Research Topics: Managing Complexity

Introduction to Managing Complexity

Question 1 Are managers obsolete? One of the best ways that managers can increase the level of motivation among subordinates is to be effective leaders. Leadership can be defined as a process of influence in which the leader is able to get the follower to stay on a prescribed path toward the attainment of specific goals that are desired by the leader. Thus, by definition the art of leadership is an important part of effective management.  The art of leadership may be inherent within the individual. If leadership can be acquired through education and training it may be the most difficult thing to learn (Shell 2003). Managers in the professional environment are likely to have specialized training and are often preoccupied with the technical or scientific aspects of subordinate jobs. Consequently, they may pay little attention to the development and application of leadership skills (Shell 2003). When overall organizational success is related to leadership qualities, it is clear that effective leadership can and does make a difference Leadership qualities assume great importance in the professional work environment because professionals are highly sensitive to how they are managed (Shell 2003).    A categorization of leadership types can be established relating to the institutional settings within which leadership is exercised and which allow or prevent feasible leadership action. Leadership styles by contrast can be categorized according to the actual behavior of leaders faced by particular situations. The leadership component is not much easier to identify. Traditional organizational culture is sometimes expressed in terms such as risk aversion, inertia, hierarchy and sometimes political clientelism (Haus, Heinelt & Stewart, 2004). Leadership styles associated with this kind of political culture are far removed from the values and expectations which might be linked to an effective complementarily between leadership and community involvement. A range of leadership styles may therefore be appropriate for joint working dependent on the personal characteristics evident in the leaders reflecting the degree of charisma, commitment, persuasion, ambition etc. which rest within any individual (Haus, Heinelt & Stewart   2004).   The classical approach to management was an era where organizations were seen as nothing but creator of products. The old belief is that organizations is managed only to create products that the public needs. The organizations don’t need to have communication with its environment; it just needs to create products. The classical approach to management believed that organizations don’t have to mingle or interact with the environment and there are no opportunities in the environment. In those times managers have no capability to determine the risks and they were not able to foresee future problems of the company. The classical approach to management has brought about articles on a company’s need for managers. As the article “Are managers obsolete?” imply management has seem to lose its importance in an organization. The article mentioned that managers have no capability to predict catastrophic situations for a company. This does not mean that managers are not important anymore, they are still needed by companies because they are the ones that ensure that the company will follow the procedures in creating a product. The managers ensure that the company will use the best strategies that will help them achieve their goal.  There are different leadership styles and it includes the bureaucratic leader, the charismatic leader, the democratic leader, the autocratic leader, the laissez faire leader, the servant leader, the transaction leader, the transformation leader and the environment leader. The bureaucratic leader is the one that follows everything by the book. The charismatic leader has the capability to make the personnel do things that they don’t usually do. He/she makes use of various motivational strategies to put the personnel under his/her command.    The Autocratic leader has total authority over the organization; he uses forceful means to make the personnel perform under his/her standards.  The democratic leader listens to the personnel’s ideas and opinions and he uses the ideas to make decisions regarding the performance of the firm.  The laissez faire leader lets the employees do what they want because he/she believes that the personnel do not need supervision. The servant leader is the one that does everything even what should be done by the personnel. The transaction leader has the power to evaluate, correct and train employees who performs poorly. The transformation leader makes sure that he/she motivates well the personnel so that they will be an effective and efficient member of the organization. The environment leader makes of environmental issues and instances to change the perception and actions of the personnel.  Each leadership style has varied affects on a personnel and its effectiveness depends on the current situation of the firm. Question 2: Are assets obsolete Firms whose assets are tangible and useful in a variety of situations will carry higher levels of debt than will firms with intangible, specialized assets. Presumably insolvency costs for the former are lower because of the salvage value of the assets. Put another way, tangible, general assets offer more persuasive collateral to most lenders than do intangible and/or specialized assets (Birley & Macmillan 1997). Thus the presence of tangible general assets in a firm effectively shifts the optimum to the right, to higher levels of debt. The character or nature of such assets or capabilities should also motivate fast-growing enterprises to focus their product market mix. Many assets and capabilities are in articulable, non-tradable, not observable, and tacit. This severely limits the ability of a firm to recognize the importance or value of external opportunities and to assimilate and utilize successfully those opportunities which it does recognize. The extent to which a firm is able to recognize and seize opportunities rests on its prior experience and knowledge and its ability to learn (Birley & Macmillan 1997).   Together, the criteria create a learning range which severely delimits the ability of a firm to recognize and seize external opportunities. The presence of in articulable or tacit capabilities at founding limits the firm to recognizing and executing successfully only those initiatives which are closely related to its original capabilities firms lacking a proprietary asset or invention could not select a trajectory and, through time, develop a host of co-specialized assets. Instead, they would be forced to attempt to acquire, at least during their infancy, some asset stocks. In addition to the dilemmas of purchasing a strategic capability, some capabilities are simply not for sale (Birley & Macmillan 1997). Possessing a proprietary asset or invention at founding may often mean that the enterprise has a monopoly on it and, thus, would derive little benefit from any acquisition. Creating a stream of co-specialized assets and successfully leveraging the new asset or invention would then require a firm to venture. Since no firm can utilize its assets at 100 percent efficiency, slack or fallow resources exist within the firm. These spur growth. As a firm brings more resources on line, it simultaneously increases its stock of assets and, therefore, slack. This requires the firm to utilize still more slack growth begets growth. Given in articulable and tacit assets which are often embedded within a firms routines, internal venturing would have a greater likelihood of isolating and utilizing successfully the slack imbedded within a firm’s proprietary asset or inventions (Birley & Macmillan 1997).   Different product market focuses should also enliven differing rates of return. Much of the strategy literature on mergers and acquisitions and diversification demonstrates that a related or more tightly focused strategy outperforms a less related or more unfocused one. Focus is argued to be superior, because it confirms the strength of a firm’s endowment or capabilities. If a firm possesses assets it can continually modify and utilize to generate rents, it will not have to attempt to enter new markets. Similarly, focus also implies that the enterprise’s competition does not have competitive capabilities which force the firm to enter into unfamiliar markets and industries (Birley & Macmillan 1997). The asset is an economic benefit attained from a past event or transaction.  Assets can be in the form of current asters, long term investments, current assets and intangible assets. A company’s asset is not obsolete since it is used in making decisions on market risk. Market risk arises from the event of a change in some market-determined asset price, reference rate or index. The events that define market risk can be separated into two categories. The first type of event that generates market risk defines market risk based on the type of asset class whose price changes are impacting the exposure in question (Culp 2001).   A common form of asset class-based market risk is known as interest rate risk, or the risk that the balance sheet assets, liabilities, and off-balance sheet items of a firm including its derivatives will change in value as interest rates change. Other asset class-driven classifications of market risk include changes in the value of an exposure attributable to fluctuations in exchange rates, commodity prices, and equity values. Apart from the risk factors that influence the value of an exposure, the market risk of an exposure can also be characterized based on how those risk factors impact its value (Culp 2001). Assets give an idea on what aspect of the market should be surveyed for risk. Assets also provide stability to the company because too many liabilities can cause the downfall of any company. Moreover assets assist in preparing for future problems. Lastly assets can be used to supply the company additional operating capital. Question 3: Inventing the future Inventing the future means that a firm in an industry makes use of advanced technology to provide service to its clients. One successful instance is on Metro Transit Railway Corporation of Hong Kong. In Hong Kong the Mass Transit Railway (MTR) is a unified complex which carries throughout its entities a single semiotic system. The code preference system is uniform, but in the case of the MTR it is Chinese which is placed in the upper position, English in the lower (Scollon & Scollon2003).  The Mass Transit Railway Corporation (MTRC) is one of the two government-based corporations at present operating the railway network system of Hong Kong.  At present there are 5 underground railway lines operated by the corporation serving mainly within the metro areas. They are the Island Line running along the northern coast areas of Hong Kong Island; the Quarry Bay Line running from the eastern part of Hong Kong Island through a submerged tube across the harbor to the central-eastern part of Kowloon. The Tsuen Wan Line running from Central of Hong Kong Island, then across the harbor and serves the western portion of Kowloon until it reaches Tsuen Wan (Council on Tall Buildings and Urban Habitat 2001).   The Tung Chung Line runs from Central to the new town of Tung Chung at Lantau Island. The last one is the Airport Express Line providing direct link from Central to the new airport at Chek Lap Kok (Council on Tall Buildings and Urban Habitat 2001). MTR Corporation belongs to the transport and property industry. It produces railway systems for Hong Kong and some other countries. The company currently underwent a merger with Kowloon-Canton Railway Corporation.  The objective of the MTRC is to create and maintain an urban train system that will meet the transportation demands of the general public of Hong Kong.  MTRC monopolized the railway system of Hong Kong and it made a different travel experience for Hong Kong people and tourist. The advancement in Rail systems paved the way for it to be monopolized in various states including Hong Kong. The monopoly of the railway sector resulted in inefficiency in terms of more people using a single service. The monopoly of the railway sector reduced the desire of MTR to improve their services such as better facilities for passengers. For instance MTRC lacks public toilets especially in main line stations; this can cause the travel delay of passengers.     MTRC’s success is copied by rail road systems all over the world. Railroad companies could also benefit from combinations with corporations outside the business of railroading (Burns1998).They could diversify their investment bases, secure new avenues of capital, and acquire competing modes of transportation. Diversified investment bases might allow rail carriers to withstand more effectively declines in rail traffic while obtaining needed capital from non rail holding companies or non rail subsidiaries (Burns1998). Reduced regulation, mergers with other transportation companies, and affiliation with huge diversified conglomerates helped railroads stem the decline in their share of intercity freight. Rail carriers had access to new domestic and international markets through a booming inter modal industry, and a resurgence of the short line industry permitted the larger carriers regularly to abandon service over superfluous or marginally profitable line segments. As a result, railroads reported returns on investment at levels not seen in decades, and they boasted of highly advanced equipment and rights-of-way in first class condition. Through combinations with other systems, railroads formed the most efficient network yet realized for delivering freight to existing rail markets throughout the world (Burns1998).   Rail road systems have changed its course over the years. Due to the need to improve itself railway companies engaged in mergers to form new companies that will run the railway with much more capabilities and sources. The Rail road systems have changed in terms of the operations. Most rail systems are more automated wherein everything moves through a click of a few buttons. Rail systems have become faster and quicker in transporting people or products. Traveling using the rail systems last lesser than an hour for longer distances.  Rail systems have increased security measures due to current threats on people’s well being. Gadgets are installed in different Rail terminals all over the world. This ensures that acts of terrorism are prevented. Rail systems are now using devices that lessen waiting times. Machines have been made available that tend to provide faster way to get   a ticket.   MTRC and the innovation of rail systems proved that the future can be invented by all kinds of company as long as they would be willing to change, reorganize and accept the demands of inventing the future. References Banister, D 1995, Transport and urban development, E & FN Spon, London.   Birley, S & Macmillan, IC 1997, Entrepreneurship in a global context, London, Routledge.   Burns, JB 1998, Railroad mergers and the language of unification, Quorum Books, Westport, CT.   Council on Tall Buildings and Urban Habitat 2001, Tall buildings and urban habitat: Cities in the third millennium, Spon Press, New York.   Culp, CL 2001, The risk management process: Business strategy and tactics, Wiley, New York.   Haus, M, Heinelt, H & Stewart, M 2004, Urban governance and democracy: leadership and community involvement, Routledge, New York.   Shell, RL 2003, Management of professionals, Marcel Dekker, New York.   Scollon, R & Scollon, SW 2003, Discourses in place: Language in the material world, Routledge, London   Toporowski, J 2000, The end of finance: the theory of capital market inflation, financial derivatives, and Pension Fund Capitalism, Routledge, London.       Credit:ivythesis.typepad.com

Introduction to Managing Complexity

Question 1 Are managers obsolete? One of the best ways that managers can increase the level of motivation among subordinates is to be ef...

Modern Organizations : Issues and Trends

The Strategic Limit of Technology For a firm, product/ service differentiation is crucial in intensifying its revenue-generating capabilities.  This is because differentiation strategy seeks to be different from the firm’s competitors on as many product/ service feature as possible (Porter 1980).  In this manner, the focal point of the strategy, which is to provide goods/ services that are perceived by customers in different ways that are important to them, can be attained.  However, commissioning external suppliers would result to competitors having the same inputs (from raw material suppliers), having the same machines (from production suppliers), having the same technology (from software-providers) and even having the same strategy (from consultants).  If not identified by firms before formally running the value chain, customers might see personal value, however, not on a single firm, but on almost all the industry players.  Thus, their bargaining power and choices increase to the detriment of differentiation strategy (Sloman & Sutcliffe 2001).             In the past, Bavarian Motor Works or more popularly known as BMW tried to emphasize cost leadership strategy rather than differentiation to reduce designing costs and increase productivity leading to higher revenues (Hitt, Hoskisson & Ireland 2003).  This made the management buy a technology that transformed the formerly manual crash-testing into machine-operated procedure.  Although efficiency is enhanced, the differentiation of such technique (a previously unique internal process of BMW) from the auto-industry was easily copied by its competitors through contracting with identical vendors which literally devalue BMW’s design.  The error was later identified in undermining a complex intangible resource (the interactions among design engineers of BMW) in the purchase decision.  The pursuit of automation, subsequently the purchase, omitted such occurrence.             Since a firm does not have limitless competencies and even some competitive advantages are short-lived (Bernard 1993), differentiation is a process that involves product customization that undermines economies of scale particularly in production.  In doing so, it can be able to extend the life of its competitive advantage or survive competition from a niche of selected customers who value their produced.  However, when revenues rather growth is emphasized, mass production will take-over the corporate approach which goes for efficiency with a large customer base waiting to buy a low-priced produced.  Henry Ford manufacturing is an example (Mccarthy 2001).  Since value-creation is non-existent within the approach, the firm would tend to externalize the value chain that can lead to more cost-efficiencies due to downsizing, down scoping and short-lived supplier contracts.  Eventually, creating core competency, internal improvement and building a learning curve will be overtaken by outsourced entities (outsourced technology, purchased trademark/ patent, shared plant, etc.)             In the contrary, the example of BMW shows that the value that can derive from cost leadership strategy is minimal, non-growth, unshielded to leakage/ imitation and machine-oriented.  Unfortunately, external purchase and outsourcing coincides with cost leadership.  When a firm buys an organizational asset/ knowledge from a supplier, the change is very drastic.  In addition, departmental adjustments (technical, relational and behavioral levels) would likely be minimal except possibly in the technical side.  This is contrary to internalization (a firm internally produces the asset/ knowledge) where organizational members (possibly the entire stakeholders) are involved in the product/ process development that makes the change periodic and adjustments longer.  In this view, outsourcing strategy makes a firm and its units an outsider of the new potential value-creating asset.  In effect, the former differentiation of their produced from competition is unable to be implemented not only because competitors have resorted to the same supplier but also the new technology/ asset/ knowledge might not conform with the current corporate culture, structure, controls and strategy.   The Fall of the Pooled Global Resources On the verge in the popularity of offshore labor outsourcing in the shoe industry, New Balance deviated from the beliefs of some biggest names that follow the trend like Nike and Reebok (Hitt, Hoskisson & Ireland 2003).  This is despite low cost structures (cheap labor) and comparative advantages are present in foreign countries like China.  However, resisting the cost-effective promises of outsourcing offshore made New Balance to retain its competitive advantage in design and quality control including location advantages to high-end markets.  In doing so, while producing shoes is still cheaper for offshore outsourcing (.30 compared to New Balance United States operation of .00), New Balance domestic manufacturing is more efficient (24 minutes per shoe compared to three hours per shoe in offshore outsourcing).  The firm succeeded as it focused in upgrading low-skill jobs in the line. Again, it is obvious how sustainable and growing firms undermine revenues (through external purchase) in favor of retaining competitive advantage.  In doing so, they maintain their independence as well as total control of their destiny.  In an opposite view, revenue-maximizing but non-growth firms would not bother to scan its internal and external environment in favor of one-time resource acquisition.  In addition, the outsourcing attitude would also separate them to the idea in investing in research and development.  In effect, the rationale behind competitive advantage (hard to duplicate and costly to imitate) would be short-lived as a firm exposes it to competitors.  The latter can simply buy the offshore product/ service or pirate the former suppliers into a closed deal.  This is why New Balance came out to be more efficient and more in-control of quality because it internalized its competitive advantage and further improved its effectiveness.     Competitive advantage must be enhanced and developed internally in order for the firm to enjoy revenue-generation in a sustainable manner.  BWM was able to implement differentiation strategy because it had a competitive advantage in communication among its design engineers.  On the other hand, New Balance has competitive advantage in production efficiency and quality control that resulted to faster production and quality produced.  However, when firms desire to hold an instant revenue-generation capability without undergoing expensive R&D, internal and external audit or leadership change due to risk of insolvency and plummeting market share, they opt to outsource to short cut the process and gain instantly (Takeishi 2001).  The point is that sustainability is undermined in favor of opposing business or market demise.  In the contrary, the business who implemented such tactic would confuse the solution to a problem (outsourcing technique) to a sustainable value-creating corporate strategy.  In doing so, it thought it had already bring down its cards on the table but erred that it merely resolved a short-term issue.  At this juncture, outsourcing/ purchasing externally can be said to be a short-term solution possibly to continue business or confuse competitors behind a real strategy but creating/ maintaining/ developing competitive advantage is for growth and long-term goals.   The Role of Ethics in Decision-Making In definition, “ethics is a set of principles of right conduct.  It is a moral philosophy that conforms to standards of what is right or just in behavior” (Questia Dictionary).  The irony is that it has number of definitions but in sense, no theory or philosophy had really elaborate its meaning because it is basically based in norms, customs, values, culture and laws of a certain society.  There can never be universality as countries and other ethnic groups have differences.  Suffice to hear the word right and just and leave to the various societies, perhaps the majority, judgment of the succeeding individual actions, corporate strategies, government policies or international events. In private corporations, decision-making plays a very important role in strategies especially its implementation.  Company’s overall vision and mission is applied in most of its huge and crucial undertakings usually executed by the Chief Executive Officer (CEO) but lower-levels of management and their decision-making is the instrument used to spread and implement the goals of company.  There actions tend to affect the decision of CEO and as a whole, the fate of the company. The case of the historic fall of Enron is a relevant example which is written by Thomas, C. William in 2002.  CEO K. Lay was impressed to Skilling that he gave the latter the position to run one of its divisions.  No doubt Skilling is tough and innovative because of his major contribution to transform the company into one of America’s best performing corporations in history.  But then, ethical standards seemed to slip in his consideration as he focused too much of growth and prosperity. He instituted a harsh review committee for employees that made them taught that “performance measure was the amount of profits they could produce.”  Since then, employee turnover rose as he (Skilling) hired the best employee in the business and replace the incapable to adopt and pass his policy. This is started the “darker tone in the internal culture of the company.”  Further, Fastow, the man who handled the finances and financial records of the company, also displayed injurious decisions to the company by not disclosing its real financial standing.  In addition, it is also discovered that Anderson, both external and internal auditor, was closely linked with the firm’s “internal accountants and controllers as they were his former executives.” These aspects of unethical practices of the top managers of Enron caused the eventual fall of the company.  There is no question of there actions and decisions as being unethical because they constitute unfair treatment to employees who are not “money-based” but cannot be judged as underperforming, to the company who is voluntarily accept their decisions in the hope of achieving its goal and finally, the society because they created fraud and hid transparency. Ethical practices of a person definitely influence his decision-making for the company.  Since the shareholders and even the CEO cannot monitor certain actions of its operational managers (especially in big and multi-national corporations), the latter is given freedom of choice and decision.  With this, decision-making must take into account common good and not individual interests.  Decision making is ethical if it is rational and able to weigh the benefits and costs of a certain action not only in the context of a company but also its “well-being, justice and sustainability” (Kirkman, 2005) that will effect individuals, groups, government or even other nations   It is an ethical decision if it quoted responsibility in it.      Technology and Stress As defined by Peter Varhol (2000), “stress is the body’s natural reaction to events or activities that its subconscious find threatening or challenging.”  In small doses, stress is beneficial as its helps a person to keep motivated to work on big responsibilities.  But regular or chronic stress can bring negative effects especially in long-term work-related cases like difficulty in sleeping, stomach irritation, decrease interest in your work, and irritability toward others.  (Varhol, 2000) In this fast-phased environment we are living, companies are too busy with their daily works and undertakings.  Probably, most of them, especially the ones who give less priority on employee motivation, found themselves confronted with uncommitted, hot-headed and insensitive employees.  There is a specific case in United States wherein “work-related emotional disorders (like stress, etc.) are recognized in its 19 States and accounted for more than 15 percent of total workers’ compensation costs in California in 1980.” (as cited in Linsenmayer, 1985).  Even though a country has its answers to work-related stress because of it has control of its law, budget, natural resources and the minds of its great leaders and CEOs, among others, there is one thing in this world that cannot be controlled— the uprising of machines also tagged as Technological Revolution.    Technology had greatly impacted the labor sector in several periods in history that can be related to its stress levels when it comes to work.  Some people, like traditional typist, are anxious not by the technology (specifically computers) itself but the pressure of producing more (output) in less time (cited in Brosnan, 1998, p. 20).  This “fear or anxiety of computers” (cited in Brosnan, 1998, p.12) or Technophobia added to those factors, if not rare, of making an employee stressful.  The ignorance leading to anxiety of using the technology, especially the adults, seemed a threat to the efficiency of companies that places experienced people on the top of its organizational structure. On the other hand, industrial robots and other computer controlled machine tools is a promising technology that can reduce workplace injuries and illnesses (Linsenmayer, 1985).  This is true in manufacturing companies that handle different toxic substances or construction firms that are exposed to falling debris, shocks and elevation.  Using this incentive, companies bring to employees their needed warmth and respect by promoting their welfare, especially the hazards of the occupation.    Technology applied in labor had threatened in many company cases lay-off and automation that adversely affected employment and social responsibility.  Not to mention its work-related stress due to complexity of its function and operation that adult employees think that they have no enough time to study all over again and adopt the technological change.  The younger generation can be the solution but there is a research that the “anxiety level of them to technology is increasing…” (cited in Brosnan, 1998, p.11). Finally, we are caught between the good and bad effects of the things man’s curiosity had developed.  As explained and presented, technology can cut stress or reinforce it.  Countries, in general and companies in particular, cannot control programmers, inventors and scientists from creating breakthroughs.  The later will not bother of employee’s difficulty of using their creations.  But they certainly make solutions to corporate problems, effectiveness and efficiency.  Happily, they continuously create “anti-venom for the venom” as a vicious cycle.     Bibliography Book Brosnan, M. (1998). Technophobia: The Psychological Impact of Information Technology. New York: Routledge.   Hitt, M, Hoskisson, R & Ireland 2003, Strategic Management: Competitiveness and Globalization, 5th Edition, South Western; Thomson Learning, Singapore.   Porter, M 1980, Competitive Strategy, Free Press, New York.   Sloman, J & Sutcliffe, M 2001, Economics for Business, 2nd edition, Prentice Hall.   Journal   Bernard, K 1993, ‘Business Marketing Relationships’, University of Strathclyde Graduate School of Business, vols. 1-2.   Kirkman, R. (2005). Gwinnett Opinions: Ethics also should be part of growth debate. The Atlanta Journal and Constitution.   Mccarthy, T 2001, ‘Henry Ford, Industrial Ecologist or Industrial Conservationist? Waste Reduction and Recycling at the Rouge’, Michigan Historical Review, vol. 27, no. 2. pp. 53+.   Linsenmayer, T. (1985). ILO examines impact of technology on worker safety and health. Monthly Labor Review.   Takeishi, A 2001, ‘Bridging inter- and intra-firm boundaries: Management of supplier involvement in automobile product development’, Strategic Management Journal, vol. 22, pp. 402-433.    Magazine   Thomas, W. (2002, April 1). The rise and fall of Enron; when a company looks too good to be true, it usually is. Journal of Accountancy.   Credit:ivythesis.typepad.com

Modern Organizations : Issues and Trends

The Strategic Limit of Technology For a firm, product/ service differentiation is crucial in intensifying its revenue-generating capabi...

Top