Performance Management and Organizations - Essay Example

Management For any organization to work, a number of stakeholders have to pool their efforts. Terry & Franklin (1994) define management as 'a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human beings and other resources'. Similarly Worthington and Cumberpatch (2006) defined management as; 'The roles fulfilled by individuals who manage the organization' and 'A process which enables an organization to achieve its objectives'. Management therefore involves a coordinated approach of all such business operations. Functioning of an organization is mainly affected by two types of factors; Internal: These are the factors like the strengths of the organization, in terms of its finances, human resources, management, strategies etc. These factors can be controlled well by the organization. Mullins (2005) contends that organizations comprise 'people, objectives, structures' and 'management'. Managing human resources, keeping the shareholders in good humor, organizing funds for new business ventures, planning out marketing strategies are all parts of the management which require more than the copy book style of management. External: These are the factors on which an organization may not be able to exert much of its control. These include, the legal and political scene prevailing within the state/ country of its operations, number and types of competitors, suppliers in the market, terms and conditions from financial institutions, alternative products available in the market, newer technological innovations etc. Strategists are supposed to take care of these factors by planning appropriate responses. Worthington (2006) places greater importance on political developments occurring at different levels - local, national and international. Organizations resort to strategic planning to take care of these factors and Organizations learn a lot from there environment and prevailing circumstances. But the strategic intent alone cannot be planned all in advance. It has to be a continuous evolutionary process depending upon the experiences. Henry Ford said, "Failure is the opportunity to begin again more intelligently"1 Organizations too adapt their strategies according to the prevailing circumstances and the overall business scenario. Organizations and their management are not supposed to indulge in politics and the power-game. But the management is at the same time required to carry the organization through the ups and downs of the times. Butcher & Clarke (2003) state that 'managers often seem to struggle with their role'. There are times when managers are confronted with paradoxical situations. Under such circumstances, the theories and relevant prescription might appear to be insufficient for their needs. Such circumstances require some amount of political acumen on the part of the management. Globalisation has in fact provided wings to MNCs for exploring newer vistas of business opportunities, dealing with newer sets of customers and governments. In order to leverage the economies of scale some MNCs prefer to outsource their services from Europe and US to countries like India, China (Bracken, 2004). This type of business is full of risk as it involves handing over a crucial task to people who are nowhere near the customs/ cultures of the organization, involves taking political risks both at home as well as in foreign lands. Quite a few political objections have been raised against the outsourcing decisions by some companies; as such steps are resulting in an increase in unemployment in those countries from where these services are being outsourced. On the other hand this step is resulting in more employment generation in the countries which are the outsourcing destinations. Such voices have also been 'managed' well by the management of the companies in outsourcing business, which could not have been done without some first hand experience of political maneuverability. The political establishment is a crucial stakeholder in the business. Stakeholders all have power, someone has a formal power invested in a position of authority or it could be the social power of being able to persuade others to support or oppose the policies of the company. People with higher power could be the company's most useful supporters or most dangerous opponents, depending upon the prevailing dynamics. Therefore the management of a company is supposed to 'manage' such powerful lobbies, in such a manner that they do not end up going against the tide. In general, the management of an organization prepares its strategies for its operations and growth with the help of; 1. Environment Analysis 2. Doing a SWOT Analysis 3. Preparing a Business Policy. Environment Analysis, deals with studying a range of factors related to the business. For doing a successful business in the prevailing environment, management studies the environment, factors leading to such environment, policies adopted by some other companies in the region, general perception about the company etc. before finalizing the policies. Most researchers and theorists have identified complexity as one of the important characteristics of environments (Cannon and St. John, 2007). It involves studying and analyzing the surroundings to identify the competitors, the threats and opportunities. Maslow's hierarchy of needs argued that the driving force for human actions is the urge for satisfaction of one or the other need. These needs go on changing depending upon a number of factors. The needs of consumer/ customer and those of the organization are inter-linked because organization too is an active component, so needs of the organization too keep changing. Environment analysis involves market analysis as well. PESTEL analysis is the name given to the study of environmental factors. In fact environment analysis tends to be unique to the strategists, because what may appear to be an opportunity to one organization may not look the same to other. In fact situation of threat for one may appear to be full of opportunity to another. That requires some minimum political skill for the management. For example, most of the MNCs doing business in Iraq and Afghanistan have fled the respective countries because of the uncertainties prevailing in the regions for quite a while now, yet some of the US companies and their subsidiaries are doing a roaring business in both these war zones. There's indeed an element of political maneuverability in the business proposition. Well, politics apart, it is the entrepreneurial skill and confidence in one's abilities from the past experience. Similarly, in US most of the political campaigns are funded by the business community. The decision to fund a particular campaign or political party is taken by the management after weighing different options and benefits from such donations. This too requires analyzing the political spectrum and then taking the sides. Another very crucial element of strategic planning is doing the SWOT analysis for the company. Strengths, Weaknesses, Opportunities and Threats of an organization are enlisted prior to any new venture or prior to planning for the future. Quite often the well established equations with the ruling regime in a country/ region are enlisted as the strengths of the company. Strength of an organization is something, which at times even the organization doesn't realize. It may be in the form of the good strategists, good managers, good workforce, a well recognized brand, sound financial strength, state protection from competitors, loyal customer base etc. Opportunities are often searched by identifying the distinctive competencies, some sudden developments in and around the organization etc. An organization might be able to get state protection from competitors if the company management is able to influence the political decision making. At the same time, it is of vital importance for the company that its products and services remain acceptable uniformly to all the segments of the society, irrespective of political leanings. To strengthen relations with the government of the day while not being identified with a particular political affiliation certainly requires some understanding of the political equations and an ability to deal with the situation. That effectively means there's indeed some amount of involvement of power and politics in the formal process of management. While, planning a foray into a new area, company analyses how supportive the political system is, to its kind of business and tries to work out the deal through some political leaders. Stories keep cropping up about the 'kickbacks' being provided to political leaders. This is another form of managing the political leaders by the management of the organization. Business policy preparation involves the study of functions and responsibilities of senior management. It deals with the determination of the future course of action that the organization has to adopt and how the resources will be mobilized to achieve this. Politics and businesses therefore operate in a unique blend of networking of stakes. While politics need businesses to finance their requirements for money, corporate houses require politicians for furthering their business interests. In a nutshell the scenario could be summed up by quoting a statement of a prominent American politician, who once declared2 that "money is the mother's milk of politics." Political leaders are required to make laws for governing the state, keeping the interests of the common people in mind. They are supposed to uphold the ethics and principles of good governance and they are 'not supposed to have any business interest in mind while framing laws and policies'. In principle, the politicians, being public figures, are supposed to lead exemplary lives, without being influenced by any vested interests. But, the situation is far from the ideal one. Some politicians appear to be in politics to uphold their business interests only. The corporate houses on the other hand are required to operate their businesses without meddling into politics, in such a way that no harm is done to the society, to the environment and the polity of the nation/s. With the emergence of globalisation, the concepts like 'corporate governance' have emerged for managing the businesses more effectively. Corporate governance has become a handy tool to make the synchronization between politics and business. Today, the term MNC has almost acquired the status of a regime in itself. With more and more companies adopting professional ideas and approaches to run the show on day-to-day basis. Even the governments in those nations where MNCs operate, are not taking them just as 'business entities'. Bracken (2004) underlines that it was since early 1990s when the term 'Globalization' became a catch phrase as it started entering into all walks of life. Broadly speaking 'corporate governance' can be defined as the way in which the 'corporate businesses' are managed and governed. While it is true that businesses are supposed to work within the framework of rules and guidelines formulated by the political bosses, it is now an accepted fact that politics too cannot survive without a 'big' helping hand from businesses. That effectively means the management must have developed an ability to analyze the political scene and behavior of political leaders. Companies are placed in an unenviable position of being labeled as sympathizer to one particulars party or candidate if they support one at the cost of the other. Just in case the results are different, then there's a threat of retaliation. During earlier times, politicians used to get finances from some big companies, in a hush-hush manner so that their political affiliations are not divulged. This trend continued for quite a while, but gradually started resulted in arm-twisting tactics on the part of both politicians as well as corporate houses. This led to the debate of bringing in more transparency in matters relating to political campaign finances. Such reforms are being supported in many parts of the world by political parties as well as business houses. Some business houses are not very happy with the unreasonable demands from some political quarters, while the behavior of some politicians and political parties under the influence of money-power has also brought down the image of governments. There are some differences in the manner and extent of implementation though. Such attempts to regulate campaign finances are being supported by people at large and if theirs is any opposition, it comes from within the political establishment. In USA such debates have been going on for quite some time and efforts are on to make the process more transparent and mutually acceptable. In USA the common term for such political efforts is campaign finance reform (Chapman, 1999). Citing a study undertaken by Columbia University professors Adolf A. Berle and Gardiner C. Means's, about more than half a century ago, Business Week ("How to Fix Corporate Governance") highlights the divergence between the owners of the corporation and the professional managers hired to run it. It is pointed out that widely dispersed ownership tends to absolve the management from serving the interests of stockholders. Managing the human resources is another area where, circumstances sometimes demand more than the well established theories and principles of management. Trade union issues are often handled well on the basis of political acumen of the manager concerned. Core areas of HRM include the individual, the organization and the social context of work and how all of these factors shape relations at work and result in organizational performance. In fact, to get out the optimum from a satisfied and participative individual is considered to be the ultimate objective of HRM policies. The Human Resource environment as such is affected mainly by the following five factors; Economic: The economic environment of host country, inflation rates, growth factors and the levels of unemployment affect the HR policies. Demographic: The demographic composition of the workforce like the communities involved, the caste consideration (this becomes a reasonable factor in case of some of the developing economies), the male-female composition, the population density of the country/ region also helps in devising effective HR strategies. Socio-cultural: Religion and culture never tell a person to 'not to work', yet people of some socio-cultural background are found to be less workaholic than others. The effect of family systems like 'Joint family system' or 'Nuclear family system' become crucial factors in forming the habits of individuals and thus formulating of HR policies. Technological: Rapid technological advancements have reduced the dependence on muscle power to a certain extent. Modernization and automation lead to increased accuracy and less redundancy in the output while increasing the comfort level of the workforce. Politico Legal: Prevailing political situation in the country, the party in power, the ideology of government functionaries affect the business environment. Whether it's a democracy, autocracy, monarchy, one party system, or a multi-party system gives enough room for strategy planners to devise HR policies accordingly. The law of the land has always to be kept in mind while doing the recruitments or managing the human resources. For example in some countries, formation of 'workers union' is not allowed while in some others it's mandatory. Taking a studied view from the facts and circumstances mentioned above, it appears that under the present circumstances, when globalization and liberalization are key to the global economy and we are living in multi-cultural, multi-racial, multi-lingual environment, managing an organization certainly requires more than the formal processes of planning, coordination and control. Involvement of power and politics has become an integral part of the process. References: 1. Bracken, Paul (2004), The Multinational Corporation Today, Yale SOM Working Paper No. OB-06, PM-05, OL-19, Yale School of Management, available online at http://papers.ssrn.com/sol3/papers.cfmabstract_id=514422#PaperDownload (May 1, 2007) 2. Butcher, David and Clarke, Martin (2003). 'Redefining managerial work: Smart politics'. Management Decision, Vol-41 No-5. 3. Cannon, Alan R. and St. John, Caron H. (2007). Measuring Environmental Complexity: A Theoretical and Empirical Assessment. Organizational Research Methods. Volume 10 Number 2. 4. Cantor, Joseph E., The State of Campaign Finance, available online at, http://usinfo.state.gov/products/pubs/election04/campaign$.htm (April 30, 2007) 5. Chapman, Bert (1999), Campaign finance information: an overview of print and Internet resources. Reference Services Review Volume 27 Number 3, 1999 MCB University Press 6. How to Fix Corporate Governance, (2002), Business Week Online, May 6, 2002. available online at http://www.businessweek.com/magazine/content/02_18/b3781701.htm (April 29, 2007) 7. Mullins, L. (2005) Management and organisational behaviour 7th edition. Harlow, Pearson Education 8. Terry, George R. & Franklin, Stephen G. (1994), Principles of Management, US, Richard D Irwin Inc. 9. Worthington, I. and Cumber patch, Z. (2006) 'Business organisations: the internal environment' The Business Environment 5th edition. Harlow, Pearson Education. Read More