Seven Practices of Successful Organizations - Coursework Example

Analysis of Pfeffer and Veiga’s (1999) “Seven practices of successful organizations” Introduction This essay presents an analysis of various management issues that affect the performance of organisations. The essay will specifically analyse an article by Pfeffer and Veiga (1999), which, among other points, argues that managers of organisations do not implement the “Seven practices of successful organizations”. In a nutshell, Pfeffer and Veiga (1999) argue that in order to be successful, organisations need to consider offering employment security to their workers, practise selective hiring, encourage the formation of self-managed teams as well as decentralisation, base high compensation on high organisational performance, promote training of staff, reduce organisational hierarchies, and promote sharing of information. In the essay, the assertions by Pfeffer and Veiga (1999) will be compared with other management theories that have been used in the past such as Henri Fayol’s “14 Principles of Management”, FW Taylor’s concept of scientific management, the administrative management theory, the theory of division of labour, behavioural management theory, management science theory, and Mary Parker Follett’s view of management among others. The essay will specifically explore whether or not managers who relied on Fayol’s management principles would be able to manage organisations in today’s environment given the changes that have occurred in the organisational environment as suggested by Pfeffer and Veiga (1999) and other management experts such as Gary Hamel. Analysis of the “Seven practices of successful organizations” In their article titled “Putting people first for organizational success” Pfeffer and Veiga (1999, p. 37) argue that many rigorous studies on management have suggested that organisations reap many benefits when they implement what is known as high performance, high involvement or high commitment management practices. They also argue that such studies seem to validate the practices of employee involvement and participative management. In spite of this, it is argued many organisations are moving in a direction that is opposite to what the studies actually suggest (Pfeffer & Veiga 1999, p. 37). However, Pfeffer and Veiga (1999, p. 40) point out that organisations can greatly benefit when they motivate their people to work harder by increasing their level of involvement and commitment to their organisation. It is here that the two authors propose the “Seven practices of successful organizations” which they believe are vital for organisations that attain profitability through people. The first practice proposed by Pfeffer and Veiga (1999) as a way of ensuring organisational success is providing employment security. The authors cite a source which suggests that productivity improvement and worker-management cooperation are only likely to be sustained over a long time when employees are assured that they will stay in their jobs even if they increase their productivity. According to Pfeffer and Veiga (1999, p. 40) there are many benefits of employment security, including the fact that workers are likely to increase their contribution of knowledge to the organisation. By doing this, firms also reduce the likelihood of laying off their employees during downturns. The benefit of having employment security is also in regard to the stability that is created within the organisation and the reduction in cost of repeated recruitment for firms that have selected, trained and developed their workforce well (Pfeffer & Veiga 1999, p. 40). The second practice advocated by Pfeffer and Veiga (1999, p. 40) is selective hiring. This concept was also suggested by early management theorists such as FW Taylor (Zuffo 2011, p. 28; Waddell, Jones & George 2013). Pfeffer and Veiga note that firms that are committed to making profit through people will make an effort to hire the suitable people. To achieve this, they must have a large pool of applicants from which to recruit and have clear specifications of the attributes and skills that they expect the applicants to have. Organisations also need to carefully consider the abilities and skills to ensure that they are in line with their objectives. Another important point is that organisations need to screen the people’s attributes that are not easy to change and identify characteristics that make them different. The third practice is the use of self-managed groups and decentralisation of systems in organisations (Pfeffer & Veiga 1999, p. 41). The two authors argue that various studies have attested the effectiveness of using teams as a standard of organisation design. They also suggest that the greatest benefit of using teams in an organisation is that teams supplant individual-based control of tasks. Further, they note that organisations which promote the formation of teams are considerably successful in that they make all their employees feel accountable and to have control of what they do, as opposed to individualised situations where only senior managements get accolades for achievements. This can be linked to the concept of lean manufacturing, which promotes the use of teams in doing tasks, and was a critical component of Toyota’s success in the 1970s to 1990s (Waddell et al. 2013). According to Pfeffer and Veiga (1999, p. 41), an elevated sense of responsibility spurs more effort and initiative in everyone that is involved. More importantly, the authors argue that the formation of teams allows the removal of levels of hierarchy and taking over of administrative functions formerly done by specialists, hence allowing the organisation to reduce administrative costs. Also, teams enable employees to pool their ideas and bring about improved and more innovative solutions to problems. This means that by working in teams and having a feeling that they are in control of their tasks, employees are likely to be more motivated and efficient in the workplace. The fourth practice is to base high compensation on high organisational performance (Pfeffer & Veiga 1999, p. 42). Such compensation can take the form of skill-based pay, gain sharing, stock ownership, as well as different kinds of individual and team incentives. On the same point, Baldwin (2003, p. 100) argues that in order for such systems to be successful, an organisation must allocate a reasonable amount of funds so that performance differences can translate into significant variations in pay increases. Supervisors must be adequately trained to identify performance differences among employees. As well, supervisors must be in a position to offer feedback to employees regarding their performance and have a supportive environment in which to make such decisions. More importantly, all the practices involved in contingent compensation must be adhered to consistently over time. The fifth practice identified by Pfeffer and Veiga (1999. p. 43) is training. The two authors argue that although skills and knowledge are critical in the running of organisations, not many organisations act on this area. They also point out that training is a fundamental constituent of high performance work systems since such systems depend on the skills and initiatives of employees to recognise and manage problems, to instigate new ways of doing work, and to be accountable for quality. To achieve this, the employees must be skilled and motivated, and they must possess the knowledge and capability to perform the task they are required to do. This can make organisations to have a competitive advantage. The issue of training and its significance to organisations has been discussed for a long time. For instance, Mary Parker Follett advised that training individuals and exposing them to integrative problem solving approaches can help resolve challenges related to misunderstandings in the workplace (Gibson et al. 2013, p. 453). Even other concepts such as scientific management as postulated by FW Taylor, advocated for training of employees, even though the training was limited to equipping employees for narrow tasks and was therefore of little actual importance (Waddell, Jones & George 2013; Derksen 2014, p. 155-156). The implication of all the arguments put forward by various management experts is that organisations must extensively train their employees to equip them with the skills required for solving problems and relating with others in the workplace. The sixth practice that is vital for the success of organisations is reduction of status differences within the organisation (Pfeffer & Veiga 1999, p. 44). The authors recommend that in order to make all people in an organisation feel valued and committed, there is need to reduce rank peculiarities that divide individuals and teams and result in some parties feeling undervalued. This suggestion breaks ranks with Max Weber’s theory of bureaucracy, which suggested that a manager’s official power comes from the position that she or he occupies in the organisation (Waddell et al. 2013). Weber also opined that in bureaucracy, individuals should hold positions as a result of their competency rather than their personal contacts or social position (Waddell et al. 2013). While this was a good notion in the past since it encouraged people to work harder to attain higher positions, it can be judged to cause disgruntlement among those who occupy lower positions for a long time. Also, the reasoning that official power derives from the position that one occupies meant that such power could be used against others in the organisation. The suggestion to reduce status differences also seems to reduce the duties of management, which according to Fayol, were to plan, organise, command, coordinate, and control operations in an organisation. The same suggestion however coincides with Follett’s thinking that the concept of ‘power over’ people should be replaced with ‘power with’ people (Newman & Guy 1998). The last practice suggested by Pfeffer and Veiga (1999) is sharing of information. The authors propose that sharing of information regarding an organisation’s various areas such as strategy, financial performance, and operational areas indicates to the organisation’s employees that the organisation trusts them. Further, it is argued that even trained and motivated employees can only contribute to enhancing the performance of their organisation if they have information regarding notable aspects of performance and guidance on how to utilise and infer that information. These points are in tandem with the management principles used in lean manufacturing, where workers make input in their jobs, participate in decision-making, and are expected to learn what others members of their teams do (Waddell et al. 2013). Would managers who used Fayol’s “14 Principles of Management” be able to apply the “Seven practices of successful organizations”? Managers who used Fayol’s “14 Principles of Management” can to some extent manage today’s successful organisation as outlined by Pfeffer and Veiga (1999), but may find it difficult to apply some of the principles. Principles such as equity, unity of direction, order, discipline, initiative, compensation of employees, stability of the tenure of employees, subordination of personal interests to the collective interest of the organisation, Esprit de corps and specialisation (to some extent) (Waddell et al. 2013) directly relate to the seven practices that organisations need to implement as suggested by Pfeffer and Veiga (1999). However, the other principles seem to be conflict with the “Seven practices of successful organizations” in today’s environment. These are unity of command, power and responsibility, centralisation and line of power (Waddell et al. 2013). The latter principles seem to emphasise the old style of management that focused on the interests of the management and largely ignored the interests of individual employees. The latter principles also seem to assume that organisations are similar or universal and can be run with one form of management (Parker & Ritson 2005, p. 1349). As argued by Brunsson (2008, p. 46), Fayol could have been wrong. This is because in practice, there exist many forms of management, all of which depend on the situation of a specific organisation and the position as well as persona of individual managers. Similarly, in Gary Hamel’s view, there are new challenges that organisations have to deal with such as holding the organisation together, mobilising the creativity of employees, and making the organisation a more engaging place to work in (Waddell, Jones & George 2013). Some of Fayol’s principles seem to focus on the old approach of solving one problem as suggested by Hamel – doing things to achieve perfect replicability – and ignore some of the critical issues identified by Pfeffer and Veiga (1999). Conclusion The practices suggested by Pfeffer and Veiga (1999) introduce a management approach that deviates from old management practices such as those suggested by FW Taylor, Max Weber and to some extent Henri Fayol. However, many of these issues seem to be in agreement with concepts advocated by Mary Parker Follett and Gary Hamel. Managers who used Fayol’s 14 Principles of management would find it possible to apply some of those principles but difficult to apply others which have been found to be rather inapplicable in today’s organisation in line with the ideas suggested by Pfeffer and Veiga (1999). References Baldwin, DA 2003, The library compensation handbook: a guide for administrators, librarians and staff, Libraries unlimited, Westport, CT. 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Waddell, D, Jones, G, George, J 2013, Contemporary management, 3rd edn, McGraw-Hill Education, North Ryde, Vic. Zuffo, RG 2011, ‘Taylor is dead, hurray Taylor! The “human factor” in scientific management: between ethics, scientific psychology and common sense', Journal of Business and Management, vol. 17, no. 1, pp. 23–41. Read More