Summary MNG2602 - Contemporary Management Issues_notes.

MNG2602 - Contemporary Management Issues_notes. UNIT 1 Features of contemporary organisations and new management challenges Prescribed textbook chapter 3: pp 46–68 Study guide: pp 1–10 LEARNING OUTCOMES: Cite reasons why organisations change Identify “new” variables in the business environment of contemporary organisations Defend the statement that bureaucracy fails to provide for the needs of modern organisations Expound on the features of the new, emerging organisation These changes in our lives can be attributed to two factors, namely:  globalisation; and  the Information Technology Revolution Globalisation is the economic and social interaction process whereby different countries work together to create a global economy. Globalisation involves technological, economic, political, and cultural exchanges between different countries, and is the result of advances in communication, transportation, and infrastructure (the Information Technology Revolution). The result of the process of globalisation is globality. Students of business management should understand how globalisation, and major on- going advances in technology, affect organisations and the way they do business. In this study unit, you will find out how organisations had to change fundamentally in order to be able to function in the globalising world. Work through Chapter 3 in the prescribed book. 1.3 KEY CONCEPTS  A bureaucracy is a system of administration marked by rules and regulations, red tape and proliferation.  Customer capital is the value of relationships that an organisation builds with its customers, ± reflected in their loyalty to the organisation and/or its products.  Diversity is the state of being different.  Globalisation is the economic and social interaction process whereby different countries work together to create a global economy.  A global organisation operates in many countries as an integrated unit.  A flat structure is an organisational structure with fewer levels of management.  Human capital is the health, knowledge, motivation, and skills of employees; the attainment of this is an end in itself.  Intellectual capital is the collective knowledge (whether or not documented) of the individuals in an organisation or society. 1  An international organisation operates in many countries but keeps the operations in each country separated.  The Information Technology Revolution is a term that describes the economic, social and technological trends that occurred because of major technological advances in the world.  An open system is one that interacts with its environment.  Structural capital refers to the competitive intelligence, formulas, information systems, patents, policies, processes, and so on, that result from the products or systems the organisation has created over time.  Synergy occurs when many elements or subsystems work together to create an outcome that is of more value than the total of what the individual input is.  A system is a set of interrelated parts designed to achieve a singular purpose to stay in balance.  A system boundary separates a system from its environment. 1.4 INTRODUCTION Organisations had to change fundamentally in order to be able to function in the global world. This is mainly due to forces in the environment, which change the way in which organisations operate. Systems theory is the basis from which we study organisations, how we manage them, and it refers to changes in the environment of an organisation that cause changes in the organisation itself. Systems theory implies that we view the organisation as a system consisting of value-adding parts that work together to achieve a common goal and purpose. Systems theory focuses on the interaction between the parts of a system. Instead of reducing a system, such as the solar system, into its parts or elements (e.g. sun, earth, Venus), systems theory focuses on the relationships between the parts of the system, how they work together as a whole and the interrelationship between them. The effect of the interrelationship between parts is that a change in one part could cause a change in one of the other parts. 1.5 FORCES THAT CAUSE ORGANISATIONS TO CHANGE Study the six change stimuli discussed in the prescribed textbook. Figure 1.1 contains a mind-map of the textbook content pertaining to the six major forces for change in organisations. Feel free to add and change the mind map according to your own understanding. 1.6 THE CLASSIC MODEL OF THE FORMAL ORGANISATION In management literature, some authors state that major changes in the business environment during the past two decades caused a ``new'' kind of organisation to emerge. In order to study the ``new'' organisation one should understand the ``old'' organisation, its strengths and its weaknesses. The ``old'' organisation features the characteristics of Weber's Bureaucracy. He developed this organisation model at the turn of the nineteenth century. According to Weber's model, organisations should subscribe to several desirable characteristics, such as:  division of labour  hierarchy of authority  rules and procedures  impersonality  employee selection and promotion Table 1.1 lists the strengths and weaknesses of the bureaucracy 2 3 4 Figure 1.1: The six change stimuli 5 LEARNING UNIT 1 – FEATURES OF CONTEMPORARY ORGANISATIONS AND NEW MANAGEMENT CHALLENGES  Global: “Using its worldwide presence, Siemens aims to meet the needs of a range of global markets. All its companies report to the German parent company.”  Internally Networked: “Siemens works within a new global strategy, 'Siemens One'. In all its activities, customers can call upon the potential of other Siemens groups Siemens groups use a team approach where the philosophy is that if one does not possess a skill, another will. If a particular part of the business requires something offered by another elsewhere, then that product or service is supplied.”  Externally Networked: “Through buying other businesses and strategic alliances with suppliers has grown to acquire different skill, to become a house hold name in electronics.”  Flat structure and Flexibility: “Siemens is proud of its flat structure and flexibility as this allows the company to better meet local needs”.  Workforce diversity: “Siemens AG is a global electrical and electronics business with a turnover of 53 billion Euro. The – organisation employs over 450,000 people worldwide and is based in Munich, Germany. From there, executives oversee work carried out in the name of Siemens all over the world.” LEARNING UNIT 1 Bureaucracy. This is a system of administration marked by rules and regulations, red tape and proliferation. Customer capital. This is the value of relationships that an organisation builds with its customers - reflected in their loyalty to the organisation and/or its products. Diversity. This is the state of being different. Globalisation. This is the economic and social interaction process whereby different countries work together to create a global economy. Global organisation. This is an organisation that operates in many countries as an integrated unit. Flat structure. This is an organisational structure that has fewer levels of management. Human capital. This is the health, knowledge, motivation, and skills of employees; the attainment of this is an end in itself. Intellectual capital. This is the collective knowledge (whether or not documented) of the individuals in an organisation or society. International organisation. This is a body that operates in many countries but keeps the operations in each country separated. Information technology revolution. This is a term that describes the economic, social and technological trends that occurred because of major technological advances in the world. Open system. This is a system that interacts with its environment. Structural capital. This refers to the competitive intelligence, formulas, information systems, patents, policies, processes, and so on, that result from the products or systems the organisation has created over time. 6 Synergy. This occurs when many elements or subsystems work together to create an outcome that is of more value than the total of what the individual input is. System. This is a set of interrelated parts designed to achieve a singular purpose to stay in balance. System boundary. This is a border that separates a system from its environment. UNIT 2 Managing organisational change and individual stress Heraclitus (535-475 BC), the Greek philosopher, stated: “Change is the only constant in life.” Considering that change is so evident in the most basic elements of your life, how much more evident would it be in an organisation that employs many people and is a “person” in its own right? WHAT TO STUDY: Prescribed textbook chapter 5: pp 90-115 2.3 KEY CONCEPTS  Continuous change. This is a process where there is a pattern of uninterrupted adjustments in work processes and social practices driven by organisation instability and increasing reactions to daily events.  Incremental change. This is a process whereby individual and other parts of the organisation deal incrementally with one problem at a time.  Macro-environment. This is a setting that comprises several sub- environments, including the technological, economic, social, political, ecological and international environments, from which can emanate numerous external sources of change.  Market environment. This is a setting that comprises consumers, competitors, suppliers of resources and intermediates from which can emanate numerous external sources of change.  Organisational inertia. This is when organisations resist change because the forces for and against change is equally strong and therefore the organisation remains in the same position.  Planned change. This is change that managers plan and implement to adapt to or prepare for change in the environment.  Punctuated change. This is change that makes an organisation to develop through relatively long periods of stability interrupted by relatively short bursts of fundamental change.  Quasi-stationary equilibrium. This is an equilibrium supported by a field of driving and restraining forces causing inertia.  Reactive change. This is change that takes place when organisations react to change in their environments.  Revolutionary change. This is change that involves major, radical, strategic, transformational and rapid change. 7 2.5 FORCES OF CHANGE Managers must constantly scan both the internal and external environment of the organisation for forces that necessitate an organisation to change. Figure 2.1 is a mind map of these forces. Figure 2.1: Forces of change 2.6 DIMENSIONS OF CHANGE As managers, we need to know what change looks like in order to identify it and manage it appropriately. Change can take many forms as you will see in Figure 2.2 which is a summary of the dimensions of change. 2.7 RESISTANCE TO CHANGE Knowing where change comes from and what it looks like does not make it easier to deal with. People are inherently afraid of change and more often than not they will resist it. Managers must understandresistance as it can cause barriers to the successful implementation of change. This resistance can come either from individuals in the organisation or the organisation itself. Figure 2.3 is a summary of the causes of change resistance. 8 13 MNG2602/1 Figure 2.2: Dimensions of change 9 Figure 2.3: The causes of change resistance 2.8 OVERCOMING RESISTANCE TO CHANGE If managers want their initiatives to be implemented, they will have to overcome the resistance to change. Kotter and Schlesinger (1979) offer managers six possible strategies that they can use to overcome change resistance. These strategies are summarised in Figure 2.4. Figure 2.4: Six strategies for overcoming resistance to change 2.9 SITUATIONAL FACTORS When managers implement change, they have to make certain strategic choices. These choices are context dependent. The pace, extent, involvement of others and level of resistance to the change are influenced by the following situational factors:  anticipated strength of resistance  position and power of change initiator versus those of the resistor  need for information and communication from others by the change initiator  potential risks to the short-term performance and survival of the organisation Refer to Table 5.3 in the prescribed textbook for the various options available to managers. 2.10 APPROACHES TO CHANGE 10 Although change is difficult, managers must still get it done. To get it done most effectively, they should combine Lewin's change model with Kotter's eight-step process of successful change. Lewin's change model consists of the following three steps: 1. unfreeze 2. change 3. refreeze Kotter's process has eight steps and each step is associated with a specific error managers often make: 1. Create a sense of urgency. 2. Form a guiding team. 3. Create a clear vision of the outcome. F Communicate the vision. 4. Empower others to act. 5. Produce short-term wins. 6. Consolidate improvements. 7. Create a new culture. 2.11 WHERE CAN CHANGE HAPPEN? In general, change can happen in the four areas that have been summarised in Figure 2.5. Figure 2.5: Areas of change 2.12 MANAGING WORK STRESS The section on work stress is very interesting and you should all read it; however, it is not examinable. 11 UNIT 3 CORPORATE CULTURE Culture is a fundamental part of life. It is the sum of a specific society’s beliefs, norms, attitudes, assumptions, and ways of doing things. WHAT TO STUDY: Prescribed textbook chapter 6 – pp 116-133 Study guide pp 20-30 LEARNING UNIT 2 Continuous change. This is a process where there is a pattern of uninterrupted adjustments in work processes and social practices driven by organisation instability and increasing reactions to daily events. Incremental change. This is a process whereby individual and other parts of the organisation deal incrementally with one problem at a time. Macro-environment. This is a setting that comprises several sub-environments, including the technological, economic, social, political, ecological and international environments, from which can emanate numerous external sources of change. Market environment. This is a setting that comprises consumers, competitors, suppliers of resources and intermediates from which can emanate numerous external sources of change. Organisational inertia. This is when organisations resist change because the forces for and against change is equally strong and therefore the organisation remains in the same position. Planned change. This is change that managers plan and implement to adapt to or prepare for change in the environment. Punctuated change. This is change that makes an organisation to develop through relatively long periods of stability interrupted by relatively short bursts of fundamental change. Quasi-stationary equilibrium. This is an equilibrium supported by a field of driving and restraining forces causing inertia. Reactive change. This is change that takes place when organisations react to change in their environments. Revolutionary change. This is change that involves major, radical, strategic, transformational and rapid change. Study unit 3 Corporate culture 3.1 BACKGROUND Your mother may have insisted that you attend a cultural event, a concert or an art exhibition, with the purpose of exposing you to some ``culture''. This is a misconception because culture. Culture (as defined by social 12 scientists) comprises much more than an appreciation for the finer things in life; it is a fundamental part of life. Culture is the sum of a specific society's beliefs, norms, attitudes, assumptions, and ways of doing things. 3.3 KEY CONCEPTS  Assumptions are beliefs, logical constructs, or unconfirmed facts.  Culture is the total pattern of human behaviour and its products, personified in thought, speech, action, and artefacts, and is dependent on people's capacity for learning and transmitting knowledge to succeeding generations using tools, language and systems of abstract thought.  Organisational culture is the aggregate of beliefs, norms, attitudes, assumptions, and ways of doing things that members of an organisation share and teach to new members.  A ritual is a set of actions, performed mainly for their symbolic value.  Strategic drift is the tendency of organisations to develop strategies incrementally based on historical and cultural influences, but failing to keep pace with changes in the environment.  A symbol is something that represents an idea, a process, or a physical entity.  Values are important and lasting beliefs or ideals shared by the members of a culture about what is good or bad and desirable or undesirable. 3.6 LEVELS OF CULTURE Figure 3.2 is a summary of the three levels of culture as identified by Schein (1988). Schein used an iceberg metaphor to depict the levels of organisational culture, where:  the tip of the iceberg represents the organisation's artefacts  the part of the iceberg just below the water represents the organisation's values  the mass of the iceberg represents the organisation's assumptions 3.7 WHAT SHAPES AN ORGANISATION'S CULTURE? Once you know where to look, you will see that the culture of each organisation is different, and that even within one organisation, different cultures may exist. The culture of an organisation is a unique combination (much like the DNA of a human being) of the national and regional culture, industry culture, and various organisational subcultures. Figure 3.3 summarises these sources of organisational cultural diversity. 3.8 ELEMENTS OF CULTURE If you understand the concept of organisational culture, you are ready to find out how new employees learn about the prevalent culture in their organisations. New employees learn an organisation's culture through elements such as symbols, stories, language, and rituals which people in the organisation use. 3.9 TYPES OF ORGANISATIONAL CULTURE Numerous classification systems exist for categorising the different types of organisational culture. In this study unit, we investigate four types of culture, as they are summarise in Figure 3.4. 3.10 CHANGING AN ORGANISATION'S CULTURE An organisation's culture develops over a long period and it is a product of the interaction between its workforce, management, industry and history. For this reason it is very difficult to change a culture. However, a change in circumstances could trigger the need to change an organisation's culture. Figure 3.5 summarises methods management can use to change an organisation's culture. 13 14 22 Figure 3.1: Definitions of organisational culture Figure 3.2: Three levels of culture 15 24 16 Figure 3.3: Sources of organisational cultural diversity Figure 3.4: Cultural classification systems 17 Figure 3.5: How to change an organisation's culture LEARNING UNIT 3 Assumptions. These are beliefs, logical constructs, or unconfirmed facts. Culture. This is the total pattern of human behaviour and its products, personified in thought, speech, action, and artefacts, and are dependent on people’s capacity for learning and transmitting knowledge to succeeding generations using tools, language and systems of abstract thought. Organisational culture. This is the aggregate of beliefs, norms, attitudes, assumptions, and ways of doing things that members of an organisation share and teach to new members. Ritual. This is a set of actions, performed mainly for their symbolic value. Strategic drift. This is the tendency of organisations to develop strategies incrementally based on historical and cultural influences, but failing to keep pace with changes in the environment. Symbol. This is something that represents an idea, a process, or a physical entity. Values. These are important and lasting beliefs or ideals shared by the members of a culture about what is good or bad and desirable or undesirable. UNIT 4 POWER AND POLITICS, CONFLICT RESOLUTION AND NEGOTIATION 18 Individuals, other than management, sometimes influence the behaviour of others, even that of management. They are able to do this because they possess some form of power and they use their power to influence others. 4.3 KEY CONCEPTS  When one party perceives that another party opposes or negatively influences its interests, it may result in conflict.  Conflict management involves doing things to limit the negative aspects of conflict and to increase its positive aspects.  Influence is the capacity or power of people or things to be a compelling force on, or produce effects on the actions, behaviour, opinions, etc., of others.  An interest can be an advantage, claim, duty, liability, right and/or title associated with a tangible or intangible item.  Negotiating is a process in which two or more parties are in conflict and attempt to reach an agreement.  Political behaviour includes activities that are not required as part of an employee's formal role, but that are performed to attempt to influence the distribution of advantages or disadvantages in the organisation. 4.5 POWER A person can have power without influence, but not influence without power. When people use their power for their own gain (me-orientation personal power), it has a negative ``face''. However, when ± people use their power for the good of the group (social or we-orientation social power), that power has a positive ``face''. The mind maps provided in figures 4.1, 4.2 and 4.3 summarise the sources of power people accrue organisations. Figure 4.1: French and Raven's five sources of power 19 Figure 4.2: Social networks as sources of power 4.6 INTERESTS People need power to protect their interests (what they perceive to belong to them), either their own (individual interest) or that of others (collective interest). To be able to protect their interests, people use power to influence the outcome of specific situations. This forms the basis of any political action within an organisation. 4.7 INFLUENCE Knowing the source of their power and whose interests they want to protect, enable people to influence in the outcome of a situation. Power is a prerequisite for influence, and when the target has a dependency on the agent, the agent can use influence to get the desired outcome. Figure 4.4 indicates the different tactics an agent can use to create this dependency. 4.8 POLITICAL BEHAVIOUR To succeed, managers need expertise and political skills. A person who has political skills could convert power into action and influence the distribution of advantages or disadvantages in the organisation. In organisations, two types of political behaviour occur: legitimate and illegitimate political behaviour. Figure 4.5 summarises the different actions associated with the two types of political behaviour A manager can mobilise support for political action from employees and other managers by:  recognising opposing ideas and finding ways to reconcile them  identifying who the change will effect and mapping their sources of power and influence  identifying possible supporters and blockers  identifying stakeholders and possible coalitions F obtaining buy-in from decision makers  actively creating and using networks  negotiating solutions 20 34 21 Figure 4.3: Morgan's sources of authority Figure 4.4: Influence tactics 22 36 23 Figure 4.5: Legitimate and illegitimate behaviour in organisations 4.9 CONFLICT MANAGEMENT When a third party uses power and influence to negatively affect the interests of a group or an individual, it may result in conflict. Conflict can be functional or dysfunctional, depending on its influence on torganisation's operations. Figure 4.6 depicts possible causes of conflict.