14 – People, Management & Organisations Elective_Black

People,
Management &
Organisations
Study Guide

Manchester Business School

People, Management and
Organisations Division
Original Thinking Applied

Study Guide - FRONT COVER_New Format_Black / 210 x 297mm / 4Cx0C / 4th PROOF - 29 April 2011
Manchester Business School MBA Manchester Business School MBA
This Study Guide and Workbook has been prepared for This Study Guide and Workbook has been prepared for
Manchester Business School Worldwide by: Manchester Business School Worldwide by:

Mike Bresnen & Mick Marchington Mike Bresnen & Mick Marchington

Contributions to earlier versions of this workbook were also provided by: Contributions to earlier versions of this workbook were also provided by:
Leo McCann & Miguel Martinez Lucio (Manchester Business School) Leo McCann & Miguel Martinez Lucio (Manchester Business School)
Annette Cox (Institute for Employment Studies, University of Sussex) Annette Cox (Institute for Employment Studies, University of Sussex)

We regret that the authors are unable to enter directly into any correspondence We regret that the authors are unable to enter directly into any correspondence
relating to, or arising from this Study Guide. Any comments on this work would relating to, or arising from this Study Guide. Any comments on this work would
be welcomed and should be addressed to: be welcomed and should be addressed to:

The Academic Director The Academic Director

Manchester Business School Worldwide Manchester Business School Worldwide
The University of Manchester The University of Manchester
Booth street West Booth street West

Manchester Manchester
M15 6PB M15 6PB

© MBS Worldwide © MBS Worldwide

People, Management & Organization People, Management & Organization
Manchester Business School MBA Manchester Business School MBA

The materials in this course were prepared by The materials in this course were prepared by
Mike Bresnen & Mick Marchington Mike Bresnen & Mick Marchington

Contents Contents
Unit One : Introduction to Organizational Behaviour (OB) Unit One : Introduction to Organizational Behaviour (OB)
Introduction 2 Introduction 2

Section 1 : Perspectives on Work Organization and Job Design 10 Section 1 : Perspectives on Work Organization and Job Design 10
• ‘Scientific Management’ or Taylorism 10 • ‘Scientific Management’ or Taylorism 10
• The ‘Human Relations’ Perspective 15 • The ‘Human Relations’ Perspective 15
• Back to the Future? Systems Theory, Post-Fordism and Beyond. 21 • Back to the Future? Systems Theory, Post-Fordism and Beyond. 21

Section 2 : Structures of Organizations 26 Section 2 : Structures of Organizations 26

• Defining and Designing Organizational Structures 27 • Defining and Designing Organizational Structures 27
• Contingency Perspectives 34 • Contingency Perspectives 34
• Strategic Choice and Organizational Design 38 • Strategic Choice and Organizational Design 38

Section 3 : Organizational Cultures 45 Section 3 : Organizational Cultures 45

• The Nature and Meaning of Culture 45 • The Nature and Meaning of Culture 45
• `Types of Organizational Culture and their Effects 47 • `Types of Organizational Culture and their Effects 47
• The Influence of National Culture 53 • The Influence of National Culture 53
• Can Culture be Managed? 56 • Can Culture be Managed? 56

Section 4 : Managing Organizational Change 61 Section 4 : Managing Organizational Change 61

• Sources, Triggers and the Impact of Change 62 • Sources, Triggers and the Impact of Change 62
• Planned Organizational Change 65 • Planned Organizational Change 65
• Processes of Change Management 68 • Processes of Change Management 68
• The Role of the Change Agent 73 • The Role of the Change Agent 73

References for Unit One 76 References for Unit One 76

Contents
Unit Two : Introduction to Human Resource Management (HRM)
Introduction 80
Section 1 : The Meaning of HRM and Responsibility for its Delivery in Section 1 : The Meaning of HRM and Responsibility for its Delivery in
Organizations 86
• The Intellectual and Social Context of HRM 88
• The Changing Role of the HR Function in Organizations 90
• Alternative Forms of HR Service Delivery 95
Section 2 : HRM Strategy and Practice in Context 100
• Universalism, Best Practice, High Commitment HRM 100
• Contingency and Best Fit Perspectives on HRM 103
• Resource-Based and Architecture Perspectives on HRM 105
• Changing Patterns of HRM in Practice 108
Section 3 : Employee Involvement and Participation (EIP) 116
• The Nature and Meaning of EIP 116
• The Purpose and Impact of EIP 120
• The Role of Line Managers in Implementing Formal and Informal EIP 125
Section 4 : Reward Management 131
• Reward Management in Context 131
• Types of Payment System Theory and Practice 136
• Pay System Processes 142
Appendix to Unit Two: The Group Presentation 147
References for Unit Two 149
Contents
Unit Two : Introduction to Human Resource Management (HRM)
Introduction 80
Organizations 86
• The Intellectual and Social Context of HRM 88
• The Changing Role of the HR Function in Organizations 90
• Alternative Forms of HR Service Delivery 95
Section 2 : HRM Strategy and Practice in Context 100
• Universalism, Best Practice, High Commitment HRM 100
• Contingency and Best Fit Perspectives on HRM 103
• Resource-Based and Architecture Perspectives on HRM 105
• Changing Patterns of HRM in Practice 108
Section 3 : Employee Involvement and Participation (EIP) 116
• The Nature and Meaning of EIP 116
• The Purpose and Impact of EIP 120
• The Role of Line Managers in Implementing Formal and Informal EIP 125
Section 4 : Reward Management 131
• Reward Management in Context 131
• Types of Payment System Theory and Practice 136
• Pay System Processes 142
Appendix to Unit Two: The Group Presentation 147
References for Unit Two 149
People, Management & Organization People, Management & Organization
Unit 1 – Introduction to Organizational Behaviour Unit 1 – Introduction to Organizational Behaviour

Introduction to Organizational Behaviour Introduction to Organizational Behaviour

The materials in this course were prepared by: The materials in this course were prepared by:
Mike Bresnen & Mick Marchington Mike Bresnen & Mick Marchington

Study Guide
We regret that the authors are
unable to enter directly into any
correspondence relating to, or
arising from this study guide. Any
comments on this work would be
welcomed and should be addressed
to:
The Academic irector
D
MBS
Booth Street West
Manchester M15 6PB
United Kingdom
aking the most of your studies
M
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Study Guide
We regret that the authors are
unable to enter directly into any
correspondence relating to, or
arising from this study guide. Any
comments on this work would be
welcomed and should be addressed
to:
The Academic irector
MBS
Booth Street West
Manchester M15 6PB
United Kingdom
aking the most of your studies
Each study guide and workbook has
been designed with the learning
template in mind.
It will help your revision to check
you have attempted to understand
the study element in terms of its
content.
Did you work through the guided
questions, including any directed to
personal development? Were you
able to go more deeply into recom-
mended reading materials such as
cases, articles and the textbook?
Were you able to connect this with
your personal experiences?
Support
Printed study guides have been
provided to support the electronic
version within Blackboard.
Blackboard is a core part of the
learning process which also con-
tains other course material, such as:
• Welcome letters, study plans &
course outlines
• Assignment questions
• Workshop preparatory docu-
ments
Discussion forums are available to
discuss material content.
Should your study materials
be incomplete, contact:

Your mentor or Centre materials@mbs-worldwide.ac.uk

Introduction
Welcome to Unit 1 of the People Management and Organization module, which is
concerned with the topic of Organizational Behaviour (OB). Please make sure that
you read this introduction carefully to get a clear idea of what OB is all about as a
subject area and the scope of the material covered in the rest of this workbook. This
will help provide you with important foundations and guidelines for your learning
on the course, via self-study, coursework, interactions with colleagues on blackboard,
involvement in the PMO workshop and, of course, the exam!
What is organizational behaviour?
Whether we are talking about large or small companies in the private sector, public
sector organizations, voluntary groups, sports teams or simply enthusiasts that meet
together regularly to discuss a shared hobby, they all share an important feature
in common. They are all collections of people brought together (often willingly,
sometimes not!) to achieve a common purpose. This purpose will vary considerably, as
will the organizational arrangements devised to achieve it. There are obviously vast
differences between organizations as complex as Microsoft or GEC or the University
of Manchester and a local performing arts group. However, they all share a defining
feature of organization – that they are collective social arrangements consciously
designed to achieve some common purpose or goal.
Whatever type of organization you work in or work for, you will have considerable
experience in encountering and confronting – perhaps on a daily basis – the problems
with which the study of OB is concerned. As a line manager, your role might be concerned
with managing others at work on a day-to-day basis; or as a technical specialist you
may need to work together regularly in cross-functional teams with experts from
other departments. In either situation you may perhaps have faced problems in trying
to understand how people are affected by characteristics of the work place and groups
to which they belong; and how, in turn, individual and group behaviour influences
attempts to develop and apply management practices and processes.
2 2
Introduction
Welcome to Unit 1 of the People Management and Organization module, which is
concerned with the topic of Organizational Behaviour (OB). Please make sure that
you read this introduction carefully to get a clear idea of what OB is all about as a
subject area and the scope of the material covered in the rest of this workbook. This
will help provide you with important foundations and guidelines for your learning
on the course, via self-study, coursework, interactions with colleagues on blackboard,
involvement in the PMO workshop and, of course, the exam!
What is organizational behaviour?
Whether we are talking about large or small companies in the private sector, public
sector organizations, voluntary groups, sports teams or simply enthusiasts that meet
together regularly to discuss a shared hobby, they all share an important feature
in common. They are all collections of people brought together (often willingly,
sometimes not!) to achieve a common purpose. This purpose will vary considerably, as
will the organizational arrangements devised to achieve it. There are obviously vast
differences between organizations as complex as Microsoft or GEC or the University
of Manchester and a local performing arts group. However, they all share a defining
feature of organization – that they are collective social arrangements consciously
designed to achieve some common purpose or goal.
Whatever type of organization you work in or work for, you will have considerable
experience in encountering and confronting – perhaps on a daily basis – the problems
with which the study of OB is concerned. As a line manager, your role might be concerned
with managing others at work on a day-to-day basis; or as a technical specialist you
may need to work together regularly in cross-functional teams with experts from
other departments. In either situation you may perhaps have faced problems in trying
to understand how people are affected by characteristics of the work place and groups
to which they belong; and how, in turn, individual and group behaviour influences
attempts to develop and apply management practices and processes.
Even if you work mainly alone, you are not immune from being affected by people’s
behaviour in organizations – we are all customers of many organizations and regulated
by many more and so are often directly affected by their working practices and by
those employed to deliver their products and services.
Just think about it – what key challenges do you face in your own organization
regarding the management of people?
You will also undoubtedly have developed your own thoughts and ideas about how
organizations work and what makes them tick. What motivates people at work, for
example? How do we best organize and control different types of activity? How do
organizational and cross-national cultural differences affect behaviour at work?
What’s the best way of going about managing change in organizations?
Exploring these and many other similar ‘people management’ questions is central to
the study of OB and this first unit of the PMO module sets out to introduce you to
some of the key concepts and ideas in the subject area based upon extensive research
undertaken on aspects of behaviour in organizations associated with developments
in management practice and organization. In effect, the course provides a set of
conceptual ‘tools’ based on academic research that can be applied to an understanding
and diagnosis of organizational problems and that can be used to complement and
build upon your own experiences to help you gain further insight into people’s
behaviour at work and how this may be influenced by the circumstances in which they
find themselves. How those tools are applied is, of course, up to you and dependent on
how you relate them to your own organizational circumstances and how you use them
to frame organizational problems and issues. As your experience no doubt tells you,
there is no simple, single right answer to understanding many aspects of behaviour
in organizations and many different ways in which the same issue can be interpreted
and approached.
3 3
Even if you work mainly alone, you are not immune from being affected by people’s
behaviour in organizations – we are all customers of many organizations and regulated
by many more and so are often directly affected by their working practices and by
those employed to deliver their products and services.
Just think about it – what key challenges do you face in your own organization
regarding the management of people?
You will also undoubtedly have developed your own thoughts and ideas about how
organizations work and what makes them tick. What motivates people at work, for
example? How do we best organize and control different types of activity? How do
organizational and cross-national cultural differences affect behaviour at work?
What’s the best way of going about managing change in organizations?
Exploring these and many other similar ‘people management’ questions is central to
the study of OB and this first unit of the PMO module sets out to introduce you to
some of the key concepts and ideas in the subject area based upon extensive research
undertaken on aspects of behaviour in organizations associated with developments
in management practice and organization. In effect, the course provides a set of
conceptual ‘tools’ based on academic research that can be applied to an understanding
and diagnosis of organizational problems and that can be used to complement and
build upon your own experiences to help you gain further insight into people’s
behaviour at work and how this may be influenced by the circumstances in which they
find themselves. How those tools are applied is, of course, up to you and dependent on
how you relate them to your own organizational circumstances and how you use them
to frame organizational problems and issues. As your experience no doubt tells you,
there is no simple, single right answer to understanding many aspects of behaviour
in organizations and many different ways in which the same issue can be interpreted
and approached.
This brief introduction to what OB is about should immediately suggest three key
things:
First, it is not organizations themselves that behave but the people that populate them.
If your football team plays badly, this is due to some factor or combination of factors
associated with the individual players or coaches, how they work as a team (or not),
with the ways on which they are organized and managed or with the environment in
which the game takes place (the pitch, the opposition).
Second, these factors can be looked at separately, but are very difficult to analyze
independently. For example, poor performance might be attributed to an individuals’
ability or motivation, when in fact it may have more to do with the role they have been
allocated in the team or with how that team is organized and managed or with some
aspect of the environment that is affecting performance.
Third, that disentangling such complex inter-relationships cuts across different ‘levels
of analysis’ (individual, group, organizational, environmental) and also leaves room
for multiple interpretations of the problem as well as potential solutions (buy a new
player, train the players better, bring on appropriate substitutes, re-organize defence
and midfield, invest in new facilities, sell the club!).
In trying to capture this complexity, OB as a field of study draws upon ideas and
research from across a range of social science disciplines – notably psychology, social
psychology and sociology, but also anthropology, political science and economics. As
will be seen, insights from engineering as well as practicing managers have also had a
substantial part to play in the development of the discipline. Writers and researchers
on organization may share the view expressed by some that OB can be defined as
the study of the structure and functioning of organizations and of the behaviour of
individuals and groups within them (see Buchanan and Huczynski, p. 6). However, given
the multi-disciplinary and multi-leveled nature of the subject matter, it is perhaps not
surprising to learn that views and perspectives on organization are not only many and
varied, but also highly contentious and hotly debated.
4 4
This brief introduction to what OB is about should immediately suggest three key
things:
First, it is not organizations themselves that behave but the people that populate them.
If your football team plays badly, this is due to some factor or combination of factors
associated with the individual players or coaches, how they work as a team (or not),
with the ways on which they are organized and managed or with the environment in
which the game takes place (the pitch, the opposition).
Second, these factors can be looked at separately, but are very difficult to analyze
independently. For example, poor performance might be attributed to an individuals’
ability or motivation, when in fact it may have more to do with the role they have been
allocated in the team or with how that team is organized and managed or with some
aspect of the environment that is affecting performance.
Third, that disentangling such complex inter-relationships cuts across different ‘levels
of analysis’ (individual, group, organizational, environmental) and also leaves room
for multiple interpretations of the problem as well as potential solutions (buy a new
player, train the players better, bring on appropriate substitutes, re-organize defence
and midfield, invest in new facilities, sell the club!).
In trying to capture this complexity, OB as a field of study draws upon ideas and
research from across a range of social science disciplines – notably psychology, social
psychology and sociology, but also anthropology, political science and economics. As
will be seen, insights from engineering as well as practicing managers have also had a
substantial part to play in the development of the discipline. Writers and researchers
on organization may share the view expressed by some that OB can be defined as
the study of the structure and functioning of organizations and of the behaviour of
individuals and groups within them (see Buchanan and Huczynski, p. 6). However, given
the multi-disciplinary and multi-leveled nature of the subject matter, it is perhaps not
surprising to learn that views and perspectives on organization are not only many and
varied, but also highly contentious and hotly debated.
Is OB scientific or just plain ‘common sense’? Is OB scientific or just plain ‘common sense’?
Does this all mean that there are limits to our understanding of behaviour in Does this all mean that there are limits to our understanding of behaviour in
organizations that stem from the fact that OB cannot really be considered a ‘real organizations that stem from the fact that OB cannot really be considered a ‘real
science’ and that we should simply rely instead on our ‘common sense’? science’ and that we should simply rely instead on our ‘common sense’?

Well, the answer is not so straightforward. From the earliest developments in the field, Well, the answer is not so straightforward. From the earliest developments in the field,
many academic researchers and practicing managers have tried to develop a model many academic researchers and practicing managers have tried to develop a model
of enquiry that is based firmly on the natural sciences (chemistry, physics, etc). In this of enquiry that is based firmly on the natural sciences (chemistry, physics, etc). In this
model, the goals of research are: model, the goals of research are:

DESCRIPTION (involving accurate measurement) DESCRIPTION (involving accurate measurement)

EXPLANATION (involving accurate and clear analysis of causal relationships) EXPLANATION (involving accurate and clear analysis of causal relationships)

PREDICTION (being able to generalize the results to all or most situations) PREDICTION (being able to generalize the results to all or most situations)

CONTROL (being able to manipulate ‘variables’ to have the desired effects) CONTROL (being able to manipulate ‘variables’ to have the desired effects)

These are achieved through developing theory which is then tested through research These are achieved through developing theory which is then tested through research
– usually involving controlled experimentation and often in laboratory conditions. The – usually involving controlled experimentation and often in laboratory conditions. The
problem here of course is that, in the social sciences, we are faced with a number of problem here of course is that, in the social sciences, we are faced with a number of
limitations in being able to apply that model: limitations in being able to apply that model:

• Quantifying everything is impossible. How do we measure feelings or values? • Quantifying everything is impossible. How do we measure feelings or values?

• Separating cause from effect is often very difficult. People may also be • Separating cause from effect is often very difficult. People may also be
inconsistent in their behaviour. How, for example, do we accurately gauge the inconsistent in their behaviour. How, for example, do we accurately gauge the
effects of childhood experiences on adult behaviour? effects of childhood experiences on adult behaviour?

• Generalizing results is difficult. For example, how well do ideas about organizing • Generalizing results is difficult. For example, how well do ideas about organizing
developed in the car industry apply to professional services firms? developed in the car industry apply to professional services firms?

• Control of ‘variables’ is difficult and may have ethical implications. Controlled • Control of ‘variables’ is difficult and may have ethical implications. Controlled
experimentation can be inappropriate and the results difficult to apply. How experimentation can be inappropriate and the results difficult to apply. How
easy is it, for example, for managers to change their management style? How easy is it, for example, for managers to change their management style? How
acceptable is it to try to manipulate thoughts and feelings? acceptable is it to try to manipulate thoughts and feelings?

5 5
What about common sense then? The problem with common sense is that it’s not so
common and it may not make good sense. Psychologists have long established that we
are prone to see things in ways that reflect not the object itself, but our own individual
personalities, expectations and needs. In other words, we can see or hear what we
expect or want to hear. One common perceptual error is known as the fundamental
attribution error, which is the tendency to explain the behaviour of others based on
their personality and to overlook the influence of the context (we also give tend to
give ourselves more credit for our successes than we give others!). Another is to apply
our own frame of reference based on our experiences in judging the situation and
others’ behaviour. ‘Common sense’ is therefore highly subjective and particular to
the individual and their personal and social experiences and circumstances. As Albert
Einstein once put it, “Common sense is the set of prejudices that we learn before the
age of 18”.
What, then, can we hope for in applying concepts and theories drawn from the social
sciences to the study of organizational behaviour? Well, we first need to recognize
that not only is the field a multi-disciplinary one, but that within each discipline there
is no single, over-arching theory to explain aspects of individual and social behaviour
in organizations. Instead, multiple perspectives and theories co-exist. Each of these
will have their built in assumptions about behaviour in organizations and rest upon
an evidence base that varies in its strength of support.
Limits to applying the scientific model also make it difficult to test new theories or to
disprove existing ones. The inevitable result is a proliferation of theories and models
– each of which may give at best only a partial insight into behaviour in organizations
and many of which may be hotly contested and debated.
One implication is that theories and models provide instead a way of ‘framing’
problems of organization and viewing them in different ways. However, it is only by
being aware of the limitations of those models and theories – as well as their strengths
and apparent value – that it is possible to get a more completely rounded view of
organizational problems and the solutions on offer. Another implication is that it is
important to recognize the value and importance of taking a critical stance towards
the study of behaviour in organizations.
6 6
What about common sense then? The problem with common sense is that it’s not so
common and it may not make good sense. Psychologists have long established that we
are prone to see things in ways that reflect not the object itself, but our own individual
personalities, expectations and needs. In other words, we can see or hear what we
expect or want to hear. One common perceptual error is known as the fundamental
attribution error, which is the tendency to explain the behaviour of others based on
their personality and to overlook the influence of the context (we also give tend to
give ourselves more credit for our successes than we give others!). Another is to apply
our own frame of reference based on our experiences in judging the situation and
others’ behaviour. ‘Common sense’ is therefore highly subjective and particular to
the individual and their personal and social experiences and circumstances. As Albert
Einstein once put it, “Common sense is the set of prejudices that we learn before the
age of 18”.
What, then, can we hope for in applying concepts and theories drawn from the social
sciences to the study of organizational behaviour? Well, we first need to recognize
that not only is the field a multi-disciplinary one, but that within each discipline there
is no single, over-arching theory to explain aspects of individual and social behaviour
in organizations. Instead, multiple perspectives and theories co-exist. Each of these
will have their built in assumptions about behaviour in organizations and rest upon
an evidence base that varies in its strength of support.
Limits to applying the scientific model also make it difficult to test new theories or to
disprove existing ones. The inevitable result is a proliferation of theories and models
– each of which may give at best only a partial insight into behaviour in organizations
and many of which may be hotly contested and debated.
One implication is that theories and models provide instead a way of ‘framing’
problems of organization and viewing them in different ways. However, it is only by
being aware of the limitations of those models and theories – as well as their strengths
and apparent value – that it is possible to get a more completely rounded view of
organizational problems and the solutions on offer. Another implication is that it is
important to recognize the value and importance of taking a critical stance towards
the study of behaviour in organizations.
This involves not simply being aware of the limitations of particular approaches, but
also recognizing that there are fundamentally different ways of viewing the same
problem that are based on very different assumptions about the nature of work and
organization.
Clearly, organizations consist of different stakeholders (management, employees,
shareholders, customers, unions, regulators) who have very interests and perspectives.
Problems encountered in implementing new management practices, for instance, will
be approached very differently depending on whether they are construed by those
involved as ‘resistance to change’ or by those affected as ‘the imposition of unnecessary
rules’. Creating a full picture of any organizational problem requires an analytical
approach that is open to understanding these different ‘frames of reference’.
Reflecting this diversity, OB as a subject area consists of many diverse perspectives on
organization that range from the more managerially oriented to those that are more
critical of aspects of management practice. It is important then to be aware not only
of how this feeds into debates within OB as an area of study, but also how it continues
to shape the ways we attempt to define, analyze and understand contemporary
organizational problems. Putting this another way, it is at least as important in the
study of OB to reflect on knowledge created about management, as it is to emphasize
knowledge created by or for management.
Activity One
Before going any further in this unit, read chapter 1 of Buchanan and Huczynski.
Think of a problem of behaviour in your organization and consider the assumptions
that you and others make about how people behave in organizations and how to
analyze and interpret that behaviour (its causes and consequences). How do you
think those perceptions are shaped by people’s experiences, role and circumstances?
What features of organizational behaviour do they emphasize? What possible blind
spots do they cause? Are there any other alternative perspectives on the problem?
The key point of this activity is to get you thinking about the different frames of
reference for understanding organizational problems and how to approach and
resolve them.
7 7
This involves not simply being aware of the limitations of particular approaches, but
also recognizing that there are fundamentally different ways of viewing the same
problem that are based on very different assumptions about the nature of work and
organization.
Clearly, organizations consist of different stakeholders (management, employees,
shareholders, customers, unions, regulators) who have very interests and perspectives.
Problems encountered in implementing new management practices, for instance, will
be approached very differently depending on whether they are construed by those
involved as ‘resistance to change’ or by those affected as ‘the imposition of unnecessary
rules’. Creating a full picture of any organizational problem requires an analytical
approach that is open to understanding these different ‘frames of reference’.
Reflecting this diversity, OB as a subject area consists of many diverse perspectives on
organization that range from the more managerially oriented to those that are more
critical of aspects of management practice. It is important then to be aware not only
of how this feeds into debates within OB as an area of study, but also how it continues
to shape the ways we attempt to define, analyze and understand contemporary
organizational problems. Putting this another way, it is at least as important in the
study of OB to reflect on knowledge created about management, as it is to emphasize
knowledge created by or for management.
Activity One
Before going any further in this unit, read chapter 1 of Buchanan and Huczynski.
Think of a problem of behaviour in your organization and consider the assumptions
that you and others make about how people behave in organizations and how to
analyze and interpret that behaviour (its causes and consequences). How do you
think those perceptions are shaped by people’s experiences, role and circumstances?
What features of organizational behaviour do they emphasize? What possible blind
spots do they cause? Are there any other alternative perspectives on the problem?
The key point of this activity is to get you thinking about the different frames of
reference for understanding organizational problems and how to approach and
resolve them.
Outline of the rest of the unit
The remainder of the OB part of this workbook is divided into four sections. These
are:
1) Perspectives on Work Organization and Job Design
2) Structures of Organizations
3) Organizational Cultures
4) Managing Organizational Change
Included in these sections are references to particular parts of the Buchanan and
Huczynski text, together with specified readings to supplement your reading of the
text. Full references of these specified readings are given at the end of Unit One.
Other references you can choose to add to your reading can of course be found in the
Buchanan and Huczynski text, where you will also find numerous exercises and case
studies to supplement the Activities included here.
Objectives for unit one
After completing this unit on OB, you should:
a) Have an understanding of the main approaches to work organization and job
design and their key differences
b) Be able to evaluate the application of different principles of job design in
contemporary organizations
c) Identify the main types of organizational structure, their key characteristics and
effects
d) Be able to explain how contingencies and strategic choices shape the design of
organizational structures
8 8
Outline of the rest of the unit
The remainder of the OB part of this workbook is divided into four sections. These
are:
1) Perspectives on Work Organization and Job Design
2) Structures of Organizations
3) Organizational Cultures
4) Managing Organizational Change
Included in these sections are references to particular parts of the Buchanan and
Huczynski text, together with specified readings to supplement your reading of the
text. Full references of these specified readings are given at the end of Unit One.
Other references you can choose to add to your reading can of course be found in the
Buchanan and Huczynski text, where you will also find numerous exercises and case
studies to supplement the Activities included here.
Objectives for unit one
After completing this unit on OB, you should:
a) Have an understanding of the main approaches to work organization and job
design and their key differences
b) Be able to evaluate the application of different principles of job design in
contemporary organizations
c) Identify the main types of organizational structure, their key characteristics and
effects
d) Be able to explain how contingencies and strategic choices shape the design of
organizational structures
 e) Identify the key features of organizational culture and use models to identify
different types of culture
f) Be aware of the different perspectives on organizational culture and what they
mean for attempts to ‘manage’ culture
g) Be able to apply diagnostic models to understand the effects of context on the
management of change
h) Be able to identify different processes of change management and the
circumstances under which they can be used
Assessment for PMO and the OB Unit
Before we continue, it is worth emphasizing again that there are three pieces of
assessment for the PMO module as a whole:
1. An individual case study assignment which relates to the material covered in Unit
One (OB). This comprises 25% of your module mark and further details about the
case study, what is expected, submission date and assessed work guidelines will
be given in due course via Blackboard.
2. A group presentation which relates to the material covered in Unit Two (HRM).
This also comprises 25% of the module mark and will take place during the
workshop. Some further details are given in this workbook in Unit Two.
3. An examination that relates to the material covered in the OB and HRM parts
of the course. The exam comprises 50% of your overall module mark and will
take place after the workshop. Further details and guidance will be given at the
workshop about what to expect. In the exam, you will be expected to answer
THREE questions, including at least ONE from each of the OB and HRM Units,
with the final question being chosen from either of the Units.
9 9
e) Identify the key features of organizational culture and use models to identify
different types of culture
f) Be aware of the different perspectives on organizational culture and what they
mean for attempts to ‘manage’ culture
g) Be able to apply diagnostic models to understand the effects of context on the
management of change
h) Be able to identify different processes of change management and the
circumstances under which they can be used
Assessment for PMO and the OB Unit
Before we continue, it is worth emphasizing again that there are three pieces of
assessment for the PMO module as a whole:
1. An individual case study assignment which relates to the material covered in Unit
One (OB). This comprises 25% of your module mark and further details about the
case study, what is expected, submission date and assessed work guidelines will
be given in due course via Blackboard.
2. A group presentation which relates to the material covered in Unit Two (HRM).
This also comprises 25% of the module mark and will take place during the
workshop. Some further details are given in this workbook in Unit Two.
3. An examination that relates to the material covered in the OB and HRM parts
of the course. The exam comprises 50% of your overall module mark and will
take place after the workshop. Further details and guidance will be given at the
workshop about what to expect. In the exam, you will be expected to answer
THREE questions, including at least ONE from each of the OB and HRM Units,
with the final question being chosen from either of the Units.
Section 1: Perspectives on Work
Organization and Job Design
Developments in work organization and job design provide an important starting point
for understanding contemporary management organization and practice. However, to
understand these developments it is necessary to go back briefly in time to explore
the origins of OB. It may seem odd to suggest that we do that. Why not start instead
with ‘leading edge’ thinking on management? There are at least three main reasons
for this.
First, as we will see, all of the organizations we work in today are profoundly influenced
by these early developments. Second, they had a revolutionary impact on how we
continue to approach work organization and job design problems. Third, when we
strip them down to their basics, many ‘leading edge’ management practices (TQM,
lean production, BPR, etc) are concerned today with precisely the same problems and
dilemmas facing early organizational designers and practitioners.
Just think about it – would you dismiss or even question the contemporary relevance
to understanding the physical world of Newton’s laws of gravity (1687), Einstein’s
theory of relativity (1916) or quantum mechanics (1920s)?
‘Scientific management’ or Taylorism
The first real attempt to develop a systematic approach to organizing and managing
work was by Frederick Winslow Taylor, who developed and applied his ideas – later
dubbed ‘scientific management’ – at the Midvale Steel Company and, later on, at the
Bethlehem Steel Company in the early 1900s.
Taylor was driven by a concern to apply rational, ‘scientific’ methods at the workplace.
At that time, management was in its infancy and the organization and planning of
work was very much under the control of craft workers who tended to rely upon their
own ‘rule-of-thumb’ methods in order to achieve task objectives.
10
Section 1: Perspectives on Work
Organization and Job Design
Developments in work organization and job design provide an important starting point
for understanding contemporary management organization and practice. However, to
understand these developments it is necessary to go back briefly in time to explore
the origins of OB. It may seem odd to suggest that we do that. Why not start instead
with ‘leading edge’ thinking on management? There are at least three main reasons
for this.
First, as we will see, all of the organizations we work in today are profoundly influenced
by these early developments. Second, they had a revolutionary impact on how we
continue to approach work organization and job design problems. Third, when we
strip them down to their basics, many ‘leading edge’ management practices (TQM,
lean production, BPR, etc) are concerned today with precisely the same problems and
dilemmas facing early organizational designers and practitioners.
Just think about it – would you dismiss or even question the contemporary relevance
to understanding the physical world of Newton’s laws of gravity (1687), Einstein’s
theory of relativity (1916) or quantum mechanics (1920s)?
‘Scientific management’ or Taylorism
The first real attempt to develop a systematic approach to organizing and managing
work was by Frederick Winslow Taylor, who developed and applied his ideas – later
dubbed ‘scientific management’ – at the Midvale Steel Company and, later on, at the
Bethlehem Steel Company in the early 1900s.
Taylor was driven by a concern to apply rational, ‘scientific’ methods at the workplace.
At that time, management was in its infancy and the organization and planning of
work was very much under the control of craft workers who tended to rely upon their
own ‘rule-of-thumb’ methods in order to achieve task objectives.
10
Taylor saw such methods and the lack of managerial control they represented as major
sources of inefficiency and a primary cause of ‘systematic soldiering’ – the deliberate
restriction of output – which he was determined to eradicate and which he attributed
to attempts by workers to secure jobs and control the pace of work.
The result was the development of a ‘science of work’ in which tasks would be analyzed
by breaking them down into their constituent elements, discarding any physical actions
that were unnecessary and wasteful of energy and then re-combining those elements
that remained to produce the most efficient ‘one best way’ of performing that task.
The aim was to maximize efficiency and creating predictable job performance by
simplifying and standardizing tasks and making them highly repetitive and specialized.
Discretion would be taken away from the workers and placed in the hands of managers
who would now take full responsibility for planning and control.
Taylor achieved impressive results with his new methods. For example, pig iron
handling at Bethlehem Steel rose from an average of 12.5 tonnes per person per day to
an estimated 48 tonnes per person per day – a fourfold increase in productivity. The
average cost of handling was more than halved and, for those workers that remained,
average earnings per day increased by over 60%. These job re-design practices were
distilled by Taylor into a set of four ‘principles of scientific management’:
1. Create a clear division of tasks and responsibilities between management and
workers, with managers planning the work and workers carrying out the tasks
2. Use scientific methods to replace the use of ‘rule of thumb’ methods and
determine the ‘one best way’ of completing a task
3. Apply scientific methods to the selection and training of workers
4. Ensure that workers cooperate with management in carrying out the work
as planned using via close supervision and economic incentives (payment by
results)
11
Taylor saw such methods and the lack of managerial control they represented as major
sources of inefficiency and a primary cause of ‘systematic soldiering’ – the deliberate
restriction of output – which he was determined to eradicate and which he attributed
to attempts by workers to secure jobs and control the pace of work.
The result was the development of a ‘science of work’ in which tasks would be analyzed
by breaking them down into their constituent elements, discarding any physical actions
that were unnecessary and wasteful of energy and then re-combining those elements
that remained to produce the most efficient ‘one best way’ of performing that task.
The aim was to maximize efficiency and creating predictable job performance by
simplifying and standardizing tasks and making them highly repetitive and specialized.
Discretion would be taken away from the workers and placed in the hands of managers
who would now take full responsibility for planning and control.
Taylor achieved impressive results with his new methods. For example, pig iron
handling at Bethlehem Steel rose from an average of 12.5 tonnes per person per day to
an estimated 48 tonnes per person per day – a fourfold increase in productivity. The
average cost of handling was more than halved and, for those workers that remained,
average earnings per day increased by over 60%. These job re-design practices were
distilled by Taylor into a set of four ‘principles of scientific management’:
1. Create a clear division of tasks and responsibilities between management and
workers, with managers planning the work and workers carrying out the tasks
2. Use scientific methods to replace the use of ‘rule of thumb’ methods and
determine the ‘one best way’ of completing a task
3. Apply scientific methods to the selection and training of workers
4. Ensure that workers cooperate with management in carrying out the work
as planned using via close supervision and economic incentives (payment by
results)
11
Taylor’s view was that these principles could be applied to any type of work (including
managerial work) and in any type of industrial context. Also, that the application of
these methods would benefit both management and workers (would see both improved
earnings and the end of arbitrary management decisions). Taylor’s expectation was
that his scientific management methods would improve cooperation at the workplace
as both parties would see the obvious benefits.
It didn’t quite work out like that. Despite the very significant gains in productivity,
it quickly became apparent that scientific management created enormous problems
and provoked fierce opposition, including major industrial relations problems. The
chief criticism leveled against scientific management was that it took no account of
the motivations and needs of those employed and created a work environment that
was dehumanizing and in which workers were simply expected to perform highly
monotonous, repetitive and unchallenging work purely for economic incentives. No
account was taken of the importance of job satisfaction, achievement and recognition.
Skills development and learning opportunities were purposely designed out of jobs,
allowing management to recruit unskilled workers at lower wage levels.
Nevertheless, Taylor’s ideas did have a profound effect upon the development of work
organization and management practices in the first half of the 20th century. By the
1920s, Henry Ford had applied and developed Taylor’s thinking to create a system
of mass production – Fordism – that was to become the dominant global model of
efficient mass production for the next half century. Ford’s contribution to Taylor’s
basic ideas was to:
• Analyze jobs using time and motion study
• Use single purpose machinery to manufacture standardized parts
• Introduce the moving assembly line
By extending control over all aspects of production (including labour and materials
supply markets), Ford was able to establish a system of production that met the needs
of expanding mass markets and did so by standardizing production and achieving
massive increases in productive efficiency.
12
Taylor’s view was that these principles could be applied to any type of work (including
managerial work) and in any type of industrial context. Also, that the application of
these methods would benefit both management and workers (would see both improved
earnings and the end of arbitrary management decisions). Taylor’s expectation was
that his scientific management methods would improve cooperation at the workplace
as both parties would see the obvious benefits.
It didn’t quite work out like that. Despite the very significant gains in productivity,
it quickly became apparent that scientific management created enormous problems
and provoked fierce opposition, including major industrial relations problems. The
chief criticism leveled against scientific management was that it took no account of
the motivations and needs of those employed and created a work environment that
was dehumanizing and in which workers were simply expected to perform highly
monotonous, repetitive and unchallenging work purely for economic incentives. No
account was taken of the importance of job satisfaction, achievement and recognition.
Skills development and learning opportunities were purposely designed out of jobs,
allowing management to recruit unskilled workers at lower wage levels.
Nevertheless, Taylor’s ideas did have a profound effect upon the development of work
organization and management practices in the first half of the 20th century. By the
1920s, Henry Ford had applied and developed Taylor’s thinking to create a system
of mass production – Fordism – that was to become the dominant global model of
efficient mass production for the next half century. Ford’s contribution to Taylor’s
basic ideas was to:
• Analyze jobs using time and motion study
• Use single purpose machinery to manufacture standardized parts
• Introduce the moving assembly line
By extending control over all aspects of production (including labour and materials
supply markets), Ford was able to establish a system of production that met the needs
of expanding mass markets and did so by standardizing production and achieving
massive increases in productive efficiency.
12
Like Taylorism, however, Fordism was not without its costs and criticisms. Control
through high levels of task specialization and assembly line production again caused
massive problems of employee de-motivation and dissatisfaction and led to major
industrial relations problems (which were still endemic in the 1970s). Production
system inflexibility also meant that firms were unable to respond to the increasingly
differentiated and segmented markets that began to emerge in the pre- and post-war
years.
This first, Engineering School of job design, which is typified in the ideas and practices
of Taylorism and Fordism, is of course still highly relevant today (as anyone who has
managed or worked in a call centre will know!). Focusing upon the goal of improving
efficiency, it takes a very ‘machine-like’ view of the design of jobs and work systems
and emphasizes the importance of improving operating efficiency through the use
of methods such as job simplification, process standardization and time and motion
study.
Although attempts were made from very early on to temper some of the extremes of
the scientific management approach (in the work of Laurence Gantt, for example who
introduced bonus systems), there are many contemporary examples of where work
intensification using Taylorist/Fordist principles and methods is still practiced. The
net effect of the methods is to produce a system with a clear demarcation between
managers and workers, where managers retain control over all aspects of decision-
making. Workers are required to perform highly specialized but unskilled work in a
very rigid division of labour – often in conditions of low trust and for relatively low
rates of pay.
Further reading
To explore further the impact and legacy of Ford, read the paper by Starkey and
McKinlay (1994) on ‘Managing for Ford’ (Sociology, 28(4), 975-990), which examines
Ford before and after the ‘After Japan’ programme.
These principles and their effects can also be seen in many areas of the contemporary
economy – not simply in manufacturing. George Ritzer has coined the term
‘McDonaldization’ to refer to the application of rational principles of standardization
of product/service and routinization of processes to whole areas of the service sector –
13
Like Taylorism, however, Fordism was not without its costs and criticisms. Control
through high levels of task specialization and assembly line production again caused
massive problems of employee de-motivation and dissatisfaction and led to major
industrial relations problems (which were still endemic in the 1970s). Production
system inflexibility also meant that firms were unable to respond to the increasingly
differentiated and segmented markets that began to emerge in the pre- and post-war
years.
This first, Engineering School of job design, which is typified in the ideas and practices
of Taylorism and Fordism, is of course still highly relevant today (as anyone who has
managed or worked in a call centre will know!). Focusing upon the goal of improving
efficiency, it takes a very ‘machine-like’ view of the design of jobs and work systems
and emphasizes the importance of improving operating efficiency through the use
of methods such as job simplification, process standardization and time and motion
study.
Although attempts were made from very early on to temper some of the extremes of
the scientific management approach (in the work of Laurence Gantt, for example who
introduced bonus systems), there are many contemporary examples of where work
intensification using Taylorist/Fordist principles and methods is still practiced. The
net effect of the methods is to produce a system with a clear demarcation between
managers and workers, where managers retain control over all aspects of decision-
making. Workers are required to perform highly specialized but unskilled work in a
very rigid division of labour – often in conditions of low trust and for relatively low
rates of pay.
Further reading
To explore further the impact and legacy of Ford, read the paper by Starkey and
McKinlay (1994) on ‘Managing for Ford’ (Sociology, 28(4), 975-990), which examines
Ford before and after the ‘After Japan’ programme.
These principles and their effects can also be seen in many areas of the contemporary
economy – not simply in manufacturing. George Ritzer has coined the term
‘McDonaldization’ to refer to the application of rational principles of standardization
of product/service and routinization of processes to whole areas of the service sector –
13
including, obviously, fast food restaurants. Ritzer argues that the approach typified by
McDonalds consists of four key elements (note how they mirror the goals of science):
1. Efficiency: high speed of product manufacture or service provision
2. Calculability: high value and minimum waste
3. Predictability: of product or service, irrespective of time or place
4. Control: staff perform a limited range of tasks in a precisely detailed way
According to Ritzer, this model, which encapsulates the rationalistic spirit of scientific
management and provides the same sorts of efficiency gains, also suffers from some
of the same problems. These are associated with the generation of highly specialized
and specified tasks that create low skilled jobs that leave little room for worker
discretion and creative input – so-called ‘McJobs’.
Activity Two
Read Buchanan and Huczynski, ch 14 and pp 83-4. Consider whether (and where) in
your own organization you still encounter the principles of the engineering school
of job design. How widespread is their application? What are the benefits? What
are the costs? How extensively are they applied to management jobs? Compare and
contrast your experiences with other members of the course on Blackboard.
Important to these types of work environments and an off-shoot of scientific
management is what could be described as the Ergonomics School of job design.
Ergonomics is now a well established discipline in its own right and is concerned
with designing equipment and working environments that promote simple, safe and
reliable working and which minimize the effort expended in undertaking work. The
aim is to achieve a good ‘fit’ between people, equipment and working environments.
Although efficiency concerns are clearly of great importance, so too are safety,
comfort, ease of use and other considerations associated with working practices (e.g.
re-designing office layouts to improve communication).
14
including, obviously, fast food restaurants. Ritzer argues that the approach typified by
McDonalds consists of four key elements (note how they mirror the goals of science):
1. Efficiency: high speed of product manufacture or service provision
2. Calculability: high value and minimum waste
3. Predictability: of product or service, irrespective of time or place
4. Control: staff perform a limited range of tasks in a precisely detailed way
According to Ritzer, this model, which encapsulates the rationalistic spirit of scientific
management and provides the same sorts of efficiency gains, also suffers from some
of the same problems. These are associated with the generation of highly specialized
and specified tasks that create low skilled jobs that leave little room for worker
discretion and creative input – so-called ‘McJobs’.
Activity Two
Read Buchanan and Huczynski, ch 14 and pp 83-4. Consider whether (and where) in
your own organization you still encounter the principles of the engineering school
of job design. How widespread is their application? What are the benefits? What
are the costs? How extensively are they applied to management jobs? Compare and
contrast your experiences with other members of the course on Blackboard.
Important to these types of work environments and an off-shoot of scientific
management is what could be described as the Ergonomics School of job design.
Ergonomics is now a well established discipline in its own right and is concerned
with designing equipment and working environments that promote simple, safe and
reliable working and which minimize the effort expended in undertaking work. The
aim is to achieve a good ‘fit’ between people, equipment and working environments.
Although efficiency concerns are clearly of great importance, so too are safety,
comfort, ease of use and other considerations associated with working practices (e.g.
re-designing office layouts to improve communication).
14
The origins of ergonomics can be traced back to the work of Frank and Lillian Gilbreth,
who were also pioneers of scientific management. Frank Gilbreth’s contribution was
to develop methods of measurement – particularly of motion (he introduced the
time and motion studies that Ford went on to deploy most fully). Lillian Gilbreth
was a psychologist whose interests were in the causes and effects of fatigue. Her
contribution was in seeing how the total working environment might be manipulated
to reduce fatigue and its negative effects on performance (through changing the
length of the working day, introducing rest breaks, changing working conditions and
providing social facilities).
These ideas refined and moderated the impact of scientific management and their
development has had a profound effect on contemporary office and work design.
However, it is not until the advent of the ‘Human Relations’ approach and the
Psychological School of job design that it gave rise to that we see a shift in understanding
about the relationship between job design, motivation and performance.
The ‘Human Relations’ perspective
The Human Relations approach originated from a series of experiments and
observations carried out at the Hawthorne Works of the Western Electric Company
in Chicago in the late 1920s-early 1930s. Originally intended to examine the effects
of changed working conditions on performance across the plant, the research team
led by a psychologist – Elton Mayo – soon generated more important insights into
behaviour at the workplace that were to have a profound impact on the development
of ideas concerning motivation, job design, group behaviour and leadership at work.
A first set of experiments was conducted in the Relay Assembly Test Room, where a
group of female workers were separated out from the rest of the workforce and their
working and environmental conditions (rest breaks, lighting, heating, etc) manipulated
to study the effects on productivity. The results revealed that, whatever the changes
introduced (including reverting to original or worse conditions), productivity levels
improved. Interviews with the group led the researchers to conclude that it was the
sense of involvement and recognition experienced by the group that was a significant
factor in leading to improved performance.
15
The origins of ergonomics can be traced back to the work of Frank and Lillian Gilbreth,
who were also pioneers of scientific management. Frank Gilbreth’s contribution was
to develop methods of measurement – particularly of motion (he introduced the
time and motion studies that Ford went on to deploy most fully). Lillian Gilbreth
was a psychologist whose interests were in the causes and effects of fatigue. Her
contribution was in seeing how the total working environment might be manipulated
to reduce fatigue and its negative effects on performance (through changing the
length of the working day, introducing rest breaks, changing working conditions and
providing social facilities).
These ideas refined and moderated the impact of scientific management and their
development has had a profound effect on contemporary office and work design.
However, it is not until the advent of the ‘Human Relations’ approach and the
Psychological School of job design that it gave rise to that we see a shift in understanding
about the relationship between job design, motivation and performance.
The ‘Human Relations’ perspective
The Human Relations approach originated from a series of experiments and
observations carried out at the Hawthorne Works of the General Electric Company
in Chicago in the late 1920s-early 1930s. Originally intended to examine the effects
of changed working conditions on performance across the plant, the research team
led by a psychologist – Elton Mayo – soon generated more important insights into
behaviour at the workplace that were to have a profound impact on the development
of ideas concerning motivation, job design, group behaviour and leadership at work.
A first set of experiments was conducted in the Relay Assembly Test Room, where a
group of female workers were separated out from the rest of the workforce and their
working and environmental conditions (rest breaks, lighting, heating, etc) manipulated
to study the effects on productivity. The results revealed that, whatever the changes
introduced (including reverting to original or worse conditions), productivity levels
improved. Interviews with the group led the researchers to conclude that it was the
sense of involvement and recognition experienced by the group that was a significant
factor in leading to improved performance.
15
A second set of observations conducted in the Bank Wiring Room on groups of male
workers revealed that the groups themselves established their own output norms
and controlled the levels of output of group members by imposing physical sanctions.
Importantly, not only were overperforming ‘rate-busters’ sanctioned, so too were
under-performing ‘chisellers’. The implication was that, left to control their own
output levels, work groups would not only set targets that could exceed those set
by management, but also apply their own sanctions to control individual member
behaviour and performance.
Follow up interviews across the plant as a whole revealed that, in contrast to
management’s emphasis on cost and efficiency, the workforce stressed instead
emotion and sentimentality. The researchers took the findings as a whole to suggest
that what was absent under Taylorised systems of working was an awareness of the
importance of social factors at the workplace as a source of motivation, satisfaction
and productivity at work. Involvement, recognition, autonomy, a sense of meaning
in the work and ability to relate to co-workers were all important attributes that job
simplification simply ignored as unimportant. Motivation was about satisfying social,
as well as economic, needs.
Critics of this research have pointed to a number of problems with the methods used
and conclusions drawn. Most notably, the research introduced us to the Hawthorne
effect – or the consequences that the methods employed in the research itself can
have upon producing experimental findings.
Many have also questioned the assumptions of the researchers. Is it possible or likely,
for instance, for management to provide the conditions under which social needs
would be satisfied (after the research, conditions reverted back to ‘normal’)? Do
social needs equate with motivation and performance as simply and directly as the
findings suggested or is the relationship more complex? Are social needs as important
to everyone or are some people much more focused on financial incentives? How do
conditions outside the workplace (in the job market, economy and at home) also
influence orientations to work and pay?
16
A second set of observations conducted in the Bank Wiring Room on groups of male
workers revealed that the groups themselves established their own output norms
and controlled the levels of output of group members by imposing physical sanctions.
Importantly, not only were overperforming ‘rate-busters’ sanctioned, so too were
under-performing ‘chisellers’. The implication was that, left to control their own
output levels, work groups would not only set targets that could exceed those set
by management, but also apply their own sanctions to control individual member
behaviour and performance.
Follow up interviews across the plant as a whole revealed that, in contrast to
management’s emphasis on cost and efficiency, the workforce stressed instead
emotion and sentimentality. The researchers took the findings as a whole to suggest
that what was absent under Taylorised systems of working was an awareness of the
importance of social factors at the workplace as a source of motivation, satisfaction
and productivity at work. Involvement, recognition, autonomy, a sense of meaning
in the work and ability to relate to co-workers were all important attributes that job
simplification simply ignored as unimportant. Motivation was about satisfying social,
as well as economic, needs.
Critics of this research have pointed to a number of problems with the methods used
and conclusions drawn. Most notably, the research introduced us to the Hawthorne
effect – or the consequences that the methods employed in the research itself can
have upon producing experimental findings.
Many have also questioned the assumptions of the researchers. Is it possible or likely,
for instance, for management to provide the conditions under which social needs
would be satisfied (after the research, conditions reverted back to ‘normal’)? Do
social needs equate with motivation and performance as simply and directly as the
findings suggested or is the relationship more complex? Are social needs as important
to everyone or are some people much more focused on financial incentives? How do
conditions outside the workplace (in the job market, economy and at home) also
influence orientations to work and pay?
16
Nevertheless, despite these important debates (which continue to rage), an important
part of the legacy of the Hawthorne research was its impact on research on the
motivational effects of work design itself. This led to the Psychological School of job
design and, in particular, the principles of job re-design based on Job Enrichment.
Job Enrichment is a pervasive feature of many contemporary working practices and
lies at the heart of many management initiatives (such as TQM, JIT-based production,
team-working and empowerment). It builds back into jobs the motivating factors
that were taken out by scientific management in the drive for highly specialized, low
discretionary work by adding in greater variety, autonomy, responsibility, meaning
and challenge.
Job enrichment derives from the work of Frederick Herzberg, whose research into
motivation suggested that there were two basic sets of factors influencing motivation
and satisfaction at work. ‘Hygiene factors’ are related to the environment of work and
so are extrinsic to the task (they include pay, company policy, supervisory style, status,
job security and working conditions). When these conditions are not favourable,
they create dissatisfaction which can lead to absenteeism and labour turnover; but
improving them does not produce greater satisfaction and motivation. ‘Motivators’
are, in contrast, what create satisfaction/motivation. They relate to the work itself and
so are intrinsic to the job (including achievement, advancement prospects, possibilities
for growth, recognition, responsibility and the work itself).
Job enrichment involves building motivators as intrinsic rewards back into the content
of jobs. This is achieved partly through increasing the range of activities undertaken
to produce less specialized tasks and creating jobs that have more variety and scope
(also known as horizontal job enlargement). However, it is principally achieved by
increasing the vertical loading of jobs – increasing levels of discretion, creating less
standardized tasks and building in more motivators (this is also sometimes referred
to as vertical job enlargement). According to Herzberg, there are seven key principles
of job enrichment.
17
Nevertheless, despite these important debates (which continue to rage), an important
part of the legacy of the Hawthorne research was its impact on research on the
motivational effects of work design itself. This led to the Psychological School of job
design and, in particular, the principles of job re-design based on Job Enrichment.
Job Enrichment is a pervasive feature of many contemporary working practices and
lies at the heart of many management initiatives (such as TQM, JIT-based production,
team-working and empowerment). It builds back into jobs the motivating factors
that were taken out by scientific management in the drive for highly specialized, low
discretionary work by adding in greater variety, autonomy, responsibility, meaning
and challenge.
Job enrichment derives from the work of Frederick Herzberg, whose research into
motivation suggested that there were two basic sets of factors influencing motivation
and satisfaction at work. ‘Hygiene factors’ are related to the environment of work and
so are extrinsic to the task (they include pay, company policy, supervisory style, status,
job security and working conditions). When these conditions are not favourable,
they create dissatisfaction which can lead to absenteeism and labour turnover; but
improving them does not produce greater satisfaction and motivation. ‘Motivators’
are, in contrast, what create satisfaction/motivation. They relate to the work itself and
so are intrinsic to the job (including achievement, advancement prospects, possibilities
for growth, recognition, responsibility and the work itself).
Job enrichment involves building motivators as intrinsic rewards back into the content
of jobs. This is achieved partly through increasing the range of activities undertaken
to produce less specialized tasks and creating jobs that have more variety and scope
(also known as horizontal job enlargement). However, it is principally achieved by
increasing the vertical loading of jobs – increasing levels of discretion, creating less
standardized tasks and building in more motivators (this is also sometimes referred
to as vertical job enlargement). According to Herzberg, there are seven key principles
of job enrichment.
17
Table 1: Principles of Job Enrichment (from Herzberg, 1987, p. 10) Table 1: Principles of Job Enrichment (from Herzberg, 1987, p. 10)

Principles of Vertical Job Loading Motivators Principles of Vertical Job Loading Motivators

Remove some controls while retaining Responsibility and achievement Remove some controls while retaining Responsibility and achievement
accountability accountability

Increase the accountability of Responsibility and recognition Increase the accountability of Responsibility and recognition
individuals for their own work individuals for their own work

Give a person a complete natural unit Responsibility, achievement and Give a person a complete natural unit Responsibility, achievement and
of work (e.g. module, division, area) recognition of work (e.g. module, division, area) recognition

Grant additional authority to Responsibility, achievement and Grant additional authority to Responsibility, achievement and
employees in their activity; job recognition employees in their activity; job recognition
freedom freedom

Make periodic reports directly Recognition Make periodic reports directly Recognition
available to the workers themselves available to the workers themselves
rather than to supervisors rather than to supervisors

Introduce new and more difficult tasks Growth and learning Introduce new and more difficult tasks Growth and learning
not previously handled not previously handled

Assign individuals specific or Responsibility, growth and Assign individuals specific or Responsibility, growth and
specialized tasks, enabling them to advancement specialized tasks, enabling them to advancement
become experts become experts

These principles go beyond simple job rotation or horizontal job enlargement (both of These principles go beyond simple job rotation or horizontal job enlargement (both of
which only add variety to work and do nothing to enrich the content of work). Note which only add variety to work and do nothing to enrich the content of work). Note
here too that we are not talking about pay, which is an extrinsic reward and will be here too that we are not talking about pay, which is an extrinsic reward and will be
considered further in the HRM section on Reward Systems. considered further in the HRM section on Reward Systems.

Further reading Further reading

To explore further the ideas behind job enrichment, read the paper by Herzberg (1987) To explore further the ideas behind job enrichment, read the paper by Herzberg (1987)
on ‘One more time: how do you motivate employees?’ (Harvard Business Review, Sept- on ‘One more time: how do you motivate employees?’ (Harvard Business Review, Sept-
Oct, pp 5-16) and also the paper by Bassett-Jones and Lloyd (2005) which assesses the Oct, pp 5-16) and also the paper by Bassett-Jones and Lloyd (2005) which assesses the
contemporary relevance of Herzberg’s work. contemporary relevance of Herzberg’s work.

18 18
How then do we apply these ideas of job enrichment and work re-design from the How then do we apply these ideas of job enrichment and work re-design from the
Psychological School to the re-design of work? One particularly useful framework is Psychological School to the re-design of work? One particularly useful framework is
the Job Characteristics Model originally developed by Hackman and Oldham (1976). the Job Characteristics Model originally developed by Hackman and Oldham (1976).
This model identifies five core dimensions of jobs: This model identifies five core dimensions of jobs:

• Skill Variety: the extent to which different skills and abilities are used • Skill Variety: the extent to which different skills and abilities are used

• Task Identity: the extent to which a job involves a meaningful piece of work • Task Identity: the extent to which a job involves a meaningful piece of work

• Task Significance: the extent to which a job impacts on the work of others • Task Significance: the extent to which a job impacts on the work of others

• Autonomy: the extent to which a job provides independence and discretion • Autonomy: the extent to which a job provides independence and discretion

• Feedback: the extent to which individuals get feedback about performance • Feedback: the extent to which individuals get feedback about performance

According to the model, there are five main ways in which managers can redesign According to the model, there are five main ways in which managers can redesign
simplified jobs that lead to improvements in the five core job dimensions: simplified jobs that lead to improvements in the five core job dimensions:

• Combine tasks: simplified jobs can be combined into larger work packages for • Combine tasks: simplified jobs can be combined into larger work packages for
individuals to increase skill variety and task identity individuals to increase skill variety and task identity

• Form natural work units: creating natural work units creates a meaningful • Form natural work units: creating natural work units creates a meaningful
‘whole’ task that can also impart a sense of ‘ownership’ of the work. For example, ‘whole’ task that can also impart a sense of ‘ownership’ of the work. For example,
creating teams to build complete products creating teams to build complete products

• Establish client relationships: establishing direct personal relationships with • Establish client relationships: establishing direct personal relationships with
clients can increase the variety of skills required, create more autonomy and clients can increase the variety of skills required, create more autonomy and
allow more direct feedback allow more direct feedback

• Vertical loading: providing employees with more responsibility and autonomy • Vertical loading: providing employees with more responsibility and autonomy
by giving them tasks normally allocated to supervisors, such as scheduling work, by giving them tasks normally allocated to supervisors, such as scheduling work,
establishing methods and priorities and checking quality establishing methods and priorities and checking quality

• Open feedback channels: increasing feedback from task performance – especially • Open feedback channels: increasing feedback from task performance – especially
if directly from performance of the task itself and not via management – provides if directly from performance of the task itself and not via management – provides
greater learning and development opportunities for employees greater learning and development opportunities for employees

19 19
However, they argue that, for intrinsic motivation to occur, there are three critical
psychological states that need to be realized:
1. Experienced meaningfulness of work (based on skill variety, task identity and
significance)
2. Experienced responsibility for outcomes (based on autonomy)
3. Knowledge of results (based on feedback)
They suggest that, based on answers to a survey questionnaire known as the Job
Diagnostic Survey (JDS), a job’s motivating potential score (MPS) can be calculated
as:
MPS = (skill variety + task identity + task significance) x automony x feedback
3 3
Consequently, if any one of these critical states scores low, it can have a dramatic
impact on motivation. Note how this model places more of an emphasis on vertical
enrichment elements (autonomy and feedback) than horizontal enlargement elements
(skill variety, task identity and significance).
Activity Three
Read Buchanan and Huczynski, pp 279-85 and pp 84-6. Imagine you are in charge
of an assembly plant producing chocolate bars and confectionary. The work is to
some extent automated but still labour-intensive, semi-skilled and highly repetitive.
Absenteeism and labour turnover are high, the quality of work is poor and morale
is low. What questions would you ask to explore whether different forms of job
design might be the way forward and what factors would you take into account in
exploring whether job re-design was going to be feasible and effective in resolving the
problems? Discuss your analysis with other members of your course on Blackboard.
20
However, they argue that, for intrinsic motivation to occur, there are three critical
psychological states that need to be realized:
1. Experienced meaningfulness of work (based on skill variety, task identity and
significance)
2. Experienced responsibility for outcomes (based on autonomy)
3. Knowledge of results (based on feedback)
They suggest that, based on answers to a survey questionnaire known as the Job
Diagnostic Survey (JDS), a job’s motivating potential score (MPS) can be calculated
as:
MPS = (skill variety + task identity + task significance) x automony x feedback
Consequently, if any one of these critical states scores low, it can have a dramatic
impact on motivation. Note how this model places more of an emphasis on vertical
enrichment elements (autonomy and feedback) than horizontal enlargement elements
(skill variety, task identity and significance).
Activity Three
Read Buchanan and Huczynski, pp 279-85 and pp 84-6. Imagine you are in charge
of an assembly plant producing chocolate bars and confectionary. The work is to
some extent automated but still labour-intensive, semi-skilled and highly repetitive.
Absenteeism and labour turnover are high, the quality of work is poor and morale
is low. What questions would you ask to explore whether different forms of job
design might be the way forward and what factors would you take into account in
exploring whether job re-design was going to be feasible and effective in resolving the
problems? Discuss your analysis with other members of your course on Blackboard.
20
Back to the future? Systems Theory, Post-Fordism and beyond
As suggested above, job enrichment also applies at a group level in organizations
and this is reflected in the development of Autonomous Work Groups, which first
became prominent as a mode of organization when applied by Volvo in Sweden in
the 1970s. Today, they are of course found across many areas of manufacturing and
service industry, but in the form of self-managing or autonomous teams associated
with high-performance work systems. As such, they correspond to a movement away
from Fordism as the dominant mode of production in the middle of the 20th century
towards more flexible systems of mass production.
Their origins, however, lie with the development of Systems Theory in the 1950s. Derived
from the work of Eric Trist and colleagues at the Tavistock Institute in London, systems
theory challenges the primacy attached to production efficiency in Taylorism/Fordism
as well as the emphasis placed on social factors in the Human Relations approach.
It conceives of organizations as open socio-technical systems. A system functions
by virtue of the interdependence of its constituent parts (or sub-systems) and an
open system is one that interacts with its external environment. Organizations can
be viewed in this way because they consist of component parts (production system,
purchasing system, etc) that are inter-dependent and transact in various ways with
external elements (product and supply markets, for example).
According to systems theory, the most effective form of work design is the one that
creates the best ‘fit’ between the organization’s social system (people) and technical
system (plant and machinery).
Maximizing one or the other has detrimental effects – as Taylorism/Fordism clearly
demonstrated. So, organizations need to look for the best possible combination of
technical and social systems that will lead to ‘joint optimization’. In other words,
choices can be made about how technology is used and combined with social
aspects of work. Trist’s research in the British coal-mining industry demonstrated
how attempts at mechanization (through the introduction of the ‘longwall method’)
created enormous problems of conflict and competition. These were eventually
resolved through the establishment of a ‘composite longwall method’ that combined
the new methods of working with elements of autonomous team-working associated
with premechanization.
21
Back to the future? Systems Theory, Post-Fordism and beyond
As suggested above, job enrichment also applies at a group level in organizations
and this is reflected in the development of Autonomous Work Groups, which first
became prominent as a mode of organization when applied by Volvo in Sweden in
the 1970s. Today, they are of course found across many areas of manufacturing and
service industry, but in the form of self-managing or autonomous teams associated
with high-performance work systems. As such, they correspond to a movement away
from Fordism as the dominant mode of production in the middle of the 20th century
towards more flexible systems of mass production.
Their origins, however, lie with the development of Systems Theory in the 1950s. Derived
from the work of Eric Trist and colleagues at the Tavistock Institute in London, systems
theory challenges the primacy attached to production efficiency in Taylorism/Fordism
as well as the emphasis placed on social factors in the Human Relations approach.
It conceives of organizations as open socio-technical systems. A system functions
by virtue of the interdependence of its constituent parts (or sub-systems) and an
open system is one that interacts with its external environment. Organizations can
be viewed in this way because they consist of component parts (production system,
purchasing system, etc) that are inter-dependent and transact in various ways with
external elements (product and supply markets, for example).
According to systems theory, the most effective form of work design is the one that
creates the best ‘fit’ between the organization’s social system (people) and technical
system (plant and machinery).
Maximizing one or the other has detrimental effects – as Taylorism/Fordism clearly
demonstrated. So, organizations need to look for the best possible combination of
technical and social systems that will lead to ‘joint optimization’. In other words,
choices can be made about how technology is used and combined with social
aspects of work. Trist’s research in the British coal-mining industry demonstrated
how attempts at mechanization (through the introduction of the ‘longwall method’)
created enormous problems of conflict and competition. These were eventually
resolved through the establishment of a ‘composite longwall method’ that combined
the new methods of working with elements of autonomous team-working associated
with premechanization.
21
Although socio-technical systems theory and thinking has been hugely influential
and continues to shape developments in organization (e.g. in information systems,
just-in-time systems of production, or ideas about the ‘learning organization’), it has
nevertheless been the subject of a good deal of criticism. Despite appearing to integrate
technical and social system requirements, the rather ‘mechanistic’ logic associated
with systems thinking tends to promote a technically driven and impersonal view of
the organization, in which environmental forces flow through the organization and
somehow determine appropriate patterns of work organization. Such an approach
tends to ignore the elements of action and choice that are important in managerial
decision-making, ignore unintended effects and also presumes a unity and consensus
within the organization that may simply not be there.
Just think about it – do your organization’s knowledge management systems
always align well with individual needs, management practices or organizational
processes?
Socio-technical systems theory perspectives have also been significantly challenged
by developments in management practice from the 1980s and beyond that have had
somewhat different implications for work organization and job design. One major
influence has been the development of ‘lean production’ techniques typified by the
model of the Toyota Production System (TPS) that lay behind the growing competitive
influence and success of Japanese manufacturing companies in the 1980s.
Another major influence is in developments in information technology that have
had important effects on the potential for more decentralized ‘network’ forms of
organization and greater demands for ‘knowledge work’ and ‘knowledge workers’ in
the so-called ‘Knowledge Economy’.
Neither of these trends and the detailed forms of work organization they give rise to
will be examined or discussed in any great detail here. There is a considerable amount
of information and research available on both of these trends and both have attracted
a considerable amount of debate about the nature and extent of their impact. Some
of this discussion and debate will be referred to in later sections of this workbook
(e.g. when looking at organizational structures/cultures); other aspects you may have
22
Although socio-technical systems theory and thinking has been hugely influential
and continues to shape developments in organization (e.g. in information systems,
just-in-time systems of production, or ideas about the ‘learning organization’), it has
nevertheless been the subject of a good deal of criticism. Despite appearing to integrate
technical and social system requirements, the rather ‘mechanistic’ logic associated
with systems thinking tends to promote a technically driven and impersonal view of
the organization, in which environmental forces flow through the organization and
somehow determine appropriate patterns of work organization. Such an approach
tends to ignore the elements of action and choice that are important in managerial
decision-making, ignore unintended effects and also presumes a unity and consensus
within the organization that may simply not be there.
Just think about it – do your organization’s knowledge management systems
always align well with individual needs, management practices or organizational
processes?
Socio-technical systems theory perspectives have also been significantly challenged
by developments in management practice from the 1980s and beyond that have had
somewhat different implications for work organization and job design. One major
influence has been the development of ‘lean production’ techniques typified by the
model of the Toyota Production System (TPS) that lay behind the growing competitive
influence and success of Japanese manufacturing companies in the 1980s.
Another major influence is in developments in information technology that have
had important effects on the potential for more decentralized ‘network’ forms of
organization and greater demands for ‘knowledge work’ and ‘knowledge workers’ in
the so-called ‘Knowledge Economy’.
Neither of these trends and the detailed forms of work organization they give rise to
will be examined or discussed in any great detail here. There is a considerable amount
of information and research available on both of these trends and both have attracted
a considerable amount of debate about the nature and extent of their impact. Some
of this discussion and debate will be referred to in later sections of this workbook
(e.g. when looking at organizational structures/cultures); other aspects you may have
22
already explored in other modules (e.g. practices of lean production in operations
management).
However, it is important to at least signal up the implications these developments have
for the themes and issues explored earlier in this section. Lean production methods,
though they also emphasize team-working, do so in the context of highly mechanized
and controlled systems of production that place an emphasis on a fast pace of work
and continuous pressure to produce process improvements. As such, they share a
lot in common with Taylorist/Fordist systems of production and represent a more
constrained form of group autonomy than is commonly associated with autonomous
workgroups.
Information technology also complements Taylorist/Fordist systems of production in
many important ways (e.g. through CAD/CAM systems or Statistical Process Control
(SPC) and Six Sigma systems devised for quality improvement). However, information
technology also enables more distributed and decentralized systems of working. An
emphasis on ‘knowledge work’ also heightens the importance of enriched jobs and
autonomous working (in professional teams, for example).
The questions these developments leave bring us back again to the main themes
explored in this section. To what extent do contemporary work organization and job
design practices embody the principles of rationalism or humanism underpinning
Taylorism/Fordism or Human Relations?
What consequences are there for the organization and how, in particular, is motivation
and commitment at the workplace affected? What do current job design practices
mean for the development of skills and the use of knowledge? Do developments in
job design and work organization suggest a continuing long term trend towards
‘de-skilling’ and the greater surveillance of employees? Or do they suggest that ‘up-
skilling’ is more prevalent as well as the greater freedom of action of employees? How
do we reconcile the seemingly contradictory tendencies towards ‘McDonaldization’ on
the one hand and the importance of ‘knowledge work’ on the other? How are these
conditions influenced by conditions in different organizations and sectors?
23
already explored in other modules (e.g. practices of lean production in operations
management).
However, it is important to at least signal up the implications these developments have
for the themes and issues explored earlier in this section. Lean production methods,
though they also emphasize team-working, do so in the context of highly mechanized
and controlled systems of production that place an emphasis on a fast pace of work
and continuous pressure to produce process improvements. As such, they share a
lot in common with Taylorist/Fordist systems of production and represent a more
constrained form of group autonomy than is commonly associated with autonomous
workgroups.
Information technology also complements Taylorist/Fordist systems of production in
many important ways (e.g. through CAD/CAM systems or Statistical Process Control
(SPC) and Six Sigma systems devised for quality improvement). However, information
technology also enables more distributed and decentralized systems of working. An
emphasis on ‘knowledge work’ also heightens the importance of enriched jobs and
autonomous working (in professional teams, for example).
The questions these developments leave bring us back again to the main themes
explored in this section. To what extent do contemporary work organization and job
design practices embody the principles of rationalism or humanism underpinning
Taylorism/Fordism or Human Relations?
What consequences are there for the organization and how, in particular, is motivation
and commitment at the workplace affected? What do current job design practices
mean for the development of skills and the use of knowledge? Do developments in
job design and work organization suggest a continuing long term trend towards
‘de-skilling’ and the greater surveillance of employees? Or do they suggest that ‘up-
skilling’ is more prevalent as well as the greater freedom of action of employees? How
do we reconcile the seemingly contradictory tendencies towards ‘McDonaldization’ on
the one hand and the importance of ‘knowledge work’ on the other? How are these
conditions influenced by conditions in different organizations and sectors?
23
Activity Four
Read Buchanan and Huczynski, pp 87-95 and 285-90. Then read the article by Harold
Leavitt (2007) on ‘Big organizations are unhealthy environments for human beings’
(Academy of Management Learning & Education, 62(21), 253-63). Consider what
he has to say about ‘systemizers’ and discuss the following questions with other
members of your course on Blackboard:
1. Do you think that any of these attributes apply to your own organization?
2. What do you think of Leavitt’s portrayal of ‘systemizers’?
3. Why does he criticize this approach and are his criticisms valid?
On reflection
This first section of OB has attempted to provide an overview of some of the major
approaches taken towards work organization and job design and to explore how
they continue to influence work organization and provoke debate about employee
motivation today. In doing so, the three main schools of thought about job design –
Engineering, Ergonomics and Psychological – and the principal contributors to each
have been introduced. The key messages that should emerge from this section are:
1. that there are arguments for and against each that continue to influence debates
in practice as well as in research and theory;
2. that current job design practices will inevitably resonate with (and perhaps draw
their inspiration directly from) one or other of these approaches;
3. that they do not constitute a cumulative body of knowledge about work
organization and job design – with one approach logically leading to the next
and then being superseded. Instead, they represent very different approaches to
how to organize and control work while at the same time generating motivation
and commitment; and
4. that there are always important trade-offs to consider when designing jobs.
Increasing efficiency and relying solely on extrinsic rewards may lower costs but
24
Activity Four
Read Buchanan and Huczynski, pp 87-95 and 285-90. Then read the article by Harold
Leavitt (2007) on ‘Big organizations are unhealthy environments for human beings’
(Academy of Management Learning & Education, 62(21), 253-63). Consider what
he has to say about ‘systemizers’ and discuss the following questions with other
members of your course on Blackboard:
1. Do you think that any of these attributes apply to your own organization?
2. What do you think of Leavitt’s portrayal of ‘systemizers’?
3. Why does he criticize this approach and are his criticisms valid?
On reflection
This first section of OB has attempted to provide an overview of some of the major
approaches taken towards work organization and job design and to explore how
they continue to influence work organization and provoke debate about employee
motivation today. In doing so, the three main schools of thought about job design –
Engineering, Ergonomics and Psychological – and the principal contributors to each
have been introduced. The key messages that should emerge from this section are:
1. that there are arguments for and against each that continue to influence debates
in practice as well as in research and theory;
2. that current job design practices will inevitably resonate with (and perhaps draw
their inspiration directly from) one or other of these approaches;
3. that they do not constitute a cumulative body of knowledge about work
organization and job design – with one approach logically leading to the next
and then being superseded. Instead, they represent very different approaches to
how to organize and control work while at the same time generating motivation
and commitment; and
4. that there are always important trade-offs to consider when designing jobs.
Increasing efficiency and relying solely on extrinsic rewards may lower costs but
24
 at the expense of higher labour turnover, absenteeism and lower work motivation. at the expense of higher labour turnover, absenteeism and lower work motivation.
Increasing intrinsic motivation may cost more in terms of recruitment and Increasing intrinsic motivation may cost more in terms of recruitment and
training, but can produce higher levels of quality, motivation and satisfaction at training, but can produce higher levels of quality, motivation and satisfaction at
work. work.

Below are a few questions to guide your reflection on this part of Unit One: Below are a few questions to guide your reflection on this part of Unit One:

1. To what extent do the principles of scientific management and Fordism still 1. To what extent do the principles of scientific management and Fordism still
apply to work organization today? Use examples from your own organization as apply to work organization today? Use examples from your own organization as
well as others to assess this. well as others to assess this.

2. Is job re-design using job enrichment principles (individual or group based) always 2. Is job re-design using job enrichment principles (individual or group based) always
an appropriate and effective way of improving motivation and commitment? an appropriate and effective way of improving motivation and commitment?
What are its strengths and limitations? What are its strengths and limitations?

3. Does systems theory provide an appropriate way out of having to make trade- 3. Does systems theory provide an appropriate way out of having to make trade-
offs between technical efficiency and individual motivation? Why or why not? offs between technical efficiency and individual motivation? Why or why not?

4. Do the principles of work organization embodied in approaches such as the 4. Do the principles of work organization embodied in approaches such as the
Toyota Production System signify a return to the idea that there is ‘one best way’ Toyota Production System signify a return to the idea that there is ‘one best way’
of organizing and managing? of organizing and managing?

25 25
Section 2: Structures of Organizations
One of the typical ways we think about the structures of organizations is through
the organization charts that depict them. They describe the formal division of labour
within an organization (into divisions, departments, sections and individual roles) and
also the system of hierarchical authority relationships devised to coordinate activity.
As such, they tell us something about its basic structural features, in terms of how the
organization is differentiated (horizontally and vertically) as well as how work is then
integrated.
They tell us whether activities are grouped according to their particular functional
specialism, product base (e.g. desk top and laptop divisions), geographic region (global
or local), or some other basis (e.g. corporate or non-corporate clients). Depending on
the number of hierarchical levels separating senior management from others, they
tell us whether the organization is ‘tall’ or ‘flat’ and whether managers have ‘wide’
or ‘narrow’ spans of control (the number of individuals that report to them). They
may even suggest very important differences in the type of authority – line, staff or
functional – that groups or individuals exercise and the problems that might arise if
these get confused.
Although they indicate how complex the organization might be, organization charts
tell us very little, however, about how the structure of the organization works in
practice, about how it got that way, or about how fit for purpose it may be. As visual
representations, they are very hard to compare and contrast meaningfully between
organizations. Since they only depict the formal pattern of roles and authority
relationships within an organization, they also tell us very little about other ways in
which work may be formally coordinated (e.g. using rules and procedures); or about
how these aspects relate to more informal organizational influences on individual
and group behaviour (such as motivation, management style or social status).
Just think about it – what does your firm’s own organization chart say about your
organizational structure and what important aspects does it miss out?
26
Section 2: Structures of Organizations
One of the typical ways we think about the structures of organizations is through
the organization charts that depict them. They describe the formal division of labour
within an organization (into divisions, departments, sections and individual roles) and
also the system of hierarchical authority relationships devised to coordinate activity.
As such, they tell us something about its basic structural features, in terms of how the
organization is differentiated (horizontally and vertically) as well as how work is then
integrated.
They tell us whether activities are grouped according to their particular functional
specialism, product base (e.g. desk top and laptop divisions), geographic region (global
or local), or some other basis (e.g. corporate or non-corporate clients). Depending on
the number of hierarchical levels separating senior management from others, they
tell us whether the organization is ‘tall’ or ‘flat’ and whether managers have ‘wide’
or ‘narrow’ spans of control (the number of individuals that report to them). They
may even suggest very important differences in the type of authority – line, staff or
functional – that groups or individuals exercise and the problems that might arise if
these get confused.
Although they indicate how complex the organization might be, organization charts
tell us very little, however, about how the structure of the organization works in
practice, about how it got that way, or about how fit for purpose it may be. As visual
representations, they are very hard to compare and contrast meaningfully between
organizations. Since they only depict the formal pattern of roles and authority
relationships within an organization, they also tell us very little about other ways in
which work may be formally coordinated (e.g. using rules and procedures); or about
how these aspects relate to more informal organizational influences on individual
and group behaviour (such as motivation, management style or social status).
Just think about it – what does your firm’s own organization chart say about your
organizational structure and what important aspects does it miss out?
26
Defining and designing organizational structures
Understanding the main variations between organizational structures, how these
variations are explained and how structures may be appropriately designed requires
an approach that moves beyond the basic features depicted in organization charts.
One way of capturing some of the variations found across organizations in a way that
permits greater analysis but which still uses visual representation, is found in the
work of Henry Mintzberg, who proposes that an organization consists of five basic
parts. Each part operates according to its own logic and creates particular (centrifugal)
tendencies towards differentiation and resulting problems of integration within the
organization.
• Strategic apex: refers to senior management and other senior stakeholders
within the organization and is associated with a tendency to centralize decision-
making
• Operating core: refers to those involved in the main production/service delivery
activities of the organization and associated functions (purchasing, sales, etc)
and is associated with a tendency to professionalize work
• Middle line: refers to those managers responsible for putting strategic plans
into effect and monitoring and controlling performance and is associated with a
tendency towards ‘balkanization’ (or fragmentation)
• Technostructure: refers to technical staff involved in process development and
systems support and is associated with a tendency to standardize
• Support staff: refers to those providing administrative and clerical support
(including security, etc) and is associated with a tendency to collaborate
These parts of the organization and their inter-relationships can be represented
visually, with differences between organizations being depicted by the relative size
and shapes of the component parts. So, for example, a motor vehicle manufacturer
using lean production methods may have a dominant operating core and influential
technostructure, but slimmed down middle line and support staff. A small business
will have a dominant strategic apex (the entrepreneur) and some operating core, but
with very little middle line, technostructure and support staff.
27
Defining and designing organizational structures
Understanding the main variations between organizational structures, how these
variations are explained and how structures may be appropriately designed requires
an approach that moves beyond the basic features depicted in organization charts.
One way of capturing some of the variations found across organizations in a way that
permits greater analysis but which still uses visual representation, is found in the
work of Henry Mintzberg, who proposes that an organization consists of five basic
parts. Each part operates according to its own logic and creates particular (centrifugal)
tendencies towards differentiation and resulting problems of integration within the
organization.
• Strategic apex: refers to senior management and other senior stakeholders
within the organization and is associated with a tendency to centralize decision-
making
• Operating core: refers to those involved in the main production/service delivery
activities of the organization and associated functions (purchasing, sales, etc)
and is associated with a tendency to professionalize work
• Middle line: refers to those managers responsible for putting strategic plans
into effect and monitoring and controlling performance and is associated with a
tendency towards ‘balkanization’ (or fragmentation)
• Technostructure: refers to technical staff involved in process development and
systems support and is associated with a tendency to standardize
• Support staff: refers to those providing administrative and clerical support
(including security, etc) and is associated with a tendency to collaborate
These parts of the organization and their inter-relationships can be represented
visually, with differences between organizations being depicted by the relative size
and shapes of the component parts. So, for example, a motor vehicle manufacturer
using lean production methods may have a dominant operating core and influential
technostructure, but slimmed down middle line and support staff. A small business
will have a dominant strategic apex (the entrepreneur) and some operating core, but
with very little middle line, technostructure and support staff.
27
Many of the tensions created by attempts to integrate the activities of these
differentiated parts encapsulate long-established management concerns about,
for example: the position and status of middle managers; managing ‘line-and-staff
conflict; or achieving an appropriate balance between professional and managerial
control. Structural re-organizing is often seen as an appropriate response to changing
competitive conditions and managerial strategies of ‘downsizing’ and ‘delayering’
(reduction of middle line) and ‘outsourcing’ (of technostructure and support staff)
can clearly be seen as ways of fundamentally ‘re-shaping’ the organization to respond
to these and other challenges.
Activity Five
Read Buchanan and Huczynski ch 15 for a discussion of these aspects of
organizational structure. Then use the above framework to represent and reflect
upon your own organization. What key issue or issues does this highlight? How does
your organization compare to other competitors or others in your sector? Has the
organization experienced any recent changes that have had implications for the
balance of various parts of the structure? How has the organization responded and
with what effects?
Although such visual representations may be useful, they do not specify in much detail
what organizational structures consist of and how they work. Most OB specialists
would define organization structure as consisting not only of the formal roles and
relationships linking individuals and groups but also of the mechanisms used to specify,
coordinate and integrate activity geared towards the achievement of organizational
goals (including rules, policies, processes and systems).
Capturing this administrative complexity in a more simplified yet meaningful way is
helped by research undertaken at Aston University in the 1960s that was the first to
spell out, and develop metrics for measuring, some of the underlying dimensions of
organizational structure. The researchers identified five major dimensions:
• Specialization: the extent of differentiation in terms of specialized roles
• Standardization: the extent to which processes are routine or standardized
28
Many of the tensions created by attempts to integrate the activities of these
differentiated parts encapsulate long-established management concerns about,
for example: the position and status of middle managers; managing ‘line-and-staff
conflict; or achieving an appropriate balance between professional and managerial
control. Structural re-organizing is often seen as an appropriate response to changing
competitive conditions and managerial strategies of ‘downsizing’ and ‘delayering’
(reduction of middle line) and ‘outsourcing’ (of technostructure and support staff)
can clearly be seen as ways of fundamentally ‘re-shaping’ the organization to respond
to these and other challenges.
Activity Five
Read Buchanan and Huczynski ch 15 for a discussion of these aspects of
organizational structure. Then use the above framework to represent and reflect
upon your own organization. What key issue or issues does this highlight? How does
your organization compare to other competitors or others in your sector? Has the
organization experienced any recent changes that have had implications for the
balance of various parts of the structure? How has the organization responded and
with what effects?
Although such visual representations may be useful, they do not specify in much detail
what organizational structures consist of and how they work. Most OB specialists
would define organization structure as consisting not only of the formal roles and
relationships linking individuals and groups but also of the mechanisms used to specify,
coordinate and integrate activity geared towards the achievement of organizational
goals (including rules, policies, processes and systems).
Capturing this administrative complexity in a more simplified yet meaningful way is
helped by research undertaken at Aston University in the 1960s that was the first to
spell out, and develop metrics for measuring, some of the underlying dimensions of
organizational structure. The researchers identified five major dimensions:
• Specialization: the extent of differentiation in terms of specialized roles
• Standardization: the extent to which processes are routine or standardized
28
 • Formalization: the extent of written rules and procedures
• Centralization: the extent to which authority is held at the top of the
organization
• Configuration: the basic ‘shape’ of the organization (grouping of activities,
hierarchical levels, spans of control)
Conceptualizing organizational structures in this way allows the direct comparison and
contrast of organizational features using standard metrics. As some of the dimensions
the Aston researchers identified were found to be inter-related, they further proposed
combining them into the following four main features:
1. Structuring of activities: The extent to which work is more or less specified and
routine (reflected in levels of specialization, formalization and standardization)
2. Concentration of authority: The extent to which decision-making is centralized
or decentralized within the organization
3. Line control of the workflow: The extent to which work in the operating core is
directly controlled by management, rather than through standard processes
4. Supportive component: The relative size of the support staff and
‘technostructure’
The Aston researchers were interested in understanding variation in organizational
structure – particularly in the different forms and degrees of bureaucracy that can
occur in large scale organizations. However, a concern with bureaucracy pre-dates
an interest even in scientific management and, as we know, continues to resonate
strongly with the challenges faced by successive generations of chief executives and
policy makers who continue to pledge themselves to ‘doing away with bureaucracy’!
Bureaucracy
To understand what bureaucracy is and what makes it so resilient, it is important to
refer back initially to the ideas of Max Weber who was the first to identify bureaucracy
as a new organizational form that developed alongside industrialization in western
29
• Formalization: the extent of written rules and procedures
• Centralization: the extent to which authority is held at the top of the
organization
• Configuration: the basic ‘shape’ of the organization (grouping of activities,
hierarchical levels, spans of control)
Conceptualizing organizational structures in this way allows the direct comparison and
contrast of organizational features using standard metrics. As some of the dimensions
the Aston researchers identified were found to be inter-related, they further proposed
combining them into the following four main features:
1. Structuring of activities: The extent to which work is more or less specified and
routine (reflected in levels of specialization, formalization and standardization)
2. Concentration of authority: The extent to which decision-making is centralized
or decentralized within the organization
3. Line control of the workflow: The extent to which work in the operating core is
directly controlled by management, rather than through standard processes
4. Supportive component: The relative size of the support staff and
‘technostructure’
The Aston researchers were interested in understanding variation in organizational
structure – particularly in the different forms and degrees of bureaucracy that can
occur in large scale organizations. However, a concern with bureaucracy pre-dates
an interest even in scientific management and, as we know, continues to resonate
strongly with the challenges faced by successive generations of chief executives and
policy makers who continue to pledge themselves to ‘doing away with bureaucracy’!
Bureaucracy
To understand what bureaucracy is and what makes it so resilient, it is important to
refer back initially to the ideas of Max Weber who was the first to identify bureaucracy
as a new organizational form that developed alongside industrialization in western
29
economies. Weber contrasted the legal-rational basis of authority that was associated
with bureaucratic organization with other, earlier forms of domination based on the
charismatic qualities of individuals or traditional custom and practice within societies.
Although he did not see bureaucratic organization as desirable, he did propose that
the model of organization it represented was more efficient and so more suited to
emerging patterns of industrialization. The key features of his pure model or ‘ideal’
type are:
• Specialization: jobs are broken down into simple, routine, well defined tasks with
clearly defined authority and responsibilities
• Authority hierarchy: positions exist in a clearly ordered hierarchy linked through
a clear chain of command
• Rules: rules and procedures are the principal way of ensuring that activities are
standardized, coordinated and controlled
• Impersonality: conduct is based on impersonal and formal criteria, to avoid
favouritism and nepotism
• Employment and career: personnel are selected and promoted on the basis of
their technical competence and merit
• Separation of personal and public spheres: individuals have influence by virtue of
the office they occupy, not their personal attributes or circumstances
Consequently, bureaucracy as a form of organization scores highly on the dimensions of
specialization, standardization, formalization and centralization and is also configured
as a form of organization with several hierarchical layers (that provide a career ladder)
and relatively narrow spans of control.
The Aston researchers did later identify different types of bureaucracy that vary across
these dimensions, including ‘full bureaucracies’ (Weber’s ‘ideal type’ and very rare),
‘workflow bureaucracies’ (e.g. found in manufacturing) and ‘personnel bureaucracies’
(e.g. found in the public sector). Mintzberg has made a similar distinction between
the machine bureaucracies that characterize Fordist systems of production and the
professional bureaucracies that dominate parts of the public sector (e.g. health,
30
economies. Weber contrasted the legal-rational basis of authority that was associated
with bureaucratic organization with other, earlier forms of domination based on the
charismatic qualities of individuals or traditional custom and practice within societies.
Although he did not see bureaucratic organization as desirable, he did propose that
the model of organization it represented was more efficient and so more suited to
emerging patterns of industrialization. The key features of his pure model or ‘ideal’
type are:
• Specialization: jobs are broken down into simple, routine, well defined tasks with
clearly defined authority and responsibilities
• Authority hierarchy: positions exist in a clearly ordered hierarchy linked through
a clear chain of command
• Rules: rules and procedures are the principal way of ensuring that activities are
standardized, coordinated and controlled
• Impersonality: conduct is based on impersonal and formal criteria, to avoid
favouritism and nepotism
• Employment and career: personnel are selected and promoted on the basis of
their technical competence and merit
• Separation of personal and public spheres: individuals have influence by virtue of
the office they occupy, not their personal attributes or circumstances
Consequently, bureaucracy as a form of organization scores highly on the dimensions of
specialization, standardization, formalization and centralization and is also configured
as a form of organization with several hierarchical layers (that provide a career ladder)
and relatively narrow spans of control.
The Aston researchers did later identify different types of bureaucracy that vary across
these dimensions, including ‘full bureaucracies’ (Weber’s ‘ideal type’ and very rare),
‘workflow bureaucracies’ (e.g. found in manufacturing) and ‘personnel bureaucracies’
(e.g. found in the public sector). Mintzberg has made a similar distinction between
the machine bureaucracies that characterize Fordist systems of production and the
professional bureaucracies that dominate parts of the public sector (e.g. health,
30
education) – where professional input makes decisionmaking more decentralized and
work less standardized.
We now know of course that bureaucracy is beset with problems and, although it
may be intended to be rational, it has many unintended consequences. Bureaucratic
organizations tend to suffer from very rigid, rule-bound behaviour, promote a ‘silo
mentality’ that inhibits crossfunctional working and stifle creativity and innovation
by encouraging compliance with minimum performance standards and discouraging
initiative.
However, their resilience owes a lot to the ways in which they tend to become self-
reinforcing and self-reproducing. By promoting conformity to accepted rules and
standards, bureaucracies treat any deviation caused by these effects (including
perhaps any effective ‘workarounds’) as a reason for ‘tightening up’ existing controls
and procedures. This vicious circle of control (which also tends to be a feature of
technologically based systems of control such as Fordism) reinforces existing ways of
working. Similarly, when faced with conditions of change, the bureaucratic response
can be even more bureaucracy (in appointing specialist roles, creating extra rules,
forming working parties and committees, etc). The net effect of these mechanistic
pathologies as they have been called is to create an iron cage of bureaucratic control
that, despite its obvious dysfunctions, is very difficult to break free from.
Typologies of organizational forms
Contemporary organizational forms can therefore be conceived of as ranging across
a typology of structural types, varying according to their general configuration and
underlying structural dimensions:
Simple structures: Small entrepreneurial firms in the early stages of development often
have relatively simple organizational structures that allow them to operate flexibly
and informally. Being highly centralized though, they depend on the capabilities of
the entrepreneur/manager, who may find it difficult to relinquish control as the firm
grows.
31
education) – where professional input makes decisionmaking more decentralized and
work less standardized.
We now know of course that bureaucracy is beset with problems and, although it
may be intended to be rational, it has many unintended consequences. Bureaucratic
organizations tend to suffer from very rigid, rule-bound behaviour, promote a ‘silo
mentality’ that inhibits crossfunctional working and stifle creativity and innovation
by encouraging compliance with minimum performance standards and discouraging
initiative.
However, their resilience owes a lot to the ways in which they tend to become self-
reinforcing and self-reproducing. By promoting conformity to accepted rules and
standards, bureaucracies treat any deviation caused by these effects (including
perhaps any effective ‘workarounds’) as a reason for ‘tightening up’ existing controls
and procedures. This vicious circle of control (which also tends to be a feature of
technologically based systems of control such as Fordism) reinforces existing ways of
working. Similarly, when faced with conditions of change, the bureaucratic response
can be even more bureaucracy (in appointing specialist roles, creating extra rules,
forming working parties and committees, etc). The net effect of these mechanistic
pathologies as they have been called is to create an iron cage of bureaucratic control
that, despite its obvious dysfunctions, is very difficult to break free from.
Typologies of organizational forms
Contemporary organizational forms can therefore be conceived of as ranging across
a typology of structural types, varying according to their general configuration and
underlying structural dimensions:
Simple structures: Small entrepreneurial firms in the early stages of development often
have relatively simple organizational structures that allow them to operate flexibly
and informally. Being highly centralized though, they depend on the capabilities of
the entrepreneur/manager, who may find it difficult to relinquish control as the firm
grows.
31
Functional structures: Are distinguished by the grouping together of like activities
(production, marketing, etc) and are designed to reap the benefits of specialization
(economies of scale, pooled resources and identifiable career ladders for employees).
The functional form is well suited to smaller or medium-sized operations that need
to establish systems and procedures. But it does not cope well when products (and
processes) become differentiated and there is more need to ensure cross-departmental
communication and coordination. The horizontal and vertical differentiation created
by specialization, hierarchy and the centralization of authority in the hands of the CEO
also makes them prone to bureaucratic dysfunctions.
Divisional structures: Creating more self-contained units that integrate activity around
common task goals (in order to respond to the needs of diverse products or markets) is
a way to overcome the goal displacement that can occur in functional forms as separate
departments pursue their own goals. Divisionalized forms first emerged in the US in
the 1920s (at General Motors, DuPont) and are now commonly adopted by large scale
corporations. Their principle strengths are in creating greater task goal integration,
decentralization and more autonomy and career development opportunities for
middle managers. However, these strengths also produce weaknesses – by leading
to the duplication of resources, vertical differentiation between center and divisional
heads and problems of controlling the conflict and competition between disparate
parts of the organization (e.g. over investment decisions).
Matrix organization: Now increasingly common across many different types of
organization, matrix organization first emerged in the US aerospace industry in the
1960s, as contractors employed on the Apollo moon landing programme combined their
specialist engineeringcapabilities – organized functionally – with NASA’s demands
for effective client-facing project management. Matrix organization tries to combine
the benefits of functional and divisional forms of organization (i.e. specialization and
task goal integration) by creating project teams to which individuals are seconded
from their functional home base. Its main characteristic – a dual authority and
reporting structure – is also its principal weakness as it can create high levels of role
ambiguity (due to lack of clarity in reporting relationships) and role conflict (due to
competing demands on team members). Matrix organization is therefore a complex
and demanding structure.
32
Functional structures: Are distinguished by the grouping together of like activities
(production, marketing, etc) and are designed to reap the benefits of specialization
(economies of scale, pooled resources and identifiable career ladders for employees).
The functional form is well suited to smaller or medium-sized operations that need
to establish systems and procedures. But it does not cope well when products (and
processes) become differentiated and there is more need to ensure cross-departmental
communication and coordination. The horizontal and vertical differentiation created
by specialization, hierarchy and the centralization of authority in the hands of the CEO
also makes them prone to bureaucratic dysfunctions.
Divisional structures: Creating more self-contained units that integrate activity around
common task goals (in order to respond to the needs of diverse products or markets) is
a way to overcome the goal displacement that can occur in functional forms as separate
departments pursue their own goals. Divisionalized forms first emerged in the US in
the 1920s (at General Motors, DuPont) and are now commonly adopted by large scale
corporations. Their principle strengths are in creating greater task goal integration,
decentralization and more autonomy and career development opportunities for
middle managers. However, these strengths also produce weaknesses – by leading
to the duplication of resources, vertical differentiation between center and divisional
heads and problems of controlling the conflict and competition between disparate
parts of the organization (e.g. over investment decisions).
Matrix organization: Now increasingly common across many different types of
organization, matrix organization first emerged in the US aerospace industry in the
1960s, as contractors employed on the Apollo moon landing programme combined their
specialist engineeringcapabilities – organized functionally – with NASA’s demands
for effective client-facing project management. Matrix organization tries to combine
the benefits of functional and divisional forms of organization (i.e. specialization and
task goal integration) by creating project teams to which individuals are seconded
from their functional home base. Its main characteristic – a dual authority and
reporting structure – is also its principal weakness as it can create high levels of role
ambiguity (due to lack of clarity in reporting relationships) and role conflict (due to
competing demands on team members). Matrix organization is therefore a complex
and demanding structure.
32
Conglomerate structures: Are commonly found where companies grow through
diversification and acquisition and represent a form of divisionalization where each
division effectively operates as a separate and independent business (under an
umbrella corporate HQ or holding company). This lack of interdependence between
divisions is not only its principal characteristic, but also the source of its main
advantages (the ability to acquire new businesses and to divest poor performing parts
of the organization) as well as its disadvantages (which are those of the divisional
form).
Network organizations: Many contemporary trends in organization (e.g. restructuring,
downsizing, outsourcing, the development of IT) have led to widespread interest in
what some would classify as ‘network’ forms of organization. Network organizations
consist of independent companies or other bodies (usually possessing complementary
resources) that combine together on a more or less equal basis to engage in joint
activity in the pursuit of common goals. Consequently, they combine elements of
internal organization (coordination and control mechanisms) with elements of market-
based transactional relationships. ‘Network organization’ is often used quite loosely
to refer to quite structured forms of inter-organizational collaboration, including close
supply chain integration (including keiretsu systems) and joint ventures and strategic
alliances (such as the Star Alliance formed in the airline industry).
However, the concept of network perhaps applies better when depicting more
distributed networks such as those found in sectors like independent film-making
and open source software development. Such variety and complexity in (inter-)
organizational form obviously makes it more difficult to identify distinct features and
common advantages/disadvantages and there is now a considerable body of research
that attempts to demarcate different networked forms of interaction (including those
found in internal management hierarchies).
Further reading
Read Huczynski and Buchanan ch. 16, pp 489-498 and also ch. 17 for further
discussion of these points, including some critical discussion of classical management
theorists’ views on resolving the dilemmas of organizational design. Follow this up
with a reading of the paper by Anand and Daft (2007) in Organizational Dynamics
which looks at different eras of organizational design and the different typologies
developed.
33
Conglomerate structures: Are commonly found where companies grow through
diversification and acquisition and represent a form of divisionalization where each
division effectively operates as a separate and independent business (under an
umbrella corporate HQ or holding company). This lack of interdependence between
divisions is not only its principal characteristic, but also the source of its main
advantages (the ability to acquire new businesses and to divest poor performing parts
of the organization) as well as its disadvantages (which are those of the divisional
form).
Network organizations: Many contemporary trends in organization (e.g. restructuring,
downsizing, outsourcing, the development of IT) have led to widespread interest in
what some would classify as ‘network’ forms of organization. Network organizations
consist of independent companies or other bodies (usually possessing complementary
resources) that combine together on a more or less equal basis to engage in joint
activity in the pursuit of common goals. Consequently, they combine elements of
internal organization (coordination and control mechanisms) with elements of market-
based transactional relationships. ‘Network organization’ is often used quite loosely
to refer to quite structured forms of inter-organizational collaboration, including close
supply chain integration (including keiretsu systems) and joint ventures and strategic
alliances (such as the Star Alliance formed in the airline industry).
However, the concept of network perhaps applies better when depicting more
distributed networks such as those found in sectors like independent film-making
and open source software development. Such variety and complexity in (inter-)
organizational form obviously makes it more difficult to identify distinct features and
common advantages/disadvantages and there is now a considerable body of research
that attempts to demarcate different networked forms of interaction (including those
found in internal management hierarchies).
Further reading
Read Huczynski and Buchanan ch. 16, pp 489-498 and also ch. 17 for further
discussion of these points, including some critical discussion of classical management
theorists’ views on resolving the dilemmas of organizational design. Follow this up
with a reading of the paper by Anand and Daft (2007) in Organizational Dynamics
which looks at different eras of organizational design and the different typologies
developed.
33
Activity Six
This part has covered a number of frameworks that can be helpful in categorizing
and analyzing the suitability of organizational forms. Using these frameworks,
assess your own organization – with particular regard to the Aston dimensions of
structure, the presence of any bureaucratic tendencies (and the reasons for that)
and the type of organizational form (including any internal or external network
characteristics) Do you think the organizational form is suited to the context in
which it operates? Why or why not? Have there been any recent changes with major
implications for the organization’s basic configuration and underlying dimensions?
What effects (intended and unintended) have these had?
Contingency perspectives
As useful as these categorization schemes might be, they still do not explain particularly
well how underlying structural dimensions relate to organizational circumstances and
performance – apart, that is, from saying something about how product and market
characteristics may suggest different basic configurations. Why, for example, might
one divisionalized company be more or less highly structured and centralized than
another? And what impact might these differences have on company performance?
Contingency perspectives try to do just that. They contrast with approaches (such
as scientific management, bureaucracy and classical management theory) that argue
that there is ‘one best way’ to organize and suggest instead that the most appropriate
structural form is the one that ‘best fits’ its internal organizational characteristics
(technology and size) and/or its external environment.
Technology and Size
The possible effect of technology on structure has important contemporary relevance
when we consider the impact of information technology (more about this below).
However, Joan Woodward was the first to detail the effects of technology on structure.
Focusing on production technologies, she categorizing them into three basic types
that represented increasing levels of technological complexity:
• Unit and small batch production (e.g. craft systems and prototype production)
34
Activity Six
This part has covered a number of frameworks that can be helpful in categorizing
and analyzing the suitability of organizational forms. Using these frameworks,
assess your own organization – with particular regard to the Aston dimensions of
structure, the presence of any bureaucratic tendencies (and the reasons for that)
and the type of organizational form (including any internal or external network
characteristics) Do you think the organizational form is suited to the context in
which it operates? Why or why not? Have there been any recent changes with major
implications for the organization’s basic configuration and underlying dimensions?
What effects (intended and unintended) have these had?
Contingency perspectives
As useful as these categorization schemes might be, they still do not explain particularly
well how underlying structural dimensions relate to organizational circumstances and
performance – apart, that is, from saying something about how product and market
characteristics may suggest different basic configurations. Why, for example, might
one divisionalized company be more or less highly structured and centralized than
another? And what impact might these differences have on company performance?
Contingency perspectives try to do just that. They contrast with approaches (such
as scientific management, bureaucracy and classical management theory) that argue
that there is ‘one best way’ to organize and suggest instead that the most appropriate
structural form is the one that ‘best fits’ its internal organizational characteristics
(technology and size) and/or its external environment.
Technology and Size
The possible effect of technology on structure has important contemporary relevance
when we consider the impact of information technology (more about this below).
However, Joan Woodward was the first to detail the effects of technology on structure.
Focusing on production technologies, she categorizing them into three basic types
that represented increasing levels of technological complexity:
• Unit and small batch production (e.g. craft systems and prototype production)
34
 • Large batch and mass production (e.g. assembly line production) • Large batch and mass production (e.g. assembly line production)

• Continuous process production (e.g. petrochemical industries) • Continuous process production (e.g. petrochemical industries)

In a survey of 100 firms in south-east England, she discovered that increasing technical
complexity tended to be associated with greater bureaucracy (measured according to
more hierarchical levels, wider managerial spans of control and greater proportions of
managers and support staff; this was up to a point – continuous process production
systems tended to require less direct managerial control than mass production.) She
also found that those firms that performed better adopted the appropriate model of
organization. So, unit/small batch firms needed to work more flexibly and informally,
whereas mass producers needed standardization and specialization for greater
efficiency.
In a survey of 100 firms in south-east England, she discovered that increasing technical
complexity tended to be associated with greater bureaucracy (measured according to
more hierarchical levels, wider managerial spans of control and greater proportions of
managers and support staff; this was up to a point – continuous process production
systems tended to require less direct managerial control than mass production.) She
also found that those firms that performed better adopted the appropriate model of
organization. So, unit/small batch firms needed to work more flexibly and informally,
whereas mass producers needed standardization and specialization for greater
efficiency.

Woodward’s study was solely about production technology, but these findings Woodward’s study was solely about production technology, but these findings
about the effect of technology can be generalized out to other forms of activity (e.g. about the effect of technology can be generalized out to other forms of activity (e.g.
service sector and professional services work). Charles Perrow categorized technology service sector and professional services work). Charles Perrow categorized technology
according to the level of predictability of tasks. according to the level of predictability of tasks.

He found that tasks that were highly predictable (involving low task variety and high
task analyzability) required more structured forms of organization; more unpredictable
tasks (high variety, low analyzability) required more flexible organizational forms,
involving much flatter hierarchies, less formality and more team-working (see table
below).
He found that tasks that were highly predictable (involving low task variety and high
task analyzability) required more structured forms of organization; more unpredictable
tasks (high variety, low analyzability) required more flexible organizational forms,
involving much flatter hierarchies, less formality and more team-working (see table
below).

Table 2: Perrow’s Classification of Types of Technology Table 2: Perrow’s Classification of Types of Technology

Task variety Task variety

Low High Low High

Low Craft technology Non-routine technology Low Craft technology Non-routine technology

Task (specialists) (e.g. R&D) Task (specialists) (e.g. R&D)

analyzability High Routine technology Engineering technology analyzability High Routine technology Engineering technology

(e.g. mass production/ (e.g. mass production/

(e.g. professional services) (e.g. professional services)
services) services)

35 35
Although technology undoubtedly will have some effect in constraining structural
options, the Aston researchers found however that its effect were rather limited.
Why, for example, should the production technology employed have any effect
upon the structure of the firm’s HR or advertising departments? Instead, they found
organizational size to be a key determinant. Put simply, as organizations become
larger, they become structurally more complex, with greater structuring of activities,
degree of line control and supportive components (another reason for the tenacious
hold of bureaucracy in larger firms).
The Environment
Another important factor influencing organizational structure is the external
environment in which it operates and the degree of uncertainty associated with
changes in product markets and process technologies. As noted earlier, systems
theory emphasized that organizations are open systems and systems theorists were
important too in categorizing the types of environment in which organizations
operate. According to Emery and Trist, there are four types of environment that vary
in their levels of complexity and uncertainty and in their implications for structural
forms:
1. Placid, randomized: The simplest type of environment. Conditions are relatively
stable, changes are randomly distributed and there is little uncertainty. Successful
organizations are highly structured with standardized work processes
2. Placid, clustered: There are more threats in this environment, even though
conditions move relatively slowly and there is only moderate uncertainty (e.g.
dependence on supply markets). Organizations need to plan effectively and
decentralize control
3. Disturbed, reactive: Greater levels of uncertainly and change create a more
complex environment that is more difficult to predict. Competition may be high
and requires organizations to be flexible, adaptable and decentralized
4. Turbulent field: The most complex and dynamic type of environment. Conditions
are highly uncertain and constantly changing. The organization needs to
continually adapt to change and develop new products, services and processes
to survive. A very fluid and flexible organization structure is needed
36
Although technology undoubtedly will have some effect in constraining structural
options, the Aston researchers found however that its effect were rather limited.
Why, for example, should the production technology employed have any effect
upon the structure of the firm’s HR or advertising departments? Instead, they found
organizational size to be a key determinant. Put simply, as organizations become
larger, they become structurally more complex, with greater structuring of activities,
degree of line control and supportive components (another reason for the tenacious
hold of bureaucracy in larger firms).
The Environment
Another important factor influencing organizational structure is the external
environment in which it operates and the degree of uncertainty associated with
changes in product markets and process technologies. As noted earlier, systems
theory emphasized that organizations are open systems and systems theorists were
important too in categorizing the types of environment in which organizations
operate. According to Emery and Trist, there are four types of environment that vary
in their levels of complexity and uncertainty and in their implications for structural
forms:
1. Placid, randomized: The simplest type of environment. Conditions are relatively
stable, changes are randomly distributed and there is little uncertainty. Successful
organizations are highly structured with standardized work processes
2. Placid, clustered: There are more threats in this environment, even though
conditions move relatively slowly and there is only moderate uncertainty (e.g.
dependence on supply markets). Organizations need to plan effectively and
decentralize control
3. Disturbed, reactive: Greater levels of uncertainly and change create a more
complex environment that is more difficult to predict. Competition may be high
and requires organizations to be flexible, adaptable and decentralized
4. Turbulent field: The most complex and dynamic type of environment. Conditions
are highly uncertain and constantly changing. The organization needs to
continually adapt to change and develop new products, services and processes
to survive. A very fluid and flexible organization structure is needed
36
The effects of environmental uncertainty were also explored by Burns and Stalker who,
in a highly influential study of change in 20 English and Scottish firms in the 1960s,
identified two structural types or model – mechanistic and organic. Mechanistic forms
(as typified in a rayon mill they studied) are more highly structured, but nevertheless
can be suited to their more stable environmental conditions. Where environmental
uncertainly is high, however (measured according to the rate of change of product lines),
mechanistic structures respond very poorly. In these circumstances, organizations need
to adopt more flexible and adaptable organic structures (as typified in an electronics
firm they studied). The two models (each of which is again rarely found in its pure
form – they represent instead two ends of a continuum) are contrasted below:
Table 3: Burns and Stalker’s Mechanistic and Organic Forms
‘Mechanistic’ (e.g. rayon mill) ‘Organic’ (e.g. electronics firm)
Specialized tasks Flexible tasks
Standard, formal procedures Highly informal
Centralized power and control Decentralized power and control
Vertical communications Lateral communications
Commands and control Advice and information
Emphasis on loyalty Emphasis on task
Parochial outlook Cosmopolitan outlook
A further highly influential study that looked at the impact of environmental
uncertainty on structure was conducted by Lawrence and Lorsch. They studied 10 firms
in three industries representing quite distinct types of environment (containers, food
and plastics). Whereas conditions in the container industry were relatively stable, the
plastics industry was more volatile with greater competition and higher rates of new
product development and process innovation (the food industry was mid-way between
the two). Lawrence and Lorsch measured uncertainty as the lack of information
available, the uncertainty of causal connections in work-flow processes and the time
needed to obtain definitive performance feedback. Importantly, they drew attention
to the fact that different departments within each firm (research, production and
sales) would each face different levels of uncertainty associated with their particular
sub-environment (respectively: scientific, technical-economic and market).
37
The effects of environmental uncertainty were also explored by Burns and Stalker who,
in a highly influential study of change in 20 English and Scottish firms in the 1960s,
identified two structural types or model – mechanistic and organic. Mechanistic forms
(as typified in a rayon mill they studied) are more highly structured, but nevertheless
can be suited to their more stable environmental conditions. Where environmental
uncertainly is high, however (measured according to the rate of change of product lines),
mechanistic structures respond very poorly. In these circumstances, organizations need
to adopt more flexible and adaptable organic structures (as typified in an electronics
firm they studied). The two models (each of which is again rarely found in its pure
form – they represent instead two ends of a continuum) are contrasted below:
Table 3: Burns and Stalker’s Mechanistic and Organic Forms
‘Mechanistic’ (e.g. rayon mill) ‘Organic’ (e.g. electronics firm)
Specialized tasks Flexible tasks
Standard, formal procedures Highly informal
Centralized power and control Decentralized power and control
Vertical communications Lateral communications
Commands and control Advice and information
Emphasis on loyalty Emphasis on task
Parochial outlook Cosmopolitan outlook
A further highly influential study that looked at the impact of environmental
uncertainty on structure was conducted by Lawrence and Lorsch. They studied 10 firms
in three industries representing quite distinct types of environment (containers, food
and plastics). Whereas conditions in the container industry were relatively stable, the
plastics industry was more volatile with greater competition and higher rates of new
product development and process innovation (the food industry was mid-way between
the two). Lawrence and Lorsch measured uncertainty as the lack of information
available, the uncertainty of causal connections in work-flow processes and the time
needed to obtain definitive performance feedback. Importantly, they drew attention
to the fact that different departments within each firm (research, production and
sales) would each face different levels of uncertainty associated with their particular
sub-environment (respectively: scientific, technical-economic and market).
37
The result was a particular level of internal differentiation within each firm, which
Lawrence and Lorsch defined as not just the degree of specialization (horizontal
differentiation) but also the resultant changes in attitude created by differences in
departmental structures, goals, orientations to time and interpersonal relations. The
more turbulent, complex and uncertain the environment, the greater the need to
achieve higher levels of differentiation within the organization and, as a result, the
greater the need for higher levels of integration.
They defined integration as the quality of the state of collaboration between
departments and found that the mechanisms used to achieve integration became
increasingly more sophisticated as levels of environmental uncertainty rose. So, for
instance, the relatively lower levels of differentiation found in the container industry
could be easily managed using standard hierarchical methods of control. In the plastics
industry, in contrast, greater differentiation created by higher levels of environmental
uncertainty required much more elaborate mechanisms, including the use of
permanent cross-functional teams and whole departments specialized in providing
integration services (e.g. project managers). The more successful firms in each sector
again adopted structural mechanisms that were suited to their circumstances.
Further reading
For more discussion of these and other studies in this area, read Buchanan and
Huczynski, pp 500-510 for an overview of contingency theory and pp 47-51 for the
contribution from systems theory to studying environmental influences.
Strategic choice and organizational design
Although these and other similar studies throw some very important light upon the
factors that shape organizational structure and so influence the design process, they
do not give a full picture or a completely satisfactory one.
Take information and communication technologies (ICT), for example. We know that
the use of ICTs (through email, the internet, intranets, video-conferencing, mobile
phones and the like) allows a great deal of flexibility in operation. On the face of it, they
are ‘enabling technologies’ that allow distributed working and decentralized control.
They also allow more direct communication between those located in different parts
38
The result was a particular level of internal differentiation within each firm, which
Lawrence and Lorsch defined as not just the degree of specialization (horizontal
differentiation) but also the resultant changes in attitude created by differences in
departmental structures, goals, orientations to time and interpersonal relations. The
more turbulent, complex and uncertain the environment, the greater the need to
achieve higher levels of differentiation within the organization and, as a result, the
greater the need for higher levels of integration.
They defined integration as the quality of the state of collaboration between
departments and found that the mechanisms used to achieve integration became
increasingly more sophisticated as levels of environmental uncertainty rose. So, for
instance, the relatively lower levels of differentiation found in the container industry
could be easily managed using standard hierarchical methods of control. In the plastics
industry, in contrast, greater differentiation created by higher levels of environmental
uncertainty required much more elaborate mechanisms, including the use of
permanent cross-functional teams and whole departments specialized in providing
integration services (e.g. project managers). The more successful firms in each sector
again adopted structural mechanisms that were suited to their circumstances.
Further reading
For more discussion of these and other studies in this area, read Buchanan and
Huczynski, pp 500-510 for an overview of contingency theory and pp 47-51 for the
contribution from systems theory to studying environmental influences.
Strategic choice and organizational design
Although these and other similar studies throw some very important light upon the
factors that shape organizational structure and so influence the design process, they
do not give a full picture or a completely satisfactory one.
Take information and communication technologies (ICT), for example. We know that
the use of ICTs (through email, the internet, intranets, video-conferencing, mobile
phones and the like) allows a great deal of flexibility in operation. On the face of it, they
are ‘enabling technologies’ that allow distributed working and decentralized control.
They also allow more direct communication between those located in different parts
38
of the organization (structurally or globally) and so can ‘shrink’ time and space and
overcome some of the structural barriers to communication and decision-making. They
even improve the capacity of the organization to cope with environmental uncertainty
caused by lack of knowledge or information (through search engine capabilities, for
example).
At the same, time, however, they also provide the opportunity for more centralized
control and decision-making and greater standardization and formalization of process
when embodied in corporate information systems. This is a very different model of
organization from that implied above and one which may have radically different
consequences. The use of IT-based systems may also have unintended effects which
affect structural attributes. A good example here may be SAP models which may
standardize purchasing procedures, but which may inhibit decentralized decision-
making regarding one-off purchases on unique projects.
The missing element in the contingency approach is the choices made and actions
taken about how technologies are employed and what structural consequences
they may have. This is as important an issue for the implementation of any new IT
system which imposes standard routines on distributed activity as it is to wider social
debates as the implications of ICTs for control/surveillance and the impact this may
have on civil liberties. This is where these earlier contingency approaches have their
limitations. Although useful in being able to identify clear mismatches between an
organization and its size, technology and environment, they tend to presume that
these contingencies effectively determine organizational structure, leaving little room
for the choices that are made about how they might be combined together or aligned
with different structural characteristics and how, in the first case, those contingencies
themselves are the product of choice.
If one looks, for example, at the influences of national differences in ‘culture’ as
another set of contingencies influencing global operations (more on this in the next
section), there are two important implications. First, that while local conditions might
constrain operations they do not wholly determine them (Disney and McDonald’s still
operate in Paris in very distinctive ways!). Second, that operating in different contexts
is the result of strategic choices already made (e.g. establishing new investments in
India or China based on choices about markets, technological capabilities, regulatory
39
of the organization (structurally or globally) and so can ‘shrink’ time and space and
overcome some of the structural barriers to communication and decision-making. They
even improve the capacity of the organization to cope with environmental uncertainty
caused by lack of knowledge or information (through search engine capabilities, for
example).
At the same, time, however, they also provide the opportunity for more centralized
control and decision-making and greater standardization and formalization of process
when embodied in corporate information systems. This is a very different model of
organization from that implied above and one which may have radically different
consequences. The use of IT-based systems may also have unintended effects which
affect structural attributes. A good example here may be SAP models which may
standardize purchasing procedures, but which may inhibit decentralized decision-
making regarding one-off purchases on unique projects.
The missing element in the contingency approach is the choices made and actions
taken about how technologies are employed and what structural consequences
they may have. This is as important an issue for the implementation of any new IT
system which imposes standard routines on distributed activity as it is to wider social
debates as the implications of ICTs for control/surveillance and the impact this may
have on civil liberties. This is where these earlier contingency approaches have their
limitations. Although useful in being able to identify clear mismatches between an
organization and its size, technology and environment, they tend to presume that
these contingencies effectively determine organizational structure, leaving little room
for the choices that are made about how they might be combined together or aligned
with different structural characteristics and how, in the first case, those contingencies
themselves are the product of choice.
If one looks, for example, at the influences of national differences in ‘culture’ as
another set of contingencies influencing global operations (more on this in the next
section), there are two important implications. First, that while local conditions might
constrain operations they do not wholly determine them (Disney and McDonald’s still
operate in Paris in very distinctive ways!). Second, that operating in different contexts
is the result of strategic choices already made (e.g. establishing new investments in
India or China based on choices about markets, technological capabilities, regulatory
39
environments, etc). In a similar vein, trying to avoid the bureaucratic tendencies environments, etc). In a similar vein, trying to avoid the bureaucratic tendencies
created by greater size can be approached differently (e.g. by decentralizing to strategic created by greater size can be approached differently (e.g. by decentralizing to strategic
business units); ultimately, however, size too is the result of a strategic decision – to business units); ultimately, however, size too is the result of a strategic decision – to
grow the business. grow the business.

Alfred Chandler pointed out in the 1960s that ‘structure follows strategy’. That is,
organizational structures need to be seen as following on from the strategic choices
made by decision-makers. Chandler was interested in charting the emergence and
development of multi-divisional forms of organization in the inter-war period at
companies such as General Motors, Standard Oil, Sears Roebuck and Dupont. A more
recent take on the mutual interdependency between strategy and structure and how
they tend to co-evolve is in the work of Miles and Snow, who identify four types of
corporate strategy that are associated with particular types of structure:
Alfred Chandler pointed out in the 1960s that ‘structure follows strategy’. That is,
organizational structures need to be seen as following on from the strategic choices
made by decision-makers. Chandler was interested in charting the emergence and
development of multi-divisional forms of organization in the inter-war period at
companies such as General Motors, Standard Oil, Sears Roebuck and Dupont. A more
recent take on the mutual interdependency between strategy and structure and how
they tend to co-evolve is in the work of Miles and Snow, who identify four types of
corporate strategy that are associated with particular types of structure:

Table 4: Miles and Snow’s Typology of Corporate Strategies Table 4: Miles and Snow’s Typology of Corporate Strategies

Corporate Strategy Organization Structure Corporate Strategy Organization Structure

Prospector: ‘First to the market’; good Prospector: ‘First to the market’; good
Flexible, decentralized structure using Flexible, decentralized structure using
at innovation but not at efficient at innovation but not at efficient
divisions and teams divisions and teams
production production

Defender: Offers a limited, stable Defender: Offers a limited, stable

Mechanistic structure; functional form Mechanistic structure; functional form
product line. Cost effective and product line. Cost effective and
and centralized decision-making and centralized decision-making
maintains quality maintains quality

Analyser: ‘Second in’ strategy. Internal differentiation allows some Analyser: ‘Second in’ strategy. Internal differentiation allows some
Combines strengths of defenders and parts to be flexible and some stable. Combines strengths of defenders and parts to be flexible and some stable.
prospectors, improving products on Uses matrix forms to integrates prospectors, improving products on Uses matrix forms to integrates
basis of quality/cost functions and divisions basis of quality/cost functions and divisions

Reactor: Passively responds to change No clear structural approach due to no Reactor: Passively responds to change No clear structural approach due to no
in an ad hoc way clear strategic direction in an ad hoc way clear strategic direction

They argue that, to be successful, the choices need to match environmental conditions They argue that, to be successful, the choices need to match environmental conditions
and management processes and that managers make strategic choices depending on and management processes and that managers make strategic choices depending on
perceptions of the environment and their organizations capabilities. perceptions of the environment and their organizations capabilities.

40 40
However, there are also many other ways in which organizations can make strategic
choices that help influence and shape the environments they are operating in. Various
forms of strategic alliance and joint venture, as well as other forms of collaborative
inter-organizational relationship (for example, based on outsourcing and then
contracting in services from preferred or sole suppliers), offer the opportunity for firms
to combine resources and capabilities in ways that help them to reduce dependence
on their environment and so deal more effectively with environmental complexity and
uncertainty. The keiretsu systems used by Japanese car manufacturers, for example,
creates a tiered system of cooperative supply chain relationships that not only secures
supply markets, but also enables the sharing of knowledge and learning between supply
chain partners. Forming close relationships with small biotechnology firms allows
large pharmaceutical companies to effectively outsource some of their R&D capacity
and so to contain the effects of environmental uncertainty in key areas of science
(genomics, for example). All of these strategies will have structural consequences
for the organization through their effect on containing or otherwise influencing
contingencies. So, for example, establishing a joint venture with one company rather
than another may give access to the technological capabilities the company needs
without it having to invest in the technology itself (and develop appropriate support
structures and systems).
Further reading
For more discussion, read Buchanan and Huczynski and Buchanan, ch 16, pp 510-14
and see also pp 69-84 for a discussion of technological effects and a critique of the
idea of technological determinism.
In emphasizing perception and choice, those researchers who take what could be
considered more of a ‘strategic contingencies’ approach to organizational design
highlight a further important aspect. That is in the impact that the subjective
perceptions and personal and political preferences of those at the ‘strategic apex’
of the organization have upon issues of strategic choice and organizational design.
Going back to the example of Ford, the success of Ford was in developing a system of
production (and associated highly structured management hierarchy) that was suited
to the needs of the mass market it was serving and which became a template for other
manufacturers to copy. The near collapse of the Ford Motor Company was brought
about by Henry Ford’s insistence on continuing with the strategy of mass producing
41
However, there are also many other ways in which organizations can make strategic
choices that help influence and shape the environments they are operating in. Various
forms of strategic alliance and joint venture, as well as other forms of collaborative
inter-organizational relationship (for example, based on outsourcing and then
contracting in services from preferred or sole suppliers), offer the opportunity for firms
to combine resources and capabilities in ways that help them to reduce dependence
on their environment and so deal more effectively with environmental complexity and
uncertainty. The keiretsu systems used by Japanese car manufacturers, for example,
creates a tiered system of cooperative supply chain relationships that not only secures
supply markets, but also enables the sharing of knowledge and learning between supply
chain partners. Forming close relationships with small biotechnology firms allows
large pharmaceutical companies to effectively outsource some of their R&D capacity
and so to contain the effects of environmental uncertainty in key areas of science
(genomics, for example). All of these strategies will have structural consequences
for the organization through their effect on containing or otherwise influencing
contingencies. So, for example, establishing a joint venture with one company rather
than another may give access to the technological capabilities the company needs
without it having to invest in the technology itself (and develop appropriate support
structures and systems).
Further reading
For more discussion, read Buchanan and Huczynski and Buchanan, ch 16, pp 510-14
and see also pp 69-84 for a discussion of technological effects and a critique of the
idea of technological determinism.
In emphasizing perception and choice, those researchers who take what could be
considered more of a ‘strategic contingencies’ approach to organizational design
highlight a further important aspect. That is in the impact that the subjective
perceptions and personal and political preferences of those at the ‘strategic apex’
of the organization have upon issues of strategic choice and organizational design.
Going back to the example of Ford, the success of Ford was in developing a system of
production (and associated highly structured management hierarchy) that was suited
to the needs of the mass market it was serving and which became a template for other
manufacturers to copy. The near collapse of the Ford Motor Company was brought
about by Henry Ford’s insistence on continuing with the strategy of mass producing
41
the model-T Ford despite changes occurring in the market. The centralized power and
control he wielded, which was a primary feature of the Fordist system of production,
allowed him to pursue that strategy.
This may seem a very obvious point – Ford had his preferences and he got it wrong.
The interpretation however is a bit more subtle than this. It not only points to the
importance of choices made by powerful stake-holders within the organization
(whether the CEO or others) about strategic domains to occupy and corresponding
structural forms to adopt. It also points to the ways in which the perceptions of
individuals or groups actively shape structure and therefore determine the limits to
action in the organization. Karl Weick describes this as a process of sense-making
in which individuals and groups enact their environment. That is, rather than the
environment (or technology) existing as an objective fact ‘out there’, they and the
structures they give rise to are the product of our conscious interpretations which, in
turn, define and limit possibilities for future action.
Just think about it – managers may talk about the need to be flexible to respond
to the competition. How much is this a statement of fact? How much is it active
sense-making designed to influence action in the organization?
In the case of Ford, we see the construction of a production system and associated
management structure that, in its coherence (and bolstered by initial success) creates
a frame of reference that precludes other strategic or organizational possibilities (as
they tend to be judged in terms of how well they conform with the requirements of
the current system). Another example can be seen in the case of IBM where success
in main frame computers (and an organizational structure designed to maximize
its capabilities in that area) created strategic and organizational ‘blind spots’ when
it came to the emergence of the market for personal computing. Going back to the
earlier example of ICTs, whether senior managers use ICTs to allow decentralized
communications and decision-making or to enhance centralized control may reflect
their predisposition towards trusting others within the organization which, in turn,
may well be affected by the structural conditions already in place (e.g. where several
layers in the hierarchy create a ‘distance’ between senior managers and others). It
is these interpretations that will actively shape how structures and contingencies
inter-twine, rather than anything to do with their ‘objective’ qualities or deterministic
impact.
42
the model-T Ford despite changes occurring in the market. The centralized power and
control he wielded, which was a primary feature of the Fordist system of production,
allowed him to pursue that strategy.
This may seem a very obvious point – Ford had his preferences and he got it wrong.
The interpretation however is a bit more subtle than this. It not only points to the
importance of choices made by powerful stake-holders within the organization
(whether the CEO or others) about strategic domains to occupy and corresponding
structural forms to adopt. It also points to the ways in which the perceptions of
individuals or groups actively shape structure and therefore determine the limits to
action in the organization. Karl Weick describes this as a process of sense-making
in which individuals and groups enact their environment. That is, rather than the
environment (or technology) existing as an objective fact ‘out there’, they and the
structures they give rise to are the product of our conscious interpretations which, in
turn, define and limit possibilities for future action.
Just think about it – managers may talk about the need to be flexible to respond
to the competition. How much is this a statement of fact? How much is it active
sense-making designed to influence action in the organization?
In the case of Ford, we see the construction of a production system and associated
management structure that, in its coherence (and bolstered by initial success) creates
a frame of reference that precludes other strategic or organizational possibilities (as
they tend to be judged in terms of how well they conform with the requirements of
the current system). Another example can be seen in the case of IBM where success
in main frame computers (and an organizational structure designed to maximize
its capabilities in that area) created strategic and organizational ‘blind spots’ when
it came to the emergence of the market for personal computing. Going back to the
earlier example of ICTs, whether senior managers use ICTs to allow decentralized
communications and decision-making or to enhance centralized control may reflect
their predisposition towards trusting others within the organization which, in turn,
may well be affected by the structural conditions already in place (e.g. where several
layers in the hierarchy create a ‘distance’ between senior managers and others). It
is these interpretations that will actively shape how structures and contingencies
inter-twine, rather than anything to do with their ‘objective’ qualities or deterministic
impact.
42
Activity Seven
Read the chapter from the book ‘Friendly Fire’ by Lt Col Scott A. Snook. This book is
about the shooting down of two US Blackhawk helicopters carrying 26 UN peace-
keepers in the aftermath of the first Gulf War. In this chapter, Snook draws together
the threads of his analysis and the lessons learned from the incident (note that
Eagles refer to the Blackhawks, Tigers are the US F-15 fighters, Duke was the major
in change of Airborne Command AWACs and Mad Dog was the highly experienced
Mission Director. Operation Provide Comfort refers to the overall mission). Apply
what you have learned from these last two parts of this section on structure (on
contingency theory and strategic choice) to analyze the organizational causes of the
shooting down and the likelihood of lessons being learned by the military. Discuss
the case with other members of your course on Blackboard.
On reflection
This section has attempted to provide an overview of some of the major approaches
to organizational structures, focusing on different ways of conceptualizing and
categorizing structures and their underlying dimensions, the contingency factors that
influence whether forms of organization are appropriate and the impact of strategic
influences on designing and enacting structures. The key messages that should
emerge are:
1. that there is no ‘one best way’ of designing an organizational structure and
that the different forms observed reflect the suitability of different types of
organization to different circumstances
2. that contingencies such as the size of the organization, its technology and its
environment can constrain choices about effective organizational structure but
do not determine which type of structure will work best
3. that there is a close relationship between the strategy of the organization (which
isconcerned with its goals) and structure (which is concerned with the means to
achievethose goals)
4. that the design and enactment of organizational structures is a process of
choice that involves subjective interpretation and active sense-making by
43
Activity Seven
Read the chapter from the book ‘Friendly Fire’ by Lt Col Scott A. Snook. This book is
about the shooting down of two US Blackhawk helicopters carrying 26 UN peace-
keepers in the aftermath of the first Gulf War. In this chapter, Snook draws together
the threads of his analysis and the lessons learned from the incident (note that
Eagles refer to the Blackhawks, Tigers are the US F-15 fighters, Duke was the major
in change of Airborne Command AWACs and Mad Dog was the highly experienced
Mission Director. Operation Provide Comfort refers to the overall mission). Apply
what you have learned from these last two parts of this section on structure (on
contingency theory and strategic choice) to analyze the organizational causes of the
shooting down and the likelihood of lessons being learned by the military. Discuss
the case with other members of your course on Blackboard.
On reflection
This section has attempted to provide an overview of some of the major approaches
to organizational structures, focusing on different ways of conceptualizing and
categorizing structures and their underlying dimensions, the contingency factors that
influence whether forms of organization are appropriate and the impact of strategic
influences on designing and enacting structures. The key messages that should
emerge are:
1. that there is no ‘one best way’ of designing an organizational structure and
that the different forms observed reflect the suitability of different types of
organization to different circumstances
2. that contingencies such as the size of the organization, its technology and its
environment can constrain choices about effective organizational structure but
do not determine which type of structure will work best
3. that there is a close relationship between the strategy of the organization (which
isconcerned with its goals) and structure (which is concerned with the means to
achievethose goals)
4. that the design and enactment of organizational structures is a process of
choice that involves subjective interpretation and active sense-making by
43
 powerful individuals and groups whose actions shape how structure works and powerful individuals and groups whose actions shape how structure works and
the possibilities it generates for future action. the possibilities it generates for future action.

Below are a few questions to guide your reflection on this part of Unit One: Below are a few questions to guide your reflection on this part of Unit One:

1. How would you characterize your own organizational structure and how does 1. How would you characterize your own organizational structure and how does
this relate to organizational strategy and performance? this relate to organizational strategy and performance?

2. Why do you think that repeated attempts to ‘do away with bureaucracy’ are 2. Why do you think that repeated attempts to ‘do away with bureaucracy’ are
often so unsuccessful? often so unsuccessful?

3. How strongly do contingencies influence the design and operation of organizations 3. How strongly do contingencies influence the design and operation of organizations
and how constraining are they on the choices available? Use examples from your and how constraining are they on the choices available? Use examples from your
own organization or organizations with which you are familiar. own organization or organizations with which you are familiar.

44 44
Section 3: Organizational Cultures
Achieving integration within the organization through structural means is, of course,
only one part of a much more complex story. As we saw above, there are important
‘cultural’ aspects to many of these models of organization (for example, the more
‘cosmopolitan’ outlook in organic forms and the more rigid forms of behaviour
associated with bureaucracy). Indeed, these cultural attributes are what often
define for us how we think about particular organizations – the emphasis placed
on environmental issues in companies like the Body Shop, for example, or the value
placed on creativity in product design by Apple, or the ‘total football’ practiced by
Brazil (sometimes!).
This section sets out to explore organizational cultures – examining the attributes that
go to make up an organization’s ‘culture’, the presumed impact it has on organizational
performance, and how it may be affected by working in different national contexts.
While culture may have a very strong hold on our everyday understandings of
organization, its meaning and impact has, however, attracted considerable controversy
and critical debate. This centers upon the ways in which culture has been approached
and conceptualized and crystallizes into one key question: can organizational culture
be ‘managed’? Before we start addressing that question, though, it is first important
to look more closely at the nature and meaning of organizational culture.
The nature and meaning of culture
Contemporary definitions of organizational culture are quite varied but share in
common the idea that culture in organizations refers somehow to the relatively
enduring set of values, beliefs, customs, traditions and practices that are shared across
the organization and which help shape individual and group behaviour.
These values and beliefs commonly find expression in some of the more visible and
material aspects of organizations that influence everyday behaviour and which
symbolize particular values, beliefs and traditions.
45
Section 3: Organizational Cultures
Achieving integration within the organization through structural means is, of course,
only one part of a much more complex story. As we saw above, there are important
‘cultural’ aspects to many of these models of organization (for example, the more
‘cosmopolitan’ outlook in organic forms and the more rigid forms of behaviour
associated with bureaucracy). Indeed, these cultural attributes are what often
define for us how we think about particular organizations – the emphasis placed
on environmental issues in companies like the Body Shop, for example, or the value
placed on creativity in product design by Apple, or the ‘total football’ practiced by
Brazil (sometimes!).
This section sets out to explore organizational cultures – examining the attributes that
go to make up an organization’s ‘culture’, the presumed impact it has on organizational
performance, and how it may be affected by working in different national contexts.
While culture may have a very strong hold on our everyday understandings of
organization, its meaning and impact has, however, attracted considerable controversy
and critical debate. This centers upon the ways in which culture has been approached
and conceptualized and crystallizes into one key question: can organizational culture
be ‘managed’? Before we start addressing that question, though, it is first important
to look more closely at the nature and meaning of organizational culture.
The nature and meaning of culture
Contemporary definitions of organizational culture are quite varied but share in
common the idea that culture in organizations refers somehow to the relatively
enduring set of values, beliefs, customs, traditions and practices that are shared across
the organization and which help shape individual and group behaviour.
These values and beliefs commonly find expression in some of the more visible and
material aspects of organizations that influence everyday behaviour and which
symbolize particular values, beliefs and traditions.
45
These include, for example: the organization’s rituals and ceremonies (such as annual
awards ceremonies); the physical layout of the organization and use of material
artifacts (e.g. the status differentials signified by different work-wear and office
designs); the language(s) and terminology used (technical jargon, for example); and
the mission statements, slogans and mottoes of the organization (e.g. Nike’s ‘Just do
it’).
These values and beliefs may be influenced very strongly by the impact of organizational
founders and influential leaders and embodied by the stories, myths and legends,
heroes/heroines and role models that constitute the organization’s ‘history’ and
which act as a model for current patterns of working. But they are also the product
of continuing day-to-day interaction within the community of the organization – as
decisions are actively made about the recruitment, selection, development and reward
of staff, for example, or through the mechanisms developed to support particular
working practices (e.g. how and where people meet together to discuss their work).
Cultural artifacts may shape these processes in certain ways but, as we will see, they
are also shaped by them.
Capturing this complexity and the tension it suggests between ‘top down’ as opposed
to ‘bottom up’ influences is extremely difficult but made somewhat easier if we refer
to the framework of Edgar Schein. He was the first to differentiate between three
inter-related but distinct levels of organizational culture:
• Surface manifestations: (which include physical artifacts and observable
behaviour patterns, such as those found in ceremonies, rituals and language)
• Values: (which refer to deeper preferences for one state of affairs over another)
• Basic assumptions: (which refer to the ‘taken-for-granted’ assumptions that
individuals hold about the organization and how it does or should function)
According to Schein, surface manifestations are simply that. They may be highly
symbolic and tell us quite a lot about the espoused values of members of the
organization (through what the CEO expresses in the company’s mission statement,
for example). But this is not the level at which culture resides. Nor is culture found in
those espoused values themselves (whether, for example, firms place more emphasis
46
These include, for example: the organization’s rituals and ceremonies (such as annual
awards ceremonies); the physical layout of the organization and use of material
artifacts (e.g. the status differentials signified by different work-wear and office
designs); the language(s) and terminology used (technical jargon, for example); and
the mission statements, slogans and mottoes of the organization (e.g. Nike’s ‘Just do
it’).
These values and beliefs may be influenced very strongly by the impact of organizational
founders and influential leaders and embodied by the stories, myths and legends,
heroes/heroines and role models that constitute the organization’s ‘history’ and
which act as a model for current patterns of working. But they are also the product
of continuing day-to-day interaction within the community of the organization – as
decisions are actively made about the recruitment, selection, development and reward
of staff, for example, or through the mechanisms developed to support particular
working practices (e.g. how and where people meet together to discuss their work).
Cultural artifacts may shape these processes in certain ways but, as we will see, they
are also shaped by them.
Capturing this complexity and the tension it suggests between ‘top down’ as opposed
to ‘bottom up’ influences is extremely difficult but made somewhat easier if we refer
to the framework of Edgar Schein. He was the first to differentiate between three
inter-related but distinct levels of organizational culture:
• Surface manifestations: (which include physical artifacts and observable
behaviour patterns, such as those found in ceremonies, rituals and language)
• Values: (which refer to deeper preferences for one state of affairs over another)
• Basic assumptions: (which refer to the ‘taken-for-granted’ assumptions that
individuals hold about the organization and how it does or should function)
According to Schein, surface manifestations are simply that. They may be highly
symbolic and tell us quite a lot about the espoused values of members of the
organization (through what the CEO expresses in the company’s mission statement,
for example). But this is not the level at which culture resides. Nor is culture found in
those espoused values themselves (whether, for example, firms place more emphasis
46
on innovative products or customer satisfaction). At one level, these values are a very
good way of trying to compare and contrast organizations. However, at another level,
they may bear little relation to what others in the organization – including other senior
managers – think, feel or say about those values and goals.
According to Schein, understanding organizational culture is more about the deeply
held basic assumptions of members of the organization. For an organization to have
a strong culture, we know that its values need to be intensely held, clearly ordered
or prioritized and widely shared. However, it is this more inaccessible aspect of
organizational culture that lies beneath the surface that not only makes organizational
culture an intensely studied concept but also a hotly contested one.
Further reading
Read Buchanan and Huczynski, pp 100-7 for a more detailed examination of the
attributes of organizational culture. See also the case examples of culture in that
chapter.
Types of organizational culture and their effects
Amongst the first to promote the idea that organizational culture had an impact
upon performance were Tom Peters and Robert Waterman who, in an influential book
entitled In Search of Excellence, attributed the performance of organizations to certain
key values, including a ‘bias for action’, being ‘close to the customer’, encouraging
‘productivity through people’, promoting ‘autonomy and entrepreneurship’ and top
management being ‘hands-on, value driven’. Their evangelistic work came in for a lot
of criticism (for example, they only focused on successful companies (not unsuccessful
ones); and some of those companies soon turned out to be commercial failures!).
However, coupled with a growing interest in the mid-1980s in the impact of Japanese
management practices, the interest they provoked in corporate culture spawned a
considerable amount of interest in trying to understand the variations found in
organizational culture and their impact on organizational performance.
47
on innovative products or customer satisfaction). At one level, these values are a very
good way of trying to compare and contrast organizations. However, at another level,
they may bear little relation to what others in the organization – including other senior
managers – think, feel or say about those values and goals.
According to Schein, understanding organizational culture is more about the deeply
held basic assumptions of members of the organization. For an organization to have
a strong culture, we know that its values need to be intensely held, clearly ordered
or prioritized and widely shared. However, it is this more inaccessible aspect of
organizational culture that lies beneath the surface that not only makes organizational
culture an intensely studied concept but also a hotly contested one.
Further reading
Read Buchanan and Huczynski, pp 100-7 for a more detailed examination of the
attributes of organizational culture. See also the case examples of culture in that
chapter.
Types of organizational culture and their effects
Amongst the first to promote the idea that organizational culture had an impact
upon performance were Tom Peters and Robert Waterman who, in an influential book
entitled In Search of Excellence, attributed the performance of organizations to certain
key values, including a ‘bias for action’, being ‘close to the customer’, encouraging
‘productivity through people’, promoting ‘autonomy and entrepreneurship’ and top
management being ‘hands-on, value driven’. Their evangelistic work came in for a lot
of criticism (for example, they only focused on successful companies (not unsuccessful
ones); and some of those companies soon turned out to be commercial failures!).
However, coupled with a growing interest in the mid-1980s in the impact of Japanese
management practices, the interest they provoked in corporate culture spawned a
considerable amount of interest in trying to understand the variations found in
organizational culture and their impact on organizational performance.
47
Others following on in a similar vein were quick to point out, however, that there are
important differences in corporate culture that are likely to reflect key market and
industrial sector conditions (national differences will be looked at further below). Deal
and Kennedy, for example, defined culture as ‘the way things are done around here’
and focused on fairly superficial surface attributes as ‘signposts’ of culture (customs,
stories, rituals, material symbols and language). They suggested there are four basic
‘types’. These vary according to whether risk taking or is encouraged or not and how
long the time span is for obtaining feedback from the results of decisions.
Others following on in a similar vein were quick to point out, however, that there are
important differences in corporate culture that are likely to reflect key market and
industrial sector conditions (national differences will be looked at further below). Deal
and Kennedy, for example, defined culture as ‘the way things are done around here’
and focused on fairly superficial surface attributes as ‘signposts’ of culture (customs,
stories, rituals, material symbols and language). They suggested there are four basic
‘types’. These vary according to whether risk taking or is encouraged or not and how
long the time span is for obtaining feedback from the results of decisions.

Figure 1: Deal and Kennedy’s Types of Culture Figure 1: Deal and Kennedy’s Types of Culture

High Risk Low Risk

Tough-guy macho Tough-guy macho

Bet your company Bet your company
culture culture

Investment banking Oil companies Investment banking Oil companies

Management Management
Fast feedback Aircraft manufacturers Slow feedback Fast feedback Aircraft manufacturers Slow feedback
consulting consulting

Work hard/play hard Process Culture Work hard/play hard Process Culture

Sales organizations Banks & Insurance Sales organizations Banks & Insurance

Computer companies Accounting firms Computer companies Accounting firms

Low Risk Low Risk

Some of these cultural types may resonate reasonably well with current ways of
classifying organizations. But take banks and banking, for example: are the economic
problems faced since 2008 the result of an excessively diligent process culture in a
relatively low risk environment? Such categorization schemes are obviously prone to
being too reliant on superficial interpretations of culture and broad generalization
across different types of company within a sector.
Some of these cultural types may resonate reasonably well with current ways of
classifying organizations. But take banks and banking, for example: are the economic
problems faced since 2008 the result of an excessively diligent process culture in a
relatively low risk environment? Such categorization schemes are obviously prone to
being too reliant on superficial interpretations of culture and broad generalization
across different types of company within a sector.

One of the problems with viewing culture in this way is that it focuses attention on One of the problems with viewing culture in this way is that it focuses attention on
the more outward, external trappings of organization which may or may not align well the more outward, external trappings of organization which may or may not align well
with the deeper sets of values and beliefs guiding behaviour in such organizations. with the deeper sets of values and beliefs guiding behaviour in such organizations.

48 48
 Just think about it – where in this model would you place Barings Bank in the 1990s
in the light of the actions and decisions of Nick Leeson?
Other, more abstract ways of classifying organizational culture are perhaps more
useful and less time- and context-dependent. One such approach relates to the
typology of organizational forms introduced in the previous section. Drawing upon
earlier work by Roger Harrison, Charles Handy suggests that there are four types of
‘culture’, each of which is associated with a particular structural form and a distinct
basis of influence:
• Power: These are highly centralized organizations, often found in simple
structures like small entrepreneurial firms, where control of resources (money,
information, etc) is the main basis of influence
• Role: These are highly formalized organizations, typified by functional
bureaucracies, where position power and rules are the main basis of influence
• Task: These are more flexible and adaptable organizations, often found in matrix
or project structures, where expert power is the main basis of influence
• Person: These are highly decentralized organizations, centered around individuals
(as found in some professional services work or the performing arts), where
personal power (based on charisma or expertise) is the main basis of influence
Importantly, organizations do not necessarily fall neatly into any one type. Instead,
different types of culture may operate in different locations or at different levels in
the same organization. So, for example, it is quite possible for individual ‘fiefdoms’
based on power cultures to operate within functional or divisionalized forms; or for
bureaucratic cultures to thrive in matrix organizations.
This likelihood of differences occurring across organizations is very important because
it also signals up that organizations do not necessarily conform to one single set of
cultural norms or values, but instead are likely to consist of various subcultures (and
perhaps even counter cultures) each of which will have their own distinct norms,
values and goals. Indeed, following on from the discussion in the previous section, we
49
Just think about it – where in this model would you place Barings Bank in the 1990s
in the light of the actions and decisions of Nick Leeson?
Other, more abstract ways of classifying organizational culture are perhaps more
useful and less time- and context-dependent. One such approach relates to the
typology of organizational forms introduced in the previous section. Drawing upon
earlier work by Roger Harrison, Charles Handy suggests that there are four types of
‘culture’, each of which is associated with a particular structural form and a distinct
basis of influence:
• Power: These are highly centralized organizations, often found in simple
structures like small entrepreneurial firms, where control of resources (money,
information, etc) is the main basis of influence
• Role: These are highly formalized organizations, typified by functional
bureaucracies, where position power and rules are the main basis of influence
• Task: These are more flexible and adaptable organizations, often found in matrix
or project structures, where expert power is the main basis of influence
• Person: These are highly decentralized organizations, centered around individuals
(as found in some professional services work or the performing arts), where
personal power (based on charisma or expertise) is the main basis of influence
Importantly, organizations do not necessarily fall neatly into any one type. Instead,
different types of culture may operate in different locations or at different levels in
the same organization. So, for example, it is quite possible for individual ‘fiefdoms’
based on power cultures to operate within functional or divisionalized forms; or for
bureaucratic cultures to thrive in matrix organizations.
This likelihood of differences occurring across organizations is very important because
it also signals up that organizations do not necessarily conform to one single set of
cultural norms or values, but instead are likely to consist of various subcultures (and
perhaps even counter cultures) each of which will have their own distinct norms,
values and goals. Indeed, following on from the discussion in the previous section, we
49
would expect that to be the case due to differentiation. Within limits, we would also
encourage it: as Lawrence and Lorsch pointed out, departments may need to operate
differently due the work they do and the environments they operate in.
Activity Eight
Read the chapter ‘On the Cultures of Organizations’ from Understanding
Organizations by Charles Handy (4th edition, 1999, Penguin). Using this framework
(and also that of Deal and Kennedy) address the following questions:
1. Do any of these cultural types apply to your own organization? If they do,
where in the organization do they apply?
2. What are the main manifestations or ‘signposts’ of this culture (e.g. rituals,
language)?
3. Are there identifiable sub-cultures and counter-cultures that make it difficult
to talk of a unitary organizational culture?
4. What effects do any identifiable differences in culture have upon your
organization and its performance?
5. These are two very different frameworks that emphasize different aspects.
What do these differences tell you about attempts to classify and contrast
cultures?
This focus on cultural inconsistency and divergence due to differentiation is important
because it signals up a missing element in many early attempts to understand
organizational culture that stem from the tendency they had to employ a unitary
frame of reference – which among other things tends to assume that goals, values
and norms are shared across the organization. That may be the case or may be seen as
desirable and an important aspiration.
However, given the complexity of many organizations it is unlikely to be the natural
state of affairs and simply assuming there is (or should be) consensus over goals, values
and norms is only likely to exacerbate any underlying conflicts or disagreements that
already exist across parts of the organization.
Meyerson and Martin have suggested that it is important to realize instead that there
are different frames of reference or paradigms of culture that reflect very different
starting assumptions about the problems of, and possibilities for, cultural integration.
50
would expect that to be the case due to differentiation. Within limits, we would also
encourage it: as Lawrence and Lorsch pointed out, departments may need to operate
differently due the work they do and the environments they operate in.
Activity Eight
Read the chapter ‘On the Cultures of Organizations’ from Understanding
Organizations by Charles Handy (4th edition, 1999, Penguin). Using this framework
(and also that of Deal and Kennedy) address the following questions:
1. Do any of these cultural types apply to your own organization? If they do,
where in the organization do they apply?
2. What are the main manifestations or ‘signposts’ of this culture (e.g. rituals,
language)?
3. Are there identifiable sub-cultures and counter-cultures that make it difficult
to talk of a unitary organizational culture?
4. What effects do any identifiable differences in culture have upon your
organization and its performance?
5. These are two very different frameworks that emphasize different aspects.
What do these differences tell you about attempts to classify and contrast
cultures?
This focus on cultural inconsistency and divergence due to differentiation is important
because it signals up a missing element in many early attempts to understand
organizational culture that stem from the tendency they had to employ a unitary
frame of reference – which among other things tends to assume that goals, values
and norms are shared across the organization. That may be the case or may be seen as
desirable and an important aspiration.
However, given the complexity of many organizations it is unlikely to be the natural
state of affairs and simply assuming there is (or should be) consensus over goals, values
and norms is only likely to exacerbate any underlying conflicts or disagreements that
already exist across parts of the organization.
Meyerson and Martin have suggested that it is important to realize instead that there
are different frames of reference or paradigms of culture that reflect very different
starting assumptions about the problems of, and possibilities for, cultural integration.
50
Only the first of these is found in some of those earlier accounts of organizational
culture:
• The Integration perspective emphasizes consistency and the shared values and
language of organizational members. It suggests that there is, and needs to be,
consensus within the organization and that leaders and managers are important
‘creators’ of culture. Any ambiguity or confusion in cultural values is a problem
that needs to be resolved in favour of the dominant ideology.
• The Differentiation perspective emphasizes inconsistency and diversity in values,
language and practices. It recognizes that there are sub-cultures and counter-
cultures within the organization and that their values can originate from
elsewhere (as with the established professions, for example). Any ambiguity
or conflict in cultural values can nevertheless be channeled or harnessed to
potentially good effect (in the way that innovation can occur through the ‘creative
abrasion’ between experts; or security systems improved by the employment of
hackers).
• The Ambiguity perspective emphasizes that there are no shared integrative values
and that, in fact, differences in values, meanings and norms may be irreconcilable.
Such fragmentation makes it possible only to build consensus around specific
issues or problems that need to be solved as any other use of unifying values
would be seen as insidious cultural or ideological control. Ambiguities in culture
therefore need to be accepted and even embraced as the only way forward.
Political coalitions are one example of this (and of its precariousness!)
Further reading
For a more in-depth examination of these key differences in frames of reference about
culture, see the article by Meyerson and Martin (1987) in the Journal of Management
Studies.
These major differences have an important bearing on the question of whether and
how it is possible to ‘manage’ culture as they signal up a crucial difference between
earlier, more managerially-inspired and consultant-led investigations of organizational
culture and later, more academically-based analyses of its nature and effects. The
basic distinction revolves here around the question of what organizational culture
51
Only the first of these is found in some of those earlier accounts of organizational
culture:
• The Integration perspective emphasizes consistency and the shared values and
language of organizational members. It suggests that there is, and needs to be,
consensus within the organization and that leaders and managers are important
‘creators’ of culture. Any ambiguity or confusion in cultural values is a problem
that needs to be resolved in favour of the dominant ideology.
• The Differentiation perspective emphasizes inconsistency and diversity in values,
language and practices. It recognizes that there are sub-cultures and counter-
cultures within the organization and that their values can originate from
elsewhere (as with the established professions, for example). Any ambiguity
or conflict in cultural values can nevertheless be channeled or harnessed to
potentially good effect (in the way that innovation can occur through the ‘creative
abrasion’ between experts; or security systems improved by the employment of
hackers).
• The Ambiguity perspective emphasizes that there are no shared integrative values
and that, in fact, differences in values, meanings and norms may be irreconcilable.
Such fragmentation makes it possible only to build consensus around specific
issues or problems that need to be solved as any other use of unifying values
would be seen as insidious cultural or ideological control. Ambiguities in culture
therefore need to be accepted and even embraced as the only way forward.
Political coalitions are one example of this (and of its precariousness!)
Further reading
For a more in-depth examination of these key differences in frames of reference about
culture, see the article by Meyerson and Martin (1987) in the Journal of Management
Studies.
These major differences have an important bearing on the question of whether and
how it is possible to ‘manage’ culture as they signal up a crucial difference between
earlier, more managerially-inspired and consultant-led investigations of organizational
culture and later, more academically-based analyses of its nature and effects. The
basic distinction revolves here around the question of what organizational culture
51
is. Is it something that an organization has – a critical organizational ‘variable’ that,
like structures or reward systems, can be relatively easily manipulated by powerful
individuals or groups (i.e. management) to systematically improve performance?
Or is it something that is more intangible and all-embracing that defines what an
organization is – a ‘root metaphor’, if you like, for understanding how organizations
work and which is just as likely to produce unintended consequences when attempts
are made to change it?
Just think about it – how do you view your organization’s culture? What aspects
does it lead you to focus on? Does it lead you to ignore or downplay any aspects?
Earlier accounts taking a more managerial line tended to adopt the former approach,
arguing that, through the manipulation of key cultural attributes (mission statements,
reward systems, ceremonies, rituals and the like) culture could be managed and
changed in clear and predictable ways. Later approaches, that draw more of their
inspiration from the social sciences argue that, although managers and other senior
figures may have a great deal of influence, power is more distributed and the fact that
culture ultimately resides in the ‘hearts and minds’ of people and is a product of their
interactions makes it difficult, if not impossible to manipulate culture in this way.
The problem here is not only one of perspective, but also of evidence. If one looks
closely at the evidence for the effects of culture on performance, it is itself ambiguous
and provides no definitive answer to the question of whether and how culture affects
performance. As Ogbonna and Harris have recently concluded, the links between
culture and performance are often asserted rather than demonstrated and there are
many stake-holders (especially senior executives and consultants) who have every
incentive to sign up to the ideas (a) that culture makes a difference and (b) that they
are the ones that can make this difference. The problem though is that a good deal
of ‘research’ on organizational culture lacks an appropriate methodology or evidence
base – often the evidence is very anecdotal or based upon management/consultant
assertions, rather than the views of other stakeholders such as employees or customers
(or ‘senior-executives-inwaiting’ who may have very different strategic preferences).
52
is. Is it something that an organization has – a critical organizational ‘variable’ that,
like structures or reward systems, can be relatively easily manipulated by powerful
individuals or groups (i.e. management) to systematically improve performance?
Or is it something that is more intangible and all-embracing that defines what an
organization is – a ‘root metaphor’, if you like, for understanding how organizations
work and which is just as likely to produce unintended consequences when attempts
are made to change it?
Just think about it – how do you view your organization’s culture? What aspects
does it lead you to focus on? Does it lead you to ignore or downplay any aspects?
Earlier accounts taking a more managerial line tended to adopt the former approach,
arguing that, through the manipulation of key cultural attributes (mission statements,
reward systems, ceremonies, rituals and the like) culture could be managed and
changed in clear and predictable ways. Later approaches, that draw more of their
inspiration from the social sciences argue that, although managers and other senior
figures may have a great deal of influence, power is more distributed and the fact that
culture ultimately resides in the ‘hearts and minds’ of people and is a product of their
interactions makes it difficult, if not impossible to manipulate culture in this way.
The problem here is not only one of perspective, but also of evidence. If one looks
closely at the evidence for the effects of culture on performance, it is itself ambiguous
and provides no definitive answer to the question of whether and how culture affects
performance. As Ogbonna and Harris have recently concluded, the links between
culture and performance are often asserted rather than demonstrated and there are
many stake-holders (especially senior executives and consultants) who have every
incentive to sign up to the ideas (a) that culture makes a difference and (b) that they
are the ones that can make this difference. The problem though is that a good deal
of ‘research’ on organizational culture lacks an appropriate methodology or evidence
base – often the evidence is very anecdotal or based upon management/consultant
assertions, rather than the views of other stakeholders such as employees or customers
(or ‘senior-executives-inwaiting’ who may have very different strategic preferences).
52
Even where attempts are made to develop more sophisticated research designs, the
problems of ‘measuring’ culture and controlling for the effects of other variables make
it difficult to disentangle the effects of culture from other internal or external factors
(e.g. changes in structure, technology, market conditions, etc). There are also inevitable
dilemmas that may arise when attention is directed towards certain key cultural
values rather than others. For example, when does ‘attention to detail’ translate into
obsession with process and lack of strategic thinking? And when does innovation and
risk-taking depart from meeting customer needs or shareholder expectations?
Last but by no means least, to what extent do espoused values translate into changed
attitudes and behaviour across the organization? We all know of organizational cultures
that have seemingly been turned around – often by influential figures (Jack Welsh at
GEC, for example). But, we also know of failed or only partly successful cultural change
initiatives (Carly Fiorina at HP, for example). Clearly, organizational culture can not only
be transformed but can also face resistance in attempts to change it. This is of course
the key challenge in any cultural change initiative and directs attention towards the
factors that might, in any one particular case, support or inhibit change (more about
this in the next section). The question of whether culture can be managed and, if so
how, will be returned to again later. But before then, there is another dimension of
culture that is of importance and which warrants some attention.
Further reading
Before continuing, read Buchanan and Huczynski, pp 111-120 for a brief discussion of
these issues.
The influence of national culture
Given the greater globalization and internationalization of business in recent years,
an obvious question becomes to what extent and how national cultural differences
influence organizations and their management. Clearly, the different institutional
and environmental contexts found in different parts of the world (political, economic,
social technological, legal and environmental) will have an impact upon the conditions
under which business is conducted. But how do national cultural differences influence
behaviour in organizations and, in particular, organizational culture?
53
Even where attempts are made to develop more sophisticated research designs, the
problems of ‘measuring’ culture and controlling for the effects of other variables make
it difficult to disentangle the effects of culture from other internal or external factors
(e.g. changes in structure, technology, market conditions, etc). There are also inevitable
dilemmas that may arise when attention is directed towards certain key cultural
values rather than others. For example, when does ‘attention to detail’ translate into
obsession with process and lack of strategic thinking? And when does innovation and
risk-taking depart from meeting customer needs or shareholder expectations?
Last but by no means least, to what extent do espoused values translate into changed
attitudes and behaviour across the organization? We all know of organizational cultures
that have seemingly been turned around – often by influential figures (Jack Welsh at
GEC, for example). But, we also know of failed or only partly successful cultural change
initiatives (Carly Fiorina at HP, for example). Clearly, organizational culture can not only
be transformed but can also face resistance in attempts to change it. This is of course
the key challenge in any cultural change initiative and directs attention towards the
factors that might, in any one particular case, support or inhibit change (more about
this in the next section). The question of whether culture can be managed and, if so
how, will be returned to again later. But before then, there is another dimension of
culture that is of importance and which warrants some attention.
Further reading
Before continuing, read Buchanan and Huczynski, pp 111-120 for a brief discussion of
these issues.
The influence of national culture
Given the greater globalization and internationalization of business in recent years,
an obvious question becomes to what extent and how national cultural differences
influence organizations and their management. Clearly, the different institutional
and environmental contexts found in different parts of the world (political, economic,
social technological, legal and environmental) will have an impact upon the conditions
under which business is conducted. But how do national cultural differences influence
behaviour in organizations and, in particular, organizational culture?
53
The impact of Japanese management practices on western manufacturing in the
1980s provided some of the clearest indications of the tensions that can exist between
national and organizational cultures – with many studies at the time highlighting
the very different cultural values and norms that made the translation of Japanese
management practices into western manufacturing fairly problematic (e.g. lean
manufacturing based on the Toyota Production System).
However, it was a series of studies initiated by Geert Hofstede that led to the generation
of findings about the effects of national culture on a more global basis. Based upon an
initial crosscultural study of IBM’s operations in several different countries, Hofstede
found that the attempts by the company to develop a global corporate culture were
severely constrained by the effects of national system differences.
Following this work up with numerous other studies based upon large-scale surveys,
he identified five main dimensions of difference in national culture traits:
• Power distance: the acceptance of unequal distributions of power in society
• Individualism-collectivism: the extent to which people tend to act more
individually or collectively
• Masculinity-femininity: whether assertive masculine values or more sensitive
feminine values predominate
• Uncertainty avoidance: the extent to which people avoid uncertainty and risk
• Long-term/short-term orientation: whether horizons are short or long term
According to Hofstede’s results, it is possible to identify different country ‘profiles’
that have clear implications for attempts to translate organizational culture from one
national context to another. For example, there would be a clear ‘clash of cultures’
associated with the translation of more collective Japanese values into the more
individualistic context of US business, as a good deal of the research into the translation
of Japanese car plants into the US and UK in the 1980s seemed to suggest.
54
The impact of Japanese management practices on western manufacturing in the
1980s provided some of the clearest indications of the tensions that can exist between
national and organizational cultures – with many studies at the time highlighting
the very different cultural values and norms that made the translation of Japanese
management practices into western manufacturing fairly problematic (e.g. lean
manufacturing based on the Toyota Production System).
However, it was a series of studies initiated by Geert Hofstede that led to the generation
of findings about the effects of national culture on a more global basis. Based upon an
initial crosscultural study of IBM’s operations in several different countries, Hofstede
found that the attempts by the company to develop a global corporate culture were
severely constrained by the effects of national system differences.
Following this work up with numerous other studies based upon large-scale surveys,
he identified five main dimensions of difference in national culture traits:
• Power distance: the acceptance of unequal distributions of power in society
• Individualism-collectivism: the extent to which people tend to act more
individually or collectively
• Masculinity-femininity: whether assertive masculine values or more sensitive
feminine values predominate
• Uncertainty avoidance: the extent to which people avoid uncertainty and risk
• Long-term/short-term orientation: whether horizons are short or long term
According to Hofstede’s results, it is possible to identify different country ‘profiles’
that have clear implications for attempts to translate organizational culture from one
national context to another. For example, there would be a clear ‘clash of cultures’
associated with the translation of more collective Japanese values into the more
individualistic context of US business, as a good deal of the research into the translation
of Japanese car plants into the US and UK in the 1980s seemed to suggest.
54
Table 5: Hofstede on the Effects of National Culture Table 5: Hofstede on the Effects of National Culture

Power Uncertainty Long-term Power Uncertainty Long-term

Country Individuality Masculinity Country Individuality Masculinity
distance avoidance orientation distance avoidance orientation

China High Low Medium Medium High China High Low Medium Medium High

Germany Low High High Medium Medium Germany Low High High Medium Medium

Hong Kong High Low High Low High Hong Kong High Low High Low High

Japan Medium Medium High High High Japan Medium Medium High High High

US Low High High Low Low US Low High High Low Low

Source: Hofstede, G. (1993), Cultural constraints in management theories. Academy of Management Executive, p. 91. Source: Hofstede, G. (1993), Cultural constraints in management theories. Academy of Management Executive, p. 91.

He went on to suggest that different parts of the world were characterised by
different types or ‘models’ of organisation. So, for example, high uncertainty avoidance
combined with low power distance was associated with the well oiled machine of
German business; whereas low uncertainty avoidance combined with relatively high
power distance was associated with the family business model adopted in parts of
Asia.
He went on to suggest that different parts of the world were characterised by
different types or ‘models’ of organisation. So, for example, high uncertainty avoidance
combined with low power distance was associated with the well oiled machine of
German business; whereas low uncertainty avoidance combined with relatively high
power distance was associated with the family business model adopted in parts of
Asia.

Although Hofstede’s work has been highly influential in highlighting the impact of
national system differences and has prompted others to continue to measure and track
any changes in global national traits, the work has been subjected to a considerable
amount of criticism (that also applies to much of that follow on work). The first and
most obvious point is the tendency it creates towards sweeping generalization and
national stereotyping. Particular societies are obviously highly complex and consist of
different subcultures and groups with diverse values, customs and traditions. Trying
to understand the effects of such complexities on the operation of businesses and
other organisations is obviously important and useful. But assuming that whole
societies, let alone individual businesses or other organizations, act in particular ways
is too simplistic. There are other problems with the approach too that stem from the
methodology employed (the potential bias in sampling and use of ‘snapshot’ survey
methods). The research is also very descriptive and static. It simply does not provide
any explanation for how differences emerge or whether and how conditions might
change.
Although Hofstede’s work has been highly influential in highlighting the impact of
national system differences and has prompted others to continue to measure and track
any changes in global national traits, the work has been subjected to a considerable
amount of criticism (that also applies to much of that follow on work). The first and
most obvious point is the tendency it creates towards sweeping generalization and
national stereotyping. Particular societies are obviously highly complex and consist of
different subcultures and groups with diverse values, customs and traditions. Trying
to understand the effects of such complexities on the operation of businesses and
other organisations is obviously important and useful. But assuming that whole
societies, let alone individual businesses or other organizations, act in particular ways
is too simplistic. There are other problems with the approach too that stem from the
methodology employed (the potential bias in sampling and use of ‘snapshot’ survey
methods). The research is also very descriptive and static. It simply does not provide
any explanation for how differences emerge or whether and how conditions might
change.

55 55
Consequently, although work in this tradition has something potentially useful to
say about national cultural differences and the impact they have upon, for instance,
global diversification or cross-cultural team-working, it often falls far short of
providing satisfactory explanations of key cultural differences and how they affect
organisations. Not only do such approaches court controversy and debate by tending
to reinforce particular stereotypes at national level, they also clearly fail to account for
the importance of group and individual differences in understanding organisational
behaviour.
Activity Nine
See Buchanan and Huczynski, pp 121-8 for an overview of debates in this area. Discuss
on Blackboard with members of the course to which it applies, whether or not
national cultural differences have had an impact on your organization’s operations.
Is there evidence that national cultural differences matter in the ways expressed by
Hofstede? Or are these differences merely cultural stereotypes as Hofstede’s critics
would argue? How is it possible to come to any firm conclusions in this area?
Further reading
For those of you interested in exploring further the major methodological and other
debates in this area, see the Hofstede article and also the highly critical paper by
Brendan McSweeney in Human Relations. Both of these papers are listed at the end
of this Unit.
Can culture be managed?
The above sections should point to the obvious conclusion that the answer to this
question is not that simple or straightforward. Organizational culture is a complex
amalgam of a variety of influences – societal culture, sector conditions, organizational
histories, peer group influences and individual differences. It is often self-reinforcing
and self-reproducing, but is always inherently social and dynamic so that any attempts
to change it may have unpredictable (and uncontrollable) effects. Even those who
would argue that the answer is ‘yes’ and take an integrationist or unitary perspective
would acknowledge that managing culture can be a complex and difficult task, the
effects of which are often uncertain and unpredictable.
56
Consequently, although work in this tradition has something potentially useful to
say about national cultural differences and the impact they have upon, for instance,
global diversification or cross-cultural team-working, it often falls far short of
providing satisfactory explanations of key cultural differences and how they affect
organisations. Not only do such approaches court controversy and debate by tending
to reinforce particular stereotypes at national level, they also clearly fail to account for
the importance of group and individual differences in understanding organisational
behaviour.
Activity Nine
See Buchanan and Huczynski, pp 121-8 for an overview of debates in this area. Discuss
on Blackboard with members of the course to which it applies, whether or not
national cultural differences have had an impact on your organization’s operations.
Is there evidence that national cultural differences matter in the ways expressed by
Hofstede? Or are these differences merely cultural stereotypes as Hofstede’s critics
would argue? How is it possible to come to any firm conclusions in this area?
Further reading
For those of you interested in exploring further the major methodological and other
debates in this area, see the Hofstede article and also the highly critical paper by
Brendan McSweeney in Human Relations. Both of these papers are listed at the end
of this Unit.
Can culture be managed?
The above sections should point to the obvious conclusion that the answer to this
question is not that simple or straightforward. Organizational culture is a complex
amalgam of a variety of influences – societal culture, sector conditions, organizational
histories, peer group influences and individual differences. It is often self-reinforcing
and self-reproducing, but is always inherently social and dynamic so that any attempts
to change it may have unpredictable (and uncontrollable) effects. Even those who
would argue that the answer is ‘yes’ and take an integrationist or unitary perspective
would acknowledge that managing culture can be a complex and difficult task, the
effects of which are often uncertain and unpredictable.
56
Pronouncements of changing organizational values and similar one-way forms
of communication are certainly insufficient ways of influencing culture. Given the
deeper values and belief systems that culture derives from, for it to be in any sense
‘managed’ requires more than just effective communication that results in behavioural
compliance. Even if that is backed up by extrinsic rewards, such as financial incentives,
these can simply be used to rationalize behaviour, with people complying due to the
financial rewards available but not actually internalizing any change in values.
Instead, managing culture involves instilling deeper changes of attitudes and values
that are reinforced through appropriate changes to organizational structures,
processes and systems.
If ‘cultural engineering’ is seen as appropriate and desirable, then there are several key
intervention points at which managers can perhaps influence and shape organizational
attitudes and values. In the shorter term, these relate to the cultural attributes
outlined earlier – the rites and rituals of organizational life – that can be consciously
changed to reflect new systems of values and beliefs and reinforce preferred forms of
behaviour. However, for such changes to achieve the ‘buy-in’ required from members
of the organization there needs to be something that makes new ways of working
attractive and appealing. This may be the intrinsic appeal of the new organizational
values and beliefs themselves (e.g. the promise of giving people more autonomy).
Or it may have something to do with the particular sets of circumstances in which
organizations find themselves which make them more responsive to change. These
might include the more personal interaction that occurs in smaller organizations, an
absence of strong existing or alternative cultures, a welcome change in leadership
or a collective belief that change is seen as the way out of a crisis (of course, some of
these perceptions can themselves be shaped by the active ‘sense-making’ of powerful
individuals).
In the longer term, there are also other important intervention points that relate to
processes of socialization into the organization. Through the selection and recruitment
of staff who share key organizational attitudes and values, backed up by appropriate
induction into ‘the way things are done around here’ (and other HR systems including
training, development and reward), organizations can produce and re-produce desired
cultural attributes. The costs of doing so are in the conformity this can create (which
57
Pronouncements of changing organizational values and similar one-way forms
of communication are certainly insufficient ways of influencing culture. Given the
deeper values and belief systems that culture derives from, for it to be in any sense
‘managed’ requires more than just effective communication that results in behavioural
compliance. Even if that is backed up by extrinsic rewards, such as financial incentives,
these can simply be used to rationalize behaviour, with people complying due to the
financial rewards available but not actually internalizing any change in values.
Instead, managing culture involves instilling deeper changes of attitudes and values
that are reinforced through appropriate changes to organizational structures,
processes and systems.
If ‘cultural engineering’ is seen as appropriate and desirable, then there are several key
intervention points at which managers can perhaps influence and shape organizational
attitudes and values. In the shorter term, these relate to the cultural attributes
outlined earlier – the rites and rituals of organizational life – that can be consciously
changed to reflect new systems of values and beliefs and reinforce preferred forms of
behaviour. However, for such changes to achieve the ‘buy-in’ required from members
of the organization there needs to be something that makes new ways of working
attractive and appealing. This may be the intrinsic appeal of the new organizational
values and beliefs themselves (e.g. the promise of giving people more autonomy).
Or it may have something to do with the particular sets of circumstances in which
organizations find themselves which make them more responsive to change. These
might include the more personal interaction that occurs in smaller organizations, an
absence of strong existing or alternative cultures, a welcome change in leadership
or a collective belief that change is seen as the way out of a crisis (of course, some of
these perceptions can themselves be shaped by the active ‘sense-making’ of powerful
individuals).
In the longer term, there are also other important intervention points that relate to
processes of socialization into the organization. Through the selection and recruitment
of staff who share key organizational attitudes and values, backed up by appropriate
induction into ‘the way things are done around here’ (and other HR systems including
training, development and reward), organizations can produce and re-produce desired
cultural attributes. The costs of doing so are in the conformity this can create (which
57
might discourage creative differences) and in the generational time-scale it can involve.
More immediate and drastic steps might be taken – the removal or displacement of
staff who do not share those organizational values – however this too will have its
significant costs and potential downsides (e.g. loss of knowledge and expertise).
The final sting in the tail is in knowing whether or not attempts at shaping, managing
or changing organizational culture have been successful.
To what extent are new patterns of behaviour simply due to compliance with
managerial directives, new systems or processes? To what extent are positive attitudes
to change ‘faked’ and conceal very different underlying beliefs and assumptions? Or to
what extent do they actually reflect deeper, internalized values that have changed in
response to cultural initiatives and managerial interventions? Discovering the answers
to these questions is of course extremely difficult and not only requires complex acts
of deduction (are people taking on board new ways or simply rationalizing their older
ways of working?), but also an awareness that our own attributions can be suspect
(e.g. the wish fulfillment that our managerial interventions have had the desired
effect).
Activity Ten
See Buchanan and Huczynski, pp 107-11 for a discussion of socialization processes.
Also, read the following two articles that explore the extent to which control based
on cultural management is attempted and achieved within organizations: (i) the
article by Van Maanen on the ‘Smile Factory’ at Disney; and (ii) Taylor and Tyler’s
article on the use of ‘emotional labour’ within sectors such as the airline industry.
Discuss with other members of the course on Blackboard the following questions:
1. What do these articles tell you about the possibilities and limits of attempts
to control using culture? Is managing culture appropriate, necessary or
desirable?
2. What unintended consequences do such attempts suggest and what alternative
perspectives on ‘cultural manipulation’ do they flag up?
3. What if attempts to instill new values and attitudes just leads to ‘faking’ or
resistance? Does this matter? Or is behavioural compliance all that matters?
58
might discourage creative differences) and in the generational time-scale it can involve.
More immediate and drastic steps might be taken – the removal or displacement of
staff who do not share those organizational values – however this too will have its
significant costs and potential downsides (e.g. loss of knowledge and expertise).
The final sting in the tail is in knowing whether or not attempts at shaping, managing
or changing organizational culture have been successful.
To what extent are new patterns of behaviour simply due to compliance with
managerial directives, new systems or processes? To what extent are positive attitudes
to change ‘faked’ and conceal very different underlying beliefs and assumptions? Or to
what extent do they actually reflect deeper, internalized values that have changed in
response to cultural initiatives and managerial interventions? Discovering the answers
to these questions is of course extremely difficult and not only requires complex acts
of deduction (are people taking on board new ways or simply rationalizing their older
ways of working?), but also an awareness that our own attributions can be suspect
(e.g. the wish fulfillment that our managerial interventions have had the desired
effect).
Activity Ten
See Buchanan and Huczynski, pp 107-11 for a discussion of socialization processes.
Also, read the following two articles that explore the extent to which control based
on cultural management is attempted and achieved within organizations: (i) the
article by Van Maanen on the ‘Smile Factory’ at Disney; and (ii) Taylor and Tyler’s
article on the use of ‘emotional labour’ within sectors such as the airline industry.
Discuss with other members of the course on Blackboard the following questions:
1. What do these articles tell you about the possibilities and limits of attempts
to control using culture? Is managing culture appropriate, necessary or
desirable?
2. What unintended consequences do such attempts suggest and what alternative
perspectives on ‘cultural manipulation’ do they flag up?
3. What if attempts to instill new values and attitudes just leads to ‘faking’ or
resistance? Does this matter? Or is behavioural compliance all that matters?
58
Further reading
Those wishing to explore these issues further can look at Alan Bryman’s book on the
Disneyization of Society (2004), which explores the wider contemporary relevance of
the theming, hybrid consumption, merchandizing and performative labour used at
Disney (see Buchanan and Huczynski, pages 40-1 for a quick summary).
On reflection
This section has attempted to provide an overview of some of the major approaches
to organizational culture, focusing its meaning and complexity, the very different
perspectives taken to exploring culture, the relative impact of organizational and
national cultural differences on behaviour and the crucial question of what this all
means for whether and how culture can be managed. The key messages that should
emerge are:
1. that culture is a multi-layered concept that is expressed in behaviour but which
resides at a deeper level of values and basic assumptions
2. that views differ enormously on how culture can be approached and that
differentiation and the existence of subcultures and counter-cultures make it
difficult to talk in unitary terms about organizational culture
3. that evidence for the effects of organizational culture on performance remains
patchy and inconclusive
4. that national cultural context has an impact upon organizational culture with
important implications for cross-cultural organization and management
5. that culture can be influenced, managed and even changed, but that the ways in
which this happens is complex and can be difficult to predict and ascertain
59
Further reading
Those wishing to explore these issues further can look at Alan Bryman’s book on the
Disneyization of Society (2004), which explores the wider contemporary relevance of
the theming, hybrid consumption, merchandizing and performative labour used at
Disney (see Buchanan and Huczynski, pages 40-1 for a quick summary).
On reflection
This section has attempted to provide an overview of some of the major approaches
to organizational culture, focusing its meaning and complexity, the very different
perspectives taken to exploring culture, the relative impact of organizational and
national cultural differences on behaviour and the crucial question of what this all
means for whether and how culture can be managed. The key messages that should
emerge are:
1. that culture is a multi-layered concept that is expressed in behaviour but which
resides at a deeper level of values and basic assumptions
2. that views differ enormously on how culture can be approached and that
differentiation and the existence of subcultures and counter-cultures make it
difficult to talk in unitary terms about organizational culture
3. that evidence for the effects of organizational culture on performance remains
patchy and inconclusive
4. that national cultural context has an impact upon organizational culture with
important implications for cross-cultural organization and management
5. that culture can be influenced, managed and even changed, but that the ways in
which this happens is complex and can be difficult to predict and ascertain
59
Below are a few questions to guide your reflection on this part of Unit One: Below are a few questions to guide your reflection on this part of Unit One:

1. Is observing people’s behaviour always a good way of assessing an organisation’s 1. Is observing people’s behaviour always a good way of assessing an organisation’s
culture? Why or why not? culture? Why or why not?

2. Compare and contrast some of the main frameworks for classifying organizational 2. Compare and contrast some of the main frameworks for classifying organizational
cultures. How useful are they for understanding differences between and within cultures. How useful are they for understanding differences between and within
organizations? organizations?

3. Examine the arguments for and against the idea that behaviour is more 3. Examine the arguments for and against the idea that behaviour is more
influenced by national than organizational culture. influenced by national than organizational culture.

4. Can culture be managed? Examine the arguments for and against and give 4. Can culture be managed? Examine the arguments for and against and give
examples to illustrate examples to illustrate

60 60
Section 4: Managing Organizational
Change
Managing organizational change is in many ways an underlying theme in all the topics
we have explored so far. Any diagnosis of organizational problems is likely to indicate
that some degree of change may be required. This may be relatively localized and
‘shallow’ (such as minor improvements in office layout to improve communications).
Or it may involve ‘deeper’ and more extensive change (such as the development of a
common structure or culture following a merger). Because of their impact on people,
even seemingly relatively minor changes may have a profound impact (changing office
layout may also affect individuals’ personal space or break up existing social networks).
Consequently, attempting to introduce change (in patterns of work organization, job
design, organizational structure or culture) is unlikely to be a simple or overnight
task.
Although there may be pressing reasons for introducing change (e.g. changing
market or technological conditions), these points suggest that it is important also to
understand the internal context of change (structural, cultural, for example) and the
ways in which this might inhibit or enable change. Intentionally or unintentionally,
change may affect the workloads and influence of individuals or groups, cut across
existing ways of working and habits or simply create uncertainty and confusion in
the minds of those affected. Consequently, understanding too the ways in which the
processes used in introducing and managing change may impact upon these features
of organization becomes important too. This theme of exploring inter-relationships
between the content, context and process of change (a framework first introduced by
Andrew Pettigrew and Richard Whipp and further developed by Patrick Dawson) will
be the over-arching idea guiding this section.
Just think about it – when change has been introduced in your organization how
much attention has been paid to the process of change or understanding the effects
of context? Has this been intentional? Have there been any unintentional effects?
61
Section 4: Managing Organizational
Change
Managing organizational change is in many ways an underlying theme in all the topics
we have explored so far. Any diagnosis of organizational problems is likely to indicate
that some degree of change may be required. This may be relatively localized and
‘shallow’ (such as minor improvements in office layout to improve communications).
Or it may involve ‘deeper’ and more extensive change (such as the development of a
common structure or culture following a merger). Because of their impact on people,
even seemingly relatively minor changes may have a profound impact (changing office
layout may also affect individuals’ personal space or break up existing social networks).
Consequently, attempting to introduce change (in patterns of work organization, job
design, organizational structure or culture) is unlikely to be a simple or overnight
task.
Although there may be pressing reasons for introducing change (e.g. changing
market or technological conditions), these points suggest that it is important also to
understand the internal context of change (structural, cultural, for example) and the
ways in which this might inhibit or enable change. Intentionally or unintentionally,
change may affect the workloads and influence of individuals or groups, cut across
existing ways of working and habits or simply create uncertainty and confusion in
the minds of those affected. Consequently, understanding too the ways in which the
processes used in introducing and managing change may impact upon these features
of organization becomes important too. This theme of exploring inter-relationships
between the content, context and process of change (a framework first introduced by
Andrew Pettigrew and Richard Whipp and further developed by Patrick Dawson) will
be the over-arching idea guiding this section.
Just think about it – when change has been introduced in your organization how
much attention has been paid to the process of change or understanding the effects
of context? Has this been intentional? Have there been any unintentional effects?
61
Sources, triggers and the impact of change
Many observers argue that contemporary organizations face unprecedented levels
of change in their environments and, with greater economic and other pressures
(globalization, more intense competition, fast changing technology, changing political
and regulatory conditions), need to be more adaptable and able to respond to more
turbulent environmental conditions. Such external triggers of change are many and
their interactions complex, prompting many to suggest that change is simply more
pervasive and so organizational forms need to be more flexible and adaptable. More
dramatically, there are those like Tom Peters who talk about companies ‘thriving on
chaos’. Clearly, there are many areas of commercial and non-commercial activity where
such changes and their challenges are in evidence (in science, medicine, ICTs and so
on).
Although conditions may indeed be very complex and dynamic, this does not however
mean that organizations are simply at the mercy of environmental forces. As we
discovered earlier, there are important ways in which organizations are able to respond
proactively and strategically to conditions in their environments – including shaping
those conditions and people’s perceptions of them. It is also important to bear in mind
that, along with change, there can be important continuities too in the ways in which
organizations operate, despite complex and changing environmental conditions. This
can sometimes make the wholesale and frequent transformation of organization to
meet contemporary challenges an unnecessarily complex, traumatic and expensive
process. ‘Fine-tuning’ might instead be more appropriate if the changes required are
relatively localized and shallow. Wave after wave of change may also to lead to change
fatigue and reinforce any skepticism or resistance that already exists – making future
change even harder. Consequently, it is important to subject claims about the need
for constant and radical change to analysis and to continue to test and challenge
conventional wisdom.
Change can also be prompted of course by conditions internal to the organization.
Again, previous sections have suggested that there are important ways in which
conditions within the organization may or may not ‘fit’ or be in ‘balance’ (including
with conditions outside the organization). There may be a mismatch, for example,
between the technology being employed (involving highly skilled work) and the
systems used to manage it (very mechanistic and centralized).
62
Sources, triggers and the impact of change
Many observers argue that contemporary organizations face unprecedented levels
of change in their environments and, with greater economic and other pressures
(globalization, more intense competition, fast changing technology, changing political
and regulatory conditions), need to be more adaptable and able to respond to more
turbulent environmental conditions. Such external triggers of change are many and
their interactions complex, prompting many to suggest that change is simply more
pervasive and so organizational forms need to be more flexible and adaptable. More
dramatically, there are those like Tom Peters who talk about companies ‘thriving on
chaos’. Clearly, there are many areas of commercial and non-commercial activity where
such changes and their challenges are in evidence (in science, medicine, ICTs and so
on).
Although conditions may indeed be very complex and dynamic, this does not however
mean that organizations are simply at the mercy of environmental forces. As we
discovered earlier, there are important ways in which organizations are able to respond
proactively and strategically to conditions in their environments – including shaping
those conditions and people’s perceptions of them. It is also important to bear in mind
that, along with change, there can be important continuities too in the ways in which
organizations operate, despite complex and changing environmental conditions. This
can sometimes make the wholesale and frequent transformation of organization to
meet contemporary challenges an unnecessarily complex, traumatic and expensive
process. ‘Fine-tuning’ might instead be more appropriate if the changes required are
relatively localized and shallow. Wave after wave of change may also to lead to change
fatigue and reinforce any skepticism or resistance that already exists – making future
change even harder. Consequently, it is important to subject claims about the need
for constant and radical change to analysis and to continue to test and challenge
conventional wisdom.
Change can also be prompted of course by conditions internal to the organization.
Again, previous sections have suggested that there are important ways in which
conditions within the organization may or may not ‘fit’ or be in ‘balance’ (including
with conditions outside the organization). There may be a mismatch, for example,
between the technology being employed (involving highly skilled work) and the
systems used to manage it (very mechanistic and centralized).
62
Such mismatches are likely to be at the root of any organizational problems (e.g. poor
commitment of expert workers). These types of knock-on effects can be represented
in the following figure (known as Leavitt’s ‘diamond’ after Harold Leavitt) which
suggests that change in any one factor will inevitably have an effect on the others
(e.g. technological change requiring changes to task objectives, job design/structure
and skills/training).
Figure 2: Leavitt’s ‘Diamond’
There may then be important internal triggers for change that have internal
consequences – again, that may not just simply arise but be the result of conscious
choice and action (e.g. new top management that bring new strategic preferences
that require a new organizational structure). Consequently, it is important to recognize
that change has its own internal dynamic and can be emergent as a result of the
interaction of these factors.
Nowhere is this more evident than if we consider two other variables – strategy and
size (these could also be added to Leavitt’s model). Together, these have a significant
impact upon the growth of organizations over time. Greiner has suggested that
organizations effectively have lifecycles and that they pass fairly predictably through
several stages of development, punctuated by crises that produce a great deal of
conflict and which require a transition to different ways of working characterized by
different organizational forms.
63
Such mismatches are likely to be at the root of any organizational problems (e.g. poor
commitment of expert workers). These types of knock-on effects can be represented
in the following figure (known as Leavitt’s ‘diamond’ after Harold Leavitt) which
suggests that change in any one factor will inevitably have an effect on the others
(e.g. technological change requiring changes to task objectives, job design/structure
and skills/training).
Figure 2: Leavitt’s ‘Diamond’
There may then be important internal triggers for change that have internal
consequences – again, that may not just simply arise but be the result of conscious
choice and action (e.g. new top management that bring new strategic preferences
that require a new organizational structure). Consequently, it is important to recognize
that change has its own internal dynamic and can be emergent as a result of the
interaction of these factors.
Nowhere is this more evident than if we consider two other variables – strategy and
size (these could also be added to Leavitt’s model). Together, these have a significant
impact upon the growth of organizations over time. Greiner has suggested that
organizations effectively have lifecycles and that they pass fairly predictably through
several stages of development, punctuated by crises that produce a great deal of
conflict and which require a transition to different ways of working characterized by
different organizational forms.
63
Figure 3: Greiner’s Organizational Growth Model
Based on: Greiner, L. E. (1972) Evolution and revolution as organizations grow. Harvard Business Review,
July-August, p. 41
So, for example, the first (entrepreneurial) stage of growth is typified by growth
though creativity centered upon the entrepreneur. A crisis point is inevitably reached
– one of leadership – where professional managers are needed if the organization is
to develop further. The second (collective) stage is the point at which the organization
starts to ‘take shape’ and roles and departments are established. The crisis is then
one of autonomy, as the entrepreneur inevitably faces pressure to delegate and
to relinquish some control. The third (formalization) stage sees the organization
developing more highly structured systems and processes – becoming more akin to a
functional bureaucracy. The inevitable crisis is one of control as it becomes extremely
difficult to deal with the differentiation and complexity created with growth and
there is a need to develop more decentralized and lateral systems for coordination
and integration (including divisionalization). The fourth (elaboration) stage is where
growth continues in this way, but increasingly lead to problems of control that create
a need for ever more dispersed systems that rely not on central direction, but on
collaboration (conglomerate, network).
Of course, these are no fixed stages in time and growth is not inevitable:
organization s may ‘plateau’ (or decline) at any point in the life-cycle.
64
Figure 3: Greiner’s Organizational Growth Model
Based on: Greiner, L. E. (1972) Evolution and revolution as organizations grow. Harvard Business Review,
July-August, p. 41
So, for example, the first (entrepreneurial) stage of growth is typified by growth
though creativity centered upon the entrepreneur. A crisis point is inevitably reached
– one of leadership – where professional managers are needed if the organization is
to develop further. The second (collective) stage is the point at which the organization
starts to ‘take shape’ and roles and departments are established. The crisis is then
one of autonomy, as the entrepreneur inevitably faces pressure to delegate and
to relinquish some control. The third (formalization) stage sees the organization
developing more highly structured systems and processes – becoming more akin to a
functional bureaucracy. The inevitable crisis is one of control as it becomes extremely
difficult to deal with the differentiation and complexity created with growth and
there is a need to develop more decentralized and lateral systems for coordination
and integration (including divisionalization). The fourth (elaboration) stage is where
growth continues in this way, but increasingly lead to problems of control that create
a need for ever more dispersed systems that rely not on central direction, but on
collaboration (conglomerate, network).
Of course, these are no fixed stages in time and growth is not inevitable:
organization s may ‘plateau’ (or decline) at any point in the life-cycle.
64
Further reading
Read Buchanan and Huczynski, pp 562-70 and 579-82 and also the article by Greiner
referenced above. Assess how it can be used to throw light on your own organization’s
growth and development.
Planned organizational change
Whether there are such systemic influences (external/internal) that create pressures for
change through introducing such imbalances or mismatches – or change is simply the
result of conscious strategic action – it is important to be able to model or understand
change processes and their relationship to context. Planned organizational change is
one way of viewing the change process and of assessing how change might best be
managed.
One of the most influential ways of understanding planned organizational change
originates in the work of Kurt Lewin who took a systems theory perspective. Lewin
argued that, at any one time, organizations exist in a quasi-stationary equilibrium,
which means that they are effectively held in place by series of opposing forces –
either acting to change the status quo or to reinforce it. He labeled these Driving
forces and Restraining forces (we use the same idea today when we talk of ‘drivers for
change’).
65
Further reading
Read Buchanan and Huczynski, pp 562-70 and 579-82 and also the article by Greiner
referenced above. Assess how it can be used to throw light on your own organization’s
growth and development.
Planned organizational change
Whether there are such systemic influences (external/internal) that create pressures for
change through introducing such imbalances or mismatches – or change is simply the
result of conscious strategic action – it is important to be able to model or understand
change processes and their relationship to context. Planned organizational change is
one way of viewing the change process and of assessing how change might best be
managed.
One of the most influential ways of understanding planned organizational change
originates in the work of Kurt Lewin who took a systems theory perspective. Lewin
argued that, at any one time, organizations exist in a quasi-stationary equilibrium,
which means that they are effectively held in place by series of opposing forces –
either acting to change the status quo or to reinforce it. He labeled these Driving
forces and Restraining forces (we use the same idea today when we talk of ‘drivers for
change’).
65
Table 6: Lewin’s Driving and Restraining Forces Table 6: Lewin’s Driving and Restraining Forces

Restraining forces (forces against Restraining forces (forces against

Driving forces (forces for change) Driving forces (forces for change)
change) change)

From individuals From individuals

Fear of failure Fear of failure
Loss of status Loss of status
Changing markets Inertia (habit) Changing markets Inertia (habit)
Shorter product life-cycles Fear of the unknown Shorter product life-cycles Fear of the unknown
Changing values towards work Loss of friends Changing values towards work Loss of friends
Globalisation Globalisation
Social transformations Social transformations
From organisations From organisations
Increased competition Increased competition
Strength of culture Strength of culture
New technology New technology
Rigidity of structure Rigidity of structure
New personnel New personnel
Sunk costs Sunk costs
Lack of resources Lack of resources
Contractual agreements Contractual agreements
Strongly held beliefs and recipes for Strongly held beliefs and recipes for
evaluating corporate activities evaluating corporate activities

According to Lewin, introducing change is not just about driving it through, but about According to Lewin, introducing change is not just about driving it through, but about
understanding the forces reinforcing the status quo. The process of change therefore understanding the forces reinforcing the status quo. The process of change therefore
involves three crucial stages: unfreezing, changing behaviour and refreezing. involves three crucial stages: unfreezing, changing behaviour and refreezing.

Unfreezing behaviour is the crucial first step the importance of which, Lewin argues,
is often ignored or downplayed. Unfreezing existing behaviour can be achieved by
increasing driving forces, reducing restraining forces or some combination of the two.
However, in practice, it is often difficult to add to driving forces – greater competition
might be crucial and this can be clearly articulated by senior management; but how do
we add to its force other than through rhetoric (backed up with evidence)? Incentives
might be used, but these may not have the desired effect and may even heighten fears.
Instead, Lewin argues more for attempting to reduce restraining forces (or combine
the two).
Unfreezing behaviour is the crucial first step the importance of which, Lewin argues,
is often ignored or downplayed. Unfreezing existing behaviour can be achieved by
increasing driving forces, reducing restraining forces or some combination of the two.
However, in practice, it is often difficult to add to driving forces – greater competition
might be crucial and this can be clearly articulated by senior management; but how do
we add to its force other than through rhetoric (backed up with evidence)? Incentives
might be used, but these may not have the desired effect and may even heighten fears.
Instead, Lewin argues more for attempting to reduce restraining forces (or combine
the two).

The list of restraining forces in the table above suggest a wide range of individual, The list of restraining forces in the table above suggest a wide range of individual,
social, cultural and political factors that can contribute towards sustaining the status social, cultural and political factors that can contribute towards sustaining the status
quo. Some observers such as Kotter and his colleagues have attempted to crystallize quo. Some observers such as Kotter and his colleagues have attempted to crystallize
these into what they see as four principal sources of resistance to change: these into what they see as four principal sources of resistance to change:

66 66
 • parochial self-interest
• misunderstanding and lack of trust
• contradictory views and assessments (of the need and value of change)
• low tolerance of change
Of course, presenting ‘resistance to change’ in this way paints a very one-sided and
negative view of the problem and privileges one perspective (those introducing the
change) over others (those it affects). It may be the case that resistance is generally
considered obstructive for one or more of the reasons above. However, resistance
(say based on contradictory views) can also be valuable in providing alternative
perspectives, information and options or in surfacing symptoms of deeper problems
that need to be resolved (e.g. a climate of mistrust within the organization). There
may also be situations in which acceptance or indifference towards change is, in fact,
much more problematic.
Just think about it – how would resistance and acceptance be viewed in controversial
religious cults or extreme political parties?
Clearly, this signals the importance of acknowledging that there are often different
perspectives on the nature and extent of change needed each of which may be valid.
Whatever the precise list of factors and debates about what they might mean in
practice, it may be that some are easier to address if they are at least acknowledged
(e.g. fears due to uncertainty).
Changing behaviour involves changing behaviour to suit the implementation of new
systems, technologies, structures or processes. An important consideration here is the
change management process used and this will be returned to below.
Re-freezing is the important final step and the means to avoid a reversion to previous
ways of working by properly embedding the changes in practice and sustaining them
through appropriate reinforcement mechanisms and supporting systems. So, for
example, changes to reward systems and training processes may need to be introduced
67
• parochial self-interest
• misunderstanding and lack of trust
• contradictory views and assessments (of the need and value of change)
• low tolerance of change
Of course, presenting ‘resistance to change’ in this way paints a very one-sided and
negative view of the problem and privileges one perspective (those introducing the
change) over others (those it affects). It may be the case that resistance is generally
considered obstructive for one or more of the reasons above. However, resistance
(say based on contradictory views) can also be valuable in providing alternative
perspectives, information and options or in surfacing symptoms of deeper problems
that need to be resolved (e.g. a climate of mistrust within the organization). There
may also be situations in which acceptance or indifference towards change is, in fact,
much more problematic.
Just think about it – how would resistance and acceptance be viewed in controversial
religious cults or extreme political parties?
Clearly, this signals the importance of acknowledging that there are often different
perspectives on the nature and extent of change needed each of which may be valid.
Whatever the precise list of factors and debates about what they might mean in
practice, it may be that some are easier to address if they are at least acknowledged
(e.g. fears due to uncertainty).
Changing behaviour involves changing behaviour to suit the implementation of new
systems, technologies, structures or processes. An important consideration here is the
change management process used and this will be returned to below.
Re-freezing is the important final step and the means to avoid a reversion to previous
ways of working by properly embedding the changes in practice and sustaining them
through appropriate reinforcement mechanisms and supporting systems. So, for
example, changes to reward systems and training processes may need to be introduced
67
as well to support the introduction of new process technologies or new ways of
working. Similarly, departmental re-organizations may need to be accompanied by
steps taken to ensure that new social networks that are created are supported.
Activity Eleven
Read Huczynski and Buchanan, pp 570-3. Given the recent financial crisis faced
by many economies, a good deal of attention has been directed towards critically
evaluating behaviour in the banking sector (especially risk-taking) and the financial
and other conditions that may have led to or encouraged such behaviour. On the
basis of your understanding of conditions within the sector (which will be very
specific for those employed there!) discuss on Blackboard whether or not you think
that any changes made to the ways on which banks and bankers operate has paid
adequate attention to reducing the restraining forces inhibiting change, driving
change through and/or re-freezing new behaviour.
Processes of change management
Managing the change process effectively has attracted considerable attention as many
attempts at change often encounter huge problems and many can even be considered
failures. Trying to understand what tactics work best when introducing change has led
to the development of several approaches that attempt to identify appropriate change
strategies and tactics that will overcome or diminish the problems experienced. Most
of these recognize the vital importance of social, cultural and political factors that help
define the context of change. But they differ very markedly in what they prescribe.
N-Step recipes for change
One set of approaches have been described by David Collins as n-step recipes for change.
There are many different versions of this approach, but they all share in common the
idea that there are a distinct number of steps, phases or stages that managers need to
go through in order to institute change. One of these is that proposed by John Kotter
which consists of an 8-step approach that involves:
1. Establishing a sense of urgency
2. Forming a guiding coalition
68
as well to support the introduction of new process technologies or new ways of
working. Similarly, departmental re-organizations may need to be accompanied by
steps taken to ensure that new social networks that are created are supported.
Activity Eleven
Read Huczynski and Buchanan, pp 570-3. Given the recent financial crisis faced
by many economies, a good deal of attention has been directed towards critically
evaluating behaviour in the banking sector (especially risk-taking) and the financial
and other conditions that may have led to or encouraged such behaviour. On the
basis of your understanding of conditions within the sector (which will be very
specific for those employed there!) discuss on Blackboard whether or not you think
that any changes made to the ways on which banks and bankers operate has paid
adequate attention to reducing the restraining forces inhibiting change, driving
change through and/or re-freezing new behaviour.
Processes of change management
Managing the change process effectively has attracted considerable attention as many
attempts at change often encounter huge problems and many can even be considered
failures. Trying to understand what tactics work best when introducing change has led
to the development of several approaches that attempt to identify appropriate change
strategies and tactics that will overcome or diminish the problems experienced. Most
of these recognize the vital importance of social, cultural and political factors that help
define the context of change. But they differ very markedly in what they prescribe.
N-Step recipes for change
One set of approaches have been described by David Collins as n-step recipes for change.
There are many different versions of this approach, but they all share in common the
idea that there are a distinct number of steps, phases or stages that managers need to
go through in order to institute change. One of these is that proposed by John Kotter
which consists of an 8-step approach that involves:
1. Establishing a sense of urgency
2. Forming a guiding coalition
68
 3. Creating a vision
4. Communicating the vision
5. Empowering people to act on the vision
6. Creating short term wins
7. Consolidating improvements to generate more change
8. Institutionalizing new approaches
There is some intuitive value in this type of approach as it does signal up certain
aspects of the change process that might need attention and that are commonly
identified as associated with failed change programmes. However, these types of
approach have been heavily criticized for the assumptions they make about change
unfolding in a logical, rational sequence. Most observers of change management would
argue that change is not that linear and that it tends to unfold in very untidy, complex
and iterative ways. Imposing such order is simply too simplistic and unrealistic. Its
more Machiavellian tone also promotes a very unquestioning approach to the content
of the change itself.
Organizational Development (OD)
OD is a particular approach to change management that developed in the 1960s and
has been highly influential ever since. Like the n-step recipe approach it recognizes
the importance of taking account of underlying social, cultural and political aspects.
Unlike the n-step approach, however, it takes a much more complex and participative
approach to the change process.
OD is a very distinctive approach to change management in organizations that is
concerned with wholesale organizational transformation. It takes a systems approach
and so emphasizes the importance of recognizing complex interdependencies and the
need to take a holistic approach to changing organizations. To do that, it prescribes
close interaction between members of the organization and external change agents
(consultants). The methods used are those of action-research (a very applied and
69
3. Creating a vision
4. Communicating the vision
5. Empowering people to act on the vision
6. Creating short term wins
7. Consolidating improvements to generate more change
8. Institutionalizing new approaches
There is some intuitive value in this type of approach as it does signal up certain
aspects of the change process that might need attention and that are commonly
identified as associated with failed change programmes. However, these types of
approach have been heavily criticized for the assumptions they make about change
unfolding in a logical, rational sequence. Most observers of change management would
argue that change is not that linear and that it tends to unfold in very untidy, complex
and iterative ways. Imposing such order is simply too simplistic and unrealistic. Its
more Machiavellian tone also promotes a very unquestioning approach to the content
of the change itself.
Organizational Development (OD)
OD is a particular approach to change management that developed in the 1960s and
has been highly influential ever since. Like the n-step recipe approach it recognizes
the importance of taking account of underlying social, cultural and political aspects.
Unlike the n-step approach, however, it takes a much more complex and participative
approach to the change process.
OD is a very distinctive approach to change management in organizations that is
concerned with wholesale organizational transformation. It takes a systems approach
and so emphasizes the importance of recognizing complex interdependencies and the
need to take a holistic approach to changing organizations. To do that, it prescribes
close interaction between members of the organization and external change agents
(consultants). The methods used are those of action-research (a very applied and
69
problem-focused form of research), social science data collection methods (e.g. surveys
and interviews) and experiential learning (through implementation methods such as
participation and feedback, teambuilding, ‘sensitivity training’ and management grid
development). OD is so distinctive an approach that it constitutes a field of study
and practice in its own right and so is not considered here in any further detail (see
Buchanan and Huczynski, pp. 577-9 for more explanation and discussion). However, in
promoting a tailor-made and very resource-intensive approach it provides a further
model of change management that may be suited to highly complex and ‘deep’
organizational change.
Contingency models of change management
The tailor-made approach of OD is extremely useful for focusing on an individual
organization’s needs. However, being intensely participative, it can be costly and
time-consuming and may not be suitable for dealing with less profound change
situations. It may also not be appropriate where there is likely to be intense conflict
and resistance. One set of approaches that attempts to allow for these potentially
important situational differences are contingency approaches to managing change.
Kotter and Schlesinger provide one prominent and influential model for understanding
the different tactics used in introducing change (and in overcoming any resistance).
They suggest there are six basic styles, which vary from the more supportive to the
more coercive and manipulative. Each of these styles will vary in their suitability and
have distinct advantages and disadvantages that will depend upon: the time and
resources involved; the amount of information and knowledge available; and the
distribution of power and likelihood of resistance. These styles and the appropriate
circumstances for their use are summarized below:
70
problem-focused form of research), social science data collection methods (e.g. surveys
and interviews) and experiential learning (through implementation methods such as
participation and feedback, teambuilding, ‘sensitivity training’ and management grid
development). OD is so distinctive an approach that it constitutes a field of study
and practice in its own right and so is not considered here in any further detail (see
Buchanan and Huczynski, pp. 577-9 for more explanation and discussion). However, in
promoting a tailor-made and very resource-intensive approach it provides a further
model of change management that may be suited to highly complex and ‘deep’
organizational change.
Contingency models of change management
The tailor-made approach of OD is extremely useful for focusing on an individual
organization’s needs. However, being intensely participative, it can be costly and
time-consuming and may not be suitable for dealing with less profound change
situations. It may also not be appropriate where there is likely to be intense conflict
and resistance. One set of approaches that attempts to allow for these potentially
important situational differences are contingency approaches to managing change.
Kotter and Schlesinger provide one prominent and influential model for understanding
the different tactics used in introducing change (and in overcoming any resistance).
They suggest there are six basic styles, which vary from the more supportive to the
more coercive and manipulative. Each of these styles will vary in their suitability and
have distinct advantages and disadvantages that will depend upon: the time and
resources involved; the amount of information and knowledge available; and the
distribution of power and likelihood of resistance. These styles and the appropriate
circumstances for their use are summarized below:
70
Table 7: Kotter and Schlesinger’s Change Management Strategies Table 7: Kotter and Schlesinger’s Change Management Strategies

Approach Commonly used Advantages Drawbacks Approach Commonly used Advantages Drawbacks
when when

Education & Lack of Involvement in the Time-consuming if Education & Lack of Involvement in the Time-consuming if
communication information change many involved communication information change many involved
or inaccurate or inaccurate
information information

Participation & Lack of Commitment and Time-consuming if Participation & Lack of Commitment and Time-consuming if
involvement information & uses knowledge inappropriate involvement information & uses knowledge inappropriate
others are able to ideas others are able to ideas
resist resist

Facilitation & People No other approach Time-consuming Facilitation & People No other approach Time-consuming
support experiencing works and expensive support experiencing works and expensive
adjustment adjustment
problems problems

Negotiation & Groups will lose Avoids conflict and Expensive if others Negotiation & Groups will lose Avoids conflict and Expensive if others
agreement out & have power resistance resist too agreement out & have power resistance resist too
to resist to resist

Manipulation & Other tactics will Resistance dealt Can make people Manipulation & Other tactics will Resistance dealt Can make people
co-optation not work or too with fast & feel manipulated co-optation not work or too with fast & feel manipulated
expensive cheaply expensive cheaply

Explicit & Speed is essential Quick & Can create anger Explicit & Speed is essential Quick & Can create anger
implicit coercion and initiator has overcomes and resentment implicit coercion and initiator has overcomes and resentment
power resistance power resistance

Source: Kotter, J. P. and Schlesinger, L. A. (1979) Choosing strategies for change. Harvard Business Review, Source: Kotter, J. P. and Schlesinger, L. A. (1979) Choosing strategies for change. Harvard Business Review,
March-April, 106-114. March-April, 106-114.

So, for example, it is possible to assess in advance (or evaluate retrospectively) the most So, for example, it is possible to assess in advance (or evaluate retrospectively) the most
appropriate style to adopt (or that should have been adopted) given the circumstances appropriate style to adopt (or that should have been adopted) given the circumstances
and explain why particular strategies may or may not work. and explain why particular strategies may or may not work.

A similar logic is found in the application of another highly influential contingency
framework developed by Dunphy and Stace. They first identify four different levels
of change. Fine-tuning involves the refining of methods or procedures, typically at
a department or divisional level. Incremental adjustment involves distinct but non-
strategic adjustments to strategies structures and management processes. Modular
transformation refers to more radical restructuring, but only in particular parts of the
A similar logic is found in the application of another highly influential contingency
framework developed by Dunphy and Stace. They first identify four different levels
of change. Fine-tuning involves the refining of methods or procedures, typically at
a department or divisional level. Incremental adjustment involves distinct but non-
strategic adjustments to strategies structures and management processes. Modular
transformation refers to more radical restructuring, but only in particular parts of the

71 71
organization (e.g. divisions). Corporate transformation involves wholesale radical and organization (e.g. divisions). Corporate transformation involves wholesale radical and
strategic change. strategic change.

According to Dunphy and Stace, there are four leadership styles (which again range According to Dunphy and Stace, there are four leadership styles (which again range
from the more collaborative to the more coercive) and these translate into four types from the more collaborative to the more coercive) and these translate into four types
of change management strategy that are suited to different circumstances (related to of change management strategy that are suited to different circumstances (related to
the time and resources available and the likelihood of resistance): the time and resources available and the likelihood of resistance):

Table 8: Dunphy and Stace’s Change Management Model Table 8: Dunphy and Stace’s Change Management Model

Incremental Modular Corporate Incremental Modular Corporate

Fine tuning Fine tuning
adjustment transformation transformation adjustment transformation transformation
Type 2 Type 2
Type 1 Type 1
Collaborative Charismatic transformation Collaborative Charismatic transformation
Participative evolution Participative evolution
Use where major adjustments Use where major adjustments
Use where minor adjustments Use where minor adjustments
are needed, where there is are needed, where there is
are needed, where time is are needed, where time is
insufficient time and where insufficient time and where
Consultative available and where key interest Consultative available and where key interest
there is support for radical there is support for radical
groups favour change groups favour change
change change

Type 4 Type 4
Type 3 Type 3
Directive Dictatorial transformation Directive Dictatorial transformation
Forced evolution Forced evolution
Use where major adjustments Use where major adjustments
Use where minor adjustments Use where minor adjustments
are needed, where there is no are needed, where there is no
are needed, where time is are needed, where time is
internal support, but where internal support, but where
Coercive available but where key interest Coercive available but where key interest
radical change is needed for radical change is needed for
groups oppose change groups oppose change
survival survival

The distinguishing feature of Dunphy and Stace’s model is that they allow for the
possibility that forced change may work (and may be needed) under particular sets
of circumstances. Many of the more universal models that adopt more of a ‘one best
way’ emphasize either the importance of subtle political manipulation (n-step) or the
value of participative approaches (OD). Contingency approaches recognize that there
may be different change management situations (including in the same organization,
at the same time) that require different management of change approaches or styles.
Inevitably, such approaches simplify change situations and do not adequately capture
the complexity and iterative nature of change processes (what about individual
The distinguishing feature of Dunphy and Stace’s model is that they allow for the
possibility that forced change may work (and may be needed) under particular sets
of circumstances. Many of the more universal models that adopt more of a ‘one best
way’ emphasize either the importance of subtle political manipulation (n-step) or the
value of participative approaches (OD). Contingency approaches recognize that there
may be different change management situations (including in the same organization,
at the same time) that require different management of change approaches or styles.
Inevitably, such approaches simplify change situations and do not adequately capture
the complexity and iterative nature of change processes (what about individual

72 72
differences or group effects for example?). But they do at least provide useful
frameworks for evaluating the appropriateness of change management strategies
that are typically adopted.
The role of the change agent
Last but not least, all of the models presented above signal up in one way or other the
importance of the change agent. Change agents may be internal (in the case of senior
managers), external (in the case of consultants) or some combination.
Some approaches (e.g. OD) rely very heavily on external change agents and this has the
distinct advantage that it brings with it a fresh perspective on organizational problems
and, with it, alternative knowledge and expertise. Whether or not this means greater
objectivity is, of course, debatable as consultants have their own commercial interests
and will also be employed for a specific purpose by management. What is undeniable,
however, is that they can be used to help foster greater perceptions of objectivity and
so enhance the legitimacy of the change process. In some instances, they may even be
used quite explicitly for that purpose.
Internal change agents, who will be more embedded in the organization (and perhaps
seen as less objective) will depend for their legitimacy on the commitment and support
of top management (assuming that top management are not the change agents).
Research on the skills required by internal change agents consistently emphasizes
the importance of this support, together with the individual(s) being accepted and
trusted, seen as credible, sensitive and people-oriented. Rosabeth Kanter distills these
attributes of any change agent ‘person specification’ into three principal elements:
analytical skills, participative skills and power skills. Again, we see here the importance
of recognizing how politically charged change management can be and how it becomes
important to understand how the processes of change inter-connect with the internal
social and political context of change.
73
differences or group effects for example?). But they do at least provide useful
frameworks for evaluating the appropriateness of change management strategies
that are typically adopted.
The role of the change agent
Last but not least, all of the models presented above signal up in one way or other the
importance of the change agent. Change agents may be internal (in the case of senior
managers), external (in the case of consultants) or some combination.
Some approaches (e.g. OD) rely very heavily on external change agents and this has the
distinct advantage that it brings with it a fresh perspective on organizational problems
and, with it, alternative knowledge and expertise. Whether or not this means greater
objectivity is, of course, debatable as consultants have their own commercial interests
and will also be employed for a specific purpose by management. What is undeniable,
however, is that they can be used to help foster greater perceptions of objectivity and
so enhance the legitimacy of the change process. In some instances, they may even be
used quite explicitly for that purpose.
Internal change agents, who will be more embedded in the organization (and perhaps
seen as less objective) will depend for their legitimacy on the commitment and support
of top management (assuming that top management are not the change agents).
Research on the skills required by internal change agents consistently emphasizes
the importance of this support, together with the individual(s) being accepted and
trusted, seen as credible, sensitive and people-oriented. Rosabeth Kanter distills these
attributes of any change agent ‘person specification’ into three principal elements:
analytical skills, participative skills and power skills. Again, we see here the importance
of recognizing how politically charged change management can be and how it becomes
important to understand how the processes of change inter-connect with the internal
social and political context of change.
73
Activity Twelve
Read Buchanan and Huczynski, pp 572-9 and 582-3 for an overview and evaluation
of these change management models. Use these models to apply to recent changes
introduced within your own organization (include the n-step recipes and OD models,
if appropriate). Identify the change management strategy or strategies adopted
and evaluate their appropriateness to the situation and their relative success.
Did strategies match the situation well and were all appropriate steps or stages
followed? How change agents were used (if applicable) and how well were they used?
Are there any lessons to be learned from applying these models for future change
management? Again, compare and contrast your experiences with other members
of the group on Blackboard.
On reflection
This final section of the OB part of the PMO unit has attempted to provide an overview
of some of the major issues associated with managing organizational change, focusing
on the complexities of organizational change, perspectives on planned organizational
change, the different strategies available for introducing change and the role of the
change agent. The key messages that should emerge are:
1. that organizational change is complex in its causes and disruptive in the effects
it can have (both intended and unintended) due to inter-connections within the
organization
2. that change can be emergent or planned and that planned change involves
understanding how the organizational context enables or restrains change
3. that different change management strategies and tactics may have different
effects and be suited to different circumstances
4. that the management of change is as much a political process as it is a process
of being analytical and involving people in the process
74
Activity Twelve
Read Buchanan and Huczynski, pp 572-9 and 582-3 for an overview and evaluation
of these change management models. Use these models to apply to recent changes
introduced within your own organization (include the n-step recipes and OD models,
if appropriate). Identify the change management strategy or strategies adopted
and evaluate their appropriateness to the situation and their relative success.
Did strategies match the situation well and were all appropriate steps or stages
followed? How change agents were used (if applicable) and how well were they used?
Are there any lessons to be learned from applying these models for future change
management? Again, compare and contrast your experiences with other members
of the group on Blackboard.
On reflection
This final section of the OB part of the PMO unit has attempted to provide an overview
of some of the major issues associated with managing organizational change, focusing
on the complexities of organizational change, perspectives on planned organizational
change, the different strategies available for introducing change and the role of the
change agent. The key messages that should emerge are:
1. that organizational change is complex in its causes and disruptive in the effects
it can have (both intended and unintended) due to inter-connections within the
organization
2. that change can be emergent or planned and that planned change involves
understanding how the organizational context enables or restrains change
3. that different change management strategies and tactics may have different
effects and be suited to different circumstances
4. that the management of change is as much a political process as it is a process
of being analytical and involving people in the process
74
Below are a few questions to guide your reflection on this part of Unit One:
1. Identify the main driving forces and restraining forces influencing change in
your own organization and assess their effects.
2. What are the main factors influencing the effectiveness of different processes of
introducing change? How do these influence change in your own organization?
3. Discuss the arguments for and against using external consultants as change
agents. Use examples to illustrate.
Last but not least …
Before the references for Unit One get listed, this is just a reminder about the individual
case study assessment that relates to the OB part of the module. Details will be posted
on Blackboard early on in the course and don’t forget that this assignment will be due
in sometime before the workshop (date to be confirmed) and that it will constitute
25% of your overall mark for PMO.
75
Below are a few questions to guide your reflection on this part of Unit One:
1. Identify the main driving forces and restraining forces influencing change in
your own organization and assess their effects.
2. What are the main factors influencing the effectiveness of different processes of
introducing change? How do these influence change in your own organization?
3. Discuss the arguments for and against using external consultants as change
agents. Use examples to illustrate.
Last but not least …
Before the references for Unit One get listed, this is just a reminder about the individual
case study assessment that relates to the OB part of the module. Details will be posted
on Blackboard early on in the course and don’t forget that this assignment will be due
in sometime before the workshop (date to be confirmed) and that it will constitute
25% of your overall mark for PMO.
75
References for Unit One References for Unit One
Anand, N. and Daft, R.L. (2007) What is the right organizational design? Organizational Anand, N. and Daft, R.L. (2007) What is the right organizational design? Organizational
Dynamics, 36(4), 329-44. Dynamics, 36(4), 329-44.

Bassett-Jones, N. and Lloyd, G. C. (2005) Does Herzberg’s motivation theory have Bassett-Jones, N. and Lloyd, G. C. (2005) Does Herzberg’s motivation theory have
staying power? Journal of Management Development, 24(10), 929-43. staying power? Journal of Management Development, 24(10), 929-43.

Buchanan, D. A. and Huczynski, A.A. (2010) Organizational Behaviour (7th edition). Buchanan, D. A. and Huczynski, A.A. (2010) Organizational Behaviour (7th edition).
London: FT Prentice Hall. London: FT Prentice Hall.

Dunphy, D.C. and Stace, D.A. (1988) Transformational and coercive strategies for Dunphy, D.C. and Stace, D.A. (1988) Transformational and coercive strategies for
planned organisational change. Organizational Studies, 9(3), 317-34. planned organisational change. Organizational Studies, 9(3), 317-34.

Greiner, L. E. (1998) Evolution and revolution as organizations grow. Harvard Business Greiner, L. E. (1998) Evolution and revolution as organizations grow. Harvard Business
Review, 76(3), 55-68. Review, 76(3), 55-68.

Handy, C. (1999) On the cultures of organizations. Chapter 7 of Understanding Handy, C. (1999) On the cultures of organizations. Chapter 7 of Understanding
Organizations (4th edition), Penguin. Organizations (4th edition), Penguin.

Herzberg, F. (1987) One more time: how do you motivate employees? Harvard Business Herzberg, F. (1987) One more time: how do you motivate employees? Harvard Business
Review, Sept-Oct, 5-16. Review, Sept-Oct, 5-16.

Kotter, J. P. and Schlesinger, L. A. (1979) Choosing strategies for change. Harvard Business Kotter, J. P. and Schlesinger, L. A. (1979) Choosing strategies for change. Harvard Business
Review, March-April, 106-114. Review, March-April, 106-114.

Leavitt, H. J. (2007) Big organizations are unhealthy environments for human beings. Leavitt, H. J. (2007) Big organizations are unhealthy environments for human beings.
Academy of Management Learning & Education, 62(2), 253-63. Academy of Management Learning & Education, 62(2), 253-63.

Meyerson, D. and Martin, J. (1987) Cultural change: an integration of three different Meyerson, D. and Martin, J. (1987) Cultural change: an integration of three different
views. Journal of Management Studies, 24(6), 623-47. views. Journal of Management Studies, 24(6), 623-47.

Snook, S. (2002) Friendly Fire: The Accidental Shoot Down of US Black Hawks over Snook, S. (2002) Friendly Fire: The Accidental Shoot Down of US Black Hawks over
Northern Iraq (ch. 7: Conclusions). Princeton: Princeton University Press. Northern Iraq (ch. 7: Conclusions). Princeton: Princeton University Press.

Starkey, K. and McKinlay, A. (1994) Managing for Ford. Sociology, 28(4), 975-990. Starkey, K. and McKinlay, A. (1994) Managing for Ford. Sociology, 28(4), 975-990.

Taylor, S. and Tyler, M. (2000) Emotional labour and sexual difference in the airline Taylor, S. and Tyler, M. (2000) Emotional labour and sexual difference in the airline
industry. Work Employment and Society, 14(1), 77-95. industry. Work Employment and Society, 14(1), 77-95.

76 76
Van Maanen, J. (1991) The smile factory: work at Disneyland. In P.J. Frost, L.F. Moore,
M.R. Louis, C.C. Lundberg and J. Martin (eds), Reframing Organizational Culture, London,
Sage, 1991, pp 58-76 and 374-95.
The above are the main text and specified further readings in unit one. There are, of
course, a multitude of further readings that can be explored through the course and
for which full reference details can be found in Buchanan and Huczynski linked to
the sections you have been referred to. To narrow down the search a little for those
wishing to read further, the following are some of the key references referred to in
Unit One but not included in the above specified reading list:
Bryman, A. (2004) The Disneyization of society. London: Sage.
Hackman, J.R. and Oldham, G.R. (1976) Motivation through the design of work: test of
a theory. Organizational Behaviour and Human Performance, 16(2), 250-79.
Hofstede, G. (1993), Cultural constraints in management theories. Academy of
Management Executive, p. 91.
Hofstede, G. (2001) Culture’s Consequences: International Differences in Work-related
Values (2nd edition). London: Sage.
McSweeney, B. (2002) Hofstede’s model of national cultural differences and their
consequences: a triumph of faith - a failure of analysis. Human Relations, 55(1): 89-118
Mintzberg, H. (1979) The Structuring of Organizations. Englewood Cliffs, NJ: Prentice
Hall.
Ritzer, G. (2007) The McDonaldization of Society: An Investigation into the Changing
Character of Contemporary Social Life (5th revised edition). Thousand Oaks, CA: Pine
Forge Press.
77
Van Maanen, J. (1991) The smile factory: work at Disneyland. In P.J. Frost, L.F. Moore,
M.R. Louis, C.C. Lundberg and J. Martin (eds), Reframing Organizational Culture, London,
Sage, 1991, pp 58-76 and 374-95.
The above are the main text and specified further readings in unit one. There are, of
course, a multitude of further readings that can be explored through the course and
for which full reference details can be found in Buchanan and Huczynski linked to
the sections you have been referred to. To narrow down the search a little for those
wishing to read further, the following are some of the key references referred to in
Unit One but not included in the above specified reading list:
Bryman, A. (2004) The Disneyization of society. London: Sage.
Hackman, J.R. and Oldham, G.R. (1976) Motivation through the design of work: test of
a theory. Organizational Behaviour and Human Performance, 16(2), 250-79.
Hofstede, G. (1993), Cultural constraints in management theories. Academy of
Management Executive, p. 91.
Hofstede, G. (2001) Culture’s Consequences: International Differences in Work-related
Values (2nd edition). London: Sage.
McSweeney, B. (2002) Hofstede’s model of national cultural differences and their
consequences: a triumph of faith - a failure of analysis. Human Relations, 55(1): 89-118
Mintzberg, H. (1979) The Structuring of Organizations. Englewood Cliffs, NJ: Prentice
Hall.
Ritzer, G. (2007) The McDonaldization of Society: An Investigation into the Changing
Character of Contemporary Social Life (5th revised edition). Thousand Oaks, CA: Pine
Forge Press.
77
78 78
People, Management & Organization
Unit 2 – Introduction to Human Resource Management (HRM)
Introduction to Human Resource
Management
The materials in this course were prepared by:
Mike Bresnen & Mick Marchington
Study Guide
We regret that the authors are
unable to enter directly into any
correspondence relating to, or
arising from this study guide. Any
comments on this work would be
welcomed and should be addressed
to:
The Academic irector
D
MBS
Booth Street West
Manchester M15 6PB
United Kingdom
aking the most of your studies
M
Each study guide and workbook has
been designed with the learning
template in mind.
It will help your revision to check
you have attempted to understand
the study element in terms of its
content.
Did you work through the guided
questions, including any directed to
personal development? Were you
able to go more deeply into recom-
mended reading materials such as
cases, articles and the textbook?
Were you able to connect this with
your personal experiences?
Support
Printed study guides have been
provided to support the electronic
version within Blackboard.
Blackboard is a core part of the
learning process which also con-
tains other course material, such as:
• Welcome letters, study plans &
course outlines
• Assignment questions
• Workshop preparatory docu-
ments
Discussion forums are available to
discuss material content.
Should your study materials
be incomplete, contact:
Your mentor or Centre
People, Management & Organization
Unit 2 – Introduction to Human Resource Management (HRM)
Introduction to Human Resource
Management
The materials in this course were prepared by:
Mike Bresnen & Mick Marchington
Study Guide
We regret that the authors are
unable to enter directly into any
correspondence relating to, or
arising from this study guide. Any
comments on this work would be
welcomed and should be addressed
to:
The Academic irector
MBS
Booth Street West
Manchester M15 6PB
United Kingdom
aking the most of your studies
Each study guide and workbook has
been designed with the learning
template in mind.
It will help your revision to check
you have attempted to understand
the study element in terms of its
content.
Did you work through the guided
questions, including any directed to
personal development? Were you
able to go more deeply into recom-
mended reading materials such as
cases, articles and the textbook?
Were you able to connect this with
your personal experiences?
Support
Printed study guides have been
provided to support the electronic
version within Blackboard.
Blackboard is a core part of the
learning process which also con-
tains other course material, such as:
• Welcome letters, study plans &
course outlines
• Assignment questions
• Workshop preparatory docu-
ments
Discussion forums are available to
discuss material content.
Should your study materials
be incomplete, contact:
materials@mbs-worldwide.ac.uk
Introduction
Preamble
Welcome to Unit 2 of the People Management and Organizations module of the Global
MBA. This is about Human Resource Management (HRM). Please read this introductory
section carefully to get an initial idea of what HRM means because this will facilitate
learning during your period of self-study, in interactions with colleagues on the course
and with tutors, during the workshop, and in helping to revise for the examination.
You will soon spot that many of the issues that arose in the Organizational Behaviour
Unit that you have just completed appear again in the HRM Unit. This is hardly
surprising as both areas of study (and of business) have some common roots and
points of comparison. So, do not see this as replication but reinforcement, and the
opportunity to apply some of the ideas that you have already learned/developed to
a specific functional area of management. We are also assuming that you already
have an idea of what HRM entails from your own career. Indeed, some of you may
actually have worked in an HR functional role, and if you have we hope that this Unit
will give you the opportunity to reflect on how your own experiences compare with
those that are central to the literature and the ways in which HRM operates in other
organizations, sectors and countries. Many of you will have been line managers and
implemented HRM policies within your own organization, and interacted with the
HR function – for better or for worse – during your career. And some of you may only
know about HRM and the HR function in your roles as employees, professionals or
consultants.
Whatever your role and experience, everyone knows something about HRM. For some
of you this may have created negative feelings because you may have been paid less
than you think you are worth, missed out on important communications, or received
a standard response from the e- HR function in your organization.
During the course of this Unit we hope to show you that HRM does have another side.
HRM could be seen as the most important element in the managerial mix because
without sufficiently skilled and committed workers, organizations are unlikely to get
high levels of customer service or consistent product quality. The HR function could
80
Introduction
Preamble
Welcome to Unit 2 of the People Management and Organizations module of the Global
MBA. This is about Human Resource Management (HRM). Please read this introductory
section carefully to get an initial idea of what HRM means because this will facilitate
learning during your period of self-study, in interactions with colleagues on the course
and with tutors, during the workshop, and in helping to revise for the examination.
You will soon spot that many of the issues that arose in the Organizational Behaviour
Unit that you have just completed appear again in the HRM Unit. This is hardly
surprising as both areas of study (and of business) have some common roots and
points of comparison. So, do not see this as replication but reinforcement, and the
opportunity to apply some of the ideas that you have already learned/developed to
a specific functional area of management. We are also assuming that you already
have an idea of what HRM entails from your own career. Indeed, some of you may
actually have worked in an HR functional role, and if you have we hope that this Unit
will give you the opportunity to reflect on how your own experiences compare with
those that are central to the literature and the ways in which HRM operates in other
organizations, sectors and countries. Many of you will have been line managers and
implemented HRM policies within your own organization, and interacted with the
HR function – for better or for worse – during your career. And some of you may only
know about HRM and the HR function in your roles as employees, professionals or
consultants.
Whatever your role and experience, everyone knows something about HRM. For some
of you this may have created negative feelings because you may have been paid less
than you think you are worth, missed out on important communications, or received
a standard response from the e- HR function in your organization.
During the course of this Unit we hope to show you that HRM does have another side.
HRM could be seen as the most important element in the managerial mix because
without sufficiently skilled and committed workers, organizations are unlikely to get
high levels of customer service or consistent product quality. The HR function could
80
also be regarded as the glue that keeps an organization together, focusing on issues
to do with culture, engagement and sustainable forms of people management. For
example, if the HR function is treated as a business partner, on a similar footing to
other managerial functions and able to contribute to top level decisions, then this
can produce greater levels of alignment, integration and consistency with potentially
positive results for all stakeholders.
Far too often, organizations treat HRM as an add-on to what are seen as the more
exciting areas of strategy, innovation and marketing, and regard the HR function as
nothing more than an administrative burden which costs the organization money and
produces nothing of value. Part of the problem here is that HRM is not invited to
the party until something goes wrong, and when the HR function tries to overcome
the problem it is already too late as mistakes have been made earlier in the process.
Achieving a quick fix solution to a difficult problem often makes things worse, and
then HR gets the blame again. However, research suggests that most organizations
would have benefited from a more strategic focus on HRM much earlier in the
process and thinking more carefully about issues such as recruitment and selection,
learning and development, work organization, pay and reward, and involvement and
engagement. For example, better selection techniques might have reduced labour
turnover by weeding out difficult workers before they were even appointed, better
communication processes might have prevented a strike or a failure to cooperate with
management when faced with the need to complete a rush order at the last minute,
and better reward systems might have ensured that workers were motivated to go the
extra mile and did not resent others they felt were earning more for less effort.
Learning tips
To aid your learning, this workbook is structured in the following way. Key readings
have been selected from the set text to build up your understanding of topics,
and these are reinforced by material from other books and journals. Sometimes
these readings provide cases and examples for you to examine, whilst others offer
alternative points of view so that you can evaluate different perspectives on an
issue. We also provide key learning points, typically organized around questions and
activities which aim to develop your understanding of the material through reflection
and debate. Moreover, given that much of your learning will not be through face-to-
face interaction with tutors, it is important that you use blackboard to discuss your
81
also be regarded as the glue that keeps an organization together, focusing on issues
to do with culture, engagement and sustainable forms of people management. For
example, if the HR function is treated as a business partner, on a similar footing to
other managerial functions and able to contribute to top level decisions, then this
can produce greater levels of alignment, integration and consistency with potentially
positive results for all stakeholders.
Far too often, organizations treat HRM as an add-on to what are seen as the more
exciting areas of strategy, innovation and marketing, and regard the HR function as
nothing more than an administrative burden which costs the organization money and
produces nothing of value. Part of the problem here is that HRM is not invited to
the party until something goes wrong, and when the HR function tries to overcome
the problem it is already too late as mistakes have been made earlier in the process.
Achieving a quick fix solution to a difficult problem often makes things worse, and
then HR gets the blame again. However, research suggests that most organizations
would have benefited from a more strategic focus on HRM much earlier in the
process and thinking more carefully about issues such as recruitment and selection,
learning and development, work organization, pay and reward, and involvement and
engagement. For example, better selection techniques might have reduced labour
turnover by weeding out difficult workers before they were even appointed, better
communication processes might have prevented a strike or a failure to cooperate with
management when faced with the need to complete a rush order at the last minute,
and better reward systems might have ensured that workers were motivated to go the
extra mile and did not resent others they felt were earning more for less effort.
Learning tips
To aid your learning, this workbook is structured in the following way. Key readings
have been selected from the set text to build up your understanding of topics,
and these are reinforced by material from other books and journals. Sometimes
these readings provide cases and examples for you to examine, whilst others offer
alternative points of view so that you can evaluate different perspectives on an
issue. We also provide key learning points, typically organized around questions and
activities which aim to develop your understanding of the material through reflection
and debate. Moreover, given that much of your learning will not be through face-to-
face interaction with tutors, it is important that you use blackboard to discuss your
81
ideas with other members of your learning set. You are encouraged to make use of
the online discussion facilities and to seek clarification from tutors and facilitators as
appropriate. A briefing is also provided for the assessed presentation you are required
to undertake at the workshop.
We do not believe it is appropriate to provide model answers because HRM is an area
where there is no such thing as a right or wrong answer and so much depends on the
context in which your organization is operating. Potential ways forward could vary
significantly between an organization operating in the UK, Germany and India, for
example, depending on the culture and the institutions that operate in each of these
countries. Similarly, what makes sense for a large multinational might be unaffordable
- and actually counter-productive - for a small firm which relies on getting HR
support from a local consultant. And, as we see in subsequent sections, because HRM
should both follow and drive organizational goals, appropriate HR practices can vary
significantly depending on the business model. It is also crucial to analyze, select and
apply HR practices with careful attention to the types of work and worker, the type
of organization, its sector, size and the influence of national cultures and domestic
and transnational employment regulations. In addition, we need to examine these
strategies and techniques in the light of employee perspectives.
We have chosen to divide the HRM part of the workbook into four sections. These
are:
1) The meanings of HRM and responsibility for its delivery in organizations
2) HRM strategy and practice in context
3) Employee involvement and participation (EIP)
4) Reward management
This means that we have two sections which look at the broader role of HRM and
the way it operates in different organizations. Having provided this base, we then
seek to develop a deeper understanding of two specific components of the subject.
EIP is a relatively ‘soft’ intrinsic HR practice which is often seen as discretionary in
its application. It is argued that EIP can be used to ‘mould’ employees’ attitudes and
82
ideas with other members of your learning set. You are encouraged to make use of
the online discussion facilities and to seek clarification from tutors and facilitators as
appropriate. A briefing is also provided for the assessed presentation you are required
to undertake at the workshop.
We do not believe it is appropriate to provide model answers because HRM is an area
where there is no such thing as a right or wrong answer and so much depends on the
context in which your organization is operating. Potential ways forward could vary
significantly between an organization operating in the UK, Germany and India, for
example, depending on the culture and the institutions that operate in each of these
countries. Similarly, what makes sense for a large multinational might be unaffordable
- and actually counter-productive - for a small firm which relies on getting HR
support from a local consultant. And, as we see in subsequent sections, because HRM
should both follow and drive organizational goals, appropriate HR practices can vary
significantly depending on the business model. It is also crucial to analyze, select and
apply HR practices with careful attention to the types of work and worker, the type
of organization, its sector, size and the influence of national cultures and domestic
and transnational employment regulations. In addition, we need to examine these
strategies and techniques in the light of employee perspectives.
We have chosen to divide the HRM part of the workbook into four sections. These
are:
1) The meanings of HRM and responsibility for its delivery in organizations
2) HRM strategy and practice in context
3) Employee involvement and participation (EIP)
4) Reward management
This means that we have two sections which look at the broader role of HRM and
the way it operates in different organizations. Having provided this base, we then
seek to develop a deeper understanding of two specific components of the subject.
EIP is a relatively ‘soft’ intrinsic HR practice which is often seen as discretionary in
its application. It is argued that EIP can be used to ‘mould’ employees’ attitudes and
82
behaviors , and their subsequent performance, by aligning worker and organizational
interests, but in reality it not quite so simple. Reward – in its broadest sense - is
necessary for all jobs, and often relies on extrinsic, tangible sources of motivation in
the form of financial compensation. It is also one of the most contentious areas of
HRM as we have seen recently in relation to the high bonuses paid to bankers, but it is
also apparent in everyday conversation when people compare their own benefits from
work - usually unfavourably - with others either at the same workplace or elsewhere.
Activity One
Before doing any more work on this Unit, think about what HRM means to you.
Talk to people at work about key events that have taken place recently and search
the newspapers or magazines for any item which relates to HRM. Ideally, this could
be something to do with HRM in general or about reward systems or employee
involvement and participation (EIP). If you can’t find material on these areas,
anything will do – for example, there may be a report on an industrial dispute, a
feature on absenteeism, a case of bullying and harassment, or some data about
working conditions for migrant labour. Again, share this with other members of
your learning set and discuss the issues that arise.
The key point of this activity is to get you thinking about HRM before you go any
further.
Having completed the introductory part of Unit Two, we hope that you now have a
better idea of what it comprises and that you will enjoy the material and learn a lot
from it. We also hope that you see this as the start rather than the culmination of your
interest in HRM. Next we provide you with information about learning objectives and
forms of assessment.
83
behaviors , and their subsequent performance, by aligning worker and organizational
interests, but in reality it not quite so simple. Reward – in its broadest sense - is
necessary for all jobs, and often relies on extrinsic, tangible sources of motivation in
the form of financial compensation. It is also one of the most contentious areas of
HRM as we have seen recently in relation to the high bonuses paid to bankers, but it is
also apparent in everyday conversation when people compare their own benefits from
work - usually unfavourably - with others either at the same workplace or elsewhere.
Activity One
Before doing any more work on this Unit, think about what HRM means to you.
Talk to people at work about key events that have taken place recently and search
the newspapers or magazines for any item which relates to HRM. Ideally, this could
be something to do with HRM in general or about reward systems or employee
involvement and participation (EIP). If you can’t find material on these areas,
anything will do – for example, there may be a report on an industrial dispute, a
feature on absenteeism, a case of bullying and harassment, or some data about
working conditions for migrant labour. Again, share this with other members of
your learning set and discuss the issues that arise.
The key point of this activity is to get you thinking about HRM before you go any
further.
Having completed the introductory part of Unit Two, we hope that you now have a
better idea of what it comprises and that you will enjoy the material and learn a lot
from it. We also hope that you see this as the start rather than the culmination of your
interest in HRM. Next we provide you with information about learning objectives and
forms of assessment.
83
Objectives for Unit Two
After completing this Unit on HRM, you should:
a) Be able to explain the meaning and purpose of HRM
b) Know the different forms which the HR function takes in organizations, and
explain why these forms are chosen
c) Have a basic understanding of a range of models of HRM
d) Be able to explain how different models of HRM are shaped by labour and
product market factors as well as by country, sector and organizational factors
e) Know the major forms of EIP and explain the part they play within organizations
in a range of contextual circumstances
f) Understand reasons for the growth, application and outcomes of EIP
g) Understand the purpose, mechanics and consequences of different forms of
reward management practice
h) Be able to explain the advantages and disadvantages of different reward
techniques
A reminder about assessment for PMO and the HRM Unit
We have already mentioned that there are three pieces of assessment for the PMO
Module as a whole. You will probably have completed an assessment for the OB Unit
already, which accounts for 25% of the overall mark.
The next piece of assessment takes place during the workshop. You will be allocated to
teams and need to do some work prior to the workshop so that when you get together
it will be relatively straightforward to finalize your presentation. At the workshop, your
team will be asked to make a presentation to the tutor comparing and contrasting EIP
in two organizations and required to submit a set of power-point slides relating to
your presentation. The presentation and question/answer session will last for about
30 minutes for each team. The mark awarded will contribute 25% of the overall mark
84
Objectives for Unit Two
After completing this Unit on HRM, you should:
a) Be able to explain the meaning and purpose of HRM
b) Know the different forms which the HR function takes in organizations, and
explain why these forms are chosen
c) Have a basic understanding of a range of models of HRM
d) Be able to explain how different models of HRM are shaped by labour and
product market factors as well as by country, sector and organizational factors
e) Know the major forms of EIP and explain the part they play within organizations
in a range of contextual circumstances
f) Understand reasons for the growth, application and outcomes of EIP
g) Understand the purpose, mechanics and consequences of different forms of
reward management practice
h) Be able to explain the advantages and disadvantages of different reward
techniques
A reminder about assessment for PMO and the HRM Unit
We have already mentioned that there are three pieces of assessment for the PMO
Module as a whole. You will probably have completed an assessment for the OB Unit
already, which accounts for 25% of the overall mark.
The next piece of assessment takes place during the workshop. You will be allocated to
teams and need to do some work prior to the workshop so that when you get together
it will be relatively straightforward to finalize your presentation. At the workshop, your
team will be asked to make a presentation to the tutor comparing and contrasting EIP
in two organizations and required to submit a set of power-point slides relating to
your presentation. The presentation and question/answer session will last for about
30 minutes for each team. The mark awarded will contribute 25% of the overall mark
84
for PMO. The assessment criteria for this activity are included in an appendix at the
end of the workbook.
Finally, you will have an examination some time after the workshop takes place. The
examination covers both OB and HRM, each of which is in a different section. You will
be asked to answer THREE questions in the PMO examination, including at least ONE
from each of the OB and HRM Units, with the final question chosen from either of the
Units. The examination as a whole comprises 50% of the marks for the Unit.
85
for PMO. The assessment criteria for this activity are included in an appendix at the
end of the workbook.
Finally, you will have an examination some time after the workshop takes place. The
examination covers both OB and HRM, each of which is in a different section. You will
be asked to answer THREE questions in the PMO examination, including at least ONE
from each of the OB and HRM Units, with the final question chosen from either of the
Units. The examination as a whole comprises 50% of the marks for the Unit.
85
Section 1: The meanings of HRM
and responsibility for its delivery in
organizations
Introduction
HRM can be defined quite simply as the management of the employment relationship.
This tells us something about the parties involved – employer and employee – and also
it helps us to understand that HRM is about contracts, structures and processes. The
legal underpinning of the employment relationship is obvious if a written contract
(or statement of terms and conditions) is available, but the contract is much more
than this. It can be formed and have meaning even if it is unwritten but is observable
through the day-to-day interactions that occur in any workplace. It can even be seen
in the customs and practices that take place at work because these set precedents for
future behavior. For example, a manager who allows an employee to turn up late for
work each morning sets precedents that others might wish to take advantage of at a
later date. If s/he is unhappy about this, and seeks to re-assert the sanctity of the start
time, they may find problems in getting this accepted. The employment contract can
also be invisible to the naked eye, and important elements of a job may be known only
to the specialist workers employed on these activities, or tacit (that is, unwritten and
in some cases sub-conscious) skills that are done without conscious efforts to follow
a set of instructions.
Take a relatively simple activity such as driving, which most of us do routinely without
thinking specifically about it, and try to write down the precise steps required in
changing gear or pulling away from the kerb. It is almost certain that some steps will
be omitted or terms will be used that do not have meaning to an individual that is not
familiar with the language involved.
Just think about it – what does change gear, look in the mirror or depress the
clutch actually mean? Find some new clothes, check your hair is OK, make the
clutch unhappy!
86
Section 1: The meanings of HRM
and responsibility for its delivery in
organizations
Introduction
HRM can be defined quite simply as the management of the employment relationship.
This tells us something about the parties involved – employer and employee – and also
it helps us to understand that HRM is about contracts, structures and processes. The
legal underpinning of the employment relationship is obvious if a written contract
(or statement of terms and conditions) is available, but the contract is much more
than this. It can be formed and have meaning even if it is unwritten but is observable
through the day-to-day interactions that occur in any workplace. It can even be seen
in the customs and practices that take place at work because these set precedents for
future behavior. For example, a manager who allows an employee to turn up late for
work each morning sets precedents that others might wish to take advantage of at a
later date. If s/he is unhappy about this, and seeks to re-assert the sanctity of the start
time, they may find problems in getting this accepted. The employment contract can
also be invisible to the naked eye, and important elements of a job may be known only
to the specialist workers employed on these activities, or tacit (that is, unwritten and
in some cases sub-conscious) skills that are done without conscious efforts to follow
a set of instructions.
Take a relatively simple activity such as driving, which most of us do routinely without
thinking specifically about it, and try to write down the precise steps required in
changing gear or pulling away from the kerb. It is almost certain that some steps will
be omitted or terms will be used that do not have meaning to an individual that is not
familiar with the language involved.
Just think about it – what does change gear, look in the mirror or depress the
clutch actually mean? Find some new clothes, check your hair is OK, make the
clutch unhappy!
86
Imagine how much more difficult it is to apply this logic to a more intellectually
demanding job, and you get an idea of how the employment contract is so much more
than what is written down. It also explains why so much depends on goodwill between
the parties – the manager (as the agent of the employer) and the employee – to work
beyond contract in the everyday pursuit of organizational goals.
This brings out the other main features of HRM – structures/practices and processes.
Much of the literature focuses on structures/practices, the way in which HRM is formally
organized and implemented, on the substantive features of HRM such as the pay
system, methods of recruitment, trade union recognition agreements, and procedures
governing grievance and disciplinary issues. These are often easy to identify as they
are ‘factual’; a collective agreement between a firm and a trade union is committed to
paper, data is often available on levels of absenteeism in a particular organization, and
the minimum wage is set by government (ultimately) in quite a few countries.
Processes, by contrast, are harder to identify as they often relate to informal interactions,
say between a supervisor and one of her staff, which can operate quite distinctly from
substantive structures. For example, even though there may be systems in place to
ensure that bullying and harassment are regarded as intolerable, and procedures for
managing these issues, individual managers vary in their willingness and ability to abide
by these rules. Some may blatantly ignore them and make life very difficult for certain
workers, a situation that only emerges when the company is taken to court. Processes
are important because they tend to define the every-day experience of workers just as
much as structures can do. Try asking two people in different departments of a large
firm what they think of the organization’s avowed commitment to free speech, for
example, and check out just how similar their experiences really are. But processes
on their own lack any formal underpinning which sustains their existence, and they
are always susceptible to different interpretations and vary in the extent to which
different managers see them as a priority. Without structures and agreements about
HRM, work would be very unpredictable and uncertain, and there is little doubt many
workers would not be so willing to cooperate with employers as they do now.
So far, we have been thinking mostly of HRM within the context of a single establishment
or organization, located within a single country and sector. Yet many workers experience
a much more complex situation. For example, given the growth of multi-employer
87
Imagine how much more difficult it is to apply this logic to a more intellectually
demanding job, and you get an idea of how the employment contract is so much more
than what is written down. It also explains why so much depends on goodwill between
the parties – the manager (as the agent of the employer) and the employee – to work
beyond contract in the everyday pursuit of organizational goals.
This brings out the other main features of HRM – structures/practices and processes.
Much of the literature focuses on structures/practices, the way in which HRM is formally
organized and implemented, on the substantive features of HRM such as the pay
system, methods of recruitment, trade union recognition agreements, and procedures
governing grievance and disciplinary issues. These are often easy to identify as they
are ‘factual’; a collective agreement between a firm and a trade union is committed to
paper, data is often available on levels of absenteeism in a particular organization, and
the minimum wage is set by government (ultimately) in quite a few countries.
Processes, by contrast, are harder to identify as they often relate to informal interactions,
say between a supervisor and one of her staff, which can operate quite distinctly from
substantive structures. For example, even though there may be systems in place to
ensure that bullying and harassment are regarded as intolerable, and procedures for
managing these issues, individual managers vary in their willingness and ability to abide
by these rules. Some may blatantly ignore them and make life very difficult for certain
workers, a situation that only emerges when the company is taken to court. Processes
are important because they tend to define the every-day experience of workers just as
much as structures can do. Try asking two people in different departments of a large
firm what they think of the organization’s avowed commitment to free speech, for
example, and check out just how similar their experiences really are. But processes
on their own lack any formal underpinning which sustains their existence, and they
are always susceptible to different interpretations and vary in the extent to which
different managers see them as a priority. Without structures and agreements about
HRM, work would be very unpredictable and uncertain, and there is little doubt many
workers would not be so willing to cooperate with employers as they do now.
So far, we have been thinking mostly of HRM within the context of a single establishment
or organization, located within a single country and sector. Yet many workers experience
a much more complex situation. For example, given the growth of multi-employer
87
networks, when employers collaborate across organizational boundaries, we can end
up with a manager at one organization (the client) supervising the daily activities of
a worker employed by another organization – such as an agency or a sub-contractor.
Just to make the situation even more complicated, once we add in trade unions as
representatives of workers and employers’ organizations as representatives of different
firms, we can see that the contract is shaped by a range of different forces. And, finally,
just to stretch things that bit further, an increasing number of organizations have
employees in many different countries where employment regulations and cultural
norms add to the complexity, especially if they are different from those operating at
HQ in the multinational firm. Perhaps HRM is not so easy after all.
Further reading
Those of you wanting to explore the role of national culture and its interaction with
the activities of multi-national companies in more detail should read chapter 2 in
the book edited by Tony Edwards and Chris Rees, International Human Resource
Management, FT Prentice Hall, 2006. Also, look back to the sections on national
culture in Unit One of the PMO workbook.
The intellectual and social context of HRM
Intellectually, HRM draws from various academic disciplines and sub-disciplines, and
to some extent these vary according to distinct national contexts. The subject was
born out of traditional personnel management, on the one hand, and employment/
industrial relations on the other. From its former roots, HRM was seen as administrative
in nature, invoking notions both of people management and of welfare. Typically
personnel management was seen as an intermediary between the goals of the
employer and that of employees, and some personnel managers were characterized
as akin to social workers – thinking as much about the welfare of workers as they did
about business needs. In the past, many personnel managers came from the armed
forces following retirement or from the ranks of trade union representatives (‘poachers
turned gamekeepers’), or from an administrative background. From the latter roots,
HRM is seen much more to be about control over the employment relationship,
conflicts and potential disagreements between employers and employees – capital and
labour in its crudest sense. The employment relationship is recognized as uncertain
and incomplete, based on interpretations made by either party, and some might be
amazed that so little conflict actually arises between employers and employees. From
88
networks, when employers collaborate across organizational boundaries, we can end
up with a manager at one organization (the client) supervising the daily activities of
a worker employed by another organization – such as an agency or a sub-contractor.
Just to make the situation even more complicated, once we add in trade unions as
representatives of workers and employers’ organizations as representatives of different
firms, we can see that the contract is shaped by a range of different forces. And, finally,
just to stretch things that bit further, an increasing number of organizations have
employees in many different countries where employment regulations and cultural
norms add to the complexity, especially if they are different from those operating at
HQ in the multinational firm. Perhaps HRM is not so easy after all.
Further reading
Those of you wanting to explore the role of national culture and its interaction with
the activities of multi-national companies in more detail should read chapter 2 in
the book edited by Tony Edwards and Chris Rees, International Human Resource
Management, FT Prentice Hall, 2006. Also, look back to the sections on national
culture in Unit One of the PMO workbook.
The intellectual and social context of HRM
Intellectually, HRM draws from various academic disciplines and sub-disciplines, and
to some extent these vary according to distinct national contexts. The subject was
born out of traditional personnel management, on the one hand, and employment/
industrial relations on the other. From its former roots, HRM was seen as administrative
in nature, invoking notions both of people management and of welfare. Typically
personnel management was seen as an intermediary between the goals of the
employer and that of employees, and some personnel managers were characterized
as akin to social workers – thinking as much about the welfare of workers as they did
about business needs. In the past, many personnel managers came from the armed
forces following retirement or from the ranks of trade union representatives (‘poachers
turned gamekeepers’), or from an administrative background. From the latter roots,
HRM is seen much more to be about control over the employment relationship,
conflicts and potential disagreements between employers and employees – capital and
labour in its crudest sense. The employment relationship is recognized as uncertain
and incomplete, based on interpretations made by either party, and some might be
amazed that so little conflict actually arises between employers and employees. From
88
this perspective HRM is characterized as a mixture of conflict and cooperation, the
precise outcome depending on how employment relations is shaped and organized
within particular countries and organizations. In general, HRM still deals with issues
that are also claimed by other functional areas – for example, payroll often resides with
finance departments, communications with marketing, and reputation management
with public relations. It was only with the emergence of HRM in the 1980s in the
USA and the 1990s in the UK that a distinct area began to appear, focused on issues
concerning such as employee control, co-operation and commitment.
Academically, HRM has constituted itself as something distinctive from personnel
management and employment relations, with key proponents arguing that it is more
individualistic, strategic and performance-driven in orientation and not ‘reactive’ or
collectively underpinned. Firstly, the role of occupational psychology has dovetailed
into discussions on HRM regarding leadership, motivation and commitment, and its
influence over certain HR practices is clear to see; for example, psychometric testing,
employee attitude surveys, and the use of learning theory in training and development.
A lot of the work by psychologists has focused on issues at the individual level, say in
terms of transformational leadership, person-organization fit, and worker identity and
commitment, to the neglect of issues at a more strategic or global level. A shortcoming
is that it does not always make clear the economic and organizational context in
which its findings have been generated. The influence of psychology on HRM has been
greatest in the USA, and indeed many of the papers that appear in US journals come
from that tradition. Second, there is an economics and industrial relations tradition
within which HRM concerns itself with relationships between employers and trade
unions, internal and external labour markets, and HRM outcomes – say, in relation to
wages, labour turnover and organizational productivity. Much of the work by industrial
relations and economics scholars has focused on collective issues, and in particular
the role that firms play within the wider market. Its influence can be seen through
research on pay systems, collective bargaining and negotiations, and on third party
intervention in the employment relationship. The influence of industrial relations on
the study of HRM has been greatest in the UK. Third, there is a sociological trajectory,
which is more interested in issues to do with work organization and processes, and the
role that workers, employers and trade unions play within wider society. Issues to do
with work relations are common here, and there is a growth of studies that examine
race and gender-based elements of the working relationship, as well as topics such
as emotional labour as a different way of conceptualising skills. Finally, lawyers have
89
this perspective HRM is characterized as a mixture of conflict and cooperation, the
precise outcome depending on how employment relations is shaped and organized
within particular countries and organizations. In general, HRM still deals with issues
that are also claimed by other functional areas – for example, payroll often resides with
finance departments, communications with marketing, and reputation management
with public relations. It was only with the emergence of HRM in the 1980s in the
USA and the 1990s in the UK that a distinct area began to appear, focused on issues
concerning such as employee control, co-operation and commitment.
Academically, HRM has constituted itself as something distinctive from personnel
management and employment relations, with key proponents arguing that it is more
individualistic, strategic and performance-driven in orientation and not ‘reactive’ or
collectively underpinned. Firstly, the role of occupational psychology has dovetailed
into discussions on HRM regarding leadership, motivation and commitment, and its
influence over certain HR practices is clear to see; for example, psychometric testing,
employee attitude surveys, and the use of learning theory in training and development.
A lot of the work by psychologists has focused on issues at the individual level, say in
terms of transformational leadership, person-organization fit, and worker identity and
commitment, to the neglect of issues at a more strategic or global level. A shortcoming
is that it does not always make clear the economic and organizational context in
which its findings have been generated. The influence of psychology on HRM has been
greatest in the USA, and indeed many of the papers that appear in US journals come
from that tradition. Second, there is an economics and industrial relations tradition
within which HRM concerns itself with relationships between employers and trade
unions, internal and external labour markets, and HRM outcomes – say, in relation to
wages, labour turnover and organizational productivity. Much of the work by industrial
relations and economics scholars has focused on collective issues, and in particular
the role that firms play within the wider market. Its influence can be seen through
research on pay systems, collective bargaining and negotiations, and on third party
intervention in the employment relationship. The influence of industrial relations on
the study of HRM has been greatest in the UK. Third, there is a sociological trajectory,
which is more interested in issues to do with work organization and processes, and the
role that workers, employers and trade unions play within wider society. Issues to do
with work relations are common here, and there is a growth of studies that examine
race and gender-based elements of the working relationship, as well as topics such
as emotional labour as a different way of conceptualising skills. Finally, lawyers have
89
also contributed to the development of HRM as a subject, with their interest being
both at the local level in terms of individual elements of the employment contract but
also with the role that collective regulation plays in shaping HRM. Issues to do with
discipline, industrial action and the role of the state in setting the legal context are
common here.
HRM is therefore a multi-disciplinary area of analysis in terms of its academic context.
It is a highly ‘populated’ subject in terms of academic researchers, in the main due
to the increasing prominence of business schools during the past two decades.
There has also been an increasing demand, from a practitioner perspective, for
information and guidance. This demand has come from organizations seeking greater
flexibility in their workplaces, greater employee commitment, and developments in
the capabilities of employees (e.g. the move from technical skills to communication
and social skills). These demands have been driven by changes in product markets,
competitive strategies, organizational structures, globalisation and social changes, as
well as competing views on the role of regulation within market economies.
Activity Two
Talk to a friend who works in a quite different environment from you, and try to
establish what he or she thinks HRM actually means in the context of their own
organization. Ideally this would be someone from a different country, a different
sector, and/or a totally different sized-organization. Note down what HRM looks
like in their organization in terms of contracts, structures/practices and processes,
and work out how influences from beyond the organization (eg legal, social and
political forces) might have shaped HRM at their organization.
Before doing this, skim-read Chapter 2 of Marchington and Wilkinson (2012) in order
to get some ideas about how these forces might shape HRM
The changing role of the HR function in organizations
It is often useful to ask who is responsible for HRM in your organization; aside from the
flippant response that nobody is, several answers can be provided. Most might see the
HR or Personnel function as having ultimate responsibility because this is who they
approach if a problem arises with their wages or their holiday entitlement. Others
might argue it is their line manager because this person is responsible for managing
90
also contributed to the development of HRM as a subject, with their interest being
both at the local level in terms of individual elements of the employment contract but
also with the role that collective regulation plays in shaping HRM. Issues to do with
discipline, industrial action and the role of the state in setting the legal context are
common here.
HRM is therefore a multi-disciplinary area of analysis in terms of its academic context.
It is a highly ‘populated’ subject in terms of academic researchers, in the main due
to the increasing prominence of business schools during the past two decades.
There has also been an increasing demand, from a practitioner perspective, for
information and guidance. This demand has come from organizations seeking greater
flexibility in their workplaces, greater employee commitment, and developments in
the capabilities of employees (e.g. the move from technical skills to communication
and social skills). These demands have been driven by changes in product markets,
competitive strategies, organizational structures, globalisation and social changes, as
well as competing views on the role of regulation within market economies.
Activity Two
Talk to a friend who works in a quite different environment from you, and try to
establish what he or she thinks HRM actually means in the context of their own
organization. Ideally this would be someone from a different country, a different
sector, and/or a totally different sized-organization. Note down what HRM looks
like in their organization in terms of contracts, structures/practices and processes,
and work out how influences from beyond the organization (eg legal, social and
political forces) might have shaped HRM at their organization.
Before doing this, skim-read Chapter 2 of Marchington and Wilkinson (2008) in order
to get some ideas about how these forces might shape HRM
The changing role of the HR function in organizations
It is often useful to ask who is responsible for HRM in your organization; aside from the
flippant response that nobody is, several answers can be provided. Most might see the
HR or Personnel function as having ultimate responsibility because this is who they
approach if a problem arises with their wages or their holiday entitlement. Others
might argue it is their line manager because this person is responsible for managing
90
people on a daily basis, and most explicitly influence their working lives - for good or
for bad. Very few are likely to suggest it is senior managers or shareholders as they
are not involved in the details of HRM, yet both these groups have the potential to
shape and influence the details of people’s working lives via the broad policies their
organizations pursue. Compare, for example, the overall principles which govern the
management of people in the UK and France, or China and Brazil, or the policies which
are pursued by an asset-stripping firm or one such as John Lewis where all staff are
partners and have a stake in the success of the firm. The style of HRM can also be
driven by the leader, as is apparent at Virgin or in Apple. In a similar vein, the legal
environment operating in a country can have a major influence on HRM and the way
in which it is practised or managed.
As with many questions in this area, there is no right or wrong answer as to how the
responsibility for HRM might best be distributed – what may suit a large multinational
with expatriates in many parts of the world is highly unlikely to work well for a small,
engineering firm or a family-owned hotel that trades at just one location. Whilst the
former might have a complex structure which operates at multiple levels across the
globe, making use both of internal and external sources of HR support, in the latter
there may be no-one with specific responsibility for HRM; perhaps the owner recruits
all new staff, a secretary deals with the paperwork, and a friend who used to work
in personnel before retiring is called in to help if problems arise with employment
contracts or if a worker has committed an offence. In short, rather than seeking a
prescriptive solution that is peddled by the gurus, each organization should have
sufficient information available to review the options before coming to a decision.
Hopefully the remainder of this Section will provide this.
The HR function potentially fulfils a number of roles, and there have been various
attempts to categorise these over the years – both in terms of change over time and
in how the role varies between organizations or different HR professionals within a
team. Drawing on the material from PP. 143-149 of Marchington and Wilkinson (2012),
the principal differences arise due to the level of strategic influence the HR function
has within the organization, the profile it achieves and the time-frame over which its
interventions operate. So, for example, at one end of the spectrum, the HR function may
be low-level, lack any profile and primarily react to events whilst at the other it might
have high-level strategic influence, a visible profile and be forward-thinking in terms
of how it helps to drive the organization forward. In the former case, the HR function
91
people on a daily basis, and most explicitly influence their working lives - for good or
for bad. Very few are likely to suggest it is senior managers or shareholders as they
are not involved in the details of HRM, yet both these groups have the potential to
shape and influence the details of people’s working lives via the broad policies their
organizations pursue. Compare, for example, the overall principles which govern the
management of people in the UK and France, or China and Brazil, or the policies which
are pursued by an asset-stripping firm or one such as John Lewis where all staff are
partners and have a stake in the success of the firm. The style of HRM can also be
driven by the leader, as is apparent at Virgin or in Apple. In a similar vein, the legal
environment operating in a country can have a major influence on HRM and the way
in which it is practised or managed.
As with many questions in this area, there is no right or wrong answer as to how the
responsibility for HRM might best be distributed – what may suit a large multinational
with expatriates in many parts of the world is highly unlikely to work well for a small,
engineering firm or a family-owned hotel that trades at just one location. Whilst the
former might have a complex structure which operates at multiple levels across the
globe, making use both of internal and external sources of HR support, in the latter
there may be no-one with specific responsibility for HRM; perhaps the owner recruits
all new staff, a secretary deals with the paperwork, and a friend who used to work
in personnel before retiring is called in to help if problems arise with employment
contracts or if a worker has committed an offence. In short, rather than seeking a
prescriptive solution that is peddled by the gurus, each organization should have
sufficient information available to review the options before coming to a decision.
Hopefully the remainder of this Section will provide this.
The HR function potentially fulfils a number of roles, and there have been various
attempts to categorise these over the years – both in terms of change over time and
in how the role varies between organizations or different HR professionals within a
team. Drawing on the material from pp 183-90 of Marchington and Wilkinson (2008),
the principal differences arise due to the level of strategic influence the HR function
has within the organization, the profile it achieves and the time-frame over which its
interventions operate. So, for example, at one end of the spectrum, the HR function may
be low-level, lack any profile and primarily react to events whilst at the other it might
have high-level strategic influence, a visible profile and be forward-thinking in terms
of how it helps to drive the organization forward. In the former case, the HR function
91
is likely to be small in size and managed by someone with very little or no professional
background in the area whilst in the latter, the function may be intensively staffed, led
by someone with vast amounts of experience in the profession and/or sector, and a
key guardian of the values espoused by the organization. But, somewhat strangely, in
both cases the most senior person might be called the HR Director – even if they only
have the role because they can type and are related to the Managing Director, as arose
at a road haulage firm I visited during a research and consultancy exercise a few years
ago. Names can be misleading clearly.
Developing out of material covered in Unit One, we can anticipate that the management
of change might call on HR in very different ways depending on its role. In some cases,
especially where HR is seen almost totally in administrative and/or welfare terms, the
HR function is there merely to ensure smooth operations and can be seen as a link
between senior management and workers. It might even pursue a primarily welfare
function – which is not to be under-valued in times when organizations are facing
rapid and unsettling change. On the other hand, the HR function can be seen as the
prime driver and advocate of change, not only in relation to manual or office workers
but also in terms of development and design of the organization as a whole – including
the senior management team or Board of Directors. A further question arises as to
whether the HR function should be seen primarily as an organ of management or as
an employee advocate when changes occur, and it is this dilemma which has beset the
HR function over time. It also makes HR somewhat different from other management
functions that explicitly support all management goals without much thought for
how they might impact on employees/workers.
Perhaps the best known commentator on the role of the HR function is Dave Ulrich – if
you want to read more on this, see his paper in the Harvard Business Review (January-
February 1998, pp 124-34). Since the late 1990s, Ulrich has come up with a number of
attempts to categorise the role and has proposed various ways in which to turn HR
from what he regards as a predominantly value-sapping function to one that adds
value across the board. The five roles he outlines are:
1) Employee advocate: where the HR function acts as a voice for employees,
representing their concerns to senior management and, by empathising with
them, hoping to improve their contribution to organizational goals.
92
is likely to be small in size and managed by someone with very little or no professional
background in the area whilst in the latter, the function may be intensively staffed, led
by someone with vast amounts of experience in the profession and/or sector, and a
key guardian of the values espoused by the organization. But, somewhat strangely, in
both cases the most senior person might be called the HR Director – even if they only
have the role because they can type and are related to the Managing Director, as arose
at a road haulage firm I visited during a research and consultancy exercise a few years
ago. Names can be misleading clearly.
Developing out of material covered in Unit One, we can anticipate that the management
of change might call on HR in very different ways depending on its role. In some cases,
especially where HR is seen almost totally in administrative and/or welfare terms, the
HR function is there merely to ensure smooth operations and can be seen as a link
between senior management and workers. It might even pursue a primarily welfare
function – which is not to be under-valued in times when organizations are facing
rapid and unsettling change. On the other hand, the HR function can be seen as the
prime driver and advocate of change, not only in relation to manual or office workers
but also in terms of development and design of the organization as a whole – including
the senior management team or Board of Directors. A further question arises as to
whether the HR function should be seen primarily as an organ of management or as
an employee advocate when changes occur, and it is this dilemma which has beset the
HR function over time. It also makes HR somewhat different from other management
functions that explicitly support all management goals without much thought for
how they might impact on employees/workers.
Perhaps the best known commentator on the role of the HR function is Dave Ulrich – if
you want to read more on this, see his paper in the Harvard Business Review (January-
February 1998, pp 124-34). Since the late 1990s, Ulrich has come up with a number of
attempts to categorise the role and has proposed various ways in which to turn HR
from what he regards as a predominantly value-sapping function to one that adds
value across the board. The five roles he outlines are:
1) Employee advocate: where the HR function acts as a voice for employees,
representing their concerns to senior management and, by empathising with
them, hoping to improve their contribution to organizational goals.
92
 2) Functional expert: here the HR function provides a body of expert knowledge
about HRM, both about foundational practices such as recruitment and selection
and about emerging practices such as job design and organization structures.
3) Human capital developer: this role refers to HR’s job in reinforcing the view that
employees at all levels can be seen as critical assets that need to be engaged and
developed to ensure they contribute to sustainable organizational growth.
4) Strategic partner: to be effective, the HR function needs to act as a partner to line
managers at all levels within the organization, both in terms of helping to define
its architecture and asking awkward questions of other managers by playing
devil’s advocate.
5) HR leader: it is imperative that the HR function, in its efforts to reach out and
work with other members of management and the organization, does not forget
to value and develop those working within its own team and create structures
for their development.
Ulrich’s ideas have been around long enough for a large number of organizations
to take them up and for many critics to find holes in them. Whilst, at a superficial
level, some of the roles seem to be aimed primarily at supporting and developing
employees, closer inspection reveals they only do so within the context of improving
organizational performance – perhaps over a longer time-scale than some other
interventions might take. For example, workers need to be nurtured so as to make
them more productive, they need to be developed so that their organization-specific
skills are built-up, and they need to be engaged so that a greater stock of ideas is
available to improve performance. Some might argue there is nothing wrong with
this; after all, organizations exist to make products or serve customers, not to make
the lives of their staff more fulfilling. But, can HR have it both ways, acting to serve
both wealth creation and worker well-being?
93
2) Functional expert: here the HR function provides a body of expert knowledge
about HRM, both about foundational practices such as recruitment and selection
and about emerging practices such as job design and organization structures.
3) Human capital developer: this role refers to HR’s job in reinforcing the view that
employees at all levels can be seen as critical assets that need to be engaged and
developed to ensure they contribute to sustainable organizational growth.
4) Strategic partner: to be effective, the HR function needs to act as a partner to line
managers at all levels within the organization, both in terms of helping to define
its architecture and asking awkward questions of other managers by playing
devil’s advocate.
5) HR leader: it is imperative that the HR function, in its efforts to reach out and
work with other members of management and the organization, does not forget
to value and develop those working within its own team and create structures
for their development.
Ulrich’s ideas have been around long enough for a large number of organizations
to take them up and for many critics to find holes in them. Whilst, at a superficial
level, some of the roles seem to be aimed primarily at supporting and developing
employees, closer inspection reveals they only do so within the context of improving
organizational performance – perhaps over a longer time-scale than some other
interventions might take. For example, workers need to be nurtured so as to make
them more productive, they need to be developed so that their organization-specific
skills are built-up, and they need to be engaged so that a greater stock of ideas is
available to improve performance. Some might argue there is nothing wrong with
this; after all, organizations exist to make products or serve customers, not to make
the lives of their staff more fulfilling. But, can HR have it both ways, acting to serve
both wealth creation and worker well-being?
93
Activity Three
Where do you think the HRM function ‘stands’ in your organization or in one with
which you are familiar – as a part of management, an employee champion, or a
neutral presence? How does or should the HR function gain its legitimacy, both in
your own organization and more widely?
Read pp 4-10 of Marchington and Wilkinson (2012) to complement this discussion
of the roots of HRM, both academically and in practice, as well as pp 177-83 to look
at how the HR function emerged and changed in the UK. Also, read pp 1-28 of Boxall
and Purcell (2008) about the management goals of HRM, and at Francis and Keegan’s
paper in the Human Resource Management Journal, Volume 16(3), 2006, pp231-49.
You should notice from these readings that HRM faces tensions from the potentially
conflicting priorities of different stakeholders. This is likely to be felt more acutely
than in other business functions because HRM is not simply a managerial or technical
function but has to work at the interface between employer and employee interests.
There is little doubt that HRM is concerned with improving business performance by
extracting maximum value from the skills and efforts of employees in the most cost-
effective manner possible.
On the other hand, the history of HRM and its origins in personnel management tell
us that there is a residual preoccupation in the function about employee welfare, in
particular whether they are treated fairly by their employers. These tensions between
worker and management interests are expressed in the concepts of ‘unitarism’ and
‘pluralism’. Unitarism is a management belief that everyone working for an organization
shares the same interests and is working towards the same goals, often expressed
in terms of being on the same side as in a football team. Pluralist management
perspectives are found when managers believe workers may have differing interests
or priorities, for example, in getting home on time rather than doing extra work for
their organization.
The Boxall and Purcell chapter introduces the concept of ‘social legitimacy’, the
view that HRM does not simply pursue the maximization of short-run profits but is
concerned that employees should be able to hold on to their dignity at work, and that
employment regulation actually has an important role in society more generally. Even
94
Activity Three
Where do you think the HRM function ‘stands’ in your organization or in one with
which you are familiar – as a part of management, an employee champion, or a
neutral presence? How does or should the HR function gain its legitimacy, both in
your own organization and more widely?
Read pp 4-10 of Marchington and Wilkinson (2008) to complement this discussion
of the roots of HRM, both academically and in practice, as well as pp 177-83 to look
at how the HR function emerged and changed in the UK. Also, read pp 1-28 of Boxall
and Purcell (2008) about the management goals of HRM, and at Francis and Keegan’s
paper in the Human Resource Management Journal, Volume 16(3), 2006, pp231-49.
You should notice from these readings that HRM faces tensions from the potentially
conflicting priorities of different stakeholders. This is likely to be felt more acutely
than in other business functions because HRM is not simply a managerial or technical
function but has to work at the interface between employer and employee interests.
There is little doubt that HRM is concerned with improving business performance by
extracting maximum value from the skills and efforts of employees in the most cost-
effective manner possible.
On the other hand, the history of HRM and its origins in personnel management tell
us that there is a residual preoccupation in the function about employee welfare, in
particular whether they are treated fairly by their employers. These tensions between
worker and management interests are expressed in the concepts of ‘unitarism’ and
‘pluralism’. Unitarism is a management belief that everyone working for an organization
shares the same interests and is working towards the same goals, often expressed
in terms of being on the same side as in a football team. Pluralist management
perspectives are found when managers believe workers may have differing interests
or priorities, for example, in getting home on time rather than doing extra work for
their organization.
The Boxall and Purcell chapter introduces the concept of ‘social legitimacy’, the
view that HRM does not simply pursue the maximization of short-run profits but is
concerned that employees should be able to hold on to their dignity at work, and that
employment regulation actually has an important role in society more generally. Even
94
from a narrow, managerialist perspective, most employers need to encourage workers
to offer their services in pursuit of corporate goals, rather than seeking to undermine
their managers at every turn, and to preserve their reputation in order to continue
attracting new recruits of the right calibre.
Alternative forms of HR service delivery
In recent years, an increasing number of organizations have outsourced their HR
activities, or at least part of them, to external specialist providers. A wide range of HR
practice areas are outsourced, such as recruitment, training and development, payroll,
redundancy counseling and general administration. Many of these are relatively low-
level tasks which, it can be argued, do not need to be undertaken by HR specialists
provided the right systems are in place to ensure the client organization gets the
standards it requires; for example, in relation to recruitment, both in terms of the
people actually available to choose from and the presence of independent processes
that minimize bias. Indeed, recruitment agencies might possess greater skills and
experience in this regard than a company which rarely ventures into the job market
for new staff.
The principal reason for outsourcing in this situation is reduced costs, either in the
short-run because it is too expensive to retain internal staff that are not central to the
organization’s purpose or in the longer-run because employment costs and add-ons
(such as office accommodation, holiday pay and pensions) do not have to be covered
and potential rigidities are removed. When doing this cost-benefit equation, it is
also important to take into account the costs of monitoring contracts with external
providers and how to address any major problems that occur in terms of service
delivery or mistakes made by sub-contractors.
Although reducing costs is a major reason for outsourcing all or part of the HR
function, it is not the only one. Many small firms have no option but to outsource HR
work because they lack internal expertise and do not have the required capabilities
in-house and/or they decide it is not feasible to set up an internal HR function. Other
organizations outsource particular areas of HR work – such as legal support or specific
projects that are likely to be a one-off – because it makes more sense to partner with
one or more specialist firms that can offer a much higher level of knowledge and
experience. Some HR work is also outsourced merely to provide an independent
95
from a narrow, managerialist perspective, most employers need to encourage workers
to offer their services in pursuit of corporate goals, rather than seeking to undermine
their managers at every turn, and to preserve their reputation in order to continue
attracting new recruits of the right calibre.
Alternative forms of HR service delivery
In recent years, an increasing number of organizations have outsourced their HR
activities, or at least part of them, to external specialist providers. A wide range of HR
practice areas are outsourced, such as recruitment, training and development, payroll,
redundancy counseling and general administration. Many of these are relatively low-
level tasks which, it can be argued, do not need to be undertaken by HR specialists
provided the right systems are in place to ensure the client organization gets the
standards it requires; for example, in relation to recruitment, both in terms of the
people actually available to choose from and the presence of independent processes
that minimize bias. Indeed, recruitment agencies might possess greater skills and
experience in this regard than a company which rarely ventures into the job market
for new staff.
The principal reason for outsourcing in this situation is reduced costs, either in the
short-run because it is too expensive to retain internal staff that are not central to the
organization’s purpose or in the longer-run because employment costs and add-ons
(such as office accommodation, holiday pay and pensions) do not have to be covered
and potential rigidities are removed. When doing this cost-benefit equation, it is
also important to take into account the costs of monitoring contracts with external
providers and how to address any major problems that occur in terms of service
delivery or mistakes made by sub-contractors.
Although reducing costs is a major reason for outsourcing all or part of the HR
function, it is not the only one. Many small firms have no option but to outsource HR
work because they lack internal expertise and do not have the required capabilities
in-house and/or they decide it is not feasible to set up an internal HR function. Other
organizations outsource particular areas of HR work – such as legal support or specific
projects that are likely to be a one-off – because it makes more sense to partner with
one or more specialist firms that can offer a much higher level of knowledge and
experience. Some HR work is also outsourced merely to provide an independent
95
perspective on an issue which is likely to cause major problems if any attempt is
made to resolve this internally; for example, in situations where the Chief Executive is
aware that two or more internal functions are likely to disagree vehemently with one
another, and in order to reduce the carnage it is better to have recommendations from
an external supplier.
Of course, outsourcing is not just a once-and-for-all, one-way process but something
which recurs regularly in many organizations. Circumstances may change that make
the original decision no longer viable, standards of service delivery from the provider
may fall, or a new senior management team may decide that it is better to retain the
HR function (or parts of it) inhouse because it is felt to be a core part of the business.
Moreover, just because one area of HR work is outsourced, this does not mean that
others automatically follow.
Another form of HR service delivery that can be used is the shared service centre (SSC).
This can either be in-house, where a multi-establishment – and often multi-country
– organization decides that a more efficient service can be offered by grouping HR
specialists together at one or more sites rather than providing a basic presence at all
locations.
The argument in favour of this approach is that in general users, such as line managers,
will be provided with greater cover and access to enhanced expertise than they would
by relying on an HR person at local level. Some of the evidence suggests this works
well when ‘customers’ of the HR function are content with remote working but poorly
if managers feel they need for reassurance from a local HR specialist even if that
person is not able to claim expertise across the board. SSCs can also operate across
a number of organizations; for example, a group of schools in one geographical area
might decide to pool resources in a single centre to get the HR advice and support
they all need rather than each one employing an HR specialist for one day per week.
96
perspective on an issue which is likely to cause major problems if any attempt is
made to resolve this internally; for example, in situations where the Chief Executive is
aware that two or more internal functions are likely to disagree vehemently with one
another, and in order to reduce the carnage it is better to have recommendations from
an external supplier.
Of course, outsourcing is not just a once-and-for-all, one-way process but something
which recurs regularly in many organizations. Circumstances may change that make
the original decision no longer viable, standards of service delivery from the provider
may fall, or a new senior management team may decide that it is better to retain the
HR function (or parts of it) inhouse because it is felt to be a core part of the business.
Moreover, just because one area of HR work is outsourced, this does not mean that
others automatically follow.
Another form of HR service delivery that can be used is the shared service centre (SSC).
This can either be in-house, where a multi-establishment – and often multi-country
– organization decides that a more efficient service can be offered by grouping HR
specialists together at one or more sites rather than providing a basic presence at all
locations.
The argument in favour of this approach is that in general users, such as line managers,
will be provided with greater cover and access to enhanced expertise than they would
by relying on an HR person at local level. Some of the evidence suggests this works
well when ‘customers’ of the HR function are content with remote working but poorly
if managers feel they need for reassurance from a local HR specialist even if that
person is not able to claim expertise across the board. SSCs can also operate across
a number of organizations; for example, a group of schools in one geographical area
might decide to pool resources in a single centre to get the HR advice and support
they all need rather than each one employing an HR specialist for one day per week.
96
Further reading
Those of you wishing to read more about outsourcing and SSC's can look at pp 150 -58
in Marchington & Wilkinson (2012). Chapter 7 of Marchington & Wilkinson (2012)
discusses the role of line managers in further detail.
The final group with responsibility for HRM is line managers. They have always played
a major role in HRM as the principal point of contact with non-managerial staff, and
they are typically expected to implement HR practices that have been determined
elsewhere. They may or may not agree with the thrust of the organization’s HR strategy
and policy or feel that it does not take account of what life at the front line is like. They
may feel they lack the people management skills required to oversee HRM, and actually
prefer to be doing the job they were trained to do – a fairly typical response from
professionals in many different types of occupation (eg, teachers, scientists, nurses or
social workers). They are sometimes referred to as ‘reluctant managers’, often feeling
compressed between senior management goals and objectives on the one hand and
worker expectations and frustrations on the other. They also face a clash of priorities
between the production or service requirements of the job and dealing with the HR
aspects of line management – team briefings, appraisals, poor performers – that are
critically important for an effective contribution to organizational goals. When the
two do clash, it is typically the HR aspects of their job which miss out; for good reason,
their boss is unlikely to accept the comment ‘I was holding my monthly team briefing
with staff’ as an excuse for long queues at the checkout of a retail store or for the
failure to deliver an important order on time.
It is widely acknowledged that many line managers lack the skills, experience or
motivation to do the HR parts of their job well; indeed, because many are promoted on
the basis of their technical expertise rather than their potential leadership skills, it is
hardly surprising that HR problems occur at this level. In order to have a decent chance
of doing this aspect of their job well, line managers need to be selected, developed,
rewarded and appraised effectively. Much more attention needs to be focused on
defining managerial competences properly before going out to recruit new managers
and in training and developing them systematically soon after they take up the role
and regularly thereafter. Similarly, reward management and appraisal systems need to
97
Further reading
Those of you wishing to read more about outsourcing and SSCs can look at pp 191-99
in Marchington and Wilkinson (2008) and a paper by Brian Klaas, ‘Outsourcing and
the HR function: an examination of trends and developments in North American
firms’, in the International Journal of Human Resource Management, Vol 19(8), pp
1500-14, 2008.
The final group with responsibility for HRM is line managers. They have always played
a major role in HRM as the principal point of contact with non-managerial staff, and
they are typically expected to implement HR practices that have been determined
elsewhere. They may or may not agree with the thrust of the organization’s HR strategy
and policy or feel that it does not take account of what life at the front line is like. They
may feel they lack the people management skills required to oversee HRM, and actually
prefer to be doing the job they were trained to do – a fairly typical response from
professionals in many different types of occupation (eg, teachers, scientists, nurses or
social workers). They are sometimes referred to as ‘reluctant managers’, often feeling
compressed between senior management goals and objectives on the one hand and
worker expectations and frustrations on the other. They also face a clash of priorities
between the production or service requirements of the job and dealing with the HR
aspects of line management – team briefings, appraisals, poor performers – that are
critically important for an effective contribution to organizational goals. When the
two do clash, it is typically the HR aspects of their job which miss out; for good reason,
their boss is unlikely to accept the comment ‘I was holding my monthly team briefing
with staff’ as an excuse for long queues at the checkout of a retail store or for the
failure to deliver an important order on time.
It is widely acknowledged that many line managers lack the skills, experience or
motivation to do the HR parts of their job well; indeed, because many are promoted on
the basis of their technical expertise rather than their potential leadership skills, it is
hardly surprising that HR problems occur at this level. In order to have a decent chance
of doing this aspect of their job well, line managers need to be selected, developed,
rewarded and appraised effectively. Much more attention needs to be focused on
defining managerial competences properly before going out to recruit new managers
and in training and developing them systematically soon after they take up the role
and regularly thereafter. Similarly, reward management and appraisal systems need to
97
be designed such that HRM is seen as part of the key performance indicators; without
this being made apparent, one can hardly blame line managers if they choose to focus
on other targets instead. Much work is required but too often organizations simply
assume that people management skills come naturally and that every manager is
capable of undertaking this part of their job without much support.
Just think about it: would you appoint someone if they did not have the right
technical skills? So, why is it OK to appoint someone to a management job without
the required HRM skills?
Activity Four
Read the extract from the study by John Purcell and his colleagues reproduced on
pp 169-70 of Marchington and Wilkinson (2012) and address the two questions at
the end of that extract. Talk with other members of your learning set about the
issues facing line managers when they do HR work and be prepared to contribute
to discussions on how responsibility can be divided up across the HR-line manager
interface. You might also find some further ideas in the paper by Perry and Kulik, ‘The
devolution of HR to the line: implications for perceptions of people management
effectiveness’, International Journal of Human Resource Management, Vol 19(2), pp
262-73, 2008.
On reflection
This first section of the HRM part of the workbook has focused on the meanings of
HRM and the range of actors that are responsible for its delivery. It should be clear
that HRM is not capable of being defined simply in one way as it draws from a number
of different traditions and areas of intellectual activity. Many of its meanings are
contested, and what appears good for one party does not necessarily look beneficial
to another given the employment relationship is characterized both by conflict and
co-operation which can vary from one issue to another. The key messages to emerge
from this section are that:
1) HRM is about much more than the work of the HR function, and it relies heavily
on line managers to implement it effectively and consistently.
98
be designed such that HRM is seen as part of the key performance indicators; without
this being made apparent, one can hardly blame line managers if they choose to focus
on other targets instead. Much work is required but too often organizations simply
assume that people management skills come naturally and that every manager is
capable of undertaking this part of their job without much support.
Just think about it: would you appoint someone if they did not have the right
technical skills? So, why is it OK to appoint someone to a management job without
the required HRM skills?
Activity Four
Read the extract from the study by John Purcell and his colleagues reproduced on
pp 203-4 of Marchington and Wilkinson (2008) and address the two questions at
the end of that extract. Talk with other members of your learning set about the
issues facing line managers when they do HR work and be prepared to contribute
to discussions on how responsibility can be divided up across the HR-line manager
interface. You might also find some further ideas in the paper by Perry and Kulik, ‘The
devolution of HR to the line: implications for perceptions of people management
effectiveness’, International Journal of Human Resource Management, Vol 19(2), pp
262-73, 2008.
On reflection
This first section of the HRM part of the workbook has focused on the meanings of
HRM and the range of actors that are responsible for its delivery. It should be clear
that HRM is not capable of being defined simply in one way as it draws from a number
of different traditions and areas of intellectual activity. Many of its meanings are
contested, and what appears good for one party does not necessarily look beneficial
to another given the employment relationship is characterized both by conflict and
co-operation which can vary from one issue to another. The key messages to emerge
from this section are that:
1) HRM is about much more than the work of the HR function, and it relies heavily
on line managers to implement it effectively and consistently.
98
 2) Responsibility for HRM varies significantly depending on the workplace,
organization and country in which it is implemented, and much depends on
context – as we explore more fully in the next section. Responsibilities can be
shared between stakeholders in a whole variety of ways and no one approach is
automatically better than others.
3) HRM is not static but changes constantly depending on the interplay between
different forces at the workplace. In the case of outsourcing, for example, needs
for cost reduction or external expertise can change depending on market forces
and the availability of skilled professionals within the organization and in
supplier firms.
Below are a few questions to guide your reflection on this part of Unit Two:
1) Compare and contrast the different meanings of HRM and explain how forces
external to the organization can shape the forms it takes in practice.
2) What forms does the HR function take in your organization or one with which
you are familiar? Why has it emerged in this way and how well does it work?
How could it be changed to make the HR contribution more effective?
3) Can line managers be trusted to design and implement HRM without any
intervention from the HR function? Provide evidence to support your answer.
4) Outline the key costs and benefits of externalizing the work of the HR function
to other providers? Assess whether or not externalization would add value to
your organization.
99
2) Responsibility for HRM varies significantly depending on the workplace,
organization and country in which it is implemented, and much depends on
context – as we explore more fully in the next section. Responsibilities can be
shared between stakeholders in a whole variety of ways and no one approach is
automatically better than others.
3) HRM is not static but changes constantly depending on the interplay between
different forces at the workplace. In the case of outsourcing, for example, needs
for cost reduction or external expertise can change depending on market forces
and the availability of skilled professionals within the organization and in
supplier firms.
Below are a few questions to guide your reflection on this part of Unit Two:
1) Compare and contrast the different meanings of HRM and explain how forces
external to the organization can shape the forms it takes in practice.
2) What forms does the HR function take in your organization or one with which
you are familiar? Why has it emerged in this way and how well does it work?
How could it be changed to make the HR contribution more effective?
3) Can line managers be trusted to design and implement HRM without any
intervention from the HR function? Provide evidence to support your answer.
4) Outline the key costs and benefits of externalizing the work of the HR function
to other providers? Assess whether or not externalization would add value to
your organization.
99
Section 2: HRM strategy and practice
in context
In the literature, three main perspectives tend to dominate discussions of HRM. These
are:
1) Universalism, best practice, high commitment models of HRM
2) Contingency, best fit, variable models of HRM
3) Resource-based, architecture models of HRM
We will now expand on each of these briefly.
Universalism, best practice, high commitment HRM
These models make the assumption that there is one best way of managing people
at work, and that this leads to improvements in business performance in all contexts.
Based upon books by people such as Jeffrey Pfeffer (1998), it is argued that a specific
bundle of HR practices has the potential to make workers and work systems more
productive, ensure the provision of high quality products and services, and thus lead
to increases in a range of employee outcomes. This then feeds through into better
organizational performance. Many studies have provided support for this argument,
many of which were conducted in the USA.
The whole point of the universalistic argument is that the bundle of HR practices
is combined together in a synergistic way to achieve higher levels of performance.
It is therefore critically important that all of these are applied together. This is not
a pick and mix type of recipe, whereby organizations can use some practices – such
as selective recruitment – because it suits them, but ignore others – such as greater
harmonization of terms and conditions between occupations at different levels
in the hierarchy – because it does not fit with what senior management thinks is
appropriate. The power of using these practices, it is argued, comes from the fact
that they are mutually supportive of one another. For example, selective recruitment
can be reinforced by high levels of training and development, and these increase
100
Section 2: HRM strategy and practice
in context
In the literature, three main perspectives tend to dominate discussions of HRM. These
are:
1) Universalism, best practice, high commitment models of HRM
2) Contingency, best fit, variable models of HRM
3) Resource-based, architecture models of HRM
We will now expand on each of these briefly.
Universalism, best practice, high commitment HRM
These models make the assumption that there is one best way of managing people
at work, and that this leads to improvements in business performance in all contexts.
Based upon books by people such as Jeffrey Pfeffer (1998), it is argued that a specific
bundle of HR practices has the potential to make workers and work systems more
productive, ensure the provision of high quality products and services, and thus lead
to increases in a range of employee outcomes. This then feeds through into better
organizational performance. Many studies have provided support for this argument,
many of which were conducted in the USA.
The whole point of the universalistic argument is that the bundle of HR practices
is combined together in a synergistic way to achieve higher levels of performance.
It is therefore critically important that all of these are applied together. This is not
a pick and mix type of recipe, whereby organizations can use some practices – such
as selective recruitment – because it suits them, but ignore others – such as greater
harmonization of terms and conditions between occupations at different levels
in the hierarchy – because it does not fit with what senior management thinks is
appropriate. The power of using these practices, it is argued, comes from the fact
that they are mutually supportive of one another. For example, selective recruitment
can be reinforced by high levels of training and development, and these increase
100
the possibility that organizations can offer employment security because they have
recruited effectively and will not need to dismiss poor-performing workers.
We return to some of these issues in the next section, but it is worth noting that the
HR practices which form the high commitment bundle tend to be seen as positive
because employers regard workers as assets to be nurtured rather than costs to be
minimized. As we can see from the Table below, the high commitment, universalistic
model includes practices such as employment security, employee involvement and
participation, high compensation levels, reduction of status differentials, and a
commitment to work-life balance.
Table 1: Key components of high commitment HRM
• Commitment to employment security for workers and extensive usage of
internal labour markets for promotion
• Use of selective hiring and more sophisticated selection techniques – such
as psychometric tests, work sampling, standardized interviews
• High levels of training, learning and development for all staff, not just
for those in senior positions or on the fast-track talent management
development programme
• Extensive use of employee involvement and participation schemes to
ensure that workers are able to find out easily about organizational issues
and contribute to decision-making
• The use of self-managed teams and team-working because this is seen
as critically important for the development of new ideas and to harness
employee commitment at all levels
• Payment at the top quartile in the range for each occupation so as to ensure
recruitment and retention of the best staff, and compensation dependent
to some extent on performance
• Strong commitment to regular and meaningful systems of performance
review which focus heavily on the individual’s future career development
• The reduction/removal of status differentials in the organization – such as
working hours, holiday entitlements, car parking, access to employee share
schemes – so they are no longer restricted just to senior management or
certain grades of staff
• The promotion of work-life balance policies – such as maternity and
paternity leave, support for child- or elder-care arrangements, flexi-time –
to help provide a more equal psychological contract.
101
the possibility that organizations can offer employment security because they have
recruited effectively and will not need to dismiss poor-performing workers.
We return to some of these issues in the next section, but it is worth noting that the
HR practices which form the high commitment bundle tend to be seen as positive
because employers regard workers as assets to be nurtured rather than costs to be
minimized. As we can see from the Table below, the high commitment, universalistic
model includes practices such as employment security, employee involvement and
participation, high compensation levels, reduction of status differentials, and a
commitment to work-life balance.
Table 1: Key components of high commitment HRM
• Commitment to employment security for workers and extensive usage of
internal labour markets for promotion
• Use of selective hiring and more sophisticated selection techniques – such
as psychometric tests, work sampling, standardized interviews
• High levels of training, learning and development for all staff, not just
for those in senior positions or on the fast-track talent management
development programme
• Extensive use of employee involvement and participation schemes to
ensure that workers are able to find out easily about organizational issues
and contribute to decision-making
• The use of self-managed teams and team-working because this is seen
as critically important for the development of new ideas and to harness
employee commitment at all levels
• Payment at the top quartile in the range for each occupation so as to ensure
recruitment and retention of the best staff, and compensation dependent
to some extent on performance
• Strong commitment to regular and meaningful systems of performance
review which focus heavily on the individual’s future career development
• The reduction/removal of status differentials in the organization – such as
working hours, holiday entitlements, car parking, access to employee share
schemes – so they are no longer restricted just to senior management or
certain grades of staff
• The promotion of work-life balance policies – such as maternity and
paternity leave, support for child- or elder-care arrangements, flexi-time –
to help provide a more equal psychological contract.
101
Of course there is a darker side to the supposed utopia of the high commitment HRM
bundle which is meant to provide equal gains to both employers and employees. This
sees high commitment as nothing more than a management con-trick, a device to
hook workers more completely into the web of management ideology under the guise
of offering them what seem to be better terms and conditions at work.
The literature is full of flowery language about this; managers utilizing this form
of HRM are seen as ‘wolves in sheep’s clothing’, regarded as great at the rhetoric of
caring about workers but poor in its application, and they are characterized as being
keen merely to reinforce their own control by indoctrinating workers to accept the
supposed benefits of mutuality.
Further reading
Those of you wishing to follow up the idea that HRM is actually anti-worker would
gain from reading the following paper. It is quite old but it still summarizes this
debate well. David Guest (1999), ‘HRM: the workers’ verdict’, Human Resource
Management Journal, Vol 9(3), pp 5-25.
There is also a further, and arguably more significant, concern about whether the
universal model of high commitment HRM works in practice – it does not accord with
reality! Critics argue that whilst those writing in support of the model have drawn on
examples from a range of industries, there have not been sustained studies of whole
sectors to see how widespread the high commitment model actually is in reality.
Whilst the bundle of high commitment practices might make sense in sectors where
goods and services are sold on the basis of quality, and where dedicated professionals
make the difference between good and bad products/services, there are many other
sectors where this is not the case. A cursory examination of wage data soon shows
the reader that levels of remuneration vary dramatically between sectors such as
pharmaceuticals and hospitality. Similar differences would be apparent in relation to
an organization’s investment in training or its ability to offer employment security if
there is a major economic downturn. As we find out in more detail below, HR strategies
owe a lot to the commercial environment and product market context within which
organizations are located.
102
Of course there is a darker side to the supposed utopia of the high commitment HRM
bundle which is meant to provide equal gains to both employers and employees. This
sees high commitment as nothing more than a management con-trick, a device to
hook workers more completely into the web of management ideology under the guise
of offering them what seem to be better terms and conditions at work.
The literature is full of flowery language about this; managers utilizing this form
of HRM are seen as ‘wolves in sheep’s clothing’, regarded as great at the rhetoric of
caring about workers but poor in its application, and they are characterized as being
keen merely to reinforce their own control by indoctrinating workers to accept the
supposed benefits of mutuality.
Further reading
Those of you wishing to follow up the idea that HRM is actually anti-worker would
gain from reading the following paper. It is quite old but it still summarizes this
debate well. David Guest (1999), ‘HRM: the workers’ verdict’, Human Resource
Management Journal, Vol 9(3), pp 5-25.
There is also a further, and arguably more significant, concern about whether the
universal model of high commitment HRM works in practice – it does not accord with
reality! Critics argue that whilst those writing in support of the model have drawn on
examples from a range of industries, there have not been sustained studies of whole
sectors to see how widespread the high commitment model actually is in reality.
Whilst the bundle of high commitment practices might make sense in sectors where
goods and services are sold on the basis of quality, and where dedicated professionals
make the difference between good and bad products/services, there are many other
sectors where this is not the case. A cursory examination of wage data soon shows
the reader that levels of remuneration vary dramatically between sectors such as
pharmaceuticals and hospitality. Similar differences would be apparent in relation to
an organization’s investment in training or its ability to offer employment security if
there is a major economic downturn. As we find out in more detail below, HR strategies
owe a lot to the commercial environment and product market context within which
organizations are located.
102
On the other hand, the high commitment model is potentially very useful as it provides
an argument for investing in workers, which has both a moral and a business case.
Whilst not applicable in its entirety to all organizations in all countries, it does offer
some ideas for those employers keen to move away from traditional, hierarchical HRM
systems.
Further reading
Read pp 55-68 of Marchington and Wilkinson (2012) for more information on what
the high commitment model comprises, and pp 74-77 for a brief discussion as to
why it is not universally applicable. Get together some ideas on this from your own
organization or one with which you are familiar so that you are ready to engage in
discussion during the workshop. Those of you wanting to find out more about this
model are encouraged to read the whole of chapter 3 in Marchington and Wilkinson
(2008). If you want it might be interesting to read chapter 2 of Pfeffer’s 1998 book.
Contingency and best fit perspectives on HRM
Unlike the universalistic perspectives, which claim there is one best way to manage
people in any country, sector and organization, the contingency approach takes the
opposite stance. You should recall from Unit One that HRM – or for that matter, any
aspect of management – varies significantly depending on the context in which it
operates. At one level, this is hardly illuminating as it is a bit like saying HRM is unique
to any one organization. But proper contingency frameworks go much further than this,
both in identifying different patterns of HRM and seeking explanations for why these
differences occur. This offers a major advance because if we are better able to identify
the circumstances in which particular patterns seem to work, this means that advice
can be provided to practitioners. Of course the real world is not so straightforward,
and employers do not always follow the advice of experts for a variety of reasons, so –
as with any area of social science – it is hard to ‘prove’ these linkages. However, as with
the high commitment idea, things can be learned from this approach.
The major factors which might shape HRM are spelled out in Table 2 below, along with
some examples to illustrate how this might operate in practice.
103
On the other hand, the high commitment model is potentially very useful as it provides
an argument for investing in workers, which has both a moral and a business case.
Whilst not applicable in its entirety to all organizations in all countries, it does offer
some ideas for those employers keen to move away from traditional, hierarchical HRM
systems.
Further reading
Read pp 94-109 of Marchington and Wilkinson (2008) for more information on what
the high commitment model comprises, and pp 133-37 for a brief discussion as to
why it is not universally applicable. Get together some ideas on this from your own
organization or one with which you are familiar so that you are ready to engage in
discussion during the workshop. Those of you wanting to find out more about this
model are encouraged to read the whole of chapter 3 in Marchington and Wilkinson
(2008). If you want it might be interesting to read chapter 2 of Pfeffer’s 1998 book.
Contingency and best fit perspectives on HRM
Unlike the universalistic perspectives, which claim there is one best way to manage
people in any country, sector and organization, the contingency approach takes the
opposite stance. You should recall from Unit One that HRM – or for that matter, any
aspect of management – varies significantly depending on the context in which it
operates. At one level, this is hardly illuminating as it is a bit like saying HRM is unique
to any one organization. But proper contingency frameworks go much further than this,
both in identifying different patterns of HRM and seeking explanations for why these
differences occur. This offers a major advance because if we are better able to identify
the circumstances in which particular patterns seem to work, this means that advice
can be provided to practitioners. Of course the real world is not so straightforward,
and employers do not always follow the advice of experts for a variety of reasons, so –
as with any area of social science – it is hard to ‘prove’ these linkages. However, as with
the high commitment idea, things can be learned from this approach.
The major factors which might shape HRM are spelled out in Table 2 below, along with
some examples to illustrate how this might operate in practice.
103
Table 2: Some of the key factors which can shape HRM in practice
Factor shaping HRM Examples of sub-factors that influence HRM
Country in which • Coordinated, liberal or state controlled market
organization is economy
located
• Extent of legislation covering workers’ rights
• Dominance of shareholders or stakeholders over
business
• Type of government in the country
Product market • Degree of competition in specific product markets
position
• Degree of dominance of employer in market
• Stage in life cycle for organization and subsidiary
• Length of time of alliances between organizations
Technology, skill and • Level of technological sophistication at organization
staffing levels
• Degree of capital or labour intensity in production
• Innovation or major shifts in technology employed
• Choices about staff-customer ratios
Labour markets and • Availability of labour in the external market
industrial relations
• Type of labour used, eg home versus migrant workers
• Extent and nature of trade union membership
• Co-operative or hostile union-management relations
Activity Five
We take up the contingency ideas again later in this section where we focus more
specifically on how models of HRM might vary both between and within organizations.
For now, think about how these factors shape HRM in your own organization or one
with which you are familiar. In particular, try to assess how the country/countries in
which your organization is located shapes HRM there – look at the first set of factors
in Table 2, and draw upon pp 109-120 of Marchington and Wilkinson (2012) to guide
your analysis.
104
Table 2: Some of the key factors which can shape HRM in practice
Factor shaping HRM Examples of sub-factors that influence HRM
Country in which • Coordinated, liberal or state controlled market
organization is economy
located
• Extent of legislation covering workers’ rights
• Dominance of shareholders or stakeholders over
business
• Type of government in the country
Product market • Degree of competition in specific product markets
position
• Degree of dominance of employer in market
• Stage in life cycle for organization and subsidiary
• Length of time of alliances between organizations
Technology, skill and • Level of technological sophistication at organization
staffing levels
• Degree of capital or labour intensity in production
• Innovation or major shifts in technology employed
• Choices about staff-customer ratios
Labour markets and • Availability of labour in the external market
industrial relations
• Type of labour used, eg home versus migrant workers
• Extent and nature of trade union membership
• Co-operative or hostile union-management relations
Activity Five
We take up the contingency ideas again later in this section where we focus more
specifically on how models of HRM might vary both between and within organizations.
For now, think about how these factors shape HRM in your own organization or one
with which you are familiar. In particular, try to assess how the country/countries in
which your organization is located shapes HRM there – look at the first set of factors
in Table 2, and draw upon pp 26- 40 of Marchington and Wilkinson (2008) to guide
your analysis.
104
Resource-based and architecture perspectives on HRM
It is now widely accepted that the resource-based view (RBV) is one of the dominant
frameworks in strategic management and it has grown in influence in the field of
HRM since the late 1990s. Unlike theories of best fit/contingency perspectives which
take what is often termed an ‘outside-in’ approach, whereby the management of
people is felt to be shaped primarily by forces external to the organization, RBV takes
an ‘inside-out’ approach.
This means that key drivers of both HRM and organizational performance are seen as
internal capabilities, such as the quality of the talent pool employed by the organization
and the processes that govern the employment relationship. This leads us to think
about HRM in quite a different way from the two previous approaches, both of which
assumed that all employees should be treated in similar ways and clear differences
in treatment between them – aside from levels of salary which are also driven by
external market forces as well as internal relativities – would not exist. If you recall,
the universal view argued there was one best way to manage all staff to get higher
levels of performance, whereas the contingent perspectives suggested that factors in
the labour and product markets (and elsewhere) to a large extent determined which
HR model should be utilized. Because RBV specifically focuses on internal capabilities,
it attempts to identify which workers should be granted better benefits and which
should be treated more like commodities, and in consequence have lower levels of
protection and support (Boxall and Purcell, 2008).
RBV focuses on four organization-specific attributes which are deemed to offer the
potential for sustained competitive advantage (Wright et al, 2001). These are:
• Value. This means that specific occupational groups or individuals, or specific
HR practices and processes, are capable of making a difference to organizational
performance. This is likely to vary between organizations. For example, it might
be particular managers that are particularly good at securing new contracts,
inventing new products or ensuring that the organization’s reputation is
enhanced. It might even be those customer-facing staff whose performance
over the telephone or face-to-face can influence whether or not consumers
recommend their organization to other people or tell horror stories about how
they have been treated. In terms of HR processes and practices, it could be the
culture and system which is seen as unique and encourages employees to work
105
Resource-based and architecture perspectives on HRM
It is now widely accepted that the resource-based view (RBV) is one of the dominant
frameworks in strategic management and it has grown in influence in the field of
HRM since the late 1990s. Unlike theories of best fit/contingency perspectives which
take what is often termed an ‘outside-in’ approach, whereby the management of
people is felt to be shaped primarily by forces external to the organization, RBV takes
an ‘inside-out’ approach.
This means that key drivers of both HRM and organizational performance are seen as
internal capabilities, such as the quality of the talent pool employed by the organization
and the processes that govern the employment relationship. This leads us to think
about HRM in quite a different way from the two previous approaches, both of which
assumed that all employees should be treated in similar ways and clear differences
in treatment between them – aside from levels of salary which are also driven by
external market forces as well as internal relativities – would not exist. If you recall,
the universal view argued there was one best way to manage all staff to get higher
levels of performance, whereas the contingent perspectives suggested that factors in
the labour and product markets (and elsewhere) to a large extent determined which
HR model should be utilized. Because RBV specifically focuses on internal capabilities,
it attempts to identify which workers should be granted better benefits and which
should be treated more like commodities, and in consequence have lower levels of
protection and support (Boxall and Purcell, 2008).
RBV focuses on four organization-specific attributes which are deemed to offer the
potential for sustained competitive advantage (Wright et al, 2001). These are:
• Value. This means that specific occupational groups or individuals, or specific
HR practices and processes, are capable of making a difference to organizational
performance. This is likely to vary between organizations. For example, it might
be particular managers that are particularly good at securing new contracts,
inventing new products or ensuring that the organization’s reputation is
enhanced. It might even be those customer-facing staff whose performance
over the telephone or face-to-face can influence whether or not consumers
recommend their organization to other people or tell horror stories about how
they have been treated. In terms of HR processes and practices, it could be the
culture and system which is seen as unique and encourages employees to work
105
 harder and smarter – such as a work-life balance practice, or a willingness to
listen when staff have problems or reward them with a cafeteria-system of
benefits that accords with individual needs.
• Rarity. This means there must be a shortage of these resources in the labour
market or in the HR systems which are adopted. Often this is seen in terms of
educational qualifications, experience or reputation, and as such is typically
associated with higher level jobs within organizations. But it could also relate
to people who just have high levels of emotional intelligence or to those that
can encourage staff to perform at a high level or teams to come up with more
ideas than anyone else has been able to achieve. Why else, it could be argued,
should senior managers be offered such a better range of benefits than others?
However, if every worker in the internal or external labour market were able to
offer similar capabilities, then rarity would not be an issue.
• Imperfect imitability. This refers to the idea that it is very difficult, if not
impossible, for others to copy these specific valuable and rare resources; if these
are easy to copy, then no sustained competitive advantage can be gained, and
indeed in this situation it could be that other organizations soon gain advantage
over the first mover by modifying their ideas. Whilst some of this advantage
might relate to the possession of individuals with very rare abilities, mostly it
refers in HR terms to particular practices and processes that are used. Although
it might be easy to copy a particular practice such as appraisal, the way in
which this is done, the path dependencies that exist at the organization and
its specific cultural meaning is much harder to copy. In short, it is not so much
what organizations do but how they do it, and how it is embedded into their
organizational routines which are hard to copy.
• Lack of substitutes. No matter how valuable, rare or hard to copy by other
organizations, if the resource is easily replaced by other means then it cannot
be regarded as key. For example, if the work done by an individual can be
undertaken by robots or done better and/or at a cheaper cost by sub-contractors,
then it no longer has value and rarity. Technological change has rendered certain
occupations – such as printing by traditional means – as less crucial to the
economy or to the organizations where they were employed, and therefore less
important as a resource.
106
harder and smarter – such as a work-life balance practice, or a willingness to
listen when staff have problems or reward them with a cafeteria-system of
benefits that accords with individual needs.
• Rarity. This means there must be a shortage of these resources in the labour
market or in the HR systems which are adopted. Often this is seen in terms of
educational qualifications, experience or reputation, and as such is typically
associated with higher level jobs within organizations. But it could also relate
to people who just have high levels of emotional intelligence or to those that
can encourage staff to perform at a high level or teams to come up with more
ideas than anyone else has been able to achieve. Why else, it could be argued,
should senior managers be offered such a better range of benefits than others?
However, if every worker in the internal or external labour market were able to
offer similar capabilities, then rarity would not be an issue.
• Imperfect imitability. This refers to the idea that it is very difficult, if not
impossible, for others to copy these specific valuable and rare resources; if these
are easy to copy, then no sustained competitive advantage can be gained, and
indeed in this situation it could be that other organizations soon gain advantage
over the first mover by modifying their ideas. Whilst some of this advantage
might relate to the possession of individuals with very rare abilities, mostly it
refers in HR terms to particular practices and processes that are used. Although
it might be easy to copy a particular practice such as appraisal, the way in
which this is done, the path dependencies that exist at the organization and
its specific cultural meaning is much harder to copy. In short, it is not so much
what organizations do but how they do it, and how it is embedded into their
organizational routines which are hard to copy.
• Lack of substitutes. No matter how valuable, rare or hard to copy by other
organizations, if the resource is easily replaced by other means then it cannot
be regarded as key. For example, if the work done by an individual can be
undertaken by robots or done better and/or at a cheaper cost by sub-contractors,
then it no longer has value and rarity. Technological change has rendered certain
occupations – such as printing by traditional means – as less crucial to the
economy or to the organizations where they were employed, and therefore less
important as a resource.
106
 Just think about it: are there people or HR practices and processes in your
organization that fit the criteria required for RBV in terms of value, rarity, being
hard to copy and not substitutable by other means?
The thinking behind RBV has recently found increased relevance in HRM with
the emergence of HR architecture models. These suggest that within individual
organizations it is important to work out where each occupational group or HR
practice might sit in terms of their contribution to organizational goals. Those that
are deemed to be valuable, rare, not easily copied, and not substitutable, are likely to
be able to press their case for preferential treatment and higher levels of employment
security. Those that are not high on these factors are likely to find it much harder to
be treated well or be seen as the specific HR practice that makes the difference. So,
for example, some individuals might be identified for pushing through a fast-track
career stream or an organization might decide that it is the quality of their Senior
Management Team or Organizational Development Group that really makes the
difference. Other groups of workers may be seen as liable for outsourcing if this can
achieve gains for the organization. But, just as one organization might be seeking to
identify a specific group for preferential treatment, so too are the individuals in this
group likely to be very attractive to other organizations, and able to move to other
firms which then sell their services back to the original employer. Of course, if these
workers (and/or the organizations which employ them) are seen to get too powerful
and demanding, there might be a backlash as organizations search for alternatives
(ie substitutes) for what come to be seen as over-valued resources. This takes us into
the realm of interorganizational relations and labour economics which is beyond the
remit and time-frame of this particular Unit.
107
Just think about it: are there people or HR practices and processes in your
organization that fit the criteria required for RBV in terms of value, rarity, being
hard to copy and not substitutable by other means?
The thinking behind RBV has recently found increased relevance in HRM with
the emergence of HR architecture models. These suggest that within individual
organizations it is important to work out where each occupational group or HR
practice might sit in terms of their contribution to organizational goals. Those that
are deemed to be valuable, rare, not easily copied, and not substitutable, are likely to
be able to press their case for preferential treatment and higher levels of employment
security. Those that are not high on these factors are likely to find it much harder to
be treated well or be seen as the specific HR practice that makes the difference. So,
for example, some individuals might be identified for pushing through a fast-track
career stream or an organization might decide that it is the quality of their Senior
Management Team or Organizational Development Group that really makes the
difference. Other groups of workers may be seen as liable for outsourcing if this can
achieve gains for the organization. But, just as one organization might be seeking to
identify a specific group for preferential treatment, so too are the individuals in this
group likely to be very attractive to other organizations, and able to move to other
firms which then sell their services back to the original employer. Of course, if these
workers (and/or the organizations which employ them) are seen to get too powerful
and demanding, there might be a backlash as organizations search for alternatives
(ie substitutes) for what come to be seen as over-valued resources. This takes us into
the realm of interorganizational relations and labour economics which is beyond the
remit and time-frame of this particular Unit.
107
Changing patterns of HRM in practice
Many of the models which try to explain how HRM operates focus on the product
markets and commercial environment within which organizations operate. One
common approach views the stage in an organization’s life cycle as a key factor shaping
HRM.
1) At start-up/establishment of the organization, there is likely to be little in the
way of formalized policies for any aspect of management – and probably hardly
anything for the management of staff – as all efforts are focused on survival and,
hopefully, growth. HRM rarely gets considered unless something goes wrong -
such as a mistake by an employee or poor performance, or problems in recruiting
staff which lead to massive over-work by existing employees.
2) As the firm grows and starts to create levels in the hierarchy, issues then arise
more overtly about how to manage staff, who to promote and whether they need
training, and inevitably issues of consistency start to emerge. Some managers
might be better than others at HRM, some may be new to the organization and
clash with those who were there from the beginning, whilst others start to worry
the organization is changing fr the worse as it grows. At this point decisions
tend to be made about hiring an HR person and introducing some procedures,
typically after the first major problem – such as an employee being incorrectly
sacked – costs the organization money.
3) At the next stage – maturity – the organization is well-developed, has a range
of HR policies and procedures, and tends to run quite smoothly as the benefits
of a stable (and hopefully growing) market make life easier. HRM in this sort
of organization closely resembles many of the practices outlined in the high
commitment perspective presented in Table 1.
4) Finally, though not inevitably as with human beings, the organization moves
into the decline phase. This is when things get tough as employers find that
their products and services are no longer quite as special or the competition
catches up and does things more reliably, quicker and/or cheaper. This state of
affairs has characterized manufacturing firms in the developed economy for the
last twenty or thirty years as goods have been sourced much more cheaply from
108
Changing patterns of HRM in practice
Many of the models which try to explain how HRM operates focus on the product
markets and commercial environment within which organizations operate. One
common approach views the stage in an organization’s life cycle as a key factor shaping
HRM.
1) At start-up/establishment of the organization, there is likely to be little in the
way of formalized policies for any aspect of management – and probably hardly
anything for the management of staff – as all efforts are focused on survival and,
hopefully, growth. HRM rarely gets considered unless something goes wrong -
such as a mistake by an employee or poor performance, or problems in recruiting
staff which lead to massive over-work by existing employees.
2) As the firm grows and starts to create levels in the hierarchy, issues then arise
more overtly about how to manage staff, who to promote and whether they need
training, and inevitably issues of consistency start to emerge. Some managers
might be better than others at HRM, some may be new to the organization and
clash with those who were there from the beginning, whilst others start to worry
the organization is changing fr the worse as it grows. At this point decisions
tend to be made about hiring an HR person and introducing some procedures,
typically after the first major problem – such as an employee being incorrectly
sacked – costs the organization money.
3) At the next stage – maturity – the organization is well-developed, has a range
of HR policies and procedures, and tends to run quite smoothly as the benefits
of a stable (and hopefully growing) market make life easier. HRM in this sort
of organization closely resembles many of the practices outlined in the high
commitment perspective presented in Table 1.
4) Finally, though not inevitably as with human beings, the organization moves
into the decline phase. This is when things get tough as employers find that
their products and services are no longer quite as special or the competition
catches up and does things more reliably, quicker and/or cheaper. This state of
affairs has characterized manufacturing firms in the developed economy for the
last twenty or thirty years as goods have been sourced much more cheaply from
108
 low-wage economies or more flexibly and with greater agility by newer firms
which do not carry the potential excess baggage of traditional organizations; as
you will know from Unit 1 of the PMO Module. For HRM this can lead to major
changes as the expectations of existing employees are shattered with pressure
to reduce headcount, sell off parts of the operation and restructure HRM. Some
firms manage to maintain a high commitment approach but only for what are
regarded as core workers or for high value-added segments of the business.
Further reading
If you happen to work in a start-up business, or are part of an organization which is
in a process of continuous restructuring, take a look at pp 82-85 of Marchington and
Wilkinson (2012) and read the paper by Rutherford et al (2003) which is referenced
there.
Probably the best-known and most useful models relating product market context to
HRM come from Porter’s ideas on competitive strategy which differentiate between
cost reduction, quality enhancement and innovation. Basically this categorizes
organizations into three broad groupings depending on whether they aim to compete
primarily on low costs, high quality or innovative products/services that are ahead of
the competition and provide a marked change from existing provision on the market.
Not surprisingly patterns of HRM tend to be rather different in these three sets of
organizations.
1) In the cost reducers, there is little emphasis on employees other than as costs
to be minimized, and employers show little interest in spending time trying
to recruit high quality staff, paying wages above the lowest the employer can
get away with, or showing any willingness to train and develop workers over
the longer-term. These types of firms are prevalent in many countries, typically
from amongst the smaller organizations there and those that supply larger
enterprises with cheaper goods and services than they can produce internally.
With globalization, it is now increasingly common for these firms to be based in
low-wage economies.
2) The quality enhancers, conversely, tend to operate more in line with the high
commitment perspective, not necessarily out of any underlying desire to treat
109
low-wage economies or more flexibly and with greater agility by newer firms
which do not carry the potential excess baggage of traditional organizations; as
you will know from Unit 1 of the PMO Module. For HRM this can lead to major
changes as the expectations of existing employees are shattered with pressure
to reduce headcount, sell off parts of the operation and restructure HRM. Some
firms manage to maintain a high commitment approach but only for what are
regarded as core workers or for high value-added segments of the business.
Further reading
If you happen to work in a start-up business, or are part of an organization which is
in a process of continuous restructuring, take a look at pp 143-46 of Marchington and
Wilkinson (2008) and read the paper by Rutherford et al (2003) which is referenced
there.
Probably the best-known and most useful models relating product market context to
HRM come from Porter’s ideas on competitive strategy which differentiate between
cost reduction, quality enhancement and innovation. Basically this categorizes
organizations into three broad groupings depending on whether they aim to compete
primarily on low costs, high quality or innovative products/services that are ahead of
the competition and provide a marked change from existing provision on the market.
Not surprisingly patterns of HRM tend to be rather different in these three sets of
organizations.
1) In the cost reducers, there is little emphasis on employees other than as costs
to be minimized, and employers show little interest in spending time trying
to recruit high quality staff, paying wages above the lowest the employer can
get away with, or showing any willingness to train and develop workers over
the longer-term. These types of firms are prevalent in many countries, typically
from amongst the smaller organizations there and those that supply larger
enterprises with cheaper goods and services than they can produce internally.
With globalization, it is now increasingly common for these firms to be based in
low-wage economies.
2) The quality enhancers, conversely, tend to operate more in line with the high
commitment perspective, not necessarily out of any underlying desire to treat
109
 workers well but because they are seen as major assets in the achievement of
sustained competitive advantage and efforts need to be made to recruit and
retain them. This is not to say that the quality enhancers pay no attention to
reducing costs; they do, but the rationale for keeping costs low has to be measured
constantly against any potential losses to product or service quality. Questions
that might seem simple to the cost reducer – such as keeping numbers employed
in call centres as low as possible – are more complex for the quality enhancer
because they want to retain existing customers and ensure that their image is
not compromised in the wider market place.
3) The innovators are different again given their focus on staying ahead of the
curve; whilst elements of the high commitment model might be appropriate
in these situations, the emphasis is less on employment security and a wide
range of benefits which accrue over a long period of employment but more on
flexibility, informality and agility. The expectation is that many of these firms
might not survive, and that therefore the HR practices adopted cannot be too
rigid or expensive in the long-term. On the other hand, the hope is that these
organizations will grow rapidly and become important players in the market, so
they need to offer the promise of potentially high returns to those workers that
are able to make the difference – see the RBV discussion earlier in this section. In
short, the innovators are keen both on cost reduction and quality enhancement,
but doing this in a way that meshes in with the needs and aspirations of people
who want to work at these firms. Tensions are likely to arise when either party
(employer or employee) feels their expectations are not being met.
One of the problems with the competitive advantage models is that they assume an
organization utilizes just one pattern of HRM in response to a specific set of market
conditions. This might be relatively accurate as a description of sub-contractor at
the beginning of the supply chain where finance is tight and security is limited; they
might have little option but to employ a cost reduction model across the board. The
same might also be true of a professional partnership in accounting or law (quality
enhancement) or a leading edge biotechnology firm (innovation), at least for the most
part. But many organizations face a range of product markets – and indeed that could
well be part of a balanced business model – which ‘suggest’ different HRM patterns
for separate parts of the organization. In a conglomerate, for example, decisions about
HRM are routinely devolved to business unit level and accordingly a range of patterns
might be used which ‘fit’ with a relevant business strategy.
110
workers well but because they are seen as major assets in the achievement of
sustained competitive advantage and efforts need to be made to recruit and
retain them. This is not to say that the quality enhancers pay no attention to
reducing costs; they do, but the rationale for keeping costs low has to be measured
constantly against any potential losses to product or service quality. Questions
that might seem simple to the cost reducer – such as keeping numbers employed
in call centres as low as possible – are more complex for the quality enhancer
because they want to retain existing customers and ensure that their image is
not compromised in the wider market place.
3) The innovators are different again given their focus on staying ahead of the
curve; whilst elements of the high commitment model might be appropriate
in these situations, the emphasis is less on employment security and a wide
range of benefits which accrue over a long period of employment but more on
flexibility, informality and agility. The expectation is that many of these firms
might not survive, and that therefore the HR practices adopted cannot be too
rigid or expensive in the long-term. On the other hand, the hope is that these
organizations will grow rapidly and become important players in the market, so
they need to offer the promise of potentially high returns to those workers that
are able to make the difference – see the RBV discussion earlier in this section. In
short, the innovators are keen both on cost reduction and quality enhancement,
but doing this in a way that meshes in with the needs and aspirations of people
who want to work at these firms. Tensions are likely to arise when either party
(employer or employee) feels their expectations are not being met.
One of the problems with the competitive advantage models is that they assume an
organization utilizes just one pattern of HRM in response to a specific set of market
conditions. This might be relatively accurate as a description of sub-contractor at
the beginning of the supply chain where finance is tight and security is limited; they
might have little option but to employ a cost reduction model across the board. The
same might also be true of a professional partnership in accounting or law (quality
enhancement) or a leading edge biotechnology firm (innovation), at least for the most
part. But many organizations face a range of product markets – and indeed that could
well be part of a balanced business model – which ‘suggest’ different HRM patterns
for separate parts of the organization. In a conglomerate, for example, decisions about
HRM are routinely devolved to business unit level and accordingly a range of patterns
might be used which ‘fit’ with a relevant business strategy.
110
In order for this to work, however, there has to be little interaction between different
parts of the business and each has to be regarded as distinctive in terms of HRM.
Similarly, multi-national organizations operating across the globe might also decide
to employ different patterns of HRM in India, Russia, Canada, Egypt and France,
for example. The only exception to this model could be for a senior management
group that are treated as a special cadre and expected to move around the globe on
assignments.
In order for this to work, however, there has to be little interaction between different
parts of the business and each has to be regarded as distinctive in terms of HRM.
Similarly, multi-national organizations operating across the globe might also decide
to employ different patterns of HRM in India, Russia, Canada, Egypt and France,
for example. The only exception to this model could be for a senior management
group that are treated as a special cadre and expected to move around the globe on
assignments.

Another shortcoming is that the competitive advantage models fail to take into account
the influence of labour markets in shaping patterns of HRM. When this is brought into
the equation, we can see that HRM might also vary between occupational groups at a
single site (or country) within organizations. Following the RBV perspective, we would
expect that workers in short supply or critical to organizational goals might be treated
better by employers than those that are more marginal or are easier to replace. Manual
workers in areas where production can easily be undertaken in countries where labour
costs are cheaper are therefore most at risk of facing a set of HR practices based on the
cost reduction model whilst those in core business functions or in specialized branches
of work might be subject to a quality enhancement model and those in research and
development roles treated in line with the innovation pattern. If we move beyond the
internal dynamics of the organization, and consider the option of outsourcing or in-
sourcing areas of work, then further complications arise. Drawing on material from
Lepak and Snell (1999 and 2007, for example) in a variety of publications, Table 3 shows
a range of options.
Another shortcoming is that the competitive advantage models fail to take into account
the influence of labour markets in shaping patterns of HRM. When this is brought into
the equation, we can see that HRM might also vary between occupational groups at a
single site (or country) within organizations. Following the RBV perspective, we would
expect that workers in short supply or critical to organizational goals might be treated
better by employers than those that are more marginal or are easier to replace. Manual
workers in areas where production can easily be undertaken in countries where labour
costs are cheaper are therefore most at risk of facing a set of HR practices based on the
cost reduction model whilst those in core business functions or in specialized branches
of work might be subject to a quality enhancement model and those in research and
development roles treated in line with the innovation pattern. If we move beyond the
internal dynamics of the organization, and consider the option of outsourcing or in-
sourcing areas of work, then further complications arise. Drawing on material from
Lepak and Snell (1999 and 2007, for example) in a variety of publications, Table 3 shows
a range of options.

Table 3: The HR Architecture Model Table 3: The HR Architecture Model

High strategic value and unique skills Low strategic value and unique skills High strategic value and unique skills Low strategic value and unique skills

Core internal workers Alliance workers/professionals Core internal workers Alliance workers/professionals

Quality enhancement HRM? Innovation HRM or in-sourced from Quality enhancement HRM? Innovation HRM or in-sourced from
specialist organization? specialist organization?

High strategic value and readily Low strategic value and readily High strategic value and readily Low strategic value and readily
available skills available skills available skills available skills

Peripheral internal workers Contract or temporary workers Peripheral internal workers Contract or temporary workers

Mix of cost reduction and quality Cost reduction HRM or outsourced to Mix of cost reduction and quality Cost reduction HRM or outsourced to
enhancement HRM? subcontractor? enhancement HRM? subcontractor?

111 111
These ideas will be developed more fully during the workshop when we consider the
feasibility of using a range of patterns of HRM at the same workplace and the role that
contracting with other organizations is likely to play. Whilst from a technical angle,
it might seem highly appropriate to apply different patterns of HRM, from an equity
and integration perspective this could create tensions. If one of the goals of HRM is
to achieve higher levels of alignment, integration and consistency, treating workers
very differently might cause problems with teamwork and commitment to a shared
organizational mission. Clearly the precise form that HRM takes in any organization
depends strongly on the approach taken by senior managers and how they decide to
address the potential tensions caused by trying to harmonize or differentiate their HR
policies and practices.
Activity Six
Further discussion on the patterns of HRM that we have discussed in this section is
available on pp 85-88 of Marchington and Wilkinson (2012), plus some examples in
the boxes there. Please make sure you look at this before coming to the workshop
and talk with the rest of your learning set about where your own organizations
might fit into this model. Do they make sense in the context of your own country
and/or sector?
In order to improve your understanding of the HR architecture models, also read
Chapter 11 by Lepak and Snell in the book edited by Peter Boxall, John Purcell and
Patrick Wright, The Oxford Handbook of Human Resource Management, Oxford
University Press, 2007, and the paper by Nick Kinnie and colleagues, ‘Satisfaction
with HR practices and commitment to the organization: why one size does not fit
all’, Human Resource Management Journal, Volume 15 (4), pp9-29, 2005.
Although much of the HRM literature focuses on HR practices such as recruitment
and selection, reward management or employee involvement and participation, a
parallel strand of material looks at HR processes – as we saw in the first section of this
Unit. Rather than examining what is done in organizations, this examines how it is
done instead; it is a case of not so much what you do but how you do it! Accordingly,
a major emphasis is placed on issues such as leadership style and communications
processes. A particular focus has been directed at what is called the ‘strength’ of the
HRM system (Bowen and Ostroff, 2004). This is the degree to which all employees
share the same interpretation as senior management of the attitudes and behaviours
112
These ideas will be developed more fully during the workshop when we consider the
feasibility of using a range of patterns of HRM at the same workplace and the role that
contracting with other organizations is likely to play. Whilst from a technical angle,
it might seem highly appropriate to apply different patterns of HRM, from an equity
and integration perspective this could create tensions. If one of the goals of HRM is
to achieve higher levels of alignment, integration and consistency, treating workers
very differently might cause problems with teamwork and commitment to a shared
organizational mission. Clearly the precise form that HRM takes in any organization
depends strongly on the approach taken by senior managers and how they decide to
address the potential tensions caused by trying to harmonize or differentiate their HR
policies and practices.
Activity Six
Further discussion on the patterns of HRM that we have discussed in this section is
available on pp 146-51 of Marchington and Wilkinson (2008), plus some examples in
the boxes there. Please make sure you look at this before coming to the workshop
and talk with the rest of your learning set about where your own organizations
might fit into this model. Do they make sense in the context of your own country
and/or sector?
In order to improve your understanding of the HR architecture models, also read
Chapter 11 by Lepak and Snell in the book edited by Peter Boxall, John Purcell and
Patrick Wright, The Oxford Handbook of Human Resource Management, Oxford
University Press, 2007, and the paper by Nick Kinnie and colleagues, ‘Satisfaction
with HR practices and commitment to the organization: why one size does not fit
all’, Human Resource Management Journal, Volume 15 (4), pp9-29, 2005.
Although much of the HRM literature focuses on HR practices such as recruitment
and selection, reward management or employee involvement and participation, a
parallel strand of material looks at HR processes – as we saw in the first section of this
Unit. Rather than examining what is done in organizations, this examines how it is
done instead; it is a case of not so much what you do but how you do it! Accordingly,
a major emphasis is placed on issues such as leadership style and communications
processes. A particular focus has been directed at what is called the ‘strength’ of the
HRM system (Bowen and Ostroff, 2004). This is the degree to which all employees
share the same interpretation as senior management of the attitudes and behaviours
112
expected of them, and the extent to which this leads to improvements in organizational
effectiveness. Whilst not using the same terminology as Bowen and Ostroff, according
to Marchington et al (2011, forthcoming) the key features of a strong HRM system
are:
1) Alignment between individual attitudes/behaviours and organizational goals and
objectives. In some psychology texts this is referred to as ‘person-organization
fit’, or alternatively it could be seen as high levels of consensus about what the
organization is trying to achieve and a strong degree of support for its objectives.
A key outcome would be that workers identify closely with organizational goals
and demonstrate trust and loyalty. Of course, in order to generate a positive
psychological contract, as we see in the section on reward management later,
this also requires similar levels of commitment and trust to be shown by line
managers.
2) Integration between different components of HRM to ensure there is a high level
of synergy across the HR bundle. As we saw earlier, HR practices achieve most
when they are linked together and support each other so as to gain maximum
leverage from their individual contribution. ‘Deadly combinations’ – that is,
where HR practices conflict with rather than support each other – tends to lead to
confusion, uncertainty and ambiguity, which can undermine the whole system.
These problems can occur at the organizational level if two different programmes
– say, for employee involvement and participation - contradict one another in
terms of their underlying purposes. It can also occur at the departmental level if
managers have very different interpretations of specific HR practices.
3) Consistency in how individual parts of the HR package are seen by employees.
This can be seen in terms of consistency over time, so that workers can expect
their terms and conditions are not routinely changed; between employees so
that the treatment of one worker is broadly similar to that of another; among
employees so that each HR practice is part of a ‘powerful connection’ with the
remainder of the package. In many countries there is also a legal underpinning
to consistency, in particular between employee consistency, through the
importance of precedence and custom and practice.
113
expected of them, and the extent to which this leads to improvements in organizational
effectiveness. Whilst not using the same terminology as Bowen and Ostroff, according
to Marchington et al (2011, forthcoming) the key features of a strong HRM system
are:
1) Alignment between individual attitudes/behaviours and organizational goals and
objectives. In some psychology texts this is referred to as ‘person-organization
fit’, or alternatively it could be seen as high levels of consensus about what the
organization is trying to achieve and a strong degree of support for its objectives.
A key outcome would be that workers identify closely with organizational goals
and demonstrate trust and loyalty. Of course, in order to generate a positive
psychological contract, as we see in the section on reward management later,
this also requires similar levels of commitment and trust to be shown by line
managers.
2) Integration between different components of HRM to ensure there is a high level
of synergy across the HR bundle. As we saw earlier, HR practices achieve most
when they are linked together and support each other so as to gain maximum
leverage from their individual contribution. ‘Deadly combinations’ – that is,
where HR practices conflict with rather than support each other – tends to lead to
confusion, uncertainty and ambiguity, which can undermine the whole system.
These problems can occur at the organizational level if two different programmes
– say, for employee involvement and participation - contradict one another in
terms of their underlying purposes. It can also occur at the departmental level if
managers have very different interpretations of specific HR practices.
3) Consistency in how individual parts of the HR package are seen by employees.
This can be seen in terms of consistency over time, so that workers can expect
their terms and conditions are not routinely changed; between employees so
that the treatment of one worker is broadly similar to that of another; among
employees so that each HR practice is part of a ‘powerful connection’ with the
remainder of the package. In many countries there is also a legal underpinning
to consistency, in particular between employee consistency, through the
importance of precedence and custom and practice.
113
On reflection
Section 2 has provided an overview of the principal ways in which HRM has been
conceptualized in the literature. The three major perspectives are best practice/
universalism, best fit/contingency perspectives, and resource-based and architecture
views, and each has a part to play in understanding the nature of HRM strategy and
practice. Each of these approaches offers insights into how HRM, organizational
strategy and performance are linked together, so universalism tries to demonstrate
links between people and performance, best fit tries to show how forces beyond HRM
shape its character, and RBV tries to suggest how internal capabilities and talent
management can be critical to recruitment and retention.
The key messages to emerge from this section are that:
1) HRM has links with strategy and performance, even if this is not explicitly
recognized by actors within the organization. To improve integration and
alignment between HRM and organizational goals, HRM needs to be analyzed
systematically in relation to its context.
2) HRM can be seen both in terms of practices and processes. HR practices, and in
particular the links between them, are critically important in establishing the
structure of the organization. HR processes are equally crucial in underpinning
the culture of the organization, especially the way in which employees feel they
are treated by line managers.
3) Patterns of HRM vary both between and within organizations, but these cannot
simply be ‘read-off’ from contextual factors/strategy and applied in the same
way in each organization. They are subject to compromises and decisions made
by internal actors about the best way forward – as seen in the debates about HR
architecture.
Below are a few questions to guide your reflection on the second part of Unit Two:
1) What is the basis of the argument that a specific set of HR practices will always
produce better levels of performance, and how well does that stand up to
criticism?
114
On reflection
Section 2 has provided an overview of the principal ways in which HRM has been
conceptualized in the literature. The three major perspectives are best practice/
universalism, best fit/contingency perspectives, and resource-based and architecture
views, and each has a part to play in understanding the nature of HRM strategy and
practice. Each of these approaches offers insights into how HRM, organizational
strategy and performance are linked together, so universalism tries to demonstrate
links between people and performance, best fit tries to show how forces beyond HRM
shape its character, and RBV tries to suggest how internal capabilities and talent
management can be critical to recruitment and retention.
The key messages to emerge from this section are that:
1) HRM has links with strategy and performance, even if this is not explicitly
recognized by actors within the organization. To improve integration and
alignment between HRM and organizational goals, HRM needs to be analyzed
systematically in relation to its context.
2) HRM can be seen both in terms of practices and processes. HR practices, and in
particular the links between them, are critically important in establishing the
structure of the organization. HR processes are equally crucial in underpinning
the culture of the organization, especially the way in which employees feel they
are treated by line managers.
3) Patterns of HRM vary both between and within organizations, but these cannot
simply be ‘read-off’ from contextual factors/strategy and applied in the same
way in each organization. They are subject to compromises and decisions made
by internal actors about the best way forward – as seen in the debates about HR
architecture.
Below are a few questions to guide your reflection on the second part of Unit Two:
1) What is the basis of the argument that a specific set of HR practices will always
produce better levels of performance, and how well does that stand up to
criticism?
114
2) Explain how best fit approaches can be applied to an organization of your choice 2) Explain how best fit approaches can be applied to an organization of your choice
in terms of models of HRM that are adopted. What happens if different forces in terms of models of HRM that are adopted. What happens if different forces
‘suggest’ that different patterns of HRM are appropriate? ‘suggest’ that different patterns of HRM are appropriate?

3) Outline briefly what is meant by the term ‘HR architecture’ and assess whether 3) Outline briefly what is meant by the term ‘HR architecture’ and assess whether
or not – and how – this might be applied to your organization. Illustrate your or not – and how – this might be applied to your organization. Illustrate your
answer with examples. answer with examples.

Further Reading
If you happen to work in a start-up business or are part of an organisation which
is in a process of continuous restrict, take a look at pp 82-85 of Marchington &
Wilkinson (2012) and read the paper by Rutherford and colleagues, Human
Resource Management, Volume 42 (4) pp 321-35, 2003.

115 115
Section 3: Employee Involvement and
Participation (EIP)
The nature and meaning of EIP
Employee involvement and participation (EIP) is a concept that has been around a
very long time, although the terminology – and to some extent the precise forms it
takes – has varied considerably. The notion of an assembly of all citizens goes back
to ancient Greece, providing a kind of primitive and, in some ways, deeply embedded
form of direct democracy. More recently, in the late 1960s and 1970s, the notion of
involving workers in the decision-making processes of their organizations revolved
around ideas of industrial democracy and worker directors sitting on executive boards
of their companies, following the lead of several EU countries. During the 1980s and
1990s, and to a large extent since then in most developed countries, greater emphasis
has been placed on direct forms of involvement and participation where workers
receive information direct from management and have the chance to make their voice
heard to some extent through quality circles, problem-solving groups and attitude
surveys. Other terms have also come to the fore over time – such as empowerment,
engagement and autonomous teams, which all presuppose that non-managerial staff
has some degree of influence over their working lives. Whether this is for real or not is
an open question, but many of the studies have confused psychological empowerment
– where workers believe they have an influence – with structural empowerment –
where workers are actually given some say through specific HR practices in what goes
on.
Just think about it: do you believe that your own employer - or one with which you
are familiar - appears to have any interest in EIP? Why do you say this? How might
this be changed to capture your engagement?
Accordingly, despite its popularity as an idea, EIP lacks a clear and unambiguous
definition. This is problematic because research and practice refer to a multitude of
different practices with a range of names but sometimes without much in common
between them.
116
Section 3: Employee Involvement and
Participation (EIP)
The nature and meaning of EIP
Employee involvement and participation (EIP) is a concept that has been around a
very long time, although the terminology – and to some extent the precise forms it
takes – has varied considerably. The notion of an assembly of all citizens goes back
to ancient Greece, providing a kind of primitive and, in some ways, deeply embedded
form of direct democracy. More recently, in the late 1960s and 1970s, the notion of
involving workers in the decision-making processes of their organizations revolved
around ideas of industrial democracy and worker directors sitting on executive boards
of their companies, following the lead of several EU countries. During the 1980s and
1990s, and to a large extent since then in most developed countries, greater emphasis
has been placed on direct forms of involvement and participation where workers
receive information direct from management and have the chance to make their voice
heard to some extent through quality circles, problem-solving groups and attitude
surveys. Other terms have also come to the fore over time – such as empowerment,
engagement and autonomous teams, which all presuppose that non-managerial staff
has some degree of influence over their working lives. Whether this is for real or not is
an open question, but many of the studies have confused psychological empowerment
– where workers believe they have an influence – with structural empowerment –
where workers are actually given some say through specific HR practices in what goes
on.
Just think about it: do you believe that your own employer - or one with which you
are familiar - appears to have any interest in EIP? Why do you say this? How might
this be changed to capture your engagement?
Accordingly, despite its popularity as an idea, EIP lacks a clear and unambiguous
definition. This is problematic because research and practice refer to a multitude of
different practices with a range of names but sometimes without much in common
between them.
116
Some observers might regard industrial democracy as the only real type of EIP because
workers have the potential to exert some degree of control over their organizations
whereas others feel that two-way communication between managers and their staff as
the only meaningful example as it relates to their daily working experiences. Similarly
while some might believe that EIP is impossible if workers are not represented by
trade unions, others argue that it is only when workers are given lots of discretion
in their jobs that they experience true involvement. In short, because EIP is such an
elastic term, greater precision is required if we are to analyze it properly.
In order to improve both analysis and practice, EIP needs to be broken down into a
number of categories/factors - degree, scope, level and form - that can be combined
together into a matrix.
In more detail these are:
1) The degree of EIP indicates the extent to which workers and/or their
representatives are able to influence management decisions. As can be seen
from Figure 1 below, the escalator of EIP ranges from information dissemination
at the lower extreme through to workers’ control over managerial decisions at
the upper limit.
Figure One: The escalator of EIP
Control
Codetermination
Consultation
Communication
Information
In between these extremes, managers and non-managerial staff engage in
some degree of shared influence, stretching from two-way communication
where managers retain most of their control, to consultation where managers
explicitly seek out workers’ views, and then to co-determination where shared
decision-making is more overt – in principle, at least.
117
Some observers might regard industrial democracy as the only real type of EIP because
workers have the potential to exert some degree of control over their organizations
whereas others feel that two-way communication between managers and their staff as
the only meaningful example as it relates to their daily working experiences. Similarly
while some might believe that EIP is impossible if workers are not represented by
trade unions, others argue that it is only when workers are given lots of discretion
in their jobs that they experience true involvement. In short, because EIP is such an
elastic term, greater precision is required if we are to analyze it properly.
In order to improve both analysis and practice, EIP needs to be broken down into a
number of categories/factors - degree, scope, level and form - that can be combined
together into a matrix.
In more detail these are:
1) The degree of EIP indicates the extent to which workers and/or their
representatives are able to influence management decisions. As can be seen
from Figure 1 below, the escalator of EIP ranges from information dissemination
at the lower extreme through to workers’ control over managerial decisions at
the upper limit.
Figure One: The escalator of EIP
Control
Codetermination
Consultation
Communication
Information
In between these extremes, managers and non-managerial staff engage in
some degree of shared influence, stretching from two-way communication
where managers retain most of their control, to consultation where managers
explicitly seek out workers’ views, and then to co-determination where shared
decision-making is more overt – in principle, at least.
117
 2) The scope of EIP refers to the range of decisions over which non-managerial staff
has some input. At the strategic end of this continuum, the subject matter may
be long-term in nature and related to key business goals whereas at the trivial
end issues are typically tangential to organizational objectives and plans, rather
more related to hygiene factors such as the colour of the office wallpaper or the
annual Christmas party. Employees may be allowed a high degree of influence
over trivial issues whilst being lucky to receive any information in advance about
long-term plans or new developments.
3) The level at which employees (or their representatives) are involved is the third
factor. EIP can take place within the department, at establishment level or above
– such as at national or business unit level in a large MNC or at head office.
4) The form of EIP comprises the final factor. This can be direct, in which case the
individual worker is involved personally in a shop floor meeting or receiving
their own copy of an announcement. It can be indirect (sometimes called
representative), whereby workers are represented by their trade union or a fellow
employee on a consultative committee. And it can be financial participation
by all or some workers in the economic success of the organization – such as
through an employee share ownership programme or a profit sharing scheme.
It is therefore essential to classify EIP practices according to this matrix if we are to
make any progress in understanding what is actually taking place in any organization
or country. So, for example, a town hall meeting (popular in some US firms) would be an
example of two-way communication, with a wide scope covering a number of issues,
conducted at establishment level or below, and direct in form. By contrast, a European
Works Council would either be consultation or co-determination in degree of influence,
more strategic in scope, conducted at corporate level or regional HQ, and it would
be indirect in form. Team-working could be co-determination in degree, extensive in
scope even if restricted to workplace level, and direct in form. Each different type of
EIP practice could be categorized in this way and – assuming management want this
to happen, which is not always the case (!) – employees would then be clearer about
its potential role.
118
2) The scope of EIP refers to the range of decisions over which non-managerial staff
has some input. At the strategic end of this continuum, the subject matter may
be long-term in nature and related to key business goals whereas at the trivial
end issues are typically tangential to organizational objectives and plans, rather
more related to hygiene factors such as the colour of the office wallpaper or the
annual Christmas party. Employees may be allowed a high degree of influence
over trivial issues whilst being lucky to receive any information in advance about
long-term plans or new developments.
3) The level at which employees (or their representatives) are involved is the third
factor. EIP can take place within the department, at establishment level or above
– such as at national or business unit level in a large MNC or at head office.
4) The form of EIP comprises the final factor. This can be direct, in which case the
individual worker is involved personally in a shop floor meeting or receiving
their own copy of an announcement. It can be indirect (sometimes called
representative), whereby workers are represented by their trade union or a fellow
employee on a consultative committee. And it can be financial participation
by all or some workers in the economic success of the organization – such as
through an employee share ownership programme or a profit sharing scheme.
It is therefore essential to classify EIP practices according to this matrix if we are to
make any progress in understanding what is actually taking place in any organization
or country. So, for example, a town hall meeting (popular in some US firms) would be an
example of two-way communication, with a wide scope covering a number of issues,
conducted at establishment level or below, and direct in form. By contrast, a European
Works Council would either be consultation or co-determination in degree of influence,
more strategic in scope, conducted at corporate level or regional HQ, and it would
be indirect in form. Team-working could be co-determination in degree, extensive in
scope even if restricted to workplace level, and direct in form. Each different type of
EIP practice could be categorized in this way and – assuming management want this
to happen, which is not always the case (!) – employees would then be clearer about
its potential role.
118
Even though some types of EIP scheme tend to be more extensive than others,
variations exist both at the level of the nation state and individual organizations
depending on a variety of factors – such as the legal underpinning for HRM, the
traditions of union membership, the type of product market in which the company
operates and the range of occupational groups employed. Direct EIP is more extensive
than any other form in most developed countries but at the same time indirect EIP
plays a central role in many parts of the EU via worker directors, works councils and
extensive legislation supporting workers’ rights. In Anglo-Saxon economies such as
the UK and the USA, there is relatively little in terms of legislative requirements for any
form of EIP but this does not prevent organizations from choosing to set up extensive
forms of representative participation if they wish. Similarly, whilst there is typically
no requirement to offer financial forms of EIP in most countries, some employers have
a strong reputation for the longevity and inclusiveness of their share ownership or
profit sharing schemes.
Without knowing it, perhaps, most employees will have had some experience of EIP;
for example, if you have responded to an employee attitude survey, taken part in a
team briefing or been a member of a share ownership scheme, you have had some
experience of EIP. More active involvement may have come from being part of a self-
managed team on a production line or in a hospital, playing a key role on a problem-
solving group or even agreeing to be the spokesperson for your department on a joint
consultative committee. Many other aspects of EIP are likely to take place without
employees being aware of their existence - or only faintly knowledgeable of their
role - in meetings between managers and employee representatives; yet these could
have a major impact on their working lives. In fact, all these are examples of formal
EIP schemes that are part of the organizational infrastructure but, as we see later,
informal EIP has potentially the greatest significance and most immediate relevance
for the majority of employees.
119
Even though some types of EIP scheme tend to be more extensive than others,
variations exist both at the level of the nation state and individual organizations
depending on a variety of factors – such as the legal underpinning for HRM, the
traditions of union membership, the type of product market in which the company
operates and the range of occupational groups employed. Direct EIP is more extensive
than any other form in most developed countries but at the same time indirect EIP
plays a central role in many parts of the EU via worker directors, works councils and
extensive legislation supporting workers’ rights. In Anglo-Saxon economies such as
the UK and the USA, there is relatively little in terms of legislative requirements for any
form of EIP but this does not prevent organizations from choosing to set up extensive
forms of representative participation if they wish. Similarly, whilst there is typically
no requirement to offer financial forms of EIP in most countries, some employers have
a strong reputation for the longevity and inclusiveness of their share ownership or
profit sharing schemes.
Without knowing it, perhaps, most employees will have had some experience of EIP;
for example, if you have responded to an employee attitude survey, taken part in a
team briefing or been a member of a share ownership scheme, you have had some
experience of EIP. More active involvement may have come from being part of a self-
managed team on a production line or in a hospital, playing a key role on a problem-
solving group or even agreeing to be the spokesperson for your department on a joint
consultative committee. Many other aspects of EIP are likely to take place without
employees being aware of their existence - or only faintly knowledgeable of their
role - in meetings between managers and employee representatives; yet these could
have a major impact on their working lives. In fact, all these are examples of formal
EIP schemes that are part of the organizational infrastructure but, as we see later,
informal EIP has potentially the greatest significance and most immediate relevance
for the majority of employees.
119
Activity Seven
Which of the EIP practices discussed above and in the literature are used in your own
organization? How long have they been in existence, how well do they work and
what do most people think of them? Do most employees believe they are valuable
and worthwhile or do they think that they are a waste of time? Does this vary
between EIP practices?
Use the terminology of downward communications, upward problem-solving,
task-based participation and team-working, indirect participation and financial
participation used in the set readings, and compare your findings with those of
other members in your learning set.
In order to get more background information on EIP, read pp 351-369 of Marchington
and Wilkinson (2012) and pp 398-409 of Bach (2005) before doing this exercise.
This will prove very helpful in preparing for your presentation at the workshop.
The purpose and impact of EIP
Like all HR practices, EIP is heavily influenced by management’s original objectives
and their willingness to invest in its success thereafter. We have already seen how EIP
is elastic, capable of performing quite differently in organizations even if it has the
same name. So, for example, team briefing at one firm might be well-supported and
resourced, take place regularly and according to schedule, be managed in a way which
encourages workers to discuss ideas, and fit in with other components of EIP and
HRM. At another organization, it might be treated as an unnecessary waste of time,
be cancelled frequently, lack any support from senior management, and be seen as the
latest fad and fashion to be installed in the organization. Think back to the material you
covered in the OB Unit to see how this might be linked with organizational cultures.
The overall purpose of EIP from a management perspective is to improve productivity,
quality and customer service but sub-goals can vary substantially. Some of the most
common are:
1) Informing and ‘educating’ workers about organizational plans and the reasoning
behind them. Its purpose here is to inform employees about issues which may or
may not be important to them in the expectation it will lead to improvements in
120
Activity Seven
Which of the EIP practices discussed above and in the literature are used in your own
organization? How long have they been in existence, how well do they work and
what do most people think of them? Do most employees believe they are valuable
and worthwhile or do they think that they are a waste of time? Does this vary
between EIP practices?
Use the terminology of downward communications, upward problem-solving,
task-based participation and team-working, indirect participation and financial
participation used in the set readings, and compare your findings with those of
other members in your learning set.
In order to get more background information on EIP, read pp 403-20 of Marchington
and Wilkinson (2008) and pp 398-409 of Bach (2005) before doing this exercise.
This will prove very helpful in preparing for your presentation at the workshop.
The purpose and impact of EIP
Like all HR practices, EIP is heavily influenced by management’s original objectives
and their willingness to invest in its success thereafter. We have already seen how EIP
is elastic, capable of performing quite differently in organizations even if it has the
same name. So, for example, team briefing at one firm might be well-supported and
resourced, take place regularly and according to schedule, be managed in a way which
encourages workers to discuss ideas, and fit in with other components of EIP and
HRM. At another organization, it might be treated as an unnecessary waste of time,
be cancelled frequently, lack any support from senior management, and be seen as the
latest fad and fashion to be installed in the organization. Think back to the material you
covered in the OB Unit to see how this might be linked with organizational cultures.
The overall purpose of EIP from a management perspective is to improve productivity,
quality and customer service but sub-goals can vary substantially. Some of the most
common are:
1) Informing and ‘educating’ workers about organizational plans and the reasoning
behind them. Its purpose here is to inform employees about issues which may or
may not be important to them in the expectation it will lead to improvements in
120
 attitudes, behavior and performance; this may be seen positively as a sign of open
management styles or regarded as little more than an attempt to indoctrinate
workers so they support management ideas.
2) Collecting ideas from employees about how to improve work processes and
methods. This could be via problem-solving groups or quality circles, or just
through employees being prepared to offer recommendations just because
managers seem genuinely interested in listening to them. An alternative
perspective is that workers feel negative because management is felt to be
‘stealing’ their ideas for free.
3) Enhancing loyalty and commitment to the organization. It is argued that workers
are likely to be more satisfied and have a more positive psychological contract
if they have positive experiences of EIP. This occurs as a result of being provided
with more information about company plans and an opportunity to take part
in problem-solving groups and other forms of EIP such as team-working. If
managers are not seen to be genuine in their motives, workers might feel they
have been duped.
4) Reducing labour turnover and absenteeism. Opportunities provided via EIP can
encourage employees to engage more fully with their work, come in rather than
take days off and remain with their employer rather than constantly looking
for alternative jobs. According to government data in the UK, a more engaged
workforce is typically seen as correlated with lower levels of quits and higher
levels of attendance at work. But if employees’ experience of EIP is negative and
it is seen as little more than a platform for management to tell workers what to
do, this may backfire.
5) Gaining co-operation for change. This is likely to be higher if workers and/or their
representatives have been part of the decision-making process in some way. This
is because people are more likely to accept change if they are fully aware of the
reasons for it, and they feel that they have been consulted about the options.
But, if employee views are consistently disregarded, negative reactions and
apathy might emerge instead.
121
attitudes, behavior and performance; this may be seen positively as a sign of open
management styles or regarded as little more than an attempt to indoctrinate
workers so they support management ideas.
2) Collecting ideas from employees about how to improve work processes and
methods. This could be via problem-solving groups or quality circles, or just
through employees being prepared to offer recommendations just because
managers seem genuinely interested in listening to them. An alternative
perspective is that workers feel negative because management is felt to be
‘stealing’ their ideas for free.
3) Enhancing loyalty and commitment to the organization. It is argued that workers
are likely to be more satisfied and have a more positive psychological contract
if they have positive experiences of EIP. This occurs as a result of being provided
with more information about company plans and an opportunity to take part
in problem-solving groups and other forms of EIP such as team-working. If
managers are not seen to be genuine in their motives, workers might feel they
have been duped.
4) Reducing labour turnover and absenteeism. Opportunities provided via EIP can
encourage employees to engage more fully with their work, come in rather than
take days off and remain with their employer rather than constantly looking
for alternative jobs. According to government data in the UK, a more engaged
workforce is typically seen as correlated with lower levels of quits and higher
levels of attendance at work. But if employees’ experience of EIP is negative and
it is seen as little more than a platform for management to tell workers what to
do, this may backfire.
5) Gaining co-operation for change. This is likely to be higher if workers and/or their
representatives have been part of the decision-making process in some way. This
is because people are more likely to accept change if they are fully aware of the
reasons for it, and they feel that they have been consulted about the options.
But, if employee views are consistently disregarded, negative reactions and
apathy might emerge instead.
121
 6) Complying with external regulations. In contrast to the reasons specified above,
this is sometimes the only reason why employers implement forms of EIP. In this
situation, employers are unlikely to put any effort into making systems work and
feel resentful they have been forced to do something against their will. On the
other hand, following the introduction of a scheme, management might actually
see some benefits; concrete experience sometimes proves less scary than prior
anticipation.
6) Complying with external regulations. In contrast to the reasons specified above,
this is sometimes the only reason why employers implement forms of EIP. In this
situation, employers are unlikely to put any effort into making systems work and
feel resentful they have been forced to do something against their will. On the
other hand, following the introduction of a scheme, management might actually
see some benefits; concrete experience sometimes proves less scary than prior
anticipation.

Further reading Further reading

Take a look at the chapter by John Purcell and Konstantinos Georgiadis in Freeman, Take a look at the chapter by John Purcell and Konstantinos Georgiadis in Freeman,
Boxall and Haynes edited book, What workers say: employee voice in the Anglo- Boxall and Haynes edited book, What workers say: employee voice in the Anglo-
American workplace, Cornell University Press, 2007. This questions what employers American workplace, Cornell University Press, 2007. This questions what employers
might gain (or lose) from implementing employee involvement and participation. might gain (or lose) from implementing employee involvement and participation.

We have already mentioned that even the same forms of EIP – such as briefing groups
- might vary quite substantially both in terms of format and interpretation by the
actors involved. Differing management objectives for EIP provides a large part of this
explanation as expectations are often set by initial experiences. Have a look at Table
4 below (which is also in Bach, 2005, p 408 in a slightly different form) and consider
the differences in the terminology applied to EIP under the ‘bouquets’ and ‘brickbats’
columns.
We have already mentioned that even the same forms of EIP – such as briefing groups
- might vary quite substantially both in terms of format and interpretation by the
actors involved. Differing management objectives for EIP provides a large part of this
explanation as expectations are often set by initial experiences. Have a look at Table
4 below (which is also in Bach, 2005, p 408 in a slightly different form) and consider
the differences in the terminology applied to EIP under the ‘bouquets’ and ‘brickbats’
columns.

Table 4: Contrasting Meanings of EIP Table 4: Contrasting Meanings of EIP

Bouquets Brickbats Bouquets Brickbats

Educating Indoctrinating Educating Indoctrinating

Empowering Emasculating Empowering Emasculating
Liberating Controlling Liberating Controlling
Delayering Intensifying work Delayering Intensifying work
Teamwork Peer group pressure Teamwork Peer group pressure
Responsibility Surveillance Responsibility Surveillance
Blame-free culture Identification of errors Blame-free culture Identification of errors
Commitment Compliance Commitment Compliance

122 122
Think back to the previous section where we introduced the notion of bundles of
HR practices which combined together to produce better outcomes. This idea also
applies to EIP, and it is important to utilize the most appropriate mix of practices that
are relevant for each organization and workplace. Clearly this can vary depending on
context. For example, the product market environment within which the organization
operates sets parameters for the choice of EIP system, and in this context it is likely
that a quality enhancement employer would go for a wider range of more progressive
and empowering types of EIP than would a cost reducer – the latter would not be
particularly interested in EIP other than as a way to control employees and secure
their compliance with organizational goals. Similarly, countries with low power
distance indices would also tend to develop EIP schemes which aimed to devolve
responsibility, encourage teamwork and allow workers to apply their discretion to
improve organizational routines. Other things being equal, large firms are likely to
implement a range of different EIP practices than small ones, unionized organizations
have combinations of both direct and indirect forms of EIP whereas non-union firms
are more likely to focus on direct forms alone, and start-up organizations more likely
to use informal EIP whilst their more mature counterparts are more formalized. This
takes us on to consider how employers might seek to embed EIP in order to increase
its impact and effectiveness.
The idea of embeddedness derives from the work of Granovetter (1985) which
situates economic activity and decision-making within a network of social pressures
and structures. This network of influences includes other components of HRM, the
quality of relationships among staff, and the extent to which management shows
commitment to EIP.
It is evident that different configurations of these pressures will shape the degree of
embeddedness of EIP which are in turn likely to affect the strength of its impact. Recent
work by Cox et al. (2006, 2009) developed ideas about embeddedness to analyse the
breadth and depth of EIP.
Breadth can be measured by the number of EIP practices operating at the workplace.
Single EIP practices are likely, other things being equal, to have less effect than a
number of practices operating together because they lack reinforcement. They can
be more easily dismissed as ‘bolted-on’ or out of line with other HR practices, and not
123
Think back to the previous section where we introduced the notion of bundles of
HR practices which combined together to produce better outcomes. This idea also
applies to EIP, and it is important to utilize the most appropriate mix of practices that
are relevant for each organization and workplace. Clearly this can vary depending on
context. For example, the product market environment within which the organization
operates sets parameters for the choice of EIP system, and in this context it is likely
that a quality enhancement employer would go for a wider range of more progressive
and empowering types of EIP than would a cost reducer – the latter would not be
particularly interested in EIP other than as a way to control employees and secure
their compliance with organizational goals. Similarly, countries with low power
distance indices would also tend to develop EIP schemes which aimed to devolve
responsibility, encourage teamwork and allow workers to apply their discretion to
improve organizational routines. Other things being equal, large firms are likely to
implement a range of different EIP practices than small ones, unionized organizations
have combinations of both direct and indirect forms of EIP whereas non-union firms
are more likely to focus on direct forms alone, and start-up organizations more likely
to use informal EIP whilst their more mature counterparts are more formalized. This
takes us on to consider how employers might seek to embed EIP in order to increase
its impact and effectiveness.
The idea of embeddedness derives from the work of Granovetter (1985) which
situates economic activity and decision-making within a network of social pressures
and structures. This network of influences includes other components of HRM, the
quality of relationships among staff, and the extent to which management shows
commitment to EIP.
It is evident that different configurations of these pressures will shape the degree of
embeddedness of EIP which are in turn likely to affect the strength of its impact. Recent
work by Cox et al. (2006, 2009) developed ideas about embeddedness to analyse the
breadth and depth of EIP.
Breadth can be measured by the number of EIP practices operating at the workplace.
Single EIP practices are likely, other things being equal, to have less effect than a
number of practices operating together because they lack reinforcement. They can
be more easily dismissed as ‘bolted-on’ or out of line with other HR practices, and not
123
taken seriously by workers. Combinations of EIP provide the potential for employees
to be involved in different ways. For example employees can receive information from
and ask questions of their line managers through team briefings, give their views
on aspects of work via surveys, resolve issues about quality through problem solving
groups and interact with their representatives who can exercise collective influence
at establishment level through meetings with senior managers. Information received
in one forum can be used in others, and influence on decision making at a more senior
level can help to shape employment relations at workplace level. If managers show
they value employee views and share information on a range of issues, this can help
to build trust.
Depth can be assessed, amongst other things, by the frequency with which meetings
take place, the opportunity for employees (or their representatives) to raise issues
and the relevance and importance of subjects considered at meetings. The more
frequently meetings take place, and the more that employees are directly involved in
the process - for example via their contribution to team briefings or to problem-solving
groups - then the more embedded the practice is at workplace level and potentially
the stronger and more positive its association with employee perceptions. Without
regular meetings to discuss views, issues may be forgotten and without opportunities
for upward communication, employees may assume their views are not sincerely
valued. Conversely, regular and frequent use of EIP mechanisms builds up expertise
and familiarity with their operation among managers and employees so both parties
may commit more to and gain more from the process. Survival of the mechanisms
in an organisation over a period of time may indicate commitment to making them
worthwhile and useful. Greater depth reduces the possibility that techniques will be
regarded as superficial.
Cox et al (2006, 2009) used the Workplace Employment Relations Survey (WERS)
data to examine associations between EIP embeddedness and employee outcomes.
It shows that the breadth of EIP had consistently positive and significant associations
with organizational commitment and job satisfaction. Indeed, combinations of EIP
practices had a substantially stronger association with employee perceptions than
single practices alone. The depth of EIP also showed significant positive associations
with organizational commitment and job satisfaction. In short, the more embedded
EIP is within the organization – measured through frequency of meetings, proportion
of staff covered by an EIP practice, or potential influence – the more positive are
124
taken seriously by workers. Combinations of EIP provide the potential for employees
to be involved in different ways. For example employees can receive information from
and ask questions of their line managers through team briefings, give their views
on aspects of work via surveys, resolve issues about quality through problem solving
groups and interact with their representatives who can exercise collective influence
at establishment level through meetings with senior managers. Information received
in one forum can be used in others, and influence on decision making at a more senior
level can help to shape employment relations at workplace level. If managers show
they value employee views and share information on a range of issues, this can help
to build trust.
Depth can be assessed, amongst other things, by the frequency with which meetings
take place, the opportunity for employees (or their representatives) to raise issues
and the relevance and importance of subjects considered at meetings. The more
frequently meetings take place, and the more that employees are directly involved in
the process - for example via their contribution to team briefings or to problem-solving
groups - then the more embedded the practice is at workplace level and potentially
the stronger and more positive its association with employee perceptions. Without
regular meetings to discuss views, issues may be forgotten and without opportunities
for upward communication, employees may assume their views are not sincerely
valued. Conversely, regular and frequent use of EIP mechanisms builds up expertise
and familiarity with their operation among managers and employees so both parties
may commit more to and gain more from the process. Survival of the mechanisms
in an organisation over a period of time may indicate commitment to making them
worthwhile and useful. Greater depth reduces the possibility that techniques will be
regarded as superficial.
Cox et al (2006, 2009) used the Workplace Employment Relations Survey (WERS)
data to examine associations between EIP embeddedness and employee outcomes.
It shows that the breadth of EIP had consistently positive and significant associations
with organizational commitment and job satisfaction. Indeed, combinations of EIP
practices had a substantially stronger association with employee perceptions than
single practices alone. The depth of EIP also showed significant positive associations
with organizational commitment and job satisfaction. In short, the more embedded
EIP is within the organization – measured through frequency of meetings, proportion
of staff covered by an EIP practice, or potential influence – the more positive are
124
levels of organizational commitment and job satisfaction. Testing separately for links
between depth of direct EIP and indirect EIP and employee perceptions showed that
additive combinations of direct EIP that were embedded in the workplace had positive
and statistically significant associations with both organizational commitment and
job satisfaction. This suggests that worker attitudes are more positive if EIP practices
have a close and immediate impact on them. Of course, we might not be convinced
by such data because it focuses solely on psychological involvement and it does not
examine the link between EIP and measures of organizational performance such as
productivity, quality and profitability. On the other hand, we should not forget that
some of these measures are open to influence from forces – such as MNC strategies,
exchange rate fluctuations and global recession - which are way beyond the control of
individual employees.
Activity Eight
Review your conclusions to activity seven in the light of this additional material
about management objectives and the extent to which EIP is embedded within your
organizations.
Before doing this, take a look at the case studies on pp 350-370 in Marchington and
Wilkinson to see how multiple forms of EIP – such as downward communications
and social partnership - can co-exist in organizations and the extent to which they
mesh together. Also read pp 409-17 in Bach (2005) and Cox et al (2009), ‘Employee
involvement and participation: developing the concept of institutional embeddedness
using WERS 2004, International Journal of Human Resource Management, Vol 20(10),
pp 2150-68 to reinforce your understanding of these issues.
The role of line managers in implementing formal and informal EIP
Most analyses have examined formal systems of direct, indirect and financial EIP, and
hardly any attention has been paid to informal EIP. Public policy has focused almost
exclusively on toplevel and/or potentially powerful institutions – such as collective
bargaining and works councils - that are designed specifically to counteract unilateral
management power within organizations or across an industry. The literature has
likewise addressed all three forms of EIP mentioned above, so most definitions refer to
methods, mechanisms and structures rather than processes and faceto- face dialogue.
Strauss (1998, p15) specifically defines informal EIP as ‘the day-to-day relations between
125
levels of organizational commitment and job satisfaction. Testing separately for links
between depth of direct EIP and indirect EIP and employee perceptions showed that
additive combinations of direct EIP that were embedded in the workplace had positive
and statistically significant associations with both organizational commitment and
job satisfaction. This suggests that worker attitudes are more positive if EIP practices
have a close and immediate impact on them. Of course, we might not be convinced
by such data because it focuses solely on psychological involvement and it does not
examine the link between EIP and measures of organizational performance such as
productivity, quality and profitability. On the other hand, we should not forget that
some of these measures are open to influence from forces – such as MNC strategies,
exchange rate fluctuations and global recession - which are way beyond the control of
individual employees.
Activity Eight
Review your conclusions to activity seven in the light of this additional material
about management objectives and the extent to which EIP is embedded within your
organizations.
Before doing this, take a look at the case studies on pp 407-17 in Marchington and
Wilkinson to see how multiple forms of EIP – such as downward communications
and social partnership - can co-exist in organizations and the extent to which they
mesh together. Also read pp 409-17 in Bach (2005) and Cox et al (2009), ‘Employee
involvement and participation: developing the concept of institutional embeddedness
using WERS 2004, International Journal of Human Resource Management, Vol 20(10),
pp 2150-68 to reinforce your understanding of these issues.
The role of line managers in implementing formal and informal EIP
Most analyses have examined formal systems of direct, indirect and financial EIP, and
hardly any attention has been paid to informal EIP. Public policy has focused almost
exclusively on toplevel and/or potentially powerful institutions – such as collective
bargaining and works councils - that are designed specifically to counteract unilateral
management power within organizations or across an industry. The literature has
likewise addressed all three forms of EIP mentioned above, so most definitions refer to
methods, mechanisms and structures rather than processes and faceto- face dialogue.
Strauss (1998, p15) specifically defines informal EIP as ‘the day-to-day relations between
125
supervisors and subordinates in which the latter are allowed substantial input into
decisions…a process which allows workers to exert some influence over their work and
the conditions under which they work.’ In other words, this relates to the interactions
between managers and workers that take place outside of formal structures and
would not be recorded in studies examining the extensiveness or success of formal
mechanisms.
We know from studies across HRM that there are often huge gaps between what
employers intend and how well this is implemented. This literature suggests there are
major obstacles to the implementation of formal EIP because of contextual factors. For
example, pressures of work brought about by sudden surges in customer demand - as
in a supermarket, a restaurant or a hotel - can restrict opportunities to hold scheduled
meetings, as too can requirements to have at least a proportion of staff available
to deal with telephone or other queries. Similarly, organizations that employ large
numbers of part-time or temporary workers find it hard to schedule formal problem
solving groups or team briefings, thus requiring multiple meetings over a period of
weeks to ensure all workers get the chance to attend. Operational pressures such as
these are acutely apparent in customer-facing organizations such as hotels, shops and
airports, and they have clear implications for both formal and informal EIP.
There are also problems with regard to line management commitment and ability.
Front-line managers may not implement schemes as intended, leading to potential
inconsistencies between different sub-units in how formal EIP is put into effect and
perceived by employees. They may also lack the skills and/or the commitment to
involve their subordinates, thus limiting the value of any information passed on to
staff or reducing their opportunity to contribute to decisions.
Moreover, line managers are often inadequately trained in HRM and EIP to embed this
effectively at the workplace, and their appraisals tend not to include EIP – or indeed
any aspect of HRM – as a key performance indicator. Furthermore, inconsistencies
can also arise because managers enjoy having the flexibility to decide which staff
to involve in discussions; those that are trusted tend to be involved whilst others are
ignored.
126
supervisors and subordinates in which the latter are allowed substantial input into
decisions…a process which allows workers to exert some influence over their work and
the conditions under which they work.’ In other words, this relates to the interactions
between managers and workers that take place outside of formal structures and
would not be recorded in studies examining the extensiveness or success of formal
mechanisms.
We know from studies across HRM that there are often huge gaps between what
employers intend and how well this is implemented. This literature suggests there are
major obstacles to the implementation of formal EIP because of contextual factors. For
example, pressures of work brought about by sudden surges in customer demand - as
in a supermarket, a restaurant or a hotel - can restrict opportunities to hold scheduled
meetings, as too can requirements to have at least a proportion of staff available
to deal with telephone or other queries. Similarly, organizations that employ large
numbers of part-time or temporary workers find it hard to schedule formal problem
solving groups or team briefings, thus requiring multiple meetings over a period of
weeks to ensure all workers get the chance to attend. Operational pressures such as
these are acutely apparent in customer-facing organizations such as hotels, shops and
airports, and they have clear implications for both formal and informal EIP.
There are also problems with regard to line management commitment and ability.
Front-line managers may not implement schemes as intended, leading to potential
inconsistencies between different sub-units in how formal EIP is put into effect and
perceived by employees. They may also lack the skills and/or the commitment to
involve their subordinates, thus limiting the value of any information passed on to
staff or reducing their opportunity to contribute to decisions.
Moreover, line managers are often inadequately trained in HRM and EIP to embed this
effectively at the workplace, and their appraisals tend not to include EIP – or indeed
any aspect of HRM – as a key performance indicator. Furthermore, inconsistencies
can also arise because managers enjoy having the flexibility to decide which staff
to involve in discussions; those that are trusted tend to be involved whilst others are
ignored.
126
Accordingly, formal mechanisms can never be sufficient on their own to embed EIP at
the workplace or ensure that workers believe it is meaningful. Without active support
from line managers formal voice systems may fall by the wayside or have little meaning
for workers whose voice they are trying to capture. It is through informal interactions
that workers are more likely to hear about new developments in work organization
and have greater opportunities to influence their manager. This is also attractive to
line managers because it provides them with opportunities to explain issues directly
to workers and some choice about whether or not to accept their ideas, and it also
allows them to develop closer relationships with some employees more than with
others. Workers also appear to like informal voice. Surveys have shown that one-to-
one meetings and informal discussions prove much more useful than arms-length
forms of communication such as newsletters or notice boards. Instead EIP is likely to
be most meaningful when it occurs on a personal, face-to-face basis, generating two-
way discussion between the parties. It is also suggested that even though the same
formal structures may be present, it is the way in which these are implemented, if they
run at all, which impacts on employees.
In the situation where no formal mechanisms exist, line managers are required
to promote an environment that encourages employees to take an active role in
improving their work practices. Leader-member exchange (LMX) theory is particularly
appropriate for examining informal EIP because it focuses explicitly on how reciprocal
relationships evolve and are sustained in an environment where delegation to, and
increased autonomy for, staff is being pursued (Gerstner and Day, 1997). Research into
LMX suggests that positive outcomes flow from informal EIP because line managers
empower employees in exchange for high levels of performance or organizational
citizenship behaviours; in these situations, both parties report higher levels of
job satisfaction and work performance. Furthermore, when employees feel well-
supported by their front-line managers they are likely to reciprocate with higher levels
of commitment to these managers rather than to the organization as a whole.
Just think about it: try to identify a manager who, in your experience, has been able
to get you to work harder and produce more ideas by their style. Then, categorize
their behaviours and see to what extent this has been due to active attempts to
involve you in what goes on.
127
Accordingly, formal mechanisms can never be sufficient on their own to embed EIP at
the workplace or ensure that workers believe it is meaningful. Without active support
from line managers formal voice systems may fall by the wayside or have little meaning
for workers whose voice they are trying to capture. It is through informal interactions
that workers are more likely to hear about new developments in work organization
and have greater opportunities to influence their manager. This is also attractive to
line managers because it provides them with opportunities to explain issues directly
to workers and some choice about whether or not to accept their ideas, and it also
allows them to develop closer relationships with some employees more than with
others. Workers also appear to like informal voice. Surveys have shown that one-to-
one meetings and informal discussions prove much more useful than arms-length
forms of communication such as newsletters or notice boards. Instead EIP is likely to
be most meaningful when it occurs on a personal, face-to-face basis, generating two-
way discussion between the parties. It is also suggested that even though the same
formal structures may be present, it is the way in which these are implemented, if they
run at all, which impacts on employees.
In the situation where no formal mechanisms exist, line managers are required
to promote an environment that encourages employees to take an active role in
improving their work practices. Leader-member exchange (LMX) theory is particularly
appropriate for examining informal EIP because it focuses explicitly on how reciprocal
relationships evolve and are sustained in an environment where delegation to, and
increased autonomy for, staff is being pursued (Gerstner and Day, 1997). Research into
LMX suggests that positive outcomes flow from informal EIP because line managers
empower employees in exchange for high levels of performance or organizational
citizenship behaviours; in these situations, both parties report higher levels of
job satisfaction and work performance. Furthermore, when employees feel well-
supported by their front-line managers they are likely to reciprocate with higher levels
of commitment to these managers rather than to the organization as a whole.
Just think about it: try to identify a manager who, in your experience, has been able
to get you to work harder and produce more ideas by their style. Then, categorize
their behaviours and see to what extent this has been due to active attempts to
involve you in what goes on.
127
Given workers, and perhaps most employers, have a preference for informal EIP, the
question then arises as to whether this is likely to be effective on its own, without
any formal structures. In small firms, say those employing less than 25, formal
structures might serve little additional purpose if there are few levels in the hierarchy
and managers are highly visible to employees. However, informality and corridor
conversations, even in the context of a small organization, run the risk of excluding
individuals either because they are not present when the manager walks the shop
floor or they are not part of the inner circle. Variations in the quality of leader-member
exchange could lead to feelings of alienation and lessened levels of commitment from
those workers who do not enjoy close relations. Moreover, a lack of written and formal
communications can lead to inconsistencies in the messages received by different
workers and to variations in their commitment to supervisors and to organizational
goals.
If formal and informal EIP systems operate together, links are bound to exist between
them, irrespective of whether or not this is explicitly intended by senior managers. As
one of the few authors to address this issue, Strauss (1998, p18) suggests two possible
options: (1) that the presence of a formal scheme may encourage informal EIP to develop,
and (2) that formal schemes are more likely to be successful if they are introduced
in an atmosphere of informal EIP. Either way, positive links are anticipated between
them; several studies have confirmed that multiple forms of EIP are complementary
and not mutually exclusive.
Consequently, formal and informal EIP can operate in parallel or sequentially. The
former could occur where different forms of EIP focus on distinct areas and are not
required to interact. For example, formal systems might be used to disseminate
information which must get through to all workers – say, relating to health and safety
or product messages - where there is little need for discussion. The latter could be
used for more complex or potentially difficult issues – such as staff rotas or minor
changes in work organization - that can benefit from face-to-face discussions where
misunderstandings can be addressed directly. If the two systems operate sequentially,
formal EIP offers a safety net so that workers that are absent when an issue is discussed
informally can then catch up on information or offer their views at a team meeting.
In a sense, the formal system provides an audit trail which informal EIP is not able,
nor designed, to do. Alternatively, or perhaps additionally, informal EIP can reinforce
formal structures, used by either party to lubricate the wheels of participation.
128
Given workers, and perhaps most employers, have a preference for informal EIP, the
question then arises as to whether this is likely to be effective on its own, without
any formal structures. In small firms, say those employing less than 25, formal
structures might serve little additional purpose if there are few levels in the hierarchy
and managers are highly visible to employees. However, informality and corridor
conversations, even in the context of a small organization, run the risk of excluding
individuals either because they are not present when the manager walks the shop
floor or they are not part of the inner circle. Variations in the quality of leader-member
exchange could lead to feelings of alienation and lessened levels of commitment from
those workers who do not enjoy close relations. Moreover, a lack of written and formal
communications can lead to inconsistencies in the messages received by different
workers and to variations in their commitment to supervisors and to organizational
goals.
If formal and informal EIP systems operate together, links are bound to exist between
them, irrespective of whether or not this is explicitly intended by senior managers. As
one of the few authors to address this issue, Strauss (1998, p18) suggests two possible
options: (1) that the presence of a formal scheme may encourage informal EIP to develop,
and (2) that formal schemes are more likely to be successful if they are introduced
in an atmosphere of informal EIP. Either way, positive links are anticipated between
them; several studies have confirmed that multiple forms of EIP are complementary
and not mutually exclusive.
Consequently, formal and informal EIP can operate in parallel or sequentially. The
former could occur where different forms of EIP focus on distinct areas and are not
required to interact. For example, formal systems might be used to disseminate
information which must get through to all workers – say, relating to health and safety
or product messages - where there is little need for discussion. The latter could be
used for more complex or potentially difficult issues – such as staff rotas or minor
changes in work organization - that can benefit from face-to-face discussions where
misunderstandings can be addressed directly. If the two systems operate sequentially,
formal EIP offers a safety net so that workers that are absent when an issue is discussed
informally can then catch up on information or offer their views at a team meeting.
In a sense, the formal system provides an audit trail which informal EIP is not able,
nor designed, to do. Alternatively, or perhaps additionally, informal EIP can reinforce
formal structures, used by either party to lubricate the wheels of participation.
128
There is little doubt that EIP, in whichever forms it appears, has the potential to
engage employees beyond the traditional aspects of the employment contract. It also
provides employers with an opportunity to improve work processes and organizational
performance that would not be available from more overt, direct control mechanisms
policed strictly by line managers. However, not all observers agree with this potential
win-win scenario. EIP is criticized as subject to the whims of management, who
retain control over the subject matter and degree of involvement, rarely allowing
opportunities for employees to shape the agenda. It could also be argued that EIP is
merely a ‘soft’ but manipulative control mechanism, designed by managers to gain
greater influence over the workforce. Even if this is the case, however, supporters of
EIP argue that it is preferable for employees to experience subtle control rather than
the bureaucratic or autocratic methods of Taylorist work organization – as we saw in
the OB section of the PMO module.
Activity Nine
One question we will cover at the workshop relates to the factors which act as
barriers to effective EIP and those that promote the chances of its success. Drawing
upon this section of the workbook, other material on HRM and management in
general - as well as your own experience - list five success factors for effective EIP
and five barriers to its implementation.
Read the paper by Bruce Kaufman, ‘High-level employee involvement at Delta
Airlines’, Human Resource Management, Vol 42(2), pp 175-90, 2003 and the chapter
by George Strauss in Heller et al’s book, Organizational Participation: myth and
reality, Oxford University Press, 1998 (Chapter 6)to aid your task.
On reflection
Section 3 has provided an overview of the principal ways in which employee involvement
and participation (EIP) may operate within organizations. One of the most important
things to note is that EIP can take a whole range of forms and can vary substantially
from one organization to another depending on management choice and institutional/
legal arrangements. Even when a particular practice has the same name (for example,
team briefing) it can still vary between workplaces and organizations depending
on the extent to which it is embedded and integrated into other HR practices and
organizational routines. Employers that take EIP seriously make strenuous efforts to
129
There is little doubt that EIP, in whichever forms it appears, has the potential to
engage employees beyond the traditional aspects of the employment contract. It also
provides employers with an opportunity to improve work processes and organizational
performance that would not be available from more overt, direct control mechanisms
policed strictly by line managers. However, not all observers agree with this potential
win-win scenario. EIP is criticized as subject to the whims of management, who
retain control over the subject matter and degree of involvement, rarely allowing
opportunities for employees to shape the agenda. It could also be argued that EIP is
merely a ‘soft’ but manipulative control mechanism, designed by managers to gain
greater influence over the workforce. Even if this is the case, however, supporters of
EIP argue that it is preferable for employees to experience subtle control rather than
the bureaucratic or autocratic methods of Taylorist work organization – as we saw in
the OB section of the PMO module.
Activity Nine
One question we will cover at the workshop relates to the factors which act as
barriers to effective EIP and those that promote the chances of its success. Drawing
upon this section of the workbook, other material on HRM and management in
general - as well as your own experience - list five success factors for effective EIP
and five barriers to its implementation.
Read the paper by Bruce Kaufman, ‘High-level employee involvement at Delta
Airlines’, Human Resource Management, Vol 42(2), pp 175-90, 2003 and the chapter
by George Strauss in Heller et al’s book, Organizational Participation: myth and
reality, Oxford University Press, 1998 (Chapter 6)to aid your task.
On reflection
Section 3 has provided an overview of the principal ways in which employee involvement
and participation (EIP) may operate within organizations. One of the most important
things to note is that EIP can take a whole range of forms and can vary substantially
from one organization to another depending on management choice and institutional/
legal arrangements. Even when a particular practice has the same name (for example,
team briefing) it can still vary between workplaces and organizations depending
on the extent to which it is embedded and integrated into other HR practices and
organizational routines. Employers that take EIP seriously make strenuous efforts to
129
ensure it fits with other components of HRM, it is given management support – at ensure it fits with other components of HRM, it is given management support – at
both a senior level and through front-line managers - to make it work effectively, and both a senior level and through front-line managers - to make it work effectively, and
that it is able to gain the commitment of all employees. that it is able to gain the commitment of all employees.

The key messages to emerge from this section are that: The key messages to emerge from this section are that:

1) EIP needs to be analyzed in terms of degree, scope, level and form in order to 1) EIP needs to be analyzed in terms of degree, scope, level and form in order to
evaluate how it might work in practice and what it can be expected to achieve. evaluate how it might work in practice and what it can be expected to achieve.
Without this, EIP is likely to drift. Without this, EIP is likely to drift.

2) EIP can only be assessed in terms of management objectives and those of other 2) EIP can only be assessed in terms of management objectives and those of other
stakeholders, and not evaluated against impossible expectations. If EIP is not stakeholders, and not evaluated against impossible expectations. If EIP is not
expected to transform how the organization functions, it is illogical to dismiss it expected to transform how the organization functions, it is illogical to dismiss it
as a con and/or a failure because it does not achieve a major shift in power. as a con and/or a failure because it does not achieve a major shift in power.

3) As with other components of HRM, EIP needs the active support of line 3) As with other components of HRM, EIP needs the active support of line
managers. This is obvious in terms of direct involvement which relies heavily on managers. This is obvious in terms of direct involvement which relies heavily on
line managers for its implementation, but also it is important to ensure that line line managers for its implementation, but also it is important to ensure that line
managers promote indirect/representative schemes through their actions. managers promote indirect/representative schemes through their actions.

Below are a few questions to guide your reflection on the third part of Unit Two: Below are a few questions to guide your reflection on the third part of Unit Two:

1) Outline what is meant by EIP? Compare and contrast the different forms it can 1) Outline what is meant by EIP? Compare and contrast the different forms it can
take, and examine the impact these are likely to have in practice. take, and examine the impact these are likely to have in practice.

2) Review the effectiveness of EIP at your own organization or one with which you 2) Review the effectiveness of EIP at your own organization or one with which you
are familiar. Using examples indicate how existing EIP systems and practices be are familiar. Using examples indicate how existing EIP systems and practices be
improved and identify measures to evaluate its effectiveness. improved and identify measures to evaluate its effectiveness.

3) Who gains what from EIP? Provide examples from different organizations in a 3) Who gains what from EIP? Provide examples from different organizations in a
range of sectors and/or countries to illustrate your answer. range of sectors and/or countries to illustrate your answer.

130 130
Section 4: Reward Management
Reward management in context
Reward management is one of the most important aspects of HRM. It is also one of
the most contentious and difficult areas to manage because it goes right to the heart
of the employment relationship. In simple terms, it could be argued that employers
typically want to keep pay down so as to control costs whilst employees want it to
rise so as to provide them with enough money to spend outside of work. Indeed, this
is how most observers would see pay issues because this is how it is portrayed in
the media, say in the lead-up to or during a strike over pay which is often resolved
by the parties splitting the difference or trading issues so as to maintain face. For
example, an employer might refuse to increase base pay but agree to workers having
the chance to earn additional money provided they perform to a certain level, whilst
the trade union might be able to claim credit for reduced working hours and/or gains
in holiday entitlement which increase the value of the overall package. In addition to
being concerned with pay, reward management also incorporates a range of other
financial and non-financial components as well. The list is long but it could include:
one-off bonus payments, profit-sharing, employee share schemes, pensions, holiday
entitlement, working hours, prizes, more interesting tasks and greater discretion at
work.
It should also be apparent from this list that reward management is not as
straightforward as it first appears and is much more than a zero sum game whereby
employers gain only at the expense of employees – and vice versa. Most employers
are not interested solely in keeping wages as low as possible and most employees are
interested in more than high levels of short-term compensation alone. Of course some
are. On the employer side, firms that are competing on the basis of cost reduction
have little option but to keep wages as low as they can get away with – provided
they can attract sufficient labour. On the employee side, it would appear that some
professional footballers are keen only on enhancing their own worth and perhaps
many traders in the city only have their sights set on earning as much as possible in
a short space of time without any concern for other workers. However, in most cases,
things are much more complicated as Table 5 shows.
131
Section 4: Reward Management
Reward management in context
Reward management is one of the most important aspects of HRM. It is also one of
the most contentious and difficult areas to manage because it goes right to the heart
of the employment relationship. In simple terms, it could be argued that employers
typically want to keep pay down so as to control costs whilst employees want it to
rise so as to provide them with enough money to spend outside of work. Indeed, this
is how most observers would see pay issues because this is how it is portrayed in
the media, say in the lead-up to or during a strike over pay which is often resolved
by the parties splitting the difference or trading issues so as to maintain face. For
example, an employer might refuse to increase base pay but agree to workers having
the chance to earn additional money provided they perform to a certain level, whilst
the trade union might be able to claim credit for reduced working hours and/or gains
in holiday entitlement which increase the value of the overall package. In addition to
being concerned with pay, reward management also incorporates a range of other
financial and non-financial components as well. The list is long but it could include:
one-off bonus payments, profit-sharing, employee share schemes, pensions, holiday
entitlement, working hours, prizes, more interesting tasks and greater discretion at
work.
It should also be apparent from this list that reward management is not as
straightforward as it first appears and is much more than a zero sum game whereby
employers gain only at the expense of employees – and vice versa. Most employers
are not interested solely in keeping wages as low as possible and most employees are
interested in more than high levels of short-term compensation alone. Of course some
are. On the employer side, firms that are competing on the basis of cost reduction
have little option but to keep wages as low as they can get away with – provided
they can attract sufficient labour. On the employee side, it would appear that some
professional footballers are keen only on enhancing their own worth and perhaps
many traders in the city only have their sights set on earning as much as possible in
a short space of time without any concern for other workers. However, in most cases,
things are much more complicated as Table 5 shows.
131
Table 5: Employer and employee objectives in reward management Table 5: Employer and employee objectives in reward management

Employer objectives Employee objectives Employer objectives Employee objectives

• Affordability and ability to pay
depending on corporate needs
• Recruiting and retaining staff
of the right quality to enhance
performance
• Purchasing power and ability to
live in a way which meets personal
needs
• Recognition of one’s ability in the
internal and external labour market
• Affordability and ability to pay
depending on corporate needs
• Recruiting and retaining staff
of the right quality to enhance
performance
• Purchasing power and ability to
live in a way which meets personal
needs
• Recognition of one’s ability in the
internal and external labour market

• Motivating staff to perform at the • Feeling that paid fair rate for job in • Motivating staff to perform at the • Feeling that paid fair rate for job in
expected level over time comparison with effort expended expected level over time comparison with effort expended

• Driving cultural change in the • Having some degree of security • Driving cultural change in the • Having some degree of security
organization about level of future rewards organization about level of future rewards

Approaches to reward management can vary depending on the type of worker
involved, the type of organization and its market context, and over time. There can
also be variations between countries depending on legislation, culture and trade
union presence. For example, whilst employers might be particularly interested in
affordability for large occupational groups that are easy to recruit and replace, they
are more willing to offer rewards packages way above the norm for workers who are
seen as rare, valuable and hard to substitute (look back at Section 2 of this Unit if
you need a reminder about (RBV). Similarly some employers might be keen to pay
large bonuses in order to meet short-term targets, whilst others are more bothered
about the long-term contribution of staff to sustain long-term growth over a number
of years. As ever, much depends on the employers’ product market position and the
interest they have in achieving low cost or high quality products and services. Levels
of pay also vary depending on economic factors, both at a global and local level, and in
some cases pay might actually decrease – either overtly through salary reductions or
by reducing working hours (and pay) to survive through a downturn.
Approaches to reward management can vary depending on the type of worker
involved, the type of organization and its market context, and over time. There can
also be variations between countries depending on legislation, culture and trade
union presence. For example, whilst employers might be particularly interested in
affordability for large occupational groups that are easy to recruit and replace, they
are more willing to offer rewards packages way above the norm for workers who are
seen as rare, valuable and hard to substitute (look back at Section 2 of this Unit if
you need a reminder about (RBV). Similarly some employers might be keen to pay
large bonuses in order to meet short-term targets, whilst others are more bothered
about the long-term contribution of staff to sustain long-term growth over a number
of years. As ever, much depends on the employers’ product market position and the
interest they have in achieving low cost or high quality products and services. Levels
of pay also vary depending on economic factors, both at a global and local level, and in
some cases pay might actually decrease – either overtly through salary reductions or
by reducing working hours (and pay) to survive through a downturn.

Reward management systems also vary between countries (Rubery and Grimshaw,
2003). In some, it is felt that pay should be related to seniority and that long service
is celebrated (as was typically the case in China), whilst in others a short-term bonus
culture is regarded as the norm (as is typically the case for expatriates in some Gulf
states). In countries where trade unions have a strong presence and there is legal
regulation of wages – such as the national minimum wage and equal pay for work
Reward management systems also vary between countries (Rubery and Grimshaw,
2003). In some, it is felt that pay should be related to seniority and that long service
is celebrated (as was typically the case in China), whilst in others a short-term bonus
culture is regarded as the norm (as is typically the case for expatriates in some Gulf
states). In countries where trade unions have a strong presence and there is legal
regulation of wages – such as the national minimum wage and equal pay for work

132 132
of equal value – employers and employees expect fairness to be central to systems of
reward management. This is likely to matter less in countries with limited regulation,
as differentials between grades would typically be much larger. However, in this
context, pay systems would be rather more chaotic and open to inconsistencies
between individuals in the same occupational group.
A key issue when devising reward management systems and setting pay and benefits
is the notion of equity. This takes two forms, external and internal, and of course the
two are inter-linked.
External equity refers to the overall rate for the job in comparison to that paid in other
organizations with which the employer competes for labour. It is clearly critical to
set this at the right level because if it is too low, current staff may decide to leave for
better rates elsewhere and the organization is likely to face major problems attracting
new starters and/or replacements for those that leave. This is not just a matter of
headline pay alone however – though this is what people often see when they look
for other jobs – but also the range of other benefits that might accrue from working
at an organization.
So, even though base rates might be lower than at a competitor, the existing employer
might still be able to retain staff because of other inducements such as higher bonuses,
more suitable working hours and greater promotion opportunities. However, workers
are also influenced by other factors which have nothing to do with employer policies,
and may decide to move (or stay) because of family commitments, easier travel-to-
work arrangements, or just plain laziness to engage in a job search. Moreover some
workers might be prepared to accept lower compensation packages than are available
in the external labour market because of moral or ethical concerns about who they
work for – such as doctors that have chosen to work in Africa or skilled professionals
who prefer to work for a charity, knowing full well that they are not earning as much
as their counterparts employed by commercial firms.
If labour turnover rates are low and it proves possible to recruit sufficiently well-
qualified staff from the external market, then employers may decide to leave things
as they are. Typically, however, those organizations which are seeking to improve their
133
of equal value – employers and employees expect fairness to be central to systems of
reward management. This is likely to matter less in countries with limited regulation,
as differentials between grades would typically be much larger. However, in this
context, pay systems would be rather more chaotic and open to inconsistencies
between individuals in the same occupational group.
A key issue when devising reward management systems and setting pay and benefits
is the notion of equity. This takes two forms, external and internal, and of course the
two are inter-linked.
External equity refers to the overall rate for the job in comparison to that paid in other
organizations with which the employer competes for labour. It is clearly critical to
set this at the right level because if it is too low, current staff may decide to leave for
better rates elsewhere and the organization is likely to face major problems attracting
new starters and/or replacements for those that leave. This is not just a matter of
headline pay alone however – though this is what people often see when they look
for other jobs – but also the range of other benefits that might accrue from working
at an organization.
So, even though base rates might be lower than at a competitor, the existing employer
might still be able to retain staff because of other inducements such as higher bonuses,
more suitable working hours and greater promotion opportunities. However, workers
are also influenced by other factors which have nothing to do with employer policies,
and may decide to move (or stay) because of family commitments, easier travel-to-
work arrangements, or just plain laziness to engage in a job search. Moreover some
workers might be prepared to accept lower compensation packages than are available
in the external labour market because of moral or ethical concerns about who they
work for – such as doctors that have chosen to work in Africa or skilled professionals
who prefer to work for a charity, knowing full well that they are not earning as much
as their counterparts employed by commercial firms.
If labour turnover rates are low and it proves possible to recruit sufficiently well-
qualified staff from the external market, then employers may decide to leave things
as they are. Typically, however, those organizations which are seeking to improve their
133
position will try to find ways to refresh their existing workforce and gain information
about market rates paid elsewhere through benchmarking and/or pay clubs across an
industry.
For those at the bottom end of the market, external equity is achieved through
minimum pay levels for particular jobs and age groups, and even in relatively low
pay occupations – such as check-out operators in supermarkets – some firms seek to
differentiate themselves from the competition by paying above the required minimum
so as to attract and retain higher quality staff. Alternatively, some public sector
employers have outsourced cleaning, catering and care worker contracts to external
providers that are able and prepared to pay less, some of whom even refuse to pay for
the time spent travelling between tasks.
Internal equity refers to the way in which rewards vary within an organization, both
between occupational groups and between individuals in the same roles. This has
recently become a more heated topic given concerns over overall pay packages
of top business leaders, especially when they have presided over a period of poor
performance by their firms. It is also reflected in public outrage in many developed
countries about the bonuses received by investment bankers at a time when ordinary
workers are losing jobs – for example in the USA – and seeing pay cuts in order to help
their economies out of recession. This is even apparent in the public sector; in the UK,
for example, Will Hutton is chairing an investigation into whether or not the pay of
top public servants should be capped at no more than twenty times the minimum rate
in the organizations they run. This is due to report in 2011.
Whilst these might be headline issues, for many people their main concern is how their
own reward package compares with others in similar or even the same jobs within
the organizational hierarchy. This is often regarded as a major source of unfairness
by workers, and in many ways more immediate than any comparisons with people
earning twenty, fifty or a hundred times what they receive. As we see in the next
part of this section when we look at pay systems, internal equity can refer both to
comparisons of outcomes such as pay and benefits but also to perceived differences in
input and effort; why should someone on the same team who only works half as hard
as me get as much as I do, for example?
134
position will try to find ways to refresh their existing workforce and gain information
about market rates paid elsewhere through benchmarking and/or pay clubs across an
industry.
For those at the bottom end of the market, external equity is achieved through
minimum pay levels for particular jobs and age groups, and even in relatively low
pay occupations – such as check-out operators in supermarkets – some firms seek to
differentiate themselves from the competition by paying above the required minimum
so as to attract and retain higher quality staff. Alternatively, some public sector
employers have outsourced cleaning, catering and care worker contracts to external
providers that are able and prepared to pay less, some of whom even refuse to pay for
the time spent travelling between tasks.
Internal equity refers to the way in which rewards vary within an organization, both
between occupational groups and between individuals in the same roles. This has
recently become a more heated topic given concerns over overall pay packages
of top business leaders, especially when they have presided over a period of poor
performance by their firms. It is also reflected in public outrage in many developed
countries about the bonuses received by investment bankers at a time when ordinary
workers are losing jobs – for example in the USA – and seeing pay cuts in order to help
their economies out of recession. This is even apparent in the public sector; in the UK,
for example, Will Hutton is chairing an investigation into whether or not the pay of
top public servants should be capped at no more than twenty times the minimum rate
in the organizations they run. This is due to report in 2011.
Whilst these might be headline issues, for many people their main concern is how their
own reward package compares with others in similar or even the same jobs within
the organizational hierarchy. This is often regarded as a major source of unfairness
by workers, and in many ways more immediate than any comparisons with people
earning twenty, fifty or a hundred times what they receive. As we see in the next
part of this section when we look at pay systems, internal equity can refer both to
comparisons of outcomes such as pay and benefits but also to perceived differences in
input and effort; why should someone on the same team who only works half as hard
as me get as much as I do, for example?
134
Attempts to manage internal equity typically take the form of job evaluation systems,
whereby jobs are compared with others in the same organization.
In order to move away from pay levels being determined by immediate supervisors,
and therefore potentially open to unfairness and allegations of preferential treatment
for some workers and not others, a system of factors is used to rank jobs (and job
families) on a scale. In recent years, many job evaluation schemes have changed
considerably to ensure that they do not discriminate on the basis of gender, and are
therefore significantly different from earlier schemes which rated jobs in terms of
strength required or gave more points for technical rather than for caring skills – with
the result that women who were more likely to work in caring jobs were on lower
grades. Now, typical factors included in what is called a points rating system are:
• Experience and qualifications
• Knowledge and skills
• Decision-making activities
• Freedom to act without having to seek supervisory approval
• People management and financial responsibilities
• Communication and networking
• Special aspects of the working environment
• Impact on customers/results of errors
Efforts to remove clear gender bias in job evaluation systems have been driven, at least
in part, by legislation. In the UK, following a strike by sewing machinists at Ford in the
late 1960s, the Equal Pay Act was passed in order to ensure that men and women
doing the same jobs were paid the same rates. Unfortunately this has relatively little
impact as many jobs were (and in some cases, still are) segregated into men’s and
women’s work, and without a direct comparator it was not possible to bring cases
forward. More recent legislation in the UK, promoted by moves across the European
135
Attempts to manage internal equity typically take the form of job evaluation systems,
whereby jobs are compared with others in the same organization.
In order to move away from pay levels being determined by immediate supervisors,
and therefore potentially open to unfairness and allegations of preferential treatment
for some workers and not others, a system of factors is used to rank jobs (and job
families) on a scale. In recent years, many job evaluation schemes have changed
considerably to ensure that they do not discriminate on the basis of gender, and are
therefore significantly different from earlier schemes which rated jobs in terms of
strength required or gave more points for technical rather than for caring skills – with
the result that women who were more likely to work in caring jobs were on lower
grades. Now, typical factors included in what is called a points rating system are:
• Experience and qualifications
• Knowledge and skills
• Decision-making activities
• Freedom to act without having to seek supervisory approval
• People management and financial responsibilities
• Communication and networking
• Special aspects of the working environment
• Impact on customers/results of errors
Efforts to remove clear gender bias in job evaluation systems have been driven, at least
in part, by legislation. In the UK, following a strike by sewing machinists at Ford in the
late 1960s, the Equal Pay Act was passed in order to ensure that men and women
doing the same jobs were paid the same rates. Unfortunately this has relatively little
impact as many jobs were (and in some cases, still are) segregated into men’s and
women’s work, and without a direct comparator it was not possible to bring cases
forward. More recent legislation in the UK, promoted by moves across the European
135
Union, have now required employers to pay men and women the same if their work is
of equal value. This has had some success but it is notable that substantial differences
still exist between the pay levels of men and women. Some of this occurs because more
women work part-time than men, and because women still tend to over-employed in
jobs which are paid at lower rates, but even accounting for that, on average men are
paid more than women for doing the same type of job.
Activity Ten
We have covered a lot of ground here, and no doubt a large number of questions
have been raised. Liaise with the rest of your learning set to compare and contrast
reward management systems in your organizations, paying particular attention to
their objectives and the context in which they are implemented. Look in particular
at issues to do with internal and external equity, and at the gender implications of
reward systems.
In order to support this activity, read pp 371-98 in Marchington and
Wilkinson (2012) plus the chapter by Ian Kessler in John Storey’s edited book, Human
Resource Management: A Critical Text, published by Thomson, 2007. See also the
paper by Damian Grimshaw and Jill Rubery, ‘Undervaluing women’s work’, published
in the Equal Opportunities Commission Working Paper Series, Number 53 (2007).
Types of payment system; theory and practice
We have already seen that reward management has links with other aspects of HRM
and with organizational goals, and this should remind you of earlier material looking
at notions of alignment, integration and consistency. Pay systems do not operate in
a vacuum but are closely dependent on other factors, both in terms of fitting in with
existing cultural norms and in driving change throughout the organization. So, in
other words, choice of pay systems will also vary depending on a range of factors -
such as management objectives, product market and labour market context, type of
occupational group, and national institutions and culture.
Payment systems can be divided into three broad groups. The first are those which
reward employees based on the amount of time they spend at work, calculated for
example as an annual salary or weekly wage. The second are those which reward
individuals for some measure of their performance such as output, service quality
136
Union, have now required employers to pay men and women the same if their work is
of equal value. This has had some success but it is notable that substantial differences
still exist between the pay levels of men and women. Some of this occurs because more
women work part-time than men, and because women still tend to over-employed in
jobs which are paid at lower rates, but even accounting for that, on average men are
paid more than women for doing the same type of job.
Activity Ten
We have covered a lot of ground here, and no doubt a large number of questions
have been raised. Liaise with the rest of your learning set to compare and contrast
reward management systems in your organizations, paying particular attention to
their objectives and the context in which they are implemented. Look in particular
at issues to do with internal and external equity, and at the gender implications of
reward systems.
In order to support this activity, read pp 460-67 and 488-501 in Marchington and
Wilkinson (2008) plus the chapter by Ian Kessler in John Storey’s edited book, Human
Resource Management: A Critical Text, published by Thomson, 2007. See also the
paper by Damian Grimshaw and Jill Rubery, ‘Undervaluing women’s work’, published
in the Equal Opportunities Commission Working Paper Series, Number 53 (2007).
Types of payment system; theory and practice
We have already seen that reward management has links with other aspects of HRM
and with organizational goals, and this should remind you of earlier material looking
at notions of alignment, integration and consistency. Pay systems do not operate in
a vacuum but are closely dependent on other factors, both in terms of fitting in with
existing cultural norms and in driving change throughout the organization. So, in
other words, choice of pay systems will also vary depending on a range of factors -
such as management objectives, product market and labour market context, type of
occupational group, and national institutions and culture.
Payment systems can be divided into three broad groups. The first are those which
reward employees based on the amount of time they spend at work, calculated for
example as an annual salary or weekly wage. The second are those which reward
individuals for some measure of their performance such as output, service quality
136
or achievement of budgetary targets. The third category is group-based pay systems
which reward teams, organizational sub-units or whole companies according to
performance at that level. Whilst there can be ‘pure’ examples of each of these, it is
more likely that payment systems will combine more than one of these categories
– for example, an annual guaranteed salary with an individually-set bonus for
the achievement of certain goals during the course of the year; or an individual
performance-related payment scheme with an employee share ownership scheme
which rewards all workers with the same level of bonus at year end or a proportion of
their salary depending on organizational performance. Pay systems come in various
shapes and sizes and even use the same name to describe very different schemes; for
example, a ‘bonus’ system in one organization may be totally different from one that
operates in another. It is important that you understand what the system comprises,
its composition and purposes, and are not tricked into thinking schemes are similar
when in fact they are not. Also, organizations often use multiple forms of pay system
simultaneously – large companies can use up to four or five schemes at the same
time.
1) Time-based pay systems
These sorts of schemes were common for most white collar and professional workers
for decades as they fitted with the notion of long-term employment, internal career
paths and the importance of organization-specific skills.
In recent times they have become less extensive, at least in their pure form, as
employers seek to reward shorter-term performance and motivate employees to
increase their contribution to organizational goals. The first key point about time-
based schemes is that employees are secure in the knowledge that they will receive a
set amount of income over the course of the week, month or year irrespective of how
much work they do. Second, time-based schemes allow for workers to be slotted into
salary groups, and provided they perform at an acceptable level it is expected their
pay would increase each year by increments. Of course, if employees do not perform
to an acceptable standard, then some form of corrective action should be taken via
a performance management process – though this does not always happen. The
third point about these sorts of schemes is that opportunities exist for some degree
of progression up the hierarchy, though this is typically limited by sub-divisions of
137
or achievement of budgetary targets. The third category is group-based pay systems
which reward teams, organizational sub-units or whole companies according to
performance at that level. Whilst there can be ‘pure’ examples of each of these, it is
more likely that payment systems will combine more than one of these categories
– for example, an annual guaranteed salary with an individually-set bonus for
the achievement of certain goals during the course of the year; or an individual
performance-related payment scheme with an employee share ownership scheme
which rewards all workers with the same level of bonus at year end or a proportion of
their salary depending on organizational performance. Pay systems come in various
shapes and sizes and even use the same name to describe very different schemes; for
example, a ‘bonus’ system in one organization may be totally different from one that
operates in another. It is important that you understand what the system comprises,
its composition and purposes, and are not tricked into thinking schemes are similar
when in fact they are not. Also, organizations often use multiple forms of pay system
simultaneously – large companies can use up to four or five schemes at the same
time.
1) Time-based pay systems
These sorts of schemes were common for most white collar and professional workers
for decades as they fitted with the notion of long-term employment, internal career
paths and the importance of organization-specific skills.
In recent times they have become less extensive, at least in their pure form, as
employers seek to reward shorter-term performance and motivate employees to
increase their contribution to organizational goals. The first key point about time-
based schemes is that employees are secure in the knowledge that they will receive a
set amount of income over the course of the week, month or year irrespective of how
much work they do. Second, time-based schemes allow for workers to be slotted into
salary groups, and provided they perform at an acceptable level it is expected their
pay would increase each year by increments. Of course, if employees do not perform
to an acceptable standard, then some form of corrective action should be taken via
a performance management process – though this does not always happen. The
third point about these sorts of schemes is that opportunities exist for some degree
of progression up the hierarchy, though this is typically limited by sub-divisions of
137
unskilled and semi-skilled manual workers, craft trades, administrative, technical,
professional, managerial and executive grades. The assumption behind these schemes
is that employees will work to the best of their ability and be prepared to work hard
because of the security these schemes offered.
Many parts of the public sector in lots of countries still utilize time-based schemes,
especially for professionals and office staff, where the ethos revolves around
providing the best service possible irrespective of financial gain for individuals. In
universities, for example, whilst there are opportunities for high-flying academics to
move up more than one increment within the band or get promoted in the case of
exceptional service, the time span for this is typically over a period of years. In this
sense, time-based schemes work on the principle of deferred gratification rather than
an immediate reward for additional effort on the part of the employee concerned.
Many manufacturing or service sector jobs at low skill levels also utilize time-based
rates but without the promise of being able to gain increments routinely each year.
Therefore, over time, even if manual workers start on higher rates than office staff,
they soon tend to drop behind if they are not promoted.
2) Incentive-based pay systems
In the past, manual workers in manufacturing firms and sales agents were often
employed on these sorts of system, traditionally known as payment-by-results (PBR)
schemes. In their pure form, workers were only paid for what they produced, so in
theory their payment at the end of the week or month could range from nothing to
quite a lot depending on units manufactured or sales achieved. In reality, most were
paid a fairly low standard rate which was then supplemented – sometimes quite
considerably – by a variable element to their wages. Employees who were particularly
good at selling or had the advantage of working in a prosperous area tended to value
these schemes because they were able to earn high wages during the good times and
then move onto other work when conditions deteriorated. Seasonal jobs – such as fruit
picking – also fitted into this category. The major problem was insecurity as the good
times inevitably came to an end, either because economic conditions worsened or
work study engineers clamped down on the opportunity for people to earn particularly
high rates. As one can imagine, tensions often arose between workers who benefitted
from PBR and those that felt they were being denied access to potentially lucrative
work.
138
unskilled and semi-skilled manual workers, craft trades, administrative, technical,
professional, managerial and executive grades. The assumption behind these schemes
is that employees will work to the best of their ability and be prepared to work hard
because of the security these schemes offered.
Many parts of the public sector in lots of countries still utilize time-based schemes,
especially for professionals and office staff, where the ethos revolves around
providing the best service possible irrespective of financial gain for individuals. In
universities, for example, whilst there are opportunities for high-flying academics to
move up more than one increment within the band or get promoted in the case of
exceptional service, the time span for this is typically over a period of years. In this
sense, time-based schemes work on the principle of deferred gratification rather than
an immediate reward for additional effort on the part of the employee concerned.
Many manufacturing or service sector jobs at low skill levels also utilize time-based
rates but without the promise of being able to gain increments routinely each year.
Therefore, over time, even if manual workers start on higher rates than office staff,
they soon tend to drop behind if they are not promoted.
2) Incentive-based pay systems
In the past, manual workers in manufacturing firms and sales agents were often
employed on these sorts of system, traditionally known as payment-by-results (PBR)
schemes. In their pure form, workers were only paid for what they produced, so in
theory their payment at the end of the week or month could range from nothing to
quite a lot depending on units manufactured or sales achieved. In reality, most were
paid a fairly low standard rate which was then supplemented – sometimes quite
considerably – by a variable element to their wages. Employees who were particularly
good at selling or had the advantage of working in a prosperous area tended to value
these schemes because they were able to earn high wages during the good times and
then move onto other work when conditions deteriorated. Seasonal jobs – such as fruit
picking – also fitted into this category. The major problem was insecurity as the good
times inevitably came to an end, either because economic conditions worsened or
work study engineers clamped down on the opportunity for people to earn particularly
high rates. As one can imagine, tensions often arose between workers who benefitted
from PBR and those that felt they were being denied access to potentially lucrative
work.
138
For the last two decades, the most prominent form of incentive scheme has been
individual performance-related pay (IPRP). Once the preserve of the private sector, these
schemes have now become more common across the public sector and in manual jobs
as well as managerial occupations.
The main point about IPRP is that employees receive a base-rate level of pay which
can then be supplemented by a percentage based on performance; typically this is
quite small at no more than 10% of base pay. The system is often complicated and
resource-intensive because much management time has to be devoted to appraising
employees.
Just think about it: let’s say you worked hard and achieved all your goals in a year,
and this was accepted by your line manager. How much do you think you deserve
on top of base pay – 5%, 10%, 50%? What would you feel if you did not get what
you think you deserved?
Proponents argue that IPRP provides workers with a target to aim at and financial
recognition for their efforts and success in contributing to organizational goals.
Critics suggest that these sorts of scheme individualize work and discourage team
members from supporting each other, as well as being unfair and open to management
manipulation in their application.
Research evidence shows conflicting results as to whether employees find these
sorts of schemes motivating or de-motivating. There has been plenty of UK research
reporting that IPRP provokes jealousy, damages teamwork and that some employees
may work so hard that they have no spare capacity to increase their effort. Finding
important - and measurable - individual objectives can be difficult for some jobs
and some employees are not motivated by money (Cox, 2005). However, there is no
doubt IPRP can be effective in organizations where there is a meritocratic culture and
performance can be measured accurately, and where the schemes are perceived to be
fair. Table 6 shows some of the principal advantages and disadvantages of IPRP.
139
For the last two decades, the most prominent form of incentive scheme has been
individual performance-related pay (IPRP). Once the preserve of the private sector, these
schemes have now become more common across the public sector and in manual jobs
as well as managerial occupations. Some school teachers, for example, are now able
to take part in an IPRP system as shown on pp 474-75 in Marchington and Wilkinson
(2008). The main point about IPRP is that employees receive a base-rate level of pay
which can then be supplemented by a percentage based on performance; typically this
is quite small at no more than 10% of base pay. The system is often complicated and
resource-intensive because much management time has to be devoted to appraising
employees.
Just think about it: let’s say you worked hard and achieved all your goals in a year,
and this was accepted by your line manager. How much do you think you deserve
on top of base pay – 5%, 10%, 50%? What would you feel if you did not get what
you think you deserved?
Proponents argue that IPRP provides workers with a target to aim at and financial
recognition for their efforts and success in contributing to organizational goals.
Critics suggest that these sorts of scheme individualize work and discourage team
members from supporting each other, as well as being unfair and open to management
manipulation in their application.
Research evidence shows conflicting results as to whether employees find these
sorts of schemes motivating or de-motivating. There has been plenty of UK research
reporting that IPRP provokes jealousy, damages teamwork and that some employees
may work so hard that they have no spare capacity to increase their effort. Finding
important - and measurable - individual objectives can be difficult for some jobs
and some employees are not motivated by money (Cox, 2005). However, there is no
doubt IPRP can be effective in organizations where there is a meritocratic culture and
performance can be measured accurately, and where the schemes are perceived to be
fair. Table 6 shows some of the principal advantages and disadvantages of IPRP.
139
Table 6: benefits and limitations of IPRP schemes Table 6: benefits and limitations of IPRP schemes

Potential benefits of IPRP Potential shortcomings of IPRP Potential benefits of IPRP Potential shortcomings of IPRP

• Attracting and retaining talent • Encouraging a narrow focus on work • Attracting and retaining talent • Encouraging a narrow focus on work

• Improving individual and corporate • Discouraging workers from helping • Improving individual and corporate • Discouraging workers from helping
performance team members resolve issues performance team members resolve issues

• Recognizing and rewarding high- • Inability to undertake • Recognizing and rewarding high- • Inability to undertake
level performance appropriately comprehensive assessments of level performance appropriately comprehensive assessments of
worker performance worker performance

• Increasing alignment between • Line managers not able to conduct • Increasing alignment between • Line managers not able to conduct
individual and corporate goals performance reviews effectively individual and corporate goals performance reviews effectively

• Providing a rationale for dealing • Tendency to inflate the pay bill as • Providing a rationale for dealing • Tendency to inflate the pay bill as
with poor performers most workers are rated as above with poor performers most workers are rated as above
average average

A further development in terms of individualized and performance based systems is
the link with competency and skills-based pay. As the need for a skilled workforce
grows, we need to address the key issues of how skills - and in particular new forms
of skills such as soft/communication skills - are rewarded. Competency and skills-
based pay systems are demanding in terms of the time needed to design and validate
appropriate skills and competencies.
A further development in terms of individualized and performance based systems is
the link with competency and skills-based pay. As the need for a skilled workforce
grows, we need to address the key issues of how skills - and in particular new forms
of skills such as soft/communication skills - are rewarded. Competency and skills-
based pay systems are demanding in terms of the time needed to design and validate
appropriate skills and competencies.

Employees may seek much more support and resource for training and development
when they realize their pay is dependent upon demonstrating developing expertise.
However, competency and skill profiles can be linked into recruitment/selection,
training and succession planning systems and be important components of the HR
bundle within an organization.
Employees may seek much more support and resource for training and development
when they realize their pay is dependent upon demonstrating developing expertise.
However, competency and skill profiles can be linked into recruitment/selection,
training and succession planning systems and be important components of the HR
bundle within an organization.

3) Group-based pay systems 3) Group-based pay systems

Finally we will look briefly at financial participation. Although a wide range of different Finally we will look briefly at financial participation. Although a wide range of different
schemes have been developed they share the common principle of allocating some schemes have been developed they share the common principle of allocating some
portion of the reward package according to group performance – typically at the portion of the reward package according to group performance – typically at the
level of the establishment or the company as a whole. By aligning employees with level of the establishment or the company as a whole. By aligning employees with

140 140
performance at a level higher than their own, the argument is that they will recognize
how their individual efforts can contribute to broader organizational goals, and realize
it is important to focus on activities that generate additional gains for the wider
unit. In other words, questions may be asked about the relevance and importance of
particular activities, so helping to improve efficiency, productivity and organizational
performance.
Further reading
Read the paper by Andrew Pendleton, ‘Employee participation in employee
share ownership: an evaluation of the factors associated with participation and
contributions in Save As You Earn plans’, British Journal of Management, Vol 21(2),
2010, pp 555-70.
Advocates of these pay systems argue that they decrease absence rates because
employees can see that non-attendance will have an impact on their bonus. It is also
argued that peer pressure helps to discourage employees from taking unnecessary
sick days because this might undermine the collective efforts of all their colleagues.
Labour turnover might also reduce as some financial participation schemes - such
as UK share ownership plans - require employees to remain employed by a company
for up to five years before being able to cash-in their shares without incurring tax
penalties. However, this could result in unmotivated employees who simply stay with
an organization until they can cash their shares and then leave!
Critics also argue that the larger the group which shares in pay related to group
performance, the more likely that individuals will not exert the full effort possible as
the impact of each person’s performance is diluted. The schemes are often financially
complicated. Effective communication of how the schemes work and financial literacy
on the part of employees are critical. It is sometimes questioned whether employees
can see a clear link between individual effort and overall results, especially when the
latter are measured at the level of a large business unit or even at corporate level
in a complex organization. Remember this point for the next section – it relates to
performance–reward expectancy in motivation theory.
141
performance at a level higher than their own, the argument is that they will recognize
how their individual efforts can contribute to broader organizational goals, and realize
it is important to focus on activities that generate additional gains for the wider
unit. In other words, questions may be asked about the relevance and importance of
particular activities, so helping to improve efficiency, productivity and organizational
performance.
Further reading
Read the paper by Andrew Pendleton, ‘Employee participation in employee
share ownership: an evaluation of the factors associated with participation and
contributions in Save As You Earn plans’, British Journal of Management, Vol 21(2),
2010, pp 555-70.
Advocates of these pay systems argue that they decrease absence rates because
employees can see that non-attendance will have an impact on their bonus. It is also
argued that peer pressure helps to discourage employees from taking unnecessary
sick days because this might undermine the collective efforts of all their colleagues.
Labour turnover might also reduce as some financial participation schemes - such
as UK share ownership plans - require employees to remain employed by a company
for up to five years before being able to cash-in their shares without incurring tax
penalties. However, this could result in unmotivated employees who simply stay with
an organization until they can cash their shares and then leave!
Critics also argue that the larger the group which shares in pay related to group
performance, the more likely that individuals will not exert the full effort possible as
the impact of each person’s performance is diluted. The schemes are often financially
complicated. Effective communication of how the schemes work and financial literacy
on the part of employees are critical. It is sometimes questioned whether employees
can see a clear link between individual effort and overall results, especially when the
latter are measured at the level of a large business unit or even at corporate level
in a complex organization. Remember this point for the next section – it relates to
performance–reward expectancy in motivation theory.
141
Activity Eleven
What do you think are the organizational circumstances in which any form of
incentivized pay system would work best? Provide some examples to support your
answer
Refer back to the material dealt with in Section 2 in order to identify some of
the principal contextual factors which shape HRM and reward management in
organizations. In addition read pp 378-98 in Marchington and Wilkinson (2012)
and Chapter 28 in Torrington, Hall and Taylor’s book, Human Resource Management,
published by FT Prentice Hall in 2008.
Pay System Processes
The final area we are going to examine is the concept of motivation, because it is
assumed that whichever reward system is chosen it should act to motivate staff
and encourage them to perform better. The most important principle to pick up on
here is expectancy theory (note that you will also come across this called ‘Valency-
Instrumentality-Expectancy theory’ or ‘VIE theory’).
VIE theory offers a map or model of the cognitive process that employees work through
when deciding not only whether to bother exerting effort to earn a reward but also
in evaluating whether they think the rewards they received at work were worth the
effort. It therefore has both a predictive and explanatory function. Valency is the value
that an employee attaches to a reward on offer. So an employee will look at the offer
of a promotion or a bonus and assess its worth to them. Valency has both qualitative
and quantitative dimensions. So is the reward one that the employee values? And
142
Activity Eleven
What do you think are the organizational circumstances in which any form of
incentivized pay system would work best? Provide some examples to support your
answer
Refer back to the material dealt with in Section 2 in order to identify some of
the principal contextual factors which shape HRM and reward management in
organizations. In addition read pp 467-86 in Marchington and Wilkinson (2008)
and Chapter 28 in Torrington, Hall and Taylor’s book, Human Resource Management,
published by FT Prentice Hall in 2008.
Pay System Processes
The final area we are going to examine is the concept of motivation, because it is
assumed that whichever reward system is chosen it should act to motivate staff
and encourage them to perform better. The most important principle to pick up on
here is expectancy theory (note that you will also come across this called ‘Valency-
Instrumentality-Expectancy theory’ or ‘VIE theory’).
VIE theory offers a map or model of the cognitive process that employees work through
when deciding not only whether to bother exerting effort to earn a reward but also
in evaluating whether they think the rewards they received at work were worth the
effort. It therefore has both a predictive and explanatory function. Valency is the value
that an employee attaches to a reward on offer. So an employee will look at the offer
of a promotion or a bonus and assess its worth to them. Valency has both qualitative
and quantitative dimensions. So is the reward one that the employee values? And
142
secondly, is the employer offering enough of it? The implications of this part of VIE
theory are often overlooked. The first thing an employer needs to do in designing
a reward system is make sure that they are offering the right kind of reward. No
point in offering extra money for overtime if the employee wants a greater holiday
entitlement!
If the amount of reward is enough to make the employee interested in obtaining it,
they will then look at the connections between effort and performance. Here the
employee needs to be equipped with the right skills and materials or other resources
to be able to achieve a good level of performance. Not everyone has the talent to be
the next Wayne Rooney or Lionel Messi on the football pitch or the next Celine Dion
or Frank Sinatra in the concert hall. But if employees are not supported by appropriate
training, have faulty or insufficient equipment or lack support from their employer,
they will not achieve high standards.
We can probably all think of a time when we were asked to undertake a task which was
felt to have an unrealistic deadline, insufficient resources or we lacked the training to
do. How did this affect our performance on the task and the rewards we received?
The next connection is between performance and reward. Here, the employee will
be looking at the size of the reward to make sure it matches what was promised and
the timing. If there are long delays between a manager noting good performance
and the receipt of some reward for this, the link in the sequence is broken. Equally if
employees believe that the reward does not reflect their personal effort, they may be
disappointed and perceive the rewards as unfair. This can be a common problem with
financial participation schemes. For example, the travel industry experienced poor
financial performance following the terrorist attacks of 9/11 but employees may still
have been performing to the best of their ability.
Lastly, we have the feedback loop from reward to valency. The diagram above shows
that the whole cycle will be evaluated by employees after its completion, and therefore
their experience of each reward cycle is likely to shape their expectations of future
cycles.
143
secondly, is the employer offering enough of it? The implications of this part of VIE
theory are often overlooked. The first thing an employer needs to do in designing
a reward system is make sure that they are offering the right kind of reward. No
point in offering extra money for overtime if the employee wants a greater holiday
entitlement!
If the amount of reward is enough to make the employee interested in obtaining it,
they will then look at the connections between effort and performance. Here the
employee needs to be equipped with the right skills and materials or other resources
to be able to achieve a good level of performance. Not everyone has the talent to be
the next Wayne Rooney or Lionel Messi on the football pitch or the next Celine Dion
or Frank Sinatra in the concert hall. But if employees are not supported by appropriate
training, have faulty or insufficient equipment or lack support from their employer,
they will not achieve high standards.
We can probably all think of a time when we were asked to undertake a task which was
felt to have an unrealistic deadline, insufficient resources or we lacked the training to
do. How did this affect our performance on the task and the rewards we received?
The next connection is between performance and reward. Here, the employee will
be looking at the size of the reward to make sure it matches what was promised and
the timing. If there are long delays between a manager noting good performance
and the receipt of some reward for this, the link in the sequence is broken. Equally if
employees believe that the reward does not reflect their personal effort, they may be
disappointed and perceive the rewards as unfair. This can be a common problem with
financial participation schemes. For example, the travel industry experienced poor
financial performance following the terrorist attacks of 9/11 but employees may still
have been performing to the best of their ability.
Lastly, we have the feedback loop from reward to valency. The diagram above shows
that the whole cycle will be evaluated by employees after its completion, and therefore
their experience of each reward cycle is likely to shape their expectations of future
cycles.
143
It should be evident from the reading and thinking you have done so far that reward
systems need customizing, ideally to the needs and desires of each individual worker
if they are to have maximum impact. But this creates dilemmas for managers
because it is not realistic to run multiple pay systems simultaneously as this would
be ludicrously complicated and employers would not be able to take advantage of
some economies of scale. We also need to recall that reward management systems
also include non-financial rewards and recognition, and that intangible rewards
may be just as important as tangible ones in managing staff. Although there is talk
of cafeteria benefits systems, designed to suit the needs and aspirations of each
employees, in reality this is virtually impossible to achieve, even more so when non-
financial rewards are factored into the equation. Such systems are also likely to
introduce inconsistencies into the implementation of reward management and make
it difficult to match this with the rest of the HR bundle. This highlights the difficulty
of trying to make reward systems simple to understand while at the same time also
aiming to satisfy each employee’s expectations. You will learn more about the idea of
the HR bundle and integration during the workshops.
It should be evident from the reading and exercises you have undertaken that
managing reward is one of the most complicated and contested elements of HRM.
Managers and employees are often unsatisfied or actively displeased with reward
systems which fail to live up to expectations. This may be because of poor design and
implementation, because too much is expected from reward management or that any
pay system tends to decay and become more problematic over time. Sometimes it just
needs refreshing.
Activity Twelve
You will be pleased to know, having got to this stage in the workbook, that this final
activity is pretty short. Read pp 395-98 in Marchington and Wilkinson (2012) on
non-financial rewards and recognition, and reflect on the extent to which you are
motivated by financial rewards compared to non-financial rewards and recognition.
Would you be prepared to accept slightly less pay (say, 10%) in exchange for a
really positive working environment and/or reduced working hours or would you
always want to earn as much as you could without worrying too much about being
motivated by the work that you did?
144
It should be evident from the reading and thinking you have done so far that reward
systems need customizing, ideally to the needs and desires of each individual worker
if they are to have maximum impact. But this creates dilemmas for managers
because it is not realistic to run multiple pay systems simultaneously as this would
be ludicrously complicated and employers would not be able to take advantage of
some economies of scale. We also need to recall that reward management systems
also include non-financial rewards and recognition, and that intangible rewards
may be just as important as tangible ones in managing staff. Although there is talk
of cafeteria benefits systems, designed to suit the needs and aspirations of each
employees, in reality this is virtually impossible to achieve, even more so when non-
financial rewards are factored into the equation. Such systems are also likely to
introduce inconsistencies into the implementation of reward management and make
it difficult to match this with the rest of the HR bundle. This highlights the difficulty
of trying to make reward systems simple to understand while at the same time also
aiming to satisfy each employee’s expectations. You will learn more about the idea of
the HR bundle and integration during the workshops.
It should be evident from the reading and exercises you have undertaken that
managing reward is one of the most complicated and contested elements of HRM.
Managers and employees are often unsatisfied or actively displeased with reward
systems which fail to live up to expectations. This may be because of poor design and
implementation, because too much is expected from reward management or that any
pay system tends to decay and become more problematic over time. Sometimes it just
needs refreshing.
Activity Twelve
You will be pleased to know, having got to this stage in the workbook, that this final
activity is pretty short. Read pp 508-14 in Marchington and Wilkinson (2008) on
non-financial rewards and recognition, and reflect on the extent to which you are
motivated by financial rewards compared to non-financial rewards and recognition.
Would you be prepared to accept slightly less pay (say, 10%) in exchange for a
really positive working environment and/or reduced working hours or would you
always want to earn as much as you could without worrying too much about being
motivated by the work that you did?
144
On reflection
Section 4 has provided an overview of the principal ways in which reward management
operates in organizations, and in particular of the objectives which both employers and
employees have from these schemes. Whilst some of these objectives appear quite
different for each party, there are also other areas where employers and employees
are keen on similar things – for example, the continued success of the organization
and the recruitment and retention of high quality staff. It should also be evident that
pay systems take many different forms, and that it is essential to make sure that the
right reward management strategy – and the right mix of pay systems - is adopted in
order to avoid employee relations problems. As with HRM in general, it is important
that reward systems are integrated with other components of HRM and are aligned
with organizational goals.
The key messages to emerge from this section are that:
1) Reward management strategy and pay system design needs to be linked in
with both organizational strategy and contextual circumstances in order to be
effective. Just because a particular system works very well at one workplace is
no guarantee that it will be effective elsewhere.
2) Choice of pay system design needs to be done carefully, taking into account
workers’ expectations about the effort-reward equation.
3) When specific combinations are mixed together at the workplace, it is important
to ensure that they do not conflict with and/or undermine each other. Given
that reward management comprises both financial and non-financial factors, it
is highly complex and potentially beset with tensions.
4) Performance-related pay systems, both individual and group-based schemes,
are not automatically and universally better than other systems in rewarding
and motivating employees. Much depends on the occupational group which is
involved, types of organizational strategies pursued and variations in cultures
between countries.
145
On reflection
Section 4 has provided an overview of the principal ways in which reward management
operates in organizations, and in particular of the objectives which both employers and
employees have from these schemes. Whilst some of these objectives appear quite
different for each party, there are also other areas where employers and employees
are keen on similar things – for example, the continued success of the organization
and the recruitment and retention of high quality staff. It should also be evident that
pay systems take many different forms, and that it is essential to make sure that the
right reward management strategy – and the right mix of pay systems - is adopted in
order to avoid employee relations problems. As with HRM in general, it is important
that reward systems are integrated with other components of HRM and are aligned
with organizational goals.
The key messages to emerge from this section are that:
1) Reward management strategy and pay system design needs to be linked in
with both organizational strategy and contextual circumstances in order to be
effective. Just because a particular system works very well at one workplace is
no guarantee that it will be effective elsewhere.
2) Choice of pay system design needs to be done carefully, taking into account
workers’ expectations about the effort-reward equation.
3) When specific combinations are mixed together at the workplace, it is important
to ensure that they do not conflict with and/or undermine each other. Given
that reward management comprises both financial and non-financial factors, it
is highly complex and potentially beset with tensions.
4) Performance-related pay systems, both individual and group-based schemes,
are not automatically and universally better than other systems in rewarding
and motivating employees. Much depends on the occupational group which is
involved, types of organizational strategies pursued and variations in cultures
between countries.
145
Below are a few questions to guide your reflection on the final part of Unit Two: Below are a few questions to guide your reflection on the final part of Unit Two:

1) Taking your own organization as an example, consider the ways in which internal 1) Taking your own organization as an example, consider the ways in which internal
and external equity might be achieved for at least TWO groups of employees. and external equity might be achieved for at least TWO groups of employees.
Outline the HR systems which are in place to achieve equity and review whether Outline the HR systems which are in place to achieve equity and review whether
or not these are working effectively. Use examples to support your argument. or not these are working effectively. Use examples to support your argument.

2) What are the main advantages and disadvantages of individual performance- 2) What are the main advantages and disadvantages of individual performance-
related pay (IPRP) in any organization? Using these ideas, identify TWO groups related pay (IPRP) in any organization? Using these ideas, identify TWO groups
for which IPRP is particularly suited and TWO for which it is not appropriate. for which IPRP is particularly suited and TWO for which it is not appropriate.
Provide evidence to illustrate your answer. Provide evidence to illustrate your answer.

3) It has been suggested that reward management is the most problematic area of 3) It has been suggested that reward management is the most problematic area of
HRM. Why is this? HRM. Why is this?

146 146
Appendix to Unit Two: The Group Presentation
Briefing for group presentation
You will be allocated into groups for the presentations prior to attending the workshop.
Each person in the group should be involved in putting together the material for the
presentation but it does not make sense for all of you to stand up and present the
slides; choose amongst yourselves but it is likely that no more than two or three people
need to do this. However, you will need to divide up responsibilities for preparation
evenly between all group members. The presentation will be made at the workshop, it
should last 20 minutes, with an additional 10 minutes for questions from the tutors.
You will need to submit the slides prior to your presentation as these will form part
of the assessment. Remember that the presentation and accompanying material is
worth 25% of the marks for the module.
The task is that you are required to compare and contrast the contribution to HR
strategy made by the EIP methods used by any TWO organizations for whom members
of your learning set work.
The presentation should cover:
a) Background: Brief background to the organizations, their product/service,
location, numbers of people employed, the business strategy and goals
pursued.
b) Key issues in the literature on EIP and their relevance to an understanding of
why particular approaches to EIP have been selected in the organizations.
c) Methods of EIP used, the extent to which they fit with overall HR strategies
pursued by the organizations, the strengths and weaknesses of the methods,
and tensions that exist in terms of EIP.
d) Any recommendations for improvements in the EIP techniques you have
identified during the course of your analysis.
147
Appendix to Unit Two: The Group Presentation
Briefing for group presentation
You will be allocated into groups for the presentations prior to attending the workshop.
Each person in the group should be involved in putting together the material for the
presentation but it does not make sense for all of you to stand up and present the
slides; choose amongst yourselves but it is likely that no more than two or three people
need to do this. However, you will need to divide up responsibilities for preparation
evenly between all group members. The presentation will be made at the workshop, it
should last 20 minutes, with an additional 10 minutes for questions from the tutors.
You will need to submit the slides prior to your presentation as these will form part
of the assessment. Remember that the presentation and accompanying material is
worth 25% of the marks for the module.
The task is that you are required to compare and contrast the contribution to HR
strategy made by the EIP methods used by any TWO organizations for whom members
of your learning set work.
The presentation should cover:
a) Background: Brief background to the organizations, their product/service,
location, numbers of people employed, the business strategy and goals
pursued.
b) Key issues in the literature on EIP and their relevance to an understanding of
why particular approaches to EIP have been selected in the organizations.
c) Methods of EIP used, the extent to which they fit with overall HR strategies
pursued by the organizations, the strengths and weaknesses of the methods,
and tensions that exist in terms of EIP.
d) Any recommendations for improvements in the EIP techniques you have
identified during the course of your analysis.
147
The assessment criteria for the group presentation are as follows: % The assessment criteria for the group presentation are as follows: %

1) understanding of relevant concepts and literature 25 1) understanding of relevant concepts and literature 25

2) quality of analysis and critical reasoning 25 2) quality of analysis and critical reasoning 25

3) quality of evidence used to back up your argument 25 3) quality of evidence used to back up your argument 25

4) quality of presentation and responses to questions 25 4) quality of presentation and responses to questions 25

148 148
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203-21. 203-21.

Boxall, P and Purcell, J. (2008), Strategy and Human Resource Management. 2nd edition, Boxall, P and Purcell, J. (2008), Strategy and Human Resource Management. 2nd edition,
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Francis, H. and Keegan, A. (2006), ‘The changing face of HRM: in search of balance’, Francis, H. and Keegan, A. (2006), ‘The changing face of HRM: in search of balance’,
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Gerstner, C. V. and Day, D. V. (1997), ‘A meta-analytic review of leader-member exchange Gerstner, C. V. and Day, D. V. (1997), ‘A meta-analytic review of leader-member exchange
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Kaufman, B. (2003), ‘High-level employee involvement at Delta Airlines’, Human Kaufman, B. (2003), ‘High-level employee involvement at Delta Airlines’, Human
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Kessler, I. (2007), ‘Reward choices: strategy and equity’, in Storey, J. (ed), Human Resource Kessler, I. (2007), ‘Reward choices: strategy and equity’, in Storey, J. (ed), Human Resource
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Kinnie, N., Hutchinson, S., Purcell, J., Rayton, B. and Swart, J (2005), ‘Satisfaction with HR Kinnie, N., Hutchinson, S., Purcell, J., Rayton, B. and Swart, J (2005), ‘Satisfaction with HR
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Klaas, B. (2008) ‘Outsourcing and the HR function: an examination of trends and Klaas, B. (2008) ‘Outsourcing and the HR function: an examination of trends and
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152 152
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