People Management Represents the Catalytic Condition X-Factor - Assignment Example

Student’s Name] [Instructor’s Name] [Class] The X Factor Critically analyse and evaluate how leadership, motivation and rewards might contribute to this "essential X factor" for both employees and organisational high performance. Introduction The CIPD (2001) reports that leadership, employee motivation and pay systems that are based on rewarding employees can significantly contribute to the level of productivity and performance which is seen at various enterprises. A critical evaluation of this statement is possible by looking at the example presented by Apple Inc. and GE which has been given the title of the most admired company in the world by Fortune magazine (Demos, 2006). The case of GE shows that GE has the X factor which is provided by a combination of the leadership values at GE as well as the motivational and reward management policies which are followed at the company. There is no other company in the world which is as well respected as GE in terms of business practices (Demos, 2006). Of course the company has had some management related issues in the past but in recent years, it has been given the highest awards and accepted as one of the global stalwarts of good management methods (Fisher, 2006). The respect that GE has owes a lot to the way in which GE manages and creates leaders at the company. These leaders help to provide motivation for GE employees and reward them for high performance levels which in turn, make GE more productive (Welch, 2005). While GE is a large company with more than 300,000 employees, Schmitt (2001) notes that the policies used by GE can be applied for smaller firms as well. This is because GE is in a variety of businesses where the same values are applied across the board. The company has entered markets which related to high technology, financial services and even the manufacture of medical equipment and it maintains a leadership position in those fields. Most importantly, while GE works in more than 150 countries around the world, its core values remains the same regardless of the fact that it is working in Australia, the UK, the United States of America or India (GE, 2006). Leadership GE appears to be using the functionalist paradigm of management which suggests that people will behave rationally. The paradigm also suggests that organizational behaviour can be understood through experimental observation and by evaluations of created hypotheses (Boxall and Purcell, 2003). This paradigm is certainly applicable for GE since its leadership system and the way in which the leaders of the company interact with the employees is based on rationality. This rationality also becomes evident for rewarding and motivating employees but Leadership has to be considered first since it starts from the top. Jack Welch is the former CEO of GE and his leadership style as well as his leadership policy has been maintained at GE even after his departure. In fact, as reported by Colvin (2006) little has changed since his exit because the systems established by him were continued in place with only minor modifications to reflect the changing times. Welch has shared his experiences concerning management in his book titled Winning and his leadership values have been recognised by Business Week since it considers him to be America’s Best Manager (Byrne, 1998). Welch (2005) agreed with analysts such as Byrne (1998) and Schmitt (2001) who in turn make several points which are common with what House (2004) has stated about leadership. According to House (2004) the quality of leadership is, “The ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizations of which they are members (House, 2004, Pg. 15)”. If this definition is used, then Jack Welch managed to lead GE quite effectively since his leadership has been credited as one of the primary reasons why GE went from being a company in financial trouble and low investor confidence to become the most admired company in the world (Colvin, 2006). Welch (2005) gave his own approach to leadership which seems to be based on the trait theory of leadership when he gives the eight rules he follows for leadership. These eight primary rules as suggested by Welch (2005) are: 1. Leaders should upgrade their followers by using opportunities to become coaches and mentors to evaluate and improve their abilities. 2. Leaders share the vision of the company with all employees and embody the vision themselves. 3. Leaders are always positive and are always optimistic. 4. Leaders show integrity and remain transparent with the employees. 5. They should have the courage to make employees unhappy with decisions that may be considered unpopular. 6. Leaders look for answers and demand results from employees. 7. They inspire risk taking behaviour in individuals and set examples to show that they learn from their mistakes. 8. Leaders celebrate their victories. These leadership values are deeply connected with the idea of charisma which is a trait of a leader. Charisma is defined by House (2004) to be a rare quality which is seen in some leaders that are able to create devoted followers to their cause . These followers and other employees who become a leader’s personal friends and have complete faith in the leader’s vision are simply essential for companies like GE (Welch, 2005). However, creating such employees can only be done with good leadership and an informal style of management as applied at GE. Byrne (1998) explains this by saying that: “Making the company ''informal'' means violating the chain of command, communicating across layers, paying people as if they worked not for a big company but for a demanding entrepreneur where nearly everyone knows the boss. It has as much to do with Welch's charisma as it has to do with the less visible rhythms of the company--its meetings and review sessions--and how he uses them to great advantage.” (Byrne, Pg. 1, 1998) Apple computer also has a leader at the helm of the company who motivates and energises the company with his vision. The history of computer technology has seen major companies ousted and minor players become market leaders. While many have come and gone over the decades, Apple comes across as one company which has stood the test of time to create convincing products that have given it an image of innovation. Apple Computers is based in America with operations around the world. Its global sales stand at nearly seven billion pounds and it has had more than 14,000 people working for it (Forbes, 2006). The main products of the company are PCs , portable media devices, software and associated hardware. No mention of the company can be complete without discussing the cult of personality around its founder and CEO, Steve Jobs. Jobs founded the company, was removed from the head of the company and then was called back to lead it again (Beckman & Hirsch, 2001). Writing for The Guardian, Smith says that: “He is a 'demigod', whose product launches are adulatory affairs regularly likened to religious revivalist meetings. The Jobs life story - humble birth, rise and fall, then miraculous comeback - has even been likened by Apple fanatics to the heroic myths of Odysseus, Krishna and Christ (Smith, 2006, Pg. 1).” As a part of the X factor in Apple, it is difficult to separate Steve from the company since Steve is the driving force behind the technologies brought to the market by Apple (Smith, 2006). The behaviour of the company as well as the individuals can be considered anti-organisational behaviour since the personality of Steve Jobs appears to take the radical humanist perspective towards the management of individuals (Boxall and Purcell, 2003). At the same time, his ways of leading the company appear dangerously draconian. By taking an outside perspective towards Apple, it is clear that Apple takes guidance and puts a lot of trust in one man who becomes the power that drives the company. Jobs’ hold on the company is unquestioned since he is known for firing people working for the company instantly. His presence on the company campus means that it is a time in which anything can happen anywhere (Deutschman, 2000). An organisation may take a lot of time for both hiring and firing individuals since there may be legal questions that need to be answered but since Jobs works in anti-organisational manner to create the X factor for Apple his managemtn sytle becomes a little more unique. As per the description given by Deutschman (2000) Steve Has: “Total disregard for the hierarchical chain of command. He would remember what several hundred people did and call on whomever he needed, always bypassing their managers. It was as though everyone in the company reported directly to Steve himself (Deutschman, 2000, Pg. 1).” This management style creates the X factor for the company through leadership which supports the idea of innovation which is the mainstay of Apple Inc. Apple and Steve Jobs have removed social constraints and challenge their employees’ limits by ignoring middle managers and breaking the chain of command. This may seem inappropriate behaviour to some, but the end results of continuous innovation and the profits made by Apple under such leadership can silence many objections (Forbes, 2006). Motivating and Rewarding These two components of the X factor are certainly connected with each other since motivation comes with the promise of rewards and giving rewards to an individual is likely to motivate them to seek higher rewards. At GE, the rewards process seems directly linked with the content theory of motivation and is also focused on Maslow’s Hierarchy of needs. Under the hierarchy, the first to the third order of needs might be fulfilled by having enough money but fourth and fifth order needs might not be satisfied by just a salary. GE recognizes this and uses a peer based reward and recognition system (Welch, 2005). The money associated with the award is nominal but it is the recognition of a job well done which is helpful in motivating employees and creating the X factor at GE. When it comes to money, GE combines recognition based awards with a cash award for the employee even if such an award comes from outside the company. Welch (2005) describes the case of a scientist who won an award in science while he was employed at GE. Welch got the company board to connect the scientist’s award with a significant cash bonus and notes that even the Nobel peace prize comes with a measureable dollar figure attached to it. The process of rewarding employees is directly connected with their performance and output for the company. GE forcibly ranks employees into three segments where: “The top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the stars at a company that differentiates. They are the best and are treated that way (Welch, 2005, Pg. 41)”. The rest of the employees are broken up into the middle 70% and the bottom 10% and then treated according to company policy. GE’s differentiation system has copied by some of the top names in the business world. Their ranking system for rewarding employees is used by Microsoft, HP, Dell, Sun, Cisco Capital One, Intel and PepsiCo as well as many others. Sun goes as far as exactly mirroring GE’s system to reward employees by saying that that the top twenty percent are superior, the middle seventy percent are ‘Sun Standard’ and the bottom ten percent are underperforming (Grote, 2002). The get the same X factor as GE, a fourth of all the organisations in the Fortune 500 have established this process as a means of motivating their employees with cash rewards and with other benefits such as public recognition (Grote, 2002). Perhaps the most interesting feature of GE’s motivational plan is the public disclosure of employee evaluations at the company. Divisions within the company are required to list by name, position and compensation the cash bonuses given to the top employees as well as the bottom level employees (Schmitt, 2001). Such public disclosure may be difficult to adjust to but Welch (2005) defends his decision by saying that people always seem to know this information anyways. By declaring it publically, the information can be used as a method for motivation and supporting the creation of the X factor since it lets all employees see which persons are the stars of their divisions. On the other hand, it also informs employees concerning those who are under the axe (Welch, 2005). As recommended by Boxall and Purcell (2003) GE appears to be using rewards as a tool for strategic management as well as creating motivation for their employees. In this sense, fear is employed as a motivating factor since GE works as a meritocracy where there is no space for poor performance. Every Year, the bottom ten percent of the company strength is removed from service, which also allows fresh individuals to take replace non-performing employees quite rapidly. Individuals may also be asked to move to different departments within the company to seek better matches for their abilities (Welch, 2005). Conclusion Given the examples of management practices, reward mechanisms, motivational tools and the leadership processes used at GE, it is easy to see that these elements go a long way towards creating and contributing to the X factor which helps companies as well as individuals become high performers. Leadership and Motivation remain two essential aspects for any organisation especially when it operates on a scale which is comparable to GE. The company shows that it has the X factor and it is to their credit of the company that their motivational techniques and leadership values have been emulated by many other organisations around the world. As one of the most admired companies with efficient management systems in the world, GE remains a positive beacon for companies that wish to improve their own systems. Word Count: 2,556 Works Cited Beckman, D. and Hirsch, D. 2001, ‘Mac Is Back in Town’, ABA Journal, vol. 87, no. 8, pp. 70-72. Boxall P. and Purcell J. 2003, Strategy and Human Resource Management, Palgrave & Macmillan: New York Byrne, J. 1998, ‘How Jack Welch Runs GE: A Close-up Look at How America's #1 Manager Runs GE’, BusinessWeek.com, [Online] Available at: http://www.businessweek.com/1998/23/b3581001.htm Colvin, G. 2006. What Makes GE Great? Fortune, vol. 153, no. 4, pp. 90-96. Demos, T. 2006, The World’s Most Admired Companies. Fortune. vol. 153, no. 4, pp. 72. Deutschman, A. 2000, ‘The once and future Steve Jobs’, Salon.com, [Online] Available at: http://archive.salon.com/tech/books/2000/10/11/jobs_excerpt/index.html Fisher, A. 2006, ‘America’s most admired companies’, Fortune, vol. 153, no. 4, pp. 65-76. Forbes. 2006, ‘Steven Jobs’ Forbes.com, [Online] Available at: http://www.forbes.com/lists/2006/10/HEDB.html GE, 2007. ‘General Electric’. ge.com [Online] Available at: http://www.ge.com/en/ge/morefaqs.htm Grote, D. 2002, Forced Ranking: Behind the Scenes, Across the Board, vol. 39, no. 6, pp. 40-46. House, R. 2004, Culture, Leadership, and Organizations. Sage. Kerr, S. 1996, Risky business: The new pay game. Fortune, vol. 134, no. 2, pp. 94-97. PC Magazine. 2006, ‘Low-Cost Apple laptop is very enticing’, PC Magazine, vol. 25, no. 13, pp. 31-32. Schmitt, J. 2001. Welch has a lesson, even for small shops, Contractor Magazine, vol. 48, no. 10, pp. 16. Welch, J. 2005. Winning. HarperCollins. Read More