and received.

Negotiations may be conducted from two points of view:

that those involved trust each other to do their best by the particular situation and
to resolve a particular matter in ways acceptable to all concerned:
a basic lack of trust — managers do not trust staff members or their
representatives; and staff and their representatives do not trust their managers or
the organization’s owners.

In many situations therefore, negotiations are an integral part of the process of the
management of conflict. It is essential therefore that both negotiating expertise and
understanding of the demands of the environment are present.
Where there is a basis of mutual trust, matters can be discussed openly and
honestly with a view to resolving them. Where this basis does not exist, the following
approaches have to be taken:

e the opening position is always stated on the basis that it will be rejected:

134
 e there then follows a process of counter-offer and counter-claim with each party
working its way gradually towards the other;
e the content of the final agreement is usually clearly signalled before it is made as
is the basis of what is genuinely acceptable or otherwise; uoned
(NS
¢ serious disputes occur when one side is determined not to settle or where there is
genuine misunderstanding or misreading of the signals;
e settlements are normally couched in positive terms in relation to all concerned to
avoid the use of words such as ‘loss’, ‘loser’, ‘climb down’ and ‘defeat’, which have
negative connotations, and which tend to store up resentment for the future and
polarize attitudes.

Behavioural aspects of negotiation

The following must be understood.

e The distributive effect: opportunities and consequences of settling with one

group at the expense of others.
e Integrative drives: opportunities and constraints of settling everything to the
satisfaction of all involved.
e Influencing attitudes: in which attitudes are formed, modified and developed
as follows:
e confrontational — whereby the parties are motivated to defeat the other or win
them over to their own point of view;
e individualistic — in which the parties concerned pursue their own self-interests
without any regard for the positions of others;
e cooperative — whereby each party is concerned about the other, as well as its
own position;
¢ collusion — whereby the parties concerned form a coalition in which they
pursue a common purpose, possibly to the detriment of other groups within the
organization, or else to the organization as a whole;
¢ use of language — which may be confrontational or cooperative;
e the formality—informality balance — especially the need for informal systems of
communication between the parties involved where the formalized are
presenting barriers.

Sr
Expert negotiators always know, understand and respect the positions of the others
involved. They never treat others with contempt or disdain. They also know and under-
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stand that any agreement that is reached has to be capable of implementation at the end
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of the negotiation.

e Individual and collective expectations: based on what people know,

understand, believe and perceive that they are likely to gain from a particular

155
 situation. Serious misunderstandings occur when individuals and groups have
either been misinformed, or else have failed to read the fact that substantial
changes in a particular situation have led to radically altered expectations.

These processes must then be understood and engaged according to the demands
of the particular situation (see Figure 7.3).
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(a) Steps in the negotiating process

Substance and process Other factors

Initial offer and response claim Strategic nature of offer

Adoption of postures Strength and validity of cases

Ritual: movements and processes Strengths of each party

Morale of each party
Attitudes of each party

> | Negotiations Public sympathy and support

<4 | Further offers/responsibilities Government sympathy and support

—-> | Basis of agreement

Final offer/response Media coverage

Each of these activities must be undertaken in these circles.

Each of the other factors must be acknowledged and understood.

(b) Process operation

~<«--
Area of agreement
8 Claim

High

Management Staff/union

The collective bargaining process: offers between A and B rejected by staff; between C and D instantly
accepted by staff; claims between A and B instantly accepted by management; between C and D rejected by
management; B-C is basis for negotiated settlement; normal first offer is around A, which leads to instant
rejection; normal first claim is around D, but engages the process.

Figure 7.3 The negotiating process

136
 Negotiations are required in resolving issues concerning the following.

e Issues between staff and management, in the pursuit of individual and collective
grievances; and also concerning pay rises and improvements in terms and
conditions of employment (in traditional UK organizations, this process is known uoned

as collective bargaining).
e Disputes between organizations and their customers.
e Interdepartmental issues: addressing, managing and resolving misunderstandings,
gaining cooperation and agreement.
e Internal issues: handling discipline, grievance, disputes and dismissals; resolving
personal and professional disputes.
e Customer and client relations: handling and managing complaints.
e Contracting agreements: on supply and output sides; in the engagement of
temporary, specialist and subcontracted staff.
e Gathering resources, especially where this is known, believed or perceived to be
a competitive or distributive issue.
e Managing barriers and blockages, especially resolving crises and hold-ups on the
supply and distribution sides.
e Managing the concerns of stakeholders and influential figures.

Conclusions
Effective communication is vital for the successful functioning of any organization. It
follows from this that all managers must be effective communicators, and all organi-
zations must have effective formal methods, mechanisms and processes of communi-
cation as well as suitable and effective means of making sure that what they wish to
say is transmitted effectively.
Effective communication is dependent on the volume, quality and accessibility of
information; the means and media by which it is transmitted and received; the use to
which it is put; its integrity; and the level of integrity of the wider situation.
Understanding and being able to apply the rules, principles, skills and techniques
indicated are core and universal managerial skills. They result in the ability to
produce effective communication capable of being received, accepted and acted
upon or responded to. All levels of communication should be monitored. Remedial
action where communication is poor or ineffective should always be taken. Concen-
tration on barriers and blockages to effective communication should be designed to
reinforce the need for clarity of purpose and language. As many channels of commu-
nication as possible should also be used, each giving the same message, so that the
message received is complete and not subject to editing, interpretation or distortion.
Wherever toxic, expedient or dishonest communications take place, these are always
instantly recognized by those on the receiving end.

137
 Organizations and their managers are therefore responsible for creating the
conditions in which effective communications can take place, and ensuring that
their managers understand the full effects of what they say, write and present. It is
essential to understand the broad context, as well as being able to apply specific
skills and techniques.
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e All managers need to be expert communicators. Communication in all its forms is a

key area to practice.
e Understanding organizational communications requires constant observation. It is
especially essential to observe where and why things go wrong, and the contribution
that is made by bad or inadequate communications.
e Technology is not a substitute for communication. Technology should be used in
conjunction with all other communication media. E-mail especially, should never
become the dominant form of communication.
e All communications need to have clearly stated aims and objectives. This is especially
true of written documentation, meetings, committees and negotiations.
e All communication media need to be carefully chosen, recognizing the effects that
particular media have on the receivers.
e |nall communications, it is essential to make sure that you know, understand and
respect the position, needs, wants and expectations of everyone else involved.

Further reading
Adair, J. (2009) Effective Communication: The Most Important Skill ofAll. Arrow.
Barker, A. (2010) Improve Your Communication Skills (and create success). Kogan Page.
Cornelissen, J. (2008) Corporate Communication: A Guide to Theory and Practice. Wiley.
Hargie, O. (2006) The Handbook of Communication Skills. McGraw Hill.
Quirke, W. (2008) Making the Connections. Kogan Page.
Stanton, N. (2009) Mastering Communication. Palgrave Macmillan.

138
 Management
Influence,
power and
conflict

In this chapter
e the nature of power and influence in organizations
e managing those with powerful personalities and agenda
e identifying and managing the sources and causes of conflict
e creating the conditions in which power and influence and conflict work for
the good of all

Introduction
Influence, power and authority are present in all organizations; and all managers have
measures of influence, power and authority.

e Influence is where a person, group or organization changes the attitudes, values,

behaviour, priorities and activities of others.
e Power is the capability to exercise influence in these ways.
e Authority is the legitimization of the capability to exercise influence and the
relationship by which this is exercised.

There are responsibilities attached to influence, power and authority; and those
who wield influence, power and authority are normally accountable for their actions
and results.
Power and influence are to be seen as positive and negative. The positive occurs
where power and influence are used to energize, enhance and develop productive and
profitable activities. The negative is where power and influence are used to block or

139
 diminish activities; to limit the ability of others to succeed through the capability to
restrict resources, money or information for example; or to bully, victimize and harass.
Influence, power and authority are all themselves limited and modified by organi-
zational structures and methods of behaviour. Authority is normally given out for a
limited range of activities or people only, and the extent of influence and the ability
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pue to wield power are therefore also limited. Authority also normally impersonalizes:
when someone acts with authority, they do so in the name of the organization and not
in a personal capacity. The need to exercise authority will be founded on both
personal and professional judgement; the actions carried out are in ways prescribed
by the organization.

Leaders and managers have to be able to exercise power, influence and authority in the
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o best interests of everyone concerned; and to use responsibility based on integrity and
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judgement. Leaders and managers need to know and understand where the boundaries of
a!
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their power, influence and authority do lie; where those boundaries ought to lie; and where
there are differences between the two, leaders and managers need to take steps to define
the extent of their influence, power and authority.

Sources of power and influence

There is a range of sources of power and influence present in all organizations. These
are as follows.

e Physical and coercive power: the power exerted by individuals because of their
physical size and strength, the force of their personality, and their appearance.
Physical and coercive power is used to dominate situations, and influence the
outcome of meetings and decisions. Large and dominant organizations exert their
own equivalent of physical power in the pursuit of market or sector domination
and in the ability to select their own preferred range of prices to determine the
ways in which markets will operate, and in the ability to command staff expertise
and resources.
Physical power is also used by individuals to intimidate, bully and victimize
others; for example:
* managers lose their temper or become aggressive and strident in meetings in
order to get their own way;
¢ people use loud and strident voices, and angry tones in order to enhance their
physical presence;
¢ people become aggressive when forced to defend a point of view that they
know they have mistaken or which is wrong;
¢ people threaten and sometimes use physical force against colleagues when
disagreements and disputes get out of hand;

140
 ¢people use aggression and the threat of physical force when personal issues are
allowed to extend into the workplace.
e Traditional power: whereby the ability to command influence derives from
accepted customs and norms. Traditional power is present in the hereditary
principle whereby the office or position is handed down from parent to child — for
example kings and queens and the aristocracy; family businesses; and (less
frequently at present than in previous times) in areas such as dock working where
the child took the parent’s job.
e Expert power: based on the expertise held by an individual or group, its
relative availability, and the demand for this. The power and influence exerted Jamod
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by those with scarce expertise can, and does, cause its price and cost to rise;
and those with this expertise can then take their own steps to control and limit
its availability.
e Charismatic power: charisma is the effect of one personality on others, the
ability to exert influence based on force of personality. Charisma is the ability to
inspire high levels of confidence and identity among other people. Those with
charisma are found in all parts of society, and all departments, divisions and
functions in organizations. Hitler, Napoleon and John F. Kennedy all had
charisma; and all went to a lot of trouble to manufacture the kind of personality
and identity that they knew would be well received by those who followed them.

or
Charismatic power and influence normally has to be manufactured. Those who have the
oO
power of personality normally know and understand this, and go to a lot of trouble to
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ensure that their appearance, powers of speech, communication, public appearances and
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media coverage are all carefully structured and manufactured so as to give the lasting
desired impression.

e Resource power: is the ability to influence others based on the command of

resources. This may be beneficial and positive — the giving and allocating of
resources to enable someone else to succeed, the result of which is a feeling of
well-being towards the resource giver.
It may be negative, threatening or coercive, based on the ability to limit or cut
off particular resources if the receiver does not behave in certain ways. Resource
power is closely related to reward power, which is the ability to influence behav-
iour and activities by holding out and offering rewards for compliance and accept-
ance. The extent of influence exerted in this way is dependent upon the nature
and volume of rewards and the extent to which these meet the needs of those over
whom influence is sought. The other side of this is the power to punish. Again, the
extent of the influence exerted depends upon the nature of the punishment being
threatened and whether this is felt to be important by those affected.

141
 e Legal, rational and position power: the limitation, ordering and direction of
power and influence in the name of organizations. Legal, rational and position
power is based on the setting of rules, procedures, regulations and norms for each
job, role, department, division and sector, and for the individuals who carry out
the work. It is based on certain principles:
juaweseueyw
ajdoed
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best ways of working;
¢ the managerial prerogative — the establishment of persons in positions of
command, responsibility and accountability to ensure that these are put into
practice;
¢ the willingness of subordinates to accept direction and the right of superiors to
expect this;
¢ duties of care placed on organizations by legal, social and ethical pressures
which means that they will seek to operate in efficient, effective and profitable
ways without being punitive or coercive.

Responsibility, authority and accountability are based on the legitimacy of the

position held, and the specific duties and obligations that have to be carried out.

Centres of power in organizations

Every organization, department, division, function and group always has its own
power bases and centres of power. These power bases are both structured, and also
limited, by a range of organizational and environmental circumstances.
All departments, divisions, functions, groups and individuals have legitimate
areas of influence that they need to exert in the pursuit of their working activities.
Problems arise when this legitimacy is either not made clear or where particular
groups and individuals are allowed to extend their power and influence without
proper authorization from the organization.
As well as this extension, organizations and their managers additionally have to be
aware of the existence of: vested interests, pressure groups and lobbies; overmighty
and over-influential individuals and departments; the structures of relationships, and
the spheres of influence that they develop.
Vested interests, pressure groups and lobbies, both internal and external, bring
their own point of view to bear on particular proposals and activities. For example,
work groups may lobby for improved facilities for themselves, citing as reasons for
this that many people have already left the group, and that they are difficult to
replace. Pressure is then exerted on the organization to consider the request and if
necessary reallocate and re-prioritize resources in order to comply.
Externally, organizations are subject to public pressure groups wherever they
contemplate engaging in activities that are, or are perceived to be, detrimental to the

142
environment (for example, construction, infrastructure projects and waste disposal
always have to cope with this).

Formal Longevity Informal

Rules ———> <— Individual and group

CENTRE effectiveness
Resources ——> OF <— ‘Corridor’ relationships
POWER
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Relationships ——> «— Ability to block

EXTENT OF INFLUENCE

Longevity: people, groups and institutions become behaviourally both strong and influential when
they have been in place for a long while. This has implications for needs and demands for change,
reorganization and restructuring.
Blocking: this is the power to prevent things from being done. It exists in most situations and is a
combination of resource and reward restriction and work prioritization. It is also the ability to call
upon other resources and influences to ensure that the blocking process is effective.
Corridor diplomacy: this occurs as a route to be considered around problems when the formal
procedures of the organization have been exhausted. Power and influence are used between the
parties concerned on an informal basis to try and explore other means of resolving the issue.
Success and failure: a run of successes may lead to an individual or group becoming acknowledged
as experts, enabling their influence to grow. Conversely, a series of failures is likely to lead to loss of
influence, whatever the absolute standard of the expertise present.
Group energy: this is the ability of the group as a whole to influence things, both positively and
negatively. Especially negative, groups can become very effective in dissipating the energies of those
who come to them. For example, those dealing with bureaucracies and who are constantly handed
on from one person to the next spend a great deal of energy in this and may well give up altogether
if the goal is not important, or if some other way of achieving it can be found.

Figure 8.1 Factors relating to the centres of power

Pressure groups may also arise among shareholders and other stakeholders as the
result of, or in response to, proposed sets of activities; or conversely, they may propose
or attempt to influence these sets of activities themselves. They may also consist of
cluster groups of managers, supervisors, technical and professional experts; specialist
eroups; trade unions and employee representatives.
Overmighty and over-influential staff and groups exist to an extent in all but the
smallest organizations. Organizations need to be able to devolve and delegate partic-
ular activities to groups and individuals and this is normal practice. Problems arise
when, as the result, the individual or group becomes too powerful for the interests of
the organization. Especially where there is a regional, federal organizational struc-
ture, or where the individual or group has a distinctive or scarce expertise, staff in
these positions become very influential and can exert influence that serves their own
interests on the organization as a whole. Examples are:

143
 traders in the investment banking sector who continue to do things in their own
preferred ways regardless of the risks inherent as the result of the banking crisis;
top and senior managers in central and local government departments who form
cartels to preserve salary and reward levels;
regional managers in global and international organizations who need to be able
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top brand consultancies such as Bain and McKinsey who are very often engaged
simply to push up short-term stock and share prices; and whose proposals and
recommendations have then to be uncritically accepted and implemented.

Examples of personality types within organizations that gain influence are:

managers and others who lose their temper, as above, or who adopt unpleasant
and prickly personalities so as to be able to get their own way;
people with distinctive expertise (for example maintenance, IT) who use their
position to regulate, prioritize and limit the flow of their expertise;
key figures such as personal assistants to top managers who use their position to
attract favours from others, who seek in turn favours and preferential treatment
from the top manager.

Relationship structures and spheres of influence are created by individuals.

groups and departments, both to serve themselves and also to act in the name of the
organization as a whole, as follows.

Mutual interest groups and alliances occur between individuals, groups and
functions to try and exert wider pressures on their organizations. This occurs, for
example, where one of these has failed and where there is nevertheless a widely
perceived need for particular changes or activities to be undertaken.
The extent and prevalence of other means of interaction, participation and
involvement. This includes departmental and group staff meetings, work
improvement groups, quality circles and project groups. It may also include
pioneering activities, research and development functions where those involved
are drawn from across the organization.
External consultancies, agencies and statutory bodies may be called in or
cited in support of particular points of view. For example, consultants carry great
influence when engaging in restructuring operations; changes in working
practices may lead to health and safety experts being called in; in some cases,
trade unions exert influence when the restructuring of work and changes to
working practice are being considered.
Isolation and inclusion; and both isolation and inclusion may be physical, as
well as psychological. Inclusion may be used to ensure that specific individuals
and groups support (or oppose) particular ideas, proposals and initiatives.

144
 (@
Isolation is used to ensure that specific groups and individuals have as little
influence on proposals as possible.

Organizational politics
Politics exists in all organizations; and organizational politics influences the relation-
ships between groups, divisions, departments and functions, and individuals.
Those involved seek initially to ensure that their position is legitimized within the
organization both in terms of functional outputs, and also in terms of influence on
direction. In practice, this is then developed, in many cases, to try and influence the JaMod
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orders of priority; and to try and influence any position of dominance and dependency
to the advantage of the particular group or individual. If this is not possible, then
individuals and departments use other means (for example personality, resource
control) to assure their position and influence, and to try and move themselves up the
organizational order of priority.

Orders of priority
Orders of priority refer to the position each individual, group or department has in
relation to the organization as a whole. This is the organizational pecking order; and it
is established as the result of a combination of factors — the respect and regard held
for the group or individuals by the organization’s top management; demands for
resources and the ability to command these; the extent of the group’s influence on
organization output; the extent of its influence on internal ways of working; the size of
the group and the nature of the expertise that it wields; its physical location; and the
nature and quality of its leadership, output and results both in absolute terms and
also in those required and valued by the organization.
In establishing the integrity or otherwise of the organizational pecking order, the
following need to be considered:

e the use, value and influence of think-tanks and project groups, especially those
constituted by top and senior management;
e attendance at particular groups, committees and other meetings where there is a
status rather than operational drive to attend;
e the relative value placed in fact by organizations on their primary and frontline
activities relative to those that operate processes and support functions;
e the relative value and position accorded to those who are working on new
projects, ventures and initiatives relative to those who are delivering the steady-
state activities of the organization;
e physical distance from head office; in which the fact, belief or perception (truth or
untruth) of those who work in distant and remote locations, away from centres of

145
 power, is that their contribution is less valued because they are not seen on a
daily basis.

Dominance and dependency

Dominance and dependency is the summary of the extent to which some groups are
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able to influence, direct and dominate the courses of action of others, and the benefits
and consequences that arise as the result. How organizations, managers and partic-
ular groups work within positions of dominance and dependency is a mark of overall
organizational integrity. It is necessary to distinguish between external dominance
and dependency and internal dominance and dependency.

External dominance and dependency

The key areas of external dominance and dependency are as follows:

e Captive markets are dominated by their suppliers and providers and this brings
responsibility in terms of level, volume, quality and frequency of supplies and
service, and the prices that can be charged — and the prices that should be charged.

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self-evidently being exploited (and in many cases, wronged), the drives for this are:

e maximizing short-term shareholder and backer returns;

e maximizing staff and managerial bonuses;
e creating funds that can then be used as the organization sees fit, at least for the short-
term future.

In many cases of course, exploiting captive markets in these ways is only sustainable in
the very short term. Eventually, someone comes in with a different business model
enabling them to provide alternative supplies for a much lower price. Knowing and under-
standing this of course increases the pressure to maximize the prices and charges. It does
not alter the fact that, unless a justification can be clearly made on business and opera-
tional grounds, the approach is morally wrong and commercially unsustainable except in
the very short term, as above.

e Locations may be dominated by a single employer or industrial, commercial or

public service group and this brings with it responsibilities in terms of corporate
citizenship, as well as the local dependency for employment.
e Individuals may dominate an organization or work group through the combination
of their expertise and their force and strength of personality and charisma.

146
e Experts may dominate in particular situations, especially when their expertise is
urgently or highly required, or prized. This leads to the ability to charge at very
high levels (economic rent); and experts may also choose to limit or filter their
expertise, or else to prioritize those with whom they have dealings.
e Owners and controllers of rare supplies, raw materials and specialist information
may, from time to time, exert undue influence at specific points during the
relationship. This includes putting up prices and charges, reducing or limiting
the supply, and restricting supplies to preferred or otherwise useful customers
and users.
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Internal dominance and dependency
The key areas of internal dominance and dependency are as follows:

e Resources, especially finance, command and control, are, in many cases, a

dominance—dependency issue. This especially occurs where organizations require
their staff, managers, departments, divisions and functions to bid against each
other as part of the allocation process. This is always morally questionable and
operationally inefficient. Those involved nevertheless have to engage in bidding
activities in the particular environment and context. For some groups, this
requires the need for alliances and other forms of support.
e Staff and workforces are dominated by their employers; the potential for this
increases at times of increasing unemployment, causing some organizations to
take a more expedient view of the working relationships.
e Organizations can find themselves dominated by powerful professional and
occupational groups. They can also find themselves having to do things according
to the priorities of particular stakeholder groups (especially shareholders and
other financial interests), regardless of whether this is indeed the best thing for
the organization or for others directly involved.

Dominance—dependency also exists as a consequence of physical and psychological

distance. Those in remote locations find themselves powerless to influence the course of
events; and this is compounded when organizations have preconceptions about partic-
ular locations based on prejudice rather than strategic and operational assessment.
Those in positions of real and perceived lesser status find themselves marginalized
when decisions about future activities and initiatives are being taken and implemented.
The ways in which organizations and their managers address their responsibilities
is critical for long-term success and well-being. In the short term it is possible for
organizations and groups to use a dominant position to drive home advantages; in the
longer term, people and organizations that find themselves in a dependent position
will strive to ensure that they remove themselves from this as soon as the opportunity
arises. When this happens, those in hitherto dominant positions have to completely
reposition themselves in order to regenerate the advantages that they had before.

147
 Hierarchy
Organizational hierarchies are normally based on a combination of rank and function
and this is reflected in job titles (marketing director, quality manager, production
supervisor, personnel assistant). This is normally well understood by those in partic-
ular organizations. The process is clouded by job titles such as secretary, officer,
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executive and controller, and again these have to be understood by those involved.
The hierarchy is a feature of organization design and is composed of structure, job
and work allocation, and rules and procedures. It indicates the extent of collective and
individual power and influence; and it indicates spans of control, areas of responsibility
and accountability, chains of command (the scalar chain) and reporting relationships.

Status
Status influences the perceptions of power relationships in organizations. It is also a
reflection of general perceptions of influence. Status is a reflection of the rank or
position of someone (or something) in a particular group. Relative status is based on
the interrelationship of each position. Status is based on the importance and value
ascribed to the rank by the organization and individuals concerned, and by the
esteem and respect that accrue as the result of holding the given rank. Status is also
based on the ambition, self-esteem and self-worth of the rank holder — the ability to
say with pride ‘I hold job x’ or ‘I work for organization y’.
Status is reinforced by the trappings that go with the rank held — personal office,
expensive furniture, car, top brand computer, blackberry and mobile phone tech-
nology, expense account; and by the volume and quality of items such as these.
Status is also reinforced by the responsibilities of the rank held — size of budget,
numbers of staff, performance requirements. It is also often reinforced by the physical
location of those concerned; for example whether their office is in the ‘corridors of
power’ (that is, the same as that of the top managers). In wider social circles it may
also be reinforced by perceptions of glamour or excitement that are assumed to exist
in certain occupations — for example show business, publishing, travel.
Status and rank are closely related; and it is additionally essential to note that both
status and rank can be used both with and without responsibility.

Friendships
Friendships influence power relationships in organizations where people who have
positive feelings for each other also work together. A part of the way of working then
becomes the desire to support the friend to ensure that they derive some of the
benefits that are to accrue from particular courses of action. The use of friendships,
of personal contacts to resolve problems and address issues is a general feature of
the informal organization.

148
 It represents the ability to use personal influence (referent power) to the organiza-
tion’s advantage; and it also represents the ability to use personal influence to the
individual’s advantage. Ambitious individuals cultivate friendships that they know
are going to be useful to them as they make their way up the career ladder. These
friendships are built on mutual use and value within the organization, as well as (or
instead of) genuine liking and respect.

Dislike
The converse of friendship is where dislike and antagonism exist between people.
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Dislike and antagonism are nearly always barriers to effective organizational activi-
ties. This form of power and influence is used to block or hinder the progress of the
other individual or group, and is compounded where operational reasons are given for
the purpose of satisfying a personal grudge or grievance.
This is influenced by other personal emotions — of envy, jealousy, hatred and
resentment. It is also influenced by organizational and operational matters of expedi-
ency, especially where there is the need to find a scapegoat for a failure.

Delegation
Delegation is the allocation of work to subordinates accompanied by the handing
down of:

e authority in the given area to carry out the work and to make requests for
equipment, materials and information; to act in the name of department, group or
superior in the given area;
e control over the process by which the work is to be carried out. This normally
involves, in turn, relaxing a part of the process of work supervision. Activities
taken in pursuit of the task are normally left entirely to the subordinate.

There is an effect on the wider issues of responsibility and accountability. Overall

responsibility, especially to the wider organization, normally remains with the supe-
rior. Any problems arising, especially questions of failure or ineffectiveness, therefore
remain a matter between the superior and the rest of the organization. However, this
is invariably accompanied by discussions between the superior and subordinate.
Where such problems do arise, to apportion blame to the subordinate in dealings with
the wider organization, leads to loss of morale and accusations of scapegoating.

Effectiveness
For effective delegation to take place, strong mutual trust, respect and confidence
must exist. On the part of the superior, this is based on respect for the capabilities,
motivation and commitment of the subordinates and the fact that they are interested

149
 in the work and wish to pursue it to a successful conclusion. On the part of the subor-
dinates, thisisbased on an understanding that they will receive support and backing
in their efforts to get the work done, help with any problems and a proper assessment
of the end results. This is always enhanced where a strong and effective reporting
relationship is already established and mutual trust and confidence are already in
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and the staff available to carry them out. The greater the control the superior has over
this, the more likely that confidence and trust are present and the greater the willing-
ness of the superior to cede the required measure of control.
For both, work is likely to be successful only if expectations are clearly set out at
its commencement. This is reinforced wherever possible with the establishment of
proper, measurable, deadlined objectives. The subordinates can then be given enough
autonomy over the process to see that the work is done.

Misuses of power and influence

It remains the case that in practice, both individuals and groups misuse the power
and influence that they have. The main areas of misuse are:

e Favouritism: the ability to influence an individual’s career, prospects and

advancement by virtue of a personal liking and at the expense of others.
e Victimization: the converse of favouritism; the blocking or reduction of career
prospects and advancement.
e Lack of manners: calling out rudely to people, abusing and humiliating
subordinates in public.
e Lack of respect: treating subordinates with contempt; giving individuals
dressing-downs in public; conducting discipline in public.
e Bullying and harassment: overwhelmingly by superiors of subordinates. This is
usually found in the following forms: racial prejudice; sexual harassment
(especially of female staff by males); bullying of the disabled by the able-bodied;
religious manias and persecutions (for example, where a Catholic company
bullies the elements of its workforce that are of other religions); personal likes
and dislikes — especially where the dislike is based on a perceived threat to the
security of the senior’s position.
¢ Scapegoating: the need to find someone to blame for the superior’s errors.
e Inequality of opportunity: the setting of a priority order for the advancement of
staff based on gender, race or disability elements.

= Each of these misuses can, if not checked, lead to serious problems. For example, in HR
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150
 The problem is compounded by the fact that many managers and supervisors often
do not see that they are acting improperly. In many cases, managers and supervisors
state that they act in these ways because this is how they were treated when they were
in more junior positions. Other managers state that they only act in these ways
because they thought that it would help to get the job done. It is, however, clear that
many managers and supervisors do indeed know that they are doing wrong. Whether
by accident or design, this is an organizational problem and needs to be stamped out
wherever and whenever it is found.

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Organizational integrity and toxicity
Organizational integrity and toxicity are reflections of the fundamental wholesome-
ness (or lack of) that exists within the organization, the working and interpersonal
relationships, the communication systems and networks, and the dealings with the
staff, the markets, communities and other stakeholders.
At the core of organizational integrity are the purposes and interests that are genu-
inely served. Of course, no company ever states overtly that it serves anything other
than its markets, customers and clients, and the shareholder and staff interests, as
priorities. For many organizations, this is indeed the case; and the result is to form
the basis for ensuring long-term effectiveness, viability and profitability.
Elsewhere however, this is not always the case. For example:

e RBS and Lloyd’s banking groups continued to pay out standard levels of staff
bonuses after they had gone bankrupt and had been bailed out by the government;
e when Nike and Gap were caught by journalists using child and slave labour in
their manufacturing activities, they first denied all knowledge and then
restructured, separating off the factories as independent companies so that they
were no longer responsible for work practices;
e Glasgow Rangers football club continued to pay salaries that they simply could
not afford, collectively denying that there was any problem at all, until called to
account by the tax authorities;
e when faced with budget cuts in local authorities, the top and senior managers of
30 UK councils took themselves off to Nice in the South of France to 5-star hotels
to discuss the problems.

The overall extent of organizational integrity or toxicity can be seen in the speed at
which top management salaries rise relative to the rest of the organization. The overall
spread between top and bottom salaries and pay levels is another indicator; the
greater the spread, the greater the fundamental lack of integrity.
Within organizations, integrity and toxicity is evaluated through reflections on the
overall culture, climate and collective well-being. Signs to look out for include the
overall conduct of interpersonal, inter-professional and inter-group relations. If these

151
 relations are fundamentally open, honest, productive and inclusive, then there are
fewer problems than if they are based on competition and jockeying for position and
influence, or if professional and occupational groups know, believe and perceive that
they have to protect their position and influence.

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Two university administrators were talking over the differences and difficulties that they
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had in booking accommodation for lectures, classes and other meetings. One of them,
Jane, constantly found problems in getting accommodation with matters often only
being resolved at the last minute; and this meant that both staff and students very often
did not know where to go for particular events. This in turn meant that the students
missed classes, staff missed meetings, leading to extra work, tutorials and follow-up
activities and gatherings.
The other administrator, Jill, had no such problems; and the two tried to work out why.
It transpired that Jane’s approach was always formal and through the required channels. Jill
also used the formalities and required channels; however, she had also taken the time and
trouble to get to know the room booking's people, to find out what their pressures were,
and to find out also essential facts like league times and how bookings could be integrated
best within the booking environment.
On the one hand, it is clear that the purely formal system had to be followed. However,
it was either not working effectively or at the very least, it could only resolve problems and
deliver what it promised at the very last minute. On the other hand, it is a part of the
humanity of any organization and working relationship that people respond better to the
human touch as well as following operational processes. In this case, Jane was doing
nothing wrong, Jill was doing more things right more often.
So organizational integrity has to be seen in terms of how things actually work, as well
as how they ought to work.

The balance of integrity and toxicity can also be observed in terms of:

e the sources, causes and nature of conflict within the organization;

e the nature of interpersonal relationships especially in terms of the regularity,
frequency and content of disputes and grievances;
e fundamentally unacceptable staff management practices, including the frequency
of bullying, victimization, discrimination and harassment cases;
e the nature of rewards on offer and how they are distributed and allocaied;
e the nature of opportunities on offer and how these are distributed and allocated.

152
@ One of the greatest influences that any manager can make on their overall staff perform-
ance is to be completely transparent in the distribution of rewards and opportunities. If
rewards and opportunities can be clearly demonstrated to be distributed from a funda-
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mentally wholesome and open position, then in this critical field, staff have nothing to
complain about.

Where there is a fundamental integrity, those responsible must never allow their
standards to slip. Where there is toxicity, this needs to be addressed; and the lead in
remedying this has to come from the top, addressing the basis of all relationships, and Juawas
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taking whatever steps are required in order to clean up this part of organizational
practice. If the existing leadership and management cannot do this, then others need
to be brought in.

Conflict
Conflict, or the potential for conflict, exists everywhere where two or more people are
gathered together. It is inevitable that people will have differences and disagree-
ments. The nature of differences and disagreements is enhanced and sharpened by
the nature of organizational settings where departments, divisions, functions, groups
and individuals pursue their own agenda, activities and priorities, as well as those of
the organization.
Conflict may be positive and beneficial, capable of being harnessed for the greater
good, and contributing to organizational effectiveness, performance and development.
Conflict is also clearly negative and destructive in many forms.
The following levels of organizational conflict may be distinguished.

e Argument, discussion and debate, which are essential if any progress is to be

made at all; they do however need to be structured and ordered so that everything
is concentrated on the matter in hand rather than becoming a competition
between the personalities involved.
e Competition, which may be positive and beneficial, capable of being harnessed
for the greater good of everyone and contributing to enduring organizational
effectiveness. Competition becomes negative where it is used as a form of ‘divide
and rule’ by top managers in the fond (and mistaken) belief that, for example,
having different departments, groups and individuals competing for resources at
the expense of each other is ‘a good thing’.
e Conflict as ‘warfare’, which exists where inter-group relations have got out of
hand, where the main aims and objectives of activities have been lost and where
energies and resources are therefore taken up with fighting a particular position
whether or not this is in the interests of the organization as a whole.

153
 Sources and causes of conflict
The main sources and causes of conflict are:

e real and perceived unfairness and inequality of treatment;

e real and perceived unfairness in the allocation of resources;
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victimization of different groups and individuals;
e where people and individuals are publicly denigrated or shown to have lost a
particular position, leading to humiliation and wounded pride.

e It is essential for all managers to know and understand that the greatest injury that they
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Conflict is also caused where the attitudes, values, belief and priority of the
organization in general are not the same as those of the individuals who carry out the
work. People can, and are, from time to time asked to do things that are counter to
their own personal beliefs. For example, they may be asked to lie on the part of the
organization (such as give a false excuse for the failure of a delivery), and then to
sustain this in public at least. They may be asked to dismiss or discipline someone
because those at the top of the organization say so rather than because they want to or
see the professional and occupational need to do so. The result is that, from within,
the organization’s fundamental integrity is questioned.

Forms of conflict
The main forms of conflict in organizations are as follows.

e Differences between corporate, group and individual aims and objectives, and the
inability of the organization to devise systems, practices and activities in which
these can be reconciled.
e Interdepartmental and inter-group wrangles overwhelmingly concerned with:
¢ territory — where one group feels that another is treading in an area that is
legitimately its own;
* prestige — where one group feels that another is gaining recognition for efforts
and successes that are legitimately its own;
¢ agenda — where one group feels that it is being marginalized by the activities
of others;
¢ poaching and theft — where one group attracts away the staff, resources,
reputation and prestige of others.

154
 ¢ Conflict also arises from changes in the status quo both where people seek to alter
their own positions, and also from changes that the organization is making. For
example, when an individual or group suddenly loses power, then there is certain
to be resentment. Conversely, individuals or groups may suddenly find themselves
in favour for some reason and so the others rush to do it down.
e The relative status awarded by an organization to its different departments,
divisions, functions, groups and individuals is also a source and cause of conflict.
Again, especially where it is clear that some groups have favoured status and
others have unfavoured status, there is resentment in terms of: the means by
which these differentials in status are arrived at; what it means to those JaMod
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concerned; and what the consequences are for everyone.

e Conflict is also caused by the emergence of secondary and hidden agenda. This is
where individuals and groups become involved in particular activities for a stated
set of reasons and then other reasons — the true reasons — subsequently become
apparent. For example, if a group or individual has been engaged on a particular
venture because of its own expertise, and yet this venture is seen to carry little
prestige or recognition, then they may nevertheless do their best to ignore it or
only carry it out to the barely minimum acceptable standards.

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Conflict management
As well as the operational issues indicated above, human emotions, especially those
of envy, jealousy, anger and greed, are brought into being when people are confronted
with a situation in which they perceive themselves to be losing out. Resentment
flourishes if the nature of the situation is such that those involved feel threatened by
the ways in which conflict is developing and progressing.
The first step towards reconciling and resolving conflict therefore lies in a true
understanding of the sources and causes, and the extent of human emotions present.
Once this is assessed, then the relative positions of: the parties to the conflict; the
issues in dispute; and their causes and sources can be fully evaluated.

The outcomes of conflict

Everyone who enters into conflict needs to know and understand what they need and
want to get out of it; and the minimum conditions under which a settlement can be
made. This involves knowing the aims and objectives of all parties involved; and
within this context, the ideal is to get to: win-win, in which everyone is content.

155
 Other outcomes — win—lose or lose—win — mean that resentment is generated and
the matter is certain to arise in some form at a future date. The position lose—lose
simply means that the conflict escalates.
Whatever the approach, it is always essential to remember that people do not like
to be defeated and neither do they like to have been seen by others to have been
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&pue defeated. It is essential in the management of conflict that people are not humiliated
even when they do lose a dispute, otherwise again, resentment is generated.

me)
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Workplace power and influence: Strikes and disputes
=}
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= Strikes and disputes are used as part of the mechanism for addressing the grievances in
=
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= staff and employee relations. Strikes and disputes are also used as each of the following:

e enhancement of charisma, authority and influence by the strike leaders;

e rites and rituals in pay bargaining processes;
@ trials of strength between staff and managers;
e trials of strength between organizations and strike leaders;
e safety valves;
e additional holidays;
e catalysts for change, as well as for the resolution of grievances.

Individuals and groups engage in strikes and disputes to serve their own ends as well as
addressing the problems tnat exist. Everyone involved is invariably seeking to gain influ-
ence and be taken more seriously as well as (or alongside) addressing the particular matters
in hand. Those involved also understand that taking these forms of action may cause atti-
tudinal changes on the part of those with whom they have the dispute. This is clearly an
extremely fragile position:

e from the point of view of management involvement, it is always possible that staff
members (or key members of staff) will simply leave the organization;
e from the staff point of view, there is always the possibility that senior mangers will
simply close things down altogether.

Conclusions
In all organizations, everyone involved recognizes to some extent the nature and
prevalence of particular forms of power, authority and influence within organizations,
and the ways in which these are wielded. They also recognize the presence or absence
of integrity in organizational approaches to the management of the different power
and influence bases that are present. Above all, they understand the extent of their
influence in the given situations; and become especially disillusioned when they
know that the management of influence is based on expediency rather than integrity.

156
 (99)
The integrity of the organization as a whole and its managerial practices, in
particular, form the basis of the effective management of the different sources of
power and influence. It is essential therefore that a full understanding of the true
extent and nature of power and influence is established by those responsible for the
strategy and direction of the particular organization. This can then be translated into
managerial authority so that this part of organization management and activity is
addressed effectively. In particular, when addressing either organizational toxicity or
serious conflicts, this authority has to be exercised with a clear set of aims and objec-
tives in mind; and it is also essential that the sources and causes of toxicity and
conflict are tackled effectively. Jamod
iuawas
‘aduany
puke
IDIyUOD

This is especially a problem when authority is devolved to those working in remote

locations, or as a result of their distinctive expertise. It is, for example, very difficult
for some health authority managers to confront expert surgeons and other medical
practitioners, especially where this expertise is linked to an extremely powerful and
dominant personality. It is very difficult for head office managers to exercise full
authority over those who work in remote locations or in the operational field, and this
is often compounded by the lack of a full understanding of what the exact nature of
this authority should be. The result, in each case, is that there is great potential for
the particular individuals to run their part of activities as their own monarchy, and for
effective accountability and responsibility to be diluted or lost. Once problems such
as these arise, they become extremely difficult to retrieve. Indeed, in some cases the
situation may only be brought under control as the result of a scandal or disaster.

S|
e Power, authority and influence are present in all organizations, groups and individuals;
oO
=
(@)
at
and everyone seeks to exert their influence and authority (such as it may be) in order
to assert their position within the organization.
e Power, influence and authority may be exercised positively and with integrity; or they
may be exercised with negativity and ulterior motives, leading to organizational
tOxICcity.
e The use of power, influence and authority by managers comes with the need to accept
responsibility and accountability for particular decisions and actions.
e Conflict is present in all organizations; the potential for, and extent of, internal
organizational conflict has to be recognized in each situation.
e In order to resolve conflict effectively, it is essential to know the ideal and intended
outcomes of everyone involved.
e In order to resolve conflict effectively, it is essential to know what processes and
approaches are going to work in given situations and in response to particular issues; It
is not possible to prescribe a standard or foolproof approach to everything.

157
 Further reading
Etzioni, A. (1964) Power in Organizations. Free Press.
McAlpine, A. (2000) The New Machiavelli. Wiley.
Pettinger, R. (2010) Organizational Behaviour. Routledge.
Shapiro, D. (2004) Conflict and Communication. Kogan Page.
Stanley, A. (2009) Leadership and Conflict Management Styles. Sage.
2|doad
1)
iuawaseuey
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Wheeler, D. and Sillanpaa, A. (2000) The Stakeholder Corporation. FTPitman.

158
 Human resource
management 9

y ‘the principles of %
| — equality, fairness
and diversity must —
be embedded within
_ the organization _
culture.’

In this chapter
e the purpose of human resource management (HRM) in providing the basis
for effective and sustainable levels of work and performance
e the need for strategic approaches to HRM
e the relationship between the HR strategies defined and the nature of HR
practices
e developing HR strategies and operations in line with overall organization
demands

Introduction
The purpose of human resource management (HRM) is to provide the basis for staff
management, employee relations (ER), and personnel practices required by the
organization. This is so as to be able to fit work to people, and fit people to technology,
producing effective and profitable products and services. This in turn enables maxi-
mization and optimization of return on return in what is normally the largest single
fixed cost incurred — the staff.

a
&
Cc
Strategic HR —- Nissan UK: The art of the possible
(a)
a)
en
e)
When Nissan UK opened its factories in Sunderland, north-east England, it was entering what
=
S
had become an industrial wasteland. The docks, steelworks and shipyards had all been closed
down or greatly reduced. There was a commonly held view that, because of social and historic
industrial problems, it was impossible to conduct effective and profitable business in the area.

159
 Nissan knew and understood this in advance, and went ahead nevertheless. Nissan
started by clearly setting out the basis on which the staff were to be engaged and managed,
and the conditions under which they would work. These were:

e Nissan would pay up to 130% of the average wage for those working in the car
iuatueseue—=
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industry in the UK;
e there would be full flexibility of working, and Nissan would spend as much time and
resource as necessary in training the staff;
e there would be a no-strike deal, replaced by a speedy and substantial arbitration
mechanism to resolve disputes;
e attendance would be monitored, and those off work would always be interviewed
when they came back;
e promotion and development opportunities would always be offered to the existing
workforce before being advertised externally.

Nissan used this strategic approach to HRM as the basis for attracting and retaining its
workforce, and developing its capabilities. By 2007, Nissan UK was the most productive car
production plant in the world — producing 135 cars, per annum, per employee. Staff
absenteeism runs at 0.5% per annum. The company has had no collective industrial action;
and only two disputes that have gone to employment tribunal. During the car production
crisis of 2008-2009, Nissan UK weathered the storm with no compulsory redundancies. In
the industrial and economic crisis of 2010 onwards, the company continued to produce
cars for export all over the world, as well as the domestic market; and continues to set
production and output records for the entire industry.

HR strategies
Organizations require clear and understood HR strategies. HR strategies are set in
the overall context of core foundation or generic positions adopted; and this then
forms the basis for the structure, composition and expertise of the workforce. HR
strategy is then implemented and delivered through the adoption of one of the
following positions in relation to the staff:

e Unitarism: which assumes that the objectives of all involved are the same or
compatible and concerned only with the well-being of the organization and its
products, services, clients and customers.
e Pluralism: admitting a variety of objectives, not all compatible, among the staff.
Recognizing that conflict is therefore present, rules, procedures and systems are
established to manage it and limit its influence as far as possible. This is the
approach taken especially in public services, local government and many

160
 industrial and commercial activities, where diverse interests have to be
reconciled in order that productive work may take place.
¢ Radicalism: the view that commercial and industrial harmony is impossible until
the staff control the means of production, and benefit from the generation of
wealth. Until very recently, this was a cornerstone of the philosophy of many trade
unions and socialist activists in industry, commerce and public services.
e Conflict: the basis on which staff are to be dealt with is one of mistrust, JUdWAB
le)
URWNH
adINOS

divergence, irreconcilable aims and objectives; disparity of location; divergence

and complexity of patterns of employment and occupations; this includes profes-
sional, technical, skilled and unskilled staff. In such cases as this, the HR
strategy will be devised to contain the conflicts; to reconcile differences; and to
promote levels of harmony as far as possible.
e Conformity: where the diversity of staff and technology may be (and often is) as
great as in the above scenario, but where the HR strategy rather sets standards of
behavioural and operational aims and objectives that in turn require the different
groups to rise above their inherent differences.
e Consensus: where the way of working is devised as a genuine partnership
between the organization, its staff and their representatives; the consensus
position in HR is rare in all but the simplest and smallest of organizations (and
may not exist even in these).
e Paternalism: in which the organization accepts responsibilities for providing staff
comfort and support in return for known, understood and assured ways of working,
including flexible responses when pressures on the organization are heavy.

Whichever approach is adopted must be known, agreed and implemented by all

managers whatever their department, division or function. This then forms the foun-
dation of leadership and management style (see Chapter 2); and it also forms the
foundation and standpoint for the conduct of all staff management, as well as HR and
personnel activities. Whatever the approach adopted, the role and function of stra-
tegic and operational HRM is:

e to produce, deliver and implement policies;

e to support line managers and staff;
e to establish standards of best practice, and reinforce absolute standards of
conduct, behaviour and performance.

oO
Whichever the HR strategy in place, it is essential that you are able to make it work for you
oO

to best advantage. While it is clearly indicated that consensus, conformist and participative
wn
ct
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—

approaches are ‘the best’, in practice you may have to work with conflict or pluralist
ee)
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sah,
Qa

approaches because these are the only things that can be done in the given set of circum-
(a)

stances. So you need to understand where the opportunities for development and inter-
vention are, and take full advantage of these when they occur.
 HR and employment law
HRM and employment practice are governed by the law and statutory instruments
and regulations as follows:

e laws and statutes relating to equality and fairness of treatment, discrimination,

uaweseue—w
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pue bullying, victimization, and harassment;
e health and safety at work;
e the conduct of recruitment, selection and remuneration activities and policies;
e the management of ER, disputes, grievances, dismissals, strikes and other
industrial action;
e stress and occupational health management;
e working hours;
e protection from hazardous substances; and protection when carrying out
hazardous activities;
e the production and implementation of internal policies and procedures, especially
those related to collective and individual discipline, conduct, behaviour and
performance.

The principle of equality and fairness

Whatever the size, location or activities, all staff must be treated equally and fairly. As
well as being a legal requirement, this is a fundamental prerequisite to the creation of
organization and operation effectiveness. Managers and organizations must first over-
come the tendency to compartmentalize people by race, gender, religion, marital status,
disability, age, location, postal address, non-essential qualification, school background,
club membership, hobby and interest. They must take the opposite standpoint of
isolating the qualities essential and desirable to carry out a job. They must view people
in terms of their potential as staff members, as contributors to the success and pros-
perity of the organization. Without this, true equality of opportunity cannot exist.
There is also a question of basic human decency, which requires that all people be
treated the same. This is a social as well as organizational concern. For organizations,
all activities, management style, policies, practices and procedures, publications,
advertisements, job and work descriptions, and person specifications are written in
ways that reinforce this. This emphasizes, formulates and underlines the required
attitudes and beliefs.
These standards are based on operational capabilities alone. Anyone, including
managers, adopting a negative approach or attitude to equality of opportunity, or
who victimizes, harasses or bullies members of their staff, must be subject to
organization discipline.
Offering equality of opportunity to all sectors of the workforce is both cost-effective
and profitable. By concentrating on (discriminating against) certain sectors of the

162
 population on operational grounds, organizations greatly limit their prospects either
of making effective appointments or of maximizing the human resource.
The lead therefore, comes from the top of organizations and the attitudes filtered
down to all the staff. Organizational equal opportunities policies must be clear,
unequivocal and easily understood by all concerned. They must be valued and adopted
at all levels and in all sectors and departments. A genuine adoption of the principle of
equality for all constitutes excellent marketing to the human resource of the organiza- JUAWWAB
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BDINOSA
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tion — staff are known to be valued for their capabilities. It also underlines any high
moral or ethical stance taken in other business and organizational activities.

Managing diversity
The management of diversity is concerned with ensuring that people from a wide
range of backgrounds, ethnic origins, social groups and occupational disciplines are
brought together and harmonized into an effective and productive workforce. Effec-
tive diversity management seeks to bond and maximize the strengths inherent in the
absolute standards set by the organization, and the different knowledge, under-
standing and expectations brought by those from a variety of different backgrounds.
Diversity management takes the fundamental premise of equality of treatment and
opportunity a stage further. Diversity management concentrates on ensuring that
everyone gets the same treatment and opportunities, rather than identifying and
separating out those whose career paths and opportunities may be hindered, and then
removing the obstacles faced by the particular groups.
Overall workforce cohesion is then further reinforced by the business opportuni-
ties that this form of employment practice brings.

@
=
Equality and diversity management
aS)
®g
ov
The CIPD (Chartered Institute of Personnel and Development) states:
=.
ig?)
=
‘Managing diversity is based on the concept that people should be valued as indi-
viduals for reasons related to business interests, as well as for moral and social reasons.
It recognised that people from different backgrounds can bring fresh ideas and
perceptions which may make the way work is done more efficient, and products and
services better.

The business benefits identified are:

e improved customer satisfaction and market penetration by employing and supporting

a diverse workforce whose composition reflects that of the local population;
e a diverse workforce brings a range of skills and approaches to generic problems and issues;
e effective diversity management improves the supply of staff, confidence between staff
and organization, and reduces costly discrimination cases.

163
 For example, HBOS invited members of Manchester's Chinese community to apply for
work within the bank. In the past, the company had few customers and staff from this
community. Bilingual posters were placed in the main Chinatown advice centre in the city
asking whether people were interested in working for the bank. This eventually led to the
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employment of six Chinese people by the bank in the Manchester area. A consequence of
the policy has been increased business from the Chinese community at large, because of
both cultural recognition, and also language capability.
Over the period since 1998, HBOS has increased the proportion of employees from
ethnic minorities from 4% to 6.4% nationally. Increases in some localities are even higher,
for example from 9% to 27% in Keighley, West Yorkshire.
The bank's diversity programme is also about women, older workers and people with
disabilities. The company uses a diversity team, and this team includes a disability manager
and an equal opportunities adviser.

Sources: CIPD (1999); Merrick (2001); Marchington and Wilkinson (2009).

To be fully effective however, diversity management requires fully institutional-

izing as a corporate commitment and priority in strategic HRM. Diversity is an
investment on which both immediate and also enduring returns are sought and
demanded. Once the decision is taken to go down this route, this then becomes a key
factor in organization development and the creation of an effective positive and cohe-
sive culture and set of values.

oO Equality and diversity ought to be a fundamental element of all HR practices. Apart from
oO
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=
anything else, a genuine respect for equality and diversity promotes the overall humanity
i.)
a)
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(a)
and inclusiveness of the organization. Failure to do so means that inequality and a lack of
oO
diversity are being accommodated; and this is certain to lead to pressures and conflicts at
some point.

Pay and reward

All staff need to be paid adequately and effectively for their work, expertise, commit-
ment and contribution. Pay and reward packages consist of:

e Payment: annual, quarterly, monthly, four-weekly, weekly, daily. Commission,

bonus, increments, fees. Profit, performance and merit-related payments.
e Allowances: attendance, disturbance, shift, weekend, unsocial hours, training
and development, location and relocation, absence from home.
e Benefits: loans (for example for season tickets), pension (contributory or
non-contributory), subsidies (on company products, canteen, travel), car, telephone/
car phone, private healthcare, training and development, luncheon vouchers.

164
 le
e Chains of gold or super benefits: school holidays (teachers); cheap loans
(banks); free/cheap travel (railway, shipping, airlines); pension arrangements (for
older or longer-serving staff).
e Economic rent: high rates of pay for particular expertise (especially scarce
expertise or that which is required at short notice).
e Work/life and rewards: in which people who have to balance work demands
with outside pressures, accept a given level of pay in return for flexible working Juawas
ddiNOSa
UBLUNH
arrangements.
e Performance and profit-related pay: in which bonuses are delivered in return
for meeting performance criteria, particular targets, and collective and individual
profit and output levels.
e Specific incentives: related to particular occupations, partly reflecting people’s
expectations, and partly reflecting performance.

=wn
a Always think about what you are rewarding, and what you want to reward. It is essential to
mo

35 | remember that, in practice, what gets rewarded gets done.

iS
So
o
©
This is very complex, and the mixes adopted by organizations in the devising and
implementation of reward strategies for different staff categories cover a variety of
aims and purposes in response to particular situations. The overall general objective
is, however, to address the following.

e Expectations: all systems must meet the expectations of the job holder to a
greater or lesser extent if they are to be effective at attracting and retaining staff
in the required occupations.
e Motivation: within the constraints illustrated above, all payment and reward
motivates to a greater or lesser extent; the levels of reward offered to particular
job holders also carry implications for the nature, complexity and commitment to
the work in hand that is required on their part.
e Mixes of pay with other aspects: much of this relates to expectations also — for
example, in the UK, the offer of a company car to professional and managerial
staff is still very attractive, in spite of the diminishing tax advantage.
e Occupational aspects: part of the reward package may include the provision of
specialist or expert training and equipment.
e Training and development, and career development: which has assumptions of
leading to higher levels of pay and reward and further opportunities for the future.
e Other prospects and opportunities: again, providing potential for higher levels
of pay and salary, and further career development.
e International variations: organizations operating in different parts of the world
offer different reward packages including pay, opportunities and career
development potential.

165
 = Always remember the difference between motivation and incentives. Motivation is a
wa

process based on the relationship between organization and staff; incentives are specific
a
ow

3.
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financial and material rewards delivered in return for short-term effort.
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Attraction, recruitment and retention

The ability to attract, recruit and retain staff is based on a variety of factors:

e the relative attraction of the organization, the work offered, its wider reputation,
together with perceptions of more general contacts with the organization, for
example through media coverage, or as a customer;
e the location of the organization; and this refers both to the place of work, and also
in relation to ease and convenience of transport and access;
e the relative value and worth of the occupation, both to the individual and also to
the organization;
e the relative perception in which the organization and the work are held.

Assessment of these factors indicates the overall attractiveness or otherwise of the

organization and the work. This has then to be related to the rewards on offer:

e material rewards — salary/pay/wages, and other benefits;

e intrinsic rewards, including responsibility, autonomy, opportunities for progress
and development;
e reflections of personal value, including status, esteem, rank and job title, each of
which is important to some people in particular sets of circumstances;
e recognition factors on the part of the individual, the organization and society at large;
e the fit between the particular occupation and the management style with which
the work is directed.

Attraction, recruitment and retention of staff are based on good levels of expert
knowledge of each of the factors indicated above. Full assessment of these factors
indicates why people want to carry out their occupation for the particular organiza-
tion, and the advantages and barriers relative to this.
It is additionally necessary to see the nature of the rewards on offer relative to
people’s professional and occupational demands and expectations.

Sources of staff
Potential staff exist everywhere, limited only by qualifications, capability and willing-
ness to work in the organization. Organizations use: recruitment advertising in news-
papers and trade press; agencies and specialists; and local and professional word of
mouth. Recruiting people with specialist or scarce expertise may additionally require

166
such approaches as ‘executive search’. Advances in international education, together
with the opportunities afforded by technology, have additionally led organizations
either to establish specialist services overseas, or to recruit staff from overseas to
come and work in the UK.
Ideally, a mix and diversity of sources of staff will be used; and this is to ensure
the maximum possible opportunity of gaining the best people for the job, and gaining
a wide range of approaches and perspectives. JualWas
adiNOS
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|e

Some posts within organizations will attract both internal and external candidates.
The priority here is to reconcile the issues relating to:

e the need to offer opportunities for development to staff already working within the
organization; and reconciling this with preventing becoming too inward looking;
e attracting fresh talent and energy as above; and reconciling this with the fact that
external expertise has to be capable of being harnessed and delivered within the
culture and operational constraints of the particular organization;
e attracting and retaining key staff, and filling skills shortages, for which it may be
necessary to vary standard terms and conditions of employment, and especially
pay and remuneration packages.

Wherever staff come from, they need to be given the best possible opportunity to
demonstrate their capability and willingness to do the job in the ways demanded by
the organization. Where there is a field of candidates for particular positions, everyone
must be given the same fair and equal opportunity to demonstrate their capabilities.
Consequently, recruitment interviewing, selection testing, personality tests and other
specific requirements must be structured in order to be fair to everyone involved.
The attraction, recruitment and retention of staff is, from time to time, a competi-
tive process. Competitive pressures arise when:

e new employers open up in the particular locality;

e existing employers move from the particular locality, resulting in spouses and
dependants of particular groups of staff having to go with them;
e wages and salaries increase within organizations in the same sector;
e wages and salaries increase within professional and occupational groups in the
same sector;
e changes in transport affect access and egress availability.

Induction
The purpose of induction is to get the new member of staff as productive as possible,
as quickly as possible. This consists of matching the organization’s needs with those
of the individual as follows.

e Setting the attitudes and standards of behaviour required, ensuring that new
employees know what is expected of them, and that they conform to these

167
 expectations and requirements. It is most important that the organization assumes
absolute responsibility for this, rather than allowing employees to set their own
standards, or for these to emerge by default.
e Job training and familiarization, mainly to do with the ways of working required
by the organization, and ensuring that these are matched with the new employee's
ajdoed
iuawaseuew
&pure expertise; and establishing the required standards and methods of work.
e Introductions to the new team, work colleagues, and other key contacts as part of
the process of gaining confidence, understanding and mutuality of objectives
required for the development of effective working relationships and environment.
e Familiarization with the environment, premises, ways of working, and particular
obligations on the part of the employer; ensuring that the new employee
understands their position in this environment; emergency procedures and health
and safety.

The induction process will have been started in general terms by any vague impres-
sion that new employees have picked up of the organization; it will have been further
reinforced if, for example, they have been customers or clients in the past. Any correc-
tion of these impressions must also be addressed as part of the induction process, which
will also be reinforced by the ways in which the selection process is conducted.

Performance measurement and appraisal

Performance measurement is conducted for the organization, departments, divisions,
groups and individuals. To be effective and successful, it must be conducted as follows.

e Pre-set and pre-agreed aims and objectives, priorities, performance targets, and
deadlines for achievement.
e A process of regularized formal reviews, combined with a continuous and
participative working relationship.
e Fully participative between appraiser and appraisee.
e Concentration on a combination of measuring and evaluating achievements,
together with establishing what is to be done for the future.

Within this framework, particular organizational appraisal schemes may seek to:
provide merit pay awards; identify potential; identify training and development
needs; identify job—person mismatch; identify organization development prospects;
identify poor and substandard performance; be a vehicle for other remedial action.
Appraisal schemes fall into disrepute for the following reasons: that they are not
believed in or valued; they do not contribute to the wider success of the organization;
they are bureaucratic or mechanistic; that it is the scheme and its paperwork that are
important, and not the process that should be completed; that the reviews are too
infrequent, or (in practice) missed altogether; that what is promised in them (for
example pay awards, training, promotion) is not delivered in practice.

168
 o

Maintenance factors in human resource management

Like every other resource, the staff require maintenance if their value is to be maxi-
mized and optimized. Attention is therefore required to:

e job and work development;

e training and development;
e career management; Juawas
adINOSa
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e discipline and grievance;

¢ creative approaches to employment;
e stress;

© occupational health.

Job and work development

Job and work development are designed both in terms of the formation of attitudes
and standards at the workplace to which employees are required to subscribe, and
also in the division, regulation and allocation of the work itself. They are undertaken
with the intention of generating a greater measure of positive commitment and a
reduction of workplace alienation. This may involve job rotation and progression
schemes; and project work, secondments, and fixed-term action learning type place-
ments also. Related to this is the ever-increasing obligation on employees to maintain
and improve their skills, knowledge and technical expertise in the interests of
continuing organization effectiveness, profitability and prosperity. On the other hand,
the expectations of those at work have also changed, and part of the job design
process increasingly includes improving the quality of working life.

Training and development

All staff require training and development — initial and continuing job training, iden-
tification of potential, and as the result of performance appraisal. Organizations have
to strike a balance between ensuring that employees maximize and optimize their
potential relative to the opportunities that are genuinely on offer. It is essential that
organizations do not raise people’s expectations unrealistically; on the other hand,
staff should never be restricted from pursuing their ambitions as long as the organiza-
tion can accommodate these.

Career management
Whatever their occupation, most people require some kind of a career based on
progression, development and enhancement. Career management and progression
therefore becomes a partnership between organization and individual. The priority, as
above, is to make clear what the organization can offer and then be realistic about

169
 whether individual ambitions can be satisfied by the organization, or whether the
organization’s demands fit in with the capabilities and potential of particular individ-
uals. Once this context has been established, opportunities should be clearly stated
and then, all things being equal, when these arise, individuals should be given the
first opportunity to apply for them and to see if they can work within them. It is usual
&
iuaweseuew
a\doed
pue also to ensure that individuals have training and development prior to accepting
career progression opportunities so that they are at least familiar with what they will
be doing in the future.

Discipline and grievance management

All organizations require disciplinary and grievance policies; and these must be
clearly stated and published to everyone concerned.
Discipline, and the procedures that underpin it, exists in order to ensure that
people conduct themselves to the required standards of behaviour and performance.
Clearly stated sanctions must be published indicating what is to happen when
particular transgressions occur; and especially what is to happen when serious or
gross misconduct takes place. It is essential to remeinber that all organizational
approaches to discipline and grievance are bounded by the law. Especially, proce-
dures must be followed and rights of representation, response and appeal must be
allowed; otherwise any sanction, including dismissal, will normally automatically be
found to be unfair.
Grievance management exists to ensure that any problems or issues are raised as
early as possible and dealt with quickly and effectively. Individuals have the right to
raise a grievance against any member of staff about any matter at all, including:
interpersonal, inter-professional and _ inter-occupational relations; attitudes and
behaviour of management; pay, remuneration and reward policies; equality and fair-
ness of treatment. When issues are raised, again individuals have statutory rights;
they must be allowed to state their case, have their case heard and answered, and
then appeal against the findings if they are still not satisfied.

Creative approaches to employment

Creative approaches to employment involve a much greater awareness and willing-
ness on the part of organizations to relate the hours of work that they offer to the non-
work commitment and aspirations of potential staff members. This means having
regard to the use of flexitime, annual hours and other flexible work patterns; job
sharing; working away from the organization and especially allowing staff to work at
home and providing them with the means and workstations to do so; and the devising
of shift patterns especially to fit around those with primary responsibility for looking
after young children. More widely, organizations may offer career breaks — extended
periods of time off for employees in which they may go to do other things.

170
 Organizations may offer ‘returner schemes’ pitched primarily at those who have had
lengthy periods of time out of work, usually for the purpose of bringing up a family;
the returner scheme tackles the issues of familiarization, confidence building and
personal and professional comfort that are the concerns of anyone coming into any
job after a lengthy break. Such schemes also provide specific job training and
retraining as necessary and desirable. Organizations may also underline their
commitment to these creative approaches, through the provision of nursery facilities JUAWAB
9DINOSA
URLUNH
ie

for very young children; canteen facilities that are open all day so that all work
patterns are accommodated; and through the adoption of general ways of working and
general attitudes at the workplace that place the same intrinsic value on all members
of staff regardless of their own particular pattern of work.

Stress
Stress may be either positive or negative. It essentially consists of the amount of pres-
sure present in a given situation in which the individual finds himself. The sources of
stress are occupational, role, organizational, hierarchical, social and personal; and
pressures arising on the individual result from an imbalance of these. There is, in
particular, a growing awareness of the links between work and stress and other
illnesses such as nervous exhaustion, executive and professional burnout, heart
conditions and high blood pressure. The manager’s role in this is therefore threefold:
to recognize it as an issue; to prevent stress among staff; and to recognize it in himself
and take steps to limit it.
Good occupational health schemes thus have stress recognition and the ability
to treat the symptoms and manifestations of it as a central part of them. The ability
of organizations to accept and recognize the condition, to treat it where it occurs
and, above all, to engage in practices and a style of management that prevent it
from arising as far as possible is an essential contribution to the maintenance of the
human resource.

Cr
(@)
It is essential to remember that ‘stress’ means different things to different people: one
w
ao
)= person's stress may be something that others can cope with easily. When questions of
jo¥)
(ai
fay
(se
stress are raised with managers, a full investigation should always be carried out, and find-
oO
ings made available to those who have raised the issues.
@

Occupational health
Organizations are increasingly assuming responsibility for the good health of their
staff, and taking positive steps and making interventions that are designed to ensure
this. This consists of determining that the employee is fit and healthy when he or she
first starts work and that this continues throughout the period of employment. For

171
 those who have persistent or regular time away from work, there may be included
assessments by company medical staff as well as the employee’s own doctor. More-
over, this may require the employee to take medical treatment at the behest of the
organization as a precondition of continuing to work for it. Occupational health
schemes at the workplace are, in the best cases, particularly strong and valuable in
uaweseue—=
a|doad
&
pur the early diagnosis of job-specific illnesses and injuries. They also provide a valuable
general source of medical knowledge by which the organization may assess the
overall state of its workforce’s health.
Particular matters related to the workplace have come to the fore and gained
recognition and currency. Major issues of which any manager should be aware are:

e stress, its causes and effects and techniques for its management, as above;
e repetitive strain injuries (RSI) which are caused by continuous use of certain
muscles or the carrying out of certain activities — for example continuous
keyboard working and process work;
e provision of protective clothing, equipment and training;
e back injuries caused either by bad lifting practices or by a continuous bad back
posture;
e the effects of VDU screens on eyesight;
e industrial and commercial heating, lighting and working conditions; and the
relationship between these and eye strain, coughs, colds and other minor but
recurrent ailments;

e smoking, both active and passive, and the effects of it on all staff, both in relation
to health and also more general concerns of its offensive odour;
e alcohol abuse;
e HIV and AIDS, and other serious illnesses and diseases; and the implications for
particular workplaces and occupations.

Employee relations
Employee relations (ER) — or industrial relations, employment relations, staff rela-
tions — is the system by which workplace activities are regulated, the arrangement by
which the owners, managers and staff of organizations come together to engage in
productive activity. In practice, ER is concerned with setting standards, promoting
agreement between staff and management, addressing and resolving staff problems
and managing conflict.
It is usual to define a broad framework for ER as a relationship between:

¢ government, which legislates for ER and workplace practice in many areas; and
which influences all organizational ER in its role as dominant employer and in
the management of public services;

172
 e employers, in discharging their enduring responsibilities to staff; and in
conducting and developing their relationships with the staff in accordance with
the provisions of the law;
e employees, and their representatives (including trade unions) in ensuring that
required standards of behaviour, probity and performance are carried out within
the constraints of the particular situation.
JuaWaBe
UBLUNH
adiNOSa
>

@
x |
oO
The Donovan Commission
®g
a
=
2
A key part of the review of the Royal Commission on Trade Unions and Employers’ Asso-
=
ciations (the Donovan Commission of 1965-1967) was to define for the first time what
the real roles of unions were. In summary, the findings were that unions:

e bargain for best possible wages, terms and conditions for members;
e lobby for improved share in national wealth for members;
e influence government policy, legal framework on behalfofmembers;
e lobby for social security for all;
e lobby for full employment, job security, wage levels, cheap housing for the poor;
e bargain nationally, regionally, locally, industrially, for organizations and individuals;
@ represent members at disputes and grievances and for any other reason according to need.

In recent years, the collective and political influence of trade unions has declined partly
as the result of legislation, and partly also because of the collapse of those industries where
trade unions were traditionally strong.
The main work of trade unions at present is to represent individual employees in indi-
vidual disputes and grievances.
©
Source: Donovan (1968).

ER developments
In recent years, many organizations have actively redrawn the relationship between
staff management practices and ER in terms of integration with, and contribution to,
overall organizational performance. As well as being concerned with employee terms
and conditions, and the state of the working environment, many organizations now
negotiate and consult with staff representatives and recognized trade unions on a
much wider range of issues including:

e productivity and service delivery issues, including attention to quality and

customer satisfaction;
e organizational operating expenses, engaging consensus and cooperation in how
best to manage these;

173
 e the design and implementation of technology changes and upgrades;
e the opening up of new markets, products, services and locations.

This represents a shift away from adversarial and conflict-based approaches to

ER, towards consensus and cooperation; and this in turn has led to much greater
levels of participation and involvement on the part of the staff in many organizations.
ajdoad
iuausseue—=
&pue

Problem-solving
It remains true that a substantial part of organizational ER practice is concerned with
resolving problems, disputes, grievances and disciplinary issues. These issues arise
as the result of:

e genuine misunderstandings;
e negligence;
e personality, professional and cccupational clashes;
e determination to engage in conflict.

Historically, these matters used to be resolved through reference to lengthy and

complicated procedures. The provision of procedures, together with ensuring
adequate representation, remains a statutory duty. However, many organizations and
their managers have come to know and understand that, if matters can be resolved
without recourse to formal procedures, this is more productive and less stressful for
everyone concerned. This in turn has led to a much greater emphasis on management
development and training in the field of ER, with specific reference to:

e problem-solving and resolution;

e disputes and grievance management;
e correct ways to conduct disciplinary hearings.

This is underpinned by organizations producing comprehensive staff handbooks in

which all duties and obligations are clearly set out. Such staff handbooks ensure that
everyone knows and understands what constitutes: minor misdemeanours; major
problems; and serious and gross misconduct (the penalty for which will normally
be dismissal).
The onus is therefore shifted on to managers to resolve problems when they do
arise; and to create the conditions and relationships in which matters are raised
early and resolved quickly without the need to resort to formal procedures.
It does however remain true thatmany organizations do still conduct ER in more
traditional ways. It is not always easy to shift managerial or collective staff atti-
tudes; and not always possible without more extensive organizational restructuring.
It remains the case, however, that where adversarial ER does exist, there is a much
greater organizational expense inherent in its management and conduct, leading to
a much greater proliferation of disputes, grievances and disciplinary matters.

174
 ER — and disputes and conflicts
A strategic approach to ER matters will be adopted by organizations and their managers.
aS
UIOd
JO
MalA As well as briefings for staff, and training for managers in ER skills and knowledge, organiza-
tions will take an approach to the management of workplace conflicts based on answers
to questions in the following six areas.
JUaWABe
UBLUNH
9DINOSa
[oe

1 What is the likelihood of a dispute occurring? If it does, how long might it last? What
are the wider consequences to ourselves, and to our staff?
2 If it does occur, can we win it? What are the consequences of winning it? What are the
consequences of losing it?
3 If it does occur, what costs are we going to incur? As well as financial cost, what of the
questions of PR, media coverage and local feelings in our community? Is this a price
worth paying?
4 What happens when it all settles down? How will we interact and work with the staff
afterwards? How long will any bad feeling last? What are the wider implications of this?
5 What other ways are there around the matter or dispute in hand? Are we able to use
these? What are the pros and cons of going down these alternatives, vis-a-vis a dispute?
6 What are the behavioural and psychological aspects that surround this issue? If we
win, what will be the effects on the workforce? And on managers? Are there
questions of morale to be considered? If we lose, would loss of face be important?
How could we save face if that were to arise? What would be the response of the
workforce and its representatives?

From consideration of the matter in hand this way, and by establishing the answer to
these issues, the answer to the critical question emerges: Why are we seeking, entering,
or preparing to enter, into this dispute?
This approach will form the basis of any strategic consideration of any conflict, or
potential conflict, whether global, organizational, departmental, or divisional; or at team,
group or individual level.
©

Conclusions
Staff management, human resource management, and ER strategies and policies
must be designed to work in harmony and in the interests of the organization, rather
than those of HRM and ER specialist functions. Many organizations are coming
increasingly to the view that HRM is a strategic rather than operational issue; and
that this, in turn, means that day-to-day HRM issues are tackled and resolved by the
particular line managers and supervisors involved, rather than referring them to
specialist functions. It is therefore necessary that all managers are expert in HR and
staff management operational issues at least.

175
 Especially, failure in each of these areas normally leads to staff disputes and
erievances, or staff problems, and these invariably turn out to be expensive. In detail,
the areas of knowledge and understanding required are as follows (see Table 9.1).

Table 9.1 Human resource management summary

iuaweseuey—
ajdoad
&
pur Area of work Strategy and direction 2 Personnel operations ]
| :
Work design and Principles, approaches, Job descriptions, work patterns, work
structuring departmentalization, structuring
organization structure 4

Staff planning Systems appraisal, design Systems usage

commissioning
Recruitment and Standpoint (grow your own, | Training of recruiters and selectors,
selection buy in from outside) recruitment and selection activities
{

Induction Policy, content, priority Delivery

Use of agencies and Principles, circumstances Contacts and commissions
external sources of staff
|
Performance appraisal Purpose, systems, design, Systems implementation, training of
principles, aims and objectives |appraisers and appraisees
Pay and rewards Policy, levels, mix of pay and_ | Assimilate individual staff to policy
benefits, package design
Occupational health Policy, content, design of Operation of package in conjunction
and stress management | package with functional departments
Equality and diversity Standards, policy, content, Policy operation, monitoring of
context, ethics standards, remedial actions
Employee relations Standpoints (conflict, Negotiations, consultation,
conformist), representation participation, staff communications
r
Discipline Policy, procedure, practice, Implementation of policy and
design, standpoint procedure, support for staff, training of |
all staff
Grievance Policy, procedure Implementation of policy and
procedure, training ofall staff
Training and Priority and resources Activities, opportunities, accessibility
development |

Dismissal Standards of conduct, Operation ofdisciplinary procedures,

examples of gross operation ofdismissal procedures,
misconduct support and advice

Human Resource Management is divided into strategic and directional activities, and personnel activities.
The role and function is:
policy, advisory, consultative, supporting, a point of reference;
personnel practitioner;
establisher of policy content;
establishing standards of best practice;
creator of personnel activities;
monitor/evaluator of personnel activities.

176
 {Se}
There is clearly a pressure for this strategic approach to be developed and
enhanced. With the increased complexity of organizational structure, uncertainties of
market, and continuing need for the development of expertise, a strategic approach to
HRM is much more likely to make a long-term and enduring contribution to organiza-
tional effectiveness through following this agenda than by concentrating on specific
issues and minutiae in functional departments and divisions. The strategic HR role
also requires specific attention to establishing, maintaining and developing the Juawa
URLUN
a.unos
required organizational management style and culture, and of engaging management
development programmes in support of this. Staff development, expertise and techno-
logical training are also much better managed from a strategic point of view. Finally,
the procedures that underwrite the required and desired HRM style and strategy are
much more likely to be effective if they are written from a strategic, rather than opera-
tional, point of view.

e Knowing and understanding the legal and operational boundaries of HRM is essential,
ut
jag whether an HR expert and practitioner or not.
e It is essential to know and understand the legal, statutory and operational framework
of HRM; and essential also to recognize that these frameworks give specific rights,
duties and obligations to employers and employees.
e |f organizational staff are indeed recognized as ‘the human resource’, then it is essential
to ensure that their value and well-being are maximized and optimized as far as
possible.
e There are specific interventions — staffing policies, training and development, and the
management of ER — that, if conducted effectively, go a long way towards ensuring
organization well-being, profitability, viability and long-term effectiveness and stability.
e The principles of equality, fairness and diversity must be embedded within the
organization culture.

Further reading
Bratton, J. and Gold, J. (2007) Human Resource Management. Palgrave Macmillan.
Cheatle, K. (2001) Mastering Human Resource Management. Palgrave Macmillan.
CIPD (1999) Managing Diversity. Chartered Institute of Personnel and Development.
Donovan, T. (1968) Report of the Royal Commission on Trade Unions and Employers Associations.
The Stationery Office.
Marchington, M. and Wilkinson, A. (2009) People Management and Development. CIPD.
Merrick, N. (2001) People Management. CIPD.
Pettinger, R. (2002) The Future of Industrial Relations. Cassell.
Storey, J. (2001) Human Resource Management: A Critical Text. Routledge.

177
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 Leadership
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management
has its own distincti
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In this chapter
the nature of organization leadership, and its critical importance and value
as a part of managerial expertise
leadership traits, styles and types
the critical position of confidence that is required of all those in leadership
positions
identifying and developing leadership expertise

introduction
The context in which leadership expertise is required of managers is as follows.

It is becoming increasingly essential to be able to legitimately assign

responsibility, authority and accountability to those in charge of organizations,
and those who head individual departments, divisions and functions.
It is increasingly difficult, and in some cases impossible, to sustain the expense
incurred through having large and complex hierarchical and bureaucratic systems
for the coordination and control of organizations.

Employing and assigning those with expertise in leadership, and developing the
traits, characteristics and qualities required, is therefore a clear alternative.
Employing people with leadership expertise in key and critical positions and func-
tions therefore reduces expense; and it additionally leads to clearer lines of authority
and accountability, resulting in increased output, delivered more quickly, and with
fewer problems and barriers.

179
 Leadership is therefore the core of all managerial and supervisory activities. This
is more clearly observable in some areas than others — political leaders and chief
executives officers are self-evidently ‘in charge’. However, all those in managerial
positions have a leadership function; and all those in leadership positions have
managerial responsibilities. These are:
iusweseue=
ajdoed
&pue
e to give vision and direction;
e to energize;
e to set and enforce absolute standards of behaviour, attitude, presentation and
performance;
e to determine, implement and develop strategy, operations and performance (and
this applies whatever the levels of management undertaken);
e to allocate and prioritize resources and activities.

In this context, the key role and function is having the combination of expertise,
commitment and personality required to see things through to completion. It is addi-
tionally essential that leaders surround themselves with expertise that they them-
selves do not have so that any gaps in their own shortcomings are filled.

PR
S
=
Winston Churchill
oO
vn
a
e)
=
Winston Churchill, the UK prime minister during the period 1940-1945 of the Second
SS

World War, provided identity and inspiration to the British population at a time of
enduring national crisis.
Many of Churchill’s military commanders, however, complained of his constant
meddling and interference in both the strategy and tactics used. The commanders took
the view that they were employed as experts in the particular field, and so should be
allowed to get on with the job.
Those employed in key and critical positions need to be sufficiently expert themselves
in order to be able to respond to detailed questioning. From the leader's point of view, it is
therefore much better to be accused of interference, meddling and over-attention to
detail, and having the character and capacity to ‘back off, than it is to be accused of
remoteness, distance and inapproachability.

Leadership in practice
Leaders are expected to deliver and achieve what they set out to do; or else to provide a
clear explanation as to why this was not possible, and what they now intend to do as the
result. Leaders have specific responsibilities and accountability in the following areas.

e Organizational expertise, knowledge and understanding. Especially when

appointed to a top, senior or key position, this means becoming actively involved

180
 =iS
and immersed in the organization at the earliest possible stage. Leaders are
expected (and required) to have a full grasp of where the organization’s strengths,
weaknesses and priorities lie with a view to taking things on to the next stage. (S)
diysua
Results. Results are measured in terms of what was intended, and the actual
outcomes; how and why these were achieved; how they were viewed at the time
and subsequently by posterity; and whether this represented a good, bad or
indifferent return on the resources and énergy expended in their pursuit.
Inspiration. In order to achieve success, leaders must be able to motivate, inspire
and energize. In order that people follow, and resources are attracted to their cause,
this is normally translated into a simple, direct and positive statement of where the
leader is going and how and why this is to be achieved and the benefits that this is
to bring to others as the result. Leaders must be capable of inspiring others — it is no
use having a good idea if people do not recognize it as such.
Hard work. For all of this to occur, leaders must have great stores of energy,
enthusiasm, dedication, zeal and commitment. They have to inspire and energize
people and resources in pursuit of the desired ends. They also set the standards
for their followers — in normal circumstances, hard work cannot be expected of
others if the leader is not also prepared to put this in.
Honesty. People follow leaders, either because they believe in them or because it
is in their interest to do so (or for a combination of the two). Leaders who fail to
deliver are normally rejected or supplanted. Leaders who say one thing and mean
another will not be trusted and people continue to work for them only until they
can find something else.
Cheerleading and advocacy. Those in leadership positions are expected to be
fully enthusiastic about the organization and its future, and to demonstrate their
enthusiasm and commitment in public whenever required. It is no use expecting
enthusiasm and commitment from everyone else, if those in top and key positions
do not have it.
Strategy and direction. Leaders are expected to know and understand what the
organization strategy is, how it is expected to work, and what demands will be
placed on the people and resources concerned.
Combined long-term and short-term view. Those in leadership positions must
know in detail what is to happen over the short term, and to have a detailed grasp
of everything that is required. Leaders must also have a long-term view of the
organization, be able to project ahead how the organization ought to (or might)
look in, for example, five years’ time.
Focus. Leaders are the focal point and point of identity for everybody who works
in the organization. This does not mean necessarily that the top and senior
managers of organizations need to be public figures; it does mean that they have
to have sufficient identity within the organization to provide this focal point and
the confidence that goes with it.

181
 ° Crises and emergencies. Leaders are expected to be able to respond adequately
and effectively to crises and emergencies. A part of this requires leadership
expertise in understanding where crises and emergencies might occur, and taking
steps to ensure that these are kept to a minimum. When they do happen, leaders
need to have a clear understanding of what has gone wrong and why, and quick
ajdoed
jusweseuey=
&pue and effective — and expert — responses designed to put things right.
e Responsibility, authority and accountability. It is additionally essential that
leaders accept responsibility, authority and accountability in the context required.
When things go well, it is essential that everyone knows and understands that this
was a collective effort, and not purely down to the actions of the person at the top.
On the other hand, when things go wrong, the leader is always accountable.

The practice of leadership also requires that those in top positions are able to
create and develop senior management teams in order to ensure that the direction of
the organization is as sound, clear and effective as possible. Leaders act additionally
as energizers and coaches of these teams.
This short summary of the practice of leadership and what it entails indicates the
range of expertise and personal traits and qualities of all those who go into any lead-
ership or management position.

Traits and characteristics

There have been a great many studies of leaders, directors and managers from all
walks of life and all parts of history. By studying a range of leaders and managers
from a variety of situations and backgrounds — for example sport, politics, the mili-
tary, exploration, religion and business — it is possible to infer and draw conclusions
as to what the basis for their success or otherwise was and what the reasons and
causes of this were. Their contribution can be assessed and analysed together with
the other elements and factors present.
Attempts to identify the traits and characteristics present in successful leaders are
largely inconclusive, in that none identify all the attributes necessary to lead, direct
or manage in all situations. However, the following are more or less universal.

e¢ Communication: the ability to communicate with all people with whom the
leader comes into contact regularly, continuously and in ways and language that
those on the receiving end will be able to both understand and respond to.
e Decision-making: the ability to take the right decisions in given situations, to
take responsibility and be accountable for them, and to understand the
consequences of particular courses of action. Part of this involves being able to
take an overview or strategic view of particular situations, to see the longer term
and to take a wider general perspective. This is sometimes called ‘the
helicopter view’.

182
 ¢ Commitment: to both matters in hand and also the wider aspects of the
e€
organization as a whole. This includes an inherent willingness to draw on
personal, as well as professional, energies and to bring qualities of enthusiasm, diysua
drive and ambition to the particular situation.
e Concern for staff: respecting, trusting and committing oneself to them; developing
them, understanding them and their aspirations and reconciling these with the
matters in hand. Staff should be treated on a basis of equality and confidence.
e Concern for teams and individuals: making sure that teams remain effective,
energized, resourced and suitable for purpose; and taking steps to ensure that
resources and expertise are made available as and when required. When teams
need reconstituting or re-energizing, this also is a leadership priority. It is also
essential that leaders pay attention to the demands, drives, hopes and ambitions
of individuals within the team.
e Concern for, and commitment to, tasks and activities: ensuring that the
‘people’ part of leadership is as closely related as possible to the work in hand; and
again, taking steps to ensure that the work is adequately staffed and resourced.
e Quality: a commitment to the quality of product or service such that, whatever
the matter in hand, customers receive high value and high satisfaction, and the
staff involved receive recognition for their effort.
e Values: leaders bring a given set of values with which others will identify, and to
which they will commit themselves. These values are founded in personal
integrity, and the establishment of high absolute standards of conduct and
performance required and demanded. Values are then additionally developed and
enhanced through levels of respect accorded to all members of staff.

It is always useful to reflect on the extent to which the possession of these traits means
Te
4wn
mw that individuals are seen as good leaders. It is invariably possible to identify those who are
3.
5 known, believed or perceived to be good leaders but who do not have all these traits;
S
on
conversely, it is possible to identify individuals in leadership positions who do have all of
et

these traits — but are perceived to be bad leaders.

Leadership styles
The rationale for studying management styles is that employees will work better for
managers who use particular styles of leadership than they will for others who employ
different styles (see Table 10.1 and Figure 10.1).
In practice, there is always a question of appropriateness of a management style in
relation to the organization, work or situation. Very often there is an assumption or
perception that more participative management styles are ‘good’; in practice this is
not always the case. In some industries, companies, organizations and locations,

183
 people expect to be told what to do (and in some cases, how to do it), so in these cases
effective management styles have to be able to respond to this.

Table 10.1 Leadership and management styles

Autocratic (benevolent Consultative/ participative |Democratic/participative

iuaweseueyw
ajdoad
@®
pue or tyrannical)
Leader makes all final Leader makes decisions after Decisions made by the group — by
decisions for the group. consultation with group. consultation or vote. Voting based
on the principles of one person,
one vote; majority rules.
Close supervision. Total communication between All members bound by the group
leader and members. decision and support it.
Individual members’ Leader is supportive and All members may contribute to
interests subordinate to developmental. discussion.
those of the organization.
Subordinates treated Leader is accessible and Development of coalitions and
without regard for their discursive. cliques.
VIEWS.

Great demands placed on Questioning approach Leadership role is assumed by

staff. encouraged. Chair.
Questioning discouraged. Ways of working largely
unspecified.
Conformist/coercive | Leader retains responsibility
environment. and accountability for results.

It is also the case that where things are truly democratic, the leader has to be
prepared to go along with the majority, however small that may be. The fact that the
majority of people want to do something or have a preferred direction in mind does
not necessarily make that right for the organization as a whole. Additionally, where
there is a 51%—49% split, the preferred direction is effectively being chosen by one
half of the organization only.
The use and value of the leadership continuum and spectrum is the ability to
recognize how leadership is carried out; and again, once this is recognized, it can be
related to what is appropriate to the situation. Again also, it is essential to recognize
that in many cases, people do prefer to know and understand where they stand with
the leader regardless of whether this is democratic or participative, or not.
Any management style must therefore be supported by mutual trust, respect and
confidence existing between manager and subordinates. If these qualities are not
present then no style is effective. There must be a clarity of purpose and direction in
the first place — and this must come from the organization. Participation can only
genuinely exist if this clarity exists also — it cannot exist in a void. Leadership and
management styles must also be suitable and effective in terms of cultural and envi-
ronmental pressures, as well as personal, professional and occupational ac¢eeptability.

184
 = i)

LEADERSHIP CONTINUUM

Boss-centred ae, Subordinate-centred diysiap

leadership —_—_— leadership

Use ofauthority by the manager

Area of freedom for subordinates

A A A A
Manager Manager Manager Manager Manager Manager Manager
makes ‘sells’ presents presents presents defines limits; permits
decision and decision ideas and tentative problem, asks group subordinates
announces It Invites decision gets to make to function
questions subject to suggestions, decision within limits
change makes defined by
decision supervisor

Range of behaviour

SUMMARY
Autocratic SO SS Consultative
Production-centred <> Employee-centred
Closed pee seer Se General
Initiating structure <<———— ee? Consideration
Task-directed <0)
$$ 2 Human relations
Directive ->.-$— Supportive
Directive <r Participative

Figure 10.1 Leadership spectrum

These factors are interrelated. Account must also be taken of the fact that where
leadership style is to be truly democratic, the decisions and wishes of the group must
be accommodated, whatever is decided and whether this is ‘right’ or ‘wrong’ in terms
of the demands of the work and the pressures of the wider environment.

ion
As well as identifying the leadership style preferred by the organization and its staff, it is essen-
tial to recognize the demands of the situation. What people are used to and can respond to
io)
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—
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may or may not be appropriate; and where this is clearly not the case, the situation can be
changed. However, especially in times of crisis and emergency, or extensive pioneering activity,
a
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a more prescriptive and directive form of leadership is normally appropriate.

185
 Blake and Mouton: The managerial grid
Blake and Mouton’s (2004) managerial grid is a configuration of management styles
based on the matching of two dimensions of managerial concern — those of ‘concern
for people’ and ‘concern for production/output’. Each of these dimensions is plotted
on a 9 point graph scale and an assessment made of the managerial style according to
iuawaseue=
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&
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where they come out on each (see Figure 10.2). Thus, a low score (1-1) on each axis
reflects poverty in managerial style; a high score (9-9) on each reflects a high degree
of balance, concern and commitment in each area. The implication from this is that
an adequate, effective and successful managerial style is in place (Figure 10.2).

9 Country Production

= 8 club 9:1 team 9:9

oO 7
(2%
. 6
wm 5 Balance 5:5
4
i 4
4 3
OC 2B
1 Poverty 1:1 Task 1:9

Ce ee eee,
CONCERN FOR TASK
Other styles identified are:
9-1: the country club — production is incidental; concern for the staff and people is everything; the group
exists largely to support itself.
1-9: task orientation — production is everything; concern for the staff is subordinated to production and
effectiveness. Staff management mainly takes the form of planning and control activities in support of
production and output. Organizational activity and priority is concerned only with ouput.
5-5: balance — a medium degree of expertise, commitment and concern in both areas; this is likely to produce
adequate or satisfactory performance from groups that are reasonably well satisfied with working relations.

Figure 10.2 The managerial grid

The 9-9 score is indicated as the ideal by Blake and Mouton; and this reflects a
desired position of equal concern for people and task, and the need for continuous
improvement.
The managerial grid also implies that the best fit is along the diagonal line —
concern for the task and concern for the people should be grown alongside each other
rather than the one emphasized at the expense of the other.
The information on which the position on the grid is based is drawn from structured
questionnaires that are issued to all managers and supervisors in the organization
section, unit or department to be assessed, and also to all their staff. Once this is

186
 6
recognized, changes and improvements can be made as necessary. Especially where the
task is being neglected, it becomes apparent that this must now be attended to; and
where the staff are being neglected, this too can be remedied. diyssap

on Best practice demands that the leadership style in particular situations and organizations is
oO
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identified and then assessed for effectiveness. It is essential to recognize that leaders have
Ww

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= to be able to call on a range of styles to fit particular situations, and that a style or approach
(a>)
that is ideal for one situation (for example the need to engage staff in change processes)
may not be appropriate for others (for example response to crisis or emergency). It is
therefore essential that those in leadership positions can change and vary their style
according to the demands of the situation — and without losing their credibility, respect or
integrity. The key test of any form of leadership in any situation always must be: does it
work? if so, why? if not, why not?

Contingency approaches
Contingency and ‘best fit’ theories of leadership take account of the interaction and
interrelation between the organization and its environment. This includes the recog-
nition, and accommodation of, those elements that cannot be controlled. It also
includes recognizing that those elements that can be controlled and influenced must
be addressed in ways that vary in different situations — that the correct approach in
one case is not a prescription to be applied to others. There is a constant interaction
between the leader’s job and the work to be done; and between this and the general
operations of the organization in question. There is also the requirement to vary the
leadership style according to the changing nature of the situation.
Fiedler (1967) used the contingency approach to identify situations where direc-
tive and prescriptive styles of leadership and management worked effectively. Direc-
tive and prescriptive styles could be engaged where the overall situation was very
favourable to the leader; where the leader was liked, respected and trusted by the
group. Tasks needed to be clearly understood, easy to follow and well defined. The
leader needed to have a high degree of influence over group members in terms of
reward and punishment. Additionally, the leader enjoyed unqualified support from
the organization.
Directive and prescriptive styles of leadership and management were also effec-
tive from the point of view of achieving results where the situation was unfavourable
to the leader. Where leaders were disliked, distrusted and disrespected by the group,
where they had low degrees of influence over rewards and punishments, and where
the leader did not always enjoy the full backing of the organization, concentration on
tasks and outputs, together with a knowledge and understanding of the nature of
leadership, meant that standard and understood levels of achievement were possible.

187
 Reddin (1970) developed the contingency approach by identifying dimensions of:

e appropriateness and effectiveness;

e inappropriateness and ineffectiveness;

in relation to the organization, nature and composition of work groups, products and
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&pur services, and environmental pressures. Reddin presented a spectrum of leadership
and management behaviour as follows (see Figure 10.3).

1 2
Developer Executive
Appropriate
3 wae 4
Bureaucrat Benevolent
autocrat

2
Integrated Effective

4
Inappropriate medicated

1
Missionary Compromiser Ineffective

3 4
Deserter Autocrat

Purpose: The middle set of boxes identifies the four archetype leaders of Reddin's theory. These
archetypes may then be translated into APPROPRIATE EFFECTIVE or INAPPROPRIATE INEFFECTIVE
iLpersonal types.

Figure 10.3 W.J. Reddin: Leadership and management behaviour

Appropriate, effective
e Bureaucrat: low concern for both task and relationships; appropriate in
situations where rules and procedures are important.
e Benevolent autocrat: high concern for task, low concern for relationships;
appropriate in task cultures.
e Developer: high concern for relationships and low concern for tasks; appropriate
where the acquiescence, cooperation and commitment of the people are paramount.
e Executive: high concern for task, high concern for relationships; appropriate
where the achievement of high standards is dependent on high levels of
motivation and commitment.

188
 =

Inappropriate, ineffective
e Deserter: low concern for both task and relationships; the manager lacks
diysiap
involvement and is either passive or negative.
e Autocrat: high concern for task, low concern for relationships; the manager is
coercive, confrontational, adversarial, lacking confidence in others.
e Missionary: high concern for relationships, low concern for task; the manager’s
position is dependent on preserving harmony and there is often a high potential
for conflict.
e¢ Compromiser: high concern for both tasks and relationships; manager is a poor
decision maker, expedient, concerned only with the short term.

The contingency and best fit approaches to leadership draw attention to the
specific requirement and priority to be effective in the given organization, environ-
ment, and present and evolving set of circumstances, as well as drawing attention to
the critical need for an effective style. The question therefore arises as to whether or
not individual leaders are capable of varying their style in response to demands; or
whether it is necessary to have leaders with particular styles at which they are expert
according to the precise nature of circumstances and demands.
The consequence is that leadership is in turn itself becoming more specialized
and compartmentalized. In this context, it is usual to identify different types of leader,
and the balance of their expertise and effectiveness, as follows.

e Pioneer: pioneers and pioneering leaders establish and create new products,
services, brands, ventures and markets. Pioneers have a clear vision of what is
possible, and through their commitment, energy, enthusiasm and ambition, they
use their expertise to create and energize whatever is proposed, and see it into
existence, effectiveness and profitability. Pioneers may however become
ineffective once a particular venture is established, secured and viable.
e Transformational: transformational leaders undertake major initiatives and
ventures on behalf of organizations that require ‘transforming’ in some way. Often
appointed purely to see the particular initiative through, transformational leaders
must be able to assimilate and become authoritative, comfortable and familiar in
a new organizational setting very quickly and effectively.
e Second in command: all organizations need a ‘second in command’, a deputy
CEO; someone to take the place of the overall leader whenever they are not
present for any reason, and someone to act as a sounding board, confidant,
reflector and analyst at top organizational levels. The second in command has to
have their own strength of character and expertise in order to be able to debate,
argue — and disagree when necessary — with persons more senior than themselves;
and additionally to deliver their own expertise in ways credible and acceptable to
powerful and expert personalities.

189
 42) From number two to number one
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There are sufficient examples of where an excellent deputy has not made the transition
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successfully to the top job to draw attention to the differences between the two.
The person in charge is ultimately accountable to all stakeholders, and responsible for
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pue delivering the results desired and demanded. This is very different to acting as a sounding
board during the process of ensuring that the results are delivered; or ensuring that condi-
tions are being met for entering into a specific venture or range of products and services.
The person in charge is the figurehead and point of identity of the company or organi-
zation; and the deputy is not. Anyone who moves up from second to first has to create an
identity and focus for themselves in exactly the same way as someone who would have
been appointed from outside the organization.
Many deputies use their elevation and new position to introduce pet schemes, projects
and ventures that they have nurtured under the previous regime, but which have so far
been rejected. Such schemes and ventures require the same degree of rigour and evalua-
tion as under the previous regime.
Many former deputies fail to appoint their own adequate deputy; and this results in
not having the capabilities and character close by, as confidant, sounding board and evalu-
ator, that the new number one used to provide so effectively.
Many former deputies know, believe or perceive that they are themselves on trial, under
pressure to deliver early and high profile results. Everything then becomes concentrated
on producing a triumph, whether or not this is in the longer-term best interests of the
organization and its stakeholders.

e Corporate: corporate leaders are appointed to serve the interests of primary and
dominant stakeholders; and this normally means the shareholders and their
representatives. Problems arise when the returns to shareholders are not made for
some reason. Problems additionally arise when someone who has been successful
in one industry or company and is engaged on that basis, subsequently
encounters problems in the new organization.
e Strategic leader: strategic leaders are engaged because of their capability in
seeing and envisioning the direction that a company or organization ought to take
over the medium to long term. The key need for strategic leaders is the ability to
engage the quality and standing of expertise required to translate the vision and
strategy into action and achievement.
¢ Operational leader: operational leaders are those who provide clear leadership
and direction to those who work for them when they themselves are working to a
clear remit given to them by the organization. The best operational leaders do not
normally make fully effective pioneers or creators. Indeed, to be effective in a chair
or CEO role, corporate leaders normally have to have been given a clear remit or set
of targets or directions by those who appointed them, especially shareholders.

190
 =

e Team leader: leadership is required of all those in any position of responsibility;

and team members will look to (and look up to) their leader or supervisor to
address and resolve problems when these arise, and in times of crisis or difficulty, diysiap

as well as for assistance with general and operational matters and issues that rise
during the course of the normal working day and pattern.
e Problem-solver and crisis leader: problem-solvers and crisis leaders are
appointed to get an organization out of a mess. Problems and crises may relate to
stock market, product or service performance; or to scandals, negligence or
incompetence. The key here is the ability to master the brief; and additionally to be
able to address and resolve the particular problem, while at the same time restoring
morale and reputation. The organization has to be left strengthened by the actions of
the leader in this context; it is no use solving one problem but leaving others.

er It ought to be clear from the points above that there is a great range and complexity of
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demands placed on leaders in different positions and situations. Sometimes, all of this is
within one person's capability; sometimes, and completely legitimately, the leadership
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needs to change in order to respond to different problems, issues and circumstances. There
is no hard and fast rule for this; each situation needs to be considered on its own merits.

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The leader as servant
=
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=> When Winston Churchill was appointed prime minister of Great Britain in 1940, his imme-
=
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= diate response was: ‘| am now the leader. Therefore | must serve’.
It is an often neglected part of the understanding of leadership that part of the role is to
serve and support the rest of the organization, and ultimately its suppliers, customers and
clients (see Figure 10.4).

Markets, customers, clients

— Frontline staff

Support staff

\ Manager —

The manager or supervisor is placed at the bottom point, supporting

and serving the workforce rather than sitting on top of it.
Figure 10.4 The inverse pyramid

191
 As well as emphasizing one key position that all leaders ought to be able to operate
in and respond to, it also relates directly to the expectations of those working in
operational and other functions. They will expect that the leader will provide
resources, technology and equipment; and they will expect also that when crises and
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emergencies do occur, they can turn to the leader to get them out of whatever mess
there may be.

Measures of success and failure

The performance of those in leadership positions is assessed in simple terms against
whether they delivered what they set out to achieve, or not, and the reasons for their
success or failure. The broader approach to the assessment of performance of those in
leadership positions relates to the key questions of confidence and complexity.

Confidence
Those who appoint others to leadership and managerial positions are normally confi-
dent at the outset that they have got the right person for the job; and following
appointment, the development of mutual confidence is essential. Once those in lead-
ership and managerial positions have lost the confidence of the people who appointed
them, they normally leave.
For example, the chair of a publicly quoted company must maintain the confi-
dence of the world’s stock markets. If they do not, the share price falls. If the
share price continues to fall, whatever the activities and directions proposed, the
leader will normally have to leave. The need to go may also occur as the result of
a bad set of company figures, either for a period or on a more continuous and
long-term basis.
Confidence can also be lost among backers and stakeholders, the markets in which
business is conducted, and the communities in which activities are carried out.
Confidence may also be lost where a high profile leader who is identified fully with
the company suddenly leaves for some reason. This leads to a void being created; and
so confidence in the company is lost as the result of the leader’s departure. Where
this is likely to happen, it is essential that key stakeholders, including backers and
financial interests, take active steps to ensure that the person in question is replaced
as quickly as possible.
Finally, confidence is only maintained through honesty and integrity. Where the
leader (of anything) is caught lying, the clear, instant and unambiguous message
given out is that ‘he/she is a liar’. Any subsequent dealing or transaction with this
particular individual is therefore invariably prefixed by questions of the extent to
which they may be trusted. It is in turn exacerbated during briefings for those who are

192
 P)
to be involved with them along the lines of ‘don’t believe a word they say’ and ‘get
something in writing and get their signature’.
diyssap

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The relationship between leadership and confidence is heavily dependent on perception.
G
a
© In many cases, the judgements placed on leaders arise out of whether others think that
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they are doing a good job (whether in fact they are or not).
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Complexity
Measures of success and failure will also address the question of what else was
achieved during the particular period of office. The direction taken may have opened
up a great range of subsequent opportunities and a part of this measurement will
relate to the extent to which these were exploited.
This is also to be seen in the complexity indicated. The hard targets may be
achieved, for example, but only at the expense of the soft — the destruction of staff
relations, motivation and morale. Conversely, a superbly integrated and supportive
group may be built but one that never actually produces anything of substance. The
targets that were set may turn out to have been unmeasurable, hopelessly optimistic
or, conversely, far too easy. In the latter case in particular, it is both easy and
dangerous to indulge in an entirely false sense of success.
The legitimacy of the objectives and performance targets must also be generally
and constantly questioned. To return to the hard examples quoted above — increases
in output, profit and cost effectiveness by «% should always be treated with scepti-
cism. They assume that the basis on which the percentage is calculated is legitimate
and valid. They assume that this constitutes the best use of organization resources.
They assume (this especially applies to public services) that adequate and effective
activity levels can be maintained.
It should be clear from this that the setting of organization performance targets is a
process capable of rationalization and founded on the understanding of general
organization requirements. In the particular context of leadership, it should be clear
also that ultimate responsibility for the success/failure in achieving these targets
rests with the leader.
It is also clear that leaders are made and not born. People can be trained in
each of the qualities and elements indicated so that (as with anything else) they
may first understand, then apply, then reinforce and finally become expert in these
activities indicated. This is understood to be on the same basis as aptitude for
anything else however. Not everyone has the qualities or potential necessary in the
first place. There is nothing contentious in this — not everyone has the qualities or
potential to be a great chef, racing driver, nurse or labourer, and in this respect
leadership is no different.

193
 @
x Peters and Austin on leadership
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Peters and Austin (1985) identified a comprehensive list of factors, attributes and priorities
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= present in a ‘leader’; and these they contrasted with those of the ‘non-leader, as follows:

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‘Leader Non-Leader _
e Carries water for people Presides over the mess
Open door problem-solver, advice giver, Invisible, gives orders to staff, expects them to
cheerleader be carried out
e Comfortable with people in their workplaces Uncomfortable with peopie
e No reserved parking place, dining room or lift Reserved parking place and dining table
e Manages by walking about Invisible
e Arrives early, stays late In late, usually leaves on time
e¢ Common touch Strained with ‘inferior’ groups of staff
e Good listener Good talker
e Available Hard to reach
e Fair Unfair
e Decisive Uses committees
e¢ Humble Arrogant
e Tough, confronts nasty problems Elusive, the ‘artful dodger’
e Persistent Vacillates
@ Simplifies Complicates
e Tolerant Intolerant
e Knows people's names Doesn't know people's names
e Has strong convictions Sways with the wind
e Trusts people Trusts only words and numbers on paper
e Delegates whole important jobs Keeps all fiinal decisions
e Spends as little time as possible with outside Spends a lot of time massaging outside
directors directors
Wants anonymity for him/herself, publicity Wants publicity for him/herself
for the company
Often takes the blame Looks for scapegoats
Gives credit to others Takes credit
Gives honest, frequent feedback Amasses information
Knows when and how to discipline people Ducks unpleasant tasks
Has respect for all people Has contempt for all people
Knows the business and the kind of people Knows the business only in terms of what
who make it tick it can do for him/her
e Honest under pressure Equivocation
e Looks for controls to abolish Looks for new controls and procedures
e Prefers discussion rather than written reports Prefers long reports
e Straightforward Tricky, manipulative
e Openness Secrecy
As little paperwork as possible As much paperwork as possible
Promotes from within Looks outside the organization
Keeps his/her promises Doesn't keep his/her promises
Plain office and facilities Lavish office, expensive facilities
Organization is top of the agenda Self is top of the agenda
Sees mistakes as learning opportunities Sees mistakes as punishable offences and
and the opportunity to develop the means of scapegoating
.
Source: adapted from Peters and Austin (1985) A Passion for Excellence: The Leadership Difference. Harper and Row.
©

194
 = i)

Conclusions
In business, commercial and public service sector organizations, leadership is that
diusiap
part of management that provides the vision, direction and energy that gives life to
policy, strategy and operations. It provides everyone involved — above all, the staff,
but this also applies to suppliers, customers and community groups — a point of iden-
tity and focus, a personification of the organization with which they themselves are
involved, and with which they are dealing. Problems always occur when the leader,
for whatever reason, is either unwilling or else unable to accept the full responsibili-
ties of the position. These problems are compounded when it becomes known,
believed or perceived that the leader is acting without integrity, and is seeking to
blame either circumstances or else other people for organizational, strategic and
operational shortcomings. In these cases, staff only remain in employment so long as
they believe it in their interests to do so; and this invariably leads to the early loss of
good and high quality staff. Problems also arise when leaders accept their responsi-
bilities to one group of stakeholders in preference to others — this is a serious problem
in large public and multinational corporations when senior managers discharge their
responsibilities to shareholders, political interests, and the drives of boards of direc-
tors and governors, at the expense of staff, suppliers, customers and clients.
Those who aspire to leadership positions must therefore be prepared to accept that
there are certain qualities that go with the job — above all, enthusiasm, ambition,
clarity of purpose, energy and direction — and must be prepared to develop these as
the condition of employment in these positions. It is also important to recognize that
this part of management development cannot be achieved except through a period of
long-term prioritized intensive and demanding training, supported with periods of
further education either at a university or conducted through the private sector. It is
impossible to develop leaders purely on the basis of single or isolated short periods of
training, unsupported by activities at the workplace. Moreover, it must be stressed
again, that the best practitioners of a particular trade, profession or occupation do not
necessarily make the best leaders and managers of groups of these staff. Assessment
for leadership and management potential must be carried out on the basis of the
ability to observe the fledgling qualities required, rather than existing professional
and technical expertise.
It ought to be clear from the content of this chapter that leadership can be taught,
learned and developed. The qualities, traits, styles and approaches indicated can all
be learned; there is nothing magical or mystical about them. Organizations requiring
the development of the next generation of their top and senior figures ought therefore
to concentrate on these aspects, and identify members of staff who have them and
who are capable of, and willing to be, developed for the future.
It is clear therefore that leadership development is going to become very much
more important in the future. Organizations are certain to value much more highly the

195
 all-round capabilities and willingness to accept responsibility of those whom they
place in top positions. In the medium to long term, the ability to satisfy dominant
shareholder or political interests is certain not to be enough.

=
e Leadership is a key part of management that has its own distinctive expertise and set
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of demands.
e There is no ‘one right way’ of leading and directing organizations or activities within
them; different companies, staff groups and situations require different types and styles
of and approaches to leadership.
e The range of situations faced by leaders means that in some cases, a single leader will
be capable, adequate and able to deal with everything; in other cases, a change in
leadership Is required.
e All those in leadership positions must be prepared to act as a focal point and point of
identity for all the staff groups and stakeholders that they serve.
e The development of leadership expertise is certain to be much more important and
critical in the future. Leadership expertise is becoming evermore sought after and
prized by all organizations.

Further reading
Adair, J. (2004) Inspirational Leadership. Arzow.
Anderson, M. (2010) The Leadership Book: How to Deliver Outstanding Results. Pearson (FT series).
Blanchard, K. et al. (2010) Leadership by the Book. Sage.
Kotter, J. (2009) What Leaders Really Do. Harvard Press.
Peters, T. and Austin, N. (1985) A Passion for Excellence: The Leadership Difference. Harper and Row.
Ratcliffe, S. (2009) Leadership Plain and Simple. FTPitman (FT series).
Reddin, W.J. (1970) Leadership and Management Behaviour. McGraw Hill.
Schein, E. (2010) Organizational Culture and Leadership. Jossey Bass.

196
 PART

Strategy,
policy,
direction and
priorities

he best, most profitable and most effective organizations are those clear about what
they are doing; how, when, where and why they are doing it; for whom they are doing
it; and what they intend the results to be. This can only be achieved, however, if a
clear core or foundation for activities is established, and this is because everything
else emerges and is developed from the core or foundation position.
For the sake of this clarity, organizations and their managers therefore need to
establish and agree this foundation. This is because if those who are responsible for
the direction of organizations are not themselves clear about this, they cannot expect
anyone else to be either.
Once the core is in place, everything else can then be developed in support of this
position. Marketing strategies and operations present the quality and benefits of the
products and services on offer, in alignment with the overall intentions of the organi-
zation. The financial position can be clearly established, and the financial returns
and rewards anticipated.
For this to be successful and effective, it is usual to recognize the core position as
depending on one of the following.

e Cost leadership and advantage, in which products and services are produced to
the maximum/optimum cost-effective position. Investment is driven by the need
for production and service delivery technology that can deliver products and
services to a sustainable position of cost advantage.
e Brand leadership and brand advantage, in which everything is driven by the need
to secure a set of brand values and the real and perceived product and service
quality as the result. Marketing and promotion are therefore a priority, and so

197
 investment is required in driving, building and developing brand identities, again
reinforcing the core position and giving clarity and consistency.

If it is not possible to secure either a cost advantage or brand leadership, the

organization needs a distinctive alternative core position on which customer and
client confidence can be secured and built, and on which the foundations of endur-
ingly profitable and successful operations can be developed.
Part Three therefore deals with everything necessary to ensure a full understanding
of the establishment of a core position, and the integration of all the other aspects into
‘A8a1e195
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pure
enduringly effective and productive activities. Chapter 11 covers the establishment
of strategy, policy, direction and priorities. Chapter 12 covers marketing, both from a
strategic and also an operational point of view, indicating how all marketing activities
reinforce the development of enduringly profitable business activities.
Chapter 13 covers the different aspects of the management of projects and opera-
tions, recognizing that there are organizational and managerial aspects that have to
be present if viable activities are to take place. Chapter 14 covers the nature of finan-
cial management, including how to analyse financial performance and manage
finances effectively. Chapter 15 covers the nature of organizational performance, and
all the different aspects and factors that have to be addressed.

198
 All organizations
have an absolute
Strategy, need for clear
strategy.

policy and
direction

11
In this chapter
e what business and organization strategy are, and what they are not
e the need for a clear core and foundation position as the basis for effective
activities and the ability to compete
e developing an effective and enduring strategy process using different
approaches
e integrating organization sub-strategies with the main drives and priorities

Introduction
No organization is ever going to be fully effective unless it has a clear reason for exist-
ence and clearly defined direction, purpose and priorities. In other words, a strategy is
needed. The overall purpose of strategy is to guide and direct the inception, growth
and change of organizations as they conduct their activities. The purpose of this
chapter is an introduction to the essentials of corporate policy and strategy; the form
that it takes in different types of companies; the variations in strategy between compa-
nies, public services and other sectors; the issues involved in devising policy and
strategy; and the development, implementation and evaluation of policy and strategy.

ue}
2)
What strategy is not
5a
cs
e) The aim of all industrial, commercial and public service sector organizational strategies,
=
®
=
policies, purposes and directions should be: long-term existence in a competitive and
turbulent world.

199
 Anything that does not contribute to this should not be contemplated. Strategy there-
fore is not:

e aproduct of focus groups contemplating what would happen in a hypothetical or

imperfectly modelled set of circumstances;
e astatement of blandness or general intention that binds nobody to anything;
e about prestige, triumphalism, vanity or image — except where these factors can also be
translated into successful, profitable and enduring activities;
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e about growth, expansion, pioneering or exciting adventures into new and unknown
territories unless underpinned by a clear rationale.

These approaches invariably lead to the avoidance of the real issues of: matching
opportunities with resources; accepting the consequences of particular choices; concen-
tration on one group of stakeholders at the expense of others; determining to satisfy all
groups of stakeholders as far as possible; and above all, ensuring that everything is driven
by the required and desired volumes and quality of product and service delivery. q

A clearly articulated, accurate and understood strategy is at the hub of all

successful commercial and public activities. Where success is not forthcoming, it is
often where this clarity of purpose is also not present. This clarity additionally gives a
standpoint for the need and capability to manage resources effectively and efficiently;
and this continues to be intensified by requirements for greater accountability in both
public and private sectors.

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Core foundation and generic strategies
In order for this clarity to exist, all organizations need a core foundation or a generic
strategic position on which to base all the rest of their activities. Porter (1980, 1985)
identifies three generic positions from which all effective and profitable activities arise:

e Cost leadership: the drive to be the lowest cost operator in the field. This
enables the absolute ability to compete on price where necessary. Where this is
not necessary, higher levels of profit are achieved in both absolute terms and also
in relation to competitors. To be a cost leader, investment is required in ‘state-of-
the-art’ production technology and high quality staff. Cost leadership
organizations are lean form with small hierarchies, large spans of control,
operative autonomy, simple procedures, and excellent salaries and terms and

200
 = =v

conditions of employment. The drive for cost leadership and cost advantage is
essential in any strategic approach that seeks: mass market/mass volume products
and services for which price is the overriding benefit to customers; and public
services and utilities delivery.
e Focus: concentrating on a niche and taking steps to be indispensable. The
purpose is to establish a long-term and concentrated business relationship with
distinctive customers based on product confidence, high levels of quality, utter ‘ABarIe1
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reliability and the ability to produce and deliver the volumes of products required
by customers when required. Investment is necessary in product technology and
staff expertise. It is necessary to understand the nature of the market and its
perceptions and expectations. It is also necessary to recognize the duration of the
market, where developments are likely to come from and the extent to which
these can continue to be satisfied.
e Differentiation: offering homogeneous products on the basis of creating a strong
image or identity. Investment is required in marketing; advertising; brand
development, strength and loyalty; and outlets and distribution. Returns are
generated over the medium to long term as the result of cost awareness, identity,
loyalty and repeat purchase.

Porter argues that the common factor in all successful strategies is clarity and that
this stems from adopting one of these positions. Organizations that fail to do this do
not necessarily fail themselves; they do however fail to maximize and optimize
resources. Having said that, it is clearly possible to engage in long-term and profit-
able activities for organizations that are not the cost or brand leader; for example,
there are four major supermarket chains in the UK (and many other smaller
providers); and there are up to 20 very profitable and effective car manufacturers and
suppliers. However, long-term, secure and profitable existence and viability are only
possible for those organizations and their managers that are prepared to accept the
constraints of these positions and develop a market share and products and services
that are neither cost leaders nor brand leaders. It is also essential to recognize that,
especially in difficult times, people will tend to gravitate towards what they know,
believe, perceive and understand to be the cost or brand leader.

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The development of strategy, policy and direction

Corporate strategy is the outcome of a series and pattern of decisions that determine
the organization’s aims, objectives and goals; that produce the plans and policies

201
 required to ensure that these are achieved; that define the business in which the
organization is to operate; and how it intends to conduct this business and what its
relations with its markets, customers, staff, stakeholders and environment will be.

The internet revolution

The inability to attract, retain and serve customers on an enduringly commercial basis is a
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ups was driven by:

e fashionability and faddishness, based on extensive media coverage and public relations
activity surrounding what was perceived to be a new generation of entrepreneurs;
e the perceived technological supremacy of the internet and its infallibility as a
commercial medium;
e environmental pull — in which those who were known, believed or perceived not to be
at the cutting edge of technology were deemed to be obsolete or boring;

unfortunately:

e nobody considered the customer, consumer, client or end-user aspect in any detail;
e nobody considered how the levels of investment made in internet organizations were
to generate returns, or where and wnen these would arrive.

The problem was also compounded by the attitude adopted by many of the new
venturers and entrepreneurs when their companies ceased to trade. One virtual shoe
retailer stated: ‘It was a iovely place to work, and we still can’t think of anything we have
done wrong.
Another, a virtual cookery and recipe production company, stated: ‘We assumed that
further investment funds would be forthcoming on exactly the same basis as they had
been before’
The organizations that have succeeded using the internet as their hub of activities are
those that have concentrated on the enduring commercial drives in this context. Amazon,
the online retailer, continues to sustain business viability through high volume, low profit
margin approaches to sales. Google, the search engine company, makes its profits through
its ability to sell advertising space alongside search results. Supermarket and department
store chains generate internet sales largely as the result of customer familiarity with their
products and services, gained over many years of traditional retail shopping.

Operational policies are based on the choices made within the overall strategic
view. They are based upon a continuous appraisal of current and potential markets
and spheres of activity; the ability to acquire, mobilize and harmonize resources for

202
 = =|
the attainment of the given aims, objectives and goals; and the actual means of
conduct, including philosophical and ethical standpoints, and the meeting of wider
social expectations (see Figure 11.1).
Effective strategy development requires that the following are understood and
assessed in detail.

e The level of finance and capital required in order for the operation to be ‘A8aI1e
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established and maintained successfully.
e The levels of income, surplus and profit that the organization needs to make and
wishes to make.
e The structure of the organization that is appropriate for those operations to be
carried out.
e The management style that is to be adopted and the style of leadership, direction
and supervision.

EXTERNAL CONDITIONS INTERNAL

AND TRENDS CONDITIONS

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Figure 11.1 Source and development of organization strategy

203
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Whatever you decide to do, you have to relate your own expertise and ambitions to what
is (and is potentially) available in the market in terms of customer and client bases, and
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e The priorities that are to be placed on each of the operations; the markets and
sectors in which business is to be conducted.
e The timescales involved, especially where these are long term, and therefore
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viability and existence is to be contemplated, is often in direct conflict with financial,
competitive and other stakeholder drives for short-term, indeed immediate, financial
results and advantages. Timescale issues have to be known and understood, however, if
strategy development is to be successful. For example:

e The airline industry: it was not until the 1930s, a generation after the first manned
flight took place, that anyone was able to produce a sustainable, commercially
profitable airline, operating on a regular schedule of routes. The concept of flight as a
means of mass travel took 35 years to develop into something that was commercially
viable. The airline industry has time constraints around each one of its core operations.
It is only possible to change route networks and destinations during periods when
landing and take-off slots are made available. It then takes time to build a customer
base, familiarity and confidence in the viability and permanence of the new routes.
There are timescale issues at departure and arrival points (the need to check in early
for security reasons; the need to wait for baggage to be delivered to the arrival halls).
e The airliner industry: it is additionally the case that new generations of airliners take
many years to develop. The Airbus A380, the largest plane ever built and capable of
carrying up to 800 passengers, took 10 years from conception to delivery. Demand for
medium-size airliners capable of travelling long distances without refuelling has also
led to commitments of between 5 and 10 years on the part of both Boeing and Airbus,
which remain the world's dominant suppliers of commercial planes. These constraints
go directly against the short-term pressures for financial results. It is true that both
Boeing and Airbus deliver continuing financial results in the form of continuing sales of
existing products. The need to commit to the level of resources required over the long
term to ensure that the industry and companies are able to sustain themselves and
produce the next generation of products remains, however, an essential feature of the
industry; and those responsible for backing strategic development have to know,
understand and accept this, or else move their funds elsewhere.

204
 ==

The foundations of organization strategy

It is usual, having defined the core position, to establish:

a grand strategy, which is a clear statement of the vision and direction of the
organization, customer bases served, and the quality and value of the products
and services on offer;
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sub-strategies, which define the internal strategies and policies required to ensure
long-term organizational effectiveness and viability, relating activities to the
grand strategy.

Internal strategies and policies

Effective and successful organization strategy is dependent upon integrated and
complementary internal policies as follows.

Financial, investment, budgeting and resourcing strategies, concerned with

both the underwriting and stability of the organization, and also the maintenance
of its daily activities.
Human resource strategies designed to match the workforce and its capabilities
with the operational requirements of the organization; and related policies on
ensuring the supply of labour; effective labour relations; and the maintenance and
development of the resource overall.
Organizational design and development so that the required size, scope,
structure, technology and expertise are in place.
Marketing strategies, designed to ensure that the organization’s products and
services are presented in such ways as to give them the best possible impact and
prospects of success on the chosen markets.
Capital resource and equipment strategies, to ensure the continued ability to
produce the required value and quality of output to the standards required by the
markets; and to be able to replace and update these resources in a planned and
ordered fashion (that is, including research and development and commissioning
of new products and offerings).
Communication and information strategies, both for the organization’s staff and
its customers/clients, designed to disseminate the right quantity and quality of
information in ways acceptable to all.
Organization, maintenance, development and change strategies, for the
purpose of ensuring that a dynamic and proactive environment is fostered; a
flexible and responsive workforce; and an environment of continuous
improvement and innovation.
Ethical factors including establishing overall standards of attitude and
behaviour; absolute standards in dealings with customers, suppliers and the

205
 community; specific approaches to the environment, corporate citizenship; the
nature and quality of leadership.
Subjective elements — a recognition that strategy is a process, requiring
particular clarity and direction, ought also to ensure that subjective elements,
reflecting collective and individual preferences and priorities, are examined in
order to establish that they deliver value to the organization and contribution to
its long-term viability. If this cannot be proved or demonstrated, then subjective
elements need to be removed.
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The outcome of all of this ought to be a business model — a fully integrated direction
and purpose for the organization. The business model then needs to be translated into:

a clarity of overall purpose which is capable of being conveyed to what customers,

clients, staff and backers expect to see;
a reflection of the organization size, structure, location and standing;
a product and service portfolio which the organization can produce to the quality
and volume demanded by customers and clients;
a clear knowledge and understanding of where value is being added and lost;
a clear knowledge and understanding of the value placed on products and
services by particular groups of customers and clients;
a clear knowledge and understanding of the regularity and frequency with which
purchases will be made.

Additionally and crucially, the outcome is a clearly defined position for future devel-
opment, as well as present activities. It therefore ought to be clear that strategy is a
process and not an activity.

Core and peripheral activities

Core activities
Core activities reflect primary purpose and may be assessed in terms of:

volume of activity: what most people do, or what most resources are tied up in;
profit and income: where most of the money comes in from:
image and identity: that which gives the organization its position, status and
prominence in the sphere in which it operates;
perceptions: what people, especially customers, clients and backers, think your
core business is, and what they are prepared to get involved with.

Peripheral activities
These are the other activities in which the undertaking gets involved. They must not
be at the expense of the main or core activities, nor should they be a drain on

206
 ==

resources. Rather they should enhance the core activities, or reflect niche or segment
opportunities that exist as the result of the core business. Such activities will never-
theless be essential, expected, and extremely profitable. A hospital is not ‘in busi-
ness’ to sell food, sweets, newspapers, books, cards, fruit and flowers; nevertheless, it
is essential for a variety of operational and social reasons that these activities are
undertaken. Similarly, a car company will invariably make additional parts for the
replacement, service and spares sectors; these simply require some form of repack- ‘A8a1e1
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aging or ‘differentiation’ to generate additional business in an obvious and profitable

area of activity.

Strategies for failure

While it is impossible to predict with absolute accuracy where success and failure
are likely to occur — especially if a rigorous approach is not taken — it is possible to
indicate likely causes of failure. These are:

e Increased price/standard value: risks loss of market share, especially where lower
price, undifferentiated alternatives are available to the same quality and value.
e High and increasing prices/low value: this is unlikely to be sustainable in the
long term in anything but a monopoly situation. Where perceived quality and
value for money are not forthcoming, customers and clients will change from
using such organizations if they have any choice in the matter at all.
e Standard price/declining value: this occurs where people continue to pay the
same price for products and services, but where the volume and/or quality are
decreased. This position is only sustainable as long as the declining value
nevertheless continues to meet customers’ expectations. When this ceases to be
so, customers will look elsewhere for satisfaction.
e Low value/standard price: in these cases, customers and clients perceive that
they are over-paying for a reduced or basic level of benefits and satisfaction.
Especially where there is no cost advantage possible, organizations finding
themselves in this position are at immediate risk either from others who improve
quality and value levels, or from those who reduce prices in order to reflect
existing levels of quality and value.
e Present activities, products and services/unknown markets and sectors:
this occurs where assumptions are made that, because the organization is
successful in its existing markets, other markets will also value the products and
services. It is essential that new markets are tested before commitment is made so
as to be sure that there is indeed space in the sectors targeted.

Any strategic approach that is based on each of these is sustainable only as long as
there is a relatively captive medium to long-term customer and client base. For
example, petrol retailing manages to secure medium to long-term advantages under

207
 the heading of increased price/ standard value simply because their product is
such a fundamental commodity of the present state of civilization. Some privatized
health and social care organizations are able to sustain themselves under increased
price/low value and low value/standard price because of the political drive to
place clients of these organizations; and the activities are underwritten to some extent
by government policy and willingness to pay. Nevertheless, serious disadvantage is
certain to be reached if there is ever a political drive to improve the quality and value
aspects, or if new organizations come into the sector able to deliver the quality and
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In recent years, as the result of the internet revolution, a further indicator of likely
failure has become apparent:

e Standard price/low convenience: in which customers and clients are required

to search for products and services on the internet. Even assuming that the
correct company website can be found, problems are often compounded by the
fact that while the site is technologically brilliant, it is customer and end-user
unfriendly. It is also increasingly apparent that, at least in commercial—consumer
transactions, it is essential for the virtual presence to be reinforced by helplines,
or increasingly, an access to a physical presence alongside.

Strategic approaches
All effective organization strategies must have the following components.

e Performance targets, in whatever terms these are to be measured (for example

income, volume, quality, but set against measurable, understandable and
achievable targets).
e Deadlines that are achievable, that have been worked out in advance, and that
represent a balance between commitment, resources and contingencies.
e Contingencies built in, to cover the unlikely, and the emergency.
e Consideration of the long-term effectiveness of the organization, as well as
short-term results.
e Consideration of the organization’s products and services in terms of value and
quality, and utility to customers, clients, consumers and end-users.

Outcomes
Outcomes should be pre-evaluated in terms of the following (see Figure 11.2). In
particular, the level of bare acceptability of the outcome of a particular strategy
should be assessed at the stage of devising strategy.
Outcomes should be extrapolated from each of these positions to try and envisage
the following stage of the organization’s activities and the wider implications for the
short, medium and long term.

208
 —
Having established the need for a core foundation or generic position, the main
approaches to strategy, development and implementation are as follows.

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does go right does go wrong

Best: what is the greatest level of success that we can possibly gain by following this course of action
Worst: what is the worst level of failure that can be achieved (if that is the right word) if everything
that can go wrong does go wrong
In between: a range of outcomes under the general heading of ‘medium’ or ‘acceptable’

Figure 11.2 Pre-evaluation of strategy, policy and direction

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Growth strategies
Growth is measured against preset objectives, whether in terms of income, profit
margins, shareholder value, reputation enhancement, income per customer, income per
location, income per product, market share, sales volume and new products and sery-
ices. Required, expected or anticipated measures of growth, and the reasons and
timescales for these, must be stated in advance. How such strategies are to be supported,
financed and resourced, and the implications of this, must also be clearly stated and
understood. The staff concerned must know this and the implications involved.
Acquisitions, mergers and takeovers are all variations on the theme of growth.
Again, these approaches must be set against preset objectives, and with the overall
view to enhancing the profitability and/or quality of the business. In support of this,
what may actually happen is to introduce the organization into new geographical
areas to increase the sectoral position; it may also help to defend and protect the
organization’s own position.

209
 Such activities may also include the acquisition of suppliers and distributors and
sources of raw materials; this is known as ‘vertical integration’.
They may additionally represent niche opportunities, the ability to get into new
and profitable market sectors, to purchase the client list, resource or base of a
competitor, or parallel operator.

a Whenever proposals for growth are being considered, you always need to ask yourself: ‘Is
growth a good thing; and if so, why?’ It is very easy to be led down the path that ‘all growth
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resources that are presently available or by those that can be made available on a cost-
effective basis.

Retrenchment
Retrenchment is usually the withdrawal from niche or peripheral activities; the sale
of assets; the concentration on the core activity. It need not have negative connota-
tions; for example, an organization may sell off its lorry fleet and lease lorries at a
time of credit squeezes and high interest rates. On the other hand, where there are
negative connotations, effective retrenchment will have the overall purpose of
protecting the core business and the certain markets (in so far as there are any) at the
expense of the niches in which the organization has been operating.
Retrenchment in relation to core activities may need to occur as the result of
changes in market demands, and customer needs and wants. Retrenchment from core
activities becomes serious when it calls into question the overall viability of the
organization’s primary ranges of products and services; and if this is truly necessary,
organizations normally need to have something with which to replace them.
Retrenchment activities in public services are very often the cause of operational
crisis because there has to be every attempt to maintain the level of service against a
declining budget provision.

Diversification
This is where organizations take the conscious decision to move into new markets and
activities, very often in spite of the fact that there is no particular expertise in the new
chosen field. Expertise in the new field, and the assimilation of its modus operandi,
must be acquired by the organization if it is to be successful.
In practice, most effective and successful diversification strategies follow the vertical
integration patterns, moving into new sectors that are clearly indicated by the current
core business. For example, the Murdoch organization moved into satellite television; it
had no particular expertise in television or satellite technology but, looked at from a
different standpoint, was a major player in mass media and communications.

210
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The Virgin Group
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The move by the Virgin Group into the business ofairline operation, financial services and
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it required extensive research, projections, expertise acquisition, and market understanding
on the part of what was hitherto essentially a chain of shops. There were certain assets
perceived by the group of which it could take advantage as it moved into other areas — a Adijod
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large customer base, strong UK image, reputation for quality, and public confidence;
however, these were qualities that had, in practice, to be refashioned by the new airline for
itself. Moreover, any failure on the part of the new venture would have had serious conse-
quences for continuing and future confidence in the rest of the group’s activities.
The Virgin Group's approach to involvement in new ventures is based on:

e the proposed new sector of activities is already well established and served by other
providers;
e the service provided by other organizations falls short in some way — especially
perceived customer satisfaction;
e there must be commercial and profitable potential for engagement in ‘the Virgin way’;
e there must be potential for developing the sector using the existing Virgin customer
base;
e there must bea sense of fun and adventure.

Provided that any proposal meets at least four of these points, the company will consider
it seriously,

Price leadership
The organization in this case sets out to gain the reality and the reputation of being
the market player with the lowest prices, and to ensure that everyone who purchases
from the organization knows this. This will not be entirely at the expense of quality:
products and services still have to be good enough to attract people to purchase in
the first place.
Some price leadership activities are spectacularly successful such as the sale of
petrol by British and European supermarket chains. Supermarkets in Europe and
North America do adopt ‘pile it high, sell it cheap’ strategies, but this is generally
limited to certain products. ‘Do-It-Yourself’ chains will generally have some prod-
ucts at good prices for the consumer. The concept is most widely developed as ‘loss
leadership’, rather than as price leadership. The IKEA furniture chain, however, is
making attempts at present to expand across the countries of the EU, on the
premise and image that all its prices are low and represent better value than the
indigenous competition.

211
 Branding strategies
Branding strategies concentrate on using a combination of marketing, operational,
technological and professional activities in order that an instant perception of the
company product or service in question is fixed in the mind of the customer or client
(and also the community at large) immediately they see the brand name. A strategic
approach to branding usually considers one or more of the following points of view.

e Global branding: examples are McDonald’s and Coca-Cola, whereby a set of

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convenience — are presented in ways that will generate the maximum response
from the particular location in question.
e National: in which particular marketing strategies are devised to generate the
required responses among particular nations of the world.
e Organizational: in which the organization seeks to attach organizational values
to any line of business or activity into which it chooses to go. For example, Virgin
attaches a single name — its own — io its airline, music, bridal wear, publishing,
and high-tech activities; Heinz attaches a single name to its food products,
whether they are for babies, children or adults, and whether they are standard,
good value, healthy option or high value. Supermarkets also offer extensive ranges
of their own brand products, though with very few exceptions sell these alongside
other branded goods thus offering the maximum range of consumer choice.
e Organizational diversity: in which organizations adopt different brand names
according to different product lines and/or different markets served. For example,
Sony offers high quality, high value, premium price ranges of electrical goods
under its own name; it offers medium quality and medium priced goods under the
name AIWA; and it offers computer products under the name VAIO. Similarly,
Matsushita offers commercial electrical goods under its own name, and consumer
electrical goods under the name Panasonic.
e Local: in which smaller organizations seek to gain a local presence and
reputation through being good corporate citizens, model employers, or high
quality, high value servants of local markets. The ability to brand locally is very
often the driving force for niche or focus strategies.

Market domination
Strategies aimed at market domination normally adopt and adapt components from
each of the above to ensure a dominant position. Domination may be by sales volume,
assets, derived income, largest number of outlets, or outlets in the most places (or a
combination of some or all of these). It may also arise as the result of being the
majority supplier (that is, holding more than 50% of the market); the largest single
player, though with less than 50%; or one of an oligopoly of operators (in some

212
 =&

countries and sectors, this may be organized into a cartel, though this is illegal in
many sectors and many countries).
It is still quite rare to find massive majority dominators of sectors, though there are
exceptions. For example, Ryanair handles about 40% of UK short and medium-haul
air traffic; EasyJet about 30%; and British Airways about 23%. Tesco handles about
30% of food and grocery sales; Sainsbury’s about 18%; Asda about 16%; and Morri-
sons about 12%. Organization domination is otherwise limited to gas, electricity, ‘A8a1e12
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water, telecommunications and public road and rail transport. Commercial oligopo-
lies are also found in media, newspapers, cars, and oil and petrol sales.

Incremental strategies
The view of strategy as being incremental is popular with those who argue a rational
approach to long-term business and public service sustenance. The reasoning is that
a genuine long-term strategy is actually impossible to achieve given the sophisticated
structure of organizations, and the turbulence and instability of markets and sector
activities, without paying constant attention to direction and purpose. A successful
approach to long-term viability has therefore to be seen as being constantly influ-
enced by changing environmental, social, political and economic circumstances.
The starting point for future strategies is therefore the position of the organization
today. From this, the organization moves forwards in small steps or increments. As
each of these steps is successful, the next becomes apparent. If a mistake is made, it
is easy to retrace the step and seek other directions from the previous position. The
status quo and present levels of performance are both taken as correct. If costs are
reduced or if profits have gone up in relation to last year, this is a good general
measure of performance. If costs have risen or profit has declined in relation to the
previous period, this becomes a cause for concern.
Opportunities arise from the fact that the organization is moving slowly enough to
recognize and evaluate those situations that present themselves before rushing in
headlong, or rejecting out of hand.

Measurement and evaluation

Measurement and evaluation are carried out against the preset aims and objectives of
the particular strategy; quantifiable where possible, areas of particular success or
shortfall will be apparent, contributing to the organization’s expertise in the field and
ensuring further improvement in the strategic and planning processes for the future.
Beyond this, evaluation is both a continuous process and the subject of more
formalized regular reviews at required and appropriate intervals, thus setting a
framework against which the strategy is to be judged.
The following can then be assessed.

213
 The extent to which the strategy is identifiable, clearly understood by all
concerned, in specific and positive terms; the extent to which it is unique and
specifically designed for its given purpose.
Its consistency with the organization’s capabilities, resources and aspirations;
and the aspirations of those who work in it.
The levels of risk and uncertainty being undertaken, in relation to the
opportunities identified.
The contribution that the proposed strategy is to make to the organization as a
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Market responses and responsiveness; degrees of market captivity or choice.
The effects — positive and adverse — of dominant stakeholders, driving and
restraining forces, and product, service and project champions.

These questions can be answered as part of both the continuous evaluation and the
regular review process.

implementation of strategy
The determination of strategy is therefore a combination of: the identification of the
opportunities and risks afforded by the environment; the capabilities, actual and poten-
tial, of the organization, its leaders and top management; and issues of ethical and
social responsibility. Turning this into reality requires that the following are addressed.

Key tasks must be established and prioritized, effective decision-making

processes drawn up, and systems for monitoring and evaluation of strategic
process devised.
Work and workforce must be divided and structured to a combination of
functional and hierarchical aspects, designed to ensure the effective completion
of the tasks in hand; this must include relevant and necessary committee, project
coordination, working party, and steering group activities (see Figure 11.3).
Information and other management systems must be designed and installed;
control and constraint systems must be a part of this and include financial, human
resource, production, output and sales reporting data.
Tasks and actions to be carried out must be scheduled and prioritized in such a
way as to be achieved to given deadlines. As well as establishing a background for
precise work methods and ways of working, scheduling provides the basis for setting
standards against which short and medium-term performance can be measured.
The required technology must be made available, and staff trained to use it.
Maintenance and repair schedules must be agreed and integrated with other
activities.
Research and development, improvement and enhancement schedules must be
incorporated with the rest of activities. This includes making financial,

214
 ==

AGERTION 7 | IMPLEMENTATION |
i ie wie Ego) | (achieving results) |

Organization
ie identification of structure and
| opportunity and risk | relationships
Division of work ‘A8aI
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STRATEGY _ Information s tem:

. Determine the a Pattern of purposes re

company's material, | and policies defining | 2. Organizational
technical, financial | the company and | processes and
id he resourc its business I haviour

measurement
Motivation and
incentive systems
Control systems
. Personal values and
Recruitment of
development)

———_—_—_—_—— . Top leadership

. Acknowledgement Se | Strategic
_of non-economic a | Organizational
responsibility to society a

Figure 11.3 The implementation of strategy

technological and staff resources available as a key part of organization product

and service development.
e Monitoring, review and evaluation mechanisms and procedures, attending to
hard aspects of market responses, sales figures and product and service usage;
and soft aspects of meeting customer, client, consumer and end-user satisfaction
and expectations.
e The measurement of actual performance against forecasted, projected or
budgeted activities.
e Staff management and human resource polices must be assessed for
effectiveness and quality; the extent and prevalence of conflict, communication
blockages, disputes and grievances; the effectiveness of pay and reward systems;
the application of rule books and specific procedures.
e Financial returns must be assessed in line with projections and forecasts. A key
feature of strategy implementation is the ability to compare overall returns, costs
of sales, product and service delivery with projections; and to gauge the effects of
unforeseen circumstances on particular activities.

215
 | Set target |

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Figure 11.4 The monitoring, review and evaluation of strategy and direction

Each of these aspects provides a critical element for effective monitoring, review and
evaluation activities (see Figure 11.4).

Conclusions
A successful strategic approach can only be achieved if the ways in which the
particular sector operates are fully understood and analysed. This analysis must also
depend on gaining as full an understanding as possible of customer and client behavy-
iour, demands, wants and needs.
Ideally, the main outcome of these analyses is an informed base for those respon-
sible for organizational direction. This should consist of a full understanding of the
wider environment and general pressures that exist, as well as the more specific
aspects indicated.
It is important in the process of educating and informing all managers, and espe-
cially top managers, to think strategically, as well as operationally, and to relate the
two directly. All the approaches and models indicated should cause managers to look
beyond their operations, activities and areas of responsibility to the wider context,
and from the short to the long term. They also act as initial indicators of opportunities
and threats. Areas of risk and uncertainty should start to become apparent and points
of stress and strain that may be created by following certain directions should also be
indicated, especially if the full environment has not been analysed.

216
 &_

These activities are not ends in themselves. The key to successful strategic
management lies in how the information gained is evaluated and used; how accurately
the particular position of the organization is assessed. Organizations must be able to
translate this into effective activity based on their own strengths of flexibility, dyna-
mism, responsiveness and commitment. They must also be able to recognize potential
weaknesses and pitfalls, and take whatever steps are necessary to address these.
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e All organizations have an absolute need for clear strategy as this informs clarity of
=)
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ut purpose and priorities, and what customers and clients can expect from their dealings
with the organization.
e In support of this clarity, there is an overriding need for a clear core foundation or
generic position which must be based either in seeking cost advantage, brand
advantage, or something else that is of value to the markets served.
e Strategy is a process, driven by a need to integrate all activities in the pursuit of the
stated organizational purpose and priorities.
e Strategy must always be monitored, reviewed and evaluated for effectiveness. Where
problems are likely to arise, or where present position is becoming unsustainable,
strategic, as well as operational, decisions need to be taken.
e Strategy is a continuous process requiring attention to the long term as well as to
immediate results. The strategy process is a critical aspect of developing opportunities
and activities for the future, as well as ensuring what Is done at present remains effective.

Further reading
Campbell, D., Edgar, D. and Stonehouse, G. (2011) Business Strategy: An Introduction. Palgrave
Macmillan.
Johnson, G., Scholes, K. and Whittington, R. (2009) Exploring Corporate Strategy. PHI.
Pettinger, R. (2004) Contemporary Strategic Management. Palgrave Macmillan.
Porter, M. (1980) Competitive Strategy. Free Press.
Porter, M. (1985) Competitive Advantage. Free Press.
Whittington, R. (2009) What is Strategy and Does it Matter. Thomson.

217
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In this chapter
e the nature of marketing and its position in developing effective business
and organizational activities
e knowing and understanding the components of effective marketing
strategies, processes and activities
e managing the development of products and services
e identifying, managing and developing customer bases

Introduction
The purpose of this chapter is to introduce and illustrate the priorities and principles
required for a full understanding of marketing.
Marketing is the competitive process by which goods and services are offered for
consumption at a profit. Marketing combines product and service substance with
effective presentation, convenience, value and acceptability to engage the interest
and commitment of customers, consumers and clients, and the public at large.
Marketing processes and activities are normally classified as follows.

e Consumer marketing: which comes in two basic forms:

* unconsidered purchases, leading to instant satisfaction (or dissatisfaction);
e considered, high value purchases, leading to enduring satisfaction (or
dissatisfaction).

219
 © Industrial and business-to-business marketing: unconsidered purchases (for
example the office coffee) and considered purchases (for example capital goods,
databases); and based on the development of relationships so that considered
purchases carry trust and confidence, as well as enduring utility.
e Public services marketing: an area in which substantial development is
required, particularly in response to political drives to engage commercial
interests in these activities.
e The not-for-profit sector: advantages gained by engaging interest, sympathy
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e Internal marketing: activities designed to build mutuality of interest and
confidence, and enduring workplace relations, across organizations.
e General marketing: including communications, television advertisements,
posters, internet straplines, all designed to reinforce general impressions of
products and services.
¢ Internet and digital marketing: considered as a marketing process and activity
in its own right because all companies and organizations now have an internet
presence (whether for commercial purposes and sales or not), and this approach
and presentation is therefore a key part of marketing. As more and more data is
known about consumers, this also enables products and services to be directed
very much more precisely.
e Viral marketing, in which keys are found for products and services, presented to
the first wave of consumers, who then spread the benefits through social media
and websites.
e Direct marketing: targeting individuals, and customer and client groups with
specific products and services known, believed and perceived to be of direct
interest to them.

A core outcome of the marketing process is the development of relationships

between the organization and its customers and clients. Every interaction between
the organization, its staff and customers makes a contribution to the development of
these relationships. This is a function of generating customer loyalty, and in getting
customers to relate that loyalty to purchasing and consumption activities.
Marketing processes and activities have the immediate goal of:

e attracting customers and drawing attention to the products and services on offer;
e gaining the potential customer's interests, and encouraging them to find out more;
e generating the desire to purchase the products and services;
e making it easy and convenient for the customers to actually purchase the
products and services.

Relationships and loyalties are built, maintained and developed through the
combination of product and service quality on offer; immediate and_ after-sales

220
 =N

activities; and the continued ability of the customers to buy, use and consume the
products and services in ways that are of value to them.
Sunae
All marketing activities need to be seen as building relationships between organization
products, services, customers and clients. A key part of marketing is therefore ensuring that
these relationships are based on trust and confidence. Overwhelmingly, given any choice in
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and with whom they perceive they have a positive and productive relationship.

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Customer needs and wants: The Packard approach
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Ss Packard (1957) sought to define the relationship between product, presentation and
D
= image, and customer and consumer motivation. The conclusions were that the most
successful marketing of products and services arose when both the product and also its
presentation engaged one or more of the following responses among customers, clients,
consumers and end-users.

e Emotional security, comfort and confidence: related to bulk purchases of food;

safety features in cars; domestic security; and insurance.
e Reinsurance of worth: purchases must make customers feel good. This means that
customers have to be satisfied with the products and services on offer; and their use of
the products and services must also be respected and valued by others around them.
e Ego gratification: anything that is sold to gratify the ego must meet the subjective
demands of luxury, exclusivity and immortality. Products and services sold to gratify
the ego include expensive luxury cars, exclusive holidays, and vanity publishing.
e Creativity: products and services sold to feed the creativity need put a critical value
on the contribution of the customer or end-user to make the product effective. For
example, cake mixes that required the addition of eggs were found to be more
successful than those that simply required the addition of water, because there was a
greater input on the part of the user or consumer.
e Love objects: this aspect may be summarized as: ‘cuddly toy’ ‘dear little child’, or
‘sweet/cute little animal. Andrex, the major suppliers of toilet tissue to the UK retail
sector, has used labrador puppies as the central feature of its commercials since the
1970s. Children are used extensively in television commercials in the pursuit of
engendering this sense of love and warmth; and this extends to the marketing of
washing powder, grocery shopping, fast food, cars, holidays, central heating and
double-glazing.
© Power: the power of the product or offering is reflected in the user of it. Nearly all
automobile advertising and marketing is on the basis of power, performance and speed
as well as security. Power and strength are also strongly related to cigarette marketing,

221
 especially in Formula 1 motor racing, and also the sponsorship of cricket, rugby league,
sailing and powerboat racing.
e Traditions and roots: this is relating ‘the good old days’ to the modern era. For
example, food promotions use phrases such as: ‘just as good as mother used to make’;
Rolls-Royce cars maintain the traditions of fittings and furnishings, and reliability and
exclusivity on which their original reputation was built. Politicians exploit perceptions
and visions of golden ages with calls for returns to ‘traditional values’ and ‘back to
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basics’ because there is a very strong perception of ‘the good old days’ and association
with historic success, order, stability and prosperity.
e Immortality: this is related to security, ego gratification and traditions and roots.
Maintaining the illusion of immortality is an essential prerequisite to the effective
marketing of housing, life assurance, other insurances, loans and other financial products.

People buy products and services for the value, benefits and satisfaction delivered; and
the work of Packard sought to indicate that maximizing the chances of delivering benefits
and satisfaction required targeting at least one of the above points.
It is additionally the case, that by using a managerial approach to marketing and
product and service presentation using the above criteria, it was much easier to target the
subjective (rather than perceived or pseudo-rational) needs of customers, consumers,
clients and end-users.
Source: Packard (1957).

Marketing strategies
As stated in Chapter 11, all organizations require a core foundation or generic stra-
tegic position; and all effective marketing strategies consequently need to reflect the
core foundation or generic position chosen. Marketing strategies are then used to
build on the core foundation or generic position as follows.

e Pioneering or ‘first in the field’: opening up new markets or new outlets for
existing products, and new products for existing outlets; taking an original and
distinctive view of the marketing process and devising new methods and campaigns.
e ‘Follow the leader’: the great benefit of being second in the field is to learn
from the mistakes and experience of the pioneer, and make informed judgements
about the nature of the involvement to be taken based on their experience. Or it
may be that the second organization can see opportunities that were not
exploited by the first.
e “Me too’ or ‘all-comers’: where the market is wide open, entry to, and exit
from, it are relatively easy when the products and services in question are
universal or general, and when there are many suppliers, provided there are
more buyers than suppliers.

222
 — Nn

¢ Supply led: where the product is produced because the organization has complete
faith in it and knows that once made, it will be able to be sold at a profit.
e Technology led: whereby the organization finds itself in a particular line of SUEY
business because it has at its disposal a particular type of technology which can
be tumed to productive and profitable advantage in a variety of sectors.
e Staff led: because of the skills, qualities and preferences of the staff of an
organization that happen to be gathered together, and where the products or
offerings reflect these (very prevalent in the small business sphere).
e Market led: where the organization looks first at a range of markets, then
assesses their requirements, and finally decides which of these it can most
valuably and profitably operate in and fill.
e Moral or ethical marketing: creating and developing a high value reputation as
the result of a distinctive moral or ethical stance, such as using Fairtrade
ingredients (for example Starbucks); or using trading practices as a presentational
feature (for example Waitrose).

In relation to each of the above, marketing strategies may be either offensive or

defensive. Offensive marketing activities seek to make inroads into the competitive
position and customer and client bases of others. Defensive and responsive marketing
activities are undertaken with the object of preserving the present position in
response to the offensives of others.

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You need to recognize that in practice, all marketing is a combination of offensive, defen-
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sive and responsive activities. Concentrating purely on the offensive means that you are
3.
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running the risk of neglecting your existing customer base. Concentration purely on the
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defensive means that you are likely to be missing opportunities elsewhere. ©
a
oO

Segmentation
Effective marketing demands that the needs and wants of customers and clients are
defined as precisely as possible. It is therefore essential to be able to ‘segment’ or
classify the population in some way. The normal approaches are: social segmentation;
market and social segmentation; and customer definition.

Social segmentation
Social segmentation breaks down the population according to the occupation of the
head of household as follows.

A Aristocrats and upper middle class, directors, senior managers, senior civil
and public servants
B Middle class, lawyers, doctors, senior managers

223
 C1. Lower middle class, teachers, nurses, doctors, engineers, technologists,
managers
C2. Skilled working class, including some engineering and technology activities
D Working class
E Subsistence, including the underclass and unemployed

Market and social segmentation

Market and social segmentation has existed in the UK since 1998, when the UK
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national Office of Population Censuses and Surveys produced the following framework.

Class 1A: large employers, higher managers, company directors, senior police,
fire, prison, military officers, newspaper editors. The structure also included top
football managers and restaurateurs in this section.
Class 1B: professionals — doctors, solicitors, engineers, teachers. This section
also included airline pilots.
Class 2: associate professionals, journalists, nurses, midwives, actors, musicians,
military NCOs, junior police, fire, prison officers. This section also includes lower
managers (with fewer than 25 staff).
Class 3: intermediate occupations — secretary, air stewards and stewardesses,
driving instructors, telephone operators. This section also includes “employee
sports players’, for example footballers and cricketers.
Class 4: small employers, managers of small departments, non-professional
self-employed, publicans, plumbers, farm owners and managers. This section
also includes self-employed sports players — for example golfers and tennis
players.
Class 5: lower supervisors, crafts and related workers, electricians, mechanics,
train drivers, bus inspectors.
Class 6: semi-routine occupations, traffic wardens, caretakers, gardeners, shelf
stackers, assembly line workers.
Class 7: routine occupations, cleaners, waiter/waitress/bar staff, messenger/
courier, road worker, docker.
Class 8: the excluded. This includes the long-term unemployed, those who have
never worked, the long-term sick, and prison populations.

Clearly, social segmentation is subjective and imprecise. However, it is essential to

start somewhere in order to begin to define the nature, habits and behaviour of the
customer bases desired. When customer bases have been classified, it should never
be forgotten that this has been done with a lack of precision and a measure of subjec-
tivity. Once the customer base has been defined in this way however, there is in turn a
basis for much greater and more precise customer analysis (see Chapter 2).

224
 i—

Sy
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Whatever the customer base defined, it is essential to recognize the difference between:
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e ‘Would buy’ Sunae
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a.
oO e ‘Will buy’

You are looking at all times for customer bases that will buy products and services from you
in the volumes and regularity that you need. Getting a ‘generally favourable response’ to your
products, services and activities is very comforting but it does not generate business volumes.

Customer definition
Customer and segment definition is defined according to one of the classifications
above; and then this is further refined by identifying in detail the customers required
by: age, sex/gender, status, aspiration, values, location, occupation and expectations.
Marketing then concentrates on defining products and services in terms of the benefits
of value to the given and precisely defined segments.
Additional approaches to customer definition produce the following information:

e types and class of buyers;

e size of customer bases in given locations and niches;
e the balance of quality, volume and price that customers expect;
e the value of the product or service relative to other items available for consumption;
e the value of the product or service relative to other items that the customer base
either needs or wants to purchase;
e patterns of spending among members of the niche or customer base, and the
extent to which they use credit, credit cards, cash or cheque books;
e the need for access to product and service after-sales;
e the ease of access to facilities and services;
e the frequency with which a given product or service is to be used.

Social segmentation and customer definition are not exact sciences. They are however
useful means of defining and classifying society for the purpose of targeting products
and services as effectively as possible; and as a focus for understanding better the
needs and wants of the particular segment targeted so as to refine and improve both
product and service quality and performance, and also the marketing effort in terms
of the benefits that are of value to the given customer base.

Ethical marketing
‘Ethical marketing’ has been developed in recent years by companies and organiza-
tions providing particular products and services. As shown below, the ethical
marketing approach is complex. The ways companies go about it include:

225
 e emphasizing the ‘green’ (and perceived ‘green’) nature of their products and
services, and developing niche markets in: organic produce; energy efficient
electrical goods and cars; products that have been produced under ‘Fairtrade’
(whereby the people, companies and organizations sourcing the products get paid
‘adequately’ for their efforts);
e making sure that products and services are only sourced in countries and regions
that are being developed rather than exploited;
e refusing to use unwholesome images in advertising, sales and PR campaigns;
}
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e making a virtue of the fact that a percentage of purchase prices will always be
donated to charity.

Clearly, much of this is subjective also! However, by targeting triggers of value to

particular market sectors and segments, companies and organizations have developed
significant and very profitable niches in these areas.

a2
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The complexities of ethical marketing: Examples
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Friends Provident
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wn

Friends Provident, the mutual life insurer and financial services company, launched its first
ethical financial services lobbying unit some years ago. The purpose of this unit was to
put pressure on FTSE companies to amend their environmental policies, including invest-
ments In:

e ‘wholesome industries’ rather than safe and assured sectors including defence, oil,
energy, gas and chemicals;
@ companies that took active responsibility for waste and effluent management and
disposal;
© companies that engaged in ‘fair trading policies’ with Developing World governments
and organizations;
@ companies that took active responsibility for infrastructure development in developing
countries in order to provide social, as weil as economic, benefits.

BSkyB
BSkyB, the broadcasting and news reporting arm of NewsCorp, runs wildlife campaigns to
raise funds in order to save endangered species. BSkyB states that every time someone
takes out a subscription to its campaigns, it will match the donation with funds of its own.
To date, BSkyB has put over £40 million into helping endangered species, conservation and
environmental management projects.

226
 fi

Charities marketing
There is no question that at the core of the activities of all major charities is the funda- BSUNae

mental drive to alleviate problems that exist in different parts ofsociety, and different parts
of the world. However, the drive for ever-greater access to source of funds, as well as overall
increases in funding, has led to questionable marketing and promotional activities on
behalf of these charities.
Many charities now ‘blitz’ town and city centres with teams of subcontracted public
relations staff. These teams stop passers by in the street, engage them in conversation, and
then ask for covenanted or credit card donations in support of the particular cause. This is
a Clear direct sales approach, and would probably be unacceptable if it were for consumer
or capital goods and services. However, the large charities point to the financial results of
this approach — for example, in one year, donations to ‘War on Want’ rose by 27%.

Each of these examples illustrates the complexities that have to be considered when
adopting an ethical approach to marketing, and marketing for ethical reasons. In the
above cases:

e Friends Provident is using the approach to enter new markets, examine new products
and product ranges, and evaluate the extent to which these are profitable;
e BSkyB continues to expand its broadcasting activities, and again is seeking to explore
and define potential new market segments;
e charities marketing is taking core marketing and direct sales activities and targeting
potential groups in exactly the same way as all commercial marketing activities.

Marketing mixes
Marketing activities are based on mixes of the following elements. Each is present to
a greater or lesser extent in all marketing activities; though the balance of each
clearly varies between different products and services.

The 4Ps
e Product: variety, branding quality, packaging, appearance and design. There is
also a presumption that all products are capable of being developed, improved
and enhanced. For example:
e the first mobile phone was the size of a loaf of bread and cost £2,000; today the
product has been revolutionized and completely repositioned as a data
management, information processing, entertainment and media product, as
well as a telephone;

227
 ¢ motor car engines are being developed so that their dependence on oil is
reduced.
e Promotion: advertising, sponsorship, selling, publicity, mailshots, internet
presentations, television product placement, and branded clothing.
e Price: basic, discounting, credit, payment method, appearance. Price is also used
as a form of promotion where it is so different (usually lower) to what has hitherto
existed in the sector that the public is forced to take notice. For example:
¢ Lidl, the supermarket chain, offers a core range of grocery products at prices
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take notice;
ethe original Ryanair ticket prices were so much lower than the major airlines
that people were more or less forced to consider them as an alternative to the
existing services provided.
e Place: coverage, outlets, transport, distribution and accessibility.

me) The internet as location

©.
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The use of the internet as a marketing and organizational location has to be seen from a
SS
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variety of, often conflicting. points of view, as follows.

e From the organization's point of view, it means it has a presence — a location — on

every computer screen in the world.
e From the point of view of customers and clients, the particular organization has a
general presence on every computer screen in the country. However, this location is
convenient to customers and clients only ifthe organization website is easily accessible,
and then customer-friendly once accessed. This has especially to be borne in mind
when it is remembered that speed and convenience of access (and also perceived
speed and convenience of access) are a key marketing function
e Ifthe great strength of the internet as location is its potential presence on every
computer screen, the great weakness of the internet as location is the lack of physical
or human presence. This has to be seen in the context that the enduring success of all
marketing activities is built on the expectations of customers and clients. This in turn is
universally reinforced by the human interaction that also takes place in every
traditional transaction — whether consumer, industrial, commercial or public service.
@
The 4Cs
e Customers: directing marketing and presentational activities at the needs and
wants of customers.
e Convenience: a combination of establishing the required and desired outlets;
and of educating customers and clients to access the available outlets.

228
 = Dd

¢ Cost: the equivalent of price in the 4Ps; implicit in this is the additional
management discipline that requires the balancing of cost and price with value
and benefits. SuNaeE
e Communication: the production of advertising, sponsorship, selling, publicity,
mail-shot and internet material that is customer, client and consumer friendly,
rather than technically or visually brilliant per se.

Marketing mixes arise from combinations and interactions of each of these

elements. Consumers of products and services — offerings — will normally hold one
of the elements more important than the others. In turn, the forces and pressures of
the markets in which the offerings are made also reflect their relative importance.
For example:

e some markets will only sustain particular levels of price, and so therefore
everything has to be produced at a cost that means that profitable activities are
sustainable themselves;
e if the price of core commodities (for example gas, electricity, water) rises then
disposable income is reduced elsewhere and price levels of non-core products
and services have to fall;
e if a company leaves the market sector, it may be possible for those remaining to
increase prices in the short term; however, it should always be recognized that
prices may have to come down if others come into the market.

There are legal and ethical restraints placed on marketing activities in the Western
world. In general, spurious or misleading claims may not be made for products, nor
should misleading impressions be deliberately fostered — apart from anything else
this is very bad for repeat business. Actual products must reflect the reality or
impression given by both promotion and packaging. Products must also not be
harmful or detrimental to their consumers; minimum standards of performance,
manufacture, quality and safety have therefore to be met. Additionally, images used
in marketing, advertising and promotion campaigns must reflect the demands and
expectations of the locations in which they are delivered. At present in the UK, there
is a backlash against the use of sexual images, the glamorization of smoking and
drinking, and extravagance.

Products and services

The marketing of products and services requires a combination of the core substance
on offer, together with the ways in which it is presented. The product and service mix
is the range of products offered by an organization. This is determined by the
matching of the organization’s capabilities and capacities with the markets and niches
to be serviced and by the scope and scale of its operations. People buy the benefits
that they expect to accrue from a product or service as follows.

229
 Quality and durability: product and service quality and durability must be
considered from the point of view of the balance required, and also in terms of
customer demand (for example, there is no point in offering a highly durable
product to the stated market sector if that is not what the customers want).
Branding: which gives credence and confidence, especially where the brand is
well known and the consumer is content with what is offered and comfortable with
the appearance of the name on the product. Top brands have become household
names; and some have even become verbs (for example hoover, google).
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to the point of consumption. The design and consistency of packaging reinforces
the identity of all products and services — for example Barbie (toys); Persil (soap
powders); brochure presentation (for example Thomson package tours).
Product and service benefits: these should be seen in their widest context. The
full offering often includes after-sales service, spare parts, help and emergency
lines, call-out facilities, and product and service advice and familiarity sessions.
Product and service ranges and portfolios: the confidence and reputation of
each element of the product and service range and portfolio ought to reinforce the
strength and value of all the others. When one product or service is perceived to
be bad or unreliable, it is likely to have a knock-on effect to all of the others.
There are various different ways of looking at product and service portfolios and
ranges. Examples are:
e those which are advertised; those which sell; those which make money;
e yesterday’s breadwinners; today’s breadwinners; tomorrow’s breadwinners;
sparkles and twinkles; deadweights (see Figure 12.1).

afy
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Product and service classifications: Examples
a0)

Ford, the car manufacturer, uses the following approach:

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a)
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Cars to advertise: high performance (for example RS Turbo); high specification (for
example top of the range Granada, off-road, Ford MPV, SUV).
Cars that sell: Ka, Fiesta, Bonus, Xetec — especially the mid-range; both the high
specification at one end of the scale, and also the basic model at the other end of the
scale, sell less well than the mid-range.
Products and services that make money: accessories, servicing packages, trade-in
value, and finance plans.

Sony, the electrical goods manufacturer, classifies its product range as follows:

Yesterday's breadwinners: the Walkman, sales of televisions, other electrical goods,

video, audio and computer equipment and accessories.
Today’s breadwinners: music catalogues, the Walkman, DVD and other advanced
computer, audio and video equipment, iPod-equivalent.

230
 =|=)

¢ Tomorrow's breadwinners: mini-disc, Playstation, Columbia-TriStar Pictures, music

and video production, the VAIO range of computers. Supaey
e Twinkles and sparkles: Playstation developments, commercial computer software,
VAIO and iPod-equivalent developments.
e Deadweights: very little — the company takes the view that even if something is a
commercial failure, the knowledge and expertise gained as the result of its
development should not be lost, but rather retained within the organization.

Ryanair, the low cost airline, classifies its product range as follows.

e Plane tickets: designed to ensure that all flights are as full as possible, as often as
possible. Ryanair makes only a tiny fraction (if anything at all) on individual ticket sales;
the viability of routes depends on enduring high volume ticket sales.
e Add-ons: partnerships with car hire companies, local airports, transport networks and
hotels bring in assured revenue streams.
e Catalogues: including the sale of branded goods, duty free and other on-board sales
is an additional revenue stream.
e On-board sales of food and drink: especially on flights of more than 2 hours’
duration is a major revenue stream.

The Ryanair view is therefore that it is the total package that generates profits rather
than the narrow attention to ticket sales.

Effective product and service classification clearly identifies:

e those products and services that make money;

e those products and services that lose money;
e those products and services that are declining in sales, profitability and
effectiveness;
e those products and services that are increasing sales volumes and profitability;
e those products and services on which decisions (positive or negative) cannot yet
be made;
e those products and services that are capable of development for the future.

One way of classifying products and services in this way is to use the “Boston
Matrix’ (see Figure 12.1).

Product and service lifecycles

All products and services have a beginning, middle and an end (see Figure 12.2).
The concept of product and service lifecycles defines more precisely these stages and
identifies the points at which specific marketing initiatives and activities might
usefully be generated.

231
 Question
mark Star

Market
growth

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Dog Cash cow

Market share

Cash cows: high share of low growth market; today’s breadwinners; the main source of income.
Stars: high share of high growth market; today’s and tomorrow's breadwinners from which
future cash cows will come; normally need high investment and support to maintain position.
Question marks: low share of high growth market; tomorrow's potential breadwinners; not all
will succeed.
Dog: low share of low growth market; normaily only kept if they have some distinctive positive
feature (for example something on which a traditional or enduring reputation has been built
and without which, the present reputation may be diluted).
———
ee

Figure 12.1 The ‘Boston Group’ matrix

There are four stages:

1 Introduction: the bringing in and bringing on of the new product or service

following a period of extensive market research.
2 Growth: this is where the product or service takes off and its true potential
(rather than that projected by research and modelling) begins to become apparent;
sales and demand both rise where this is successful; unit costs decline.
3 Maturity: the product is now a familiar and well-loved feature on the market;
people are both happy and confident with it, unit costs are low. The last part of
the maturity stage is that of saturation; this is where the company seeks to
squeeze the last remaining possible commercial benefits from the item before it
loses its commercial value.
4 Decline: where the product is deemed to have run its course and no more value or
profit is to be gained from it, it will then be withdrawn from the market. Marketing
interventions are made at each stage to ensure that the product potential is
maximized. The product must take off so that the full range of benefits to be
gained from its consumers is realized by the sector at which it is aimed. Then, as
it reaches maturity, initiatives are taken to breathe as much new life into it as
possible using the whole range of promotional and advertising media; very often
this means one advertising campaign too many before the product declines.

232
 = NN

Simple =
Maturity : =
Saturation &cq.
i z
Sales !
volume Growth ;
! '
i} I i}
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Introduction ' | Decline
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Time

Complex

Saturation

Sales Maturity
volume
Growth
Introduction i}

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tH Marketing efforts, strategies, campaigns

The model indicates the conception, growth, regeneration, renewal and extension of the effective and
profitable life of particular products and services. The figure also indicates relationships with successful and
| effective marketing activities.

Figure 12.2 Product lifecycles

Products may also be rejuvenated through re-packaging, re-presentation and

changing the quality or value emphases.

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It is essential always to consider product and service mixes in full, even if one element is
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clearly declining. It is essential to understand any likely or potential effects of withdrawing
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a particular product or service from the full portfolio.
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235
 Marketing research and development
The purpose of such research is to identify and maximize opportunities that the
product and marketing mix of the organization affords. Essentially, this combines the
need to seek alternative outlets for products and the technology that the organization
has at its disposal with that of finding out what customers’ wants and needs are. Initia-
tives can then be proposed and generated with the view to satisfying these needs; and
in the devising and initiating of further business opportunities. Properly structured,
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favourable response is engaged in, the customer or client group can be targeted. It
then becomes essential that this is followed up in detail to establish exactly how often
the product or service is to be bought, used and consumed; how much the particular
segments are prepared to pay for this; and how often they are willing to pay it.

oO
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Customer perception
mo}
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= Research conducted by the tobacco industry demonstrated that brand loyalty was almost
=.
®
= entirely based on image and identity rather than the taste of the product. Tests were
conducted on those who stated categorically that they only liked their own brand.
Smokers could not differentiate between their own brands and others of equivalent
strength and similar tobacco when they were not given the packet from which to choose.
Research carried out by the Coca-Cola company on the blind tasting of both its own
Cola products, and also those of competitors, gave initial cause for alarm. In the blind
tasting sessions, Virgin Cola was found to carry what the testers perceived to be the best
taste. At first alarmed by this finding, the company soon became comfortable with its
products when it was realized that, whatever the results of blind taste, the customer-base
at large would buy the Coca-Cola product anyway.
This applies to other soft drinks; tea and coffee; bread, cakes and biscuits; butter and
margarine; beer, wine and spirits.
People are also more positively disposed towards any of these products if they are told
that it is of their preferred brand, whether it is or not.
O
Source: Clark (1988).

The process undertaken is concerned mainly with an understanding of the capa-

bilities and capacities of the organization on the one hand, and the requirements of
the market and environment in which business is conducted on the other. This will
address matters concerning general levels of confidence on the part of the market,
customers’ purchasing power, their needs and wants, their priorities and any other
seasonal aspects, and relate these to the capabilities and capacities of the organiza-
tion. Other factors to be taken into account will include a more general assessment of
the market and the products in question; the extent to which these are in expansion,

234
 =N

decline or stability. Research will include competitor analyses and the extent to
which alternative and substitute products are available in the broadest sense. It will
consider the reputation of the organization in question from a universal and general BUD
eW
standpoint, as well as in the particular case of its own relationship with its own market
sector. Customer assessments will also be conducted in order to gain a general under-
standing of their motives, desires, preferred images and identity with the particular
product, or range of products, that is to be offered.
Finally, modelling activities will need to be commissioned or conducted by the
organization with a view to assessing the extent of the profitability or effectiveness of
the range of activities in question. Marketing research and development is thus an
integral part of, and critical to, the success of wider strategic aspects; and critical
also to the determination of the organization’s future direction and instrumental in the
determination of its success.

= Having gone through an extensive and rigorous market research process, it is essential
wo
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3.
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—
needs, wants and demands of the market sector in question.
oa
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Public relations
The public relations or PR function is to ensure that the marketing wheels are kept
oiled and that the organization’s marketing machine works smoothly and positively in
order to fulfil the purposes for which it was designed. It has a maintenance and devel-
opment function that mirrors the operational equivalent. Planned PR concerns the
identification in advance of suitable initiatives and items that will generate good
publicity, and placing them in the media where they will have the greatest positive
effects. There is also remedial PR, which is where the organization has to take
responsive or other creative action to put right something that has gone wrong or to
address a negative story concerning it that has appeared somewhere in the media.
Similarly, the handling of the press, television and radio must be conducted in
ways that ensure an overall positivism is maintained, and that when problems arise,
the last and most enduring note of the story is of the progress that is now to be made.
Organizations will also engage in the placement of stories favourable to themselves
in the media, and in those parts of it where the greatest benefit to them will accrue.
This is both as a counter to those occasions when problems do arise, and also as part
of the more general process of building confidence, positive images, and an aura of
‘sood corporate citizenship’.
Organizations may also engage in more general customer and market liaison activi-
ties as part of their PR effort. This usually takes the form of sending staff on high profile
and sectoral seminars and conferences, and taking stands at trade fairs and exhibitions.

235
 Part of the effort of the sales force may also be simply to ensure that customers, and
potential customers, are kept aware of the organization’s continued existence and
activities. The sponsorship of events also contributes to this general effort.
All aspects of company and organization communications and presentation contribute
to the PR effort. For example, companies and organizations use positive media coverage
that arises from such things as sectoral prizes, contributions to the community and
recruitment advertising campaigns to build on their overall general image.
A key part of PR is the use of service as marketing. Customers contacting organi-
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queries will be taken seriously and resolved in full. To do this adequately will not
necessarily enhance positive PR; to do this inadequately is certain to generate
adverse PR.

Conclusions
Effective marketing management stems from the successful identification of a core or
generic strategic position, and then relating this to the distinctive marketing strategic
approach of first in field, ine-too, all-comers, product or service-led, staff and expertise-
led, or market-led.
From this, it is essential to develop effective marketing mixes of all products and
services on offer, targeted at customer and client perceptions, expectations and
connotations of quality, value, and convenience.
Alongside this, it is essential to develop images and impressions of the organiza-
tion as being safe and steady, full of confidence and strength. This is both directly
related to the current range of offerings, and also has implications for new products
and future activities, and for the organizational culture and management style.

49)
oe
Cheap and good value
=}a
oe
ie) All those with responsibility for marketing should understand that very few customers or
=.
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= consumers (or for that matter commercial clients) buy anything purely on price alone.
Even mercenaries (see customer analysis, Chapter 2) who state that they buy on price
alone, very often spend a lot of other resources (especially time and energy) in finding the
perceived, cheapest or best value option.
There is also the serious behavioural issue to address. Feelings of self worth are affronted
if consumers believe themselves to be forced into buying the cheapest option. Anything
that is pitched at the low price market should carry enduring perceptions ot ‘good value’
because this is a reinforcement of self-esteem and self-worth (‘l am getting excellent value
for money’), rather than cheap, which gives negative feelings (‘lam forced to buy this
because | haven't any money’).

236
 —
~

In the capital goods and major projects sectors, where competition is overtly on price,
very often the cheapest tender carries with it all sorts of hidden extras. In construction and
BUNayIeEW
civil engineering, there is a long history of a claims process at the end of a contract. The
companies that have successfully tendered for the work have offered a superficially attrac
tive price up front to the client, and have then sought to build on this by seeking to claim
for extras that were either not built in to the original tender, or else have become apparent
as the contract has been completed.

Effective marketing depends on determining the sectors in which products are to

be offered so that the benefit and satisfaction to be accrued through ownership and
usage may be presented in ways that reflect customer and consumer needs. Activities
created in support of this, including advertising campaigns, sales teams, brochures,
information, help and support lines, websites, public relations activities, product
placement and sponsorship, must reflect the hopes and aspirations of those targeted,
as well as concentrating on the benefits of the specific products and services. Increas-
ingly popular also are perceived and real relationships between organizations, their
markets, and communities at large, and this includes support for local groups, clubs,
and philanthropic and charitable activities, as well as precise attention to concerns
about the particular products or services in question.
Market research and development are essential to ensure that high levels of mutual
satisfaction and advantage continue to accrue. This is particularly critical in assessing
likely and potential demand, opportunities to be gained and possible consequences
of failure.
Product and service lifecycles have also to be continually assessed. This needs to
be conducted for both individual items, and also for the total range.
It is also essential to consider the effects of general organizational and manage-
ment practice on the confidence in which particular products and services are held.
For example, Northern Rock, the UK regional bank, was extremely well regarded by
customers and consumers with enduring high levels of confidence until it became
clear that the company’s asset base was heavily overvalued. This caused a loss of
consumer confidence and ultimately became one of the triggers of the UK banking
crisis of 2008-2009. Conversely, Gordon and Anita Roddick were able to maintain
extensive confidence in the Body Shop by consistently drawing attention to the ways
in which they conducted business and what their expectations of it were, in spite of
the fact that the profit margins are much lower than those available elsewhere in the
department store, cosmetics, and gift shop sectors.
Finally, the management of marketing requires continued attention to all aspects.
Activities that are acceptable and effective today have to be maintained, developed
and improved in order to ensure that their currency is retained into the future. The
development of marketing strategies must be entwined with the wider aspects of

237
 organizational direction, purpose and priorities. Marketing, as with all functional
activities, has to be directed and managed in support of this in order to ensure that
the presentation of the organization, its products and services, remains as effective as
the substance.

Marketing relates the substance of products and services to their presentation.

Marketing strategies should always relate to core foundation and generic organization
‘ABorens
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e People buy benefits and value. The purchase of these benefits and value depends on
the confidence in which they hold the organization's products and services.
e It is essential that all organizations have core markets on which they can depend for
future existence, viability and profitability provided that they continue to deliver
products and services that have value to the customers.
e Product and service lifecycles, and continuous improvements and developments,
mean that there is a constant need for the development of marketing activities.
e Marketing is all-pervasive. Every aspect of organizational conduct, behaviour, and
performance, as well as product and service value, contributes to the overall
marketing process.

Further reading
Baker, M. (2002) The Marketing Book. Wiley.
Brassington, F. and Pettit, 5S. (2006) Essentials of Marketing. Pearson.
Clark, E. (1988) The Want Makers. Corgi.
Kotler, P. (2009) Marketing Management. PHI.
Packard, V. (1957) The Hidden Persuaders. Penguin.
Ries, A. and Trout, J. (1997) Marketing Warfare. Wiley.

238
 Managing
operations rojectsand “

3 and projects doris ofche

mainstream activities,
a

organizations.’ 4

In this chapter
e the complexities of operations and project management
e creating the conditions for effective operations and project management
e attending to the common elements of quality of working environment,
health and safety management
e identifying the different approaches to managing the supply side of all activities

introduction
Projects and operations management exists to ensure that the organization’s primary
functions and purposes are fulfilled. Projects and operations management is
concerned with producing the organization’s products and services in the volumes
and quality required, to the deadlines and cost bases demanded, and in the locations
and outlets suitable and convenient for purchase and usage. Projects and operations
managers are therefore in turn concerned with organizing and scheduling production;
gathering resources and expertise; designing and implementing work schedules;
attending to problems and glitches; managing crises and emergencies; and ensuring
that equipment and technology are cost-effective and fully operational.

= The priority here is therefore to recognize the complexity of the management task, and
wa

the obligations placed upon those responsible for project and operations management. It
a
is¥)

3.
=
=
is also essential that all those in projects and operations management have an expert
a

knowledge of everything that can possibly go wrong in each of these areas.

oO

239
 It is usual to define operations as steady-state activities relating to the day-to-day
outputs and product and service delivery, and the processes and administrative and
management systems that support this. Projects have a clearly stated beginning,
middle and end resulting in: the production of something that did not previously
exist; changes to product and service design; changes in business processes; new
inventions; and the evaluation of new opportunities.
Large-scale operations and projects also have programmes, including:

e programmes of product and service delivery for operations;

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e programmes of different projects, and programmes of sub-projects and
contributory projects.

Everything in the project and operational environment has to be recognized,

reconciled and structured in order to meet the demands placed on project and opera-
tions managers. In all project and operational work, there is a series of pressures and
trade-offs that arise from:

e the need to reconcile time, cost, quality and safety issues (see Figure 13.1);

Time

Cost Quality

Figure 13.1 Project and operational trade-offs

e work schedules and demands to meet specific deadlines, product and service
delivery targets, and project completion dates and times (and milestones for large
and complex projects);
e the value of all activities, and their contribution to product, service and project
quality, and overall effectiveness and viability;
e¢ specific pressures arising from the availability of resources when required; for
scarce resources, raw materials and expertise, this often means having to pay high
charges in order to ensure their availability;

240
 Ww
e time issues and critical paths, which need to be defined, understood and accepted
by all as being the shortest timescale possible for the delivery of products,
services and project work.

= There is a Russian proverb that states: ‘You cannot make a baby in one month by working
nine times as hard’ Clearly, some timescales and schedules are fixed; however, all timescales
n
ot

=
2.
= and schedules should be evaluated on an individual basis to see if it is possible to speed
5= sadafoid
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things up.

However, there are fundamental differences in the overall approach to, and
outcomes of, operations and projects work.
Operations and product and service delivery are the reasons for the existence of
the organization in the first place, producing and delivering what customers and
clients need, want and expect.
Project work exists to change things. The result of project work is to create,
develop and bring about new systems, buildings, engineering and chemical inven-
tions, and business processes. Project work is needed to design, develop and bring to
production and market new products and services, and upgrades and improvements
to those that already exist. Project work therefore changes things and moves them on,
while operations deliver that which already exists and is either commercially viable
or else (in terms of support activities and processes) supports the range of primary
work carried out.

ae
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=
Primark
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Designs for the clothing industry, and the fashionability of individual items, used always to
<<
be controlled by the major fashion houses and the annual shows in London, Paris, New
York and Milan. This meant that the major fashion houses had a clear run of up to a year,
able to sell their products at high prices, before the designs filtered through to the mass
production and cheap/good value retail outlets.
Primark, the good value clothing company, commissioned a project that was designed
to change all this. The purpose was to produce a computer programme that scanned the
clothing when it was first displayed for materials, design and appearance. When the
company produced the first viable version of this scanner, it took it along to one of the
fashion shows.
The company was refused entry. The project now shifted its focus to concentrate on
photographs and television images. A series of images was produced, translated into
clothing patterns, and the first set of prototypes was delivered.
This approach was not only successful; it also transformed the fashion and clothing
industries. Designs that took anything up to 12 months to come to the mass market could

241
 now be on the good value and mass market production lines within six hours of being
scanned, either from moving images or photographs.
This illustrates the relationship between project work and operations. In this case, the
project work transformed the nature and basis of operations, and also moved the company
from being ‘a late follower’ into ‘an early follower’

Recognizing the fundamental difference of orientation between the nature and

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management of projects and operations, the core issues are:

e location of work;
e health and safety;
e working environment;
e scales of production;
e control.

Location
Location depends on the following.

e Sources, frequency and regularity of input deliveries, especially where this

includes physically heavy or bulky resources. There must therefore be adequate
access to transport and distribution infrastructures.
e Virtual location: this is less of a problem where the delivery of everything critical
can be guaranteed through computer networks and via the internet. However
again, it is necessary to ensure that the staff required do have access to places of
work; where the ‘place of work’ is at home, at business centres, or on the road, the
process is reversed because managers and supervisors require convenience and
access to their staff working in these ways.
e Just in time inputs and deliveries effectively mean that a lot of physical storage
takes place on the road; and again, the ‘location’ aspect has to ensure that there is
sufficient infrastructure capacity for this to remain effective and profitable.

Location is also affected by political, social and cultural factors. For example,
many transport, distribution and haulage companies, or multi-activity companies
with transport, distribution and haulage fleets, are now looking at the best places to
locate from the point of view of optimizing their corporation and capital taxation
allowances as some countries load these elements much more heavily than otheis.
Location used always to be influenced by the nature of production processes.
Traditionally, industry tended to locate near its markets, if the production process
added weight to the product; and at the sources of materials, if the processes detracted
weight from the products.

242
 = ct)
Location is affected by wider environmental support. For example, communities
expect to have their own schools and social, health and hospital services, as well as
commercial services, including supermarkets and banks.
For project work, location is dictated by where the work is required. The
constraints of the environment have to be reconciled with demands of the project.
Building and civil engineering require consideration of effective access and egress.
Information technology projects have to reconcile the demands placed on the partic-
ular system with the constraints of their physical location and the size of the environ- sadafoid
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ment in which they are to be implemented.

Organizations must choose their location on the basis that there is a sufficient
volume of staff available; where this is not possible directly, those employed must be
able to get to work through the use of commuter routes and public transport.

ast
=
Access to work
ia)
wn
a
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i
= Access to work is becoming a serious problem for those responsible for the location,
management and delivery of public services. Solutions have to be found to problems
caused by the inability of those in public services to afford local property because of the
high prices of homes in relation to salaries offered. It is also an enduring problem for those
on career paths in public services. In the overwhelming majority of cases, frustration and
stress are caused by strong and enduring levels of commitment to the service itself, and to
the client groups in question, against the inability to afford to remain in the sector; or if
doing so, then reconciling this with the high levels of fixed charges that accrue as a conse-
quence and condition of remaining in the profession.
This has led to highly publicized, long-term and enduring shortages of teachers, nurses
and social workers. However, this is not confined to the high commitment, low salary
occupations; there is also long-term enduring shortage of those coming into the medical,
legal and military professions, which enjoy high salaries, and high levels of job security. The
location of these activities, together with the enduring levels of stress and social dysfunc
tion faced as the result, mean that:

e a better quality of life can be enjoyed in other occupations for the same level of
qualification, salary, and expertise;
e equivalent levels of personal, professional and occupational satisfaction can be gained
without the locational dysfunction.

For example:

e A lawyer working within the military establishment found himself having to stay in London
during the week for a period of two months. This was due to a combination of particular
work pressures at the time, combined with the uncertainties of public transport. This
meant that he was only able to return home at weekends, and this caused domestic
stresses and strains, in spite of the fact that he had been married for over 15 years.

243
 A country GP in the south-west of England found himself working from any one of six
locations. This was because he was required to cover his own surgery; a cottage
hospital; two clinics; and two out-of-hours call centres and emergency surgeries. While
this was a clearly stated and understood precondition of the job, it took nearly three
years for the local health authority to agree to provide a mobile telephone, or a
substantial medical emergency travelling kit.

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Health and safety

It is the duty of every organization, so far as is reasonably practicable, to provide
a place of work that is both healthy and safe. (Health and Safety at Work Act,
1974 — Preamble)

Organizations are required to provide a place of work that is both healthy and safe;
and to take an active responsibility for this, rather than to respond to a detailed set of
legally stated criteria.
This responsibility is underpinned with specific legislation and regulations in
particular areas. Both the EU and also the UK government have legislated to address
particular operational issues, especially in the following areas:

Working time: the establishment of a basic level of maximum hours that may be
requested without the employee’s further consent. In the UK, this is 48 hours per
week. This may be varied in particular cases according to the nature of the work
being carried out; where longer hours are required in some weeks, time off must
be given in others to ensure that the average of 48 hours per week, over a
reasonable period of time, is not exceeded.
Substances hazardous to health: these must be registered, monitored, recorded
and, when not in use, kept under lock and key. Such substances may normally only
be used under supervision, or with the knowledge of someone else on the premises.
Protective clothing: required for those working outdoors or on construction or
engineering sites; and required also of those working with chemicals, and toxic
and hazardous substances.
Training: health and safety training is required for all employees; and basic
health and safety training is required for those who come to work on particular
premises as contractors.
Qualifications: many professional, technical and managerial qualifications
include specific attention to health and safety, both from the point of view of
understanding and following the legislation, and also in relation to the sorts of
hazards that are present in particular occupations.
Computers: it is normal practice not to allow anyone to work for longer than 2.5
hours at a computer screen without giving them at least 15 minutes Away from it.

244
 =)
e Breaks: it is usual to ensure that everyone who works for a continuous period of
four hours is then given a break of at least 30 minutes. Anyone working longer
than eight hours per day must be given a break of at least one hour.
e Emergency procedures: all organizations must have stated emergency
procedures. These must be written and made available to all staff and visitors to
the premises, regardless of size of the organization, or complexity of operations.
e Road haulage and transport: there are specific regulations that have to be
followed by all those working in road haulage and transport; and organizations sadafoid
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have an active responsibility to ensure that these regulations are followed.
e Waste and effluent disposal: all organizations are responsible for disposing of
any waste or effluent that their operations and activities produce.

The effectiveness of these statutory approaches to the management of health and

safety in operations activities lies in:

e the acceptance of corporate responsibility and accountability, as well as the

one-dimensional duty to work within the law;
e the powers of statutory and regulatory bodies, and levels of fines, in order to act as
deterrent to corporate malpractice;
e the relationship between being a known healthy and safe employer, and levels of
positive operational activity; the effects of being a known unhealthy and unsafe
employer, and the detrimental effects on business and service operations.

Overall responsibility for health and safety at the place of work rests at the top
management level in terms of setting standards and producing formal policies. However,
all individuals at every level have a joint degree of responsibility to ensure that their own
aspect and work environment is kept as far as possible both safe and healthy. The policy
will identify any instruments for monitoring and assessment — such as safety representa-
tives and the election or appointment of safety committees. This may also include
training for both managers and operative staff. Finally, particular hazards will be indi-
cated, as will the requirements to wear particular types of clothing, use particular types
of equipment and follow particular procedures in dealing with particular hazardous or
potentially unsafe situations and practices at the place of work. This includes the storage,
handling and usage of restricted or supervised goods, chemicals and other equipment.

Quality of working environment

The work environment must be organized in such a way as to be healthy and safe as
far as possible, and to provide the required and acceptable standards of comfort and
humanity. This includes:

e Temperature levels: appropriate training and clothing must be provided for

those who have to work in extreme heat or cold.

245
 Lighting, which must be adequate to work without strains on the eyesight of the
workforce.
Ventilation of all work premises, where necessary through air-conditioning and
filtration procedures.
Suitable and sufficient sanitary accommodation for all, including separate
conveniences for each gender and the disabled; and related provisions of washing
and drinking water facilities.
Machinery must have guards and cut-outs in-built, and training must be given in
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not be removed during operations.
Offices must also be maintained in a safe way: telephone and computer wires
must not be left trailing; fire doors must not be propped open or locked shut;
passages and corridors must be clear and unobstructed.
Floors, stairs and passages must be soundly constructed and maintained, and
railings put on stairs and raised walkways.
Specific training must be provided for all those who are required to lift heavy
weights; or to work with toxic or dangerous fumes or substances (for example
laboratories, chemicals and radioactive substances).
Records of accidents must be kept; all accidents that result in fatality, loss of
limb, or absence from work of more than three days must be notified to the Health
and Safety Inspectorate.
Technology provided must be capable of safe, effective, productive and profitable
use; where necessary, training must be provided, and this applies to upgrades as
well as the installation of new equipment.

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Project operations and technology
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(2) Rationally and logically, all technology should be provided on the basis that it is useful,
=
a
= valuable, effective, profitable and productive in the terms demanded by the organization
as it produces products and services for the enduring satisfaction of its customers and
clients. There are, however, other points to be considered:

e No technology is ever effective on its own. Its value to the organization is entirely
dependent upon the capability of those operating it.
The purchase ofgeneric technologies — especially in production and information
technology — must always be considered from the point of view of their precise
suitability for the particular organization. In particular, many off-the-shelf personnel
information management systems have been found to be less than effective because
they do not address the precise questions required by the particular organizations that
have purchased them. Many financial management information systems purchased by
central government as an aid to the management of public services, and by

246
 = Ww

multinational corporations as an aid to the management of international purchasing

and distribution, have been found not to address the substantial and priority questions
required by these institutions.
e Many technologies are produced to demonstrate the technological brilliance of the
inventors and designers, rather than the requirements of the end-users.
e Many technologies have insufficient capacity for upgrade, maximization, or changes in
product and service specification. saealoid
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Additionally, many perceived revolutionary technologies have failed to deliver the

benefits promised or strongly indicated. Many companies are still struggling to maximize
their commercial usage of the internet. Many organizations additionally have websites in
order to ensure that they have a presence on the internet, rather than as a directly opera-
tional instrument.
Many individuals, groups, departments, divisions and functions are fitted out effectively
with particular technology (especially computer technology) as part of the reward
package. For example, for managers or other key staff not to have a personal computer in
their office or individual place of work is seen to reflect a loss of status or face; or a percep-
tion that the reason why there is not one present is because the particular individual does
not know how to use it; and, above all, the understanding that they are not important
enough to have one.

The structure, design and presentation of any place of work needs to combine a
good quality of comfort with the capability to carry out activities effectively. Addition-
ally, it is expected that all organizations provide a modicum of human comfort and
humanity, as well as attending to the technological, professional and occupational
drives and priorities.

Scales of production and output

Woodward (1961) defined the following scales of production.

e Jobbing or unit production: the production of single, unique or specialist

items; unique quality of service delivery; the ability to customize or make unique
products and services according to customer and client demands.

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S Levi Strauss conducted a project to test the feasibility of offering a customized service
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allowing customers to choose from a set of features enabling them to have, within these
constraints, the jeans of their choice. Levi Strauss has created a website page offering the
range of features — including colour mixes, measurements around the hips, waist, thighs

247
 and ankles, choice of waist fasteners, and belt buckle options. Customers simply log on to
the website, choose their precise requirements from the range on offer, and arrange to
collect their jeans or have them delivered at their convenience. For those wanting more
precise made-to-measure, a body scanning service is available. This comes through one of
the following:

e indicating precise measurements, where the individual customer knows these, on the
website;
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e attending a Levi Strauss outlet that has the body scanner facility;
e attending another outlet which has the scanner facility available by arrangement with
Levi Strauss.

The pioneering work of Levi Strauss is now fully integrated into the company's main-
stream operations and activities. Because of its commercial success, it has been examined
closely by many other organizations, both from within the clothing sector and also else-
where, to see how the customization of particular products can be developed in fully
commercial ways.

Source: Pringipas (2001).

e Mass production: organizing work in order to produce high volumes of standard

quality products and services. Traditionally, mass production is the cornerstone of
all consumer goods; the same principles apply to the output of consumer services
(for example holidays, travel and transport, banking and financial services).
e Process and flow production: traditionally applied to oil, petrol, chemicals,
plastic extrusion, steel and paper manufacturing — the output of commodities in
a continuous stream or flow. This approach also applies to commercial and
public services.

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Process and flow in commercial and public services
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a Problems in both commercial and public services become apparent when managerial
ia)
wn
attention is concentrated on operational efficiency rather than quality of service, and
customer and client satisfaction. For example:

e Banking: one major clearing bank went through a process of closing hundreds of small
branches. The defining criterion was simply the volume of money held in each
account. Accordingly, a tiny rural branch in which one or two wealthy people held
accounts was kept open; while branches with a larger volume of accounts were either
closed down altogether, or opened on a part-time basis only, because the particular
branch did not serve a sufficient number of more opulent customers. The programme

248
 —w

was subsequently rescinded, costing the bank a total of £170 million. Paradoxically, the
bank was the same one that greatly improved the effectiveness of service in the eyes of
customers by introducing the single queue in place of individual queues at each desk.
Just as effectively, this was copied by, among others, post offices, large estate agencies,
and travel agents. Some banks are, however, diluting the effectiveness of this part of
their operations by restricting the nature of services that can be provided through the
cashier and customer service, and insisting that customers use machines for their sadafoid
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particular service requirements, whether or not they wish to do so.
e The National Health Service (NHS): the single operational criterion in the provision
of hospital services is frequency of bed usage. Extremely efficient in narrow terms, in
that it is most unusual to find a bed unoccupied for more than an hour between
patients, this has nevertheless led to ward closures, and reductions in hospital capacity.
This in turn has led to increases in waiting lists for hospital treatment that is deemed to
be non-emergency or non-urgent; increases in times between admission through
casualty, accident and emergency departments, and being found a ward bed; and, in
extreme cases, the stacking up of patients on trolleys in hospital corridors, canteens,
and other non-operational areas. In some cases, it is possible to observe a queue at the
entrance to wards where patients are waiting to go in before the previous bed
occupant has actually been discharged.

e Batch production: the output of medium volumes of products and services;

normally based on the ability to rejig production and service technology so that
different inputs, processing and production methods can be accommodated, and
different outputs produced. Batch production is the standard form used in the
manufacture of drugs and pharmaceuticals; and in the package holiday sector,
whereby companies buy up volumes of hotel bookings, airline seats and other
facilities in advance that are then combined into distinctive batches of offerings.
e Project production: a combination of technology, expertise, information,
resources and components for the purposes of producing substantial, unique,
finished items. Project work is a major concern in all sectors, both internally (for
example the installation of information systems), and externally where market
testing and feasibility may be conducted on a project basis. This is quite apart
from those sectors that do operate on a project basis — information systems; civil
engineering and construction; defence; and electronics and robotics.

Whatever the scale of production and service delivery, production capacity and
productivity have to be clearly understood. Whatever the set of circumstances,
production capacity and productivity are a direct consequence of the nature of the
available equipment and technology, and the quality of staff employed. Both the
technology and staff have to be capable of meeting the demands for product and

249
 service output, and project delivery, on an immediate and enduring basis. This means
ensuring that a realistic and practical view of the nature and volume of demands on
the organization is undertaken. It is additionally necessary to reconcile the balance
between getting adequate returns on technology and expertise, while retaining both
the flexibility and the spare capacity to undertake special activities when required.

ai
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Measuring productivity: Examples
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McDonald’s: McDonald's calculates that the average stay per customer in each of its
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restaurants is 12 minutes. This can lead the unwary into thinking that every seat in the
restaurant can be filled five times an hour.
e The NHS: for many years now, the NHS has entered into extensive calculations
designed to work out: costs per patient across the entire service; Costs per patient in
particular regions; costs per patient in particular hospitals; costs per patient in other
activities — clinics, day care centres, doctors’ surgeries, district nursing, and midwifery.
This has led to a system of service budgeting that was flawed from the outset.
e Further education: a further education college calculated the costs of using its
classrooms at £130 per hour. A nearby hotel offered conference facilities at £80 per
hour. It was not until extensive discussions had been held between the college
authorities and the hotel management concerning the feasibility of renting rooms on a
regular basis from the hotel that the college realized the fundamental flaw in its
comparisons — that the calculation of costs and the payment of charges are only
tenuously related in complex activities.
e Semco: ‘One sales manager sits in the reception area reading the newspaper hour after
hour, not even making a pretence of looking busy. Most modern managers would not
tolerate it. But when a Semco pump on an oil tanker on the other side of the world fails,
and millions ofgallons ofoil are about to spill into the sea, he springs into action. He
knows everything there is to know about our pumps and how to fix them. That's when he
earns his salary. No-one cares if he does not look busy the rest of the time’ (Semler, 1993).

Managing the supply side

The standpoint here is to ensure that all materials, resources, and information
required are in place when necessary, while at the same time striking a balance
against unnecessary storage costs and charges.
The main elements for consideration are:

e convenience of access, frequency and reliability of sources and deliveries, the

flexibility or otherwise of production and project scheduling;
e speed of obsolescence of components and information;

250
 w&
e whether to bear the price of stockpiling as a comfort or necessity;
¢ any specific demands of the particular range of operations, or project
requirements;
e the extent to which it is necessary to do things in accordance with the demands of
suppliers;
¢ specific issues on the supply side, especially the scarcity of expertise or raw materials;
e storage costs and charges;
e the need for specific storage facilities: large storage facilities become expensive sidefoid
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in terms of land and capital resource usage; information may require storage in
specific formats.

Whatever the approach taken to managing the supply side, the priority must be the
availability of component supplies, resources and expertise when required.

Just in time
The just in time (JIT) approach to purchasing is attractive because it removes the
need to use expensive premises for the storage of components and supplies. JIT is
based on the ability to engage in relationships with suppliers requiring regular (daily
and in some cases, many times a day) deliveries to be made. This form of supply has
always been the norm in the fresh foodstuffs industry. It has now been extended into
many industrial and commercial areas, and public service activities.
When they are delivered, supplies go more or less straight into production areas.
As long as it works well and supplies can be more or less guaranteed, JIT is both
efficient and effective. Its success depends entirely on the reliability of the suppliers.
In practice, it also depends on the ability and willingness of the supplier (or suppliers)
to vary the volumes, normally at short notice, to cope with sudden up-flows and down-
flows in production.
Further developments are as follows.

e Only when required — in which the supplier has the capacity and willingness to
provide what is required, when required, at instant or very short notice, in
response to individual requests from purchasers.
e Booking in advance — especially when critical supplies or expertise are needed for
a particular operation, or in the delivery of project work. In many cases, “booking in
advance’ means having to pay either a premium or a retainer to ensure that the
supplies and expertise are delivered at precisely the time required.
e Only when provided — in which the supplier establishes a set pattern of frequent
deliveries. This enables suppliers to schedule their own activities with a degree of
certainty, and requires entering into relationships with purchasers to establish the
enduring convenience of the ‘only when provided’ approach. From this it 1s
possible to plan hourly, daily, or weekly schedules by arrangement.

251
 aSs
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a)
‘Just in Time’: Examples
wo

DHL: DHL isa fully flexible, high quality, instant response mail, delivery and courier service
a
(e)
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e
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provider. The company undertakes to take and deliver anything, anywhere in the world,
within three hours (local), six hours (regiona ),ten hours (national) and twenty-four hours
(international) — subject only to the vagaries of long-haul air flights. The only leeway that
they allow themselves in setting their standards concerns long-haul air deliveries — in these
cases, specific terms of business are drawn up with particular clients in order to establish
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reasonable parameters around scheduled air services. In return for this quality assurance,
reliability and flexibility of delivery, the company charges extremely high prices.
e Harrods: Harrods and other perceived exclusive providers of goods and services insist
on full flexibility of response when dealing with those who supply them with exclusive,
unique or customized goods and services. Again, the charges incurred in such a
relationship are very high; and again, this is reflected in the price paid by individual
customers for this quality of service.
@ Sandals: Sandals, the exclusive travel and tour operator, had to change its West Indies
weddings package from ‘only when provided’ to ‘only when required’, and accept any
increase in costs that this brought about. This was because, on some days, couples to
be married found themselves being rushed through due to the numbers being married
on the same day. While on other days it was impossible to provide the full range of
services (for example video packages, priests of particular religious denominations)
because the lack of volume demand meant that those subcontracted to provide these
found it economically unviable to turn out.

It is important to recognize that each situation brings its own advantages, disadvantages,
opportunities and consequences. If adurable and high quality working relationship is to be
established between suppliers and purchasers, then any potential pressures brought about
by instant demands, short-term changes in quality and volume, and changes to produc
tion and service specifications, are addressed by those managers responsible.

Control
Operational and project systems, procedures and processes must be both sufficiently
well ordered, and also flexible enough to be improved where necessary. This is to
ensure the effectiveness with which the task in hand is addressed and also gives the
means of improving every aspect.
The following key questions have to be addressed.

e The slowest part of the process: where this occurs; why it occurs; what if
anything should be done about it; how it might be speeded up; the consequences
of this on other activities.

252
 meeyWw
¢ The quickest part of activities: together with any consequences; this especially
becomes a problem if it results in staff or equipment operating to less than full
capability.
e Blockages: where, why and how these occur; how often these occur; and the
range of possible responses. Blockages occur as the result of the nature of
production, service, and output processes; shortage of specific facilities; and
stockpiling at the input and output locations. It causes stresses and strains on
other parts of the process. sadafoid
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Blockages in the NHS
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Regular, enduring and frequent blockages occur in the provision of effective patient serv-
ices in many parts of the NHS. Specific blockages occur in:

e casualty, accident and emergency departments, where patients often have to wait
many hours for urgent and non-urgent treatment;
@ patients often have to wait many hours for admission to the correct hospital ward; in
extreme cases, where a patient's urgent condition becomes an emergency, this has
resulted in the need for high speed transfers to other hospitals;
e bed-blocking occurs when it becomes difficult to pass patients on to the form of care
required next, or back into the community. This is an especial problem with elderly patients.

Each of these has a compounding effect on activities in the immediate future.

These blockages are caused by a combination of staff, equipment and bed shortages
that have resulted from a lack of full understanding or attention to the broader medical
environment.

e Volume, quality and time issues: consideration of what is available, what is

possible and what the customers, clients and consumers require.
e Wastage rates: these should always be attended to, and constantly assessed for
acceptability or otherwise; the expense incurred requires calculation and
evaluation; this may also increase concerns for, and volume of activities in, waste
and effluent disposal.

It is essential to be able to respond effectively to customer complaints. This was

not normally regarded as being a part of the sphere of operations or project manage-
ment. However, it is essential to recognize that all customer complaints are founded
in dissatisfaction with products and services; and so where questions do arise,
production and service delivery functions ought to be involved. Indeed, many
organizations now make their production functions responsible for managing customer
complaints. Even where this is not the case, production and output processes require
assessment for the potential for dissatisfaction and complaint.

255
 There is a direct relationship between being able to operate in a good quality
working environment, and sustained high and satisfactory levels of volume and
quality output. Attention to the working environment requires:

e a full assessment of the working environment, its strengths, weaknesses and

shortcomings;
e a full assessment of the expectations of individuals and groups, and what they
require to do their jobs properly and effectively;
e prioritizing those areas that require attention;
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e identifying those factors inside and outside the control of those involved;
e identifying accurately staff pressures brought about by the requirement to work,
for example, in untidy, dirty, damp or draughty conditions; and recognizing that
these conditions may exist in any form of activity;
e recognizing the particular health and safety constraints inherent, and taking all
steps necessary to ensure that accidents, injuries, emergencies, and illnesses, are
kept te an absolute minimum.

Finally, it is necessary to recognize and understand the particular constraints placed

by engaging people on different patterns of work. Specific professional and occupational
eroups also require particular attention. Those with high degrees of specialization or
expertise, or who work away from the organization, or to non-standard patterns of work,
require full organizational and managerial support if they are to remain effective for the
long term. This applies to many occupations, for example:

e professional health service staff working nights and weekends;

e sales staff working in the field for long periods of time; and in many cases, also
working evenings and weekends;
e those who work twilight shifts, at times when senior management are likely not to
be present;
e those on ‘job and finish’ activities;
e those working for agencies, subcontractors, consultancies and other distinctive
specialisms that are only required for short periods of time.

The complexity of operations and project management

Project and operations managers must be able to address effectively the following as
and when they arise:

e information flows must be worked out in advance and evaluated for effectiveness:
e establishing the means of dealing with crises and emergencies;
¢ the management of the financial aspects of the work based on accurate high
quality information available to, and understood by, everyone involved;

254
 ‘wo
e the management of the work and task schedules inherent in the work, including
the establishment and acceptance of work methods, timescales, resource
gathering, problem-solving, maintenance and development functions;
¢ managing communications between everyone involved with especial reference to
organizational, occupational, professional, cultural and language difficulties;
e attention to the demands of key stakeholders;
e attention to all individuals involved, including making constructive use of talent
and expertise of all those involved; sadafoid
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e the creation and adoption of a positive and dynamic management style, with
especial concentration on the coordination and communication aspects; ensuring
effective staff, supplier, customer and client liaison;
e agreement of common aims and objectives which are understood, valued and
accepted by all those involved; or at least capable of being harmonized in pursuit
of the ultimate outcome;
e the establishment of key and specific areas of responsibility and accountability
with procedures established for the resolution of any conflict or dispute.

It is essential to understand all these factors. In the management of a computer

or information systems project, for example, ultimate responsibility for its effective-
ness lies with the client, and their ability to communicate their precise require-
ments to the contractor. For civil engineering and building projects, responsibility
lies with the capability of the contractor to translate the project requirements into
something that is acceptable using their design, building and environmental
management expertise.
In certain public projects, it may be necessary to develop the liaison process into a
non-executive but highly authoritative steering group because of the requirements or
demands of the commissioning bodies; for example where these are municipal health
authorities or instruments of national, regional and central government.

Conclusions
The effectiveness of the management of projects, operations and activities lies in the
ability to understand and apply the extremely complex set of principles indicated in
this chapter to particular situations. There is no absolute set of rules that applies to
all circumstances, and the balance and mix of these principles varies between
organizations (even those in the same industrial, commercial or public service sector)
and projects (even those concerned with the same ultimate output, for example a new
motorway, a new information system).
It is additionally apparent that all project and operations work is carried out within
particular constraints and limitations. Nothing can ever be planned for or completed
in isolation from the various pressures within the operating environment. All project
and operations managers therefore need to be aware of the following.

255
 e Sectoral economics: activities in every sector are limited by the rates of return
available; and by the costs of technology and expertise required.
e Schedules: the speed at which operations and projects progress 1s, in part,
dictated by the speed at which supplies, expertise and information can be made
available.
e Operational and project lifecycles: relating to the length of useful life of
the finished item (for example, fashionable and seasonal goods and services
have to be provided at very short notice; project work often requires
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technological pressures).
e Resources, expertise and technology: project and operations work is always
affected when resources, technology and expertise suddenly become unavailable
due to matters outside the organization’s control. For example, finance may
suddenly become unavailable because of wider economic changes (especially
downturns); expertise may no longer be available when required (for example, due
to the UK recession in building and civil engineering in the early 1990s, much
expertise was lost to these sectors altogether).

Operations and project managers therefore need as full an understanding of their

particular environment as possible and as quickly as possible. Additionally, it is a
mark of professional practice that those responsible for activities or projects become
fully knowledgeable in the particular field in which they are working. For example,
the project managers working on the 2012 Olympic project in London are completely
committed to the success of the Olympic Games. Those managing the development of
new products for Starbucks know and understand the contribution of each ingredient
to the finished product.
Finally, it is essential to recognize the broader context of operations and project
management. It is perfectly possible to create anything from the point of view of the
satisfaction of narrow self-interest or key stakeholder drive. Anything that requires
development in the long-term interests and enduring viability of the organization
needs to be understood in terms of the sheer range and complexity of activities in
which managers have to be expert.

= e Managing operations and projects is complex. As well as a range of expertise, those

oO
=
(a)
= responsible must have the ability to operate within the constraints of the given
environment.
e The health and safety ofall activities is paramount; and is bounded by jaw.
e Technology is to be seen as a resource that contributes to enduring viability and
effectiveness of projects and operations. It has no intrinsic value.

256
 = Ww

e Projects and operations form the basis of the mainstream activities, and therefore
profitability, of organizations; and this is the reason for paying prime attention to them.
e The fundamental difference between projects and operations is that projects exist in
order to change products, services and processes, or in order to create, develop and
produce new inventions, buildings, engineering and technology capabilities; operations
exist to provide organizations with a steady stream of the products and services which
they produce for customers and clients. sadafoid
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Further reading
Association for Project Management (2011) Project Management: Body of Knowledge. APM
Publications.
Goldthorpe, J. et al. (1968) The Affluent Worker: Industrial Attitudes and Behaviour. Cambridge.
Johnson, R. and Clark, G. (2009) Service Operations Management: Improving Service Delivery. Pearson.
Lockyer, K. (1996) Project Management. Penguin.
Semler, R. (1993) Maverick. Century.
Slack, N. et al. (2009) Operations and Process Management. Pearson.
Thomsett, M. (2009) The Little Black Book of Project Management. Jossey Bass.
Woodward, J. (1961) Industrial Organization: Behaviour and Control. OUP.

257
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Financial and (ees
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finishes?

aspects of
management

In this chapter
e the critical need to understand all aspects of finance
e identifying and understanding different numbers and their presentation,
and what the numbers mean and state
e using numbers and figures to support decision-making
e developing a managerial awareness of how figures are used by different
professions (for example statisticians and accountants) for their own
legitimate purposes

introduction
Finance is the lifeblood of all organizations, and therefore at the core of all activi-
ties. Commercial organizations are required to make profits, generating over periods
of time a surplus of income over expenditure that supports the continuation and
viability of the business, and provides an adequate return to shareholders and
backers. Public and government services, working to targets and budgets allocated
by governments and other authorities, use their resources to best advantage to
satisfy the sectors they serve.
It is therefore essential that managers know and understand financial structures
and mechanisms, and the other sources of data that support decision-making.

259
 The content of financial management
Financial management is concerned with all aspects ef organization finances as
follows.

e Producing accounts in accordance with statutory and regulatory demands; having

these accounts audited, agreed and signed off by independent and expert auditors
who must be allowed to take a detached view of the presentation, as well as
knowing and understanding the context in which the accounts were produced.
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e Accounting for the use of resources in all of the organizations activities. This in
turn means:
¢ accounting for capital expenditure on technology, capital goods, equipment and
premises that the organization needs in order to conduct its business effectively;
¢ accounting for revenue (or short-term) expenditure on daily activities and
operations;
e assessing where the balance of income, expenditure, costs, profits and losses
occurr.
e Assessing performance from the point of view of immediate and enduring
financial results; being able to evaluate the balance of activities for contribution
to the effectiveness of financial performance; and from this evaluation, being able
to recognize and address those areas where financial performance can, and
should, be improved.

Financial management is additionally concerned with addressing investments,

new products and services and new ventures from the point of view of the returns
generated, whether this represents maximum value for all concerned, and whether
these activities represent the best use of the organization’s resources.
Financial management is concerned with value as well as cost, income and profit;
and so has to provide structures and bases for valuing activities, the ways in which
activities are carried out, and the total contribution to the organization’s financial
strength and integrity.
Financial management is concerned with ensuring that income and expenditure
policies and priorities address the immediate demands of stakeholders (including the
financial interests), as well as ensuring that adequate levels of resources are available
to support the activities necessary for the long-term future of the organization.

ion
Finance and financial management should never be allowed to stand alone, either as sepa-
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rate organization disciplines, or as the only driving forces of performance priorities. The
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best organizations and managers integrate financial performance and the data that they
use with all other aspects of organization and management, and to inform and support
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decision-making, risk analyses and forecasting activities.

260
 =5

The context of financial management

The context of financial management needs to be known and understood fully by all
managers in any situation. The context of financial management consists of:

e knowing and understanding the nature of the financial performance that ought to be
achieved in a particular set of circumstances, and, in the context of market activities,
costs of raw materials and energy, customer and client activity and trading conditions;
e knowing and understanding the balance of profitable and loss making activities in
terms of which products and service activities and markets are profitable, which
parts cover their own costs and which parts run at a loss;
e knowing and understanding the cost of primary activities which produce, deliver juaWas
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and sell the organization’s products and services;
e knowing and understanding the balance between the costs involved in effective
primary activities, and organization support and service functions.

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dispensed with. While knowing and understanding the balance of primary and support
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functions is clearly essential, the costs incurred in having these support functions do need
addressing from the point of view of cost-effectiveness and contribution, as well as finan-
cial implications.

Within this context, financial management is concerned with:

e the production and verification of accounts as above;

e identification and management of costs;
e financial performance management;
e the apportionment of resources and budgets for departments and activities;
e asset and liability management;
e valuation of the organization and its activities and operations;
e managing investments;
e attending to the financial aspects of risk;
e developing management information systems that support and underpin the
financial management effort.

Accounts
Accounts are produced by qualified professional accountants and other experts in
accordance with legal requirements, and the existing rules, codes of conduct and
conventions that govern the ways in which these activities are carried out. Explanations
and support for how accounts are produced are given in organizational, annual and
other public reports.

261
 From a managerial point of view, the approach to accounts and financial aspects
involved ought to be concerned with the use, evaluation, interpretation, analysis and
judgement of the data, and how it is to be used. Accounts are one point of information
used as the basis for effective decision-making. Organizational accounts ought to
indicate the strengths and weaknesses of existing financial performance, and where
the opportunities and problems for the future are likely to occur.

0001 0000
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Profit and £ million £ million
loss account
INCOME 3188 3097
OPERATING COSTS (2736) (2771)
OPERATING PROFIT 452 326

INTEREST (27) 33

PROFIT BEFORE TAX 425 359

TAX (140) (117)
PROFIT AFTER TAX 285 242
DIVIDEND (82) (72)

RETAINED PROFIT 203 170

(Brackets indicate subtraction)

Figures are then normally given for earnings per share and dividend per share

31 December 0001 31 December 0000

E million E million
Balance sheet
FIXED ASSETS 2106 1996

Current Assets 1109 1043

Short-term Creditors (771) (890)

NET CURRENT ASSETS 338 153

Total Assets 2444 2149

Long-term Creditors (475) (325)
Liabilities and Charges (299) (359)

NET ASSETS 1670 1465

CAPITAL AND RESERVES
Share Capital 1470 1000
Capital Reserve 150 265
Other Resources 50 200

TOTAL EQUITY 1670 1465

(Brackets indicate subtraction)

Note: It is used to give current and previous year's figures for purposes of comparison. Thus, the overall
performance can be compared, and also the line-by-line movements and charges.

Figure 14.1 Profit and loss account and balance sheet example

262
 >)RK
From a managerial point of view, the key points of assessment of accounts ought
to be:

¢ Gearing: gearing is the relationship between bank loans and other capital
sources of finance. In particular, deperidence on very high volumes of loan capital
ought to be a cause for concern. While this is not an absolute imperative,
organizations that are wholly or mainly financed by share capital and retained
profits are understood to have a much greater inherent financial strength than
those that depend on loans.
e Profit and loss accounts: profit and loss accounts give a true and fair reflection
of the amounts of income generated over particular periods, and the costs of
generating this income. Again, conclusions can be drawn as to the relative juawWa
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strength of operations and the extent to which these are meeting expectations.
Additionally, comparing profit and loss accounts from the present and recent
periods indicates where movements are occurring, especially if costs are rising or
profits are falling.
e Balance sheet: the balance sheet balances assets and liabilities on a given date.
Assets and liabilities are valued; and the result is that the nature of assets and
liabilities are presented. From a managerial point of view, the balance sheet gives
a clear indication of the strength and nature of particular assets and the strength
and balance of the financial capital supporting the activities (again, the balance
of share and loan capital is clearly stated) — see Figure 14.1.

Identification and management of costs

It is usual to define:

e Fixed costs — are those that the organization has to bear as the result of its
existence regardless of any business activities carried out.
e Variable costs — are incurred as the result of business activities. Variable costs
vary according to the volumes of business and other activities carried out.

From a management point of view, it is additionally necessary to be aware of:

e Sunk costs — are those incurred by the organization on which there is no

discernible or tangible return. Such costs include paying for errors and omissions;
commissioning work, products and services that turn out to fail; developing and
installing IT and other technology systems that turn out to be wrong and that have
therefore to be junked; and engaging in ventures and new initiatives that turn out
to have no prospects for the future.
e Marginal costs — are the costs of producing and delivering one extra item of
product or service. It is essential to know where the margin lies; as soon as 100%

265
 of capacity is reached, it then becomes necessary to invest in new product and
service delivery technology and the staff to use it.
e Consequential costs, or the costs that arise as the consequence of being involved
in particular activities. Examples include: the need for deficit finance when
engaged in long-term and major project work; and the costs incurred in
developing and evaluating the capacities and performance of new IT systems
before they can be installed and used.

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From a managerial point of view, it is essential to know and understand how the costs
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work out in particular situations. It is also essential to provide a clear and substantial
rationale for how costs are considered.
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Financial performance management

When assessing financial performance, managers need to know and understand the
overall profitability, viability and enduring effectiveness of activities, and of the
organization as a whole. As stated above, they therefore need to know the overall
figures and structures produced in profit and loss accounts and balance sheets.
Managers additionally need to know the full detail that goes into these overall
figures. Managers need to know, understand and be aware of income, profits and costs
as follows:

e per product and service; per product and service group or cluster; per product or
service range; per activity; in total;
e per employee; and this should be broken down into the contribution per member
of frontline staff, and per member of support staff, as well as in total;
e per square metre; per outlet; per location; per region; per country;
¢ per customer or client; and this should be the starting point for assessing and
evaluating customer spending habits and frequencies;
e per hour/day/week/month/season/year.

This approach to evaluating financial performance is essential so that where costs and
income occur they can be assessed and evaluated. Judgements can then be made about
the contribution of particular departments, divisions, functions and activities to the overall
effectiveness and viability of performance. Decisions can then additionally be made about
the effectiveness and viability of particular products and services, and of the entire range.

Budgets
Budgets are streams of money given to departments, divisions, groups and managers
on the basis of their needs in order to be able to pay for activities. Thére are many
ways of looking at budgets as follows:

264
 =)S

e evaluating every cost and charge necessary to run a department, division or

function and then apportioning this amount;
¢ carrying fixed costs centrally and creating budgets that cover variable costs only;
¢ giving over a single sum of money and then allowing managers to conduct their
business as they see fit.

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There are additionally organizational, behavioural and cultural factors to consider in budg-
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e whether budgeting processes are to be used as bidding wars playing different luawas
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departments and functions off against each other;

e whether managers need to ask for 130% of what they need, hoping that they will get
at least 100%;
e whether the organization operates on the basis of total budget usage, meaning that
whatever resources are not used or consumed are lost by the department, division or
manager; and this is worse when budgets are cut for the following year as a consequence.

Managers therefore need to understand the budgeting and apportionment processes in

their particular situation. Budgeting is as much a contextual and organization cultural
exercise as a financial one.

The other critical aspect of budget establishment and management is the period of
time allocated. Many organizations set annual budgets and this is for a combination
of practicality and expediency. The annual cycle is culturally and behaviourally
easily recognizable and understood, and it gives managers time to make effective
choices and decisions and then to make things work. Shorter time periods will
enhance financial control; but the consequence would be to increase the cost of the
budgeting process.

= Whatever the budgeting process, it is essential that everyone knows and understands the
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competitive, political, or otherwise unfair, basis.

The keys to effective budgeting are the ability to control resources, and to provide
accurate financial and management information. In the pursuit of these elements,
organizations tend towards one or other of the following:

e historic approaches, in which the previous year’s budget is used as the basis for
the present year, and it is then either increased by ‘a bit’ (often a percentage that

265
 reflects real and perceived inflation rates); or else it is frozen or cut so that the
manager has to make savings and find efficiencies;
e zero-based approaches, in which the budget for the period is calculated from
scratch with each element questioned so that as far as possible, a true as well as
realistic amount is identified.

Assets and liabilities

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performance; liabilities are any item or obligation that places a drain on organiza-
tional resources.

Assets
Assets may be defined as:

e capital and tangible assets, consisting of premises, technology, equipment and

expertise;
e intangible assets, consisting of reputation, goodwill, confidence, identity and
expectation levels;
e business assets, including brand names and images, and customer and client bases;
e key figures and expertise, including top, senior and key individuals; and
including also the expertise retained in work teams and departments, divisions
and functions;
e perceived assets, including the historic reputation of the organization; and
including also perceptions about present and enduring products, services, service
levels and quality.

Liabilities
Liabilities are those factors that detract from, or place a drain on, organization
resources. Liabilities are the obligations and charges that are incurred as the result of
the organization’s present activities. Liabilities are as follows:

e regular and continuing costs and obligations;

e activity-related charges, including maintenance charges, technology upgrades,
research and development, and other pioneering and prospecting work;
e short-term liabilities, for example the need for consultants or specialist staff;
e intangible liabilities, including bad or declining reputation;
e sudden liabilities, including the sudden obsolescence of products and services, or
sudden increases in the price of suppliers, technology, gas, electricity, water and
premises’ charges.

From an accounting point of view, assets and liabilities can be clearly stated. From a
managerial point of view, the picture is more complex. In particular, something that is

266
 &

bought in as an asset can turn quickly into a liability. Production and information
technology, bought in as long-term investment, may be rendered obsolete at any time
by new inventions. Building companies that bought land banks at a particular price
find that these become liabilities if the demand for building dries up, or if the price of
land falls.

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Depreciation
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2) Depreciation is an accounting convention that shows the period of time over which an item
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remember that depreciation is purely an accounting convention, and not a managerial tool.
For example, an item of capital equipment may have cost £100,000. The organization's Juawa
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accounting function may then set out to depreciate it quite legitimately, at £20,000 for a
period of five years. The accounting convention states therefore that the item has a useful
life of five years before it is written off. However, from a managerial point of view, if it
becomes obsolete after two years, then it will need to be scrapped and replaced, whatever
the accounting convention may say.
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Value and valuations

Organizations and their managers need to know and understand the value of every-
thing: the organization overall; the staff and expertise employed; the products and
services; property; technology; brands and identity. Organizations and managers also
need to be able to place a value on their reputation, the ways in which they conduct
their activities, and goodwill.
Valuing each of these items, and valuing the organization overall, is based on a
combination of ascribing a monetary value to everything — and then coming to a
combination of informed, objective and subjective judgement about what something
is worth at a given time.
To look at value and valuation in more detail, it is necessary to ask the questions:

e What is this element worth to us?

e How much would it cost us to replace it?
e How long would it take us to replace it?
e How much is it worth to someone else?

Alongside the answers to these questions, the actual costs of acquiring, owning
and using assets, equipment, expertise and brands are calculated. There is then a
basis for beginning to arrive at a judgement. This judgement can then be related to:

e market values for property and expertise;

e the extent to which property and expertise is being sought after by others;

267
 the size and duration of commercial markets;
the amount of business that customer and client bases bring in;
the consequences of not having access to property, expertise, markets and
locations.

Particular values can then be ascribed to each element as follows.

Staff expertise
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Staff expertise includes the pay and rewards commanded; replacement costs; replace-
ment duration (for example if someone leaves, how long it will take to replace them,
and the consequences of not having the expertise for this period); any ‘brand value’
that the staff carry (for example iconic figures such as David Beckham; distinctive
expertise such as specialist surgical skills for hospitals). Moreover, it includes any
additional value that is known, believed and perceived to be added by the workforce
to the organization as a whole.

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Valuing Beckham
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Over the years, David Beckham, the former England football captain, has been built into a
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brand. As well as his considerable professional expertise, he has succeeded in developing a
combination of presence, personality and presentation that has enabled him, his employers
(Manchester United, Rea! Madrid, AC Milan and LA Galaxy), and other commercial inter-
ests to benefit and profit from the association. For example:

his period at Real Madrid resulted in sales of 3.5 million replica shirts;
his period at LA Galaxy resulted in doubled television advertising revenues wherever
he was playing.

With the exception of one or two alleged marriage infidelities, David Beckham's press,
media and PR coverage has been overwhelmingly positive. The outcome is a brand which
has value in terms of:

the cost of his present and future employment and employability;

value that he is understood to add to his employers, and also in terms of the television
and merchandising issues indicated above.

Calculations can therefore be made on the basis of all this, and a view arrived at of:

how much he is worth paying:

how much he is going to bring in, and from where;
whether present and future employers want him at that price.

Clearly, this is an extreme and iconic example! However, all organizations need to be
able to value the real and perceived expertise that they have available. In “particular, the

268
 = ~~

contribution ofall staff needs valuing from the point of view of the work that they bring in
and carry out, and whether they are worth employing at that price. This is especially true
where it is difficult to get hold of professional staff (for example nurses, teachers). The
problem here is not whether you want them at the price, but in many cases, a clear under-
standing that the price (the salary) on offer is undervaluing their expertise.

Human asset valuation

As indicated above, the ‘human assets’ — the staff and their expertise — carry a value
that is measured in terms of the performance that they deliver for the organization,
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and the organizational reputation and confidence that is developed as the result.
The basis of valuation is the cost of employment, which includes:

e the total payroll costs;

e payroll costs by staff category and expertise;
e the amounts that have to be paid in order to attract and retain high value or
scarce expertise;
e any other factors, including sectoral and occupational norms, local factors, and
the extent of sectoral or local competition for each.

As with other assets, the staff remain an asset only for as long as they continue to
deliver the behaviour, performance and value required.
The issue of human liability has therefore to be addressed. Staff and their exper-
tise become obsolete if they are not developed; and so from a general, as well as
financial management point of view, continuous attention to training and development
is required if the staff are to remain effective (in financial or any other terms).
Organizations additionally place value on top, senior and key figures. Questions of
profitability, effectiveness and organization and market development have to be
assessed in terms of the contribution of these individuals, as well as the activities of
the staff who deliver performance. In particular, any question of economic rent (or
very high value) placed on particular expertise has also to be assessed. Where indi-
viduals are known, believed or perceived to be overvalued, there is always a detri-
mental effect on collective performance; and this above all, should be a key driving
force when assessing and delivering reward packages for top and senior managers
and other key figures.

Property valuation
Valuing property is more straightforward in that there will always be known, believed
and perceived ‘going rates’ for property and premises based on existing local markets,
and the prices presently being achieved. To this is added the question of preferred
location: when the property is in a capital city, industrial centre, or other sought after

269
 place, the value tends to go up. It is also necessary to be aware of the potential limita-
tions on the property in terms of size, access and egress. It is also necessary to recog-
nize that property prices and values can fall as well as rise. Situations to be
particularly aware of are:

e where the property remains critically useful to the organization, and is tenable
from every other point of view except the ability to pay for it;
e where the property has been valued as a capital asset, but this value has now
fallen;
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e where the property has been purchased for operational reasons, but has now risen
in value so much that the organization has to consider whether or not to cash it in.

Technology
Technology has a value only in terms of what it can deliver for the organization; it is
now more or less universally understood that there is little, if any, resale or residual
value once it has fulfilled its anticipated useful life. Technology is therefore normally
regarded as a sunk cost although the expertise required to use it, and maximize and
optimize its output, does have a value.

Products and services

Products and services have wholesale and retail values based in the first instance on
the prices charged and the volumes of business conducted. Products and services have
additional value in terms of the overall customer and client bases attracted and served.
For example, a company may buy up a product or service line from another wholly or
mainly in order to gain access to the customer or client bases for its own purposes.

Brands
Brand values are ascribed to the brand of products and services; the reputation of the
organization; and the organization itself. Valuing brands is a combination of the
measurable, in terms of the amount of business generated, and the highly subjective,
based on the questions: ‘How much do we think the brand is worth?’, ‘How much do
we want for it if we do decide to sell it?’ or ‘How much do we want to pay for it if we
do decide to buy it?’
From an organizational point of view, all valuations are ultimately based on the
relative value ascribed by buyers and sellers. If someone is determined to buy
something, the price (and therefore the value) goes up. If someone is determined to
sell something, or needs to sell it, then the price comes down. If two or more buyers
are interested, then there is further upwards pressure. If nobody is interested in
buying, then the price has to come down far enough to make it attractive to poten-
tial buyers.

270
 =as
This part of the managerial perspective on finance needs careful assessment and
expert understanding. In many cases, company accounts and organizational and
departmental budgets are the only financial points of reference available. It is essen-
tial that organizations and their managers have a much deeper understanding of
assets and liabilities (and the differences between the two, and how they change from
one to the other), and values and valuation, to ensure that they know where money is
being made and lost and the contribution of each activity.

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From a managerial point of view, the definition of assets and liabilities especially is a matter
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of expert and informed judgement. Assets are anything or anyone that adds to the
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from the productive effort and places a drain or strain on resources. This fundamental
approach ought to be the guiding principle in defining assets and liabilities from a mana-
gerial point of view.

Investment appraisal
The purpose of any investment is to gain returns and these are normally expressed in
financial terms, as well as other desired outcomes.
Effective investment appraisal therefore requires that the desired and demanded
levels of returns must be made explicit at the outset. Clear financial projections must
be stated, as must related issues of returns on investment that concern market devel-
opment, sales of products and services, and reputation enhancement.

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The nature of returns on investment
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concentrated in areas and activities where these levels are possible. Conversely, if organiza-
tions are determined to be in specific activities even though these only normally deliver
returns of 3% per annum, then this represents a particular consequence that has to be
understood and managed. It is also essential to recognize that returns do change and vary
over the lifetime ofan investment, and returns that were envisaged at the outset may not
be available when the investment comes to fruition or to be realized.

In practice, it is impossible to predict with absolute certainty or accuracy the

outcome of specific investments and initiatives. It is therefore usual to define bounda-
ries of acceptability or margins against the target that are agreed to represent success
and achievement in context.
Investment appraisal and management additionally needs timescales and time
frames in all circumstances. Timescales and time frames also require understanding

271
 and acceptance at the point at which resources are committed to particular initia-
tives. Timescales can in practice, be changed, extended or contracted as the result of
changes in circumstances within the environment, changes to market, product and
service demands, and as the result of changes in specific issues, especially the costs
of finance, or the prices that can be charged for products and services.
In order to conduct effective investment activities, pre-investment groundwork is
essential. This has the purpose of gaining full and comprehensive knowledge and
understanding of the context in which investments, initiatives and ventures are being
Asarens
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pue considered. The issues that normally have to be covered are:

e the range of returns possible, both positive and negative, expressed in financial terms;
e the range of returns possible, both positive and negative, expressed in
non-financial terms;
e determination of priorities, aims and objectives for the particular initiative or
proposal;
e determination of secondary or subsidiary aims and objectives for the particular
initiative or proposal;
e assessment of the risks involved;
e definitions of success and failure, known, understood and accepted by everyone
involved.

It becomes clear that investment appraisal is a process rather than an activity. At

the core of all investment appraisal activities are the financial considerations.
However, much of the complexity involved is non-financial, relating to the business
outcomes stated.
Effective investment appraisal and management requires full and accurate know-
ledge of the environment in which investments are being made and ventures are
being considered. If the success of whatever is proposed depends on achieving a
particular financial figure, then a full assessment of whether it is possible to achieve
these figures must be undertaken at the outset; and this, in turn, must be undertaken
in conjunction with an assessment of everything that could possibly or conceivably
affect the ability to achieve these figures.
Returns on investment are normally expressed as a percentage of the total cost or
value of the investment. As stated above, returns additionally need to be expressed in
non-financial terms so that attention is drawn to the full context, and especially to the
business purposes.

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Cost—benefit analysis
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Cost—-benefit analysis is a concise ready-reckoner method of establishing the basis on
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= which given initiatives and ventures might be feasible or profitable in both financial and
non-financial terms. Cost—benefit analysis requires itemizing all of the costs and charges

272
 cs

that could possibly be incurred in the venture and then setting them out against all the
values and benefits that the completed initiative is expected to deliver.
Cost—benefit analysis is used widely in the consideration of public sector and commer-
cial projects, and commercial ventures that bring wider social and economic benefits, as
well as pure financial returns. Cost—benefit analysis is structured as follows:

action choices: relating the purpose and outcomes of courses of action to each other;
time frames: definitions of short, medium and long-term costs and the results to be accrued;
values: both monetary values, and also in relation to wider economic and generation
activities; and additionally, in terms of contribution to the public good;
priorities: the priorities ascribed by all involved to the particular venture, and an assessment Juawas
sidadse
aanemau
JO
pure
jeioueul
of some of the opportunities that might have to be forgone ifcircumstances change;
initiatives: with especial reference to the effect that particular ventures and activities
might have in terms of derived income and future prospects; and with reference also
to less acceptable by-products such as effluent, waste and environmental damage;
risk and uncertainty: consideration of the aspects of risk that must be built into the
particular venture or initiative;
strategy: aligning particular ventures and initiatives with organization strategy;
relativity: the relative valuation and priority of different costs and benefits in terms of
everything that is to be achieved;
income and expenditure: relating what is being done to the cost and charges
accrued, and to the immediate, apparent, potential and eventual returns made
available (see Figure 14.2).

Action choice Priority Initiative

+ Size + Policy driven + Integrated transport or
+ Capacity « Vested interests isolated scheme
Cost Motoring and transport Job creation
lobbies Ending local and national
Green lobbies benefits

Long term Strategic aspect Risk

+ Facility usage + Transport improvement - Lowas long as publicly
+ Upgrades + Solve part of traffic financed
Short-term disruption problem + Materials availability
and blight + Part of national network Expertise availability

Relative valuation Income-expenditure Value

+ Government Direct income only if tolls To users

Companies building it used Negative value to
+ Transport companies Derived income from enrivonmental lobbies
- Individual road users greater usage and work
« Environmental lobbies generated
| + No direct returns otherwise
!

Figure 14.2 Cost—benefit analysis for a proposed motorway scheme

273
 Other numerical data
It is essential that managers are able to understand content, context and range of
financial issues, how they interrelate with each other, and how they inform mana-
gerial thinking and judgement. It is also essential that managers know and understand
how to look at other sources of data.

Primary and secondary data

Axes
‘Adjod
saiolid
&uodauip
pue
Data can initially be categorized as primary or secondary:

e Primary data is obtained directly by organizations and individuals through

observations, surveys, interviews and samples.
e Secondary data comes from other sources such as official statistics provided by
government sources, and sectoral data gathered by employers’ associations and
markeiing organizations.

It is essential to recognize that the use of secondary data always involves taking
information that others have gathered, and interpreting it for purposes different from
those that the original gatherers had intended.
This has to be balanced against the fact that gathering primary data is more time-
consuming and expensive, though it is related directly to stated purposes.
It is therefore essential to be able to reconcile completeness and clarity of purpose
with timescales and deadlines. The shorter the timescale or deadline, the greater the
pressure to use existing data rather than primary sources.
The main sources of data available to management are:

e Government statistics: useful as general indicators of the state of national,

business and economic confidence, direction and activity, and what is likely to
happen in the foreseeable future.
e Sectoral statistics: produced by trade federations, employers’ associations and
professional bodies in the interests of their members.
e Market research organizations: which hold data on vast ranges of issues which
they sell on a commercial basis to those requiring it; and which will produce data
in response to organization requests.
e Local government and other public bodies: hold wide ranges of general data
on the composition of society and people’s standards of living and activities.
e Public inquiries: generate a great amount of information on particular initiatives
(for example urban development and capital projects) that is often a useful point
of reference for those planning other things in the area.

Whatever the basis, managers need to know and understand why specific informa-
tion has been gathered and how it was originally to be used. It is therefore necessary
to know and understand what methods were used to gather, store, analyse and evaluate

274
 = cS
particular information and any shortcomings that were either present at the time or
have subsequently emerged. Managers need to know and understand the strength of
the data and information from the point of view of:

e Validity: the extent to which the data and information prove, imply or indicate
what was intended; if the data is invalid, this means it cannot be used to prove,
indicate or imply the conclusions drawn.
e Reliability: the extent to which the data supports a single set of results only; or the
extent to which the data can be relied on to support the fact or belief that the results
would have been the same, wherever and whenever the information was gathered.
e Currency: the time lag between when the data was gathered and when it is being
used; in general, the longer the time lag, the greater the scepticism with which it luawas
anieqa
sidadse
jo
jeioueu
pue

should be used.

Decision-making
The primary use of financial information and other data and statistics is as an aid to
decision-making. All decision-making is a matter of judgement, and the greater the
comprehensiveness and clarity of the data available, the greater the basis on which it
can be used to inform and support particular decisions.
Many organizations now use business analytics and other data management activities
to support and inform the critical areas of decision-making, risk analyses and market
information evaluation. In particular, reliable and accurate financial data and other
information are required to assist and support decision-making in the following areas:

e policy and strategy formulation, and the assessment of priorities;

e marketing activities and initiatives, measurable in increases or decreases in sales
of products and services;
e output, productivity and delivery;
e identifying faults in particular aspects of products and services;
e successes and failures in staffing issues, employment relations, recruitment
campaigns and staff retention rates;
e the effectiveness, or otherwise, of particular production, service and business
process technologies;
e the effectiveness, or otherwise, of particular information technologies;
e the reliability and effectiveness of planning, forecasting and extrapolation processes.

It is additionally essential to have reliable and accurate data when considering

specific problems and issues. For example, customer complaints, production, rejec-
tion rates, staff complaints and information database deficiencies all require accurate
analysis and evaluation to consider:

e the nature and frequency of the occurrence of defects and complaints;

275
 e the source of these defects and complaints;
e the time period over which the complaints and defects have arisen, and any
trends within these time periods: for example whether the complaints have
suddenly started to be made, whether they have risen or fallen on a regular basis,
or whether the methods of logging them have changed.

The critical issue is the ability to use existing data to predict and inform decisions
for the future, when there is clearly no data available from the future! All data
management and data analyses have the flaw of using information from the past to
‘Adarens
‘An10d
saiauolid
@uoidauip
pue
assess the future; and so all forecasting and decision-making is subject to uncertainty.
The expertise of managers and data analysts in relating what has happened to what
has not yet happened is a critical factor in all forward planning, environmental
assessment and strategic and operational decision-making.

Conclusions
The main conclusion to be drawn is in recognizing the difference between the work of
professional accountants and statisticians in producing figures, and that of managers
in using, interpreting, analysing and evaluating them. In many ways, the work of
managers starts where that of the accountant and statistician finishes.
Managers need excellent and comprehensive sources of information that can
effectively inform the whole of their range of activities (see also Chapter 2). Addition-
ally, managers need to have proper knowledge and understanding of how figures are
produced, what they mean, how they can be interpreted, and what they might state
about the condition of the organization as a whole and its particular activities.
Effective financial management requires a high level of organizational and envi-
ronmental knowledge and understanding. This is a key part of the capability to choose
the right approach to finance in any particular set of circumstances, the right financial
performance measures, and the right means for the assessment of the financial and
quantitative aspects of management in particular situations.
In practice, the use of financial and other figures in management is often not
helped by the resource allocation process that occurs within organizations. Data is
used to emphasize partial points of view, or to emphasize the real, perceived and
understood levels of performance in some areas relative to others.
There is also an enduring problem for those responsible for managing budgets. The
point is made above that many budgets and financial resource allocations are set
without any relationship to the levels of finance actually required or what they are to be
spent on. This is certain to lead to many managers having to work within constraints
that make it impossible to deliver the required levels of products, services and outputs.
Understanding the context, content, use and application of financial and other
figures is therefore an essential part of managerial expertise, and one that it is essen-
tial to develop.

276
 =

It is essential to recognize the difference between accounts and financial management;

accounts are drawn up by professionals for particular legal and regulatory purposes,
while financial management is concerned with the whole range oforganizational
financial aspects.
e There are distinctive managerial approaches required in the assessment and evaluation
of costs, charges, assets, liabilities and value. In particular, assets and liabilities from the
managerial point of view can change from one to the other very quickly.
e Budgeting processes have to be seen as serving a clear and distinctive purpose — that
of ensuring resources are necessary for departments and managers to carry out their
activities effectively. luawas
aaineqwi
sidadse
JO
jeinueul
pue
e All data and statistics have to be evaluated for validity, reliability and currency if they
are to provide effective support for decision-making.
e Financial management, and the use of data and statistics, is an essential part of
underpinning and supporting the manager's wider environmental and contextual
knowledge.

Further reading
Arnold, G. (2010) Corporate Financial Management. Pearson.
Atrill, P. (2008) Financial Management for Decision Makers. Wiley.
Davenport, T. and Harris, J. (2007) Competing on Analytics: The New Science of Winning. Harvard
Business School Press.
Knott, G. (2004) Financial Management. Palgrave Macmillan.
Marchand, D. and Davenport, H. (1999) Mastering Information Management. Macmillan.
Walsh, C. (2008) Key Management Ratios. Pearson (FT series).
Weetman, P. (2006) Financial and Management Accounting: An Introduction. McGraw Hill.
 7 >

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 Organizational
and managerial
performance
“You can only.
measure anything
for success or failure —
1Fs _against what you set S
- outtoachieve’ _

In this chapter
e identifying the need to measure all performance against objectives and
intended outcomes
e the complexities of managerial and organizational performance
e using a range, diversity and complexity of measures to establish overall
performance
e attending to different aspects of performance in order to build a complete
picture

Introduction
Organizational and managerial performance is only measurable against what was
intended or planned. It follows from this that organizational and managerial perform-
ance is a combination of priorities, aims and objectives, together with the capacity,
capability and willingness on the part of everyone involved to do their best to achieve
and to deliver what was intended. This has in turn to be seen in the context of whether
performance is achievable in the present markets, locations and environment, with
the present levels of staff and technology, and whether changes in all, or any, of these
are required and desired; or conversely, whether changes in any, or all, of these would
render it impossible to deliver what was intended.
In general terms, all organizations in every sphere of activity are concerned with the
same thing.

e Maximizing customer, client and user satisfaction of their products and services
over the long term.

279
 e Maximizing the confidence of everyone involved or affected by the organization
over the long term.
e Maximizing long-term owner/shareholder value and getting the best possible
return on investment over the long term (and this applies to public services as
well as commercial undertakings).
e Securing the long-term future and well-being of the organization.
e Working within the particular context and environment, with especial recognition
of functions inside and outside the organization’s control.
Asa1ens
‘Arod
saiaolid
&uoldeup
pue
This all applies to private and commercial companies, public sector and service
organizations, and the not-for-profit sector.

OR
Oo
wn
When measuring performance, always refer back to what you set out to achieve. You have
a
42}
=
pee)
therefore an immediate benchmark for success or failure.
(a)
ete
a
oO

Prerequisites for successful and effective performance

Effective performance is only achievable if the following key elements are present.

e Agreed aims and objectives, priorities, purposes and outcomes as above: so that
everybody knows and understands what is intended by the organization as a whole,
and what the collective and individual contributions to this core purpose are to be.

1S
Sy
Agreed aims, objectives and priorities
a=
Ce
° In practice, there Is often an immediate problem with agreeing aims, objectives and priori-
<
@
= ties. For example:

e a hospital medical team has the treatment of patients as its priority;

e hospital managers have remaining within budget and delivering value for money as
their priorities.

The first priority therefore is to reconcile the extent to which the differing aims and
objectives of staff groups are capable of:

e full integration;
@ partial integration;
e little or no integration.

Where full integration is possible or achievable, there is no problem at this stage. Prob-
lems do arise where little or no integration is possible. Organizations and their managers
have to arrive at a view as to whether or not the differing aims, objectives and priorities
should be reconciled.

280
 =ew

In practice, this is very uncomfortable, and very often the decision is taken to ‘muddle
along’ rather than clarifying particular positions. Failure to address this core issue normally
leads to declining levels of performance andincreased expense.

e Clarity of purpose and direction: knowing where you are going and how to
get there; understanding the full implications and commitment necessary to
achieve this.
e Adequate levels of resources: investment; information; technology; staff
capability; expertise; willingness and commitment. jeaBeUe
IULWOJ
;eUONeZI
Pue

e Knowledge and understanding: of the markets in which activities and

operations are to take place and what customers and clients want and expect from
them; of what the organization’s total capacity is; what it can and cannot achieve;
and any operational implications arising; of the total environment in which
activities are to take place.

This gives the broad context in which performance is measured. It cannot be

measured effectively if this is not fully understood.

= It is essential always to look back at targets, aims, objectives and priorities to ensure that
=
~ they deliver at least one of the above. Where this cannot be stated or clarified, you ought
3.
=} to be reviewing the targets, aims, objectives and priorities for viability, value and validity.
=a
o

Components of successful performance

Organizational and managerial performance is measured in the following areas, again
always against what was intended or what the organization set out to achieve.

e Market standing: overall organizational reputation; reputation of products and

services; reputation of staff and expertise; size of market served; location of
market served; specific needs, wants and demands.
e Market position: actual market position in relation to desired position; the costs
and benefits of maintaining this; opportunity costs; returns on resources; returns
on investment.
e Innovation: capacity for innovation; desired and actual levels of innovation;
time taken for new products and ideas to reach the market; attitudes to
innovation; percentages of new products and ideas that become commercial
successes.
e Creativity: expertise of staff; versatility and ability to diversify; capability for
turning ideas into commercial successes; new product/service strike rates; attitudes
to creativity; other related qualities, above all flexibility and responsiveness.

281
 e Financial performance: attention to levels of income over expenditure; the
identification of specific cost and profit centres; attention to the nature and
volume of returns on investment; identifying and managing fixed, variable and
marginal cost bases; identifying the financial demands made by resources,
processes, technology and staff.
e Resource utilization: efficiency and effectiveness; balance of resources used in
primary and support functions; wastage rates; resource utilization and added value.

‘A8aIe15
sanuoud
‘Ad!od
0)
uoidesp
pue
aet
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The chocolate factory
io
The chief executive of the Mars chocolate company was making a visit to one of the
Ww
a
ie)
=
<s
company’s factories. There, he was horrified to find that some of the staff were working
on a production line where the temperature was 55 degrees centigrade. He went round
and asked the factory manager what was going on. Back came the explanation: ‘The
cooling system on the production plant is broken. | don’t have the resources to repair or
replace the equipment until the next financial year. The staff are therefore having to
work in these conditions’
The chief executive moved the factory manager's desk up into the production area
stating that it would remain there, and the factory manager would work there, until the
problem was fixed.
The problem was fixed the following day.
The lesson is that resource utilization should always be a matter of managerial judge-
ment. Changes do have to be made from time to time. If essential work needs doing,
resources always have to be found; and if necessary, taken away from areas and activities
that have a lower priority.

e Managerial performance: total managerial performance; performance by function,

department, division, group; performance at different levels of management —
director, general manager, senior, middle, junior, supervisory, first line.
e Management development: areas of strength and weakness; progress and
improvement; desired expertise and capability; actual expertise and capability;
development of specific skills and knowledge; desired and actual attitudes and
behaviour; priority of training and development.
e Staff performance: areas of strength and weakness; progress and
improvement; attitudes and willingness to work; degrees of commitment;
desired expertise and capability; actual expertise and capability; development
of specific skills and knowledge; desired and actual attitudes and behaviour;
attention to work patterns; commitment; extent and priority of training and
development; targeting of training and development; attitudes to staff
suggestions; specific positive and negative features.

282
 = a
e Workforce structure: core and peripheral; flexibility in attitudes and behaviour;
multi-skilling; work patterns; general employability; continued future
employability; relations between organization and workforce; relations between
managers and staff; length and strength of hierarchies.
e Wage and pay levels: relationships between pay and output; relationships
between pay, profits and performance; local factors and conditions; industrial
factors and conditions; relationships between pay and expertise; pay as
incentive; economic rent; known, believed and perceived areas of over and
underpaying.
e Organizational culture: the extent to which this is positive/negative; JeuaseUe
SOURWUIO
;eUONeZ
puke

identifying and removing negative factors; accentuating the positive; motivation

and morale; staff policies; industrial relations; staff management; designed,
emergent, strong, weak, suitable, unsuitable, acceptable, unacceptable aspects
of organization culture.
e Key relationships: with backers; with staff; with suppliers; with distributors;
with customers; with community.

©
S.
Stakeholder interests and performance
5
ow

ok
e) Organizations inevitably have dominant stakeholders — those whose interests must be
=
®
= i
served above all else; or, more insidiously, those whose interests are served as a priority,
whether or not this is the correct course of action for the particular organization.
The financial interest is invariably to be found as a dominant stakeholder; the best
organizations also place their staff, suppliers and customers at this level. It is also true that
any group that has cause to raise legitimate concerns about the organization and its activi-
ties should be treated as a dominant stakeholder until its problems have been resolved.
Serious problems can arise when the interests of the dominant stakeholders are served
in spite of conflicting or divergent concerns from less infiuential sources.
The lesson is to know and understand which interest is being served. In particular, it is
essential to know and understand whether specific interests are being served at the
expense of others; or whether every interest is being served as far as possible. It is addition-
ally essential to know and understand that, whichever line is taken, there are opportunities
and consequences that are certain to affect both performance itself, and also the ways and
means by which performance is achieved.
§
e Public standing: the respect and esteem in which the organization is held in its
markets, in the community, among its staff, customers and suppliers; confidence
and expectations; general public factor coverage.
e Profitability: levels of profits accrued; timescales; means of measuring and
assessing products; scope for enhancement and improvement.

285
 e Ethical factors: the absolute standards that the organization sets for itself; what
it will and will not do; its attitudes to its staff, customers, clients, suppliers and
communities; the nature of the markets served; standards and quality of the
treatment of staff; management style; attitudes and approaches to customer
complaints; attitudes and approaches to suppliers; quality of public relations;
quality of community relations.
e Other factors: general efficiency and effectiveness; product and service quality
and value; areas for improvement; areas where complaints come from;
ABarens
saluoud
‘Anjod
&uoldauip
pue opportunities and threats; crises and emergencies.

Only three of the above areas identified are clearly and overtly financial. All the
rest clearly contribute to the finances of the organization. However, drawing attention
to this list of performance areas ought clearly to indicate the shortcomings of just
concentrating on finances and figures without knowing and understanding — and
addressing — the full context.
Additionally, many of the above areas overlap. In some cases, the same phrases
are used under different headings. Without doubt, different words and phrases could
be used to convey the same meanings. The mix and balance varies between organiza-
tions. However, every element is present in all situations to a greater or lesser extent.
Initial lessons can therefore be drawn as follows.
There is no single effective measure of performance in any situation or organi-
zation. Even if a supervisor is working to a single daily production target, he/she
must have the right staff, adequately trained and motivated; the right volume and
quality of components; and somewhere to put the finished items. And given the
normal nature of work — all work — all this has to be available on a steady and
continuous basis.
A large proportion of the elements indicated are qualitative not quantitative. The
main qualities necessary to evaluate such factors properly are therefore judgement
and analysis. Success and failure are value judgements placed on events and activi-
ties based on high levels of knowledge and expertise. Seldom, if ever, is success or
failure self-evident except in the immediate or very short term.
It follows in turn that the main attributes of those who measure business and
managerial performance have knowledge, expertise and understanding: of results;
of the environment; of people; of customers and the market; of the product/services
offered; of the organization’s general position. It is also the case that any situation
can be turned to the organization’s ultimate advantage if it and its managers choose
to do so. Provided that the cause is not negligence or criminal activity, organiza-
tions can turn simple errors and omissions into profitable and effective ventures by
ensuring that what has happened is fully analysed, and then used as a vehicle for
learning and development.

284
 a

oO
x
Bo) Cock-ups can have a silver lining
ee
@
a
=.
a Many organizations, and especially their top. managers, find themselves unwilling to admit
=
where, when or why mistakes are made. Invariably, they rather look for scapegoats, or else
are inclined (if allowed to do so) to put failure down to ‘factors outside their control’ or
‘volatile market conditions’.
Yet the theory of managerial cock-ups is the orphan of management studies. Innumer-
able books have been written on strategic triumphs and tragedies, but nearly all assume
that the heroes or villains knew what they were doing. By contrast, the ‘cock-up’ theory
jeLaseu
SOURLUJO
|Puk
;eUONeZI
holds that management moves, not from one considered coordinated ploy to the next,
but by isolated lurches. These are governed, not by deep analysis and optimization of
resources, but by impulse and unguarded optimism.
The ‘cock-up’ theory holds that problems always prove much greater than anyone
expects. Financially, the potential killer is cost. If actual earnings fail to cover the true cost
of capital and other resources used in particular ventures, the value of the company
becomes eroded. Cock-ups might well be fewer therefore, if top managements were penal-
ized when acquisitions, changes of direction, and other supposed brainwaves generated
negative returns. Bonuses and long-term remuneration for directors and senior managers
ought to be reduced in direct relationship to these negative returns. That is, after all, how
many chief executives use remuneration systems to pressurize subordinates. What is sauce
for the geese should surely apply to the ganders. But the ‘cock-up’ theory holds that this is
where the whole bungling process begins — with the lack of checks and balances on over-
mighty corporate rulers.
Cock-ups teach invaluable lessons. Management who have had their noses rubbed in
the realities of the market and economic conditions tend to ensure that false assumptions
are replaced by true facts. Necessary changes in people and policies are clearly indicated.
Instead of indulging in corporate hand-wringing, there is a clear opportunity to assess why
things went wrong, and from this, to take steps to ensure that specific, useful and practical
measures of performance are instigated at the outset of any venture or initiative.

Source: Robert Heller (1998b).

The practice of performance measurement and assessment

Having identified the complexities of performance measurement and assessment, and
the full range of areas in which attention is required, it is not surprising that things
can, and do, go wrong from time to time.
From a human as well as a managerial point of view, the overwhelming pressure
and perception is to simplify things as far as possible. Especially, by concentrating
either on the finances or on production and output targets, something is available
which is clearly recognizable and overtly measurable.

285
 The simplified approach is then turned into other measurement activities such
as performance appraisal, return on investment, hitting financial and output targets,
and then handing a simplified and simplistic form of performance requirements on
to staff.
The result is that very little attention is paid to the full complexity. The develop-
ment of expertise in performance management in practice ought to be a major priority
in management development activities. It ought also to be an area of prime concern
for those in top, senior and key positions; all the while that the complexities are not
ABa1eg_
Arjod
saiauoud
&uorraip
pue addressed, performance (and what contributes to it) is not fully understood. Lack of
attention and expertise in this pari of management practice is likely also to lead to
declining levels of organizational performance when measured in financial and
production/output terms.

= Always remember that what gets measured gets done. If you concentrate on the full range
wo
a
is) of performance measures and indicators, life is more complicated but you provide the
3.
= basis for developing sustainable and increasing levels of performance. If you concentrate
S
ao
(a)
on just one performance measure, everyone else will simply concentrate on this.

Information
Effective performance imeasurement and assessment is never possible without full, or at
least adequate, information covering each of these areas and this must be constantly
gathered and evaluated. Markets, technology and expertise are all constantly changing
and organizations that do not respond have, at the very least, to recognize the effects
that such a lack of response will, or may, have. Full information enables organizations
and their managers to reduce uncertainty, analyse levels of risk, maximize chances of
success, minimize chances of failure and assess the prospects and likely consequences
and outcomes of following particular courses of activity. It enables projections to be
made for the organization as a whole and for each of its activities. Summary positions
are often established under the headings of strengths, weaknesses, opportunities,
threats; and these are most effective when related to the organization as a whole, to its
markets, to its backers and stakeholders, and to its competitors.
Effective planning is also based on full information. The value of planning is at its
greatest when it allows organizations to:

e see the future as it unfolds, recognizing possible, likely and (more oi less) certain
developments;
e assess the continued performance of all activities and operations;
e assess the ways in which other people and organizations, especially competitors
are operating.

286
 =Ww
Effective planning is a process, the purpose of which is to arrive at, and retain,
continued clarity of direction. It involves the analysis of the information: thinking it
through, testing ideas; examining what is possible and what is not. More specific
schedules, practices, operations, activities, aims and objectives all then come from
this body of knowledge and the understanding which arises from analysing it. Imple-
mentation and execution are then handed on to different people, functions, divisions
and departments within the organization.
It should be apparent from this that there is a world of difference between plan-
ning and plans. Dwight D. Eisenhower, the United States general and president, once
said: “Planning is everything, the plan is nothing.’ At their best, corporate and organi- jeaseUR
DULWUO
iF
JeUONeZ
PUR
zational plans are statements of what is now proposed as the result of information
available; and subject to change, modification and, when necessary, abandonment as
and when circumstances change.
At their worst, they are detailed statements covering the way that the world is
certain to be extending into the far distant future. No such position is sustainable
now — indeed, it probably never was in the past. This does not prevent large corpo-
rations, both public and private, and the policy units of public services drawing
these up. At best, they are an irrelevance. More usually, they constitute a waste of
organizational resources that would be better used elsewhere. At worst, they are
indeed slavishly followed in the teeth of a changing world and competitive environ-
ment with immense adverse consequences for the organization.

Responsibilities
Organizational responsibilities
Specific organizational responsibilities exist in the following areas; and these areas
provide the basis for where performance is to be evaluated and developed.

e Anticipating the future in terms of the changing environment; anticipating

changes in customer demands and perceptions; recognizing changes in the nature
of competition; recognizing changes in production and service technology;
recognizing and anticipating changes in the nature of people attracted to work for
the organization and the sector; recognizing and anticipating changes in the
customer base.
e Investment as a continued commitment: in the areas of product development;
quality improvement; management and staff training and development; production
and service technology; the well-being of the customer.
e Organization development: in terms of its skills, knowledge, capabilities, attitudes
and expertise; in terms of customer awareness and satisfaction; in terms of
processes and procedures; in terms of supplier and distributor relations; in terms
of its culture and structures.

287
 e Training and development: of both management and staff in the skills, qualities,
attributes and expertise necessary to secure the future; and in the key attitudes of
flexibility, dynamism, responsiveness, willingness and commitment.
e Recognition of the fact that all organizations currently operate in a changing and
turbulent environment; that historic and current success, efficiency, effectiveness
and profitability is no guarantee that this will extend into the future. From this
comes an obligation to ensure that all staff are capable of existing in this
environment and that they are equipped with the resources and capability to do so.
ABa1ens
‘Arjod
&®
sanoud
uonraiip
pue e Openness: people respond to uncertainty and turbulence much better if they
understand its extent and why they must constantly update and develop.
Organizations therefore have a clear duty to inform, consult and provide detail on
all aspects of performance in general; and in more detail, concerning things
which directly affect specific members and groups of staff.
e Ethics: long-term existence, the ability to secure the employment of staff, and
establishing a regular and profitable customer base are enhanced by taking,
accepting, and understanding a view of the world as it really is. There is,
therefore, a moral, as well as commercial, commitment.

Managerial responsibilities
Specific managerial responsibilities exist in the following areas.

e To develop (and be developed in) capabilities and expertise required by the

organization; required by the nature of professional management as it develops;
and which involvement in the particular business, industry or service requires.
e To take a personal commitment to organizational success as well as that of the
department, division or function for which the individual is responsible. High levels
of personal commitment are required of all professions and professionals, in all
spheres of activity and expertise, and this is also true of management and managers.
e To develop the full range of managerial skills and qualities required by the
profession of management. This currently means being able to solve problems;
manage people; set standards of performance; understand where the manager's
domain fits into the wider scheme of things and total organizational performance;
use resources efficiently and effectively; set and assess budgets; recognize the
constraints under which operations have to be carried out; and generate a
positive, open and harmonious culture and attitudes.

At the heart of all organizational and managerial responsibility is the need to

produce goods and services in the required volume and quality, at the right price, in
the right place. This can only be achieved through having top quality, expert and
highly motivated staff. This is the critical factor in which the long-term future of the
organization is secured and all effective measures of organization and managerial
performance have this at their core.

288
 = uw

Expert and professional managers know and understand their key responsibility in the
areas of performance assessment, evaluation, monitoring, review and development. A full
understanding of all these factors is essential if performance improvements and enhance-
ce
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ment are to be developed and sustained for the long term.

Priorities, aims and objectives

All performance has to be measured against what was intended, as above; and this is
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the reason for setting priorities, aims and objectives. Aims and objectives occur at
different levels and, again, are set or inferred by each of the above groups to satisfy
their particular points of view.

Corporate: reflecting the overall scope of the organization; how it is to be run in

structural and financial terms; how resources are to be allocated.
Competitive/business level: how the organization is to compete in its different
markets; which products and services should be developed and offered; the extent
to which these meet customer needs; monitoring of product performance.
Operational: how different functions of the organization contribute to total
organizational purpose and activities.
Behavioural: related to the human interactions between different parts of the
organization; and between the organization, its customers and the wider community.
Confidence: the generation of confidence and reputation among all those with
whom it comes into contact.
Ethical: meeting specific standards that may be enshrined in policy; the ability
to work in certain activities, in certain locations; the attitude taken towards staff,
customers and others with whom the organization comes into contact.

Aims and objectives should be a combination of the precise:

specific: dealing with easily identifiable and quantifiable aspects of performance;

measurable: devised in ways so that success and failure can be identified;
achievable: striking a balance between maximizing/optimizing resources and
output without setting standards so high that targets are unattainable and
therefore unvalued;
recognizable: understood by all concerned;
time constrained: so that a continuous record of progress and achievement may
be kept and problem areas identified;

and the imprecise, continuous and proactive:

reconciling these differing and often conflicting pressures;

attending to all aspects of organizational performance;

289
 e providing distinctive measures of success and failure;
e enhancing the total performance of the organization;
e where necessary, reconciling the different and conflicting demands of particular
stakeholders and interested parties;
e being prepared to adjust or alter direction and priority if the situation demands;
e establishing procedures for monitoring, review and evaluating all aspects of
performance, and acting on the results.

Aims and objectives are required for the organization as a whole; and for each and
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every department, division, function, work group, location and individual. It is there-
fore impossible to set generic objectives. All aims and objectives must be drawn up
against the organization’s specific context and background if they are to have any
meaning. Whatever they refer to, they must reflect the following questions.

e What contribution does this activity/set of activities make to total organizational

performance; where does this fit into the broader objectives of the department,
division or function concerned? Where does this fit into the wider purpose of the
organization?
e What resources, equipment, information, technology and expertise are needed to
carry it out successfully?
e What specific restraints are there — for example: can it be done straight away; are
there other things that must first be done; how long does it/will it/must it take?

Aims and objectives therefore attend to buth the broad and also the precise, including
quantitative, qualitative and unquantifiable elements.
This is the broad context in which measuring all aspects of organizational and
managerial performance takes place. It is not possible to do this effectively or
successfully in isolation — and the fact that some organizations nevertheless attempt
this, does not make it right. Without understanding this basis, both quantitative
and qualitative performance measures have no meaning to those who are allocated
more specific performance targets. Lack of any context is also one of the main
reasons why staff, product and service performance appraisal and measurement
schemes fall into disrepute. Whatever is done, must be understood, acceptable and
valuable to those involved. Acceptability springs from understanding and this is
based in turn on the effective communication of the right and required information
to those involved.
st tt
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The best managers do not set isolated performance targets. They know and understand
the full context in which performance takes place in all situations; and they know and
understand what happens to performance when elements of that context change.
(
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290
 —_Uy

Assessment and judgement

It is clear from the above that business and managerial performance measurement is
largely qualitative. This is because organizations are created and staffed by people, and
because their customers, clients and users are people also. Moreover, the most overtly
mathematical and precise measures of performance have to be seen in the context in
which they are established and then judged and evaluated by those responsible.

ue)
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To illustrate the point, a 35% increase in sales is an overtly easy and straightforward
=.
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= measure of performance. There is a precise target to aim for, and whether or not it is
achieved is easily quantifiable. However, the following elements have still to be addressed.

e The time period over which the increase is to take place.

e What constitutes bad, inadequate or unsatisfactory performance: whether this is 1%,
34%, 34.9% — or what.
e What the broader consequences of ‘just failing’ to meet the target are.
e What the consequences of achieving a 35% rise are (will this destabilize the rest of
activities; is this a useful windfall; or what?).
e What the consequences of achieving a 100%/1,000%/10,000% increase are (again, is
this a useful windfall, a serious destabilization of the rest of the organization's
activities, or what?).
e Whether the 35% increase is required across the board, or whether an overall increase
of 35% will do.
e Whether the 35% would be covered by a one-off purchase or windfall.
e Whether, if the 35% increase is fulfilled the following week, the target will be revised for
the future.
e Whether this is a reflection of the capacity and capability of the rest of the organization.
e Whether this is within the workforce’s capability, whether overtime will have to be
worked, or whether new staff will have to be taken on.
e Any questions of location — are there any questions of specific market/localized
constraints; the extent to which it is related to relative levels of prosperity in the market.
e The wider state of the market; the activities of competitors; whether the market Is
capable of sustaining this (or any other level of increase).
e Whether the 35% increase represents an increase in the total market, or whether it
means taking market share from competitors.
e Finally, where does the figure of 35% come from; who decided it; and on what grounds?

So again, the full complexities and context have to be considered. Once this form of
judgement and evaluation has been made, the behaviour of customers, consumers and
clients has to be considered. For example, the buyer may come into the establishment, not

291
 receive instant service, and turn round or storm out. Or a salesperson may be so busy
giving excellent satisfaction to one customer that the next customer is delayed, leading to
dissatisfaction on their part. Or they may be dealt with by a good salesperson who has
nothing to offer the customer; or by a bad salesperson, who nevertheless persuades the
customer to buy, leading to an instant sale but subsequent dissatisfaction. The key lesson is
therefore that the process cannot possibly be completely objective or rational; nor Is it
capable of being quantified in isolation from the need to apply judgement. Effective quali-
saiuoud
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pue fication and judgement of performance effectiveness and success therefore relies on each
of the following, even if delivering a numerical target and outcome:

e recognizing the human signs of buyer behaviour and attitudes;

e recognizing the human signs of organizational behaviour and attitudes;
e recognizing the convergence and divergence of priorities and objectives;
e recognizing the importance and influence of stakeholders and participants.

The best approach is to identify the most likely outcome in the most sets of circum-
stances; to concentrate primarily on this; and to deal with exceptions as and when they arise.
@
Priorities
Ideally, priorities are established to ensure concentration of organizational resources to
best commercial or service advantage in the pursuit of long-term customer, client and user
satisfaction. In practice, it is rarely possible to achieve everything desired or required.
Two basic approaches are possible (see Figure 15.1).

A B Cut off

[
ee
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eh

Priority Priority

A Everything is attempted, but unsatisfactory

B Those things which cannot be completed satisfactory are not attempted

Figure 15.1 Establishing priorities

There is nothing intrinsically right or wrong with either approach indicated in

Figure 15.1. The main issue at the outset is to know which approach is being taken
and the opportunities and consequences of that choice.

292
 = Ww

Objectives
The objectives are:

¢ organizational: reflecting the overall purpose and direction;

e departmental/divisional/functional: reflecting the contribution that each is
expected to make to the whole;
e managerial: reflecting the contribution that different managers are expected/
anticipated to make to the overall direction;
¢ professional/occupational: reflecting the need for professional and occupational
satisfaction in different staff and work categories; jeaseu
SUPLUI
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puke

¢ personal: reflecting more general needs, especially those of job security,

enhanced reward and prosperity, and advancement;
e present priorities: from whatever source they are driven;
e future priorities: those that begin to become apparent as the result of knowing
and understanding the organization’s preferred future direction.

a2)
oS}
Subjective and prejudicial convergence and divergence of objectives
=|
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ie) It is essential to recognize the existence of these differing objectives. The best, most
=:
a
= successful and effective organizations harmonize personal, professional and occupational
objectives with those of the organization as a whole. Where this is not possible, a certain
amount of dysfunction/malfunction occurs.
For example, a manager charged with responsibility for introducing a new education
policy knows that this will take several years to evaluate for success. The manager's political
masters want tangible results within three months. The next promotion in the manager's
career is dependent upon the satisfaction of the political masters with their performance.
The manager has therefore to reconcile the following:

e delivering the initiative professionally;

e advancing their own career;
e doing the work to the satisfaction of the political masters.

It is clear that doing the job properly requires persuading the political masters that a
three-month measure is neither feasible nor legitimate in the circumstances. It is also clear
that, on the face of it, there exists a real discrepancy between doing the job properly and
receiving personal reward, recognition and advancement.
The greatest success is achieved where the potential problems have been recognized
and steps have been taken to harmonize and integrate these different forms of objectives.
The lesson is that failure is likely where no or little recognition exists of the problem.
Where it is not possible to integrate organizational and personal/professional objectives,
recognition of the effects on performance (especially long-term performance) Is essential.
Problem areas for the future can then at least be more clearly identified.

293
 Moreover, levels of motivation and morale are normally much higher where objectives
in each category are harmonized. Where objectives do diverge and conflict, people always
pursue their personal and professional objectives rather than those of the organization.

Conclusions
Each of the elements and factors indicated is an essential and legitimate area for
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managerial inquiry when assessing either total organization performance, or parts
and features of it. Most of these elements and factors are interrelated. Several appear
under different headings. Others are directly consequential — for example, it is
impossible to have good and positive organizational attitudes without having clear
standards established by top management. Taken altogether they reflect the fact that
the performance of every organization, and every department, division and function
within it, can always be improved.
This also underlines the complexity of measuring performance successfully. This
is true even where supposedly simple or direct targets have been set — for example a
simple increase in the outputs of a production line. Before such a decision can be
taken, it has to be ensured that adequate volumes of components and supplies are
available (or can be made available); that they can be stored; that any additional staff
or overtime can be paid for; and that the increased output can be packaged, stored,
distributed — and sold. It may be that such an increase adversely affects morale (for
example, the need for additional production may be the latest in a long series of
crises); or it may send morale sky-high, and this may subsequently lead to compla-
cency if a positive, yet realistic, approach is not maintained.
So the role of the professional manager — whether chief executive officer, director,
top, middle, junior or frontline and supervisory — is to understand this, and to
continue to attend to each of the elements and factors indicated. This is equally
important when things are going well, as the reasons why success is being achieved
can be fully explained and understood. When things do go wrong, and problems begin
to arise, they can be identified early and nipped in the bud. This in turn is best
achieved if all managers understand the full range of inquiry that they need to make,
and that nothing happens in isolation.
The measurement of organizational and managerial performance is complex and
requires a high level of contextual knowledge and understanding, as well as the capa-
bility to choose the right qualitative and quantitative measures, and the required
points of inquiry.
From this, managers are able to identify what contributes to successful, effective
and profitable performance for their own organization, and that part of it for which
they are responsible. They can also pinpoint:

294
 = wn

e those activities that contribute to effective, successful and profitable

organizational performance; the extent and nature of that contribution; and their
effects upon each other;
e those activities that do not make any direct contribution to performance:
e those activities that detract from successful and effective performance; that
destroy and damage it; that dilute its effectiveness;
e diversions from purpose; blockages and barriers to progress;
e the proportion and balance of steady-state activities with crisis handling.

It is necessary to recognize the range of parties, both internal and external, who
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have a legitimate interest in the organization, who measure it for success or failure,
and the measures that they bring to bear from their own point of view. Long-term
viability is much more likely where the concerns of each group can be addressed and
reconciled successfully. One of the main tasks of top managers is to recognize the
nature and legitimacy of the interests of the different stakeholder groups and inter-
ested parties, and to take steps to see that these are widely understood and satisfied
as far as possible.
From this approach to performance, assessment and measurement comes a clear
understanding of what the organization and its managers can control and influence, and
what cannot be controlled or influenced. For example, it may not be possible to suppress
a glut of bad or negative publicity and adverse media coverage. However, organizations
can influence future coverage by responding as positively as possible in the circum-
stances, and by using this as a springboard to generate long-term positive interest.
Similarly, it is also not possible to control particular social, legal, economic and
political constraints; but it is possible to recognize and understand the extent of their
influence, and to work within them. It may also not be possible in the short to medium
term at least, to influence the size or nature of markets served; and again, it is possible
to recognize these specific constraints, and to provide products and services as
successfully, effectively and profitably as possible within them.

= e Performance assessment and measurement is complex. It can only be measured

or
=e
(a)
=
against what was intended, or what you set out to achieve in the first place.
e Performance assessment and measurement is a process, involving a range of
complexities. If it is simplified, it is essential to remember that ‘what gets measured gets
done’ and other things tend to be downgraded or ignored.
e Performance measurement and assessment ought to involve everyone, both as a
continuous process and also in terms of formal reviews.
e tis always essential to prioritize activities; and from this, there is a clear choice whether
to attempt everything or whether there are insufficient resources, and so some things
have to be dropped.

295
 e Performance assessment and measurement is a vehicle for organizational
development, knowledge and understanding, and overall improvement in every
aspect of managerial work.

Further reading
Armstrong, M. (2009) Handbook of Performance Management: Making Performance Management
Work. Kogan Page.
saaod
‘A8a1ens
‘Ado
@®
pue
uondauip
Bourne, M. and Bourne, P. (2011) Handbook of Corporate Performance Manageinent. Pearson.
Hutton, W. (2005) The Productivity Repori. Vintage.
Kaplan, R. and Norton, D. (2002) The Balanced Scorecard. HBS.
Kent, B. (2006) Performance Management. Kogan Page.
Pettinger, R. (2005) Measuring Business and Managerial Performance. Pearson.

296
 PART

Enduring
priorities in
management

f the drive for the future is towards the employment of fewer and much more expert
managers, then it is essential that those aspiring to managerial positions know and
understand where immediate and enduring priorities lie. Effective management in
action requires all the knowledge, understanding and expertise indicated in Part
One; the knowledge and understanding of collective and individual human behaviour
addressed in Part Two; and the strategic capability and the marketing, financial,
product and service knowledge and understanding covered in Part Three.
In order to be able to integrate all this knowledge and understanding into a basis
for professional and expert performance, it is essential to be able to work within the
constraints of the enduring priorities that have to be addressed on a continuous basis.
It has already been established that there are enduring organizational and mana-
gerial responsibilities. [If organizations are to be able to sustain effective and profit-
able activities for the long term, then specific issues have to be addressed. These are:

e Risk, and how it is to be assessed: and from this assessment, expert judgement is
required as to whether or not the risks can be accepted or mitigated, or whether
they need to be avoided.
e The motivation of staff: if the position that much of management is concerned
with is achieving things through and for people, then the nature of their
commitment, and the factors that affect this (adversely, as well as positively) need
to be known and understood.
e Reconciling the different pressures that are certain to arise on a regular basis;
and ensuring that managerial capability and acumen are present in order to be
able to deal with these pressures and issues when they do arise.

297
 In addition, it is essential that those in managerial positions know and under-
stand that, if they are to be recognized as professional and expert people, their
knowledge, understanding and expertise need regular attention and development.
It is essential that all those in managerial positions, or who aspire to management,
take an active interest in and personal responsibility for the state of their own
knowledge and expertise. As well as being involved in organizational management
development activities, it is essential that all managers seek out opportunities for
quatwaseuew
suunpuZ
saaold
&ul learning and development elsewhere, and ensure that they gain as much possible
new knowledge from any situation in which they may find themselves. Furthermore,
courses and conferences, and visits to other organizations and different parts of the
world, all bring with them (or ought to bring with them) further knowledge and
understanding on which to base expertise.
This in turn leads on to the question of managing in a global and international
environment. Everyone in leadership and managerial positions has to know and
understand the international as well as local environment. Many organizations now
seek to expand overseas and into new and different markets; and so it is essential to
know and understand the pitfalls and consequences, as well as the opportunities. As
competition also expands, managers have to know where the next round of pressures
are likely to come from, so that they can prepare their own responses for when the
time comes,
Part Four deals with each of these issues in turn, and there is a chapter on each.
As well as ensuring that everyone has a clear understanding of the enduring mana-
gerial priorities, and their influences on organizational and expert practice, these
aspects integrate the foundations of management, and the knowledge of behaviour
and strategy, into what ought to be a form of expert professional practice based on
sound and ever-developing knowledge and understanding of what management is,
what it ought to be, and how to go about continuously developing it for the future.

298
 ‘Risk management
ought tobeakey
disciplinein
_all management
practice?

In this chapter
e knowing and understanding what risk is, and where risks exist and occur
e identifying the relationship between management and organizational
behaviour and risk
e identifying and managing risks from the points of view of acceptance and
avoidance
e developing collective risk awareness across the organization

introduction
The purpose of this chapter is to introduce and illustrate that part of organizational,
managerial and environmental knowledge and understanding that is concerned with
those things that can, and do, go wrong from time to time.
The nature of risk is a reflection of the amount that is known and understood about a
particular situation, as a precursor in deciding to do something. High levels of risk are
incurred when little is known or understood; the more that is known and understood,
the lower the level of risk; and this is because in the latter case, everybody knows and
understands what they are letting themselves in for, and the opportunities and conse-
quences that are likely to arise. Uncertainty exists where there is no knowledge of the
particular situation. As a direct consequence, risk is insurable; uncertainty is not. The
level of risk involved in something is therefore dependent upon the completeness of
knowledge and understanding about it, its expectations; and this knowledge and under-
standing is then used to present the fullest range of outcomes possible in the given set

299
 of circumstances. In particular, a full evaluation is required of best and worst outcomes,
so that those involved know and understand the opportunities and consequences of both
success and also failure before anything is undertaken.
Uncertainty exists where there is no knowledge or understanding. One key part of
managerial expertise is coping with uncertainty (see Chapter 1). The first step towards
coping with uncertainty is to gather as much knowledge, information and under-
standing of what is not presently known or understood. This is to move the collective
quawaseuew
8uunpuZ
sauoud
&ul levels of expertise at least to relative familiarity; and from this, to begin to build a
knowledge and understanding of the risks involved in whatever is contemplated, and
to take active steps towards minimizing and, where possible, eliminating them.

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The best managers get into the habit of analysing every situation in full for all of the risks
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involved, and everything that can possibly or conceivably go wrong. This is important in all
foal
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situations; it is especially important where new ventures, new products and services, and
(2)
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new markets are being contemplated.

Risks and rewards

‘The greater the risk, the greater the reward’ is a cosy, easy and exciting mantra for
organizations and managers to adopt. It is also dangerous nonsense. The best
managers relate the assurance of rewards directly to the elimination of risks in so far
as is possible in the circumstances.

©
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Richard Branson and the Virgin organization
®Ss
a
=. ‘We took incredible risks when we first went into the airline industry. We knew that we
®
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would be up against everything that the established airlines, the national flag-carriers,
could throw at us. They tried to affect everything, from the availability of take-off and
landing slots, to questioning our quality or commitment, or reliability — indeed, the
very stability of the company as a whole’ (Richard Branson)

The picture that Branson paints is of a highly risky and very exciting venture. The percep-
tion, excitement and adventure surrounding the whole of the Virgin organization is
enhanced by the very high profile adventures in which Branson himself has been involved
in the past. For example, he has made three attempts to circumnavigate the world in a hot
air balloon, as well as being shipwrecked in the Atlantic Ocean, before going on to claim
the Blue Riband for the fastest Atlantic crossing by boat.

Lessons
Branson's statement should be rewritten to make clear that, because they knew there
would be risks, the company would take (and did take) active steps to ensuré that each of

300
 2)

these eventualities had been fully known and understood before the services were intro- Rel
duced. Consequently, the ‘incredible risks’ described by Branson were fully recognized,
acknowledged and understood as a prelude to ensuring that they were minimized so that
the Virgin organization would be able to operate within the given limits and constraints. It
should also be noted that Branson took every step possible towards minimizing the risks
involved in his ballooning and boating adventures so as to ensure that these too would
have the greatest possible chance of success.

Source: Richard Branson (1998) ‘The Money Programme Lecture’, BBC.

The correlation between risks and rewards is therefore dependent upon seeing
risks as obstacles to progress. These obstacles have either to be circumvented or
removed. Their effects on what is intended require full acknowledgement and under-
standing as above; and if the obstacles cannot be removed, then there is a question of
whether or not what is proposed should go ahead at all.

Sei This reinforces the point that you need to know and understand everything that can
w
o
pee) possibly or conceivably go wrong. Especially where you do operate in a culture of ‘the
3=)
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greater the risk, the greater the reward’ you need to satisfy yourself that what is being done
ou
oO
has a rationale and is not just a wild step into the unknown.

Internal colloquy
It is essential to realize that even when something has been fully evaluated, and steps
taken to minimize the risks involved or inherent, this is only the first step in the
engagement of expertise in strategic and operational risk management. Before a
detailed evaluation and implementation plan can be considered, the capability and
willingness of staff and their expertise have to be assessed. Existing processes and
systems have to be capable of delivering what the new proposal or venture requires;
or else new systems and processes have to be designed and integrated with what
exists already.
Collective and individual staff perceptions have to be managed. This is less of a
problem where there is a collective, cohesive and positive culture. However,
fundamental questions have to be addressed as to whether the new venture is
known, believed and perceived to be glamorous and prestigious; whether it is a
necessary evil (or a necessary good); and whether ultimately it represents a step
on the road to progress. Fundamental issues of where the resources are coming
from, and especially whether these are to be taken away from existing work, must
be made clear; and if the staff do not understand or support this, then they may
resist the idea itself.

301
 a
7)
It is essential that you see staff attitudes and receptiveness to ideas and proposals as a risk (or
potential risk). Just because staff have been receptive to things in the past, does not neces-
a
©

3.
=)
S
a
sarily mean that they will be as willing to progress in the future. Anything that is being
proposed should therefore be accompanied by full staff communication and consultation.
oO

quaweseuel
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samuowd
&Ul External colloquy
A detailed understanding is required of what external stakeholders will make of what
is proposed. Detailed knowledge and understanding is required of the likely and
possible ranges of customer, client and end-user responses, not only for the new
venture or proposal, but also in terms of the response to the existing range of products
and services.
Shareholders have also to be satisfied that their returns will continue, ideally
because of the new venture or proposal, and at least in spite of it. Shareholders
need to know and understand the worst possible consequences; and shareholders
normally need to be satisfied that they will at least get their money back over the
long term. To that end they are entitled to see detailed forecasts and projections
and are entitled to have questions answered, and any doubts and fears addressed.
In particular, shareholders are entitled to be absolutely certain that their funds are
not to be used in glamorous, exciting and untargeted ventures and adventures
without additionally being satisfied that there are commercially viable prospects
and returns available also. This is the full basis and context in which strategic and
operational risk management is then learned in detail, and put into practice. It is
increasingly usual to separate out the discipline of risk management into strategic
and operational issues as follows.

e Strategic risk management is concerned with creating the conditions, attitudes

and expertise for defining the organization’s approach to risk; identifying those
areas of risk with which the organization is, or may be, faced; and in ensuring that
the desired approach is undertaken.
e Operational risk management is concerned with the detail of risk management in
everyday activities; and this means addressing all of those things that can, and
do, go wrong, and ensuring that steps are then taken to reduce, minimize and,
where possible, eliminate risk from specific activities.

Strategic risk management

A strategic approach to risk management requires that the components of risk and uncer-
tainty that can, and do (or may possibly), affect the organization and its environment must
be studied so as to ensure that anyone in a top, senior or executive position understands

302
 =a
the full range of issues that must be considered for any situation that could conceivably
sta
arise. In particular, a strategic approach to risk management requires the following.
Sectoral trends: knowledge and understanding of whether the sector is growing
or declining, either in size or prosperity; whether these trends are likely to
continue; the nature of factors that are affecting particular trends at present; and
the nature of factors that could conceivably affect these trends in the future.
Knowledge and understanding of substitutes and alternatives: evaluating the
possibilities of whether customers, consumers and clients could, or might, change
their buying habits as an alternative to what the particular organization provides;
and whether it is necessary both now, and also in the future, to have a range of
responses available.
Knowing and understanding social, political and economic issues, drives
and restraints: in particular this means knowing and understanding the likely,
possible and potential effects of changes in interest and exchange rates; credit
squeezes; and overall purchasing power (for example, purchasing power is
affected by such things as taxation increases, or increases in charges for
transport, fuel, energy, gas and electricity).
The constitution of the organization: the constitution of the organization is
assessed and evaluated from the point of view of capability and willingness to
undertake present ranges of activities in their present volumes; proposed ranges
of activities in proposed volumes; and changes to internal structures and systems.
Evaluation of outcomes: at a strategic level, this means that all initiatives,
ventures and proposals require evaluation from the point of view of: identification
of the best, medium and worst outcomes; analysis and evaluation of any critical
obstacles or incidents; evaluating the capability to extricate oneself from the
particular situation (or not) and the consequences of having to do this; assessment
of the full range of costs and benefits to the organization and all its stakeholders.
Other behavioural and perceptual issues: in particular the comfort and commitment
which the staff are going to bring to present and envisaged ranges of activities, products
and services; this is an especial problem where mergers and takeovers are proposed, or
where there are radical shifts into new products and services.
Early warning systems: early warning systems are based on the collective
capability of the organization and its managers to have at their disposal the fullest
possible data concerning the nature of organization activities, the quality and
volume of products and services, and the present levels of activity within the
markets and environments served. In particular, organizations ought to be able to
know, understand and evaluate the likely, possible and potential effects on the
overall ability to conduct business of: epidemics; strikes and disputes; wars and
terrorist attacks; major incidents and disasters; and sudden unavailability of
supplies, raw materials and information. Internally, there needs to be a strategic
approach to organizational processes, databases and information systems.

3035
 At a strategic and operational level also, there are specific issues that have to be
covered in terms of theft and fraud; dirty tricks; and human behaviour.

Theft and fraud

All organizations are susceptible to theft and fraud. This includes both petty pilfering by
individuals, and also institutionalized larceny carried out by organized groups of staff.
An organizational view is required of what constitutes petty pilfering. This
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normally comes out in the extent to which the organization is prepared to tolerate the
de facto theft of consumables such as pens and paper by staff; and also the extent to
which the organization is prepared to tolerate the use of its telephones and computers
for personal convenience. This sounds petty and trivial; however, it is essential to
realize that small thefts can, and do, grow into grand larceny if not checked; and that
the problems can, and do, grow as a consequence, and may become unmanageable if
rules are not made clear and enforced.
Fraud on a grand scale may be carried out on an individual or institutional basis. In
both cases, it is the institution and employees that suffer; and this invariably also leads
to suffering on the part of staff, shareholders, backers, and suppliers. In many cases
also, wider reputation is lost through adverse media coverage; and this can, and does,
affect supplier confidence and the willingness of potential staff to come and work for the
organization. This reinforces the need for clear and absolute sets of standards, behav-
iour and performance. Each of these has to be reinforced by the presence, implementa-
tion and enforcement of rules and procedures, reporting relations, and standards of
conduct; and each of these in turn, has to be underpinned by sanctions when broken.

Dirty tricks
All organizations engage in competitive practices. Competitive practices exist in all
areas of organizational and managerial activity, and are not simply confined to product
and service delivery and performance. Organizations compete for assurances on the
supply side; for technological advantages; for key staff and expertise; and for customer
knowledge, understanding, acceptance and engagement. Companies and organizations
engage in marketing and public relations; and some of this can be targeted at deni-
grating the competition and alternatives, as well as building up one’s own position.
Problems arise when, again individually or institutionally, the line is crossed between
legitimate competition (however aggressive) and criminal activity. Thus for example:

e it is legitimate to offer potential staff inducements to come and join a particular

organization; it is not legitimate to induce them to breach their existing
contractual duties and obligations;
itis legitimate to market aggressively to potential customers and clients; it is not
legitimate to tell lies about their present product and service providers;

304
 =

e itis legitimate to transfer funds between budget headings within an organization;

Sty
it is not legitimate to pay individuals bonuses out of these transfers at the expense
of the future well-being of the organization and the rest of its staff:
¢ itis legitimate for top and senior managers to pay themselves (and be paid) bonuses
in accordance with the constitution of the organization; it is not legitimate for those
same managers to use the organization as a personal bank account, effectively to be
looted for personal gain at the expense of the rest of the staff and stakeholders.
By the same token, it is additionally essential to guard against the risks inherent in
talking up an organization’s product, service, staff or share performance to the point
at which it is neither sustainable nor true. This becomes a form of ‘dirty tricks’ when
the organization, its managers and staff start to believe their own rhetoric, and to act
as if their own rhetoric were actually the truth.
These forms of behaviour are often illegal; and they are always unethical. The
risks involved are wide-ranging as follows.

e The trivial, normally consisting of passing media commentary on a blemish to the

organization; and these are normally quickly forgotten if the matter is clearly a
single aberration in an otherwise excellent organization.
e A series of events and issues become known and cause the media and other
stakeholders to take an active interest in the organization’s conduct and
performance.
e Staff demotivation and demoralization caused by known, believed and perceived
sharp practice within the organization; and this problem is compounded where
these issues are known, believed or perceived to be allowed to exist and continue.
e Loss of customer, supplier and stakeholder confidence if the errors and crises
persist; and again, the problem is compounded where it becomes known and
understood that the organization is not tackling these issues.

The key lesson is to know and understand the full range of risks, outcomes and
consequences which can, or might, occur as the result of choosing to go down such
paths; or of doing nothing when it becomes clear that some organization functions are
acting in these ways on their own initiatives. An organization-wide approach to theft,
fraud and other malpractice is therefore clearly essential. This is to minimize the
chances of things going wrong, as above, and additionally so as to be able to take
remedial action quickly when they do occur.

Human behaviour
It is also essential that all organizations and their managers know and understand the
key behavioural issues associated with risk management. These are:
e complacency, which occurs both as a corporate and collective as well as
individual pattern of behaviour;

505
 e vanity and arrogance, which leads to organizations having such utter faith in
themselves that failings are neither recognized nor addressed;
e standard human failings of ‘never quite getting around to things’; or not doing the
jobs and work that they prefer not to do (or taking care to fill up their time with
things that they do prefer to do, meaning that the rest get left anyway):
e laziness and indolence, in which people cannot be bothered either to do things, or
do them properly;
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be to do them or have dealings with them;
e unwillingness to go against collective or received wisdom: people have a great
need to belong in all situations in which they find themselves, and so if they find
themselves in the ‘minority of one’ position, there is great pressure to conform.

Additionally, some organizations have cultures that preclude people from raising
concerns. This may happen on a departmental basis; and there may also be a wider
culture of repression, in which any possible risk is known or believed to be ‘off message’.
The consequence of all of the above is that problems do not (often cannot) get
raised; and this is only ever sustainable so long as the company or organization
somehow contrives to remain viable.

afan
(Ss
fa)
Risk management and the UK banking crisis
wo
a
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=
=
The report into the causes of the UK banking crisis of 2007 onwards found that the root of
the problem could be traced back to the way in which the Royal Bank of Scotland (RBS) and
the Halifax Bank of Scotland (HBOS) were being run at the time. Both were led by chief
executives who refused to look at the wider risks of what the companies were doing, espe-
cially in terms of their property acquisitions. These acquisitions were given value that could
not be sustained; and this in turn led to the total assets and overall value of the banks and
their resources being vastly overstated. Two key conclusions stand out in particular:

e that risk management was viewed as a constraint upon the business in both cases,
rather than as being an integral part of a rigorous strategic approach;
e that effective risk management would have raised issues earlier; and would have, in turn,
meant that there would have been no need for a taxpayer bailout in 2009 and 2010.

The whole crisis at both organizations arose because of the behavioural pressures,
especially those imposed at the very top of the companies. Risk management policies and
procedures were in place; staff were effectively ordered not to follow them.

306
 = an

Factors outside the control of the organization sty

Addressing factors outside the control of the organization is essential for effective
strategic approaches to risk. Addressing factors outside the control of the organiza-
tion means knowing and understanding the likely, possible and potential effects of
events and actions, which include the following.

e Political instability, war and terrorist attacks: their effects on the ability of the
organization to conduct business, and on the confidence of customers and
consumers.
e Changes in the weather and consequent changes in customer and consumer
behaviour: so that, for example, a very hot summer may cause a loss of trade to
those depending on it as customers go overseas for their holiday; or the same
thing may cause a glut of trade if customers choose to stay at home. It is not
possible to predict absolutely which way events such as these will turn out; it is
essential to take active steps to find out the likely outcome so as to be as well
prepared as possible.
e Changes in currency values and exchange rates and their effects on consumer
propensity to spend; and changes in interest rates and their effects on
consumer confidence.

The result of a strategic approach to risk, and detailed consideration of the market
and environment, criminal activities, and factors outside the organization’s control,
ought to be a detailed knowledge and understanding of the worst possible set of
circumstances in which the organization might conceivably be required to operate.
This reinforces the need for absolute standards, priority areas of attention, and the
need to enforce conduct and behaviour with clear policies drawn up and implemented
to meet the particular concerns of the organization. This fundamental approach is
then translated into action through operational approaches to risk management.

Operational approaches to risk management

At an operational level, the priority is to know and understand which events are most
likely to occur, where and why. It then becomes a priority for all managers, supervisors
and section heads to take active steps to prevent these events occurring in so far as is
reasonably practicable. The following areas for attention vary between, and within,
organizations, departments, divisions and functions. The key areas for attention are:

e patterns of behaviour;
e accidents;
e single events and errors.

307
 Patterns of behaviour
Risk management and patterns of behaviour mean that it is essential to be aware of
the potential for, and effects of, bullying, victimization, harassment and discrimina-
tion. Each is damaging and ultimately destructive to motivation and morale if not
stamped out immediately it becomes apparent. Each becomes more and more difficult
to deal with the longer it is allowed to persist. The outcome internally is that resources
and energy are consumed in dealing with these cases. Externally, customer and
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consumer confidence can be affected, especially when it becomes clear that such
problems are endemic or institutional. People would rather not deal with organiza-
tions that conduct themselves in these ways.
Bullying, victimization, harassment and discrimination are extreme examples of
collective and individual behaviour. As well as these extremes, operational risk
assessments are required to ensure that overall standards of conduct and behaviour
within departments, divisions and functions are assured and enforced. The need is to
know and understand the effects on staff cohesion and working relations of allowing
and, de facto, condoning different patterns of behaviour. It is essential to know and
understand that there is a direct relationship between behaviour and performance;
and to know and understand that failure to manage behaviour always affects perform-
ance adversely. It is therefore essential to be able to assess the likely and potential
consequences of allowing particular patterns of behaviour to persist unchecked.

Accidents
Accidents occur everywhere. From an operational risk management point of view, the
need is to ensure that accidents are kept to an absolute minimum. This part of risk
management requires attention to the nature and quality of the working environment,
patterns of work, specific health and safety aspects, and the use of technology. Health
and safety management normally requires that all staff are trained and briefed in
every aspect of the operational environment, especially in relation to technology
usage and emergency procedures. It is impossible to eliminate the chance of acci-
dents occurring; it is essential to take steps to ensure that accidents occur as infre-
quently as possible. An isolated accident is a cause for concern all round, but
normally carries little subsequent long-term risk. Regular accidents are damaging to
morale and performance, as above, and expensive in terms of resources and energy
when they have to be dealt with, investigated and evaluated.

Single events and errors

Single events and errors are impossible to manage; they will always occur. The opera-
tional management priority is to ensure that the risk of single events and errors occur-
ring is kept toa minimum. This is achieved through the creation of the right quality of

308
 working life and environment, patterns of activities and behaviour that ensure that
|AsrY
overall risk is minimized. The whole is then enforced through inspection and supervi-
sion systems and procedures.

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Single events and errors: Examples
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e During routine maintenance, a paint scraper worth 30p was accidentally dropped into
Oo
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the torpedo chamber of the USS Swordfish, an American navy nuclear submarine. The
paint scraper jammed the loading piston for the torpedoes. For a week, divers worked
to try to free the piston while the submarine was waterborne but all attempts failed.
The submarine had to be dry-docked. Subsequent repairs cost nearly £100,000.
e The Mariner 1 space probe was launched from Cape Canaveral with the purpose of
orbiting the planet Venus. All calculations were checked and double-checked; this was
to ensure that the extremely complex and precise programme that had to be followed
was fully accurate. The programme required that after 13 minutes offlight, a booster
engine would give acceleration of up to 25,000 miles per hour to Mariner 1. After 44
minutes, 9,800 solar cells would unfold to provide further energy. After 80 days, the
computer would calculate the final course corrections; and after 100 days, the space
probe would circle Venus. Four minutes after take-off, Mariner 1 plunged into the
Atlantic Ocean. Inquiries later revealed that a minus sign had been omitted from the
instructions fed into the computer.
e Pan Am, the American airline, undertook a security operation after it became worried
that its staff were stealing miniature bottles of whiskey from the aircraft. The company
wired up an alarm clock inside the drink’s cabinet of one of the airliners. This was so
arranged that it would stop whenever the door was opened. This, it was stated, would
reveal the exact time of the thefts. However, the company management omitted to
tell the cabin crew. As the result, on a flight between New York and Dubai, one of the
stewardesses heard the ticking of the clock and assumed that it was a bomb. She
alerted the pilot and the plane made a forced landing at Berlin. In the inquiry
afterwards, it became clear that the thefts had amounted to no more than petty
pilfering. The emergency landing cost the company £16,500.

The lesson is that each of these events, rationally considered, could have been prevented.
Rationally, computer programmes for the space probe would have been checked again;
additional decking would have been provided on the submarine; and the crew of the
airliner would have been called to account, if necessary directly, rather than undertaking
such a heavy handed approach. Each of the examples does however indicate the propensity
for things to go wrong by chance. When chance occurrences such as these happen, it is
essential that steps are taken to ensure that they do not happen again. However, as stated in
the text above, it is impossible to eliminate every eventuality from working situations.

309
 Analysing risk
Analysing risk requires the consideration of two key elements:

What is the risk of particular events and circumstances occurring?

What is the probability of the particular events and circumstances occurring?

It then becomes necessary to decide:

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whether to accept the risk;
whether to avoid the risk altogether (and therefore do something else);
whether to accept the risk and have responses in place for when things do go wrong.

The outcome of expert, comprehensive and effective risk analysis is the ability to take
and implement informed decisions at all times. This is so that whether things succeed or
fail, those involved will know and understand the reasons, and can use this knowledge
and understanding to better inform future decisions, proposals and initiatives.
The techniques available for effective risk analysis are as follows:

Specific factor analyses, in which a particular issue or factor is entered into a

given scenario, proposal or set of circumstances, and its likely and possible
outcomes and effects evaluated. Specific factors can be considered in either
linear or complex terms; it is certain that anything that is finally implemented
following specific facter risk analyses, will have to survive in a complex and
changing set of circumstances.
Random factor analyses, in which single or multiple issues and factors are
entered by chance or at random into a given scenario, proposal or set of
circumstances, and their possible and potential outcomes evaluated. Random
factors can be introduced either by choice or by chance; or they may be drawn
from a list using random number tables to select them.
‘What if?’ approaches; which are simpler to introduce because they can be started
by a simple statement using any or all of the questions above. This approach is
often limited, however, by personal, professional, collective or institutional lack of
capability or willingness to consider the fullest possible range of issues and
factors that could conceivably occur.

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Rising fuel costs
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e) In 2005, the price of all fossil fuels began to rise, and this has continued up till the present
<
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= time. This was variously blamed on:

e the oil companies, who saw the global political instability as a way of driving up energy
prices and therefore securing short and medium-term price and income advantages
for themselves as a hedge against the day when prices would start to fall;

310
 ¢ oil market traders, who were using the media reportage of high prices together with SY

the political uncertainty to drive prices higher;

e political initiatives undertaken by the USA and EU, which were deemed to drive
prices up;
e the huge and increasing demand for fuel and energy in the emerging markets and
economies of India and China;
e the use of fuel supplies by many of the main supplying countries (especially Russia and
the Middle East states) as a bargaining chip to secure political advantages.

Each is worthy of analysis. However, from an organization management point of view,

the main priority is the capability and willingness to be able to assess how high fuel prices
might rise; how high they might conceivably rise; the point at which they will cause a crisis
for the organization itself; and the point at which this one factor would drive the company
Or organization out of business. This then informs the risk assessment of entering into new
ventures, investing in technology, or operating any plant or machinery. It will also help to
inform transport costs and delivery charges; and may also give indications of possible
upward changes in the costs incurred through heating and lighting for premises, and
energy charges for activities.

Each approach is dependent for its effectiveness on the quality of the information
available at the time of risk assessment; and this in turn is dependent on the overall
understanding of the organizational and operating environment, and the circum-
stances that may cause this to change.
Each of these approaches can then be used to assess the probability of particular
outcomes occurring. The establishment of probability or likelihood then needs further
managerial evaluation and analysis to determine whether or not the outcome is math-
ematically certain or not. Where it is not (for example in the overwhelming majority
of cases), managerial debate is then required. This then leads to an informed and
expert judgement on which particular decisions can be taken; the risk of undertaking
particular initiatives and proposals can be assessed; and organizations and their
managers additionally develop a part of professional discipline that enhances their
own detailed expertise and understanding in this critical area of activity.

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Amid difficult retail trading conditions, Matalan, the good value clothing and household
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goods chain, announced that it was having to make a special charge of £20 million to
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offset the shortcomings and underperformance of its computer-based operational and

management information systems. This system had been installed on the advice of Kurt
Salmon Associates, an information systems and management consultancy practice.

511
 Matalan therefore considered suing Kurt Salmon in order to try and recoup some of the
above losses.
The lesson is that any risk assessment and analysis carried out in advance of the installa-
tion ought to have considered:

e what could possibly go wrong with the installation and implementation;

e what costs and charges could possibly or conceivably occur as the result;
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e what it would then take to put matters right.

Such an approach would have helped to inform the choice of system made by the
company, as well as providing a much clearer understanding of the basis on which the
consultancy was being engaged, and the key results required. It is additionally the case
that if organizations and managers comfort themselves with the thought that they can
always prosecute if things do go wrong, they should be aware that litigation normally
takes many years.

Applying risk management

Strategic and operational risk management is only effective if it is enforced. The
Confederation of British Industry stated that over the period 1985-2005, the number
of organizations with risk management policies had risen from 30% to 92% (CBI,
2005). However, this has occurred alongside a combination of organizational, institu-
tional, strategic and operational errors which have nevertheless continued, and which
the examples in this chapter illustrate.
The need therefore is to ensure that standards of conduct, behaviour and perform-
ance are related to the strategic and operational approaches to risk outlined above.
Also as stated above, standards need to be enforced and this requires that sanctions
are applied to those who breach them. This is only achievable if the organization’s top
and senior management know and understand that it is in their interests to do so. Top
and senior management then need also to take the additional step of ensuring that
risk management is an operational priority. Additionally, whoever is to be responsible
for risk management within the organization requires genuine influence and authority,
and the ability to impose sanctions for particular breaches of conduct, behaviour and
performance. Such persons also require the ability to impose delays and investiga-
tions on operational proposals and initiatives when the matters of risk are concerned
with the competitive environment, and new product and service development. There
is an overall general need for all managers to know and understand that they operate
within a risky environment, from the point of view of risk minimization as well as
remedying adverse events and incidents.

312
 Risk assessment
Re!
The outcome of applied risk management needs to be a clear understanding of every-
thing that has to be considered and can possibly go wrong. Decisions are then required
as follows:

e whether or not it is worth taking the risks identified;

e how the risks could possibly be avoided;
e what steps could be taken to mitigate the risks of events occurring;
e how to insure against specific risks (making sure that everything that has been
identified is covered);
e whether everything that could truly happen has indeed been considered.

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2.
The wild and wacky
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ie) One of the major shortcomings of all organizational approaches to risk management is
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= that they consider possible events and occurrences from a rational point of view only. It is
necessary to consider also the absolute extremes of what could conceivably happen — the
‘wild and wacky’ — of which the following are examples:

e What if interest rates remain low, and then suddenly start to rise steeply?
e What if there is political instability in the European Union?
e What if there is a series of major natural disasters that affect the ability of companies,
organizations, staff and individuals to move around easily?
e What if energy prices double? And then double again?
e What if computer technology, IT systems, and the ability to communicate are corrupted?
e What if customers suddenly stop buying Ford cars/McDonald’s meals/Ryanair tickets?
e What if the demand for Ford Cars/McDonald’s meals/Ryanair’s tickets suddenly doubles?

This approach is designed to ensure that risk management is as broadly encompassing as

possible. Not all of these events will come to pass (or come to pass immediately). On the
other hand, some of them have already occurred, and have changed company and organiza-
tional practice, the behaviour of markets, and the demand for products and services.

Expert managers take the view that anything and everything can potentially go wrong,
and therefore develop their risk management facility and capability accordingly. There is a
clear body of knowledge and understanding in this, as above; it is also essential that risk
&
aniaeid
1saq management is developed as a managerial and corporate attitude.

313
 Early warning systems
Managers at all organizational levels require early warning systems. Early warning
systems are required in each of the areas of environmental assessment and organiza-
tional understanding as above. Early warning systems include:

e regular professional updates on the state of markets, the economy, product and
service performance, the activities of competitors and alternatives, and
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* regular scouring of the business, professional and news media so as to be aware of
the events that they think are, or might be, important to the future. This is not to
say that these events will be important in the future; expert managers will then be
able to use this knowledge to help form their own judgement;
e early signs of dissatisfaction among staff about something; again this may, or may
not, be important but knowing and understanding that there is a bit of trouble or
erumbling is again useful information;
e early signs of increases in individual grievances and disputes, absenteeism and
staff turnover;
e early indications of organizational costs beginning to rise in particular areas
without apparent reason;
e declines in sales of products and services;
© increases in sales of products and services to competitors;
e early signs of rising levels of customer complaints;
e early signs of hold-ups and disputes on the supply side;
e early signs of malfunction with information and administration systems and processes.

The overall outcome is to ensure that managers know and understand every aspect
of their domain; and in the context of risk management, they build their knowledge
and understanding of where things can, and do, go wrong; and immediately, where
things might be about to go wrong. Managers faced with these issues then construct a
series of priorities designed to ensure that they are aware of the potential problems,
and have a range of approaches that can be taken according to whether things do in
fact occur; and how, when and where they do actually occur.
rm

Early warnings systems at GEC

When he was the chief executive at GEC, Arnold Weinstock used to either meet with or
1adxe
y
MalA
telephone his top managers on a weekly basis. During these conversations, Mr Weinstock
would question each manager closely about the performance of their divisions; and this
would always include matters to do with costs, sales, staffing and supply-side issues. Failure
to give precise assurances was always unacceptable; and this failure did, from time to time,
result in some staff being ‘transferred’

314
 The process had two clear outcomes. The first was that Mr Weinstock always new well in mie!

advance of where troubles might occur, he could then work through the matters with top
managers and endorse their preferred lines of approach. The second outcome was that top
managers new and understood that they were expected to do this and that failure to do so
would always be a major omission, and could get them transferred elsewhere.
By the time of Mr Weinstock's departure from the company, he had generated a cash
surplus of £2.5 billion, partially at least through ensuring that both he and his top managers
paid constant attention to what could possibly go wrong and took early steps to remedy
matters whenever they could.

Dealing with crises and emergencies

All organizations face crises and emergencies from time to time. Crises and emergen-
cies are caused by:

e combinations of circumstances;
e series of accidents and chances;
e ‘one of those things’;
e as well as by ineptitude, incompetence, negligence, fraud and other criminal activity.

The managerial priority is to face the crisis or emergency; and a very fine balance
has to be struck between providing a quick and effective response, and taking time to
gather enough information to provide the actual response required.
Much of the work ought to have been done in advance through knowing and under-
standing the range of risks inherent in the particular situation; and having systems
and procedures in place to respond as and when things do occur. The manager then
deals thoroughly with whatever has occurred.
The organizational, managerial and human priority in all crises and emergencies
is to ensure that whatever is done in response is clear, honest and effective as far as is
possible. People expect to be treated honestly in response to their legitimate concerns.
Failure to do so, and inability or unwillingness to do so, leads to an enhancement of
organizational and institutional risk. This is because people do not, and will not, trust
the managerial response to the crisis or emergency, and nor do they trust the mana-
gerial capability to resolve the matter.

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Ss
In June 2005, the city of New Orleans, Louisiana, USA, was hit by a Category 5 hurricane.
Overall, the city was used to dealing with violent storms. This one would have been little
te

different except for the fact that the force of the storm breached one of the levees (protec
tion banks) holding back the waters of the river. This breach caused the city to flood.

315
 Instead of responding to the legitimate concerns of people who had lost everything,
and especially addressing questions about the potential for pollution and disease, the US
authorities concentrated on defending the strength of the levee and the fact that it should
not have breached. Only following the resignation of top officials did it become clear that
the levee was only constructed to withstand Category 3 storms, and that the city had in
fact been at risk of flooding for many years.
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suunpuZ
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&Ul In early 2006, the decision was taken to rebuild the levee to withstand a Category 4
hurricane. An absolute approach to risk management in order to minimize absolutely the
risk of the crisis ever happening again would be to rebuild it to withstand a Category 8
storm, and then to see that it was fully maintained on a regular basis.

Other aspects of risk management

Clearly, things can, and do, go wrong in every aspect of organizational and managerial
performance and activity. Of particular concern additionally to managers in all
spheres and areas of activity ought to be the following.

Technology performance, including the consequences of technology crashes and

the loss of product and service delivery and information storage and retrieval.
Alongside technological performance is the question of suitability and capability
in terms of what the organization expects it to deliver.
Managing over distances, referring to the risks inherent in devolving responsibility,
authority and accountability to persons working in remote locations.
Ensuring that drives for expansion into new products, services, ventures, markets
and locations (including overseas markets and locations) are driven by
organizational capability and willingness, and the prospects of profitable and
effective activities; and above all, that these ventures are not driven solely by the
excitement of the venture or the prestige of being international.
Ensuring that the demands and obligations placed by everyone involved in
outsourced business activities are clearly understood. It is essential that nobody’s
reputation or business performance is damaged as the result of the actions of
other companies and organizations involved.
Ensuring that a dominant position in a market or business relationship does not
become a vehicle for sloppiness or laziness; even where it is possible to dominate
a particular sector, the full rigour of resource management and attention to
product and service quality and delivery are essential.
Where a company or organization is in a dependent relationship, opportunities for
other activities should always be considered. The fact that the dependent
relationship may have existed securely for many years to the mutual benefit of all
concerned does not alter the fact that this can change at any time.

316
 e Ensuring a rigorous approach to new product and service development, again so
ashy
that the drive is concentrated on commercial potential rather than pure creativity.

Risk management has to be seen as a key management discipline and critical foundation
stone of managerial expertise. Risk management gives a critical perspective on everything
that is being done.
()
anjoeid
1saq

Conclusions
It is clear from the above that the effective management of risk requires involvement
in all aspects of organizational structure, activities, behaviour and performance. If
anything goes wrong in any area, there is the potential for a knock-on effect that may
ultimately affect every aspect of the organization. Serious problems can, and do, lead
to loss of confidence in the organization and its products and services; and this in
turn is certain to lead to downturns in performance, and can lead to bankruptcy.
It is true that a much greater attention than before is paid to risk management in all
its forms. As above, 92% of organizations operating in the UK had risk management
policies in place by 2005. This does not alter the fact that things can, and do, go wrong;
risk and its management are therefore critical to future success and effectiveness.
It is essential in turn that everyone in the organization knows and understands the
importance of constant attention to activities, behaviour and performance. This is a key
part of the personal commitment and professional discipline required of managers in all
organizations, in every aspect of business, industry and public services. This has to be
tempered by knowing and understanding that it is impossible to plan for every eventu-
ality; it is, however, necessary to learn from these eventualities when they do arise in
order to ensure that the same thing never happens again, and so as to develop a broader
understanding of the potential for problems in every area of activity.

acat
=
‘Opulence’: The next glossy magazine
@
‘Opulence’ is the working title of a proposed new glossy magazine. The magazine is to be
wn
a
ie)
=
SS
160 pages long and presented in the same style, format and approximate size as Vogue,
Cosmopolitan — and FHM.
The style therefore clearly draws from glossy magazines pitched presently at both men
and women; and indeed, the magazine's proposed uniqueness and selling and branding
point is to be the fact that it is to attract both male and female readers. The received
wisdom is that this has never been tried before in the magazine trade, though it does work
in other aspects of publishing. For example, Colin Forbes, the thriller writer, states that his
readership is divided evenly between the sexes; and indeed, about half the people who
buy The Sun newspaper are women.

317
 ‘Opulence’ is to be published monthly at £4.95. The proposed content of the magazine
is as follows:

e editorial — 4 pages;
e celebrity interviews — 25 pages;
e book and music reviews — 10 pages;
e travel — 25 pages;
quatuaseue
suunpul
saauoud
&
Ul e finance — 6 pages;
@ property — 6 pages;
e exclusive news scoops — 6 pages;
e advertising — 30 pages.

This leaves a certain amount of leeway for other features, editorial, advertorial and other
matters that are certain to turn out to be of importance to the proposed readership.
‘Opulence’ is the brainchild of Graham Edwards. Graham has worked in the publishing
industry for the past ten years on a series of glossy magazines in London and New York. His
last post was as assistant managing editor of Vanity Fair in New York. Accordingly, he has
experience of managing mass circulation, glossy and high value/high brand/high cost
magazines for a wide variety of markets.
For several years, he has identified, as a gap in the market, the fact that there is no glossy
magazine for men and women. In spite of the fact that, as stated above, the received wisdom
of the industry is that it cannot be done, ‘Opulence’ is to fill the gap. Specifically, it is to be
pitched at men and women ofdisposable income of £40,000 each/£60,000 per couple. These
men and women are holding professional jobs in banking, retail, law, and management within
these sectors; and also in engineering, travel, transport and public services.
The intended circulation is 120,000 per issue. At £4.95 per sale, the intended circulation
brings in £594,000 per issue.
The minimum circulation is 60,000. At £4.95, the minimuin circulation brings in
£297,000. It is unviable to go below 60,000 because production costs rise as follows:

e 120,000 copies — SOp per copy;

e 60,000 copies — 80p per copy;
e 50,000 copies — £1.50 per copy;
e 20,000 copies — £2 per copy.

Additionally, the advertising revenues drop sharply if circulation falls below 60,000. At
60,000 plus, a single page advertisement can be charged at £8,000 per page; below 60,000,
the charge drops to £3,000. Over several months, Graham met with six venture capitalists,
all of whom turned him down for backing. Overall, there was a generally favourable
response to the idea; but the crunch came on editorial and especially the market — on
Graham's own admission, nobody had ever tried to produce this kind of magazine for a
male/female split market. *

318
 The key lesson is that the risks have been known, understood and evaluated in full sty
detail before the proposal or venture has gained life. Graham himself therefore, knows and
understands where the risks lie; and he will be able to explain this if, and when, he ever gets
backing for this particular product. In particular, both he and also anyone who can be
persuaded to back the venture know and understand the barriers and obstacles to
progress. Their first commitment is therefore to ensure that these barriers and obstacles
can be overcome, otherwise there is no point in pursuing the venture at all. In particular,
pitching the magazine at both male and female readers is in direct contrast to the past
history of successful magazine launches. This means that there is additionally the question
of where to locate the magazine on retailers’ shelves, which tend to be divided on gender
lines. This too is a critical question that has to be addressed.

Risk management is a primary area of managerial expertise and ought therefore to be a

key discipline in all management practice.
e There is a much greater awareness of the things that can, and do, go wrong, and of
their effects on business practice and organizational performance.
e tis essential that all managers and organizations get into the habit of constantly
asking: ‘What can conceivably go wrong?’ and ‘What if?”
e Risk management and assessment is something that ought to pervade every aspect of
organizational practice. Risk management ought to be used as a vehicle for staff and
organization development, as well as an operational element.
e Expertise in risk management ought to be continuously developed so that collective
and individual capability, knowledge, understanding and awareness are as high as
possible at all times within all organizations.

Further reading
Blunden, T. and Thirlwall, J. (2010) Mastering Operational Risk. Pearson.
CBI (Confederation of British Industry) (2005) Assessing and Managing Risk. CBI Industrial
Trends, July.
Crouhy, M. et al. (2006) The Essentials of Risk Management. Wiley.
Hopkin, P. (2010) Fundamentals of Risk Management. Pearson.
Hubbard, D. (2009) The Failure of Risk Management. McGraw Hill.
Marrison, C. (2002) The Fundamentals ofRisk Management. Kogan Page.
Pettinger, R. (2000) /nvestment Appraisal: A Managerial Approach. Palgrave Macmillan.

319
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‘17—~=«motivation «=e
increases in rewards,

In this chapter
e understanding the nature of motivation and its applications in work and
organization situations
e¢ motivation as a ‘joint venture’ between organizations, managers and staff
e taking steps to motivate staff and keep them motivated
e developing motivation as a process to create a key condition for enduring
levels of high and effective performance

Introduction
Motivation is a reflection of the reasons why people do things. All behaviour has a
purpose (often several) and is therefore based on choice — people choose to do
things that they do. Sometimes this choice is very restricted (for example sink or
swim). Sometimes again, it is constrained by the law (for example stopping the car
when the traffic lights are red). And again, it is constrained by the norms and
processes of society — for example, people tend to wear smart clothes to a party
where they know that everybody else will be doing so. In each case however, there
is a choice, though the propensity, encouragement and direction to choose one
course of action rather than the other in the examples given are strong, if not
overwhelming. The nature of motivation and what people choose to do is constantly
influenced by others; and it is also influenced by professional, social, economic
and legal pressures.

321
 @
x
Motivation may be seen as a combination of needs, wants, drives and incentives. Motiva-
ne}
a&
@
tion can be defined as ‘a process that starts with the physiological or psychological want,
=
@
=
deficiency or need that activates behaviour or a drive that is aimed at a goal or incentive in
the satisfaction of those deficiencies, wants and needs’ (Luthans, 2002).
Some of these needs and wants are fundamental: the need to be warm, sheltered, fed
and clothed. Some of these needs are social: the need to do things that are acceptable to
Cs)
JuawaseueW
SuUNpUy
sauod
Ul those whose opinion is valued; the need to belong and be comfortable in group societies
and locations; the need for self-respect and the respect of others.
In workplace terms, the need, want and drive is to earn an ‘adequate’ (whatever that
may mean) wage or salary, and to receive recognition (at a human as well as occupational
level) for work well done.
At the core of all this, there is a complexity of behavioural drives and incentives that
cause people to commit themselves wholly or partly to their job, occupation and organi-
zation, and to the people with whom they work.

Source: F. Luthans (2002).

Workplace motivation
Workplace motivation is founded in a combination of:

e individual professions, occupations and expertise that need an outlet for

development, success and achievement;
e the wage—work bargain, and the psychological contract between organization
and staff;
e the nature of the working environment;
e the general feelings of well-being that the organization exudes as a whole;
e¢ interpersonal, inter-group, interdepartmental and inter-occupational relations;
e relationships within the immediate department or location of work:
e the overall humanity of the organization and working situation, as well as its
professionalism;
e the nature of the culture of the organization as a whole.

In this context, workplace, occupational and professional motivation is therefore a

process. This process is based on a combination of internal drives from within the
individual related to what the organization can provide to satisfy these internal drives:
together with a commitment to the organization on the part of the individual in which
the organization is entitled to expect that the individual will deliver their expertise in
the ways required by the organization, and in the best interests of the organization,
over an extended period of time.

322
 =N

Motivation is therefore a combination of mutuality of interest, capability and will-

ingness. Motivation is one of the outcomes of the w orking relationship. If the employ-
ment conditions are right, known and understood, then organizations may expect high
levels of commitment; if the working conditions are wrong, then motivation is certain
to suffer. Similarly, if the individual has truly everything that they need or want in
order to do their job properly, then the organizatio n is entitled to expect these levels
of commitment. lUawWa
UuONeA
Pue

oO
Many organizations directly address the reasons why motivation is low through a combi-
ia)
wn
a
U0
=
nation of ensuring that work practices are as open and positive as possible. Organizations
>
fa)
ce support this as far as they can with full flexibility of working, and opportunities for
a
oO
advancement and achievement based on capability a nd willingness, and restricted only by
the limitations of the organization and its activities.

Motivation and incentives

Many organizations mistake motivation for incentives. Organizations offer incentives,
or directly targeted rewards, after which they th en expect to receive an enduring
commitment. Incentives provide specific rewards for short-term achievement only;
and if the only step in the direction of motivation is the provision of incentives, then
incentives have to be made available for every activity.

a
=
(os
Motivation and incentives in the central banking sector
a>)
Va)
a
(e)
=o The central banking sector is composed of the national banks of the countries of the
SS

world, together with overarching bodies, including the International Monetary Fund,
European Central Bank, and World Bank.
Across the whole sector, there is a structural di ficulty in attracting, recruiting and
retaining people of expertise. Highly qualified staff come to work in the central banking
sector; and then, attracted by the much higher salar ies on offer, move to the commercial
banking sector.
The sector as a whole concentrated on financial ncentives, rather than on addressing
the wider issue of capability and commitment. The incentives clearly fulfilled the ability to
attract people into the sector; however, the problems of retention remained.
It required a fundamental shift of emphasis, concentrating on the positive benefits and
attractions of working for these organizations. Rather than addressing purely the financial
issue, some central banks started to present what was on offer in the sector in terms of:

e the ability to influence government and international economic policy;

e involvement in political processes;

323
 e influence over how the retail, commercial and investment banking sectors themselves
operated.

Of course, the salaries had to be right; and except in comparison to the commercial
banking sector, pay and rewards were very good anyway. However, by concentrating on
the job and work content, many institutions in the sector now started to attract — and
crucially, retain — the staff that they needed to drive the sector forward into the future.
quawieseuelW
BuLNpuZ
Sa;iold
&Ul

Motivation, goals and ambitions

Goals and ambitions must be present, realistic and achievable if satisfaction is eventu-
ally to occur. Problems arise when the goals set are too low (leading to feelings of frus-
tration), or too high (leading to constant lack of achievement). They must also be
acceptable to the individual concerned — in terms of self-image, self-worth, and self-
value as well as work achievement — so they are likely to be positive and based on the
drive for improved levels of comfort, capability and well-being. They must also be
acceptable (or at least not unacceptable) to the society and environment in which the
individual lives and works, and capable of being harmonized and integrated with them.

The need for recognition and achievement

A critical part of the motivation process les in the nature and levels of recognition
accorded to the achievement of particular goals. The need for recognition is therefore
a drive. Individuals pursue goals that are of value to them; and it is essential therefore
for organizations to match their objectives to that which is important to their staff, and
to recognize their achievements.

ae
2.
Achievement
a=
°oe Achievement is largely subjective. Achievements fall into the following classifications:
=.
a
=
© personal achievements, realized at different points in the life of an individual;
e professional achievements, usually based on job and occupational progression, and
tangible deliverables;
e social achievements, in which personal and occupational fulfilment are recognized
elsewhere;
e workplace achievements, in which as well as specific occupational deliverables, people
are valued for their wider contribution to organizational well-being.

Whatever is ‘achieved! is normally of value to the individual and the others with whom
they interact (workplace and social). Indeed, some people do not value what they have

324
 =N

succeeded at or done unless the recognition is forthcoming; for these people, the fact of
success and achievement is not enough — they have to be recognized as well.
From the point of view of workplace motivation, it is essential to know and understand
the staff sufficiently in order to relate what they are asked to do to their need for achieve-
ment. It is only possible to do this by asking them and then relating their hopes and aspira-
tions to what is possible at the place of work. JUaWas
uONeAN
puke

The components of achievement are the anticipated and actual rewards that the
fulfilment of a particular goal brings. High levels of achievement occur where these
overlap completely. High levels also normally occur where real rewards exceed those
that are anticipated. Low levels occur where the anticipated rewards are not forth-
coming; this devalues the achievement. High or complete achievement is normally
seen and perceived as successful. Low achievement or failure to achieve is seen and
perceived as a failure.

x
@
ne}
Achievement motivation theory: D.C. McClelland
®
ag
a
=. McClelland (1971) identified relationships between personal characteristics, social and
=
general background, and work achievement.
Persons with high needs for achievement exhibited the following characteristics:

e task rather than relationship orientation;

e apreference for tasks over which they had sole or overriding control and responsibility;
e the need to identify closely, and be identified closely, with the successful outcomes of
their action;
e task balance: on the one hand, this had to be difficult enough to be challenging and
rewarding; to be capable of demonstrating expertise and good results, and gaining
status and recognition from others. On the other hand, it needed to be moderate
enough to be capable of successful achievement;
e risk balance: in which the individual seeks to avoid as far as possible the likelihood and
consequences of failure;
e theneed for feedback on the results achieved to reinforce the knowledge of success
and to ensure that successes were validated and publicized;
e the need for progress, variety and opportunity.

Need for achievement is based on a combination of:

e intrinsic motivation — the drives from within the individual;

e extrinsic motivation — the drives, pressures and expectations exerted by the
organization, peers and society.

325
 It is also influenced by education, awareness, social and cultural background, and values.
One potential problem was identified in relation to the appointment of high achievers to
highly responsible managerial and supervisory positions. Because the higher achievement
tended to be task rather than relationship driven, many did not possess (or regard as
important) the human relations characteristics necessary to get things done through
people, nor did they understand that they would need to develop these if they were to be

8uUuNpUy
JuawaseueW
sanuoud
8Ul
successful in the future.
More generally, it needs to be recognized that the questions of:

e What is achievement?
e What is high achievement?

have to be addressed in individual cases and circumstances.

McClelland’s findings above concentrate heavily on what individuals perceive as

achievement; there is little in terms of what is understood and valued as achievement by
workplaces, organizations or society. The overwhelming drive was the ability of the indi-
vidual to present what they had done as ‘achievement.

Source: McClelland (1971).

The need for success and rewards

Additional issues now become apparent.
People need success. People therefore tend to aim their sights at what they know
they can do, think they can do, or think that they may be able to do se that success is
forthcoming. Genuine successes, victories and triumphs enhance feelings of self-
esteem and self-value; failures diminish these.

or People need rewards, both extrinsic (money, trappings and status) and also intrinsic (self
oO
wn
o
z2)
=
esteem and value). Rewards must be valued by both the individual receiving them, and
ev)
(a)
ee
fa)
also the wider society, organization, occupation and profession; and so to be fully effective,
(a)
the rewards on offer must meet these needs as well as rewarding performance.

People need to be accepted, recognized and valued by others. The value (of self
and others) arises as the result of a combination of pursuing things that the individual
knows or perceives will be valued by those around them (as stated above) and also of
seeking out those who will value the achievements for themselves. People need to
develop and improve. If satisfaction is not forthcoming in one field, individuals are
likely to lose interest and find something else to pursue. As well as matters of comfort
and well-being, this also includes broadening and deepening experience and variety
of life (including working life). It also includes developing new skills, capabilities
and interests with the view to pursuing personal potential as far as possible.

326
 =N

Drives for success, achievement and recognition

As well as being workplace drives, these are wider social and behavioural needs,
wants and desires. Each is influenced, developed and conditioned by societies and
organizations, and groups within them. Each is based on more fundamental human
needs as follows.

e The need and instinct for society and belonging: this is a reflection of the JUaUAase
Puke
uOneAN
need for esteem, warmth and respect. More fundamentally, it is the need to
belong, to interact and to have personal contact with those with whom the
individual has identity, respect, liking and love. It also includes being drawn to
those who have similar hopes, aspirations, interests and ambitions.
e The need to be in control: this is the ability to influence the actions and
feelings of others; and the ability to influence the environment, to make it
comfortable and productive in response to the particular needs, wants and drives.
Control is a function of purpose — the organization and arrangement of particular
resources (including other people) for given reasons.
e The need to progress: this is a reflection of the capacity to develop, to enhance
knowledge, skills and capability. It includes:
e economic drives for better standards of living, quality of life and enhanced
capacity to make choices;
e social drives to gain status, respect, influence and esteem as the result of
enhanced capability and economic advantage;
e personal drives reflecting ambition and the need to maximize/optimize the
potential to achieve;
e opportunistic drives — the identification and pursuit of opportunities that may
become apparent and attractive to the individual;
e invention and creativity — the ability to see things from various points of view
and create the means by which quality oflife can be enhanced.

Development, adaptation and creativity are also features of the needs for survival,
society and control. They are a reflection of the extent to which the individual is able
to influence their ability to survive, belong and control their environment.
Except at the point of life and death, when the instinct for survival is everything,
these needs constitute parts of the wider process of adaptation and interaction. At
given moments therefore, some needs will be stronger than others — there is no linear
progression from one to the next.

Major theories of motivation

Human, workplace and occupational motivations have been extensively studied over
the period since 1945. The overall purpose has been to identify what motivates and
demotivates individuals and groups, and also to identify the conditions (social as well

327
 as occupational and organizational) that have to exist in order for people to feel moti-
vated and committed to both life and work.
An illustration and evaluation of the major theories of motivation now follow.
These theories are:

e Rensis Likert: System 4;

e Abraham Maslow’s hierarchy of needs;
e two-factor theories;
JuawaseuelW
BuuNpuy
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6Ul
e motivation and classification.

Rensis Likert: System 4

Likert’s contribution to the theories of workplace motivation arose from his work with
high performing managers: managers and supervisors who achieved high levels of
productivity, low levels of cost and high levels of employee motivation, participation
and involvement at their places of work. The work demonstrated a correlation between
this success and the style and structure of the work groups that they created. The
groups achieved not only high levels of economic output and therefore wage and
salary targets, but were also heavily involved in both group maintenance activities
and the design and definition of work patterns. This was underpinned by a supportive
style of supervision and the generation of a sense of personal worth, importance and
esteem in belonging to the group itself.
Likert identified four styles or systems of management, as follows:

e System |: Exploitative Authoritative, where power and direction come from the
top downwards and where there is no participation, consultation or involvement
on the part of the workforce. Workforce compliance is thus based on fear.
Unfavourable attitudes are generated, there is little confidence and trust, and low
levels of motivation to cooperate or generate output above the absolute minimum.
e System 2: Benevolent Authoritative, which is similar to System 1 but which
allows some upward opportunity for consultation and participation in some areas.

In both Systems | and 2, productivity may be high over the short term when targets
can be achieved by a combination of coercion, and bonus and overtime payments.
However, both productivity and earnings are demonstrably low over the long term;
there is also manifestation of high absenteeism and labour turnover. In System 2, the
basis of collective involvement can be developed through engaging a more consulta-
tive style.

e System 3: Consultative, where aims and objectives are set after discussion and
consultation with subordinates; where communication is two-way and where
teamwork is encouraged at least in some areas. Attitudes towards both superiors
and the organization tend to be favourable especially when the organization is

528
 <a|
working steadily. Productivity tends to be higher, absenteeism and turnover lower.
There are also demonstrable reductions in scrap, improvement in product quality,
reduction in overall operational costs and higher levels of earning on the part of
the workforce.

IUaWase
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pure
uONeAO

| Principles of Favourable attitudes

| supportive relations towards superiors Low absence and
igh confidence and trust turnover
igh reciprocal influence
ae
Se
gl
xcellent communications:
p, down, lateral
igh peer-group loyalty v
System
4 j Group
esas

decision- | | High productivity

making ina multiple, | | | High peer performance Low rejection rate
overlapping group = [— goals at all levels: | Low costs
structure productivity, quality, rejects | High earnings

System
3 High productivity
High-performance sea over short run
Compliance
al based on fear Low productivity
:
e| cae Lee and earnings over
| long run
2 | 8
2> |
Ny 2 i
ieer « Unfavourable attitudes,
} High pressure and
ae re confidence and trust
| tight work standards, men
e| ae ats + Poor communication
6 | Personal limitations, |
Oilee : | + Low levels of cooperative
| tight budgets imposed | ae ;
ar ~ mouvation High absence and
- Low peer performance PuTOver
| goals
| + Restriction of output

Figure 17.1 System 4

Source: Adapted from Likert (1967).

e System 4: Participative, where three basic concepts have a very important effect on
performance. These are, the use by the manager of the principle of supportive
relationships throughout the work group referred to above; the use of group decision-
making and group methods of supervision; and the setting of high performance and
very ambitious goals for the department and also for the organization overall.

Likert’s two extremes — System | and System 4 — would appear to be major points
of organizational and managerial inquiry and evaluation as the nature of work and
workplaces changes. For those on flexible, non-standard and remote patterns and

329
 places of work, there would appear to be a critical need to ensure that, when neces-
sary, short-term drives and demands can be made and met. The highly participative
approach advocated by System 4 also requires attention through the creation and
restructuring of managerial and supervisory approaches to ensure that the maximum
possible engagement is achieved on the part of those who are not always present.
Likert’s work centred heavily on creating the conditions in which high levels of
motivation and achievement were possible; those responsible for designing and
luaweseuetU
SuuNpuZ
saaoud
&Ul implementing flexible, non-standard and remote working patterns and relations need
to be aware of these issues.

Abraham Maslow: A hierarchy of needs

Maslow (1960) presented a hierarchy of needs, which explained different types and
levels of motivation that were important to people at different times. The hierarchy of
needs works from the bottom of the pyramid upwards, showing the most basic needs
and motivations at the lowest levels and those created by, or fostered by, civilization
and society towards the top of it (see Figure 17.2). The needs are:

1 Physiological — the need for food, drink, air, warmth, sleep and shelter; basic
survival needs related to the instinct for self-preservation.

Self-actualization:
fulfilment and
achievement

Esteem:
self-esteem, self-worth, selfregard,
and the esteem, value and regard
of others

Social:
Societal and the need to belong, to love and be loved,
civilizational needs to interact with others

Basic and Safety:

instinctive needs the need for protection and security

Physiological:
the need for shelter, survival, food and drink

Figure 17.2 A hierarchy ofneeds

Source: Adapted from Maslow (1960).

2 Safety and security — that is, protection from danger, threats or deprivation and
the need for stability (or relative stability) of environment.

330
 =N

3 Social — that is, a sense of belonging to a society and the groups within it, for
example the family, the organization, the work group. Also included in this level
are matters to do with the giving and receiving of friendship; basic status needs
within these groups; and the need to participate in social activities.
4 Esteem needs — these are the needs for self-respect, self-esteem, appreciation,
recognition and status, both on the part of the individual concerned and the society,
circle or group in which they interrelate; part of the esteem need is therefore the IuaWase
UuONeAN
puke

drive to gain the respect, esteem and appreciation accorded by others.

5 Self-actualization — the need for self-fulfilment, self-realization, personal
development, accomplishment, mental, material and social growth and the
development and fulfilment of the creative faculties.

os)
Qo.
Self-actualization
>a
aie) Self-actualization refers to the ability and drive of individuals to realize their full potential,
=.
o
= to progress as far as possible and to be fulfilled. This includes recognition and value by
others. Self-actualization also addresses the need for challenge, responsibility and pride in
work and achievement, as well as the technological or professional expertise.
Two views of self-actualization are taken. The first is that self-actualization is available
only to the very few. It is limited by the inability to develop sufficient qualities and capa-
bilities for this to take place. This is due to the limitations of the social background of many
people and above all, of education, training and other means by which skills, knowledge
and expertise are developed.
The second view is that self-actualization is achievable by almost everyone in their own
particular circumstances. Whatever the limitations placed by society and education, indi-
viduals nevertheless exhibit a range of capabilities and qualities that have the potential of
being harnessed and developed in the pursuit of highly rewarding lives in their own terms.
Self-actualization is therefore an individual and not an absolute process.
The second view currently holds sway; and this is of particular value in understanding that
everyone has needs for respect and esteem. Whatever the nature, level or content of work
carried out, people will tend to seek variety and enhancement if this is at all possible. If it is
not possible at the place of work, they will seek it elsewhere. This view tends to militate
against traditional and classical organization features of task specialization and administrative
hierarchies which expect individuals to restrict their capabilities, work as directed and operate
machinery and systems, rather than develop and use their capabilities and talents to the full.
@

Two-factor theories
Herzberg (1967) identified two sets of factors affecting workplace motivation:

e those factors that led to extreme dissatisfaction with the job, the environment and
the workplace; and

531
 e those factors that led to extreme satisfaction with the job, the environment and the
workplace.

The factors giving rise to satisfaction were called motivators. Those giving rise to
dissatisfaction were called hygiene factors or dissatisfiers (see Figure 17.3).
The motivators that emerged were: achievement, recognition, the nature of the
work itself, level of responsibility, advancement, and opportunities for personal
growth and development. These factors are all related to the actual content of the
luaweseuetu
suunpuZ
saaioud
&@
Ul
work and job responsibilities.
The hygiene factors or dissatisfiers that Herzberg identified were as follows:
company policy and administration; supervision and management style; levels of pay
and salary; relationships with peers; relationships with subordinates; status; and
security. These are factors that, where they are good or adequate, will not in them-
selves make people satisfied; by insuring that they are indeed adequate, dissatisfac-
tion is removed but satisfaction is not in itself generated. On the other hand, where
these aspects were bad, extreme dissatisfaction was experienced by all respondents.

ie)
x
mo}
Theory X and Y
®g
a
= McGregor (1970) developed the two-factor approach by identifying two distinctive sets of
@
=
assumptions made by managers about their staff, as follows.

e Theory X: in which people dislike work and will avoid it if they can; they would
rather be directed than accept responsibility; they must be forced or bribed to put
out the right effort; they are motivated mainly by money, which remains the
overriding reason why they go to work; their main anxiety concerns personal
security, which is alleviated by earning money; people are inherently lazy and
require high degrees of supervision, coercion and control in order to produce
adequate output.
e Theory Y: in which people wish to be interested in work and, under the right
conditions, will enjoy it; they gain intrinsic fulfilment from work; they are
motivated by the desire to achieve and to realize potential, and to work to the
best of their capabilities; they will accept the discipline of the organization and
also impose self-discipline.

Effective work motivation was therefore a managerial responsibility. The core of this
responsibility lay in understanding the collective attitudes of the organization and
designing motivation and incentives around this. Organizations that adopted a largely
Theory X approach could not expect long-term enduring high levels of production and
output; organizations that adopted the Theory Y approach required much greater levels of
investment in the behavioural, as well as operational, side of enterprises.

332
 =)rl)

The work of Herzberg and McGregor has tended to encourage attention on such
factors as:
¢ good and positive supervision which encourages and extends the workforce rather
than restricts it;
e job satisfaction which can often be increased through work restructuring, job
enrichment and job enlargement programmes;
JUaaseU
UONeAN
puke
e and the setting and achieving of targets and objectives based on a full
understanding of what they are and why they have been set.
Some organizations have also concentrated on removing the dissatisfiers or hygiene
factors to ensure that causes of intrinsic dissatisfaction with the workplace and its
environment are minimized.

Factors on the job that led to extreme Factors on the Job that led to extreme
dissatisfaction but not satisfaction satisfaction but not dissatisfaction

Percentage frequency

50 40 30 20 10 0 10 20 30 40 50
T ] |

ae ee
| ec ereeeresea| Recognition
EE Gon scl
RE esponsibility
| | aaa Advancement
Company
|
policy
| | EE Growth
and administration iii
| | Supervision rar
|
|| Relationship with supervisor ae
| | \
| | Work conditions |
{| ||

Salary MMMM
{ | | |
} i | i | i }
| {
]

Relationship with peers EE

| ‘Personal life aaa
Feetionship with,subordinates aa
Status zt |
Security eS | | |
ese u Hi

Figure 17.3 Two-factor theory

Source: Adapted from Herzberg (1967).

me} Absenteeism
2.
=.
a
fe)
Qo Absenteeism is widely held to be a feature of the general level of satisfaction or otherwise at
the place of work. The higher the level of absenteeism, the greater the level of dissatisfaction.
—
ip?)
=

335
 This translates as follows: for every hundred members of staff, every percentage point
of absenteeism requires an additional person employed. Thus 5% absenteeism requires
105 members of staff to do the work of 100; or conversely it takes 105 days to do 100
days’ work.

In order to manage the two-factor approach to motivation effectively, attention is

quatwaseuelW
suunpuZ
saaold
&Ul
essential in the following areas.

e Management style, attitude and approach to staff that is based on integrity,

honesty and trust, whatever the nature, limitations or technology concerned in the
work itself; and a suitable quality of working environment.
e The psychological contract and bond that exists between employer and employee
(see Chapter 2), and which is a key factor in determining the nature, strength and
integrity of all working relationships.
e General factors of status and importance that ensure that every member of staff is
respected, believed in, treated equally and given opportunity for change,
development and advancement within the organization.
e Effective and professional operational relationships between members of staff that
in turn promote profitable and successful activities across the entire organization.
This includes recognizing the existence of barriers and potential conflicts
between departments, divisions and functions and taking steps to provide
effective counters to these.

Pay and reward levels must meet expectations, as well as providing adequate
levels of income so that individuals feel secure in both life and work. There are
collective, cultural and social requirements to increase pay and reward levels; it is
also becoming increasingly accepted that there is a moral responsibility placed on
organizations to share the fruits of their success (for example through profit and
performance-related pay). However, it is also necessary to recognize that high levels
of pay do not make work more interesting or worthwhile — though they do certainly
make it more bearable, especially in the short term.
Administrative support and control processes and mechanisms must be designed
such that they make life easier for those working at the frontline, while at the same
time providing the necessary management information. This particularly refers to the
nature and effectiveness of the roles and functions of corporate headquarters and the
relationships between these and the frontline operations indicated.
The work itself must be divided up fairly. There is particular reference here to
those parts of the work that are looked upon with disfavour but which nevertheless
must be carried out adequately and effectively.
People need to be confident in the security of their occupation. People need to be
employed on a continuous basis as far as possible; and they need to have confidence

334
 =N

in the stability and security of their occupation. Steps have to be taken to ensure that
there is a steady and open flow of information so that when changes do become neces-
sary, the staff concerned are both forewarned and positively responsive.

=
et

(= Honda UK
@
ia)
a
fe)
S When the economic crisis struck the UK in 2008, Honda UK, like many other companies, IUaWase
Puke
uONeAN
é<

found itself in crisis. Demand for the company’s products fell by 60% over the first six
months of 2009, and this resulted in a huge stockpile of unsold cars.
In response, the company consulted extensively with all parts of the workforce and
staff. The extent of the crisis was made clear and the following series of actions were agreed.

e There would be a factory shutdown for three months. Over the period, all staff would
continue to receive their full basic wage or salary.
e When production re-started, all staff would work an extra two hours a week in order
to ‘earn back’ the salary that they had been paid ‘up front’
e Any member of staff who wanted to leave would do so on advantageous severance
terms; however, there were to be no compulsory redundancies.
e The company would make it its business to inform all staff of any changes in
circumstances. Especially, if the crisis was to continue (or even deepen), all staff would
be summoned into work for a series of meetings and further consultations if these
became necessary.

In late 2009, the crisis began to pass; and by the end of 2009, manufacturing was up to
previous levels. The company achieved this without any formal dispute. No member of
staff was materially disadvantaged.
Additionally, when work did pick up, the company had created the conditions in which
it could legitimately call on the staff to re-engage very quickly.

Motivation and classification

Schein (1971) identified the relationship between motivation and commitment, and ‘a
classification of humankind’, as follows.

e Rational economic. People are primarily motivated by economic needs. They

pursue their own self-interest in the expectation of high economic returns. If they
work in an organization, they need both motivation and control. As they intensify
the pursuit of money, they become untrustworthy and calculating.
However, there are those who are self-motivated and have a high degree of
self-control. This is the group that must take responsibility for the management of
others. They also set the moral and ethical standards required.

535
 e Social. People are social and gregarious beings, gaining their basic sense of
identity from relationships with others. People will seek social relationships at the
place of work, and part of the function of the work group will be the fulfilment of
this necessity. The role of management in this situation is therefore ereatly
concerned with mobilizing the social relationships in the pursuit of operational
effectiveness and drawing a correlation between productivity and morale; and
taking an active interest in the development of the work group.
quawaseuew
BuLNpuZ
samoud
&
Ul e Self-actualization. People are primarily self-motivated. They seek challenge,
responsibility and pride from their job and to maximize the opportunities that
these bring. They are likely to be affected negatively by organizational and
management style, external controls, scarcity of resources and other pressures.
They will develop their own ways of working and objectives, and integrate these
with those established by the organization. The inference is that this is strongest
among professional, technical, skilled and managerial staff. However, all work
groups have tended towards higher levels of motivation and morale when given a
greater degree of autonomy at work.
e Complexity. People are complex and sophisticated. People have ‘varieties’ of
emotions, needs, wants and drives driven by personal circumstances, interactions
and adaptation. They have many differing, diverse and contradictory motives that
vary according to the matter in hand and the different work and social groups in
which they find themselves. They will not fulfil every need in any one situation,
but rather require a variety of activities in order to do this. They respond to a
variety of stimuli according to needs and wants at a given moment. Schein’s view
of ‘complex man’ in organizations is that of a psychological contract based on
mutual expectations and commonality of aspirations (see Chapter 2). The nature
of the working relationships is therefore that of a psychological as well as
economic partnership.

The classification approach to motivation approaches the issue from the point of
view of the people involved. This reinforces the need for all those in managerial posi-
tions to have the best possible knowledge and understanding of human, collective
and organizational behaviour. The classification approach draws particular attention
to the rational, economic and social needs that ought to be satisfied in all working
situations. It also draws attention to the subjectivity of self-actualization and therefore
the subjective need for achievement and recognition.
Additionally, managers need to understand the ‘complexity’ issue. Recognizing
that people are indeed ‘complex and sophisticated’, it follows that they will have a
variety of needs, wants, drives and concerns at any given time. When changes in
behaviour are observed, managers ought to be able to at least initially relate this to
the ‘complexity’ issue. For example, where a normally highly motivated member of
staff is either distracted or else plainly not interested at a particular point in time,

336
 = NX

consideration needs to be given as to why this is so, rather than assuming that they
have suddenly developed a bad attitude. There could be all sorts of reasons: personal
problems; domestic issues; or even something as simple as a computer crash (leading
to frustration).

The psychological partnership and contract

jUuawas
UONeAN
pue
The psychological partnership and contract is based on the following.

e The motivation to seek out particular types of work, the determination to follow a
particular career, to work in particular sectors, occupations, trades, professions
and crafts.
e The motivation to apply for specific jobs, with specific employers, to complete the
application process and to subject oneself to the recruitment and selection
processes.
e The motivation to accept job offers, to accept the salary/occupation/prospects
mixes of particular organizations.
e The motivation to turn up for work on the first day.
e The motivation to turn up for work on the second day and to continue turning up
on a daily basis; and to start and continue to produce effective and successful
work on behalf of the organization.
e The motivation to earn a living, and to both ensure and also increase the standard
of living.
e The motivation to progress, develop and advance.
e The motivation for physical and occupational variety; and to apply skills and
expertise in a range of situations, problems and issues.
e The motivation to work for the particular organization.
e The motivation to work with particular groups of colleagues.
e The motivation to give a measure of personal, as well occupational, commitment
to the work in hand.
e The motivation that is generated by professional pride.
e The motivation that is delivered by a regular series of achievements.

The work itself has got to have known, understood and accepted value. Whatever
the occupation, the contribution to the organization as a whole, and recognition for a
job well done, must be universally applied.
It is also essential to ensure that the content of work and occupations can be
developed as far as possible. Job and work development, enrichment, rotation,
enlargement and empowerment ought to be known and understood, and employed
wherever possible. If carried out successfully, motivation and commitment can be
generated in any staff or occupational group, whatever the working situation and
provided that the behavioural satisfaction aspect is also addressed.

337
 Where recognition, satisfaction and intrinsic content are not present — where jobs and occu-
pations are not effective, productive and satisfying - demotivation and demoralization occur,
whatever the interests inherent in the particular job, work or occupation might be.
asnf
®
amuiw

Motivation, incentives and money

BuUuNpUy
quawaseue
sanwoUd
Cs)
Ul
As stated above, a clear distinction needs to be made between motivation and incen-
tives. Incentives are delivered in return for achieving specific targets; motivation is a
broader process.
Nevertheless, monetary rewards and other material benefits are important in
ensuring the levels of commitment required of the staff (see Figure 17.4). Wages and
salaries are paid by organizations to individuals to reward them for bringing their
expertise and efforts, and delivering these effectively. Financial rewards must there-
fore reflect the:

e specific levels of expertise brought by individuals, and the ways in which they are
required to apply it;
e duration, quality and intensity of effort;
e effectiveness of individual performance; and ihe effectiveness of overall performance:
e locations where performance is required.

=
wn
You should always remember that monetary and financial rewards additionally reflect the
o
mo
value that organizations place on individuals and their expertise; and the value placed by
3.
=)
&
a
individuals on their own expertise.
oO

There is a strong perceptual relationship between pay and job importance and
value. for example:

e achief executive on an annual salary of £20,000 will be widely considered not to

have a great deal of responsibility or authority;
e amarketing officer on £80,000 per year will be generally perceived to have a
responsible and high powered job.

It is additionally the case that, in times of turbulence and uncertainty, the drive is for
higher immediate rewards rather than the assurance of long-term stability of employment
(which is certain to be less available during the periods of turbulence and uncertainty).
The effectiveness of pay and rewards management in terms of generating motiva-
tion and commitment is additionally limited or enhanced by:

¢ comparisons made with other sectors employing similar types or categories of

staff;

338
 Manage
motivation
and
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339
 e the going rate; and the going rate applies to both salaries and pay rises. In
particular, if individuals receive a pay rise lower than ‘the going rate’, they tend to
feel slighted; if they receive rises above the going rate, they will tend to feel that
they have done rather well.

oO
ip)
Effective pay and reward systems address motivation at the same time as targeting the
performance required by the organization. Additionally, there is an increase in the number
yn
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of organizations seeking to relate some part of pay and reward to organizational perform-
se)
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qjuawaseue
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ance. The purpose is to ensure that strategy, performance and motivation are aligned; and
oO

to ensure that staff are recognized and compensated for the efforts that they put in (see
Figure 17.4).

Conclusions
Highly motivated and committed staff produce high quality work over long periods of
time. The highest levels of motivation occur in organizations which:

e respect and value their staff as people; treat them equally; offer opportunities on
an even and equal basis; concentrate on performance not personality; and pay
and reward their people well;
e generate positive and harmonious culture; take early action to remove negative
attitudes where they start to emerge; reward contributions to organizational
performance;
e recognize that everyone has personal, professional and occupational drives, aims
and objectives that require satisfaction; and taking steps to harmonize and
integrate these with organizational purposes;
e balance the key behavioural features of expectation, effort and reward;
e recognize and rewarding achievement, development and progress;
e balance the attention given to the work in hand, the workings of work groups, and
individual performance;
e recognize the prevalence and influence of those elements that, if right, tend to
motivate; and those that, if wrong, tend to demotivate (see Table 17.1).

The fundamental concern is to have capable people on the staff who want to
work. The best and most rewarding jobs in the world can be — and are — destroyed
by negative styles and attitudes of management. The most overtly mundane jobs in
the world can be — and are — transformed and made excellent by positive and
supportive styles of management and by offering respect, value and recognition
where it is possible.
High levels of motivation are indicated by the following:

e low levels of absenteeism;

340
e low levels of turnover;
e low levels of accidents, sickness and injury;
e few disputes, personality clashes, interdepartmental wrangles;
¢ open approach to problems; early recognition and attention to potential problems;
¢ active participation in consultation, organizational initiatives, suggestion schemes.

Table 17.1 Managerial demotivators and motivators juauase

&)
pure
uoneAN

Demotivators Motivators

+ Management/supervisory style - Value

- Administrative overload - Respect
» Length of chains of command - Esteem
- Attention to procedures rather than output - Responsibility
* Bad communications » Progress
- Lack of respect/value/esteem « Achievement
+ Status/importance based on rank rather than achievement | » Communications

In each case, these are reinforced by clear, open and participative styles of
management; ready access to organizational, functional and personal information;
and clear and simple systems and procedures.
Low levels of motivation are indicated by:

e high/increasing levels of disputes and grievances; high/increasing levels of

disciplinary cases and the use of disciplinary procedures;
e high/increasing levels of accidents, sickness and injury;
e high/increasing levels of absenteeism and turnover;
e steady decline in quality and quantity of performance over the medium to long
term. This is reinforced by the concentration of attention on procedures and
systems rather than output; and by the proliferation of new systems, procedures,
and monitoring and support functions.

These are the initial indicators of high and low levels of motivation. The key areas
to address when assessing levels of staff motivation and morale are the:

e level and nature of identity that the staff have with the organization; and the
extent to which status, esteem and rewards are issued for productive output as
distinct from adherence to procedures;
e ability to offer fulfilment, recognition accomplishment to all levels and grades of
staff.

Everyone has basic needs for a sense of belonging, self-respect and self-worth, the
respect and value of others, and the need for growth, development and progress.
Initial inquiries in this area are therefore to be made along these lines; and these are
the key features to address where problems are found to exist.

341
 D5
Motivation addresses why people do the things that they do, and the conditions
oOo
=
om
necessary for them to be committed to particular organizations and courses of action.
at
e There is a difference between motivation and incentive: motivation is an enduring
commitment; incentive is short term only.
e Motivation is fed by a combination of material and intrinsic rewards.
e The best organizations address particularly the reasons why people may become
2)
juawaseueW
BuLNpUy
saAuouUd
Ul
demotivated with a view to ensuring that demotivators are not present.
e Motivation is a process. People need continuing marks of success, as well as increases
in rewards, in order to remain motivated.

Further reading
Herzberg, F. (1967) Work and the Nature of Man. Harvard.
Likert, R. (1967) The Human Organization. McGraw Hill.
Luthans, F. (2002) Organizational Behaviour. McGraw Hill.
Maslow, A. (1960) Motivation and Personality. Harper and Row.
McClelland, D. (1971) Human Aspects of Management. John Wiley.
Schein, E. (1971) Organizational Psychology. Prentice Hall.

342
 18
Management
on a daily “
basis tz
| managerial practice is |
| acontinuous measure —
___ ofperformance
against targets and |
» objectives:

In this chapter
e understanding the full complexities of the managerial role
e developing effective techniques of managing by walking about, remaining
visible and accessible, and solving problems
e establishing the conditions under which things can be controlled as tightly
as possible
e developing patterns of effective managerial and professional behaviour

Introduction
The purpose of this chapter is to bridge the gap between the acquisition of skills, know-
ledge, experience and expertise, and the complexities involved, in order to be able to
combine them together to generate enduring effective and successful performance.

The managerial role

Managers are the figurehead, symbol, representation and point of identity and contact
to everyone who works for them. Managers represent their departments at meetings;
they carry the hopes and aspirations of the staff at all times in all dealings with the
rest of the organization. It is the departmental manager's role and duty to fight the
department's corner and to ensure that the interests of both department and staff are
put forward and represented. In this function and according to the nature of the
department in which they are working, it will additionally involve belonging to a wide

343
 range of professional associations, cluster groups and functional lobbies, and to be an
effective operator in all of these.
Managers must have decision-making capabilities suitable to the purposes and
functions specifically required. Decision-making is founded in expertise and experi-
ence; and this expertise and experience are then related to the particular matter in
hand. An effective and expert decision-making process is required in particular for
solving problems, whatever these may be. Whether it is consideration of a major
luawaseuew
8uunpuZ
samoud
&
Ul departmental investment programme, or resolving an issue concerning a day off for a
member of staff, the matter must be addressed effectively.
Effectiveness in any managerial position requires both understanding and capa-
bility in these areas. If these are present there are additional benefits in terms of the
creation of identity and pride among departmental staff. All managerial actions
constitute a critical part of creating the backcloth that is in all cases necessary to
manage effectively in any work situation.
There are specific issues that have to be considered when seeking to manage
effectively on a continuous basis. These are:

e attitudes and values;

e managing by walking about;
e wait a minute;
e control;
e time management;
e interpersonal skills;
e setting and maintaining standards;
e performance assessment;
¢ organizational survival.

Attitudes and values

To be truly effective, managers must foster an attitude of absolute equality, evenness
and fairness of treatment and opportunity. Failure to do this means that staff are
treated unequally and unfairly.
In this context, forming and nurturing the ‘right’ attitudes is an essential part of the
managerial task, and any manager or supervisor must have a full grasp of this and be
able to do it. If enthusiasm is infectious, so is negativity; it is only too easy to very
quickly have a demoralized workforce if certain matters are not picked up. In both
multinational and public and health services this is manifest in the ‘canteen culture’,
and has been partly responsible for engendering and perpetuating negative and unde-
sirable attitudes. The overall purpose must be that everyone is happy, harmonious
and productive on the organization’s terms and those of the manager and department
in question. A clear and positive lead must therefore be given, and clear and positive
attitudes engendered and formed.

344
 eeic)

(ey
Prevention of negative, unequal and unfair attitudes is achieved through managerial
oO
aia)
1Ss
behaviour and example. It is reinforced through adequate and well-designed induction
and orientation programmes so that every employee is given a positive set of both corpo-
©
ies
tay
ial
o)
rate and departmental values, a clear identity with the organization and its purposes and
confidence in the rest of the staff. Ultimately, people wish to feel good about the organiza-
tion and department for which they work. Ajep
JUaUas
esiseq
UO
ie)

The cure for bad attitudes is hard. In isolated or extreme cases, people who do not
wish to work for the particular organization will be dismissed. In large or complex
organizations they may be moved somewhere with the view of reforming their atti-
tudes and getting a positive response from them. Marks of envy and jealousy must
also be dealt with; for example, office executives who wish for the salespersons’ cars
should be informed that, without the efforts of the sales force, there would be no office
job. Similarly, professional and technical experts may feel a much stronger loyalty
and commitment to their expertise than to the organization that actually employs
them to use it. In general, departmental managers will address such matters either at
the point at which they first assume their post, or when new members of staff come
into the department. They thus set standards of attitude and conformity to which all
are to aspire in the pursuit of the goals of the department.

@
>
The hard line
mo}a
@=
=.
The CEO of an organization can give clear guidelines to staff and stakeholders, as the
@
= following extract shows:

‘| believe in as hard a line as possible being taken by the management on the staff, a
harder line being taken by the owners on the management and the hardest line being
taken by the owners on themselves. Creating this environment Is very difficult and so a
strong approach must be taken in every area. The working atmosphere must be tightly
controlled and be all-pervasive or it will not work. This seems contradictory to the
“soft” approach so often preached. | think it is necessary however, if their dreams of
what people are capable of are to be achieved.

The vital ground rules must be ascertained (no more, no less) and then they must be
stuck to absolutely rigidly. The Japanese conformity approach should be made to look
weak when it comes to the ground rules. On the other hand, once these rules are
adhered to, as much flexibility as possible should be allowed. In this way individuality is
achieved through conformity. As long as the important things are taken care of, people
can do what they want and express themselves freely through their jobs. | don't care
how they do something as long as the end product is good. Mavericks who can work
within the guidelines are welcome and a great source of creativity and inspiration.

545
 It may be possible to summarise the ground rules into simply one thing. You must keep
to your agreements. This encourages the development of the person's integrity, their
ability to make choices and their sense of responsibility. It then gives us the opportunity
to ask them to agree to what we really want, i.e, be at work at 8.00 a.m. If they agree to
this, we will hold them to it precisely; 2 minutes past 8.00 is not 8.00, and providing we
can maintain enough front (and maintain this level of integrity ourselves) then we will
pull them up on it.
quawieseuelu
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Reasons are not relevant (eg. the bus was late). It then becomes a matter of “Personal
Power” which we want to foster in the staff. It is possible to act as if you are responsible
for everything that happens in your life whether it is true or not. Doing this eventually
means it will end up as being true in your reality. It is possible to look ahead and
manipulate the environment. If you expect traffic then you can leave earlier. If they
were paid £100,000 just for turning up on time, they would be there. This principle can
be applied to everything we want, and although it may seem strange, in the long-term
it will benefit the individual as much as us:
Source: Scott (1993).

Managing by walking about

Managing by walking about (MBWA) enhances visibility, and also creates opportuni-
ties for productive harmony, early problem and issue resolution, and improvements in
communications.
In behavioural and perceptual terms, managers who are ‘visible’ are seen as
approachable and acceptable. This will be reinforced by those who, while walking
about, take active measures to approach the staff members, get to know them, under-
stand their jobs, their problems and their concerns.
More specifically, MBWA underlines the essential qualities of trust, openness,
honesty and integrity, as well as visibility. It fosters a communication forum and
informal meeting point between manager and staff that demonstrates the manager’s
care and concern, and enables small issues to be brought up and dealt with on the
spot before they become big issues.
MBWA is additionally an essential cog in the process of continually appraising the
performance of staff. It enables any misunderstandings on the part of anyone

) \i)
concerned to be raised and rectified quickly.
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mma

MBWA also fosters the quality of empathy in the manager or supervisor, and gives a full
general knowledge and background to the hopes, fears and aspirations of those who work
in the department. This is an essential prerequisite to the process of motivating the staff
asni{
e
omnulw
successfully.

346
 =)ie}

MBWA reduces both the physical and behavioural barriers between the manager
and staff. The closed door, large desk and executive trappings are not only physically
imposing; they also present a perceptual barrier that the subordinate has first to
overcome because they reinforce the differences in rank and status between the two:
MBWA dilutes these.

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Managing by walking about
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Related to MBWA is the need to lead by example and set absolute standards. Good leaders
Ss
and managers are always present, visible and accessible on a regular basis. Managers gain
and improve respect among staff through their willingness to become fully involved as
well as leading and directing. For example, Richard Branson of the Virgin Group regularly
serves drinks and meals on his scheduled airline flights and train journeys. He also makes a
point of regularly telephoning those staff whom he has not seen during the recent past.
Additionally, he visits all of his different activities as often as he possibly can. Not only is he
demonstrating his willingness, commitment and capacity, he is setting an example to, and
for, the staff, as well as keeping an active eye on the daily operations of the Virgin organiza-
tion. It is also excellent general PR and identity building among both staff and customers.

MBWA is an essential tool for managers, and one that must be in constant use. If it
is not, the staff will develop their own patterns and ways of working, their own means
of problem and issue resolution, and control will pass out of the hands and office of
the manager.
In more sophisticated or complex organizations, and where there are flexible and
non-standard patterns of work, managers need to reprioritize their schedule of activi-
ties in order to be able to maintain the visible face of the organization and its manage-
ment. This is so that visibility and identity are built and developed whatever the
working situation; and again, it helps to provide a full context for taking the day-to-day
decisions and resolving minor and operational issues before they become major crises.

Wait a minute
All managers should have a mechanism in some shape or form that constitutes a ‘wait
a minute’ facility. This will be present in the formulation of policy or direction; the
taking of decisions; and in the implementation of strategy. At departmental and other
junior levels the purpose is to ensure that no inconvenient operational precedent is
being set by taking a particular line to resolve what may seem a simple and one-off
problem. ‘Wait a minute’ is not an abdication of decision-making ability or of decision-
making itself. It need not take a ‘minute’. It is simply to ensure that what is to be done
has been questioned from every conceivable angle. It is more generally part of the
monitoring, review, early and late warning systems that should be integral to all aspects

547
 of the manager's task. The presence of a ‘wait a minute’ facility does not of itself ensure
that the right decision is taken, but it does at least afford a moment's further consider-
ation. If this is all that is necessary to confirm that what is being done is truly for the
good of the organization and the fair and equitable treatment of the staff concerned, it
is amoment well spent.

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Wait
a minute
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an
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fe) e Nike, the sportswear corporation, tried to devise a global travel policy for its staff. In
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wn particular, the focus was on who should travel first class, business class or economy
class on the world’s airlines. Should this be based on — the distance travelled; the part
of the world to which the executive was travelling; the length of the journey; or the
volume or value of business to be conducted?
e John Stevens, an official at the London office of an international bank, asked to be able
to take two years’ annual leave back-to-back (a total of two months) to visit friends
and relatives in Australia. His request was granted. Mary Phelps, an official in an
equivalent position and with longer service at the same bank, put in the same request
for the back-to-back leave to visit friends and relatives in Stornoway in the Western
Isles off the coast of Scotland. She underlined the request by stating that it would take
longer for her to get to her destination thai for Stevens to get to his.

The ‘wait a minute’ facility would not necessarily address the issues raised in the Nike
example, or change the decision about staff leave at the international bank. The ‘wait a
minute’ facility would, however, ensure that the decisions had just been briefly reconsid-
ered for integrity, fairness and transparency.

Control
All managers must have control mechanisms suitable to the department or unit
concerned; and relating to the staff, resources and operations that are carried out
within it. This must apply even where the work in hand is of a professional, adminis-
trative, technical or qualitative nature. The overall function of control involves setting
desired standards and measuring actual performance against them: from this, anal-
yses of differences between the two will be made and remedial action will be taken
where necessary. It follows from this that objectives must be fully understood by all
concerned so that involvement in the control of the work necessary and in any reme-
dial action that becomes apparent is adopted and supported by everyone.
The methods and mechanisms to be used will therefore be department or task
specific; and linked to, and in harmony with, the overall methods adopted by the
organization. They must reconcile the need to produce clear results with the need to
be flexible and objective in operation, and economical and simple. Presentation of

548
 =o

control information in ways that everyone can understand and recognize is essential.
It is necessary not only to indicate differences and deviations from required perform-
ance but also to provide the means of establishing the causes of these — where the
failures are occurring, why this is so and what to do about them. Within this context,
managers will draw up and use their own control methods. These will include:

Forecasts, based on the resources — staff, financial and technological — available;

Ajrep
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siseq
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and in relation to the outputs that the organization requires.
Risk assessment, based on knowledge of the situation as it exists and with
especial attention to what is not fully known about specific matters.
Resource allocation and usage, based on what the department has, and can, get
hold of; and based also on the resources that the department does not have and
cannot get hold of.
Priorities, and the basis of prioritization; in particular making clear to people
what can, and cannot, be done.
Deadlines, and the basis on which these have been arrived at.
Budgets, for all the activities within the manager’s sphere, covering such matters
as staff, production, outputs, operational costs, administration, other overheads,
cash and daily expenditure and possibly also an overall department reconciliation
of these matters.
Management information systems, including the gathering and promulgation of
information within the department and the reconciliation of this with desired
levels of performance; these also provide a vehicle for the manager’s contribution
to the information systems and requirements of the organization.
Reporting systems and relationships, designed to highlight any deviations and
problems immediately, and to identify means by which such situations may be
remedied; in any case, they should be able to provide information that can be
used on an organizational basis for future planning and direction setting.
Job and work design, to ensure that work is allocated in order to ensure
effective long-term organizational, departmental and individual performance; and
that the bad or unattractive parts of the work are evenly shared out. This is likely
to require attention to the ability of attracting and retaining staff; and to the
design of effective (and often flexible) working patterns.
Performance appraisal, assessment and feedback: part of the control process
is the communication process that constitutes keeping the departments informed
of its progress on a continuous basis. There is a control function inherent in the
nature and content of feedback that is given in terms of recognizing any
achievements and dealing with any shortfalls.
Conflict: part of the purpose of having control methods and procedures in place
must be to ensure that conflicts or disputes between members of staff are resolved
as quickly and effectively as possible.

349
 e Control methods and means: these should be integrated into the general review,
monitoring and process assessment that should be in place in all departments. To
be fully effective, they require full understanding on the part of all concerned —
the manager, the staff and those other departments and units with whom they
interact; they should also mirror the aims and objectives of the departments if
they are to be fully effective.
e Factors outside the manager’s control, which nevertheless have to be handled
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ul on a daily basis or as and when they arise. All managers need to do their best to
in-build time so that they have a degree of flexibility and leeway in addressing
matters when they do arise.

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An airline manager working in the Middle East
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This manager regularly fields questions from powerful and influential people in his region.
SS

Problems handled have included the following.

e Why the daughter ofa diplomat had to wait 20 minutes for an orange juice on her
flight back to London.
e Why packages and parcels carried by a worldwide courier organization had to go
through security screening and not straight on to the aeroplane.
e Why it took two hours for a particular cargo to be cleared from the airport by customs.
e Why Europeans have to go through the full immigration procedure upon arrival in
countries of the Middle East.

Each of these items is outside the manager's control. It is impossible to predict when
these, and similar, issues will arise; they do, however, have to be dealt with on the spot. And
if they appear (to outsiders) futile, trite and silly questions — nevertheless, managerial prac
tice demands that they are dealt with. And everyone has similar things in their own situa-
tions that they do indeed have to deal with when they arise.

Time management
Time at the workplace may be divided into:

e productive time;
e non-productive stoppage or downtime;
® maintenance time;

e wasted time.

From this, priority, crisis, wastage, overload and underload can be identified; and
a time—resource—energy dimension put on each. The purpose is to ensure that what
happens in reality accords with what managers think happens. Other dimensions and

350
 (i,o
variables will also be included. These include the complexity and difficulty of the
task in hand, the importance of it, the urgency of it, and the frequency of it. The value
of what is done, whether derived or implicit, will also have a time configuration to it.
What is therefore required is an attitude of continued questioning of time usage based
on the premise that anything and everything can always be improved and made more
efficient and effective.
In order to maximize or optimize time usage, certain steps can be taken. The first is Ajlep
JUaWAas
siseq
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for the manager to be aware of the time issue. Part of the process that arises from this is:

e to set priorities for the department;

e to seta pattern of delegation of tasks and activities;
e to produce suitable and effective work schedules;
e to continuously assess the work in hand against time constraints, as well as
against constraints placed by other resource implications.

Next the manager should identify those things that waste time. These may consist of:

e long, unnecessary or habitual meetings, or those which are procedural rather than
executive in content;
e interruptions and the nature of these in his or her work;
e idle conversations; unnecessary bureaucracy, reporting systems and record keeping;
e the balance of travelling time against effective business conducted;
e task allocations — especially the allocation of the easy tasks which should be
conducted on a basis that leaves those of high capacity and quality to carry out
key, critical or other activities that match their capabilities, not filling up their
work schedules with items that are well within them.

As stated above, managers need to be able to build in as much flexibility as is

necessary in order to deal with interruptions and issues that have to be addressed
immediately. Managers should also be aware of creative approaches to time manage-
ment in terms of machine, equipment and plant usage; working patterns and shift
arrangements; personal planning; the setting and maintenance of deadlines; and
giving clarity of purpose to meetings. There are opportunity costs of time usage and
especially time wastage that can never be made up. All managers and their depart-
ments should have a system of time measurement that is suitable to its purpose; and
that encourages efficiency and effectiveness of performance in regard to this resource.

Interpersonal skills
Everyone has interpersonal skills. For managers, interpersonal skills additionally
constitute a critical tool that is essential to them in the pursuit of their daily occupa-
tion. How interpersonal skills are used is instrumental in creating and reinforcing the
management style adopted.

351
 Interpersonal skills are used as part of the process of MBWA and the visibility that
goes with this, reinforcing messages of honesty, openness and trust. Interpersonal
skills have implications for general levels and states of communication within the
department, and for conducting meetings and handling public presentations.
Crucially, managers need to be able to apply their interpersonal skills when
dealing with performance or behaviour issues. They will never criticize members of
staff either in public or on a personal basis when the problem is related to work. If
8uunpuZ
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&Ul there is a personal issue that requires managerial activity and concern, this will be
conducted in private and remain a matter between the manager and the individual. If
it is necessary to criticize somebody’s work performance, then it must be done in a
clear and straightforward way with the emphasis upon remedy rather than appor-
tioning blame. Effective criticism is always constructive; the end result must be to
reinforce the importance of the individual as a member of the department. If it is
possible, such criticism should be reinforced by finding areas of work to be praised at
the same time. In this way also, the work remains at the centre of the concern.

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As well as dealing effectively with conduct and performance issues, the positive needs
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always to be emphasized. In particular, praise should be extended where it is due. It is a
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powerful form of recognition and a universal motivator. Every manager should avoid only
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dealing with staff when there are negative concerns. Praise makes the individual concerned
feel identity, respected and important. It should be handed out whenever and wherever
due, and it should be conducted in public.

Managers also use interpersonal skills to instil pride and enthusiasm for the job,
the work and the department. The best managers inspire and generate pride and
enthusiasm by the ways in which they behave in relation to the department’s work
and the people carrying it out. It is the manager’s job to instil this feeling and to
promote this attitude among the staff, and the interpersonal relationship with the staff
is instrumental in this.

ra Always remember that all work should be a matter of enthusiasm, and a matter of enjoy-
wn
a
e¥) ment as well as fulfilment. Again, the interpersonal skills of the manager are instrumental in
3a creating this background.
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Other qualities of leadership that become apparent through the use of interper-
sonal skills are: the courage of the manager concerned; knowledge of the job; self-
control and self-discipline; sense of fairness and equity; standards of personal
conduct and behaviour that reflect the standards required in the department; and a
sense of humour. It is also a reflection of the interpersonal qualities of the manager
that ensures that the correct and appropriate standards of dress, language and
manners are established. This is particularly important in departments and units

352
 = i)
where dealings with the public are an everyday feature, or where protective clothing
must be worn.
Effective use and application of interpersonal skills is demonstrated when staff
and manager each know where they stand in relation to each other. Effective and
professional application of interpersonal skills provides the basis for effective work
transactions, and organizational and departmental communications, ensuring that
disputes and misunderstandings are kept to a minimum. Effective interpersonal Ajlep
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skills, underpinned by integrity and transparency, also critically reinforce the

manager's authority, confidence and trust.

Setting and maintaining standards

WAs stated above (Chapter 8), all organizations and managers have to be able to set
and maintain standards of conduct, behaviour and performance. Much of this has to
be done on a daily basis; as well as having procedures and policies that have to be
followed, managers have to be able to visibly and effectively establish absolute
benchmarks in the following areas.

e Discipline: establishing absolute standards of behaviour and performance based

on both ordinary common decency and also absolute organizational demands; and
ensuring that when disciplinary procedures are invoked, matters are dealt with
quickly, fairly and effectively.
e Dismissal: ensuring that offences such as vandalism, violence, theft, fraud,
bullying, victimization, discrimination and harassment are dealt with fairly and
effectively; and that when these are proven, the perpetrators are dismissed.
e Grievances: handling and resolving issues rather than institutionalizing them;
ensuring that the full facts of the case are covered; and ensuring that everyone
understands what outcome has been reached and the reasons for this.
e Health and safety: creating and maintaining the conditions whereby a healthy
and safe working environment exists; taking remedial action where unsafe
practices and unhealthy aspects are found.
e Occupational health: above all paying attention to stress, repetitive strain
injuries, and the causes of these; recognizing the potential for their existence;
addressing and remedying working practices when these are found.
e Risk management: knowing and understanding where things can potentially go
wrong, especially in terms of inter-occupational, inter-professional and
interpersonal relationships; the integrity of computer and IT systems; production
and service delivery issues where all of these are related to daily activities as well
as organizational and institutional integrity.

In each of these cases, it is essential for managers to understand that there are
procedures to be followed, and that failure to do so normally constitutes a breach of a

355
 employment law. Managers must therefore become fully knowledgeable in their
content, and expert in their application.

Continuous performance assessment

anagers must be able to assess and evaluate levels and quality of performance in
their departments, and to measure this against the required standards as follows.
quatuaseue
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e Where there are departmental problems, managers need to conduct full
investigations to discover the reasons and to make judgements as the result.
Investigations are likely to consist of:
a review of processes and procedures;
sampling of activities;
e establishment of any shortfall in staff harmony and cooperation;
2 resource shortage;
e identification of blockages;
e identification of hold-ups in administration processes and procedures.

e At team level, it may be necessary to examine the extent to which there are
problems of attitudes and behaviour. If serious conflicts have arisen, these must
be addressed and remedied. If there are problems or blockages in communication,
then there is the responsibility to ensure that team members are fully briefed.
e At an individual level, it is essential that managers attend to praise for good
performance, and a quick and effective remedy for any shortfall.

All this should be underpinned by the approach taken to the general monitoring of
the work of the department. As stated above, this is a crucial output of MBWA.

oy
A critical priority of all managerial practice is a continuous measure of performance against
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targets and objectives, and the criteria against which the success or otherwise of depart-
ments and activities will be assessed. This reinforces the need for all managers to become
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actively and visibly involved in everything that concerns their department.

Survival and effectiveness

Managers have to create their own patterns of behaviour and networks of relation-
ships in order to survive and be effective. It is impossible to apply any expertise in
isolation from the particular situation.
Managers therefore need to become effective in operating within both the formal and
the informal systems of networks and relationships that exist in every organization.
The formal networks tend to consist of regular meetings, and professional and
occupational networks, all of which carry varying degrees of influenee. Managers

354
 =o

need to ensure that they become as effective as possible when working within the
formal systems and networks so that they maintain, preserve and develop their own
position and that of their departments, divisions and functions.
When working within the informal systems, managers need to find their own niches
and from there, go on and develop networks and support as they require.
Managers need to develop a keen ‘environmental’ sense. This comprises:
Ajlep
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e the ability to spot straws in the wind, indicating possible changes, developments,
innovations or crises;
e the recognition of the departments and individuals where actual power and
influence truly lie;
e sources of information within the complexities of the organization;
e ‘managerial antennae’ which are finely tuned to perceive any shifts in the other
aspects or across the environment in general.

Managers will assess their own position in the pecking order, the competition for
power and influence and the qualities that they bring to the organization’s internal
political situation. They will assess their own strengths and weaknesses in it, and the
capabilities and capacities that are required in order to be effective and professional
operators in the given situation.
They will identify where the inter-group frictions (and sometimes hostility) lie and
assess the reasons for them. From this standpoint they will similarly assess the posi-
tion of their department in the whole, and look to be able to lobby for support and
influence where they are most likely to get it in the pursuit of these interests.
They must adapt their managerial style to the situation. For example, a highly
open and task-oriented approach is not likely to work in a bureaucratic set-up. By
adopting it anyway because of preference, the manager would simply throw away any
advantages held and the political positioning necessary in order to operate in the
environment. This would also impinge upon both the work and effectiveness of the
department and its own regard in the organization.
Throughout the operational environment there will also be various agenda that are
to be followed. Departments and their managers have secondary and hidden agenda,
especially to do with the advancement of a particular course of action; but also, more
generally, in the promotion of the department or its manager in the pecking order of
the organization. Departments may engage in unhealthy, negative competition that
has nothing to do with the pursuit of effective operations but rather, negatively
encourages success at the expense of other departmental failures. It becomes a drive
for power and influence in itself motivated by the need to gain the ear of the chief
executive or in other spheres of influence.
The situation may be exacerbated by bad and inadequate communications and
communication systems so that people find things out via the grapevine or other
vested interests; in such situations especially, trade union officials prosper and

555
 flourish. There is a consequent increase in the numbers of disputes including those
between departments; and an increase also in those disputes and grievances that are
put on a formal basis and go either to arbitration or to the top of the organization for
resolution. Rules and regulations in such situations become the end and not the
means to an end. Where such situations are allowed to persist over long periods of
time, bureaucratic superstructures are devised and additional staff and procedures
taken on and adopted, and such interdepartmental and organizational wranglings
suunpuZ
quatuaseuelu
safolid
&Ul become institutionalized and part of the ways of working.

Conclusions
The issues raised and discussed in this chapter are those common to all situations —
projects, operations, and industrial, commercial and public services sectors. Whether
or not written into organization strategy, policy and direction, each has to be addressed
on a daily basis. It is essential therefore, that all managers ensure that they have their
own ways of establishing specific standards in each of these areas, and uphold them.
The manager’s performance in the eyes of their subordinates is underpinned by
their determination to know and understand the field of operations in which they are
working, even if they have no professional or occupational expertise in it. Preaching
perfection, it is every manager's duty to ensure that they know as much as possible
about the field of activities as a whole; the pressures and constraints on every activity
for which they have direct responsibility; and of the professional and occupational
boundaries for which they are ultimately responsible.
Cohesion of managerial activities with professional and occupational operations is
essential if long-term effective organizational performance is to be sustained. This
does not always happen — indeed, in some organizations, the overwhelming impres-
sion is that management and activities run parallel to each other with very little direct
contact. The public services sector has an enduring reputation for this; indeed, many
school head teachers and hospital ward managers can go for weeks without any direct
contact from those to whom they are ultimately answerable.

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Badrin Oil Ltd
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Lack of managerial and professional contact is not unique to the public sector — many
rs
multinational and multi-site industrial and commercial organizations run in exactly the
same way. For example, Badrin Oil Ltd, a large oil company, decided that it was going to
undertake a programme of strategic change. Consultants were hired, and an outline
strategy agreed. The consultants found that a key perception of those working as oil
engineers in the field was that they did all the work, while head office spent all the profits.
Accordingly, proposals were drawn up to make sure that nobody spent more than three
a

356
 = eo

years at head office without doing at least six months in the field somewhere in the
world. The same year, the company reported a 0.5% decline in annual profits, even though
turnover had risen by 7%. The company’s top managers flew to a luxury hotel in South
America to discuss the implications. The top managers decided that it was too much
trouble to do anything about the oil engineers and their complaints. More critically, the
company’s managers dropped the proposal about doing six months in the field some- Ajrep
JUaWUas
siseq
&UO
where in the world after three years at head office — contemplating this prospect was
clearly highly uncomfortable. The consultants were paid off and everything went back to
how it was before.

Finally, it is essential that all managers have a visibility and integrity of style and
personality. This applies whether the manager is autocratic, democratic or participa-
tive (there is no reason at all why autocrats should not also be honest and open).
Participation and consultation should never be used as an excuse for sitting on the
fence. Many managers use their overtly participative style as an excuse to avoid
taking decisions or confronting awkward problems and individuals. Once the staff
know, believe or perceive that a manager’s style is solely concerned with the abdica-
tion of responsibility — a ‘hands-off’ approach — the position becomes very difficult
to retrieve.
In everything that managers do, the key qualities underlining all effective perform-
ance are: enthusiasm; ambition; dynamism; flexibility; responsiveness; and the
acceptance of responsibility and accountability. To these must be added: a willing-
ness to be wrong and to admit mistakes; a willingness to put things right; and charac-
teristics of integrity and truthfulness.
It is important to recognize that, however necessary it may be to behave according
to the rules and norms of the organization, in the long term, integrity, professionalism
and working relationships can be destroyed if absolute standards of continuous and
daily managerial practice are not set and maintained.

e The position of visibility and identity in building effective managerial practice.

e Theneed for effective decision-making processes, both in terms of effectiveness, and in
relation to what the context can support.
e The need to manage time effectively, and to be flexible in its usage.
e Theneed to be able to exert control over sets of activities, and the ability to identify
and use effectively the means at the manager's disposal.
e Theneed to be able to recognize, understand and evaluate the organizational context
in which activities take place; and the need to be able to develop expertise and
presence so as to be able to survive and be influential in that context.

357
 Further reading
Colley, J. et al. (2007) Principles of General Management. McGraw Hill.
Delves Broughton, P. (2007) What They Teach You at Harvard Business School. Penguin.
Drucker, P. (1986) The Effective Executive. HarperCollins.
Hayes, J. (2002) Interpersonal Skills at Work. Kogan Page.
Peters, T. and Austin, N. (1985) A Passion for Excellence. Harper and Row.
Semler, R. (2003) The Seven Day Weekend. Century.

rs)
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8uuNpuy
salawod
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358
 _ ‘Management %
development isa
__ partnership between —
the organization and
the individuals ... the
need: of both must ,
19 _be satis |ed’

Management
development

In this chapter
understanding the nature of management development, and its critical role
in the professionalization of management
developing all aspects of managerial expertise
management development as a process; and as a personal as well as
occupational drive
understanding the value of different management development activities in
the establishment and enhancement of professional practice and expertise

introduction
If management is truly to become a profession, then managers and management have to
be developed in line with gaining the body of knowledge, understanding and expertise
required, and in order also to ensure known and understood levels of performance.
Like all expert practice, management development requires organizing along the
following lines:

e organizational, reflecting the particular needs of the organization in which

individuals find themselves;
occupational, concerned with the needs of present and future positions within
the particular organization;
professional, concerned with organizational needs, and also with a wider view of
what skills, knowledge, understanding and expertise ought to be developed;
personal, concerned with organizational, occupational and professional development,
and also attending to the preferred wider directions and interests of individuals.

359
 Within this context, management development is concerned with the following
activities:

e the development of managers and supervisors;

e the development of all staff through the activities of managers and supervisors;
e the development of overall organizational capability;
e identification of talent and potential;
e ensuring organizational succession and continuity;
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e developing expertise in line with an individual’s ambitions and aspirations.

The overall approach must therefore match organizational sustainability with devel-
oping the careers and expertise of the individuals involved.
Any discussion of management development has to start from the premise that the
skills, qualities and expertise required of good and effective managers can be taught,
learned and applied. The vast range of management courses, activities, expertise and
qualifications would tend to support this view, at least to an extent.

= For effective management development to take place, clearly the qualities have to be
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talented and expert people, while many have the expertise present within them, some
turn Out to be better footbatlers/actors/ plumbers/teachers/nurses than others.
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The ‘common sense’ view of management
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The alternative view offered to rigorous and professional management development is
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Chapter 1).

The university of life

Those who take the view that management is ‘common sense’ and therefore anyone can
do it point to the success of individuals such as Richard Branson. Clearly, Richard Branson
has turned out to be an expert leader and very successful business person. However,
Branson himself acknowledges his own shortcomings, going to a lot of trouble to surround
himself with the highest quality available expertise in the fields in which the Virgin Group
operates. Branson also acknowledges that had he gone to business school, he would have
made far fewer mistakes in any case.
There are plenty of other examples — entrepreneurs who have succeeded in building
vast organizations, and entrepreneurs who have succeeded in their own terms by building
small organizations that can support their own lifestyle and ambitions.
Otherwise, the evidence is to the contrary.
 = 2)

Promotion paths
There has been a traditional approach in much of the Western world to promote the best
professional or operative into the position of manager. Thus, for example, the best teacher
became head teacher; and the best plumber, plumbing manager. What tended to happen
was that the profession or occupation lost an expert practitioner; and the manager gained
was of uncertain and untested knowledge and expertise — because they had no prior 1uauase
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management training or development.

Other figureheads
Many other figureheads including Stelios Haji-loannou (who founded EasyJet), Michael
O'Leary (who transformed Ryanair into the largest low-cost airline in the world) and
Julian Richer (who founded the Richer Sounds chain of electrical stores) received business
and management education. Most people who rise through the ranks to the top of their
organizations have had some form of leadership or management training and develop-
ment along the way. Those who reach the very top of their organizations normally at
least undertake the executive development programme of the Institute of Directors; and
many have either completed postgraduate business and management qualifications, or
university-based executive programmes.

In practice, management development concentrates on:

e organization development and managing change;

e collective and individual development;
e the development of organizational understanding;
e the development of organizational, collective and individual behaviour;
e behaviour, attitudes, skills, knowledge, expertise and technological proficiency
development;
e technical knowledge: finance, strategy, HR, marketing and ethics;
e knowing and understanding the environment;
e product, service and operational advancement and improvement.

In the first place, the knowledge, skills and expertise required of management and
managers, as above, have to be developed and delivered in absolute terms. It then
becomes necessary to ensure that this expertise can be delivered in the particular
environment in which individuals are working. There are further demands that have
to be met, ensuring that managerial expertise is integrated with organization, environ-
mental and business pressures, opportunities and constraints. The development of
organizational, collective and individual work ethics, including personal as well as
professional commitment, has to be generated. Increasingly, managing across cultures
and in transforming occupations, professions, industries and sectors is also a priority
in all development activities.

361
 me}
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Right or wrong?
a5
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environment and cultural pressures. For example, when an organization changes attitudes,
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priority or status (for example as the result of merger or takeover, privatization or techno-
logical change) then it is assumed that present management expertise and qualities must
be wrong. Those involved are therefore removed. Something has then to be put in its
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It is also the case that when there is a change of organization chairman, chief executive
or other key figure, the new person coming in is assumed to be a right appointment. If this
‘rightness’ is to become effective, the new figure must have the skills, knowledge and
expertise to become immersed very quickly and to begin to deliver results in very short
time frames.
Finally, given that only 13% of mergers, takeovers, privatizations and technologically driven
changes are wholly or mostly successful, there is an overwhelming need for attention in these
areas and a managerial requirement to question these assumptions in the first place.
If nevertheless, this is to continue as organization practice, then it underlines the need
for a distinctive body of professional knowledge and understanding so that managers can
drop into a new job and become effective very quickly — a bit like a GP dropping into a
new practice for the first time.

Sources: Industrial Society (1999); Institute of Management (1996).

The management development requirement is therefore twofold: to identify and

develop a body of expertise; and to be able to apply it in whatever situation or envi-
ronment required.

The professionalization of management

The best managers are committed and dedicated operators; highly trained and
educated, with excellent analytical and critical faculties. Beyond this, there is a body
of skills and aptitudes, knowledge, attitudes and behaviour that the effective manager
must have and be able to draw upon.
Personal qualities are required of everyone who aspires to conduct their occupa-
lion to a ‘professional’ or expert level, and management is no different. For profes-
sional management practice, the personal qualities required include:

e ambition, energy, commitment, self-motivation;

e job, product and service knowledge;
e self-knowledge and self-respect;
e drive and enthusiasm;
© creativity and imagination;

362
 = No

e a thirst for knowledge;

¢ acommitment to improvement;
¢ acommitment to continuous development, both personal and professional;
¢ commitment to the interests of everyone involved;
¢ commitment to integrity and honesty; .
e the ability to grow and broaden the outlook and vision of the organization
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concerned;
® a positive and dynamic attitude, self-discipline, empathy with the staff and
everyone else concerned;
e a love of the organization and pride and enthusiasm in the job, its people, its
products, its services, its customers and clients.

These personal qualities have to be present within the individual, and capable of
being nurtured and developed, and they provide the springboard for the successful
and professional operator.
Currently, much of the grounding for a professional approach is formalized and
achieved through the study of business and management at school, college and
university; and there are plenty of opportunities for everyone to develop this know-
ledge and understanding to professional levels. However, this is not yet a universal or
formal requirement (see below).
Additionally, management is a global activity and lessons need to be learned
from everywhere in the world. This includes Western Europe, North America,
China, India, Japan, Korea, the Philippines, Malaysia, Indonesia, the Middle East,
Australia, New Zealand and South Africa, where managerial practices are well
documented.
It must be recognized finally, that management is currently being conducted in
a changing and turbulent environment. This has itself changed over the period
since 1945 and the reconstruction of the world damaged by the Second World
War. Then, everything was arranged to try and bring order, stability and perform-
ance steadiness to business, service and the markets and spheres in which they
operated. Today all that has gone and the processes of technological advance,
management education, automation, technological and social change, and polit-
ical development, together with the globalization of business and commerce,
ensure that all concepts of management are in turn subject to continuous change
and revision.
Truly expert and committed managers will therefore always ensure that they
keep themselves up to date with everything that impinges on both their job and
their chosen ‘profession’. Many professional management bodies and institutions
now insist that their members keep records of all continuous professional develop-
ment activities that they undertake and, indeed, insist on this as a condition of
continuing membership.

363
 Professions
Having identified the range of knowledge, skills, expertise and qualities that expert
managers need to have, it is then necessary to establish the extent to which ‘manage-
ment’ can be truly professionalized. The ‘classical’ professions are always understood
to be medicine, law, the priesthood and ihe military. The following elements were
held to distinguish these occupations from the rest of society.
qjuawiaseue
8uuNpuZ
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members.
Distinctive body of knowledge: required by all those who aspire to practise in
the profession.
Entry barriers: in the form of examinations, time serving, learning from experts.
Formal qualifications: given as the result of acquiring the body of knowledge
and clearing the entry barriers.
High status: professions are at the top of the occupational tree.
Distinctive morality: for medicine, the commitment to keep people alive as long
as possible; for law, a commitment to represent the client’s best interests; for the
church, a commitment to godliness and to serve the congregation’s best interests;
for the military, to fight within stated rules of war.
High value: professions make a distinctive and positive contribution to both the
organizations and individual members of the society.
Self-regulating: professions set their own rules, codes of conduct, standards of
performance and qualifications.
Self-disciplining: professions establish their own bodies for dealing with
problems, complaints, and allegations of malpractice.
Unlimited reward levels: according to preferred levels of charges and the
demands of society.
Life membership: dismissal at the behest of the profession; ceasing to work for
one employer does not constitute loss of profession.
Personal commitment: to high standards of practice and morality; commitment
to deliver the best possible in all circumstances.
Self-discipline: commitment to personal standards of behaviour in the pursuit of
professional excellence.
Continuous development: of knowledge and skills; a commitment to keep
abreast of all developments and initiatives in the field.
Governance: by institutions established by the profession itself.

In absolute terms ‘management’ clearly falls short in most areas. Formal qualifica-
tions are not a prerequisite to its practice (though they are highly desirable and ever-
more sought after). Discipline and regulation of managers is still overwhelmingly a
matter for organizations and not management institutions. There is some influence

364
 >o
over reward levels and training and development. Measures of status and value are
uneven. Management institutions act as focal points for debate, and they also have a
lobbying function; they do not act as regulators.
There is however a clear drive towards the ‘professionalization’ of management.
This is based on attention to expertise, knowledge and qualifications, and the
relationship between these and the value added to organizations by expert managers.
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In 1993, Charles Handy proposed that all business school graduates should be required to
take the equivalent of the medical Hippocratic Oath, thus committing themselves at all
times to best practice and the highest standards and quality of performance. If manage-
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ment is viewed in this way, it is a highly professional activity and one that demands a set
body of expertise and a large measure of commitment on the part of its practitioners. It
requires active personal commitment; and it requires involvement in continuous profes-
sional development (CPD) so that individuals take a proactive interest in making sure that
their capabilities remain fully up to date.

The body of expertise

Professions and professional occupations all have a body of knowledge, skills and
expertise; and for managers and management this may be defined as follows.

Behaviour: integrity, equity, respect and value; respecting and valuing the
opinions and capabilities of others; openness, honesty; transparency; visibility.
Attitudes: positive, enthusiastic, dynamic; concerned; flexible and responsive
(as above).
Skills: in developing the next generation of managers; in identifying and developing
skills, qualities and aptitudes of all. Specific skills development is also required in
the areas of: leadership, decision-making, delegation, performance measurement. In
the specific case of employee and organization development, a part of management
development must consist of identifying and engaging in organization,
departmental, divisional, collective, group and individual development activities.
Knowledge: keeping abreast of developments; reading; awareness; lessons from
everywhere, in the key fields of strategy, marketing, ethics, technology, HRM,
economics, market and consumer behaviour.
Expertise: establishing targets and priorities; planning; organizing; motivating:
measuring performance; communication; integration; accepting responsibility,
authority and accountability; managing relationships.
Technological proficiency, knowledge and understanding: understanding the
capacity of technology; understanding its use, value and application; maximizing
and optimizing output; scheduling maintenance; developing expertise in its
usage; supporting those who use it.

365
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Knowledge and understanding
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which managerial work takes place. For example:

e tis not necessary for managers to be able to type, file or make bookings if they have
secretaries to do this. However, they must understand the pressures, constraints and
volumes of work that secretaries have to undertake in these areas.
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e tis not necessary for hospital managers to be expert doctors, surgeons or nurses. However,
they must have a full understanding of the organizational and operational pressures and
constraints of the professional staff under their direction (failure to ensure that senior and
middle NHS managers do indeed have this full understanding of clinical and nursing
practice is a major cause of NHS underperformance at the beginning of the 21st century).

There may also be cultural pressures and occupational expectations that have to be
accommodated. For example, many sales executives need, behaviourally and culturally, to
work for someone who already has a proven track record as a sales executive. The view Is
therefore taken that the best sales executives should be promoted into the managerial posi-
tion. This must be accompanied by thorough and rigorous management training if the move
is to be effective from everybody's point of view.
Induction is therefore critical. As well as bringing the managerial knowledge and expertise
to bear on the particular situation, it is essential that mutual confidence exists between the
new manager and the existing workforce as quickly as possible. Time therefore needs to be set
aside so that each can get to know the other. Especially, time is needed for the new manager
to understand the existing demands, pressures and priorities placed on the workforce.
@
It is important to understand that all these foundations and components of the
body of expertise required can be developed — and this includes qualities of integrity,
respect and value. (People can indeed learn to be honest!)
Very often, the approach taken is to parcel up the expertise and qualities into
competency frameworks or clusters. The development effort is then concentrated on
each of the areas defined in turn, so that the foundations of the expertise are laid and
can then be built on. This approach is common in the structuring and organizing of
professional management education programmes; and it is also used by organizations
internally as the basis for development-led performance appraisal schemes.
Otherwise, the concern for all managers is to be able to take an enlightened and
responsible view of each of these, and to identify their own strengths and weaknesses.
Both require building on — strengths in order to become expert; weaknesses in order
to become at least proficient.
In the wider context, organizations also need to take a strategic or collective view
of their own pool of managerial expertise for the same reasons. Managerial audits
(needs analyses and appraisals) identify areas of overall strength and weakness. A

366
 =o

view can then be formed of what can or should be developed internally, and what
needs to be brought in from outside.

uo) Grow your own or buy in?

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principle is a balance of giving every possible opportunity to develop and enhance existing
expertise with the need for fresh blood, ideas and talents coming in from outside to
prevent introversion.
The keys as always are to examine each case on its merits and consider each managerial
vacancy as they arise. Whether the decision is taken to promote from within, or bring in
outsiders, the keys to acceptance are:

e the ability to explain, justify and support the particular case;

e the ability to get the individual working as productively as possible, as quickly as possible.

Whether organizations choose to ‘grow their own’ or to ‘buy in’ from outside, there are
always potential problems. Too much emphasis on internal development leaves organiz-
ations vulnerable to the inability of accepting ideas from elsewhere. Known or perceived
overemphasis on buying in from outside leads to feelings of frustration on the part of
those who believe (rightly or wrongly) that they should be given their chance.

Buying in expertise is of greatest value when directors and senior managers come
to a strategic and supportable view that the development of management now requires
fresh talent and expertise; and that this will give those presently in the organization a
positive and effective surge of energy. If this conclusion is genuinely arrived at, it
must be publicly stated. The justification is then clear to all and the reasons under-
standable — even if there is some short-term disgruntlement and turnover.

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Once you have reconciled the needs of the organization, you should aim at least to
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consider making appointments from within. Developing expertise in-house demonstrates
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commitment to existing staff and their capabilities, determination and motivation. This
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should never be ignored or forgotten, whatever the need for fresh talent and impetus.
Once it is explained to them, most people understand this, provided that it is clear that
their own value and worth are being recognized also.

Different approaches to management development

There are many different approaches to management development; and these are
as follows:
e identifying potential and talent through internal processes including performance
appraisal schemes;

367
 e identifying clear paths into management from professional, technological and
other occupations;
e identifying paths from one management job into another;
e using graduate employment and development schemes.

Whichever is used, there need to be clear aims and objectives, satisfying organiza-
tional, professional, occupational and career development demands.
Organizations need to define for themselves the body of skills, knowledge, under-
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standing and expertise required whichever of the paths is used. Organizations can
then structure particular development programmes, policies and activities so that
they are clear about what they expect at the end of periods of development, and so
that the individuals involved know and understand what they are going to be expected
to do once they have completed the programmes and activities.

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Specific organizational approaches: Examples
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{e) e All the UK major clearing banks require that staff on management development paths
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spend at least three months working at the frontline of operations. This includes planned
periods of placements working on customer services desks and advising members of the
public on particular financial products and services from an expert point of view.
e Those who wish to develop a management career at McDonald's must spend up to 18
months working in one of the managed branches (rather than franchise). They must
also spend an extensive period of time at the frontline serving the public.
e Those who join any of the major UK supermarket or department store chains must
spend periods of time working on the tills, in the stockroom and shelFfilling. This is so
that they get to know and understand for themselves where the operational pressures lie.

In each of these cases, the companies involved have taken a clearly understood position
for their management development schemes. Those who choose tu go into these compa-
nies therefore know and understand what they are letting themselves in for and what they
are going to have to do in order to succeed on these schemes.

Management qualifications
As yet, there exists no statutory or minimum management qualification. However, an
ever-increasing number of organizations and individuals now undertake a wide
variety of nationally recognized qualifications as follows.

e Higher National Diploma or Certificate and undergraduate business studies

courses; and an increasing number of more traditional undergraduate courses
with business or management elements (for example civil engineering with
management; construction management; information management).

368
 = oo

e Supervisory studies, Certificate in Management and other foundation courses in

professional practice: similar in coverage to much that is taught in universities
and colleges of higher and further education, though the approach is certain to
differ. This is because such courses are normally pitched at those (with and
without previously acquired academic or vocational qualifications) who already
have several years’ work experience. People take these courses as the result of
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their own drives and ambitions, those of the organization, or as one result of
performance appraisal and needs analysis.
e Diploma courses in general management, and professional and occupational
expertise: these courses are invariably pitched at either those who have done a
foundation course as above; or those in professional occupations (for example
marketing, technology, teaching, nursing) who now wish to enhance their
professional employability or (with DMS — Diploma in Management Studies) look
for opportunities to go into management.
e MBA (Master of Business Administration) and other Master’s/postgraduate level
qualifications: normally offered to those who already have substantial
occupational experience, at least a diploma, and preferably undergraduate
qualifications also. Best value is served by those wishing to acquire a substantial
body of organizational, economic, behavioural, functional and environmental
knowledge as a precursor to advancement into senior positions.
e Doctorate: attained by those with a combination of high quality managerial
experience and substantial academic achievement as the result of extensive
research and write-up of a major problem or issue.
e The vocational qualification route: those who prefer may undertake management
development by attaining a set of work-based competencies and having these
accredited through the production of a written portfolio of experience, evidence
and workplace testing and observation.

The process of gaining formal qualifications and having expertise and achievement
credited and recognized serves as:

e an accepted and understood level of achievement;

e a behavioural and perceptual benchmark of progress and opportunity;
e aspringboard for the next step;
e ameasure of value, respect and worth.

Many professional bodies (for example engineering, computer science, architec-

ture, education) now have management elements that those following the courses
have to take. This is because these bodies recognize that, as staff progress, they are
going to have to deliver some element of managerial responsibility or activity in addi-
tion to enhancing their own professional practice.
Additionally, all management qualifications are now available on open, distance
and flexible bases as well as traditional teaching, so that they are much more open to

369
 everyone than in the past. They can also be much more closely harmonized with
organization and collective development, as well as individual enhancement. Many of
these (especially certificate, diploma and Master’s) bring project and secondment
opportunities with them.

vas Individuals who gain qualifications are known and understood to have a particular body of
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Organizational and environmental expertise

Managerial expertise, whether supported by qualifications or not, is required by all
organizations whatever their size, location, sector or remit. A key management devel-
opment problem remains ensuring that this expertise is used successfully and effec-
tively in any given set of circumstances. Those who have managerial expertise
therefore require environmental knowledge, understanding and capability as much as
those who have worked in the particular situation for years and who nevertheless still
need to develop managerial capability (see Figure 19.1).

Managerial Environmental
expertise ! expertise
P Total expertise

High quality
and sustained
performance

Figure 19.1 The environmental—managerial expertise mix

Fully effective performance is only possible in the shaded area. If there is a high
level of both managerial and environmental expertise, there is a sound basis and high
expectation of effective performance. If there is a low level of either, this means that:

e those with managerial expertise have no knowledge or understanding of how it

should be applied in the particular organization, environment or situation;
e those with environmental expertise have no knowledge or understanding of what it
takes to manage activities (though they will clearly understand the context in which
activities have to be carried out, as well as the pressures and constraints that exist).

Whichever the gap, those involved are much more likely to be successful if they
are prepared to learn and be receptive and bring a positive attitude. Phey are also

370
 = i)
more likely to be successful if they are fully supported by their organization, as well
as committed to their own professional development. Additionally, anyone, on any
development programme at all, ought to be open to suggestions and ideas from else-
where as a part of their own commitment to enhancing their knowledge and under-
standing. Nobody should ever simply be prepared to stick to what they already know.
As people are developed, they should always be prepared to modify their own precon-
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ceptions and, where necessary, change their own attitudes, behaviour and priorities.

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A survey conducted of managerial attitudes found that:
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e 76% of managers surveyed believed themselves open, approachable and sympathetic
to ideas and suggestions from elsewhere;
e 74% of the staff of managers surveyed stated that their managers were aloof,
inaccessible and unreceptive to ideas and suggestions from elsewhere.

Clearly, there is some overlap! The core problem arises from ensuring that attention to
managerial or environmental learning and development has a high priority both while it is
being achieved, and also afterwards. Those in the situation require a mechanism that auto-
matically asks the question why when rejection or a blinkered view is being offered.
Another survey found that 90% of managers and supervisors who adopted an adversarial,
aggressive, confrontational or absentee management style did so because it was how they
had been treated themselves in junior positions, or because it was perceived or under-
stood that this was the way to behave, or because they perceived or understood that this
was the style to adopt if they wished to make further progress. O
Source: Handy (1993).

Core managerial expertise can then be applied to the particular organization, situ-
ation and environment as follows.

e Developing this expertise in ways acceptable and applicable to those working in

the environment and the pressures and constraints present.
e Developing behaviour, attitudes and values in ways that contribute to the positive
development of the organizational and operating culture.
e Developing a state of visibility and access that promotes mutual confidence
without being intrusive.
e Building on past positive experiences that professional, functional and
operational staff have had with managers and supervisors.
e Rescuing past negative experiences that professional, functional and operational
staff have had with managers.
e Maximizing the opportunities for staff, production and service development that
arise as the result.

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Rescuing the past
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4 Part of the management development effort in these circumstances must be to under-
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= stand why and how bad relations arose in the first place and to develop the environment,
approach and standards of confidence necessary to rescue them and make them produc
tive and effective for the future.
The keys to this are:
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e regular visibility without intrusion;
e short, regular, formal meetings with collectively agreed agenda;
e asking staff for their priorities, issues and problems;
e delivering early, positive and recognizable results.

This is then reinforced by:

e levels of integrity, enthusiasm, ambition and drive exhibited by the manager on behalf
of their staff;
e specific lobbying, cheerleading and advocacy when required;
e always supporting staff in public and resolving problems and issues privately and quickly.

This set of conditions and activities is a precursor to any attempt to rescue the past. It is
a key feature ofall management developments in large complex organizations, both public
and private. Without it, little organizational, professional and occupational cultural or
behavioural development is possible, and effectiveness of performance is always diluted.
ra)
Management development and product and service
enhancement
The contribution of management development to product and service enhancement
arises only as the result of understanding the nature of the working environment and
the products and services delivered. The contribution then becomes:

e identifying, addressing and removing barriers to effective product and service

performance;
¢ gaining staff commitment to new approaches through demonstrating the benefits
and addressing any problems or issues inherent;
e consulting with a view to gaining active involvement and participation;
e addressing key staff priorities including pressures of work, periods of overload
and underload;
e ensuring that the jobs that nobody wants to do are either subcontracted or else
shared around equally;
¢ setting and reinforcing absolute standards of behaviour and performance that apply
to everyone regardless of profession, status, occupation, length of service or hours of

372
 = ~.
work; and developing problem-solving capability and routes of access for staff so
that when these issues occur, they are raised, dealt with and nipped in the bud.

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In the overwhelming majority of cases, managers that use this phrase when confronted
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= with serious behavioural problems are understood to be avoiding the issue. Overtly, the
word ‘impartial’ implies ‘fair’ or ‘equitable. The whole phrase implies: ‘| would love to help
but | cannot’ In practice therefore, this means that the issue will not be confronted.
If an employee makes an allegation about a colleague, the manager must develop a
format that allows the employee to state their case and the alleged offender to respond
on a basis of fairness and equality. This must be conducted face to face with each.
Once the two sides are heard, then the required action becomes apparent. Above all, if
malicious and false allegations are being made, these are dealt with severely and may lead
to disciplinary action or dismissal if proven.
Dealing with anything raised quickly in this way normally means that such incidents are
kept to a minimum. Where it is known or believed that the manager ‘must be seen to be
impartial, there are widely held perceptions that nothing will be done.

This part of management development is therefore concerned with creating the

conditions in which effective and sustainable high quality product and service
delivery are possible. In directly operational and functional matters, effective devel-
opment is concerned with knowing the jobs, tasks and outputs required, observing
and analysing them, both to ensure that the present effective steady-state is main-
tained and to see where improvements can be made. These can then be discussed
with the staff concerned and either implemented if truly practicable, or else killed off
if those carrying out the activities come up with overwhelming operational reasons as
to why they are bad ideas.
Management development must be concerned with understanding and improving
customer, supplier and community relations. This involves creating the conditions in
which all contacts with each of these groups are dealt with as a priority, and
addressing specific issues, especially complaints, from the point of view of finding out
what truly went wrong and why, and putting them right in ways that satisfy those who
first raised them. If staffing or internal issues then become apparent they can be
addressed separately.
Management development must be concerned with the operational details of the
particular domain. This means knowing and understanding the following.

e Tasks, occupations and work: required and desired outputs, and the expertise
and conditions necessary for these to be achieved; problem areas and blockages,
and what causes these; deadlines and priorities.

375
 e Technology: the influence of this on work patterns and behaviour (especially
alienation); the consequences of breakdown or inability to recruit the required
expertise.
e Information: availability and accessibility; quality, volume and value;
contribution of information availability to effective, positive and productive
decision-making and activities.
e Organization: formal structures and reporting relationships; cultural and
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Towards flexible and open organizations: MMRC
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MMRC was a small but highly expert and profitable London advertising agency. It
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employed 50 staff on strictly traditional lines and reporting relationships. Everyone had
clear job descriptions. From the most positive point of view, it was a role culture.
The company was taken over by a large firm, JWT. The new owners immediately
destroyed the prevailing structure, culture and reporting relations. They brought in open-
plan accommodation, flexible and open access to work stations (hot-desking), and fully
portable technology. They also created a structure that meant there were two layers of
supervision only.
Within six months ali SO MMRC staff had left. The senior partner at JWT commissioned
a firm of consultants to contact the former staff and find out why. The key reasons given
were as follows.

e The role culture had grown up over maiiy years and was orderly and familiar. People
had expectations and knew what could be achieved, and under what circumstances.
e The role culture was destroyed and the hot-desking introduced without consultation,
and by people who were self-evidently working to a prescription rather than genuine
understanding.
e Existing staff were given no idea of what was expected of them. It was clear to them
that the new owners did not understand how the work was carried out, or the
constraints and opportunities of the existing ways of working, technology or structure
and culture.

There was a clear management development need at JWT. The new owners had simply
not understood why MMRC had been so successful. JWT had assumed that with the
expertise of MMRC, and the management presence of JWT, everything would go on
successfully into the future.
This betrayed a clear lack of management knowledge and understanding. If the
merged organization was to be successful for the future, there were management lessons
to be learned.

374
 ary°
e Primary activities: establishing aims, objectives and priorities; coordinating
activities; integrating staff; communication and decision-making processes;
planning for the present and future.
¢ Key factors: motivating staff; addressing individual and group needs, including
development needs; knowing and understanding when and where to go for help
when required; accepting and using power, influence, responsibility, authority and
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accountability; understanding the priorities, demands and constraints of the
particular situation.

The use and value of management development activities

Specific activities need to be engaged in order to identify potential, and also in order
to give those with career aspirations the opportunity to show their worth and value.
The main activities are:

e Mentoring
Mentoring schemes exist in many organizations. In simple terms, junior members of
staff with ambitions seek out more senior or experienced colleagues, and a relation-
ship is generated enabling the mentor to pass on their experience, knowledge and
understanding to the junior. The junior member of staff can access the mentor at any
time for any reason; and so a relationship is built up. Part of the process of mentoring
requires that a junior member of staff can ask for evaluation and feedback on partic-
ular tasks that have been carried out. The other part is to identify tasks and activities
that ought to be carried out in the future; and the role of the mentor in this case is to
help identify those tasks and to prepare the junior to carry them out, and then provide
a sounding board for feedback and evaluation once they have been completed.

e Project work
Project work always ought to stretch the person or group carrying it out. The purpose
of project work in the context of management development ought again be to identify
potential, as well as giving the organization the opportunity to observe ambitious
members of its staff in action. Project presentations, and review and evaluation, ought
to be carried out during the project itself and also at the end. Evaluation of what has
been learned should also always be carried out so that everyone involved knows what
went well and why; and where mistakes were made and why. Project work should also
always be seen as a process leading on to other opportunities.

e Secondments
Secondments are often built into management development structures (including
graduate schemes). The purpose of a secondment is to give the individual the oppor-
tunity to broaden their experience and to give the department, division, function or
location where the secondment is taking place the opportunity to benefit from fresh

375
 ideas, impetus and input. Secondment periods may last for a few weeks up to two
years. Clearly once the individual has been through a secondment, especially one
that lasts several months or years, it is unlikely that they will go back to their previous
job with any degree of satisfaction. Secondment periods ought therefore to lead on to
other things as long as the secondment is successful (and if the secondment is unsuc-
cessful, this is likely to be apparent in a few weeks, which means that the matter
ought to be remedied early).
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Each of these activities ought to form the basis for developing managerial expertise,
as well as identifying potential. Once individuals are on mentoring schemes, project
work or secondmenis, there ought to be a fresh range of opportunities opening up for
them and organizations ought to be supporting individuals in developing their poten-
tial along these lines rather than simply giving them mentors, projects and second-
ments to do — and then returning them to their old jobs. Nobody is going to benefit
from this. Individuals become dissatisfied and frustrated; and the organization will
therefore not benefit.

Continuous professional development

The increasing professionalization of management requires all those in these posi-
tions to take an active and personal commitment to their own development. The
rewards for expert managers are now extremely high. In return for these, it is increas-
ingly necessary to demonstrate and be able to engage genuine capability in the areas
of: leadership; decision-making; strategic awareness and strategy design; market
knowledge; organizational behaviour; and understanding people. The conflicting and
divergent interests of organization stakeholders have to be balanced and accommo-
dated. High and increasing value products and services must be delivered to ever-
more demanding customer and client groups. Self-development therefore requires a
commitment to:

e read widely about all organizations, industries and sectors to learn from their
managerial practice and approaches;
e take professional qualifications and attend short courses by agreement with the
organization as well as self-directed;
e meet with other managers at cluster groups and professional body gatherings;
e engage in continuous professional development and enhancement activities,
whether at the behest of professional bodies, or self-directed;
e search constantly for areas where both individual management practice and also
organization capability and output can be improved.

Of particular value are ‘back to the floor’ and ‘action learning’ approaches. More
generally, managers must be prepared to go into other organizations at any,time with a

376
 Ss
view to picking up ideas. They must be willing to try things out against their own
self-generated and preset criteria. Some ideas and initiatives will succeed — others
will fail or fall short of full success. As long as there was a genuine pre-evaluation of
what was intended, failure and success can both be used as part of the learning
process. This approach also tends towards instilling attitudes of self-development in
the rest of the staff.
luatud
juawas

Succession and transformation

The role of management development in succession and transformation is to:

e ensure that there is a steady flow of ever-improving expertise and quality

available to organizations to secure a future;
e identify potential capability and motivation in existing staff and to develop it for
the present and future;
e recognize succession in its broadest terms.

This means addressing it from the point of view of:

e having a pool of staff to promote when required;

e having a fund of expertise and understanding as the organization goes through its
own succession and transformation from one set of occupations, activities,
markets, products and services to the next, including the ways in which these are
delivered as well as what is delivered;
e taking a broader view of succession and transformation so that expertise and
commitment are both available should they be required;
e looking for derived opportunities especially those that present themselves as the
result of following one path of activities.

Traditionally, succession simply meant training the next generation of staff for
supervisory, managerial and senior functional positions. Now it is essential that this
includes attention to attitudes and behaviour so that qualities of positivity, flexibility
and willingness are instilled and developed. Clear lines of progression through hier-
archical organization structures are much less prevalent and subject to restructuring
in any case. However, succession opportunities are, in practice, at least as widely
available in terms of:

e rotation and progression through departments, divisions, functions, locations,

projects and centres of activities;
e moving into a new job and being given the space, opportunity, resources and
support to develop it in new ways;
e identifying potential in existing situations and ranges of activity.

Succession therefore, becomes broadened into progression and transformation. It

is dependent on a positive view of the opportunities presently available, as well as

377
 those apparent for the future. Organizations that reflect and encourage this approach
are certain to get much more out of their staff as long as they commit themselves to
offering enhanced salaries and other rewards (which were always the key drives of
those on structured promotion paths).
It is important to be able to offer genuine prospects of advancement and develop-
ment. This approach, conducted properly, ensures that individual drives for progress
are harmonized with organizational drives for greater effectiveness of resource utili-
quaweseuUeW
8uuNpuZ
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Continuous professional development, and organization as well as individual
commitment, ought to go hand in hand. In particular, a fully integrated and strategic
approach to all forms of organizational, occupational and professional development
ought to enhance product and service output, individual and collective levels of
motivation, and enduring organizational viability and profitability.

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Organizations and managers ought therefore to understand the mutual benefit that arises
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when professional commitment to continuous development is engaged. Continuous
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professional development is a partnership between organizations and individuals resulting

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in enduring mutual benefit.

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Costs and benefits

As well as being able to make the case for management development in generally
qualifiable and quantifiable terms, it ought to be possible to identify the costs and
benefits more precisely. The costs and benefits of effective management development
activities are as follows (see Table 19.1).

Table 19.1 Costs and benefits

Costs Benefits

- Variable — in paying for courses and other + High quality, enduring management-staft
support activities and periods of formalized relations
training (on and off the job) * Early identification of problems
» Fixed — in terms that management + Full organizational, environmental and
development requires a substantial amount operational understanding
of otherwise salaried and occupational time
Priorities — again a fixed cost — because
managers must be able to block off periods of
their time in order to walk their job and learn
and understand their domain and
environment

378
 2h,ce)

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Costs and benefits of engaging in organizational and management development depend on:
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e the need for management development to be accepted by the organization as a whole;

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e the strength of the joint approach between organization and individuals.
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Conclusions
Effective management development depends on organizations recognizing the
enhanced contribution and value that expert managerial staff deliver, as well as the
derived benefits of generating motivation, commitment and capability in present
occupations. It is fully dependent also on attending to the full range of behaviour,
attitudes, skills, knowledge, expertise and technological proficiency; and respecting
personal, professional and occupational, as well as organizational, drives.
Effective management development has a knock-on effect on attitudes to training
across the rest of the organization. Professional, occupational, technological and
‘unskilled’ staff are much more likely to be given opportunities if these are avail-
able to those for whom they work. This enhances collective, group and organization
development.
Highly developed and expert managers are also much more likely to under-
stand and value the importance of induction, core programmes and initial job
training. As stated above, these make major contributions to establishing the
required levels of attitudes and behaviour, as well as performance, at the outset
and in subsequently reinforcing these. Conducted effectively, management devel-
opment is therefore all-pervasive, making a positive contribution to every aspect
of performance.

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The need for continuous management development, including ‘growing your own’
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from within and ‘buying in’ talent from outside must be known, recognized,
@
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understood and accepted.
e Management development is a partnership between the organization and its
individual members; and the needs of both must be satisfied.
e Management development ought to be structured and based on a series of intended aims,
objectives and outcomes, again satisfying the needs of both organization and individuals.
e Management development is a process that leads the organization forward. Especially
when engaging in management development activities, there is a need for individuals
to be moved forwards rather than returned to previous jobs.
e All management development activities, whether carried out in organizations or on
the initiative of individuals, move ‘management’ towards a highly professionalized
position.
@

379
 Further reading
Gold, J. et al. (2010) Leadership and Management Development. Wiley.
Marchington, M. and Wilkinson, A. (2008) Human Resource Management at Work: People
Management and Development (4th edn). CIPD.
Mayo, A. (2000) The Human Value of the Enterprise. Nicholas Brealey.
Owen, J. (2012) Management Stripped Bare: What They Don’t Teach You at Business School. Kogan
Page.
Pettinger, R. (2002) Mastering Employee Development. Palgrave.
quaweseueW
8uLNpUZ
saiolid
6Ul Revans, R. (1967) Action Learning. Sage.
Senge, P. (1992) The Fifth Discipline. Century.

380
 A key strategic | =
| need is thea V
international
_ to manage diversity _

environment en Vitis
. cultures.

20
In this chapter
e understanding the nature of the global and international environment of
business and management
e recognizing the opportunities and conditions demanded in order to be able
to ‘go global’ and/or ‘go international’
e developing an understanding of the cultures, habits and norms that exist
elsewhere
e evaluating opportunities for expansion, and taking steps to ensure that
these are exploited effectively

Introduction
Organizations that either seek a global or international presence, or else are maintaining
and developing one, have to have the necessary command of the volume and quality of
resources, expertise, capability and willingness in the first place.
This appears very trite. However, it is essential to consider the case from this perspec-
tive initially. This is because top managers of organizations with a strong domestic pres-
ence and peripheral activities in several other countries begin to describe themselves as
global. It is a short step from this into getting sidetracked into exciting, glamorous, messy,
dangerous — and costly — adventures in locations about which they know and understand
very little, and often care even less, except from the point of view of easy financial returns.
So the need is to deal in some detail with what globalization is from a strategic
management point of view, and then with the issues of resources, expertise, capability
and willingness.

381
 =
Always remember that globalization and internationalization are terms that are bandied
about without a true perspective on what they actually are. Globalization is the process
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whereby organizations seek to establish a presence in the majority of countries, markets
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and communities of the world.

om

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Truly global organizations establish, maintain and develop their presence and influ-
ence in a variety of ways. Many of these are interrelated.

Global physical presence

Only three companies — ABB (the Swedish/Swiss engineering and power organization),
Coca-Cola, and Microsoft — have carried out commercial activities in more than 200
countries of the world. Transport, travel and logistics firms have the capability of a truly
global physical presence in terms of their ability to make deliveries and accept orders.
Many banking and finance companies are able to access all parts of the world through
partnership networks and relationships. Oil and energy companies also supply to all of
the countries of the world, again through networks of local providers.

Global reputation
Global reputation comes in many forms, both positive and negative. On the positive
side, Japanese manufacturing companies enjoy a high level of reputation for work prac-
tices and security of employment. Some banking and financial services companies have
brought a lot of technological work and technology-driven expertise to parts of India,
Eastern Europe and South Africa. On the other hand, there are persistent and enduring
problems with employment practices in garment manufacture in the Asian, African and
Central American factories used by the top brand clothing companies.

Global thinking
In management terms, genuine global thinking is very rare in the Western corporate
world. Organizations with genuine global presence or influence clearly think globally
and internationally to some extent. Others successfully achieve chains of global
thinking that inform decision-making processes at head offices (see Figure 20.1).
Management thinking needs to be developed as new markets and locations are
opened up. Management thinking needs to be informed by a full knowledge and
understanding of the different demands of these locations, and demands placed on
locations. It is also essential that global management thinking is informed by a full
knowledge and understanding of local cultures, customs and habits.

382
 monoO

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Regional offices: 1, 2, 3, 4,5
Local offices: A, B C, D, E

Note: the opportunities and consequences of:

+ only accessing each local office through its own regional office
+ allowing full access ofall local offices by all regional offices

Figure 20.1 The chain approach to global and international management

Global influence
Global influence arises from one or more of the following sources:

technological standards;
product and service standards;
manufacturing and service delivery standards;
the ability to command finance, information and other key resources in desired
and/or major locations;
command of rare or desirable raw materials (for example oil in Norway, Russia,
Canada, the Middle East; diamonds in Southern Africa).

The global influence may also extend to the supply and manufacture of key compo-
nents; and the supply, manufacture and delivery of the universally desired quality of
products and services (for example Microsoft software; Coca-Cola soft drinks). Global
influence may also be extended as the result of engaging in joint ventures, partner-
ships and outsourcing activities (see below).

Global standards
Global standards are established by a combination of best practice and the ability to
dominate or influence the ways of working in particular markets, locations and
sectors. For example, the global standards in financial services and banking are set in
New York, London, Tokyo and Frankfurt; the global standards for air travel are set by

385
 companies such as British Airways, Cathay Pacific, American Airlines and Qantas.
Companies such as Starbucks and McDonald’s set distinctive standards in their own
fields. Finally, fair trade has the purpose of establishing distinctive standards for
companies from the developed world in their dealings with emerging markets.

Global access, reach and coverage

Global access, reach and coverage are claimed with full justification by companies
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such as the major airlines as above, and Federal Express, TNT and DHL in deliveries
and logistics. It is claim also made by the major telecommunications, transport and
delivery companies of the world, again through their networks of suppliers, local
distributors and subcontractors.

The universality of internet coverage can lead companies, organizations and managers into
Se
thinking that they have global access and reach. It is true that you can log on to any
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5 company website, anywhere in the world. However, if this is to be translated into business
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activities, then the questions of product and service quality, access, location and conven-
ience have to be considered from the point of view of standard business practices. A
company in Paris is not going to do business with another in New Zealand just because
they can log on to their website.

Global brand and/or identity

Global identity implies influence, standards and reputation. The ‘golden arches’ are
the most recognized logo and symbol in the world. Coca-Cola is also universally
recognized. Other examples include: IBM for perceived standards in the information
technology, hardware and software sectors; Microsoft in the information software
sector; Sony for quality standards and performance in the manufacture and provision
of electrical goods; Unilever and Procter & Gamble for the production of detergents.

Other aspects of global influence

Other aspects that have to be considered are as follows.

e Global icon status: such as Walt Disney, setting standards for film production and
delivery.
e Standards of consumer goods manufacturing, quality and durability have long
since been set by Japanese companies.
¢ Global mobile telephone production is dominated by Nokia and Ericsson
(Finland).
e Fashion design is dominated by exhibitions and trade fairs in London, Paris,
Milan and New York.

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 Nni}

¢ Hotel facility standards, which were originally set by Hilton and subsequently
adopted by all those who sought a sustainable competitive position and
commercial advantage in the sector.
e Individualized corporations where expansion and globalization are based on the
individual and collective talents of those involved.

Any organization that sets or transforms any part of practice or activities has global
influence. This may be extended to, for example:

¢ organizational and managerial principles and practice (for example Semco, Body
Shop, Nissan);
e advertising (J. Walter Thompson);
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¢ management consultancy (McKinsey);
e website development and commercialization (Amazon);
e search engines (Google);
e technology (Apple).

Global and international approaches to management must therefore be informed

by as full an understanding as possible of the ways in which international and global
presence are actually achieved and sustained; ensuring that a fully structured
approach is taken for, during and after any processes of internationalization and the
march to a fully global presence.

ne)
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ie) As well as expanding overseas for sound business reasons, it is also necessary to recognize
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that companies and organizations seek an international presence for any, or all, of the
following reasons:

e itis exciting;
e itis prestigious;
e it gives managers the opportunity to travel to different parts of the world (ostensibly
on company business).

Alongside this, in many industries there is a very great deal of peer pressure (and often
shareholder pressure also). Companies and managers find themselves under pressure to
have international locations just because everybody else is known, believed or perceived to
have one also. Thus for example:

e pressure is exerted on clothing retailers to source their products from locations that
are known, believed or perceived to be cheaper than local suppliers;
e financial services companies are pressurized into having technology management and
call centres sourced overseas because these too are known, believed and perceived to
be cheaper than local provisions.

385
 Most insidiously of all, it is very often the case that cheaper provisions can be found in
particular locations — but these are not always the locations of choice. For example, the
overwhelming majority of UK call centre and technology management activities in finan-
cial services are in India. Equally expert and cost-effective provision is available in the
countries of Central and Eastern Europe. However, India is perceived to be much more
glamorous and exciting — and so companies and organizations tend to locate there
anyway. And in the particular case of technology management and customer service in
Cs)
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the financial sectors, costs in India have risen sharply (and continue to do so) simply
because of the numbers of Western companies establishing activities there.
e

The axis of globalization

Whatever the desired or required global presence or influence, it is normal to
establish and maintain a presence in the ‘commercial axis’ of the USA, EU and
Japan; and from there, spread out into other localities around the world as follows
(see Figure 20.2).

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America Py eMrOpe |)
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. South East
Asia

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Figure 20.2 The axis approach to globalization

Organizations that establish a presence in each of the axis areas have to have the
size, capability and reputation to establish price, quality, value and volume levels of
capital and consumer goods and services, and standards of overall organizational
performance. Large and dominant organizations in these areas establish levels of
investment; staff rewards, terms and conditions of employment; quality of working
life and labour relations; as well as strategic and operations management. Multina-
tional and global organizations also have great influence on local, economic and
political activities, the management of the environment, and the quality of social life
in the locations in which they work.

386
 Nno

A further and complicating issue is the emergence of what is called BRIC — Brazil,
Russia, China and India — as locations of power, influence and economic and indus-
trial size and scale. Many organizations presently find themselves needing a physical
presence in each of these areas in order to maintain their own influence.
Specific issues with which organizations that establish themselves in the axis areas
are concerned include the following:

¢ Supply side, in which supplies are sought from areas where they are most prolific
and readily available; where the relationship can be dominated by the axis
organization; or where there are commercial, economic and political advantages
in dominating the supply side.
e Manufacturing, in which axis organizations locate or subcontract their jeqo}s
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manufacturing processes at places most suitable to serve their markets (for
example Toyota and Sony in Poland); or where labour is cheap (for example
branded garments and sportswear manufacture in South-East Asia and the West
Indies; foodstuffs in South America).
e Distribution, in which axis companies place their distribution operations under
flags of convenience allowing them to employ staff on expedient/favourable terms
and conditions of employment and to operate to minimum standards of safety and
security. This is standard practice in sea transport, and becoming more
widespread in air and overland activities.
e Effluent disposal, in which organizations are able to pay developing nations’
governments to relieve them of waste and effluent for a fraction of the cost of
disposing of it effectively and in an environmentally friendly manner in the
developed world, or of reprocessing it themselves.
e Switching costs, in which axis organizations are able, because of their command
and their sheer size and volume of financial resources, to relocate to other areas
in other short timescales simply because:
e itis possible to undercut suppliers in the developing world due to the cheap
price of labour and demand for economic activity and employment;
e inorder to be able to respond to political, social and economic problems and to
be able to depart from areas in which there is suddenly war or strife without
interrupting supply side, manufacturing, distribution or other economic activity.

Resources, expertise, capability and willingness

It is essential to ensure that sufficient volumes, qualities and flexibility of resources
are available to gain the desired impact, presence and levels of activities across
the world.
Financial size and technology availability are therefore essential. However, neither
is an end in itself. These resources must be capable of energizing in the desired

387
 location and range of activities. Often insufficient attention is paid to the capability in
particular locations to maximize and optimize resource potential and usage in the
given context.
The result is therefore that operations and activities are energized at a loss rather
than full efficiency and effectiveness. In the short to medium term, this may be an
acceptable price for gaining a foothold in a desired location. If this is the case, then
effectiveness and enduring operational capability are developed alongside the gener-
8uunpuZ
quatedeue
sajowd
&Ul ation of the desired local reputation, scale of activities and productive capacity.
There is an enduring need to understand that few locations in the world are ever
genuinely grateful that a large powerful international organization has come to work
in the area. The need is to identify and build on a mutuality of interest; and this has
to be based on:

e the provision of work and rewards for that work;

e the generation of mutual respect and value.

It is very easy to take a paternalistic and assumptive view of the working relation-
ship, especially when the international organization is bringing much higher levels of
economic activity and social provision to areas of relative deprivation. Enduring
relationships are however only fully effective in the long term so long as there is a
genuine respect for the prevailing local, social, environmental and cultural issues,
customs and habits, as well as the generation of sustainable economic activity.
For this to be effective, local staff have to be trained and developed as well as
rewarded. Part of the strategic outlay must involve contribution to the society at large
in which activities are being carried out. Employment practices have to be designed
and implemented so that employee protection, health and well-being are assured as
well as enduringly high levels of production, capacity, output and quality.
Alongside this, however, is the constant stream of publicity generated as soon as
it becomes known, believed or perceived that large organizations are responsible
for unwholesome and unethical business practices in their subsidiaries or overseas
operations. A response to this has to be managed, such that it avoids the negative
aspects of:

e security measures so that investigative reporters, news teams and industry

watchdogs cannot gain access;
¢ community domination in which the populations of the particular localities are
bullied and frightened into not giving evidence or speaking against the Western
company;
e political lobbying so as to ensure that whatever practices are being carried out are
at least with the acquiescence of the particular local government and its officials:
e public relations, advertising and marketing initiatives to counteract the resultant
bad publicity.
 i°
Many organizations and managers take a fully informed and enlightened view, and in
turn take active steps to ensure that malpractice in any area is not tolerated. However,
in many cases also, malpractice continues to persist and remains widespread.

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S. Naomi Klein famously attacked corporate globalization culture in her book No Logo:
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As global brand-based connections gain popularity, the trail from the shops to the sweat-
shop becomes better travelled. | certainly was not the first foreign journalist to pick
through the laundry of the Cavite export processing zone in Indonesia. In the few months
before |arrived there had been, among others, a German television crew and a couple of feqo]s
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Italian documentary film makers who hoped to dig up some scandal on their home
grown brand, Benetton. In Indonesia, so many journalists had wanted to visit Nike's infa-
mous factories that by the time | arrived in Jakarta, the staff at the labour rights group
Yakoma were starting to feel like professional tour guides. Every week another journalist
would descend upon the area. The situation was the same at a factory | tried to visit
outside Medan where child labourers were stitching clothes for Matel and Barbie. | met
with local activists at the Indonesian Institute for Children’s Advocacy and they pulled out
a photo album filled with pictures of the NBC crew that had been there.

Elsewhere, family oriented brands like Disney and WalMart have been forced to
confront the conditions under which real families produce their goods. Many more
traditionally run companies are busy imitating Nike's model, not only copying the
company’s marketing approach, but also its ‘on the cheap’ outsourced production
structure. Adidas followed a similar trajectory; the company shut down its own facto-
ries in Germany and moved to contracting out in Asia.

After four years of research, what | find most shocking is that so many supposed “dirty
little secrets” are crammed into the global broom closet with such a casual attitude. In
economic protection zones, employment violations are a dime a dozen — they come
tumbling out as soon as you open the door even a crack’

Source: Klein (2000).

Approaches to globalization
The main approaches for those seeking to expand and develop a global and internat-
ional presence are as follows:

e corporate expansion;
e mergers, acquisitions and takeovers;
e local partnering;

389
 e outsourcing;
e other collaborations;
e joint ventures.

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potentially loss of reputation).

Corporate expansion
Corporate expansion is the process of establishing new offices, premises and centres of
activity using only an organization’s own resources, name, products, services and tech-
nology. This approach is found in retail and commercial banking, insurance and finance
in the development of international branch networks and tailored financial products.
Corporate expansion is also found in air and sea transport activities: large global
airlines and shipping companies establish their own presence at the particular sea ports
and airports of entry, and then normally develop this position through the opening of
networks of agencies in the particular region served by the sea ports and airports.

Mergers, acquisitions and takeovers

When seeking a global presence, there are a number of legitimate reasons why
mergers, acquisitions and takeovers are considered. For organizations that do have
command of high levels of resources, in particular buying up other companies means
that a presence can be established very quickly. Other reasons are as follows:

e to gain an interest in, or control of, a key source of, or outlet for, scarce raw
materials, components, expertise or distribution;
e to gain control over supplies, components, distribution outlets and access;
e to gain entry into specific markets and locations;
e to gain market share and market dominance in specific markets and locations;
¢ to buy up customer, product, service and expertise bases in particular markets,
sectors and locations;
e to speed up the process of market penetration in particular areas;
e to begin to develop a reputation, occupational base and expertise in a specific area.

As long as proposals can be legitimately considered from one or more of these

points of view, then adopting the approach of merger, acquisition or takeover enables
an advantage or potential advantage to be realized very quickly. Precise priorities,
aims and objectives can then be directly related to whichever of these points the
proposal is intended to address.

390
 N oS

From a management point of view, problems with acquisitions, mergers and

takeovers when seeking a global presence arise where one or more of the following
are present.

e The proposal is acceptable to one dominant vested interest but not others.
Invariably this is driven by stock market and short-term shareholder interests,
industrial, commercial or sectoral pressures, or by the results of financial analysis.
At the point of takeover the price of shares rises steeply, and, in many cases, this
satisfies the immediate shareholder and financial interest. This process is fuelled by
stockbrokers, shareholder representatives and financial analysts who gain
commissions; and by rises in the share prices in the acquiring company because
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e The proposal is driven by certainties, hopes and expectations of assured market
penetration, whether or not adequate market research has been carried out. Even
where the proposal is driven by the ability to command key supplies of raw
materials, components or information, these will hold full value only until
alternative supplies become available from elsewhere.
e The financial advantage has been driven through with insufficient attention to the
cultural and behavioural fit of the two organizations. Even where one organization
is taking over a very much small operation, the ways of working, management
style, logistics, operations and activities still have to be capable of harmonization
and integration. Failure to do this means that the short-term financial advantage
invariably evaporates. In more serious cases, there are interruptions on the
supply, manufacturing and distribution aspects and these are nearly always
caused by behavioural rather than financial problems.

Local partnering
Local partnering exists where the international organization agrees to go into business
with an indigenous organization for a particular proposal or venture, or to develop the
existing range of products and services from a particular local perspective, or to gain
a foothold and presence, reputation and existence in a particular area with a view to
developing further opportunities and giving substance to the general presence.

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ment is fully understood and supported at head office, there is no reason why this should not
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be effective. In particular, while further opportunities’ are being identified, assessed and devel-
oped, those on the ground should be using the local partner to make contacts, establish a
reputation and gain all-round general familiarity with the area and region.

391
 In some industries, this process is essential to the future conduct of effective and profit-
able business and represents a critical element ofthe investment required. For example, in
building, construction and civil engineering no overseas client, unless very hard pressed, is
going to engage a foreign contractor without prior knowledge and understanding of their
specific expertise, past history and track record.
This last point was mistaken by a large UK construction aggregates and civil engineering
company when it went prospecting for work in Malaysia. The company’s marketing director
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arranged a meeting with officials at the department of the Malay government responsible for
allocating road, railway and major capital urban works projects. The government department
was looking for further companies to participate in a centrally led programme of rapid expan-
sion. The company was looking for overseas opportunities to help take up spare capacity.
Proudly, the marketing director announced who he was, his company and its record of
public and commercial works in the UK. He then stated: ‘We have built a cricket ground in
Sri Lanka and an airport terminus in Canada. So we are truly a global company’
The official from the Malay government replied: ‘| have never heard of you. | doubt if
you understand our needs, wants, demands or culture. But do take advantage of the rest
of your stay to make yourself familiar with these things. Then come back and see us:
The company won no work in Malaysia at the time, and nor has it ever worked there
to date.

Outsourcing
Conducted effectively, outsourcing specific activities to different parts of the world
enables organizations that wish to expand to gain a substantial foothold and clear
understanding of the new location. A contractual arrangement is entered into,
providing product and service levels and quality to be of mutual and lasting benefit to
both organizations involved.
In practice, outsourcing takes place overwhelmingly because of a narrow drive to
reduce the cost base. This leads in many cases to either malpractice (as above), or
declines in service levels and quality.
Whenever outsourcing is being contemplated, it is therefore essential for managers
to know and understand the full range of issues that have to be addressed so that the
provision of products and services is enhanced, while at the same time the cost base
is reduced and the integrity of the organization is preserved.

Other collaborations
Collaborating with specific organizations comes in a variety of different forms. These
different forms include alliances, subcontracting, partnering and piggy-backing; and
each is very effective in gaining a foothold, presence and experience in new markets
provided that the following points are clearly understood: *

592
 Nno

e the needs of each party involved;

e the agenda of each party involved;
e the duration of the working relationship;
e the consequences of success and failure;
e sharing the rewards for success and the consequences of failure.

Sharing the rewards for success and the consequences of failure are particularly
important. Where a venture succeeds in all aspects, the parties involved can then
either agree to develop the relationship further or else go their separate ways.
However, success may be the trigger for one party to wish to withdraw having achieved
what it set out to do; while the other now wishes to carry on but needs the support and
resources of the other to do so. jeqo]3
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Failure needs to be paid for, both financially and also in terms of lost reputation
and confidence. Again, how this is to happen needs to be made clear at the outset.
While there is clearly no point in going into anything expecting to fail, the possibility
and the resultant consequences should always be assessed and evaluated under the
heading ‘worst possible outcomes’ before implementation.

Joint ventures
A joint venture is a contractual commitment by two or more parties for a particular
venture, project, product range or range of services normally for a stated period of time.
At the end of the period of time, the joint venture is then either wound up with the
rewards of success or consequences of failure apportioned accordingly. The joint venture
is a well-understood and familiar format in the defence, construction, civil engineering,
aviation and electronics industries; and the format is driven by the needs for:

e scales of resources that many organizations simply do not have on their own;
e specific expertise that is required for the particular venture;
e the need to deliver particular projects, products and services by a given date or
within a stated timescale; and this demand and drive leads to some organizations
collaborating with each other, not because they do not have the full range of
expertise themselves, but because they do not have this in sufficient volumes to
enable the desired or required timescale to be met.

Clearly, many of the conditions and opportunities indicated above apply as much
to any large or complex strategic management initiative, and are not confined to
global drives. Where they are being used to pursue strategies of globalization
however, specific attention is required to the following.

e Cultural fit: the ability of the two or more organizations and their staff to work
together productively and effectively for the duration of the venture; and if required,
in subsequent activities that have the purpose of building on progress made to date.

3593
 e Financial stability: the ability to sustain the venture for its duration and to accept
the responsibilities inherent in supporting activities in remote and distant locations.
e The standing of key staff: especially the ability to manage any sudden arrivals
or departures, changes in expertise, management and supervisory styles; and the
ability also to accommodate any other shifts in strategic priorities.
e Technological viability: the ability to deliver, install, energize and maintain all
equipment wherever it is being used; and the ability, whenever required, to
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particular activities. Closely related to this is knowledge and expertise viability,
the ability to deliver the specific expertise of particular groups and individuals in
the locations, context, culture and environment required.

Dominance and dependence

All organizational, professional and business relations have elements of dominance
and dependence; and for those concerned with global strategic management, this
position has to be fully understood. The need is to balance the finance, resources,
technology and brand strength that global and international companies have with the
responsibilities that go with this. For example, the issues surrounding sweatshop
labour in the clothing industry, and pollution and effluent caused by oil and chemical
production are often the outcomes of the ability of the multinational corporations
operating in these sectors to dominaie their particular environment.

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time, this is never the basis for enduring and viable activities.

From a management point of view, dominance and dependency need to be under-

stood as follows.

e Acquiescence: where those involved have no particular respect or liking for the
others, but are prepared to accommodate each other because it is in their present
interests to do so, or because they have no apparent alternative. Acquiescent
relationships do not produce enduring loyalty, though provided a fundamental
mutuality of interest can be identified, effective work is normally possible.
e Compliance: a more positive approach than acquiescence but where the
fundamental basis of the relationship remains the same. Compliance normally
means a modicum of willingness to act in the interests of everyone involved,
rather than the dominant organization alone.

394
 nNo
e Acceptance: where each party involved is prepared to accept that there is a
divergence of objectives and is prepared to accommodate these, at least as long as
their own objectives are not compromised or damaged.
e Formalization: where contractual conditions are placed on the particular
relationships or ranges of activity (for example, it is usual for joint ventures and
subcontracted relationships to be formalized by contract).
e Institutionalization: where the prevailing norms, values and standards are
capable of being adopted and translated into the particular situation and location
in which work is to be carried out; and where these norms, values and standards
are capable at least of acceptance by the particular locality.
e Transcendence: where the organization sets standards of attitudes, behaviour,
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performance and responsibility that transcend local difficulties; where customs,
habits, norms and values of any locality can easily be accommodated.
e Rejection: where the organization finds itself unable to establish a foothold in a
given location whatever its size and strength. This is normally because the
particular location has its own distinctive set of social, economic and
environmental habits, norms, customs and practices that either preclude it from
interacting with the incomer or, because of recent histories with other
organizations, cause it to reject the incomer.

Whichever approach is taken therefore, there are consequences. Coercive

approaches remain effective only until alternatives for those being coerced are
brought into being. This applies to monopoly supplies of water, gas, electricity, trans-
port, foodstuffs and technology; and also to employment practices imposed by large or
dominant employers.

Culture and behaviour

As stated above, organizations that seek a global or wide-ranging international posi-
tion depend on a ‘cultural fit’ in order to be enduringly successful and effective. A
key strategic need, therefore, is the ability to manage diversity or manage across
cultures. To be effective, this requires acknowledging the differences in attitudes,
values, behaviour and expectations of those who work in the various locations and
activities; and harmonizing talents, qualities and expertise in accordance with overall
policy, strategy and direction.
Clear standards of attitudes, behaviour and performance have therefore to be estab-
lished at headquarters and enforced in different locations and circumstances at local
and regional levels. Problems arise when there are known, believed or perceived varia-
tions and when organizations take advantage of lack of product, service, employment
and environmental regulations to impose disadvantageous standards on those in partic-
ular locations. A key priority is harmonizing the strengths of the organization with the
age, history, traditions and social customs of each locality and its patterns of work.

395
 There are some key actions that can be taken:

e Developing and promoting locai talent into managerial positions. This is likely to
include culture and behaviour development as well as enhancing expertise because
both commitment and capability are required. If this is to be effective, it is also
essential that people from particular localities learn to understand, value — and
influence — the activities of the parent company.
e Attracting and retaining local talent so that the bonds between the organization
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and its localities are reinforced and strengthened. Problems arise when axis
management is imposed on localities. The purpose is to develop the whole global
organization and not just local activities.

Specific attention is also required to:

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e the attitudes to local staff and organization development, and the extent of
opportunities for promotion, development and full integration; and attention to
specific local issues.

Many of the best managed international and global organizations finds themselves
having to deal with specific local issues. In many cases, from a Western (and corporate)
standpoint these issues are morally repugnant. However, in particular locations they
are custom and practice. Organizations that are faced with these issues have therefore
to be clear about how these are going to be tackled so that they begin to change
prevailing customs, attitudes and values without compromising or destroying the social
fabric of the areas in which they work. Of particular concern are:
e the use of child labour;
e the use of corporal punishment by local supervisors and managers;
e the length of working hours;
e the extent to which overtime is compulsory or not;
e the extent to which overtime is paid or not;
e the extent to which local activities can be developed to Western standards; and
the extent to which Western standards can be translated into local activities;
e pay and reward levels, both in absolute terms, and also in terms of averages and
values in particular markets;
e the frequency with which wages are paid;
e stoppages from wages and the reasons for these.
Effective culture and organization development requires attention to each of these
aspects. This in turn means that corporate policies and standpoints are required.
These must be based on a full understanding of all of the pressures inherent in each
location and the ability to set standards ultimately that transcend them. »,
 nyoS.

Responsibility and accountability

Specific global organization responsibilities extend to present and future gener-
ations of:

e backers, financiers and stockholders in terms of return on investments, return on

capital employed, dividends and enhanced values;
¢ customers and clients as the ultimate beneficiaries of the products and services;
and who in turn are to provide the financial returns required in order to ensure
present and future stability and prosperity;
e staff, to provide all that is necessary for a long-term secure and productive
relationship. Where this is not envisaged, staff always understand this. While it
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may be possible to gain the compliance of staff in specific situations, it will not
secure their loyalty;
e suppliers and especially supply side management, the effectiveness of which has
suffered in the past from (superficial) management wisdom as follows:
e multiple sourcing is a ‘good thing’ because it keeps suppliers on their toes;
e always buy from the cheapest source to keep costs down;
e never pay on time;
e itis possible to switch most suppliers at short notice if not instantly.

Global organizations can do any of these because of their sheer financial size.
However, if these activities are unconsidered or unmanaged, future problems are
stored up. Global organizations gain reputations for being bad for business on the
supply, staffing, distribution and customer management side; and they gain a reputa-
tion for staying in particular localities only until the financial interest dictates or
demands that they move on. This then quickly translates into a wider loss of reputa-
tion. Suppliers are unable to plan their own operations with any degree of certainty.
They may become dependent for existence on the global organization and then have
their own prices driven down. Customers and clients first become dissatisfied with
loss of reliability of products and services and ultimately change their buying habits.
This leads to pressures on staff. Ultimately, the financial interest also loses confi-
dence in the situation because it can see that the envisaged returns (perhaps even
returns hitherto generated) are no longer forthcoming.

Global management thinking

Global management thinking means the ability to interrelate the following elements.

e Thinking globally: adopting a perspective that envisages the organization’s

products and services on sale in the axis economies and also remote locations. A
key perceptual test of truly global thinking is the present knowledge base that
exists among top managers and strategic analysts. For example, can those

397
 responsible for strategy, policy and direction envisage working in: Anchorage,
Alaska; Dundee, Scotland; Romney, England; Montevideo, Uruguay; or Antigua,
Tahiti, Botswana or Sakhalin? However global the perceived approach may be, it
has to be:
¢ on the one hand, capable of considering the whole world as having potential
for activities and operations; and on the other hand, limited by where the
priorities truly lie;
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generate a genuinely global presence.
e Thinking locally: requiring investment in cultural, social, behavioural and
ethical understanding of the particular areas where business is envisaged. In
particular, there may be strong religious customs or social norms, and patterns of
work may be dictated by climatic extremes.
e Thinking locality: in terms of the nature of the business relationship that is to be
developed and its basis in spending and consumption patterns; propensity to buy
and consume local products and services; position and reputation of present
providers; and forecast and projected investment levels and returns. This then
needs developing into the basis of a mutually profitable relationship answering
the key questions:
e What do we gain from them?
e What do they gain from us?
e Thinking responsibly: reflecting the need to manage the demands placed on
particular localities by large and powerful companies; and reflecting the needs to
generate a mutuality of interest, respect and value if long-term profitable
activities are to be secured.

Global and international leadership

Leadership that is truly global transcends prejudices and preconceptions, acknow-
ledges the subjective elements and matches and harmonizes these with the hard
business drives and investment levels required.
The leadership of global organizations requires the following qualities:

e Integrity as the basis for all corporate and managerial activities and as the spine
of organization culture and management style.
e Humility, recognizing that no corporation, however global, can possibly know
and understand everything about all areas unless proper research and assessment
are carried out; and recognizing that all organizations, managers and staff never
stop learning and developing.
e Enthusiasm, the need for absolute commitment to all activities and locations;
and where there are priorities, ensuring that everything is carried out with the

398
 yV°°

same degree of personal, professional and occupational enthusiasm, commitment

and energy whatever the position in the priority order.
e Respect, recognizing that staff management in remote locations requires the same
fundamental basis of value as those closer to head office. For example, the race
and labour relations problems at Ford UK were compounded by the fact that for
years nobody with real influence ever came from the company’s head office in
Detroit to see the situation for themselves. Respect must be earned. Those using
powerful economic positions can gain entry more or less to the markets, sectors
and locations of their choice. Maintaining and developing this presence means
attending to the social and political elements, as well as market domination and
exploitation. It is universally necessary to respect the fact that to those who live
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there, the Vietnamese/Thai/French ‘way’ is as important as the Swiss/American/
German ‘way’ is to those at headquarters.

A key feature of global strategic leadership is the need therefore to be prepared to

travel, visit and understand the nature of activities, issues, problems and pressures in
each location in which activities are carried out. In addition, those responsible for the
guidance and direction of companies and organizations must be prepared to accept
advice and guidance from those on the ground in particular locations.

Conclusions
A major issue is the level of commitment, knowledge and understanding required of
organizations and their managers that seek international markets. Operating away
from head office in a small country brings cultural, social and operational pressures.
For example, east Londoners will state categorically that their culture is very different
from that of north, south and west London; and so this must be true for all cities,
towns and locations in the world. It is this kind of understanding and overall approach
that is required if enduring, effective and profitable activities are to take place in
unfamiliar territories.
It follows from this that senior, key and influential figures require levels of exper-
tise and understanding that enable genuine cultural awareness and comfort to be
achieved in short periods of time. This then forms the basis on which relations, know-
ledge, understanding and confidence can be further developed, as well as building a
deeper cultural and locational appreciation and respect.
It is additionally worth pointing out that overseas markets and locations are
likely to view any incursion from organizations operating within the axis locations
of USA, EU and Japan with suspicion until their genuine commitment is proved
and demonstrated. This is because many overseas markets and locations have had
bad, exploitative or expedient relations with large Western and Japanese multi-
national organizations.

399
 =
e Organizations that wish to expand into international and global markets and locations
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need to have the size and resources capable of doing so.
e There are some specific and well-understood paths — joint ventures, outsourcing, local
partnerships — that enable organizations to expand carefully.
e Reasons for expansion must always be driven by business demands. Expansion should
never be driven by excitement, vanity or prestige unless there are also substantial
Cs)
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e Organizations and managers need to take a clear view of their attitudes and behaviour
towards international and global markets and locations. If this attitude is purely
dominant and exploitative, organizations and managers should at least be honest
enough to say so clearly.
e Once an international presence is established, organizations should evaluate each
location for potential business development exactly as in domestic markets.

Further reading
al-Suleimany, M. (2007) The Psychology of Arab Management Thinking. Trafford Publishers.
Bickerstaffe, G. (1998) Mastering Global Business. FT Pearson.
Deresky, H. (2007) International Management: Managing Across Borders and Cultures. Sage.
Haghirian, P. (2011) Successful Cross Cultural Management: A Guidebook for International
Managers. Sage.
Lane, H. et al. (2009) International Management Behaviour: Leading with a Global Mindset.
Routledge.
Luthans, F. (2011) International Management: Culture, Behaviour and Strategy. McGraw Hill.
Mead, R. and Andrews, T. (2008) International Management: Culture and Beyond. Pearson.

400
 Managing
21 ~—s for the
present and maf
future = eon | understanding and |
| expertise is ever-evolving, |
a ever-increasing |
_ and lifelong’

In this chapter
understanding the need for constant and continuous development of
management knowledge, skills and expertise
recognizing the rapid pace of change in technology, markets, products and
services
understanding and being able to respond to pressures on resources and
markets
establishing ‘managing for the present and the future’ as a key professional
drive for the whole of working life

Introduction
From every point of view, the drives in developing the future expertise and practice of
management have at their core the need to gain ever greater results from finite,
diminishing, scarce and expensive resources. For the foreseeable future, this means
developing all the expertise required to ensure that there is:

full knowledge and understanding of the environment, and that managers are
comfortable and effective working within its constraints;
full knowledge and understanding of individual, collective and organizational
behaviour to ensure that the best and most enduringly productive ways of
organizing and allocating work are achieved;
full attention to the nature of rewards, and that people’s aspirations are related as
clearly as possible to organizational needs and wants;

401
 e much greater knowledge and understanding of what organizational performance
actually is and how this is to be achieved;
e an expert approach to balancing short-term demands for results with the need to
ensure that organizations remain fully viable and effective for the long-term future.

All of this ought to ensure that both the demands placed on managers by organiz-
ations, and also the personal and professional commitment of managers themselves, lead
to an ever-increasing awareness of the need for distinctive knowledge and expertise.
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they take the fullest possible advantage of all this — learning, evaluating and using it (and
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sometimes discarding it of course) to their own best advantage in terms of developing
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their professional knowledge, understanding and practice.

There are specific areas in which all managers need to be knowledgeable and
expert at present, as follows:

e the present and evolving nature of the environment;

e the use and value of technology;
e the use and value of the internet;
e creativity.

These areas represent a shift in the context of the knowledge, understanding and
expertise required; how this knowledge and understanding is to be applied effec-
tively; and how it forms one part of the basis for the evolution and development of
professional practice.

The present and evolving nature of the environment

Those coming into leadership and management positions at present are doing so in
difficult and turbulent times. Leadership and management in difficult and turbulent
times require a detailed knowledge and understanding of the environment.

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It is a key part of the professional duty and development of anyone in any field to keep up
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to date with everything that is going on in their area of expertise; and so it is with leader-
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ship and management.
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It is essential to know and understand the effects on the organization, management

and operating environment of:

e political and social upheaval in any part of the world;

¢ economic fluctuations that may cause either the collapse of markets at the one
extreme, or the development of ever-increasing markets and demand at the other;

402
 Nn mat

the effects of natural disasters on markets and the environment, and on factors
that affect the markets and environment (for example availability of resources,
disruptions to supplies, fluctuations in stock markets and share prices, changes in sSuise

currency values);
the effects of weather extremes on the ability to conduct business effectively.

All these factors are wholly or mainly outside the control of leaders and managers:
yet organizations have to be able to conduct their business as effectively as possible
for as long as possible within these constraints. And it is not as though these factors
are at all unknown; over the period since 2009, the following have all happened.

Social and political uprisings in North Africa and the Middle East; enduring
violence in India and Pakistan; terrorist attacks in Western Europe.
Government and public support for the commercial banks and violently fluctuating
asset valuations continue to reduce the amount of funds available to support capital
ventures and corporate expansion (or to make these funds more expensive).
The earthquakes in Pakistan (2009), Haiti (2010) and Japan (2011) all had effects
on the availability of raw materials and transport.
The cold weather in Western Europe in 2010 caused transport difficulties.
The earthquake in Japan caused a run on stock markets and currency values,
because there was uncertainty around how long it would take Japan to recover,
and how much it would cost.
The financial and trading uncertainty brought on by the Greek financial crisis of 2011
and the consequent destabilization of both the eurozone and other financial markets.
The wider effects on world markets of declining and restricted economic and
commercial activity have affected all economies and business activities, as well
as affecting commodity prices and charges.
There is therefore a huge range of recent experience on which to build a profes-
sional and expert knowledge of what to do in the future when these things happen
again. These factors affect everyone in all organizations regardless of size, location or
activities. For example:

a corner shop may lose the majority of its customer base if a business premises
nearby closes down, and so people are no longer in the neighbourhood;
declines in currency values often lead to interest rate rises, meaning that the cost
of borrowing in the short and medium term and for mortgage funds rises
(including for existing loans);
declines in confidence always mean that the prices of loans and other sources of
finance rise, and the conditions under which loans and finance are made available
become more stringent;
rises in oil, gas, electricity and water charges always make the cost of carrying out
business more expensive.

403
 The importance and value of expert environmental analysis, and the knowledge
and understanding that arises from this, cannot therefore be overstated. No manager
should ever be caught out by the fact of these events occurring in the future. Every
manager should have a good understanding of the sorts of actions that are going to
have to be taken when these events do arise.

The use and value of technology

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The ability to lead and manage in technology-intensive and technology-driven
organizations is certain to be a critical factor of expert and professional practice.
Managers are going to need distinctive and detailed knowledge and understanding of
whatever technology is used within organizations and within their own domain. This
is so that they can assess every aspect of their ability to organize and deliver produc-
tive work. Knowledge and understanding are therefore required in terms of:

e what the technology does, and what it does not do;

e how much it costs to operate;
e how long it takes to work and produce what is required of it;
e how it processes data, raw materials and other inputs;
e how reliable its operations and activities are;
e how to manage problems, glitches and security implications;
e what to do about breakdowns, maintenance demands and schedules, upgrades
and replacement.

Managers need to know and understand its actual and potential useful and cost-
effective life, and the costs of the staff, expertise and energy needed to operate it. This is
so that they can forecast accurately the quality, volume and cost of the products and serv-
ices produced, and the operation ef processes. It is also so that they can budget accurately
for the total costs, fixed costs and variable costs of its usage. This means that, for example:

e Retail managers need to know and understand the security and integrity of till,
stock management, sales and purchasing technology; and they need to be able to
organize their operations in terms of the length of time that it takes to get stock
into the shops. They need to know and understand the average length of time that
it takes for products to be sold. They need facilities in-built, enabling the
speeding up and delaying of supplies.
e Those who manage internet and intranet systems need to know and understand the
present capacity, and the likely and potential capacity, demanded for the future.
They need to know and understand the reasons for systems locking and breaking
down. They need to know and understand the actual extent of stability and security,
and where breaches could possibly occur. They need to know and understand the
immediate and potential lasting effects on the business if the system crashes or is
disabled for periods of time. And crucially, they need to know the costs ef all of this.

404
 Nn aa
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medical technology, and work out medical priorities on the basis that the
technology is going to be used to maximum and optimum capability. sulseu

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the content and experience of those using medical technology. At present, 30% of
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NHS medical technology is underused and this is because of the staffing and expertise
costs associated with using it to its full capacity. Much of the equipment, including
scanners and microsurgery technology, continues to be underused or not used at all
because the accounts and budgeting processes either fail to take into account the
running and staffing costs, or because of the financial management conventions in
the NHS that state that it is cheaper to have technology idle than being used. No
organization can afford to have money tied up in capital goods that are then not fully
utilized or exploited.
While this example is from the NHS, the lessons apply to all. This in turn therefore
emphasizes the requirement for expert knowledge and understanding in terms of equip-
ment purchase, usage and operating costs. Where managers do not have this expert
knowledge and understanding, they need to go out and get it — or else change jobs.

The other critical factor in technology management is an appreciation of its useful

life. This has to be seen in the context that:

e the capacity of microprocessors doubles on average every 18 months;

e technological developments may render obsolete existing technology (and its
associated equipment) and so it has to be junked and replaced before the end of
its anticipated useful life;
e new technology installations have to be compatible with what is already present;
e each time replacements and upgrades take place, the organization needs to
expend time and resources to train and develop staff in day-to-day usage and
managers in their general understanding of the new installation.

Managing in technology-driven organizations therefore requires a fresh, detailed

and expert perspective on investment appraisal, costs and benefits, and operational
and process effectiveness and efficiency.

The use and value of the internet

All organizations have websites; and all organizations use their websites at the very
least for presentation purposes, giving information, providing points of contact, and
as reinforcement of brand and identity.

405
 Many organizations make much more use of their websites than this of course,
using them for:

recruitment and selection activities, including online application forms, tests and
evaluations;
e sales of products and services, and after-sales activities;
e managing the supply side and ordering in products, services and information;
e information exchange through the use of forums, chatrooms, conferencing, e-mails
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and intranets;
e presentation of key results and achievements.

The concern for the immediate and enduring future is to assess and decide on how
best to maximize and optimize the opportunities afforded by the internet presence
without losing sight of the limitations that exist. Internet-based communications, HR
activities and trading practices have to deliver the same value, confidence, assur-
ance, integrity and quality of service that is expected when dealing face to face; and
failure to do this means that the website is wasted.
Managers have therefore to know and understand what they need and want from
websites in their own domains; and in turn to be able to work with technology and
design experts to ensure that this is indeed maximized and optimized. Managers need
to know and understand the costs and benefits, where problems are likely to occur,
and the consequences of having to put things right. Managers need also to know and
understand the possibilities and potential for the internet presence itself, and for the
commercial and operational opportunities that could, or might, accrue.
Websites must be kept up to date both in terms of the content that is delivered and
presented, and also in terms of operating capacity. And managers need to involve
themselves in the wider aspects of technology and its management from the point of
view of professional development and understanding so that when the time comes,
they are able to make informed and effective decisions on future developments of the
internet presence.
Whatever is done via the internet in terms of business practice and operations has
to be enduringly viable. Using the internet for recruitment and selection, sales or
managing the supply side requires the same attention to detail as face to face; and the
outcomes need to be as assured as face to face.

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ting to peripheral or unfashionable business in the pursuit of media coverage. Many
organizations have created their own websites on the basis that they perceived they had to
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406
 N =

have one regardless of any contribution that it would make to long-term effectiveness,
profitability and viability. suise
In an attempt to redress the balance, Porter (2000) wrote: ‘At the end of the day there
are no new business models or paradigms: There is no virtual industry. There are no easy
rides, quick fixes or absolute certainties. Nothing can be fixed through public relations
alone. There are no virtual markets. There is only competition — the pursuit of real
customers for real businesses who are going to avail themselves of products and services at
prices they are willing to pay.

Source: Porter (2000).

Developing professional and expert practice

It is stated in Chapter | that the primary concern of management is to make best use
of scarce resources in a changing and uncertain environment in order to cope with
change and uncertainty. From that point of view, managing in the future is likely not
to be all that different from managing at present and in the recent past.
It is certain, however, that a much greater understanding of what ‘coping with
change and uncertainty’ actually means is required. Effective managers are going to
be required to lead and direct change, to create structures and cultures that accom-
modate this, to do it profitably and effectively in the long term, and from the genuine
point of view of the organization’s enduring best interests, and those of all its stake-
holders. This is certain to apply to all managers, whatever their level of responsibility,
seniority or occupational position. Organizations can no longer afford the expense of
large and sophisticated bureaucratic and administrative structures; and the conse-
quence is that long-term effectiveness, profitability and viability are only possible if
this approach is adopted universally.

Creativity
There is a view, wholly mistaken, that creativity in management is about dreaming
things up and putting them into practice on a combination of whim, intuition and
freedom of choice and expression.
Nothing could be further from the truth. Artists, musicians, writers, sculptors and
designers all work very hard in professional and expert ways at their ‘creativity’.
Trying something out for the first time is never based purely on guesswork; there is
always a strong element of knowledge and understanding that ‘it ought to work’, and
this is based on prior knowledge and existing expertise.
All this ought to apply to creativity in leadership and management. ‘Creative’ deci-
sions and approaches are based on existing knowledge, understanding and expertise
in every other field. Expert leaders and managers therefore apply their creativity to

407
 develop their own ways of thinking, doing things, solving problems, and deciding on
developments for existing ventures, products and services, and deciding on new
developments. However, this has to be founded on strong existing expertise otherwise
people are indeed simply guessing at what is required.

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Having said this, it is essential that leaders and managers bring fresh approaches
to bear on future problems and issues of:

e deciding which new products, services and ventures to become involved in;
e ensuring that ever-decreasing, and often evermore expensive, resources are
ordered, used and consumed as efficiently and as effectively as possible;
e attracting and retaining the best staff and expertise;
e product and service design, delivery and execution;
e prioritizing organizational, departmental, divisional and functional activities,
and developing ways of working ensuring that as far as possible and reasonably
practicable everything is concentrated on operational priorities rather than
processes.

The whole approach to professiona! creativity demands therefore a wide and ever-
increasing expert knowledge and understanding. Expert managers ought actively to
be considering possibilities, examining them, testing them — and then for the most
part, discarding them! However, out of all this thinking, and the development of
knowledge and understanding that goes with it, come the ideas that will work for the
future, that can be tried, tested and implemented.

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e why things succeeded and went well;

@ why things went wrong:
@ what could, and should, have been done differently.

Clarity of purpose and direction

lhe aim of all organizations should be long-term effectiveness and profitable exist-
ence ina turbulent and competitive world. Lack of expertise in strategic management

408
 N=

and organizational behaviour has meant that this has all too often become lost in the
pursuit of short-term gain, or satisfaction of the financial interest alone.
Beyond this, full market, production, customer and client assessment is regularly sulseu

not fully carried out. This in turn leads to:

e fashion-based drives: for example we must have a website, we must have every
office/school/airliner equipped with computers and other portable technology as
ends in themselves;
e hiring strategy consultants and accepting their findings unquestioningly and
blindly;
e sending staff on unrelated professional, management, occupational and
organizational development programmes without relating these to the needs of the
organization or the individuals concerned;
e concentrating on peripheral rather than core issues.

Core and peripheral business activities

All organizations and their top managers must understand where the core activities
lie. It is very tempting to draw attention, and therefore resources, away from these
two fashionable alternatives, and to give the illusion of globalization. This varies
between organizations. In some organizations the core business may not even be
clear to top managers. Core business has to be assessed from the point of view of
one of the following: what attracts, what sells, what makes money and why this mix
should be so. Attention is needed in each of these areas, not just to the ‘what makes
money’ narrow issue. From the point of view of attract/sell/make money, core
business must also be seen in terms of enduring customer and client reputation,
and brand loyalty and identity.

Dominant stakeholder drives

In industry and commerce, this refers to the desired priorities of shareholders’ repre-
sentatives, other financial interests, backers, and powerful and influential figures who
drive their organizations into their own preferred core business. In public services,
the dominant stakeholder is government, which sets performance priorities and
targets according to political need. There is a divergence here from the majority
stakeholder — the public — that wants high quality, enduring, good value public serv-
ices. In the not-for-profit sector, many large charities now take the view that in order
to provide the best possible service for their client groups, it is necessary to engage in
fully commercialized fundraising activities; in these cases, the core business becomes
the conducting of marketing campaigns.
It is essential to have a balance of primary and support functions with reference to
resource consumption — what the organization values and rewards in terms of output

409
 and what it does not value; the effectiveness of administration and bureaucracy; and
in many cases, the domination of administration and bureaucracy. In extreme cases,
the ‘core business’ of organizations that are dominated by their support functions is
effectively to provide career patterns for certain individuals within them.

Economic and social demands and pressures

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the broader competitive environment. This is one reason why undertaking and using
the Five Forces model (see Chapter 2) is so vital. This especially involves taking the
broadest possible view of:

e Threats of entry: where new rivals or key players can conceivably emerge from, for
example: ‘If we can set up there, there will come a time when others can set up here.’
e Threat of substitution: where new inventions and ways of producing and delivering
products render present business practices obsolete or at risk. For example,
Amazon’s online provision has radically affected the ways in which bookshops and
music retail chains, especially, do business — bringing great pressures to bear.
e Threats of entry from players that used to conduct activities in an area or sector
but have withdrawn for the time being. This especially applies to the re-entry of
airlines into mothballed routes; re-entry of defence electronics companies into
commercial and consumer products; re-entry of private hospitals into emergency
and urgent surgery (this is going on at present by arrangement with the National
Health Service in the UK, and may become a service that is purchased
universally over the long term).
e Threats from suppliers become a problem when new players can command greater
access to suppliers thanks to initial investment levels and willingness to pay. This
may lead to supply auctions which some existing players may not be able to afford.
e Threats from customers and clients when product and service levels decline;
where the existing is superseded by the same thing at better price, quality and
value; where the existing is replaced by something altogether new.

Investment
The traditional — almost cultural — view of investment concerns the placing of finance
and other resources into a situation or venture in the expectation of more or less
certain and predictable returns. This is founded on the widely held behavioural
aspect of placing money in individual deposit accounts, on which a rate of return is
guaranteed or predicted. Even though this is less certain than in the past, and returns
tend to be lower, the psychological drive to look at all investments from this point of
view remains very strong, and this still applies to industry, commerce and public

410
sector investments. For the future, however, a much more active managerial expertise
and responsibility in this area is essential.
Investment in production, service and information technology must be undertaken Suise

on the basis that it may be necessary to discard it overnight in order to remain

competitive and effective because new equipment is now available to competitors.
Appraising potential investment in technology therefore requires that as full a projec-
tion as possible is available as to whether competitive activities around price, quality,
output and retention of market share would be sustainable should alternative tech-
nology suddenly become available.
A key part of the management of investment in industrial, commercial and public
service situations is therefore certain to require a continuous and active ‘what if ...?’
approach — so that answers to questions such as:

‘What if this technology becomes obsolete overnight?’

‘What if we have to replace a particular system at short notice?’
‘What if a competitor gains access to technology that can produce the particular
product or service in a quarter of the time?’

are always kept at the forefront.

Greater expertise in forecasting a projection is required overall. This applies
especially in those sectors that operate under mega-project conditions, where the true
costs and returns on activities may not be realized for many years. Several current,
and recent, high profile examples of this in the UK must cause a radical rethink of
how projections and forecasts are carried out.
This also applies to investment in production, service and public sector technology
by individual organizations and departments. This requires a much greater projected
understanding of density and frequency of usage, speed and convenience of product
and service, and quality enhancement and insurance as key elements of assessing
returns on investment.
Investment in technology projects and expertise has therefore to be viewed as a
sunk cost from a managerial point of view — one on which there may not be any direct
or apparent returns. This flies in the face of the widespread current behavioural need
to make simple and assured the calculation of return on investment: when investing
in technology this is not possible. Moreover, the return on investment is in every case
the subject of personal and professional evaluation as well as calculation, and these
judgements may quite legitimately vary.
Investment in expertise is dependent at the outset on whether staff are valued as
assets or liabilities, and the basis on which this is calculated. This also varies in each
case; and is likely to vary within organizations according to:

e the nature of relative and absolute expertise of particular staff in different

functions;

ani
 e the ease or otherwise with which individuals can be replaced or transformed
through retraining and redeployment;
e specific industrial, commercial and public service advantages (and liabilities) that
individuals bring. This is particularly true of highly capable and well-known key
figures in industry and commerce (for example: Michael O’Leary at Ryanair; Alex
Ferguson at Manchester United). It also applies to public services (for example:
Magdi Yacoub and Robert Winston in health services; Peter Hall in town planning).
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This is clearly a double-edged sword; individuals remain assets so long as they
deliver their expertise in ways compatible with the priorities of their organization,
and there may be a loss of confidence on the part of key backers and stock markets
should such a figure suddenly move on. On the other hand, no organization should be
dependent upon an individual, however great their expertise, for its future survival.
Investment in expertise is also required at the ‘all staff? level. This consists of
underwriting whatever steps are necessary to ensure that effective, productive and
positive conditions are created, maintained, enhanced and improved so that high
quality industrial, commercial or public service output may be maintained. It is also
essential to ensure these conditions include the capability and willingness to trans-
form when required.

Mergers and takeovers

All this is reinforced when considering the enduring managerial responsibilities to
mergers and takeovers. Investment in mergers and takeovers requires managerial
attention to the reasons behind the findings of two surveys carried out in 1996 and
1999 by the Institute of Management and the Industrial Society. These found that
87% of such ventures do not work at all or fully in the long term. The reasons for this
were found to be exactly those considered elsewhere.

e Lack of attention to behavioural and cultural aspects.

e An assumption that these would simply fall into place once the financial deal was
completed.
e Lack of attention to the long-term staff management, management style, human
resource and industrial relations issues would have to be faced, coupled with the
lack of requirement for, or understanding the necessity of, a long-term and
sustainable staff management strategy as a precondition of the particular venture.
e Lack of precise definition of what synergies or economies of scale were projected
or forecasted and the nature of investment necessary to achieve them. This
especially referred to technological incompatibility; and again it was found that a
lack of cultural fit and the necessity for culture transformation and change
programmes were not sufficiently well thought out or costed.

412
 2
e Design of the merger or venture to satisfy short-term financial demands,
shareholder interest and the reactions of the media and stock markets, rather than
long-term enduring customer satisfaction in terms of their relations with the new sulseu

merged organization.

Those in senior positions with key responsibilities are therefore required to under-
stand and acknowledge the full range of concerns when seeking opportunities and
enhancements in this form of investment. It is also incumbent upon those in depart-
mental, divisional and functional positions to understand the pressures that mergers
and takeovers bring with them, especially if it is known, believed or perceived that
overwhelming attention has been given to the narrow financial interest.

Structures and cultures

The demand here is that top managers take a continuous positive interest in the ways in
which activities are carried out in order to ensure that the organization of staff continues
to fit operational demands. Problems are caused when ranks and hierarchies work in
favour of individuals and groups but cause blockages in operations and activities. It is
therefore essential that questions of culture and structure change and development are
addressed as part of any wider staff management strategy, and that these elements are
related directly to organizational policy, priority, direction and performance.
A starting point for this is to look at structures and cultures from the point of view
of the extent of fit. The initial inquiry is to establish whether structure, culture,
strategy and staff management style:

e clearly fit and match;

e fit in some parts but not others;
e do not match and fit with strategy direction at all.

One clear indicator of this is to assess what is rewarded and punished, and what is not.
This inquiry causes attention to be drawn to the whole relationship between
behaviour, operations, activities and direction. It is often not considered or not
addressed fully because:

e its importance is not fully understood by directors and shareholders’

representatives;
e there is a history of paying attention to ‘the bottom line’ rather than how the
bottom line is achieved;
e it is not fully understood conceptually by top managers; or it is assumed that once
direction is established, everything else will automatically fall into place;
e top managers take the easy way out, preferring to rely on a consultant’s
prescription, rather than tackling critical issues for themselves.

43
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a Structure, culture, strategy and staff management and integration often get handed on to
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= consultants. This is all very well provided that a genuine brief is worked out with the consult-
ants based upon full assessment of the situation. Many consultancy firms have taken advan-
tage of this gap in organizational managerial expertise to sell off the-shelf solutions such as:

e Business process reengineering, which is overwhelmingly taken to mean reductions in

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head count, de-layering, and increases in workload for the frontline.
e Downsizing, rightsizing, resizing, the outcome of which is normally a structured design
suitable for the present rather than the future.
e Empowerment, normally resulting in pushing further responsibilities on to often
overstretched frontline staff.
e Synergies and economies of scale — concentrating again on a narrow economic rather
than broader context of behavioural aspects.
e Facilitation — guiding companies through extended programmes of change.

In many cases, this leads to a long-term relationship between consultants and client
organizations. One way of looking at this is to consider ‘the circular flow of consultancy’.
This works as follows (see Figure 21.1):

Problem identified

== : 6,11
Consultants briefed

| Report back Problem assessment

9, 14
Initial investigation
Other problems Detailed
identified : 8, 13 en
| assessment

Figure 21.1 The circular flow of consultancy

Fee levels charged by top brand consultancies make it behaviourally very difficult to
turn down their recommendations. There is also a collective perception that if fee levels
are very high, then the consultants must necessarily know what is best for the organiz-
wy

414
 (i,=

ation. Many organizations and their top managers come, therefore, to depend on the
consultants they have hired. sulseu
Effectively, consultants are asked to come in. They provide an initial organizational
assessment leading to the conclusion that ‘the organization needs some work doing’
Consultants then produce further investigations and a report to the effect that ‘you need
some more work doing’.

Management and organization development

The present view of management and organization development is that in order to
professionalize and make expert the practice of management, and develop the exper-
tise of individual managers, there is a body of skills, knowledge, attributes and quali-
ties that must be learned and put into action.
These approaches are largely well understood and represent, almost by common
consent, the known ways in which the required body of knowledge, skills and exper-
tise 1s imparted.
To this must be added the following:

e Common standards of integrity in all dealings. This is an active collective

responsibility as well as one placed on individual managers and supervisors.
Moreover, while this may stand to reason in theory, in practice, many managers do
not approach all their dealings from the point of view of this absolute standard. It
needs to be clearly understood that customers, clients, suppliers and staff all
come to know very quickly that the person or organization with whom they are
dealing is trustworthy, and when this is not the case. When the person or
organization is proved to be untrustworthy, given any choice in the matter, they
will move elsewhere if they possibly can.
e The need to develop a distinctive, positive and collective management style. This
reinforces culture, values, attitudes and behaviour, and is reinforced by the
approaches and activities of individual managers. It matters much less that this is
autocratic, participative or anything in between, than that it is common, open,
honest and universally delivered.
The need is to develop the style, attitudes and behaviour of individual managers
along the above lines. Key priorities therefore have to be:

e visibility;
e openness of communications;
e the building of the person, as well as the occupational and professional aspect of
relationships;
e and the ability to develop suitable long-term work group cohesion, expertise and
performance.

45
 Additionally, there is a critical need for continuous professional development.
Many professional and occupational bodies now demand this as a condition of
continued membership. In any case, part of the professional and personal responsi-
bility of all managers is to keep abreast of developments in the whole field, to learn
lessons as they become available, and to study and evaluate practice in other organiz-
ation sectors and locations. For example:

e One supermarket chain requires all its staff to go into competitors on a regular
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basis and to return with at least one example of what the competitor does better
than them; to return and say ‘there is nothing we can learn from them’ is not
acceptable.
e An internet-based travel agent, despairing at the lack of real customers, at last
sent its staff into its high street competitors to study the real demand of
customers; it consequently redesigned its approach and website to take account of
these factors.
e A hospital reduced attacks on, and abuse of, its staff in its accident and
emergency department by studying the management of long-stay customers and
clients in airport lounges.
e A single location grocery store quadrupled its turnover in six months as the result
of studying the range available at Tesco and Asda and increasing the perceived
choice available to customers, as well as convenience.

All this is legitimate and effective as continuous professional development. It is

as substantial as professional updates, technical studies, evaluation, and project
work and secondment. Ideally, continuous professional development should be
planned and reinforced with the opportunity to put it into practice. Ultimately this
is a matter of personal responsibility, whether or not it is actively encouraged by
particular organizations.

Conclusions
As stated above, the key drive must be towards managerial expertise in delivering
performance and coping with change and uncertainty in whatever the context present.
Organizations and their managers that blame environmental conditions for failings
and shortcomings in their own expertise are therefore increasingly certain to get left
behind by those that do not. All managers need to know and understand the effects of
the following conditions, and be able to operate effectively when they change.

e Fluctuations in interest rates, inflation, retail prices indexes, currency values and
other economic factors that ‘simply could not be predicted or foreseen’.
e Currency collapses or surges making activities either too expensive to complete,
or too expensive to contemplate.

416
 nr =

¢ Turbulence in the global economy, especially competitive surges from different

parts of the world.
e Changes in consumer demand and confidence caused by unfair trading practices Suiseu

on the part of manufacturers and service providers in areas of perceived cheap

activities. It should always be remembered that the first countries to be accused
of this were Japan on manufacturing; the Gulf States and Norway on oil
production; and Switzerland on banking and finance industry practices.
e Resorting to public relations campaigns, rather than managerial inquiry, to
counter the commentaries by media on organization and sectoral shortfalls.
e The practice of taking refuge in perceived sectoral league tables; this leads to the
excuse that ‘we are doing no worse than anyone else in our sector’, or ‘we are all
beset by difficult trading conditions’, as a substitute for active managerial
responsibility.

There is likely to be a fundamental shift away from organizational, managerial and

structural hierarchies with people rising through the ranks as they achieve the
required standards of knowledge, understanding and expertise.
There will be hierarchies, but these will have fewer links and stages that prev-
iously existed. The driving force behind this is a combination of practice and
expediency:

e practice, in that people at particular levels of the organization are going to be

required to have a much greater knowledge, understanding and expertise at the
level at which they find themselves, and to deliver critical performance rather
than being constantly developed for the next job;
e expediency, from the point of view that organizations have all decided that middle
managers are an expense that they can do without.

Superficially attractive, the blanket removal of middle management grades and posts
nevertheless removes also:

e career paths, meaning that it becomes less attractive for talented people to remain
with, and commit to, the organization;
e knowledge and developing expertise, meaning that a void is likely to be left in some
areas;
e apart of culture and organizational behaviour with which people are comfortable, and
which the organization is used to,

In practice, there is enough management literature, training, development, under-

standing and awareness in all sectors, as well as overall, to ensure that each of these
factors can be understood and accommodated. The most successful organizations in
the long term are those that accept the constraints under which they have to operate,

417
 accept the potential for competitive and operational turbulence, and understand the
factors outside their control within which they have to operate. In the future, the best
managers are going to be those who take active responsibility for this, and continue to
deliver high quality, high value, profitable and effective products and services, rather
than those who take refuge in a ready-made list of excuses.
The most important lesson for all managers to accept is that coping with change
and uncertainty, and achieving things through people, comes with a wide range of
SuunpuZ
quatuaseurtu
sajoud
&Ul active responsibilities. Furthermore, the resources required for combining into
productive, profitable and effective activities have to be gathered from a broader
environment over which individual managers have very little control.
The purpose of this final chapter has been to illustrate the active steps that can be
taken on a more or less universal basis in order to ensure the required capability and
expertise in coping with change and uncertainty, organizing and directing people,
and combining resources.
Above all, genuinely expert managers, those who accept and understand the
constraints under which they have te work, and the expertise required as a result, are
certain to become very much more highly prized in the future. As organizations come
to query evermore precisely the actual added value of support functions and struc-
tures and hierarchies, the manager who can deliver enduring customer, client,
supplier and end-user satisfaction is certain to become a most valuable commodity to
organizations, and their expertise highly prized.

=
e tis essential that all those who aspire to be leaders and managers take a professional
a
=e
@Q
5)
attitude to their own knowledge, skills and expertise.
e Management and leadership have increasingly clear bodies of knowledge,
understanding and experience that all those who wish to practise need to acquire.
e The development of knowledge, understanding and expertise is ever-evolving, ever-
increasing and lifelong.
e Management expertise is only delivered effectively if there is full knowledge and
understanding of the operating environment; and the changes that take place in this.
e The effectiveness of managerial and leadership expertise has always to be seen in
terms of how the organizations that they run perform, both for the present and also
into the future.

Further reading
Ancona, D. (2003) Managing for the Future: Organizational Behaviour and Processes. Sage.
Drucker, P. (1999) Management Challenges for the Twenty First Century. HarperCollins.
DuPrey, R. (2010) Work Place ofthe Future. Jossey Bass.
Semler, R. (1993) Maverick. Century.
Tidd, J. and Beasant, J. (2009) Managing Innovation. Pearson.
Watson, T. (2006) Organising and Managing Work. FTPitman.

41s
 PART

Summary
Sheets

here is a summary (a crib sheet!) below for each chapter of the book. The purpose is
to give you a short, quick and easy guide to looking things up; and also to remind you
of the things that you will need to know and to be able to do, as you come to learn how
to apply the principles and expertise of management. And it is also a very useful
guide to exam revision.

Definitions
You need to have available a definition of all key terms that you are ever going to use.
This is because:

a great deal of management speak and jargon is devised so that people who use
this kind of language do not have to make clear what they are talking about;
terms such as strategy, culture, and employee relations have different perceptions
and meanings attached to them; and so you have to be able to make clear the
position from which you are addressing them;
it is a question of professional discipline that you always need to be clear about
what it is that you are addressing;
it is a personal development issue that in order to know and understand things
they have first to be clear in your own mind;
it is a mark of professionalism that you do know these things and can define them,
as a part of your commitment to your job, work and discipline.

Approach
While this section gives a summary for each of the chapters of the book, it is essential to
know and understand that all aspects of management knowledge, understanding and

419
 expertise are interrelated — none of them stand in isolation from the others. So do
approach any revision or knowledge development or professional enhancement from
this point of view. You have to know and be able to apply the whole whether you work in
a small company or a multinational; whether you work in HR or marketing or sales or
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sieays
web design; whether you work in commerce, public services or the not-for-profit sector.

Chapter 1 Introduction
The coverage of what management is and how it works: management is an increas-
ingly professionalized discipline that consists of knowing everything about, and being
able to apply:

e achieving things through and for people

e delivering performance
e coping with change and uncertainty
You should be able to debate the extent to which management is a profession — the
need for expert knowledge and capability and the ability to apply this according to
the situation and the organization and circumstances (with the need therefore for a
‘professional’ approach and commitment, including a personal commitment); and the
extent to which it is not a profession — there are no entry barriers or pre-qualifications;
there is no independent ability to regulate or to set reward levels.

Chapter 2 Organizations, managers and the environment

The main things to draw from this chapter are:

e knowing and understanding the environment and the constraints that are present
and within which you have to work
e knowing and being able to do the analyses: SWOT, PESTLE, SPECTACLES, Five
Forces

You have to be able to evaluate the results of the analyses also. You have to be able
to form your own judgements and be able to support these judgements as to which are
the overriding strengths and forces, which have to be accommodated and managed
within, and which can be ignored (for the moment at least).
The other key lesson is that you need to be constantly scanning and evaluating
everything around you. Things can and do change very quickly: someone comes up
with new production technology; someone else comes up with a system that trans-
forms industry standards; the bottom drops out of the market for a product or service
line — you need to be able to anticipate these things happening, and you need to be
able to have ideas about what to do if and when these things do happen. You also
need to know (if you have invented or implemented a radical new technology or
product or service line) how long you are likely to be able to sustain a competitive
advantage before others catch up with you.

420
 One word also about the legal issues: you always have the remedy of the law if
someone offends; but you always need to remember how long it takes for things to
come to court and finally be settled. On the day that this text was written, Microsoft
announced the settlement of one of its numerous disputes with the EU; this particular
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sgaay
(7)
issue had been going on since 1998, and so if you do think of legal remedies then be
fully aware of how long the matter is going to take to resolve.

Chapter 3 Managing in a changing environment

As stated in Chapter 1, one of the key issues that managers have to face is the need
and ability to cope with change and uncertainty. You need therefore to know:
e what is changing and what is likely to change
e the likely and possible effects of these changes

You need to be able to identify where the drives for change and barriers to change
are going to come from; and you need to be able to assess and prioritize these and
formulate propositions for building on and energizing the drives, as well as addressing
the barriers and, where necessary, breaking them down.
You are going to need to know and understand how to go about changing people’s
resistances to change. This means that you need to know and understand why they
are resisting, what they fear, and how to overcome these fears. You need then to be
able to prioritize what to do and set out a clearly defined schedule and approach in
order to tackle the things that you have identified.
During the course of your studies, you will see many case studies and examples
relating to change and development. You need to get into the habit of evaluating
these, seeing where success and progress were achieved, and what went wrong, and
what could have been done differently and why.
You need also to recognize that there are no blueprints for successful change and
development — there are principles that can and need to be followed; and you do need
to have always in mind the mantra:

‘Change, from what, to what, when, where, how and why’

Chapter 4 Ethics and corporate governance

You need to be clear about the standards that you set for yourself and why you have set
these standards. You have to have a detailed and complex view of, on the one hand:

e the need to survive and be effective, and to be able to carry out your job and
duties, how you will treat people — everyone: customers, staff, colleagues, peers,
superiors, financiers, suppliers

and on the other hand, you have to relate this to your own view of:

e what is right and wrong, what you will and will not do and why, what your attitude
is to dishonesty and duplicity.

421
 You have also to know and understand how you are going to deal with the grey
areas — things that are not quite true, not quite false, and not quite accurate (but
not inaccurate). You must then be able to reconcile the different pressures and
dilemmas that all this complexity brings, so that you can be comfortable as well
&
Arewuns
sjaays
as effective.
You have to recognize that everyone has their own set of ethics, moral compass and
work ethic. You are entitled to have people do things your way — but only if you are
not breaking legal, moral or social boundaries and pressures. You are entitled to have
people work to the best of their abilities — you are not entitled to have them do wrong
things, or break their own codes, just because you say so.

Chapter 5 The practice of management

The final part of any introduction and introductory part of any management text is to
make clear that everything has to work in practice. There is therefore nothing esoteric
or utopian about any of the material covered in Part One of this book — it has applica-
tions in every situation and set of circumstances.
However, there are pressures in terms of relating knowledge to practice; and so
you have to be able to work within these pressures and constraints and be effective.
These pressures come from:

the company or organization and its resources and ways of working

company and industry or sectoral matters
staffing matters and issues, including people’s hopes and fears
the diversity of your people and staff
the technology that you use and how this affects the patterns of work that you have

You have to be able also to work within specific constraints — the law, environ-
mental pressures, getting to grips with sustainability, managing scarce, limited and
finite resources, investing in and using technology to best advantage.
Everything has then to be related to the key managerial pressures of delivering
performance, being effective, getting things done with and through and for people.
You have to recognize where ideal solutions to problems will not be possible. You
have to recognize that everything that you do or propose has to be capable of being
sustained through the conduct of business.
You have to recognize that over time the practice of management and the prac-
tices used by managers have to change in order to meet new demands and opportu-
nities — and new problems and issues. Especially as organizations grow and
develop, you need to create the means for continued effective supervision and
management — what might have been capable of being managed and organized and
directed by one person may no longer be so, as either there are now too many staff
functions to organize and direct, or the activities have now diversified to a point
where the original management person or team is no longer knowledgeable enough
to be able to do all this effectively.

422
Chapter 6 Culture
The key issues here are:

e recognizing the need for people to have a clear set of standards to follow and to AJeL
saaa
work to
e recognizing that people have the need to identify with their place of work, and to
feel that they belong to that place of work
e recognizing that if you do not set standards of conduct, behaviour and
performance, then people will set their own
e recognizing that even if you do get a strong positive and inclusive culture, this
comes with its own responsibilities — people will behave in the interests of the
organization if this happens, and so those interests have got to be managed and
discharged very effectively (remember that the Nazi SS had a very strong, positive
and inclusive culture and so those who ran it were able to get the staff to carry out
all of the repulsive crimes for which they were responsible)

Additionally, you should know the Handy and Harrison and Deal and Kennedy
models of culture and you need to know the basis on which any organization culture
is formed and developed.
Finally you need to recognize that culture change and development is a manage-
rial responsibility. It is your role to set and develop the standards that you want —
otherwise these standards will ‘emerge’ anyway, and be set by the staff.

Chapter 7 Communication
You need to know that this is one of the crucial management skills. You will probably
never be recognized as a good communicator — you will always be recognized if you
are a bad communicator! You need to recognize the strengths and shortcomings of
each of the means and ways of communication shown in Figure 7.1; and recognize
from this that there are very few fully effective ways of communicating — the key
indeed is that the best way is for you to tell people things first hand, and then rein-
force anything and everything with written documents if necessary.
You need to know that the non-verbal aspects are much more powerful than verbal —
people will remember you rather than what you said; and people will remember pictures
or being shown things, rather than words and being told things.
People recognize the messages that are really being given off, through a combina-
tion of language used, what is clearly stated and what is not, what is precise and what
is not, the past history and track record of honest and dishonest communications, and
what the agenda really is.
If you do not make clear what is going on and what is being communicated, then
people will form their own judgements and make up their own minds. This reinforces
the need for transparency and honesty — and if you cannot be fully honest, then never
tell lies. You will be remembered for this forever!

423
 Chapter 8 Management influence, power and conflict
The main things here to know and be able to work with are:

@®
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siaays e how to establish and use your own influence, as the result of the position that you
hold, and the respect with which you are regarded
e where the sources of power and influence that you have come from; and where the
sources of influence that your people have come from
e why some people and groups are powerful and influential and others are not
e how to use and exercise power and influence responsibly
We have all come across bullies and tyrants; and we all hate them. In some cases
people behave as bullies because they want to and because they can; in other cases
they mistake this for being forward and forceful. The result is always damaging and
destructive — and often very expensive in terms of loss of staff and production and
output, and loss of staff morale, and damages to those who sue you!
It follows from this that it is necessary to recognize the potential for conflict in any
organization. Conflict is a fact of human life; and so it exists in all organizations and
groups of people. You have to be able to recognize the sources, causes and symptoms,
and to be able to address the issues according to the situation and the personalities
involved. You musi be able to assess any conflict from the point of view of what you
want the outcome to be, what the desired outcomes are on the part of everyone involved,
and what the consequences of particular courses of action would be or might be.

Chapter 9 Human resource management

Human resource management (HRM) exists at strategic and operational levels in
order to structure and integrate the staff effort with company or organization objec-
tives, and to ensure that:

e people are properly selected and trained for work

e they are properly rewarded
e the collective and individual conduct behaviour and performance are kept up to
standards
e the systems and procedures are structured and managed
e the place of work is healthy and safe
You need to know what the organizational perspectives are, and whether these are
based fundamentally on consensus, cooperation, conformity or conflict. This assess-
ment gives the full basis on which HRM is to be conducted. If it is based on consensus
and participation, overtly so much the better, though this does bring with it a total
responsibility for creating the conditions in which consensus and participation are
possible and sought by the staff. If it is based on conflict, then you have to have
effective and comprehensive systems and procedures in place to structure and
manage the problems and issues and patterns of behaviour that are certain to arise.
The whole of HR is bounded by employment law and some very key principles.
The areas of recruitment and selection, training and development, health”and safety,

424
pay and rewards, and employee relations are all bounded by both law and also princi-
ples that state the absolute standards to which you have to behave and perform, in
terms of:

e equality and fairness of treatment AteW

sqaa
e diversity and recognizing and respecting people’s differences
e fairness and reasonableness
e staff collective and individual representation
e natural justice
e transparency

There are minimum standards for wages, disciplinary and grievance procedures and
health and safety practice. There are also sanctions for allowing, encouraging and
participating in bullying, victimization, harassment discrimination, vandalism, violence
and theft. Failure to follow and adhere to these minimum standards means that the
company and its managers are normally found to be at fault, and there are statutory and
discretionary remedies which are applied by courts and by employment tribunals.

Chapter 10 Leadership and management

The need here is to understand and be aware of what leadership is, how it impacts on
managerial professional performance, and the part of management that is about ‘lead-
ership’. Leadership is additional to management and a part of professional managerial
expertise in that:

e managers need to be accountable for their actions as well as responsible

e staff look to managers to give direction, confidence and assurance — ‘leadership’
e the need for leadership is critical to the future effectiveness of organization
practice and performance

It follows from this that leadership must be a combination of organizational situa-

tional and managerial knowledge; together with the ability to motivate and inspire, to
address problems and crises and to take effective decisions at all levels and according
to the needs of the situation or issue being faced.
There are leadership traits, styles, qualities and characteristics which have to be
recognized and learned. Some of this comes more easily to some people than others;
however, it is essential to understand that there is no such thing as a born leader — all
of this can be (and must be) taught and learned.

Chapter 11 Strategy policy and direction

This part of the book is about what is done within organizations and by managers, and
why. The main things to know and understand are:
e the need for clarity of purpose direction and priorities
e the ability to support and justify why the organization is pursuing its what and how

425
 Bevond this, there is the need for a core foundation or generic position from which
to compete. This is normally defined as
cost leadership or cost advantage
Meus
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sways e brand leadership or brand advantage
e focus or niche
e something else (for example convenience, reputation)

If this is clear then everything else flows from it — marketing, product and service,
HR and technology strategies all have a clear basis for development. If the core posi-
tion is not clear or precise. then everything else gets clouded also, and people (above
all, customers and backers) become uncertain and so will gravitate towards those who
do have a greater clarity.
The problems and issues with strategy are also identified: above all, the need for
development and investment, and the incremental and radical approaches that some
companies take: and the signs of failure (especially where costs are rising and income
or sales are falling).

Chapter 12 Marketing
Marketing is the competitive process by which goods and services are offered for
consumption at a profit. Marketing takes place at strategic and operational levels, and
is concerned with developing a brand, image, presence and identity for the company
and its products and services. It achieves this through:

e determining a position in relation to the core strategy as to whether the company

will be first in the field or a follower
e using marketing mixes, which are:
e the 4Ps — price, place, product. promotion
e the 4Cs — customer, convenience, choice, cost

This position and mix are then further structured and developed through the use of
marketing media — the internet, television and radio, packaging, design, colour,
images, PR, posters, leaflets and sponsorship and endorsements.

Chapter 13 Managing operations and projects

All managers are involved to a greater or lesser extent with operations and projects,
in terms of the demands of their own functional areas, and also in terms of the wider
attention needed for business and organization development, and in maximizing and
optimizing resource usage.
The need here is to be able to recognize where the priorities lie and how to address
them. The main issues are attending to resources, defining the scales of production
required and possible, and then ensuring that there is a good quality, healthy and safe
working environment.

426
 The scales of production are normally defined as:
@ unit
e batch
e mass and flow AJeW
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|

It used to be normal for a company to locate products that gained weight in the
production process near to its markets, and those that lost weight during production
near to the source of raw materials. With increasing globalization and internationali-
zation, this is no longer a crucial demand.
It is essential to have a clear strategic approach to the supply side however. There
are various approaches used, including just in time and the buying up of supply side
companies; the critical factor is to ensure that you have as much command over the
supply side as possible. Many companies and organizations go into extensive and
complex contract arrangements with key and critical suppliers.
With all of this comes a distinctive expertise and set of responsibilities — the
demands of each different place of work are different, and so a balance has to be
struck between maintaining the highest possible standards of performance, with
attending to the specific constraints of the particular situation and organization.

Chapter 14 Financial and quantitative aspects of

management
You need to know how accounts are constructed and what they show you — and what
they do not show you. You need especially to be aware of the fact that accounts are
constructed for the purpose of meeting statutory requirements and demonstrating a
summary of the company and organization financial performance — accounts are not a
management information system, though you do need to read them in conjunction
with other performance measures. You need to look at accounts also from the point of
view of examining trends — for example:

e if costs are rising then the reasons for this need to be examined and agreed
e if profits are rising then you need to know what is driving this — is it all aspects of
the organization’s performance, or is it one or two activities only

And so on. Accounts are therefore a very useful and valuable starting point for
addressing and assessing performance; you then need to relate what the accounts
show to everything else that is going on.
You need statistical and mathematical knowledge in order to be able to make sense
of all the data that comes your way, and again in order to be able to support and
justify the decisions that you take and the assertions that you make about all aspects
of business and management.
You need to be able to use data to support and justify and sometimes defend deci-
sions and proposals that you make. You need to be able to use data and statistics to
support project and operations management reports, sales efforts, production and

427
 productivity issues. Data is also needed for things like accidents, disputes and griev-
ances and other HR matters.
You need to be able to have access to data that shows how long it takes for new
products and services to get to market; the percentages of new products and services
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inventions and developments that do make it to market and profitability. You need
data that shows where blockages and hold-ups occur, and the consequences of these
in terms of lost production and output.
You need market knowledge and data that shows and supports your knowledge of
customer behaviour and attitudes to your products and services, why they are loyal to
you (or not), and what it is that makes them come to you (or not).

Chapter 15 Organizational and managerial performance

Organizational and managerial performance is a critical issue. You have to be able to
assess and evaluate performance using multiple and often complex criteria. You have
to be able to look at performance in terms of:

e overall aims and objectives

e specific and individual aims and objectives
e what you set out to achieve overall and whether or not this was feasible and
reasonable in the circumstances
e what else was achieved and what happened as a by-product of your original aims
and intentions
e what was not achieved

You have to be able to give reasons and a full justification for all of this. You have
then to be able to relate it all to each aspect of the organization: finance; product and
service performance; HR performance; marketing activities; and organization devel-
opment and progress overall. You have to be able to relate all of these in turn to:
timescales for evaluation; any milestones and critical positions along the way; and
any problems and issues that arise along the way.
You have to have formal means and methods of performance management and
appraisal (see also the HR chapter), so that people get clearly identifiable statements
of performance, and clear and official statements of what is going well and why, and
what is going badly and why. This is then reinforced through continuous discussions
of performance, which need to take place as a part of daily organizational life.
You should finally note here that, because this is so complex and involved, there is
a huge human pressure simply to look at the company or organization annual report
and let the figures speak for themselves (it is less trouble than doing the job properly;
and it is easier for everyone to understand — even if it is fundamentally wrong).

Chapter 16 Risk
Risk management is a major current issue and so you need to know:

e the nature of risk that is prevalent in all organizations

428
e the nature of risk that is prevalent in organizations that accounts for ‘sectoral risk’
or industrial risk
e the nature of human and behavioural risk
e the consequences of particular decisions and initiatives and actions
ARLU
sdaa
You need to be aware that the greatest risk to all organizations is that, collectively
and individually, staff do not always get around to doing things; or that they concentrate
on the tasks that they do like and avoid the ones that they do not like; or that they could
not be bothered to do things; or that they could not see the value in doing things.
Each of these areas is a point of essential management intervention. The greatest
contribution that anyone can make to effective risk management is to recognize where
things are not getting done, and then to take steps to see that they are done.
Risk management requires expert environmental scanning to assess and evaluate
the problems and issues from all sources; and then to take the earliest possible steps
to address them. This additionally involves deciding whether you are going to:

e accept the risk because it is either very unlikely to happen, or because the
consequences of it happening are very small
e accept the risk and take steps to mitigate it — which you will always do for things
like health and safety issues and employee relations problems
e avoid the risk, which means that once the risk is recognized you decide that the
consequences of the thing happening are too great and so you find alternative
ways of achieving your objectives
Finally, you should note that the improved perfomance of companies in the past
few years has come about at exactly the time that so many of them have introduced
very comprehensive risk management policies. The problem with risk therefore lies
not in recognizing it and having policies to deal with it, but in having the managerial
will to address it and tackle it, and to implement the risk management policies that
do already exist.

Chapter 17 Management and motivation

It is essential to know and understand motivation theories, especially those of Herz-
berg, Maslow and McClelland; and you need also to know the basis of expectancy
theory — the relationships between expectation, effort and reward. You need to know
the differences between motivation and incentives. You need to know the relationship
between intrinsic and extrinsic motivation.
You then need to be able to relate all of this to overall assessments of what makes
people happy and productive at work; and what does not make people happy and
productive at work. You need especially to be able to assess different work groups
and organizations and individual activities from the perspective of:

e why some people are very productive indeed in jobs that are neither well paid nor
glamorous

429
 e why some people who are very well paid and work in (perceived) glamorous
industries and sectors are unproductive
e why some people are willing to work for an organization but others are not
@
Areuituns
saaays You then need to be able to relate all of this to the overall management effort, and
to the HR and people management effort in particular.

Chapter 18 Management on a daily basis

The purpose here is to show how much of what is learned of the principles and prac-
tice of management comes together. The key issues to recognize are:
e the unpredictability of much of the workload of managers
e the need to bring expertise to bear on a wide variety of different situations
e the ability just to take a moment to think things through before choosing a course
of action
e that as so much of management is about achieving things through and for people,
it is essential to have the interpersonal skills and understanding necessary to get
things done with the minimum of fuss
The other factors covered in this chapter are all directly concerned with managing
on a daily basis, and these are:
e the need to promote and develop the attitudes and values that you want to have in
the place of work; and this is reinforced by the need for interpersonal skills,
thoughtfulness, addressing a wide variety of different situations as above
e managing by walking about and being visible as often as possible; and this is
because everything is addressed more fully and effectively face to face than
through e-mail or other correspondence
¢ attending on a continuous basis to performance and its management; and again
recognizing that visibility is likely to mean that performance issues are more
likely to be picked up if management is visible and involved

Out of all this arise the questions of control and direction; and this is as much
about how to control things as what to control. Certainly there is a balance to be
struck between remaining actively involved, without getting in the way of progress.

Chapter 19 Management development

All managers have to learn their expertise; and all managers have to be developed:
this is the basis of all management teaching and learning and education. This chapter
and this part of management practice are about:

¢ continuous attention to expertise and knowledge development

¢ continuous attention to professional development
e relating what is known and understood to the demands of the business
environment and company or organization performance :

430
e relating knowledge and expertise to likely and possible future demands
¢ ensuring that there is a body of managerial (and leadership) expertise that is
going to be of value to all companies and organizations for the future

The problems that arise often relate to the inability of organizations to release staff AeWI
sqaa
for development activities, and/or the inability of managers to take time out to make
sure that they do remain fully up to date and continuously developed. It follows from
this that there are needs to:

¢ integrate the development efforts with work on a daily basis

e structure development efforts so that there is a clearly identifiable and substantial
approach to management development

The means and methods outlined — on the job training, off the job training, busi-
ness school classes, project work, secondments — therefore need to be structured and
organized so that everyone becomes as proficient as possible in their present job, and
has the best possible basis for growing into future occupations as opportunities
become available.
It is also essential to recognize that the need for fresh expertise can be addressed
by bringing fresh talent and ideas in from outside as well as growing them from
within; and the balance of this needs to be assessed and determined as a part of
overall strategic management of the organization.

Chapter 20 Managing in a global and international

environment
The purpose here is to ensure that you know and understand what globalization and
internationalization are, and their effects on the principles and practice of manage-
ment. The first thing to do therefore is to recognize just how far your company or the
company that you are considering is truly global or international. You need to bear in
mind that having a website does not make you a global business; and so you need
some more tangible elements, as follows:

global influence
global physical presence
command of resources
global command of expertise
global reach
to set global standards
You then need to recognize the elements that have to be addressed if you are to be
genuinely effective in a global or international environment:
e cultural recognition and the respect of people’s differences
e language barriers
e time zones

431
 e national borders and boundaries and the issues of managing according to the
laws, customs and habits, and practices of others
e managing across distances
@&
Arewuuns
siaays Finally, you have to recognize the extent and basis on which you are welcomed into
the new and international arena overall, and the locations and countries that you go into
in particular: if it is purely because you are big enough to do so, and to set your own
rules and impose your own ways on different parts of the world, then recognize that you
do have this presence and that you will not always be respected or welcomed. You need
to be honest enough to state clearly the reasons for going into new markets; and if this is
to exploit them and then depart, you need to be honest enough to say so.

Chapter 21 Managing for the present and future

The purpose here is to make informed, educated and (informed) speculative assertions
and assumptions (and guesses) about how things are to develop over the immediate and
longer-term future. In order to do this effectively, you need to know and understand the
present and immediately unfolding state of the world because this is where you are
starting from; and you need to know and understand what is to drive your future:

e the activities that you carry out and their present and enduring value to the
customers that you serve
e the activities that you are intending to carry out in the future and their immediate
and perceived enduring value
e the ability and willingness of management to look to the future and work within
its opportunities and constraints
e specific resource pressures
specific financial pressures
problems in finding and retaining the expertise that you are going to need and want
technology developments and their commercial prospects and potential
technology and IT and their value for the future

You also need to be aware of any specific issues regarding the nature and location
of your activities, and whether things are likely to change for the future.
You need all of the capabilities in strategy, marketing and finance; the ability to
analyse and evaluate the environment, markets, customers and clients; the ability to
organize and direct operations, products and services, in the context of things that are
only partly known and assured. You have to have the capability and willingness to
operate effectively as circumstances change and as existing activities and opportuni-
ties decline and increase, and as new opportunities come your way.
Above all, it is essential to have the attitudes that embrace the future, as well as
the knowledge and expertise to deal with whatever comes up.

432
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health and safety 245 assets and liabilities 261, 263, benevolent authoritative
leadership 179, 180, 182, 184, 266-7, 271, 277 management (System 2) 328-9
190 attitudes 344-6, 354, 415, 418 benevolent autocrat leadership 188
strategy 200 change 55-7, 58 best fit approach 186, 187, 189
accountants 259, 261, 276 culture 101-2, 104, 107, bet your company culture 104
accounts 260, 261-3, 277 109-11, 116 Blake and Mouton managerial grid
achievement 324—5, 326-7, 330, ethics 68, 79, 81 186-7
332-3, 337, 340 globalization 395, 396, 400 blame 131
achievement motivation theory HRM 162-3, 167, 169 blockages 253
325-6 leadership 180 body movement 126-7
achieving things for people 4—5 management development 365, Body Shop 237, 385
achieving things through people 4 Ball, Ue Boeing 204
action learning approach 376 motivation 328-9, 340 Boston Group matrix 232
Adidas 389 negotiations 135 boundaries and timescales 93-4
advertising 120, 124 performance measurement 281, brand advantage 197-8, 201, 212,
marketing 220, 221-2, 226, 282-3, 284, 287-9, 292, 294. ZAG
228-9, 232, 237 risk 301-2, 313 brand leadership 197-8, 201, 212
advocacy 181 attracting staff 9,21, 22, 166-8 brands 270-1, 384
aesthetic issues 26 auditors 261 Branson, Richard 300-1, 347, 360
ageression 140-1 authority 139-40, 142, 156-7, 375 breaks 245
aims and objectives 280-1, delegation 149 bribery 72, 81, 394
289-90, 2934. interpersonal skills 353 British Airways 85, 116, 213, 384
Airbus 204. leadership 179, 182 British Steel 116
airline industry 90, 204, 228, 350, risk management 312 browsers (customers) 31
410 autocratic leadership 184, 188, 189 BskyB 226, 227
British Airways 85, 116, 213, autonomy 56, 68 budgets 259, 261, 204-6, 276, 277
384 axis of globalization 386-7, 397, bullying 108, 109, 162, 308, 394
globalization 383-4, 390 399 dismissal 353
Pan Am 309 influence and power 140, 150,
Virgin 211, 301 back to the floor approach 376 152
airliner industry 204 Badrin Oil Ltd 356-7 bureaucracy 50-1, 105
AIWA 212 Bain consultancy 144 bureaucratic leadership 188
alienation 106 balance sheet 263, 264 business analytics 12
alienative psychological contract 40 banking 248-9, 368, 403 Business Matters 14:
all-comers marketing 222, 236 central 323-4 business model 206

439
 business process re-engineering common sense view of management management development 361,
(BPR) 12, 414 360-1 365-6, 371-4, 379, 415
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business-to-business marketing 220 commitment 9, 18, 86, 117, 345, 402 marketing 224, 236, 237, 238
buyers 27, 40 change 11, 55-6, 58, 59 mergers and takeovers 412
Bynoe Construction 63-4 ethics 79 motivation 322
globalization 393, 396, 398-9 negotiations 135
calculative psychological contract leadership 183, 186, 189 patterns 307, 308
40 management development 361, performance management 91
call centres 386 363, 365, 367, 372, 376-9 performance measurement 289
canteen culture 344 motivation 322-3, 335, 3370, professions 364
capability 381, 387-9 342 risk 303, 304, 305-6, 307-9,
capital resource strategy 205 performance measurement 281, SIG
captive markets 146 287, 288 standards 353
career breaks 170 professions 364 Confederation of British Industry
career management 163, 165, committees 119, 121, 123-4, 145 (CBI) 312
169-70, 368 communication 119-38, 255, 375, confidence 5, 6, 17, 192-3, 403
carpets 88 415 barrier to change 51
cascade effect 121, 122 barriers 125, 128-31, 137 delegation 149-50
Cathay Pacific 384. change 52, 53, 55, 58, 62 dirty tricks 305
central banking 323-4 channels 121-2 ethics 70
change 10-13, 45-63, 205 control 349 elobalization 399
barriers 48-52 culture 106, 107, 112 interpersonal skills 353
culture 52-4, 58, 116, 118 effectiveness 355 leadership 184, 192-3
future 407, 416-18 interpersonal skills 352-3 management development 366,
management development 361, leadership 182 Slot
362 marketing 229 marketing 221, 237, 238
performance measurement 287, MBWA 346 motivation 334-5
288 motivation 328, 329, 341 performance management 92
projects and operations 240, negotiations 133-7 performance measurement 280,
241, 257 non-verbal 126-7, 133 283, 289
change agents 54—5, 63 performance measurement 290 power culture 103
change catalysts 54-5, 63 principles 124—5 risk 305, 307, 308
channels of communication 121-2 risk 302 sustainability 86
charismatic power 141, 146 shareholders 73-4 confidentiality 129
charities 8, 37, 227, 409 strategy 205 conflict 139, 153-5, 156-7, 161,
Chartered Institute of Personnel competition 23, 29, 167, 200, 312 175, 255, 354
and Development (CIPD) 163 change 47, 48 control 349
cheaper labour 387, 389, 394 conflict 153 employee relations 172, 174, 175
cheerleading 181 dirty tricks 304 HRM 160, 161
chief executive officer (CEO) pay five forces analysis 27, 410 integrity 152
77-8 performance measurement 289 motivation 334, 341
child labour 389, 396 complexity 193, 239, 254-5, 256, negotiations 134-5, 137
Chorus Group 116 343 conflicts of interest 69, 72
Churchill, Winston 180, 191 motivation 336 conformity 161
clarity 51, 52, 63, 408-9 compliance 394, 397 confrontational approach 39
classification of motivation 328, compromiser leadership 188, 189 consensus 16]
335-7 computers 89, 90, 94-5, 244. consequential costs 264
climate change 307 conduct and behaviour 4, 18, 73, construction 392
climate of organization 68, 109 305-6, 308, 395-6, 401 consultants 144, 409, 414-15
clothing industry 382, 385, 389, 394 attitudes and values 344—5 circular flow 414
Coca-Cola 124, 212, 234 culture 101-11, 114, 116, 118 McKinsey 78, 85, 115, 144, 385
elobalization 382, 383, 384 ethics 65-6, 67, 69, 71, 73, 75, 82 consultation 119-21, 123, 335, 341
cock-up theory 285 globalization 391, 395-6, 400 change 52, 53, 63
coercive psychological contract 40 HRM 161, 167-8, 170 consultative management (System 3)
collective bargaining 136, 137 interpersonal skills 352 328-9
combined long-term and short-term leadership 180, 183 consultative/participative
view 181 legal issues 162 leadership 184

Aap
consumer marketing 219 change 52-4, 58, 116, 118 demotivators 327, 338, 340, 341,
contingencies 208 characteristics 108 342 |
Xapul
contingency approach 187-92 definitions 102-6 dependency 146-7, 394-5
continuous professional assessment developing understanding 106-9 depreciation 267
3904 ethics 66, 75, 76, 79, 81, 109, deregulation 28
continuous professional development Lidl, = deserter leadership 188, 189
21, 363, 376-7, 416 globalization 391, 393-4, 395— developer leadership 188
management development 365, 6, 399 DHL 252, 384
376-7, 378, 379 HRM 159, 164, 167, 177 differentiation 201, 207
control 252-4, 348-50, 357 management 116 digital marketing 220
mechanisms 114 management development 362, direct marketing 220, 227
methods and means 350 366, 372, 374 direction 199, 201-4
motivation 327 mergers and takeovers 412 directive style leadership 185, 187
contentious industries/products 6 motivation 322, 326, 334, 340 dirty tricks 304-5
convenience customers 3] pressures 109-13 discipline 170, 353, 373
convenience marketing 228 risk 103-4, 301, 306 employee relations 174
cooperative approach 39 SPECTACLES approach 26 HRM 162, 169, 170, 176
core activities 206, 207 cultures 93, 361 motivation 34]
core business 406-7, 409, 410 globalization 381, 382, 388, discrimination 308, 353
core foundation 200-1, 209, 217 391, 395, 398-9 dishonesty 76-7, 81
marketing 223, 236, 238 performance management 92, dislike 149
corporate expansion 390, 400 93, 97 dismissal 114, 162, 345, 353, 373
corporate governance 65-82 currency values 20, 403, 416 communication 137
corporate leaders 190 customers and clients 4—5, 23, 26, conflict 154
corporate manslaughter 21 30A, 221-2 ethics 72, 78, 79
corridor diplomacy 143 barriers to change 50, 51 HRM 162, 170, 174, 176
cost base 239-40 change 55, 57, 59, 61 Disney 384, 389
cost-benefit analysis 272-3 complaints 253, 275-6, 314 distribution 387
cost-effectiveness 6, 86-8, 162, 261 definitions 225 distributive justice 73
cost leadership 197-8, 200-1, 217 dissatisfaction 397 diversification 210, 211
costs 6-7, 13, 263-4, 314, 378-9 Five Forces analysis 28, 410 diversity 92, 96, 163-4
consequential 264 internet 202 HRM 159, 163-4, 176, 177
financial management 260-1, loyalty 220, 234 dominance 146-7, 394—5
263-6, 270-3, 277 marketing 219-5, 228, 234-8 Donovan Commission (1965-67)
fixed 263 perception 234 13
internet 406 satisfaction 55, 57, 59, 279, 292, downward communication 120
marginal 263-4: 412, 418 downsizing 414
performance measurement 281, strategy 201-2, 204-11, 216, 217 Dragons’ Den 14
282, 285 dress code 126
sunk 263, 270, 411 deadlines 208, 239, 240, 349, 351, Dutton Engineering 56-7, 59
switching 387 373
technology 404, 405 Deal and Kennedy 103-4, 106 early warning systems 303-4,
variable 263 decency 73, 162, 353 314-15, 347
counselling 52 decision-making 80, 275-6, 374, earthquakes 403
creative approaches 169, 170-1 3D), She EasyJet 213, 361
creativity 96-7, 281, 327, 402, ethics 67, 79, 80 e-business 57
407-8 financial management 259, 260, economic issues 46, 335, 402-3,
of customers 221 262, 275-6, 277 410, 416-17
criminality 72, 75, 304—5, 315, 353 leadership 182, 184 crises 10, 17
crises and emergencies 208, 239, managerial role 344, 357 risks 303, 307
245, 254, 315-16 risk 310-11, 313 economies of scale 412, 414:
leadership 182, 185, 187, 191, wait a minute 347 eco-political issues 46-7
192 defectors (customers) 31, 33 Edwards, Graham 318-19
crisis leaders 191 delegation 149-50, 351 effectiveness 344, 354-6, 357,
cultural web 113 democratic/participative leadership 388, 407, 408
culture, organizational 101-18, 184 management development 360,
283, 395-6, 413-15, 417 demographics 46 379

4M
 ego gratification 221, 222 change 59-60 Fairtrade 223, 226, 384
Eisenhower, Dwight D. 287 culture 66, 75, 76, 79, 81, 109, fashion industry 384
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elites 132 WAL, fashions and fads 12-13, 385-6,
e-mail 106, 110, 125, 130, 138 dirty tricks 305 409, 414
empathy 346 performance measurement 284, favouritism 150
employee relations (ER) 70-2, 288, 289 fear and anxiety as barriers to
172-5, 176, 177 European Central Bank 323 change 51-2
ethics 66, 68, 70-2 evaluation 52 Federal Express 384
HRM 159, 162, 172-7 excellence 14, 117 Ferguson, Alex 412
misuse of power 150 executive leadership 188 financial matters 259-77
employment tribunals 150, 160 expectations 47, 55-7, 165-9 accounts 261-3
empowerment 414 expert power 141, 143, 144, 147, assets and liabilities 261, 266-7
energy costs 21, 22, 86-8, 310-11, 157 budgets 261, 264-6
403 expertise 256, 268-9, 298, 343, costs 261, 263-4
enthusiasm 344, 352, 357, 398-9 357, 365-7, 370-2, 387-9 decision-making 259, 260, 262,
leadership 181, 189, 195 attitudes and values 345 275-6, 277
management development 362, change 45, 48, 52, 55-6, 58-9, investment appraisal 261, 271-3
BOS) SOD, OU 61-2 numerical data 261, 274-5
environment 19-43, 114, 143, 355, communication 128, 133, 134 performance management 261,
402-4. culture 106, 112, 118 262, 264.
analysing 23-34, 43 environment 20-3, 35, 38, 40, performance measurement 282,
expertise 20-3, 35, 38, 40, 42, 42, 370-2 284, 286
370-2 ethics 69, 72, 78 value and valuations 261,
future 401-4, 407, 416, 418 financial management 266, 267-71
management development 361, 267-70, 276 financial returns 197, 215
362, 366, 370-2 foundations 3-4, 8-12, 14, 16-18 financial transparency 66
management style 38-41, 43 future 401-2, 404, 407-8, 41 1— Five Forces analysis 23, 27-8, 410
nature 20-3 12, 415, 416-18 fixed costs 263
organizational considerations globalization 381, 387-9, 390, flexible working 59, 68, 92, 110,
37-8 394, 395-6, 399 1
performance measurement 287-8 HRM 160, 164—9, 177 change 46, 47, 49, 53, 59
projects and operations 243, influence and power 140-1, HRM 160, 165, 170
245, 256 143=(lS anor motivation 329-30
setting priorities 35-6, 43 leadership 179-80, 182-3, 189 flexibility 345, 347, 351, 357, 374
working 245-7, 254. 90, 195-6 control 348, 349, 350
environmental issues 60, 68-9, 87 management development 359— focus 181, 201
change 47, 50, 60, 62 62, 365-74, 376-7, 379, 415 follow the leader marketing 222
management practice 86, 87, 88, management practice 83-4, Forbes, Colin 317
89 92=3,,90-3 force field analysis 53-4
equality and fairness 162-6, 373 marketing 231, 236 Ford 313, 399
attitudes and values 344-5 motivation 322, 338 forecasts and projections 349, 411
conflict 154 performance measurement 281— formalization 395
culture 112, 117 4A, 286, 288, 290 Four Cs marketing 228-9
ethics 66, 69, 72, 74, 76 professions 3064 Four Ps marketing 227-8, 229
HRM _ 159, 162-7, 170, 176-7 projects and operations 239-40, fraud 304, 305, 315, 353
interpersonal skills 352 243, 249-51, 254-6 friendly or mutual societies 37
legal issues 162 risk 301, 319 Friends Provident 226, 227
misuse of power 150 strategy 201, 204, 205, 210, friendships 148-9
motivation 334, 340 2115213 frozen fish 6-7
standards 353 exploitative authoritative
wait a minute 348 management (System 1) 328-9 Glasgow Rangers foutball club 151
equipment strategy 205 external environmental factors 20-1 global access, reach and coverage
Ericsson 384 PESTLE analysis 25-6 384.
esteem 326, 327, 328, 330, 331, 341 SWOT analysis 24-5 global branding 212, 384
ethical marketing 223, 225-7, 229 global physical presence 382
ethics 65-82, 111, 163, 205-6, facilitation 414 global reputation 382
361, 388 failure 49, 207-8 global thinking 382-3, 397-8

442
globalization 93, 167, 363, Hofstede, G. 102, 104—6 ethics 67-9, 72, 75, 81, 82
381400 Honda UK 335 influence and power 140, 145-6, fil
xapu
axis 386-7, 397, 399 honesty 181, 192 151-3, 156-7
fashions and fads 385-6 hospitals 405, 410, 416 interpersonal skills 353
illusionary 409 see also National Health Service leadership 183, 187, 192, 195,
leadership 398-9 hostages (customers) 31, 33 398
goals and ambitions 102, 112, human assets 269 management development 363,
324-7 human resource management 365, 366, 372
goodwill 266, 267 (HRM) 71, 96, 150, 159-77 management style 357
Google 104, 202, 385 employee relations 159, 162, MBWA 346
governance 364 Qs), Wz wait a minute 348
government statistics 274 strategy 160-1, 205, 215 internal environmental factors
governmental connections 67 humiliation 150, 154. 22-3
grand strategy 205 humility 398 internal marketing 220
grapevine 121, 122, 131, 355 hurricanes 315-16 internal strategies 205-6
grievances 24, 170, 314, 341, 353, internalized psychological contract
356 IBM 104, 384 40
communication 131, 132, 137 IKEA 211 International Monetary Fund (IMF)
conflict 156 immediate environment 21 BB23
culture 114 immorality 222 internationalization see
employee relations 173, 174 impartiality 373 globalization
ethics 71, 79 implementation of strategy 214-16 internet 89, 202, 208, 247, 384,
HRM 169, 170, 176 improvement 9-10, 56 405-7
legal issues 162, 170 inappropriateness and change 57
grow your own or buy in 367, 379 ineffectiveness 188, 189 future 402, 404, 405-7, 416
erowth strategies 209-10 incentives 323-4, 338-40, 342 location 228, 242
incremental strategies 213 marketing 220, 228, 229
Haji-loannou, Stelios 361 individualism/collectivism culture interpersonal skills 351-3
Halitax Bank of Scotland (HBOS) 105 intranet 404
164, 305 Indonesian Institute for Children’s inverse pyramid 19]—2
Hall, Peter 412 Advocacy 389 investment 261, 271-3, 410-12
Handy, Charles 365 induction 167-8, 176, 345, 366, change 57-8
Handy and Harrison 102-3, 106 379 isolation and inclusion 144-5
harassment 150, 152, 162, 308, industrial marketing 220
Bos Industrial Society 412 job and work design 349
hard line 345-6 industry structure analysis 27-8 job and work development 169
hard work 181 influence and power 139-58, 187, job evaluation 12
Harrods 252 321, 383-6, 387 job satisfaction 332, 333
hazardous substances 162, 244, centres of power 142-5 jobbing or unit production 247-8
245 conflict 153-6 John Lewis 39
health and safety 144, 240, 244—5, culture 102-3, 114 joint ventures 112-13, 393-4.
256 effectiveness 355 globalization 383, 390, 393-4,
accidents 308 management development 375 395, 400
legal issues 21, 162, 244—5, 256 misuse 150-1 justification 66, 82
standards 353 performance measurement 295 just in time approach 242, 251-2
working environment 245-7, information 286-7, 374 JWT 374
254, innovation 28]
Heinz 212 inspiration 181] Kanter, Rosabeth Moss 14:
Helmont Limited 6-7 Institute of Directors 361 Kennedy, John F. 141
Herzberg, F. 331, 333 Institute of Management 412 key factors 375
hierarchy 148, 377, 417-18 institutionalization 395 key relationships 283
communication 121, 122, 128 integrity 75, 151-3, 415 Klein, Naomi No Logo 389
culture 102, 103, 104, 106 attitudes and values 346 knowledge and understanding 91,
hierarchy of needs 328, 330-1 communication 119, 120, 125, 366, 399
Hilton hotels 385 Be creativity 407-8
Hitler, Adolf 141 conflict 154, 155 environment 21, 402-4:
HIV and AIDS 172 culture 114, 118 future 401-2, 404-8, 416-18

443
 internet 405-7 marketing 228 Manchester United football club 9,
management development property 269-70 412
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359-61, 365-6, 368, 370, 378 logos 369 manners, lack of 150
management practice 83-4, long-term effectiveness 199, 201, manufacturing and globalization
85-7, 89-91, 97-8 204-6, 208 387
technology 89-91, 404—5 long-term/short-term orientation 105 marginal costs 265-4:
Kurt Salmon Associates 311-12 love objects 221 Mariner 1 space probe 309
loyalists (customers) 30-1, 32, 33 market and activity shifts 10
labour costs 10, 13 loyalty 117, 345, 394, 397 market crises 10
cheaper 387, 389, 394. loyalty matrix 33 market domination 212—13
children 389, 396 market led marketing 223, 236
language 125, 128, 132, 135 macro-organizational issues 46, 76 market position 28]
lateral communication 120 macro-political issues 46 market research organizations 274
leader as servant 191-2 magazine launch 317-19 market and social segmentation
leadership 179-96, 398-9, 4.18 maintenance factors 169-72 224-5
creativity 407-8 management defined 3, 17 market standing 281
environment 402-3 management demands 102 marketing 219-38
spectrum 184, 185 management development 282, mixes 227-33
styles 183-7, 196 359-80 public relations 235-6
traits 179, 182-3, 194, 195 costs and benefits 378-9 research and development
legal issues and legislation 111, different approaches 367-8 234-5, 237
WA 220 22GIN expertise 359-62, 365-74, segmentation 223-7
employee relations 172-3 376-7, 379, 415 strategy 205, 207, 219, 222-3
environment 19, 21, 22 management groups 49, 50 markets and change 47
ethics 66, 68, 75 management information systems Mars chocolate 282
health and safety 21, 162, 349 masculinity/femininity culture 105
244-5, 256 management/leadership Maslow, Abraham 328, 330-1
HRM 162, 170, 177 relationship 14 mass production 248
PESTLE analysis 25-6 management by objectives 35 Matalan 311-12
SPECTACLES approach 26 management and organization Matel 389
standards 354 development 415-16 Matsushita 212
legal, rational and position power management research and literature Maxwell organization 81
142 13-14 McClelland, D.C. 325-6
legal status 37-8, 41 management style 357, 371, 413, McDonald’s 124, 212, 250, 313,
Levi Strauss 247-8 415 368, 384.
Lewis, Ken 56 culture 102, 107, 112, 117-18, McGregor’s two-way theory 332-3
Lidl 228 413 McKinsey Management Consultants
Likert, Rensis (System 4) 328-30 effectiveness 355 78, 85, 115, 144, 385
Lloyd’s Bank 151 environment 38-41, 43 me tov marketing 222, 236
loan capital 263 HRM 166, 177 measurement and evaluation
lobby groups 50, 142 integrity 357 213-14, 215, 216, 217
local authorities 37, 151, 274 interpersonal skills 351 media 50, 130-1, 235, 304, 305,
local branding 212 leadership 184-5, 186-7, 314
local partnering 391-2, 396, 400 188-9, 196 communication 125, 130-1,
local thinking 398 marketing 236 137, 138
locality thinking 398 motivation 334, 340, 341 meetings 124, 352, 354, 372
location 93-5, 239, 242-4, 338 projects and operations 255 communication 119, 121, 124
barrier to change 48 strategy 203 influence and power 144, 145
barrier to communication 128 managerial barrier to change 50 managerial role 343
culture 101, 107, 110-11, managerial issues 57-61 time management 351
114-15 managerial performance mentoring 375, 376
globalization 381-6, 388, measurement 282 mercenaries (customers) 31, 32,
390-400 managerial role 343-4, 357 33, 236
HRM 165, 166, 167 managing by walking about mergers and takeovers 113, 374,
influence and power 145-6, (MBWA) 92, 346-7, 352 390-1, 412-13
147-8, 157 continuous performance beneficiaries 38
internet 228, 242 assessment 354 growth strategy 209-10

444
 management development 362 one-way communication 120 perfection 52
risk 303 openness 288, 371, 415 performance appraisal 168, 286, Xapu
Microsoft 382, 383, 384. operational leaders 190 349, 367
middle management 417 operational risk management 302, performance management 91—7
Millennium Dome 34. 307-9, 312 performance measurement 168,
misconduct 170, 174 opportunities 54, 223, 286 279-96
missionary leadership 188, 189 developing further 391-2 performance targets 208
MMRC 374 molivation 323, 325, 327-8, peripheral activities 206-7, 409
monitoring 52 332, 334, 340 personal management development
moral marketing 223, 225-6 risk 299-300 399
Morrisons 213 strategies 200, 203, 207, 210, personal protective equipment 172,
motivation 4, 297, 321-42, 346, 213-17 244.
302 ‘Opulence’ 317-19 PESTLE analysis 23, 25-6
definition 322 organizational branding 212 Peters and Austin on leadership
HRM 165, 166 organizational branding diversity 194,
incentives 323-4, 338-40 212 Phelps, Mary 348
major theories 327-37 organizational considerations 37-8 physical and coercive power 140
management development 375, organizational management piggy-backing 392
317, 319 development 359 pilfering 76, 304, 309
risk 305, 308 organizational performance 402 pioneer leadership 189
multinationals 386, 394 organizations defined 3-4, 17 pioneering marketing 222, 236
see also globalization outcomes 208-9 planning 286-7
Murdoch organization 210 outsourcing 13, 316, 392 pluralism 39, 160-1
mutual approach 39 globalization 383, 389, 390, policy 199, 201-4, 205-6
mutual interest groups 144 392, 400 political issues 20, 145-9, 303,
overmighty/over-influential people 307, 311, 402-3
Napoleon Bonaparte 141 50, 142, 143, 146 crises 10, 17
national branding 212 PESTLE analysis 25-6
National Health Service (NHS) 22, packaging 60, 74, 229, 233 SPECTACLES approach 26
366, 410 Packard approach 221-2 potential entrants 27, 410
projects and operations 250, 253 Pan Am 309 power culture 102-3, 114
technology 90, 405 Panasonic 212 power of customers 221-2
natural disasters 10, 315-16, 403 participative management (System 4) power/distance culture 104—5
need to know communication 129 329-30 praise 352, 354
negativity 344-5 partnerships 383, 392 prejudices 109
negligence 21, 128, 315 passing trade (customers) 31 prescriptive style leadership 185,
negotiations 133-7 paternalism 161 187
News Corporation 226 pay and rewards 20, 23, 164-6, 401 pressure 84—5, 87, 98
Nike 151, 348, 389 change 55 culture 106, 108, 109-11
Nissan UK 110, 116, 159-60, 385 dirty tricks 305 internal 111-12
Nokia 384 ethics 66, 68, 71, 74, 77-8, 79 legal and ethical 111
non-governmental organizations 37 financial management 268, 269 pressure groups 142-3, 144
non-verbal communication 126—7, globalization 396 price leadership 211
133 HRM 164-8, 170, 176 prices and charges 146, 147,
normative psychological contract influence and power 152, 153 236-7
40 legal issues 162 marketing 225, 26, 228-9,
Northern Rock 237 management development 365, 236-7
not-for-profit sector 8, 37, 280, 409 376, 378 Primark 241-2
marketing 220 motivation 322-6, 332-5, primary activities 375
338-42 primary and secondary data 274—5,
O02 Arena 34 need for 326 277
occupational health 162, 169, performance measurement 283, priorities 35-6, 43, 145-6, 280-1,
171-2, 176, 353 285 289-90, 292, 297-8
occupational management professions 364: communication 123-4
development 359 risk 300-1 control 349
O’Leary, Michael 361, 412 top and senior managers 77-8 cost-benefit analysis 273
Olympic Games 256 people/person culture 103 creativity 408

445
 culture 107 project work 249, 375, 376 remunerative psychological contract
financial management 260, 272, projects and operations 239-57 40
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DIB, DUS promotion paths 361 repetitive strain injury (RSI) 172,
globalization 390, 398 property 267-8, 269-70 393
management development 361-2, psychological contract 39-41, 43, reporting systems 349
365-6, 371-3, 375, 378, 415 337-8 reputation 6, 266, 271, 304, 382
performance measurement motivation 322, 334, 336-7, globalization 382, 384, 388,
279-81, 283, 289-90, 292, 295 337-8 390-1, 393, 397
strategy 199, 200, 204, 214, 217 psychological distance 144, 147 valuation 267, 269
time management 351 communication 120, 127, 128, research and development 214—15,
privatization 38, 362 129, 131 266
probity 75 culture 105, 106, 111 marketing 234—5, 237
problem-solvers 71, 174, 191 public inquiries 274. resource power 141, 143, 145, 147
process culture 104 public relations 235-6, 237, 417 resources 9, 88-9, 250-2, 282,
process and flow production 248-9 public services 37, 255, 356, 409, 387-9
Procter & Gamble 384 411-12 conflict 154
product testing 68-9 access to work 243 control 349
productivity 247-50, 328-9 change 61 financial management 259-61,
products and services 197, 229-30, cost-benefit analysis 273 265-6, 276
270, 275, 410, 418 employee relations 172 future 401, 403, 407, 418
classification 230-1 ethics 69-70, 81 globalization 381, 383, 387-9,
costs 263-4 financial management 259 390, 393-4, 400
creativity 408 just intime 251 leadership 180, 181
dirty tricks 304-5 leadership 193, 195 management practice 86, 87,
enhancement 372-5 marketing 220 88-9
financial performance 264 performance measurement 280 performance measurement 281,
globalization 383, 384, 390, process and flow 248-9 282, 289, 290, 292
391, 393 profit-making 7-8 projects and operations 239,
internet 406-7 strategy 199, 201, 210 240, 250-2, 256
investment 271-2, 411 technology 246 risk 301
lifecycles 231-3, 237, 238 public standing 283 strategy 200-7
management development 361, respect 4, 145, 148, 149, 150, 347
371, 372-5, 376 Qantas 384 communication 126, 129, 130,
marketing 219-23, 225-7, qualifications 244, 364, 368-70 135, 138
229-33, 236-8 management development 361, culture 109, 112,117, 118
performance measurement 279, 365, 368-70, 376 ethics 71, 73
284, 287, 288 quality 55-7, 183, 240 global leadership 399
projects and operations 239-41, quality of working life 66, 120, 169 leadership 183, 184, 187
257 management development 365,
risk 312, 314, 316-17 radicalism 39, 161 366
strategy 200-2, 204-8, 210-11, radio station 71 motivation 340, 341
PANES rational economic motivation 335 responsible thinking 398
valuation 267, 270 Reagan, Ronald 127 responsibility 287-9, 375, 397, 418
professional management recognition 324—5, 327, 333, 338, change 50, 56-7, 60-1
development 359 352 communication 120, 132, 136,
professional managerial meetings recruitment of staff 162, 166-8, 176 138
83-4 Reddin’s theory. 188 culture 110, 111, 114
professionalism 322 redeployment 49, 51 environment 19, 26, 34, 35, 37,
professionalization 14—16, 65, redundaney 49, 51 40-1
362-3, 415 re-entry 28, 410 ethics 66, 67-8, 70-7, 81
management 362-3, 364-5, reflective practice 14, 408 foundations 5, 8, 12, 14, 18
376, 379 reinsurance of worth 221 globalization 394, 397
professions 364—5 rejection 395 health and safety 245
profit 6-8, 17, 18, 262-3, 264 religion 37, 66 HRM 161, 166, 168, 170, 171,
definition 6 relocation 48 173
profitability 283 remote workers 92, 94—5, 106, influence and power 139-40,
progress, need to 327 316, 329-30 142, 146-9, 151, 153, 157

446
 leadership 179, 182, 184, 190-1, shareholders 4—5, 10, 38, 86, 280 stories, myths and legends 115
193, 195-6 change 50, 55 strategic leadership 190 ©)
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management style 357 ethics 66, 73-4 strategic risk management 302-6,
motivation 338 financial management 259 OG, Sy
projects and operations 239, future 409, 413 strategy 181, 199-217, 275
245, 255 globalization 385, 391 change 59
results 181 leadership 190, 195, 196 cost-benefit analysis 273
retail industry 404 risk 302, 304 marketing 219, 222-3, 236, 237
retention of staff 9,21, 22, 166-8, single event and errors 307, 308-9, generic 200-1, 222, 236, 238
323-4 BZ implementation 214-16
retrenchment 210 size 107 strength of performance 35-6
return on investment 209, 271, skills 21, 365 strengths 286
272, 411 interpersonal 351-3 stress 162, 171, 174, 353
change 47-8, 55 smoking 172, 229, 234 HRM 162, 169, 171, 172, 176
ethics 66 social issues 20-1, 45, 336, 410 strikes and disputes 156, 160, 162
performance measurement future 402, 403, 410 subcontracting 392, 396
280-2, 286 motivation 322, 324, 327-8, subjective element of strategy 206
returner schemes 171 330-1, 324, 336 substitutes 27-8, 303, 410
review of change 52 PESTLE analysis 25-6 success as barrier to change 48-9
reward power 141, 143 SPECTACLES approach 26 success, need for 326
Richer, Julian 361 social segmentation 223-4, 225 succession 360, 377-8
Richer Sounds 361 Sony 8, 212, 384, 387 Sun newspaper 317
right first time, every time 12 SPECTACLES approach 26-7 sunk costs 263, 270, 411
risk 297, 299-319, 325, 353 spoken communication 120-1 supermarkets 201, 202, 211, 212,
analysis 310-12 staff excellence 55-6, 59 368, 416
assessment 313, 319, 349 staff handbooks 174 supply led marketing 223
culture 103-4, 301, 306 staff leave 348 supply and suppliers 4—5, 250-2,
financial management 260, 272, staff led marketing 223, 236 406
DB PUSS staff performance measurement Five Forces analysis 27-8, 410
performance measurement 286 282 globalization 387, 390, 391, 397
strategy 203, 207, 214-16 stakeholders 74—5, 255, 283, 376, survival 66, 69-70, 354-6, 357
rites and rituals 114, 115 409-10 sustainability 86, 87, 88, 89
road haulage 245 defined 5-6 Swordfish, USS 309
Roddick, Gordon and Anita 237 ethics 65, 66, 68-70, 72-5 SWOT analysis 23, 24-5, 286
role culture 103 financial management 260 synergies 412, 414
Rolls-Royce cars 222 future 406, 407, 409-10
routines and habits 114-15 influence and power 143, 147 targets 91, 208
Royal Bank of Scotland (RBS) 151, leadership 190, 192, 195, 196 motivation 323, 328, 333
305 performance measurement 283, performance measurement 281,
rules and regulations 102, 103, 290, 295 286, 289-91, 294,
105, 107, 108 risk 302, 303, 305 task culture 103
Ryanair 213, 228, 313, 361, 412 strategy 202 tasks 373, 375
standards 353-4, 356, 357, 383-4 team leaders 191
Sainsbury’s 213, 228 Starbucks 223, 256, 384 technology 21, 89-91, 98, 246-7,
Sandals 252 statisticians 259, 276 270, 404—5
scales of production 247—50 status 148, 166, 247, 365, 372 advance 57
scapegoating 131, 149, 150, 285 communication 124, 127, 128, barrier to change 49
second in command 189, 190 129 change 10-11, 45, 47, 53, 57,
secondments 375-6 conflict 155 63
secrets 132 culture 102, 103, 106, 114, 115 communication 130, 138
sectoral issues 26, 274, 303 global icon 384 culture 101, 106, 112
security of customers 221, 222 influence and power 145, 147, employee relations 174
segmentation 223-7 148 financial management 260, 264,
selection of staff 162, 176 MBWA 347 266-7, 270, 275
self-actualization 330, 331, 336 motivation 325-7, 331-4, 341 Five Forces analysis 28
Semco 39, 250, 385 professions 364 future 402, 404-5, 411
severance payments 78 Stevens, John 348 elobalization 382-7, 394

447
 HRM 177 management development vested interests 124, 130-1, 142
management development 360-3, 365-6 change 49, 50, 51, 53, 55
@
xepu|
361-3, 365, 374, 379 performance measurement 282, viability 8, 17, 18
marketing 223 288 victimization 140, 152,308, 353
performance measurement 281, professions 364: ‘conflict. 154 :
286, 287, 290 succession and transformation culture 108, 109
PESTLE analysis 25-6 377 legal issues 162
projects and operations 239, working environment 246 misuse-of influence and power
246-7, 249-50, 256 traits and characteristics 108, 179, 1505 O77 Sper yg
remote workers 94—5 182-3, 194, 195 viral marketing 20. WE
risk Sli 12316 transcendence 395 Virgin Cola 234°
scales of production 249-50 transformation 377-8 Virgin Group;115, DAME 212,
SPECTACLES approach 26 transformational leaders 189 300-1, 347, 360
strategy 200, 201, 202, 214 transnational organizations 37 virtual organizations “1S92, 95;
virtual organizations 95 transport 21, 31, 75, 87-8, 403 97
technology led marketing 223 change 45, 47 visibility 357; 371, 372, “15
telecommunications 21 health and safety 245 MBWA 346-7;352 «
terrorism 10 location 242-3 vocational pages ee 3369
terrorists (customers) 31, 32, 33 technology 89
Tesco 213, 228, 416 trappings 128, 129, 148, 247 wait a iii falling= oe
theft 304, 305, 309, 353 culture 102, 115 Waitrose 223 Bes is
pilfering 76, 304, 309 travel agent 416 Walmart 92,3808 ° +:
Theory X and Y 332 trust 184, 187, 221, 346, 353 i on Want ea
thinking performer 14 delegation 149-50 waste and éffliients 25-6, 47, 50,
think-tanks 145 negotiations 134. 60, 86-8
Thompson, J. Walter 385 Turley, Ernest 83-4 control 253
threats 286 turnover 341 ethics 74—5
time issues 204, 271-2, 273, 274 two-factor theories of motivation globalization 387, 394
performance measurement 289, 328, 331-5 health and safety 245
291 two-way communication 120 weaknesses 286
projects and operations 240-1, weather extremes 315-16, 403
255, 256 uncertainty 10-13, 299-300 websites 405-6, 409, 416
time management 350-1, 357 uncertainty avoidance culture 105 Weinstock, Arnold 314—15
TNT 384 Undercover Boss 14 wild and wacky risks 313
tobacco industry 234 unfreezing — transforming — willingness 4, 9, 381, 387-9
total quality management (TQM) refreezing 53-4 window-shoppers (customers) 31
12 uniforms 126 Winston, Robert 412
tough guy/macho culture 103-4: Unilever 384. work hard/play hard culture 104
toxicity 131-2, 137, 151-3, 157 unitary approach 38-9, 160 workforce structure 283
Toyota 116, 387 United Nations (UN) 37 working environment 245-7, 254.
trade unions 67, 144, 161, 173, university 90 working hours 162, 396
355-6 university administration 152 working patterns 59, 170-1, 347,
barrier to change 49, 50, 51, university of life 360-1 351
change 52 upgrading equipment 21 change 47, 56-7, 59
culture 112, 114 upward communication 120 control 254, 349
trading environment 20 motivation 328, 329-30
traditional power 14:1 VAIO 212 working time 244.
traditions and roots 48, 222 valuations 261, 267-71, 273 World Bank 323
culture 105, 106, 112, 114 values 166, 183, 344-6, 371, 396 World Health Organization (WHO)
training 93, 169, 269, 378, 388 change 55-7, 58 oe
change 48, 49, 58, 59 cost-benefit analysis 273 written communication 12]
employee relations 174, 175 culture 101, 105-9, 111-12,
health and safety 244—5 115, 117-18 Yacoub, Magdi 412
HRM_ 160, 165, 168-71, 176-7 variable costs 263
leadership 193, 195 vertical integration 210

448
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 ‘Pettinger has captured the essentials of organizations and management
studies in this concise and highly informative introductory text. It is
thoughtful, well structured and highly accessible to students.’
~ Dr Claire Hookham-Witllams, University of Liverpoo!, UK

‘A comprehensive overview of management, giving business students

anesOjed
Ue)})}IWWDeW an understanding of the key challenges and opportunities facing managers
in the 21st century with a practical focus on issues at both micro and
macro 'levels.’-— Dr David Banner, University of Westminster, UK

Designed with the student in mind, this book provides all of the essential
information for a solid grounding in contemporary management. Pettinger
introduces major management functions in an accessible and engaging
style that helps students get to grips with key theories and concepts.

Key features:
» Coverage of contemporary topics such as responsibility and
accountability, virtual organizations and sustainability
® Broad range of real life case studies
« Expert View and Best Practice features aid student learning and
understanding
* Comprehensive student and lecturer resources available on companion
website

Packed full of key term definitions, lively examples and easy to unde
academic theory, Management:A Concise Introduction is essential re
for all students studying courses in introductory management.

iichard Pettinger is Principle Teaching Fellow at University Col

London, UK. He is director of a number of undergraduate progra
and is currently Admissions Tutor. He has written over 30 book
recently Managing for Dummies.

Visit www.palgrave.com/business/pettingermanagement
additionat online resources.