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TOPIC 6TOPIC 6

MANAGEMENT OF MANAGEMENT OF RELATIONSHIPSRELATIONSHIPS

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Lecture outline:Lecture outline:

Concepts of power, bureaucracy, Concepts of power, bureaucracy, authority, responsibility, leadership and authority, responsibility, leadership and delegation.delegation.

Organisational cultureOrganisational culture Management of conflictManagement of conflict Issues of business ethics and corporate Issues of business ethics and corporate

governancegovernance

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Concept of PowerConcept of Power Power is a complex and dynamic concept and Power is a complex and dynamic concept and

difficult to define easily.difficult to define easily. At a broad level, power can be interpreted in At a broad level, power can be interpreted in

terms of control or influence over the behaviour of terms of control or influence over the behaviour of other people with or without their consent.other people with or without their consent.

Power can also be interpreted in terms of the Power can also be interpreted in terms of the extent of the influence which can actually be extent of the influence which can actually be exercised over other people.exercised over other people.

The most important aspect of power is probably The most important aspect of power is probably dependency, Example:dependency, Example:

““a person can have power over you only if he or a person can have power over you only if he or she controls something you desire”she controls something you desire”

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Concept of PowerConcept of Power Power is an inherent feature of work Power is an inherent feature of work

organisations and is often the underlying reality organisations and is often the underlying reality behind the decision-making process.behind the decision-making process.

It is central to the framework of order and It is central to the framework of order and system of command through the operation of system of command through the operation of bureaucratic structures and the implementation bureaucratic structures and the implementation of rules, policies and procedures.of rules, policies and procedures.

Lack of power and influence, and office politics, Lack of power and influence, and office politics, are among the main sources of managerial are among the main sources of managerial stress within organisation.stress within organisation.

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Concept of PowerConcept of Power Management control is the predominant Management control is the predominant

means by which activities of staff are means by which activities of staff are guided towards the achievement of guided towards the achievement of organisational goals.organisational goals.

The exercise of power is that which comes The exercise of power is that which comes from a position of formal authority within the from a position of formal authority within the management structure of the organisation management structure of the organisation and which legitimises control over and which legitimises control over subordinate staff.subordinate staff.

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AuthorityAuthority Is the right to take action or make decisions that Is the right to take action or make decisions that

the manager would otherwise have done.the manager would otherwise have done. Is the power to hold people accountable for their Is the power to hold people accountable for their

actions and to influence directly what they do and actions and to influence directly what they do and how they do it.how they do it.

Authority legitimises the exercise of power within Authority legitimises the exercise of power within the structure and rules of the organisation.the structure and rules of the organisation.

Enables the subordinate to issue valid instructions Enables the subordinate to issue valid instructions for others to follow.for others to follow.

E.g: Shareholders have ultimate authority over the E.g: Shareholders have ultimate authority over the use of a company’s resources. Legally, they own use of a company’s resources. Legally, they own the company and exercise control through their the company and exercise control through their representatives, board of directors.representatives, board of directors.

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ResponsibilityResponsibility An obligation by the subordinate to perform An obligation by the subordinate to perform

certain duties or make certain decisions certain duties or make certain decisions and having to accept possible reprimand and having to accept possible reprimand from the manager for unsatisfactory from the manager for unsatisfactory performance.performance.

Responsibility cannot be delegated.Responsibility cannot be delegated. Delegating authority can increase the Delegating authority can increase the

manager’s responsibility since there is manager’s responsibility since there is additional responsibility for the additional responsibility for the subordinate’s task.subordinate’s task.

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DelegationDelegation Is the process of entrusting authority and Is the process of entrusting authority and

responsibility to others throughout the responsibility to others throughout the various levels of the organisations.various levels of the organisations.

Delegation can be upwards or laterally or Delegation can be upwards or laterally or downwards.downwards.

Downsizing and de-layering limit the Downsizing and de-layering limit the opportunities for delegation.opportunities for delegation.

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BureaucracyBureaucracy Max Weber designed a hierarchy so that it Max Weber designed a hierarchy so that it

effectively allocates decision-making effectively allocates decision-making authority and control over resourcesauthority and control over resources

Bureaucracy:Bureaucracy: a form of organizational a form of organizational structure in which people can be held structure in which people can be held accountable for their actions because they accountable for their actions because they are required to act in accordance with rules are required to act in accordance with rules and standard operating proceduresand standard operating procedures

Founded on a formal, clearly defined and Founded on a formal, clearly defined and hierarchical structure.hierarchical structure.

Red tape and rigidityRed tape and rigidity

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Bureaucracy Bureaucracy Principle one:Principle one: a bureaucracy is founded on a bureaucracy is founded on

the concept of rational-legal authoritythe concept of rational-legal authority Rational-legal authority:Rational-legal authority: the authority a the authority a

person possesses because of his or her person possesses because of his or her position in an organizationposition in an organization

Hierarchy should be based on the needs of the Hierarchy should be based on the needs of the task, not on personal needstask, not on personal needs

People’s attitudes and beliefs play no part in People’s attitudes and beliefs play no part in how the bureaucracy operateshow the bureaucracy operates

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Bureaucracy Bureaucracy (cont.)(cont.)

Principle two:Principle two: Organizational roles are Organizational roles are held on the basis of technical held on the basis of technical competence, not because of social status, competence, not because of social status, kinship, or hereditykinship, or heredity

Principles one and two establish the Principles one and two establish the organizational role as the basic organizational role as the basic component of organization structurecomponent of organization structure

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Bureaucracy Bureaucracy Principle three: Principle three: A role’s task responsibility A role’s task responsibility

and decision-making authority and its and decision-making authority and its relationship to other roles in the organization relationship to other roles in the organization should be clearly specifiedshould be clearly specified Role conflict:Role conflict: when two or more people have when two or more people have

different views of what another person should do, different views of what another person should do, and as a result, make conflicting demands on and as a result, make conflicting demands on that personthat person

Role ambiguity:Role ambiguity: the uncertainty that occurs for a the uncertainty that occurs for a person whose tasks or authority are not clearly person whose tasks or authority are not clearly defineddefined

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Bureaucracy Bureaucracy Principle four:Principle four: the organization of roles in the organization of roles in

a bureaucracy is such that each lower a bureaucracy is such that each lower office in the hierarchy is under the control office in the hierarchy is under the control and supervision of a higher officeand supervision of a higher office

Organizations should be arranged Organizations should be arranged hierarchically so that people can recognize hierarchically so that people can recognize the chain of commandthe chain of command

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Bureaucracy Bureaucracy Principle five:Principle five: rules, standard operating rules, standard operating

procedures, and norms should be used to procedures, and norms should be used to control the behavior and the relationships control the behavior and the relationships among roles in an organizationamong roles in an organization

Rules and SOPs are written instructions that Rules and SOPs are written instructions that specify a series of actions intended to achieve specify a series of actions intended to achieve a given enda given end

Norms are unwrittenNorms are unwritten Rules, SOPs, and norms clarify people’s Rules, SOPs, and norms clarify people’s

expectations and prevent misunderstandingexpectations and prevent misunderstanding

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Bureaucracy Bureaucracy Principle six:Principle six: administrative acts, administrative acts,

decisions, and rules should be formulated decisions, and rules should be formulated and put in writingand put in writing

Bureaucratic structure provides an organization Bureaucratic structure provides an organization with memorywith memory

Organizational history cannot be alteredOrganizational history cannot be altered

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Advantages of BureaucracyAdvantages of Bureaucracy It lays out the ground rules for designing an It lays out the ground rules for designing an

organizational hierarchy that efficiently controls organizational hierarchy that efficiently controls interactions between organizational membersinteractions between organizational members

Each person’s role in the organization is clearly Each person’s role in the organization is clearly spelled out and they can be held accountable spelled out and they can be held accountable

Written rules regarding the reward and Written rules regarding the reward and punishment of employees reduce the costs of punishment of employees reduce the costs of enforcement and evaluating employee enforcement and evaluating employee performanceperformance

It separates the position from the personIt separates the position from the person It provides people with the opportunity to develop It provides people with the opportunity to develop

their skills and pass them on their successorstheir skills and pass them on their successors

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The Problems of The Problems of BureaucracyBureaucracy Managers fail to properly control the Managers fail to properly control the

development of the organizational hierarchydevelopment of the organizational hierarchy Organizational members come to rely too Organizational members come to rely too

much on rules and standard operating much on rules and standard operating procedures (SOPs) to make decisionsprocedures (SOPs) to make decisions

Such overreliance makes them Such overreliance makes them unresponsive to the needs of customers and unresponsive to the needs of customers and other stakeholdersother stakeholders

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LeadershipLeadership It is difficult to generalise about the meaning of It is difficult to generalise about the meaning of

leadership.leadership. But, we can say leadership is a relationship through which But, we can say leadership is a relationship through which

one person influences the behaviour or actions of other one person influences the behaviour or actions of other people.people.

The changing nature of work organisations i.e. flatter The changing nature of work organisations i.e. flatter structure, recognition of the efficient use of human structure, recognition of the efficient use of human resources have combined to place growing importance on resources have combined to place growing importance on leadership.leadership.

The nature of management is moving away from the The nature of management is moving away from the emphasis on getting results by the close control of the emphasis on getting results by the close control of the workforce and towards an environment of coaching, workforce and towards an environment of coaching, support and empowerment.support and empowerment.

Good leadership involves the effective process of Good leadership involves the effective process of delegation and empowerment.delegation and empowerment.

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LeadershipLeadership Leadership style:Leadership style:

The authoritarian (or autocratic) styleThe authoritarian (or autocratic) style The democratic styleThe democratic style A laissez-faire (genuine) styleA laissez-faire (genuine) style

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Organisation CultureOrganisation Culture Organisational culture is a general concept that is Organisational culture is a general concept that is

difficult to define or explain precisely.difficult to define or explain precisely. Definition:Definition:

““How things are done around here”.How things are done around here”. The collection of traditions, values, policies, beliefs and The collection of traditions, values, policies, beliefs and

attitudes that constitute a pervasive context for attitudes that constitute a pervasive context for everything we do and think in an organisation.everything we do and think in an organisation.

Organisational culture has three elements – Organisational culture has three elements – shared value; a set norms of behaviour; and shared value; a set norms of behaviour; and symbols and symbolic activities.symbols and symbolic activities.

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Organisation CultureOrganisation Culture Cartwright views culture as Cartwright views culture as a system of a system of

management authority.management authority. When accepted by employees, When accepted by employees, cultural values cultural values

increase the power and authority of management increase the power and authority of management in in three waysthree ways. Employees. Employees identify themselves with their organisation and accept its identify themselves with their organisation and accept its

rules when ‘it is the right thing to do;rules when ‘it is the right thing to do; internalise the organisations values when they believe internalise the organisations values when they believe

they are right; andthey are right; and are motivated to achieve the organisations objectives.are motivated to achieve the organisations objectives.

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Organisation CultureOrganisation Culture Schein suggests a view of organisational Schein suggests a view of organisational

culture based on distinguishing three levels culture based on distinguishing three levels of culture:of culture: Level 1 – ArtefactsLevel 1 – Artefacts

It is the most visible level – the constructed physical It is the most visible level – the constructed physical and social environment.and social environment.

Includes physical space and layout, the Includes physical space and layout, the technological output, writtens and spoken language technological output, writtens and spoken language and the overt behaviour of group members.and the overt behaviour of group members.

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Organisation CultureOrganisation Culture Level 2 – Expoused valuesLevel 2 – Expoused values

Cultural learning reflects someones original values.Cultural learning reflects someones original values. Solutions about how to deal with a new task, issue Solutions about how to deal with a new task, issue

or problem are based on convictions of reality.or problem are based on convictions of reality. If the solution works, the value can transform into If the solution works, the value can transform into

belief. Values and beliefs become part of the belief. Values and beliefs become part of the conceptual process by which group members justify conceptual process by which group members justify actions and behaviour.actions and behaviour.

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Organisation CultureOrganisation Culture Level 3 – Basic underlying assumptionsLevel 3 – Basic underlying assumptions

When a solution to a problem works repeatedly it comes to be When a solution to a problem works repeatedly it comes to be taken for granted.taken for granted.

Basic assumptions are unconsciously held learned responses. Basic assumptions are unconsciously held learned responses. They are implicit assumptions that actually guide behaviour They are implicit assumptions that actually guide behaviour and determine how group members perceive, think and feel and determine how group members perceive, think and feel about things.about things.

Schein suggests that the basic assumptions are Schein suggests that the basic assumptions are treated as the essence – what culture really is – treated as the essence – what culture really is – and values and behaviours are treated as and values and behaviours are treated as observed manifestations of culture essence.observed manifestations of culture essence.

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Figure: Where an Organization’s Figure: Where an Organization’s Culture Comes FromCulture Comes From

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The cultural web of an organisationSource: Johnson, G., Scholes, K. and Whittington, R. Exploring Corporate Strategy, seventh edition, Financial Times Prentice Hall (2005), p. 202. Reproduced with permission from Pearson Education Ltd.

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The importance of The importance of cultureculture Culture and organisation control:Culture and organisation control:

Culture as the largest organisational control system that Culture as the largest organisational control system that dictates how crazy or idiosyncratic people can be.dictates how crazy or idiosyncratic people can be.

Companies have both overt and covert culture that Companies have both overt and covert culture that influences both business and organisation behaviour.influences both business and organisation behaviour.

The covert set can be quite dysfunctional and costly. Culture – the The covert set can be quite dysfunctional and costly. Culture – the assumptions, beliefs, values and norms that drive ‘the way we do assumptions, beliefs, values and norms that drive ‘the way we do things here’ – is the largest and most controlling of the systems things here’ – is the largest and most controlling of the systems because it affects not only overt organisational behaviour but also because it affects not only overt organisational behaviour but also the shadow-side behaviour.... Culture lays down norms for the the shadow-side behaviour.... Culture lays down norms for the social system. In one institution you had to be an engineer to rise social system. In one institution you had to be an engineer to rise to the top. There was no published rule, of course, it was just the to the top. There was no published rule, of course, it was just the way things here. In one bank you could never be made an officer if way things here. In one bank you could never be made an officer if you were polyester clothes. Culture tell us what kind of politics are you were polyester clothes. Culture tell us what kind of politics are allowed and just how members of an organisation are allowed to allowed and just how members of an organisation are allowed to play the political game.play the political game.

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The importance of The importance of cultureculture Culture influences the behaviour of all Culture influences the behaviour of all

individuals and groups within the individuals and groups within the organisation:organisation: Culture impacts most aspects of organisational Culture impacts most aspects of organisational

life, such as how decisions are made, who life, such as how decisions are made, who makes them, how rewards are distributed, who makes them, how rewards are distributed, who is promoted, how people are treated, how the is promoted, how people are treated, how the organisations responds to its environment, organisations responds to its environment, and so on.and so on.

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The importance of The importance of cultureculture Culture and organisational performance:Culture and organisational performance:

Culture is clearly an important ingredient of effective Culture is clearly an important ingredient of effective organisational performance.organisational performance.

In order to aid long-term performance, there are In order to aid long-term performance, there are three main criteria needed to develop a suitable three main criteria needed to develop a suitable culture:culture: it must be strategically relevant;it must be strategically relevant; it needs to be strong in order that people care about it needs to be strong in order that people care about

what is important; andwhat is important; and the culture must have an intrinsic ability to adapt to the culture must have an intrinsic ability to adapt to

changing circumstances.changing circumstances.

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The importance of cultureThe importance of culture In order that leaders can develop, manage and In order that leaders can develop, manage and

change their culture for better performance, they change their culture for better performance, they can use three managerial tools:can use three managerial tools: Recruitment and selectionRecruitment and selection – hire people who fit the – hire people who fit the

company’s culture even if this may involve overlooking company’s culture even if this may involve overlooking some technical skills for a better cultural fit.some technical skills for a better cultural fit.

Social tools and trainingSocial tools and training – develop practices that – develop practices that enable new people to understand the values, abilities, enable new people to understand the values, abilities, expected behaviour and social knowledge in order to expected behaviour and social knowledge in order to participate fully as an employee and to create strong participate fully as an employee and to create strong bonds among members.bonds among members.

Reward systemReward system – culture is an organisation’s informal – culture is an organisation’s informal reward system but it needs to be intricately connected reward system but it needs to be intricately connected to formal rewards. E.g. include staff meetings where to formal rewards. E.g. include staff meetings where the seating arrangement is in accordance with level of the seating arrangement is in accordance with level of sales.sales.

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National cultureNational culture Culture helps to account for variations among Culture helps to account for variations among

organisations and managers, both nationally and organisations and managers, both nationally and internationally.internationally.

National differences and cultural reasons raise National differences and cultural reasons raise concerns about the transferability of organisational concerns about the transferability of organisational structures, systems and processes and question structures, systems and processes and question the logic of universal “best practice”.the logic of universal “best practice”.

Hofstede categorise four main dimensions of Hofstede categorise four main dimensions of national culture: national culture: power distancepower distance; ; individualism vs individualism vs collectivism; uncertainty avoidancecollectivism; uncertainty avoidance; and ; and masculinity vs femininitymasculinity vs femininity..

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National culture and MCSNational culture and MCS Power distance (PD)Power distance (PD)

High PD culturesHigh PD cultures are characterised by a high regard for are characterised by a high regard for formally constituted hierarchies and an acceptance that formally constituted hierarchies and an acceptance that authority and responsibility for leadership and decision-authority and responsibility for leadership and decision-making are vested at the upper-levels.making are vested at the upper-levels.

Individualism (IDV)Individualism (IDV) In highlyIn highly IDV societies, people are motivated by IDV societies, people are motivated by

individual responsibility and autonomyindividual responsibility and autonomy In low IDV cultures, there is a collectivist rather than In low IDV cultures, there is a collectivist rather than

self-orientation.self-orientation. Individuals in low PD, high IDV cultures will seek Individuals in low PD, high IDV cultures will seek

and respond more favourably to opportunities for and respond more favourably to opportunities for participation in performance-setting decisions than participation in performance-setting decisions than individuals in high PD, low IDV,individuals in high PD, low IDV,

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National culture and MCSNational culture and MCS Uncertainty avoidance (UA)Uncertainty avoidance (UA)

In high UA cultures – place greater emphasis on In high UA cultures – place greater emphasis on control through written rules, standardised operating control through written rules, standardised operating procedures and formalised planning.procedures and formalised planning.

Masculinity (MS)Masculinity (MS) MS is relevant to the set of performance indicators MS is relevant to the set of performance indicators

used in evaluation (long term vs short term).used in evaluation (long term vs short term). In high MS societies – greater focus on meeting short In high MS societies – greater focus on meeting short

term performance target, and less focus on the term performance target, and less focus on the development and well-being of organisational development and well-being of organisational members.members.

In low MS – preferred multiple performance measures In low MS – preferred multiple performance measures and less financially oriented indicators.and less financially oriented indicators.

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What is Organizational What is Organizational Conflict?Conflict? The clash that occurs when the goal-The clash that occurs when the goal-

directed behavior of one group blocks or directed behavior of one group blocks or thwarts the goals of anotherthwarts the goals of another

Although conflict is often perceived as Although conflict is often perceived as something negative, research suggests something negative, research suggests that some conflict can actually improve that some conflict can actually improve organizational effectivenessorganizational effectiveness

Can overcome inertia and lead to learning Can overcome inertia and lead to learning and changeand change

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Figure: Cooperation and Figure: Cooperation and Competition Among Organizational Competition Among Organizational StakeholdersStakeholders

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What is Organizational What is Organizational Conflict? (cont.)Conflict? (cont.) Beyond a certain point, conflict becomes a Beyond a certain point, conflict becomes a

cause for organizational declinecause for organizational decline Conflict leads to inability to reach consensus Conflict leads to inability to reach consensus

and indecisionand indecision Too much time spent on bargaining rather than Too much time spent on bargaining rather than

acting swiftly to resolve problemsacting swiftly to resolve problems

On balance, organizations should be open On balance, organizations should be open to conflict and recognize its valueto conflict and recognize its value

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Causes of ConflictCauses of Conflict InterdependenceInterdependence Difference in goals and prioritiesDifference in goals and priorities Bureaucratic factorsBureaucratic factors Incompatible performance criteriaIncompatible performance criteria Competition for scarce resourcesCompetition for scarce resources

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Figure : Relationship Between Figure : Relationship Between Conflict and Organizational Conflict and Organizational EffectivenessEffectiveness

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Managing Conflict: Managing Conflict: Resolution StrategiesResolution Strategies Organizational conflict can escalate Organizational conflict can escalate

rapidly and sour an organization’s culturerapidly and sour an organization’s culture Managing conflict is an important priorityManaging conflict is an important priority

Organizations must balance the need to Organizations must balance the need to have some “good” conflict without letting it have some “good” conflict without letting it escalate into “bad” conflictescalate into “bad” conflict

Choice of conflict-resolution method Choice of conflict-resolution method depends on the source of the problemdepends on the source of the problem

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Managing Conflict: Managing Conflict: Acting at the Level of Acting at the Level of StructureStructure

Because task interdependence and Because task interdependence and differences in goals produce conflict, alter differences in goals produce conflict, alter the level of differentiation and integration to the level of differentiation and integration to change relationshipschange relationships

Increase the number of integrating rolesIncrease the number of integrating roles Assign top managers to solve conflictAssign top managers to solve conflict Rethink the hierarchy/reporting chain to Rethink the hierarchy/reporting chain to

make sure there is no loss of controlmake sure there is no loss of control

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ManagingManaging Conflict: Acting Conflict: Acting at the Level of at the Level of IndividualsIndividuals

Establish a procedural system that allows Establish a procedural system that allows parties to air their grievancesparties to air their grievances Important for conflict between management and Important for conflict between management and

unionsunions

Use a third-party negotiatorUse a third-party negotiator Exchange/rotate/terminate individualsExchange/rotate/terminate individuals CEOs can also use their power to resolve CEOs can also use their power to resolve

conflicts and motivate units to cooperateconflicts and motivate units to cooperate

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Organisational EthicsOrganisational Ethics The moral values, beliefs, and rules that The moral values, beliefs, and rules that

establish the appropriate way for establish the appropriate way for organizational stakeholders to deal with one organizational stakeholders to deal with one another and with the environmentanother and with the environment

Derived from the personality and beliefs of the Derived from the personality and beliefs of the founder and top managementfounder and top management

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Figure : Factors Influencing the Figure : Factors Influencing the Development of Organizational Development of Organizational EthicsEthics

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Corporate Governance (CG)Corporate Governance (CG) A CG system can be thought of as the A CG system can be thought of as the

processes and structures used to direct a processes and structures used to direct a corporation's business. corporation's business.

A key objective of a CG system should be A key objective of a CG system should be the enhancement of shareholder value.the enhancement of shareholder value.

Once implemented, an effective CG Once implemented, an effective CG system can help to ensure an appropriate system can help to ensure an appropriate division of power among shareholders, the division of power among shareholders, the board of directors, and management. board of directors, and management.

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Corporate Governance (CG)Corporate Governance (CG) Professional bodies i.e MIA, CIMA develop new Professional bodies i.e MIA, CIMA develop new

CG guideline in order to restore investor CG guideline in order to restore investor confidence.confidence.

E.g CMA Canada introduce "A Balanced E.g CMA Canada introduce "A Balanced Scorecard for a Board of Directors,"to the Scorecard for a Board of Directors,"to the practice of corporate governance. practice of corporate governance. The BSC uses a mix of financial and non-financial The BSC uses a mix of financial and non-financial

performance indicators that address a company's performance indicators that address a company's internal processes, shareholder-value creation, quality, internal processes, shareholder-value creation, quality, organizational learning and community relations to organizational learning and community relations to strengthen internal and external accountability. strengthen internal and external accountability.

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ConclusionConclusion Managing relationship in organisation is important Managing relationship in organisation is important

in order to obtain strategic congruence.in order to obtain strategic congruence. A strategy must match the structure, systems, A strategy must match the structure, systems,

people and culture of the organisation. people and culture of the organisation. In addition, each organisational component needs In addition, each organisational component needs

to fit with the others.to fit with the others. If an inconsistency exists, it is likely that If an inconsistency exists, it is likely that

implementation of the strategy will be affected.implementation of the strategy will be affected.

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End of topic 6End of topic 6