Semco's Reliance on the Classical School of Management - Case Study Example

Managing People Introduction Management of an organization as it is known today exists in nonprofit, public, and private organizations. Over the years, the complexity and size of all forms of organizations have increased, and thus a professional and defined way of management has become a requirement. Management can be defined as a form of work or process that entails the direction or guidance of a group of individuals towards the objectives or goals of an organization. The management philosophies used by many organizations today rely on the theories that were formulated between the end of the 19th century, and the beginning of the 20th century during the period of the great depression. This period is what is presently referred to as the classical school of management. The contributors to this school emphasized on efficiency, scientific, administrative and bureaucratic management. Scientific management focused on the “one best way” to manage an organization. Bureaucratic management depended on a coherent set of guidelines on management, and administrative management focuses on the flow of information on a company. This paper uses Semco as a case study in discussing the management of people in an organization. The paper begins with a discussion of the classical school of management, and the reliance of Semco on this theory specifically on administrative management. The paper then discusses two motivational theories and their relevance to Semco. The two theories are two-factor theory by Fredrick Herzberg, which proposes that there are two set factors that affect the motivation of employees. The other theory is by theory X and Y which were formulated by Douglas McGregor. The paper then discusses the concept of empowerment which enables an individual to control work, take action, make a decision, behave, and think in independent ways, and its relevance to Semco. Finally, the paper discusses WL Gore & Associates, a company that has a management philosophy that is remarkably similar to that of Semco. Semco’s Reliance on the classical school of management The classical management theory was among the pioneer schools of management thought; it was established during the era of the industrial revolution as a result of the emergence of the factory system problems. Managers at the time were not sure of how deal with heightened labor dissatisfaction or the best way to train employees. This resulted in the practice of testing solutions to find the best way to manage and perform tasks. Under the classical schools of management, there are two main branches: classical administrative and classical scientific. In the case of Semco, most of its practices rely on the classical administrative school of thought. While classical, scientific school concentrates on the productivity of people, the classical administrative school of thought relies on the overall organization. The focus is on the establishment of managerial principles as opposed to working methods. The main contributors of classical administrative theory include Chester Barnard, Mary Follett, Henri Fayol, and Max Weber. All of these theorists observed the flow of information in an organization and stressed on the significance of comprehending how a company is operated. (DuBrin 2005, p.17) According to Max Weber he opposed to the way most European companies were run on a family-like and personal basis, whereby the workers were loyal to their supervisors as opposed to being loyal to the organization. He was of the idea that organizations should have a formal structure, and, that they should be run impersonally. He was opposed to the idea that authority should be based on the personality of a person. He proposed that authority should be viewed as a component of the job of an individual, whereby it should be handed from one individual to another as one individual leaves, and another takes over. This form of objective, non-personal form of management is what is presently referred to as bureaucracy. In Semco, in as much as there is no formal organizational hierarchy for control and decision-making, the organization is run impersonally. There is no CEO and Ricardo Semler who owns 90% of the company is among the six counselors who form the executive team. With regards to Weber’s idea on the authority, the company has a team of the executive who take turns as chairperson after every six months. This means that the company views authority as part of an individual’s personality, and it should be handed over from time to time (Daft 2005, p. 32). Mary Follett emphasized on the significance of the development of common goals by an organization for its employees. Follett proposed the discarding of the hierarchical organizations that were run using a command style. She was against the way employees were viewed as robots, and encouraged managers to give employees the chance to take part in decision-making especially those affecting them. She came up with ideas on leadership, power, and ethics, and emphasized on the significance of people, as opposed to techniques. In Semco, there is no organizational hierarchy for control and decision making. Key decisions concerning the whole organization such as acquisition or purchase of a new plant are done using a democratic vote. Chester Barnard came up with the concept of informal organization. According to his idea the informal organization was made up of exclusive groups of individuals or cliques. Barnard was of the idea that such informal organizations provided vital and necessary communication functions for a company as whole, and they can assist an organization in attaining its goals. He supported the idea that it was crucial for managers to instill a sense of a common goal, whereby the willingness to work together is strongly encouraged. In the case of Semco, the organization is run informally whereby there are no controls on inventory and travel expenses, no internal audit groups, and the storage rooms are not locked. Everyone is given the necessary information, and this encourages self control. The organization is also made up of concentric circles, which act as the cliques in Barnard’s theory; every clique knows its role, and this promotes the efficient running of Semco. Henri Fayol proposed the 14 principles that provided managers with the guidelines on how to supervise the activities of their department. The principles include division of labor, responsibility and authority, discipline, unity of command, unity of direction, subordination of general and individual interests, remuneration of personnel, centralization, order, equity, esprit de corps, initiative, and stability of tenure. Semco relies on most of these principles in its management. Motivational theories and their relevance to Semco Fredrick Herzberg’s two- factor theory of motivation According to Herzberg’s theory, there are certain factors that an organization could introduce, which would expressly motivate employees to put more effort in their work. Herzberg referred to these factors as the motivators. On the other hand, he argued that there are certain factors, which would de-motivate a worker if they did not exist, but would not exclusively motivate workers to put more effort. Herzberg referred to these factors as the hygiene factors (Miner 2007, p.45). The motivators are related to the job itself, for example, how appealing the job is, and the possibility of an opportunity for promotion, recognition, and extra responsibility. The hygiene factors are those which surround a given job rather the actual job. The hygiene factors prevent dissatisfaction such as; good salary and incentives, job security, sound supervisory practices and reputable company policies. The hygiene factors illustrate the work conditions rather than that work itself, for the manager to motivate the employees he should focus on the job itself rather the environment around the employee. Therefore, for the organization to be able to motivate employees, it must address both sets of factors. This means that a decrease in job dissatisfaction does not necessarily lead to an increase in job satisfaction and vice-versa. From his research, the data he realized that the nature of the work an employee performs can satisfy needs such as being competent, the status associated with the job an employee performs, self realization, and achievement are what motivates that individual. However, this does not mean that the absence of such factors leads to dissatisfaction; dissatisfaction arises when there is poor supervision, poor working conditions, inappropriate company policies, unfair salaries, and lack of suitable interpersonal relations at the work place. Herzberg was of the idea that organizations can motivate their workers by putting integrating a democratic management approach, and by enhancing the content and nature of job through methods such as: Job enlargement, which involves, giving employees a variety of jobs to perform so as to make the job more appealing Job enrichment, which entails giving workers a variety of tasks that are more challenging; interesting, and complex, in order to give the workers a greater feeling of achievement. Empowerment, which involves giving employees more power to participate in decision making in areas that affect their working life. Semco has applied this theory in motivating its employees. Through empowerment, the employees are allowed to make decisions on acquisition or purchase of a new plant, through a democratic vote. Using the nucleuses of technological innovation, workers are engaged in temporary projects whereby they are asked to participate in a new business plan, a cost reduction program, a new product, or a business improving project. Such projects promote job enrichment and job enlargement, and this motivates the employees in Semco. Theory X and Y This theory was formulated by Douglas McGregor in 1960; he came up with two theories that are based on assumptions: Theory X assumptions states that a normal human being inherently lazy and dislikes work and will aim at avoiding it at whatever cost. That people must be controlled or forced to do work, another assumption was that an individual cant work on his own initiative and must be supervised. That is why the organization needs to develop systems to control and punish the employees because they will try to avoid working whenever possible (Robbins & Judge 2008, p.79). On the other hand, theory Y assumptions state that; an employee is assumed to be self motivated, ambitious and view work as natural as rest or play. That employees are ambitious, creative, imaginative and can apply such skills in coming up with solutions to problems in the work place. This theory assumes that employees can learn to accept and seek responsibility in the work place; however, their talents and abilities are under utilized. Theory Y assumes that a manager should give employees a chance to learn and be responsible from being satisfied with the work they have done. Semco also applies theory Y in motivating its employees. Employees are assumed to be responsible and are given the chance to practice self control. The company has no controls on inventory and travel expenses, and all rooms are not locked. In addition, all information is conveyed to everyone, this promotes freedom and self control and is a powerful motivator of employees (Papa, Spiker & Daniels 2008, p.54). The concept of empowerment and its relevance to Semco Empowerment refers to the process of authorizing or enabling an individual to control work, take action, make a decision, behave, and think in independent ways. It is the feeling of self-empowerment in managing an individual’s destiny. The process of empowerment enables individuals or groups fully access collective or personal influence, power, and authority. Empowerment entails having capabilities such as: - The capability to make decisions on collective or personal circumstances. - The capability to access resources and information to be used in decision-making. - The capability to consider a variety of options and portray assertiveness in the process of making decisions. - The ability to access and learn skills for collective and personal benefit. - Involving in the changes and growth process that is self initiating and never ending. - The capability to inform the perceptions of others through engagement, education, and exchange. In human relation terms, it is wrong to concentrate on the things that one person does for another. Most individuals perceive an individual such as a manager as responsible for bestowing empowerment on the workers who report to him. As a result, the reporting workers wait for the manager to bestow empowerment on them. Empowerment should be viewed as a process of a person being able to make decisions, control work, and take action on his own in independent ways. Empowerment emanates from a person and the organization has the duty to build a work environment which helps promote the desire and ability of workers to behave in an empowered manner. Most organizations use participative management and employee involvement as ways of empowering workers (McDaniel & Gitman 2007, p.220). In the workplace, empowerment is viewed as an exercise that is more pseudo-empowerment. This view aims at changing the attitude of employees, in order to encourage them to work harder as opposed to giving them any tangible power; this is referred to as attitudinal shaping. Nevertheless, studies have indicated that the chance to exercise personal choice or discretion is a crucial element that contributes to employee well-being and engagement. Evidence suggests that motivation and initiative are raised when individuals adopt a positive attitudinal style. This enhances resilience, self belief when facing problems, and the capability to overcome obstacles. In the workplace, empowerment of workers gives them the opportunity to make decisions relating to their work (Lashley 2001, p. 215). Semco has empowered its workers in a number of ways. To begin with, employees are allowed to make decisions that affect the entire organization through a democratic vote. In addition, the other decisions affecting employees are made by them through consensus. From the concept of empowerment, the ability to make a decision about collective and personal circumstances is fundamental. The other aspect of empowerment is the availability of information for decision-making. Semco has facilitated this by making all information available to every employee so as to encourage self-control. To facilitate information exchange the organization’s offices do not have walls and all memos are limited to one page only without any exception. Moreover, all employees are trained on how to read and understand the individual, business unit and company financial statements. The company is also extremely transparent about the salary that each worker receives. This information is crucial as it empowers the employees. The company allows employees to determine their pay and salary surveys are carried out so as to establish how much the each employee earns. This information is essential in collective bargaining and decision making, whether at a collective or personal level. Semco also facilitates empowerment through its nucleuses of technology innovation. Under this plan, employees are allowed to focus on improvement projects, a new business plan, a cost reduction program, a new product, and other innovative projects. These projects will enable employees to access and learn skills for collective and personal benefit. In addition, Semco promotes empowerment by allowing employees to come up with opportunities. These opportunities act as the strategy for the company, where they gather enough support from the workers they are given resources and time until they are realized. The company maximizes on the entrepreneurship and engagement of its workers (Heller 2006). A company with a similar management philosophy to Semco One company that has a similar management to Semco is W. L. Gore and associates. The company is a leading manufacturer of products made from Fluoropolymers. Gore & associates was incorporated on 1958 by Lee Gore and Genevieve Gore, his wife. In 1965, the company initiated and implemented a unique management philosophy and system. Gore Lee Gore observed that as even though his company grew, productivity and efficiency were declining. This called for a new structure of management; however, he was of the view that pyramid management, which was popular at the time, would suppress the innovation and creativity, which was precious to him. Gore decided to invent a new management structure. While working at Dupont during World War II, Gore had encountered an organizational structure referred to as the lattice system. At Dupont, Gore worked with small task force teams. These teams were formed on an impromptu manner to take care of situations that arose unexpectedly. The teams were multidisciplinary and were operated for a short duration outside the management hierarchy of an organization. Unlike the conventional structure of management, Gore’s lattice system proposed that each person should be considered to be an associate. Under the system, there were no fixed channels of communication or chains of command, and reviews on associate contribution were founded on a peer rating system (Gore 2008, p. 92). This system had been developed to improve the overall performance and ingenuity of a group working towards a common goal. The lattice system stresses on cooperation and communication as opposed to hierarchy of authority. Gore used this system to develop a management structure whereby, any individual was permitted to make a decision provided he was committed to the organization, encouraged others, and was fair. The individual was required to consult only if a decision could result in severe damage to the organization. In addition, new employees who joined the enterprise had the same authority as the other experienced workers including Gore and his wife. There were no bosses or titles, and on limited occasions, commands were substituted by personal commitments. The new workers who joined the company were given supervisors and were encouraged to work in areas that are in line with their talents. As the new workers advanced, they were given more responsibility and were rewarded depending on their contribution individually. This system encouraged the employees perform at their best level, take risks, and to be creative. In addition, Gore came up with four culture doctrines fairness, waterline, commitment, and freedom. Under the freedom principle, associates are at liberty to allow, help, and encourage others to increase their scope of responsibility, skill, and knowledge. Under the fairness principle, workers are required to portray fairness to each person they work with. The commitment principle dictates that employees can make their commitments and are required to adhere to them. The waterline principle proposes that an individual should engage other employees in experimenting with actions that have an influence on the profitability and reputation of the company. This principle encourages employees to be creative and experiment so long as their decisions will not affect the company adversely. In Gore & associates, associates are answerable to team members and are encouraged to communicate openly with one another. The associates are also encouraged to engage in prototyping and innovation. Teams are formed around new businesses, product concepts, and opportunities. With time, new leaders emerge as teams evolve and eventually they gain followers. This management philosophy is exceedingly similar to that of Semco and has proved to be successful as it leads to increased associate retention, and satisfaction. This philosophy has enabled the company to appear consecutively in the FORTUNE magazine among the 100 top performing companies. According to the 2010 rankings released in January, the company is ranked at number 13. The excellent performance has been associated with the team based, unique culture, diverse innovations, and the flat style of management. The CEO explained that the strong performance was as a result of providing employees with a work environment where they feel passionate, engaged, and motivated about their job. The culture of the organization has been praised for promoting entrepreneurship and ownership. The culture of the company encourages associates to channel their interests and talents to produce high-value and innovative products for its customers (Hamel & Bill 2007, p. 59). Conclusion The management philosophy that an organization adopts is particularly crucial for the overall performance of a company. In today’s world, there are numerous management philosophies that are adopted by organizations depending on their size and complexity. There are organizations that have adopted a hierarchical structure of management whereby the organization is divided into different levels of management authority. Nevertheless, there are organizations that have adopted a more flat form of the organizational structure. Semco has adopted an extraordinarily amusing management philosophy that has been a source of debate amongst scholars. The democracy in Semco is unpopular among managers who fear losing control and power of their companies. There are no bosses or job titles, no grand strategy, individuals set their own salaries, and every worker shares in the companies’ profit. Despite having a controversial management structure, the company has performed better than those with strict management philosophy. The management practices in the company have been a powerful motivator of employees. Using the nucleuses of technological innovation, workers are engaged in temporary projects whereby they are asked to participate in a new business plan, a cost reduction program, a new product, or a business improving project. This promotes job enrichment and job enlargement which motivate employees. In addition, Semco also applies theory Y in motivating its employees. Employees are assumed to be responsible and are given the chance to practice self control; this promotes freedom and is a strong motivator of employees. In terms of empowerment of employees, Semco promotes it by allowing its employees to participate in decision making and by availing information to employees so that they can make informed decisions. Other companies such as WL Gore & Associates use an almost similar management philosophy and have been able succeed. WL Gore & Associates has been consecutively ranked among the top 100 companies for over 10 years, and its outstanding performance similar to that of Semco has been linked to its management philosophy. References Daft, R 2005. Management. 7th Ed. Thomson/South-Western, Australia. DuBrin, A 2005, Essentials of management, Cengage learning, Latin America. Gore, R, W 2008, The Early Days of W. L. Gore & Associates, Inc. Gore, R, W, Newark, DE. Hamel, G & Bill B, 2007, The Future of Management. The Harvard Business School Press, Boston. Heller, R 2006, Management strategy; Semco and the lessons of integrity, Managing People Thinkingmanagers.com, viewed 2 June 2010, < http://www.thinkingmanagers.com/management/management-strategy.php> Lashley, C 2001, Empowerment; HR strategies for service excellence, Butterworth-Heinemann, Woburn, MA. McDaniel, C & Gitman, L, The future of business; the essentials. Thomson/South-Western. Miner, J 2007, Organizational behavior; from theory to practice, M E Sharpe, Armonk NY. Papa, M, J, Spiker, B, K. & Daniels, T, D 2008, Organizational communication: Perspectives and trends. Sage, Thousand Oaks, CA. Robbins, P & Judge, T.A 2008, Organizational Behavior.13th Edition. Pearson/Prentice Hall. Upper Saddle River, New Jersey. Read More