I wrote this essay for the subject “Managing People and Organisations” in my first year of university (autumn semester, 2009).
This essay will argue that managers should seek to manage the views and values of their employees in light of moral, social and economic analysis. Furthermore, the formation of a corporate culture, whilst flawed, is superior to other management techniques, and, has become a self-propagating practice.
A central issue in management theory is how to overcome the Principle-Agent Problem. The problem is a description of a conflict of interests; that the principle (principle stakeholders, shareholders, etc.) earns profits on the performance of the organisation whereby the agents (employees) usually earn unconditional wages. They are parallel but conflicting wants; the principle seeks the greatest return for the least pay whereby the agent seeks to do the least work for the greatest pay. It is management’s role to mediate between these goals. There have been two dominant solutions to this problem: the first being dominative and the second based on the synchronisation of employee views and values of the organisation.
This essay develops the argument in three sections.
- Section 1 outlines the critical frames through which management theories will be analysed (Maslow A. H., 1943) (Milgram, 1974) (Black, 1990).
- Section 2 assesses dominative management theories (Morgan, 2006).
- Section 3 assesses value-based management (Akroyd, 1990) (Rosen, 1988).
This essay will show that Managers should seek to manage the views and values of their employees, since this method allows for effective fulfilment of monetary (long-term profits) and non-monetary (ethical) corporate and individual goals.
Section 1: The Effectiveness of Management Methods through Frames
It is vital to compare value based management methods in efficacy against the alternatives to ascertain its worth to management, and, hence, whether or not it ‘should’ be used. This essay will discuss the ways in which different management practices motivate employees (Maslow A. H., 1943, pp. 1, 2), (Milgram, 1974, p. 135) their contribution towards long-term profits (Akroyd, 1990, pp. 3, 4) and their ethical standards (Black, 1990, pp. 122, 123).
Maslow wrote that all human motivation “must be understood to be a channel through which … needs may be … satisfied”. He expresses needs hierarchically (see Figure 1), hypothesising that higher wants require the satisfaction of all baser needs (Maslow A. H., 1943, p. 1). Milgram states that motivation is a product of upbringing and different levels of “the Agentic state” (a state of almost complete obedience derived from submission to an authority) (Milgram, 1974, pp. 135-152) (see Figure 2.).
Profitability is a central defining quality of most organisations, especially businesses. Different managerial systems are effective in different situations, with efficiency based “Efficiency, Effectiveness and Economy” management working well in manufacturing and with value based “Evaluation, Empathy and Ethics” working better in the service sector, (Black, 1990, pp. 123, 124). This essay will regard the profitability of each managerial system in light of its most common application.
It is crucial to take into account the morality of the application of managerial techniques: what they ask of the employer, work conditions and ability for the employee to dissent in the case of a threat to base needs (safety and physiological needs as per Figure 1), or in case of a difference of opinion. In amalgamating these factors, an analysis of the “morality” of the workplace is possible.
An analysis of motivation, profit and morality allows for an evaluation of different management practices.
Section 2: Domination
The simplest response to the problem of agency is the dominative method. When work is scarce, the economic profit (net wages less next best alternative foregone (John Jackson, 2007, pp. 542, 543)) for the individual increases. This is only effective in a employer market. If the organisation’s economic wage is normal, then they lose this leverage over the employee. This idea is historically epitomised by the industrial revolution and the factory (see appendix 1). The extract below highlights codified employee restrictions.
“Any persons found Smoking on the premises will be instantly dismissed. Any person found away from their usual place of work, …or Talking with any one out of their own Alley, will be fined 2d for each offence”
(Water-Foot Mill, 1851)
Domination, according to Morgan, is a pervasive side effect of Taylorist bureaucratic management systems and code-based authoritarian management systems.
Concerning Maslow’s hierarchy, domination motivates on a base level. The sense of purposelessness derived from separate value bases and strips dominated employees of the ability to fulfil higher needs through the workplace, diminishing this management system’s effectiveness in inspiring loyalty, and, therefore, productivity.
Milgram explains the mode of the dominated worker perfectly (see Figure 2). The employee becomes “Agentic” through Cultural Antecedent (being required to obey parents, being a member of organisations), and Binding Factors (the apparent and unchallenged authority of the employer). Furthermore, this Pavlovian deference to authority “teaches [employees] to respond to impersonal Authorities” (Milgram, 1974, p. 137) such as “the management”. Milgram continues to show that this state results in almost flawless obedience (Milgram, 1974, p. 119).
However, given the correct conditions – an employer market, a relatively unskilled workforce and little government regulation – this system is able to stimulate increases in productivity. The typical examples of this are the sweatshop and the production line. According to “The Global Players”, a globalisation think-tank from Flinders University, this type of management is beneficial for the employer, who benefits from cheap labour (The Global Players, 2008, p. 5).
Whilst this practice has been persistent, the consensus is that this is a relatively ineffective form of management, since it leads to the stratification of society, alienation and horrible working conditions (Watson, 2005, pp. 551, 554). Furthermore, because of the absolute authority of the “agents” (management), the worker is not able to dissent, at least without moral support from peers (Milgram, 1974, pp. 116, 117).
An analysis of this management technique shows Domination as being fundamentally flawed. Employee inspiration is superficial and coercion based. This results the exacerbation of the problem of agency (The Global Players, 2008, p. 4), decreasing profits and practicing unethically. This essay has shown that, by failing to meet the corporate goals of profits, and the social goal of ethics, this management theory is ineffective.
Section 3: Value-Based Management
One of the first industrialists to realise the flaws in dominative management was Henry Ford, who attempted to solve the problem of agency by paying Ford employees a third more than the industrial average in between 1914-1922 (Lewchuck, 1993, p. 841: Table 3). This pay inspired productivity dually; the profit motive positively compels the worker to appease the employer and the resultant creation of an elite “fraternity” of employees provided an optimum environment for a corporate culture.
Ford created a corporate culture that increased productivity: “Ford developed a fraternalist labor strategy, a men’s club, whos objective was to … maximise labour productivity” (Lewchuck, 1993, p. 824). Ford appealed to the worker in a positive through ritual, symbolism, mottoes and social imperative; all of which are tools described as means of manipulating employee views and values (Buchanan, 2004, p. List). By stating the possibility for growth, as well as the risk of emasculation, “[if you work hard] you will be [able] to … say: I AM A MAN” (Auto Worker News, 1927, p. 4), the employee is required to fulfil work requirements.
The humanist method of managing values is flexible, assigning independence and responsibilities to different work groups (Akroyd, 1990, p. 4). The culture method, as discussed through Ford’s attempts at social propaganda and the instillation of a corporate culture, is rather proscriptive. Both seek to inspire productivity by appealing to the employees’ psyche, not rationality, to solve the Agency Problem.
This motivation proves to be deeper than the motivation of a dominated employee because of the nature of the Masloan wants to which this method appeals. The synchronisation of views and values allows for the fulfilment of all needs, including esteem, belonging and self-actualisation needs. This increases the employee’s connection with the workplace: self-definition and social connection (Rosen, 1988, pp. 477, 478) becomes intrinsically dependant on the organisation.
The notion of volunteerism is central to value-based management. This invites the employee to respond to work criteria with more than necessary vigour, extra productivity not required but volunteered. Milgram describes the power of volunteerism when coupled with a created Agentic state.
“[In this case] the principle sanctions for disobedience come from within the person… [they are] not dependent upon coercion, but … [on] the individual’ sense of commitment to his role. In this sense, there is an internalised basis for his obedience, not merely an external one”
(Milgram, 1974, p. 141)
Value-based management is extremely effective at motivating the employee. Profitability, however, is the central aim of businesses. Value based management seeks to replace external motivation with “an internalised obedience” (Milgram, 1974, p. 141). This cuts costs in the requirement for supervision and competitive wages. Not only does this reduce costs; it improves output through competition and self-management (Akroyd, 1990, pp. 3, 4, 11, 12).
Both methods of imbuing values on the employees, however, have different shortcomings, as well as different moral issues to deal with. The humanist approach, that is, allowing for the “spontaneous formation … of occupational cultures” (Akroyd, 1990, p. 4), suffers from a lack of distinct moral guidelines. Akroyd and Crowdy discuss the case of the English Slaughterman: they are productive because of self-management (Akroyd, 1990, pp. 11, 12). This freedom, however, comes with gross brutality and disobeyed health regulations (Akroyd, 1990, pp. 6, 7, 8), which can in turn lead to contingent liabilities.
The proscriptive nature of corporate culture reduces the potential for ethical breaches. Most culture-based organisations have induction programs with proscriptions against immorality: sexual harassment and anti-bullying training. Corporate culture faces two distinct setbacks: dramaturgical behaviour (Knights, 1982) and “looking up and looking around” (Jackall, 1988). Dramaturgical behaviour is performing with the knowledge of the performance, paying a kind of lip service to the officialised corporate culture whilst not believing in it because of a fear of showing contempt for the beliefs of the organisation. A South Park episode “Something Wall-Mart This Way Comes” portrays this notion: the management says out loud “I love working at Wall-Mart”, at which point he writes on a placard “kill me now” (Parker, 2004). This is an exaggeration, but, in organisations, the dramaturgicisation of corporate culture leads to reduced motivation, thus rendering the corporate culture ineffective. Furthermore, deviation towards the safe and established hinders an employee’s decision to dissent and make individual independent decisions. Excessive consequences of risks and the precedence of short-term goals over long-term goals lead to this: by “looking up and looking around” the manager is able to pass on the risk and the blame (Knights, 1982).
The delegation of authority, motivation and supervision is a central facet of value-centric management. This allows for high levels of motivation as well as increased output, especially in the service industry (Black, 1990, pp. 123, 124) , and positive, non-coercion based employee-employer relations. Moral issues are a product of ineffective management within this theoretical frame. The moral issue of free will is, furthermore, central to this debate: with the management of views and values, does an employee lose individual identity? The Jewish, traditional answer to this question is articulated by Maimonides stated that during work, an employee must say abridged prayers. This has been expanded by later Rabbi’s to mean that during the time of work, he must embody the values of the organisation unless they contradict natural law (Maimonides, 1170-1180).
Knights and Roberts deny the existence of argument altogether:
“By virtue of being self-conscious creatures, individuals always retain some control over their action, and coercion [or, in this case, management’s manipulation of employee views and values] can therefore never … [leads to the] complete control over another”
(Knights, 1982, p. 50)
Value based management, if executed effectively, solves the problem of Agency, at once allowing for profitability, good work conditions and morality. This essay, therefore, has shown that – being more effective than coercive/dominative management theory – value based management should be used by managers.
This essay has shown the limitations and proficiencies of dominative and value-based management systems. Dominative value based management motivates superficially, and is only effective in specific situations. Value-based management motivates intrinsically, tying self-definition with the organisation, not to mention the power of volunteerism suggested by Milgram. Both are profitable, but, again, value management pulls ahead, with limitless possible productivity increases. Whilst value management can be morally questionable, these moral grey areas, through effective management, can be minimised, unlike the social costs of domination: class struggles, horrible work conditions, etc. As such, this essay has shown that value-based management is highly effective, solving the principle-agent problem, thus, managers should use it.
There is an implicit danger in recommending management systems: that this practice will assume the role of “best-practice”. The problem is the reduction of the “morally charged job of managing other human beings to a process of memorising and applying techniques” (Roberts, 1984). This has been the case, with the increasing popularity of “management bibles” diluting proper management theory. Furthermore, due to its popularity, value-based management has become self-propagating, as, since its inception, the nascent immorality of other management theories has caused them to lose face. Thus, whilst it might be the most effective, it must still undergo continual critical analysis to ensure its validity.
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