People in organizations

(Unit 2)
  Manager: responsible for setting objectives, organizing resources and motivating staff
so that the organization’s aims are met

 Functions of management:

1. Setting objectives and planning

2. Organizing resources to meet the objectives
3. Directing and motivating staff
4. Coordinating activities
5. Controlling and measuring performance against targets.

 Management roles:
• Interpersonal roles: dealing with and motivating staff at all levels of the
organization
Role title Description of activities Examples of management action
Figurehead Symbolic leader of the organization Opening new factories/offices;
undertaking duties of a social or legal hosting receptions; giving important
nature presentations
Leader Motivating subordinates, selecting and Any management task involving
training other managers/staff subordinates
Liaison Linking with managers and leaders of Leading and participating in
other divisions of the business and other meetings; business correspondence
organizations with other organizations

• Informational roles: acting as a source, receiver and transmitter of information

Role title Description of activities Examples of management action
Monitor Collecting data relevant to the Attending seminars, business
(receiver) business’s operations conferences, research groups,
 reading research reports
Disseminator Sending information collected from Communicating with staff within
external and internal sources to the the organization, using appropriate
relevant people within the organization means
Spokesperson Communicating information about the Presenting reports to groups of
organization – its current position and stakeholders (e.g. annual general
achievements – to external groups of meetings) and communicating with
people the press and media

• Decisional roles: taking decisions and allocating resources to meet the

organization’s objectives

Role title Description of activities Examples of management action

Entrepreneur Looking for new opportunities to Encouraging new ideas from within
develop the business the business and holding meetings
aimed at putting new ideas into
effect
Disturbance Responding to changing situations that Taking decisions on how the
handler may put the business at risk, assuming business should respond to threats,
responsibility when threatening factors such as new competitors or changes
develop in the economic environment
Resource Deciding on the spending of the Drawing up and approving estimates
allocator organization’s financial resources and and budgets; deciding on staffing
the allocation of its physical and human levels for departments and within
resources departments
Negotiator Representing the organization in all Conducting negotiations and
important negotiations, e.g. with building up official links between
government the business and other organizations

 Leadership: the art of motivating a group of people towards achieving a common

objective.
 Qualities of a good leader:
- Desire to succeed and natural self confidence that they will succeed

- An ability to think beyond the obvious – to be creative – and to encourage others

to do the same

- Multi-talented so that they can understand discussions about a wide range of

issues affecting their businesses

- An incisive mind that enables the heart of an issue to be identified rather than
unnecessary details
 Leadership styles:

S
t
y Main features Drawbacks Applications
l
e
Leader takes all Demotivates staff who Defence forces and police
A decisions. want to contribute and where quick decisions are
u accept responsibility needed and the scope for
Gives little info to
t “discussion” must be
staff
o limited
Supervises workers
c
closely
r
One-way Decisions do not benefit In times of crisis when
a
communication from staff output decisive action might be
t
Workers are only needed to limit damage to
i
given limited info the business or danger to
c
about the business others
Participation is Consultation with staff can Businesses that expect
encouraged be time consuming workers to contribute fully
to the production and
decision-making, thereby
D satisfying their higher-
e order needs
m Two-way On occasions, quick An experienced and
o communication is decision making will be flexible workforce will be
c used which allows required likely to benefit most from
r feedback from staff this style
a Workers are given Should staff be involved in In situations that demand a
ti information about the all aspects of the business? new way of thinking or a
c business to allow full Some issues might be too new solution then staff
staff involvement sensitive, e.g. job losses; input can be very valuable
or too secret, e.g.
development of new
products
L Managers delegate Workers may not When managers are too
a virtually all authority appreciate the lack of busy (or too lazy) to
i and decision-making structure and direction in intervene
s powers their work. This could lead
s to a loss of security.
e Very broad criteria or The lack of feedback – as May be appropriate in
z limits might be managers will not be research institutions where
- established for the closely monitoring experts are more likely to
f staff to work within progress – may be arrive at solutions when
a demotivating not constrained by narrow
i rules or management
r controls.
e
 Leadership roles in business
- Directors: senior managers elected into office by shareholders in a limited
company; they are usually head of a major functional department; responsible for
delegating within department, meeting the objectives for the department set by
the Board of Directors and communicating these to their department, assisting in
the recruitment of senior staff in the department

- Managers: any individual responsible for people, resources or decision-making,

or often all three; they will have some authority over other staff below them in
the hierarchy; lead, motivate, and if necessary, discipline the staff in their section
or department

- Supervisors: appointed by management to watch over the work of others; this is

usually not decision-making role, but they will have responsibility for leading a
team of people in working towards pre-set goals; less of an inspector and more of
a work colleague who is appointed to help staff achieve objectives in a
cooperative spirit

- Worker’s representative: elected by workers, either as trade union officials or as

representative on works councils, in order to discuss areas of common concern
with managers

 Theory X and Theory Y: according to Douglas McGregor, one of the most important
factors determining the style of leadership managers are using is their attitudes toward
workers; he identified two distinct management approaches to the workers and called
them Theory X and Theory Y; he did not suggest that there were two types of workers,
X and Y, but that the attitudes of management to workers could, in extreme cases be
described by these two theories

Summary of Theory X and Theory Y

Theory X managers believe that Theory Y managers believe that
workers: workers:
Dislike work Can derive as much enjoyment from work
as from rest and play
Will avoid responsibility Will accept responsibility
Are not creative Are creative
 Informal leader: a person who has no formal authority but has the respect of
colleagues and some power over them
 Emotional intelligence (EI): the ability of managers to understand their own emotions,
and those of the people they work with, to achieve better business performance
 EI competencies
• Self-awareness: knowing what we feel is important and using that to guide
decision-making. Having a realistic view of our own abilities and having self-
confidence in our abilities.
• Self-management: being able to recover quickly from stress, being trustworthy
and conscientious, showing initiative and self-control.
• Social awareness: sensing what others are feeling, being able to take their
views into account and being to “get on” with a wide range of people
• Social skills: handling emotions in relationships well and accurately
understanding different social situations; using social skills to persuade,
negotiate and lead.

 Motivation: the internal and external factors that stimulate people to take actions that
lead to achieving a goal; the desire to see a job done quickly and well; motivation
results from the individual’s requirement to achieve objectives and to satisfy needs.
 Taylor’s motivation theory: / Scientific management: he made the first attempt to
analyze workers’ motivation in order to advise management on the best ways to
increase worker performance or productivity; the approach he used include several
stages:

1. Select workers to perform a task

2. Observe them performing the task and note the key elements of it

3. Record the time taken to do each part of the task

4. Identify the quickest method recorded

5. Train all workers in the quickest method and do not allow them to make any
changes in it

6. Supervise workers to ensure that this “best way” is being carried out and to
time them check that the set time is not being exceeded

7. Pay workers on the basis of results – based on the theory of economic man

The theory of “economic man” was widely held, and Taylor himself supported
this notion. The view was that man was driven or motivated by money alone and
the only factor that could stimulate further effort was the chance of earning extra
money. This formed the basis of Taylor’s main motivational suggestion – wage
levels based on output. He always maintained that workers should be paid a “fair
day’s pay for a fair day’s work” and that the amount should be directly linked to
output through a system known as “piece rate”.

 Mayo and the human relations theories: Mayo is best known for his “Hawthorne
effect” conclusions. These were based on a series of experiments he and his team
conducted over a five year period. His work was initially based on the assumption that
working conditions – lighting, heating, rest period and so on – had a significant effect
on workers’ productivity. Experiments were undertaken to establish the optimum
working conditions and the output of a control group was also recorded and this group
experienced no changes in working conditions at all. The results surprised all
 observers – as lighting and other conditions were changed, both improved and
worsened, productivity rose in all groups including the control group. Based on the
results, Mayo concluded that working conditions in themselves were not that
important in determining productivity levels and other motivational factors needed to
be investigated further before conclusions could be drawn

Conclusions from Mayo’s work:

1. Changes in working conditions and financial rewards have little or no effect

on productivity.

2. When management consults with workers and take an interest in their work
then motivation is improved.

3. Working in teams and developing a team spirit can improve productivity.

4. When some control over their own working lives is given to workers, such
as deciding when to take breaks, there is a positive motivational effect.

5. Groups can establish their own targets or norms and these can be greatly
influenced by the informal leaders of the group.

 Maslow and the hierarchy of human needs

 Abraham Maslow was concerned with trying to identify and classify the main
needs that humans have. According to his research our needs determine our
actions – we will always try to satisfy them and we will be motivated to do so. If
work can be organized so that we can satisfy some or all of our needs at work
then we will become more productive and satisfied.
Hierarchy of needs:
1. Physical needs /food, shelter, water, rest/

2. Safety needs /protection from threats, job security, health and safety at work/

3. Social needs /trust, acceptance, friendship, belonging to a group, social

facilities/

4. Esteem needs /respect from others, status recognition of achievement/

5. Self actualization /reaching one’s full potential/

Limitations of Maslow’s approach: not everyone has the same needs as it is

assumed by the hierarchy; in practice it can be difficult to identify the degree to
which each need has been met and which level a worker is ‘on’; money is
necessary to satisfy physical needs yet it might also play a role in satisfying the
other levels of needs, such as a status and esteem; self-actualization is never
permanently achieved; jobs must continually offer challenges and opportunities
for fulfillment otherwise regression will occur.

 Herzberg and the “Two factor” theory: his research was based around questionnaires
and interviews with employees with the intention of discovering those factors that led
to them having very good feelings about their jobs and those factors that led to them
having very negative feelings about their jobs.

His conclusions were that:

1. Job satisfaction resulted from five main factors – achievement, recognition
for achievement, the work itself, responsibility and advancement. Herzberg
called these factors “motivators”.

2. Job dissatisfaction resulted from five different factors – company policy and
administration, supervision, salary, relationships with others and working
conditions. He termed these factors “hygiene factors”. These were the factors
that surround the job itself /extrinsic factors/ rather than the work itself
/intrinsic factors/. Herzberg considered that the hygiene factors had to be
addressed by management to prevent dissatisfaction, but even if they were in
place they would not, by themselves, create a well-motivated workforce.
 Conclusions from Herzberg’s work:
1. Pay and working conditions can be improved and these will help to remove
dissatisfaction about work; but they will not, on their own, provide conditions
for motivation to exist.

2. The motivators need to be in place for workers to be prepared to work

willingly and to always give of their best.

3. A business could offer higher pay, improved working conditions and less
heavy-handed supervision of work.

 McClelland and motivational needs theory: he developed an achievement-based

motivational theory and promoted improvements in employee assessment methods. He
is best known for describing three types of motivational needs, identified in his book,
The Achieving Society (1961)
• Achievement motivation: a person with strong motivational need for achievement will
seek to reach realistic and challenging goals and job advancement. There is a constant
need for feedback regarding progress and achievement and a need for a sense of
accomplishment. This result-driven attitude is almost always a common characteristic
of successful business people and entrepreneurs
• Authority/power motivation: a person with this dominant need is “authority
motivated”. The desire to control others is a powerful motivating force – the need to
be influential, effective and to make an impact. There is a strong leadership instinct
and when authority is gained over others, it brings personal status and prestige.
• Affiliation motivation: the person with need for affiliation as the strongest driver or
motivator has a need for friendly relationships and is motivated towards interaction
with other people. These people tend to be good team members – there is a need to be
liked and popular and to be held in high regard.
 Vroom and expectancy theory: Vroom suggested that individuals choose to behave in
ways they believe will lead to outcomes they desire and value. His expectancy theory
states that individuals have different sets of goals and can be motivated if they believe
that:
• There is a positive link between effort and performance
• Favourable performance will result in a desirable reward
• The reward will satisfy an important need
• The desire to satisfy the need is strong enough to make the work effort worthwhile

His expectancy theory is based on the following three beliefs:

• Valence: the depth of the want of an employee for an extrinsic reward, such as
money, or an intrinsic reward such as satisfaction
• Expectancy: the degree to which people believe that putting effort into work
will lead to a given level of performance
• Instrumentality: the confidence of employees that they will actually get what
they desire, even if it has been promised by the manager.
 Financial reward system:

The most common payment systems include

- Hourly or time wage rate: this is the most common way of paying manual,
clerical and “non-management” workers; an hourly “time rate” is set for the job –
perhaps by comparing with other firms or similar jobs – and the wage level is
determined by multiplying this by the number of hours worked; the total is
usually paid weekly

Advantages Disadvantages
Workers will not rush their work and Too much time may be taken to do a
this could lead to high quality. job as there is no additional reward for
Gives workers some security of extra effort or faster work. To prevent
payment even if there are unavoidable this, additional supervision of workers
production hold ups. may be required.
Wage rates can be adjusted easily to Higher “overtime rates” are paid after a
reflect different skill levels required to contractual number of hours has been
do a job. worked – these could encourage slow
Most suitable when the output of working to delay completing a job.
individual workers cannot be identified
or measured.
Fairer than piece rates in situations Wages will still have to be paid even if
when employees have no control over production is halted – unless the
the speed at which they work. workers are on very flexible hours’
contracts.

- Piece rate: a rate is fixed for the production of each unit, and the worker’s wages
therefore depend on the quantity of output produced; the piece rate can be
adjusted to reflect the difficulty of the job and the “standard” time needed to
complete it; the level of the rate could be very important – if set too low it could
demotivate the workers but if too high it could reduce the incentives because
workers will be able to meet their target wage level by producing relatively few
units.
 Advantages Disadvantages
Encourages greater effort and Requires output to be measurable and
faster working. standardized – if each product is different,
then piece work is inappropriate.
May lead to failing quality and safety levels
as workers rush to complete units.
The labor cost for each unit is Workers may settle for a certain pay level
determined in advance and this and will therefore not be motivated to
helps to set a price for the produce more than a certain level.
product. Provides little security over pay level, for
example in the event of a production
breakdown.
Discourages workers from accepting change
at work as this might result in loss of pay.

- Salary: this is an annual sum that is usually paid on a monthly basis; it is the
most common form of payment for professional, supervisory and management
staff; the salary level is fixed each year and it is not dependent on the number of
hours worked (time rate) or the number of units produced (piece rate); the fixing
of the salary level for each job is a very important process because it helps to
determine the status of that post in the whole organization.

Advantages Disadvantages
Gives security of income Income is not related to effort levels or
productivity
Gives status compared to time rate or May lead to complacency of the salary
piece rate payment systems earner
Aids in costing – the salaries will not Regular appraisal may be needed to
vary for one year assess whether an individual should
Suitable for jobs where output is not move up a salary band, although this
measurable could be an advantage if this becomes a
Suitable for management positions positive form of worker appraisal
where staff are expected to put in extra
time to complete a task or assignment

- Commission: this is most frequently used in personal selling, where the

salesperson is paid a commission or a proportion of the sales gained; it has the
same advantages and disadvantages as piece rates used in production industries.

- Performance-related pay /PRP/: this is a scheme to reward staff for above-

average work performance; it is usually in the form of bonus payable in addition
to the basic salary; it is widely used for those workers whose ‘output’ is not
measurable in quantitative terms, such as management, supervisory and clerical
posts. It requires the following procedure:
 1. Regular target setting, establishing specific objectives for the individual

2. Annual appraisals of the worker’s performance against the pre-set targets

3. Paying each worker a bonus according to the degree to which the targets
have been exceeded

There are some problems with PRP systems. The main issue is one that Herzberg
would recognize – as there is no change in the nature of the work being
undertaken most of the ‘motivators’ would not be satisfied by PRP. In addition,
the concentration on individual performance can create divisions within teams
and groups, and this can work against the findings of the Hawthorne effect.
There is also a widely held view that PRP bonuses are often inadequate, even to
achieve short-term productivity gains or improvements in effort. The last
problem concerns the style of management that PRP can lead to. By giving
senior managers the power to decide which subordinates have achieved
performances above target, it can lead to claims of favoritism and the ability to
control staff by means of the “carrot” of extra rewards.
- Profit sharing: this scheme shares some of the company profit not just with the
shareholders but also with workers. The essential idea behind these arrangements
is that staff will feel more committed to the success of the business and will
strive to achieve higher performances and cost savings.

Advantages Disadvantages
Reduces the potential conflict between The reward offered is not closely
owners and workers as everyone now related to individual effort – why
has an interest in higher profits should one worker put in greater effort
when everyone will be benefiting?
Designed to lead to higher worker The schemes can be costly to set up and
effort levels and a greater preparation operate, especially in large firms with
to accept cost reduction measures and many employees
changes that benefit the business
Business is likely to attract better Small profit shares paid at the end of
recruits drawn by the chance of sharing the financial year are unlikely to
profits or owning shares in the firm promote motivation throughout the year
As the bonuses are paid out of profits Profit-sharing schemes will reduce
the scheme does not add to business profits available to be paid to owners
costs, unlike a normal increase in pay (reducing dividends) and to be
levels reinvested in the business (retained
profits)
If successful in increasing motivation Worker share ownership schemes can
then the schemes could lead to an increase the total number of shares
increase in overall business issued and “dilute” the value of existing
profitability shares.

- Fringe benefits: these are non-monetary forms of reward; they include company
cars, free insurance and pension schemes, private health insurance, discounts on
company products and low interest rates loans; they are used by business in
 addition to normal payment systems in order to give status to higher-level
employees and to recruit and retain the best staff

 Non-financial reward system:

- Job rotation: increasing the flexibility of the workforce and the variety of work
they do by switching from one job to another

- Job enlargement: a term used to refer to any attempt to increase the scope of a
job by broadening or deepening the tasks undertaken

- Job enrichment: this involves the principle of organizing work so that employees
are encouraged and allowed to use their full abilities, not just physical effort; the
process often involves a slackening of direct supervision as workers take more
responsibility for their own work and are allowed some degree of decision-
making authority

Job enrichment’s key features:

1. Complete units of work so that the contribution of the worker can be
identified and more challenging work offered

2. Direct feedback on performance to allow each worker to have an awareness

of their own progress

3. Challenging tasks offered as part of a range of activities, some of which are

beyond the worker’s recent experience
 - Job redesign: involves the restructuring of a job – usually with employees’
involvement and agreement – to make work more interesting, satisfying and
challenging

- Team working: places each member of staff into a small team of employees;
team working leads to lower labor turnover, more and better ideas from the
workforce on improving the product and the manufacturing process, consistently
higher-quality, especially when TQM is incorporated

- Quality circles: voluntary groups of workers who meet regularly to discuss work-
related problems and issues

- Worker participation: workers are actively encouraged to become involved in

decision making within the organization

 Target setting: this is clearly related to the technique of Management by Objectives; as

well as making work more interesting and rewarding, the purpose of target setting is to
enable direct feedback to workers on how their performance compares with agreed
objectives; the basic idea behind this is that people are more likely to do well when
they are working towards a goal that they helped to establish and identify
 Delegation and empowerment: involve passing down authority to perform tasks to
workers.
 Human resource management (HRM): the strategic approach to the effective
management of an organization’s workers so that they help the business gain a
competitive advantage
 HRM purpose and roles:
• Planning the workforce needs of the business
• Recruiting and selecting staff using a variety of techniques
• Appraising, training and developing staff at every stage of their careers
• Preparing contracts of employment for all staff and deciding on whether these
should be permanent or temporary, full- or part-time
• Involving all managers in the development of their staff – emphasizing that this is
not just an HR responsibility
• Improving staff morale and welfare
• Developing appropriate pay systems for different categories of staff
• Measuring and monitoring staff performance

 Workforce planning: analyzing and forecasting the numbers of workers and the skills
of those workers that will be required by the organization to achieve its objectives
• Workforce audit: a check on the skills and qualifications of all existing workers
• The number of staff required depends on: forecast demand for the firm’s products;
the productivity levels of staff; the objectives of the business; changes in the law
regarding workers’ rights; the labour turnover and absenteeism rate
• The skills of the staff required depends on: the technological change in the
industry; the need for flexible and multi-skilled staff
 Recruitment: the process of identifying the need for a new employee, defining the job
to be filled and the type of person needed to fill it, attracting suitable candidates for the
job and selecting the best one.

 Recruitment and selection process involves the following steps:

1. Establishing the exact nature of the job vacancy and drawing up a job description: a
job description is a detailed list of the key points about the job to be filled, stating
all its key tasks and responsibilities.
2. Drawing up a person specification: a detailed list of the qualities, skills and
qualifications that a successful applicant will need to have
3. Preparing a job advertisement reflecting the requirements of the job and the
personal qualities needed
4. Drawing up a shortlist of applicants
5. Conducting interviews or using other selection methods

 Training: work-related education to increase workforce skills and efficiency

• On-the-job training: instruction at the place of work on how a job should be
carried out.
• Off-the-job training: all training undertaken away from the business
• Induction training: introductory training programme to familiarize new recruits
with the systems used in the business and the layout of the business site
 Staff appraisal” the process of assessing the effectiveness of an employee judged
against pre-set objectives.

 Employment contract: a legal document that sets out the terms and conditions
governing a worker’s job.

• Temporary: employment contract that lasts for a fixed time period, e.g. six months
• Part-time: employment contract that is for less than the normal full working week
• Flexi-time: employment contract that allows staff to be called in at times most
convenient to employers and employees
 Outsourcing: not employing staff directly, but using an outside agency or organization
to carry out some business functions.
 Teleworking: staff working from home but keeping contact with office by means of
modern IT communications

 Core vs. Peripheral workers

 Shamrock organization:
 Hard vs. Soft HRM
• Hard HRM: an approach to managing staff that focuses on cutting costs, e.g.
temporary and part-time employment contracts, offering maximum flexibility but
with minimum training costs.
• Soft HRM: an approach to managing staff that focuses on developing staff that
focuses on developing it so that they reach self-fulfillment and are motivated to
work hard and stay with the business