Elisabeth Hiller
UD4023BBA9204
Chris Argyris:
Creative Management
A critical assessment
An Assignment Presented to
The Academic Department
Of the School of Business and Economics
In Partial Fulfillment of the Requirements
For The Degree of the Doctor of Philosophy
In Business Administration
ATLANTICINTERNATIONALUNIVERSITY
2nd June, 2009
Contents
Page
Introduction 3
Resources and capabilities 4
People in the organization 6
Chapter 1 - `Puzzles` 7
Chapter 2 - `Human Theories of Control: Skilled Incompetence` 10
Chapter 3 - `Organizational Defensive Routines` 11
Chapter 4 - `Fancy Footwork and Malaise` 12
Chapter 5 - `Sound Advice: It Compounds the Problem` 14
Chapter 6 - `Reducing the Organizational Defense Pattern` 15
Chapter 7 - `Making the New Theory of Managing Human
Performance Come True` 16
Chapter 8 - `Getting from Here to There` 16
Chapter 9 - `Upping the Ante` 17
Conclusion 18
References 20
Abstract
The developing business environment affects organizations. Many companies had and have to restructure for the sake of cost reductions, enhancement of profits, speed of response and flexibility to meet demand. This essay deals with internal development of companies, the learning process. What helps, what hinders? US psychologist Chris Argyris analyzes organizational defenses and provides recommendations of overcoming them. Starting with modern thinkers` thoughts, each of the nine chapters is introduced, highlighting the most challenging findings and recipes. All references showing the number of the page relate to Chris Argyris` work `Overcoming Organizational Defenses` (1990).
Introduction
Societal, technological, economical and political changes are still increasing complexity and pace of change of economics.Information technology and globalization are continuously changing the nature of business. Adequate competences of individuals enable companies to survive and prosper. Providing a portfolio of capabilities seems to affect both individual and organizational initiative. Echoing Hamel and Prahalad (1992, pp.164-5) who stated that `the distinction between competencies and capabilities is purely semantic, Grant (1995) suggested to employ the terms `competence` and `capability` interchangeably, although the term `core competence` is linked with organizational levels. During the past decades, existing skills became obsolete by progressive technology which forced employees to adopt new skills, and the question occurred who should pay for it – the employee, the employer or the government? Loyalty referring to working conditions needs to be scrutinized as both employees and companies are affected. Nearly continuous organizational restructuring requires capabilities that can be applied quickly to new and unknown situations. Thus, the assumption `once learned means forever learned` does not fit into economic life of today and increases competition among employees. People feel insecure about their careers and need development in terms of education, training, coaching and informal modes. Deriving from employees` portfolios companies take advantage, and as well, deriving from companies` profits national governments succeed. Skilled people seem to be the very sustainable competitive advantage, whereas other resources turn out to be more mobile and replicable. Hamel and Prahalad in their highly influential book Competing for the Future (1994, p.232) suggest:
The allocation and management of the assets that appear on the balance sheets is an elaborate, time-consuming ritual, infused with analytical rigor and attempts at numerical precision. But what about the other three-fourths or nine-tenths of corporate value? Through what mechanism are core competencies allocated? How explicit are the choices about where to put talent? How much pressure is put on divisional managers to justify why they should have preferential access to some particular competence pool? Although human resource executives will proudly proclaim that `people are our most important asset`, there is seldom any mechanism for allocating human capital that approaches, in its sophistication and thoroughness, the procedures for capital allocation.
The need to re-organize and update knowledge and skills seems to affect a lot of people, and senior managers admit that they are strongly committed to continuous professional development (cf. Thomson et al., 1998). A learning culture can be created by generating an organizational culture open to change. Deal and Kennedy (1982) define culture as `the way we do things around here`, but it is challenging to apply to own or another organization as the definition leaves room for interpretation. According to Wilson and Rosenfeld (1990, p.229) culture can be understood as `the basic values, ideologies and assumptions which guide and fashion individual and business behaviour. These values are evident in more tangible factors such as stories, ritual, language, and jargon, office decoration and layout and prevailing modes of dress among the staff`. Culture can hinder or help to achieve both individual and organizational goals. Sometimes companies are `stuck in the middle`, and their `sticky` culture rejects change and innovation. If an organization follows change management, it can be crucial to have committed employees with `commitment` as `the tendency of strategies to persist over time` (Ghemawat, 1991, p.14). Strategy plays a crucial role for learning as it deals with adopting, assimilating and accepting changing circumstances. High-profile companies with a usually extensive and sensitive portfolio of stakeholders often need to balance their sometimes differing and even contradictory goals. Tensions between internal and external factors, for example active national labour market policies which set the agenda, the unions and workers` council which support the employee and organizational interests are sometimes challenging. Both internal and external environment need to be distinguished: on one hand the firm comprises its goals and values, resources and capabilities, and structure and systems, and on the other hand the industry environment embracing competitors, customers and suppliers need to be matched via a strategic interface, the strategic fit (cf. Grant, 2002, pp.15-6). Strengths, weaknesses, opportunities and threats – which form the acronym SWOT – are organized in a framework which separates two characteristics of internal environment, strengths and weaknesses, from two characteristics of external environment, opportunities and threats. However, the SWOT framework offers some difficulties to distinguish strengths from weaknesses and opportunities from threats. The strength of a company is coincidentally its weakness, if the strength vanishes, for example an extraordinary Chief Executive Officer (CEO) who forms a company due to his own personality, or threats may offer opportunities if people recognize chances in changes. Thus, strategies need to be implemented that deal with adoption and learning. Strategies are successful, when they are consistent with internal and external environments, its resources and capabilities, and with its organization and systems (Grant, 2002, p.16), so an overall strategic fit including a consistent learning strategy needs to be created. Michael Porter puts it this way: `Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value` (Porter, 1996).
Resources and capabilities
The increasing pace of change invites companies to enhance flexibility. Learning is a response to market, and nurturing creativity is a means to add value, `especially in high-wage economies` (Henry, 2001, p.1). Thus, the question is how creativity can be fostered. Henry believes that creative people have similar characteristics – these are positivity, playfulness, passion, persistence – and she would like to add `persuasion` because it is necessary to involve other people in creative ideas (Henry, 2001, pp.18-9). To gain competitive advantage, resources need to come under scrutiny. The individual organizational resources are tangible, intangible and human: tangible, as financial and physical items, intangible, as technology, reputation and culture, and human, as skills, know-how, capacity for communication and collaboration, and motivation (Grant, 2002, pp.139-140). As they are, these resources usually do not generate value for the company and are not productive on their own. They need to be arranged and combined that they are able to create organizational capability which refers `to a firm`s capacity for undertaking a particular productive activity` (Grant, 2002, p.145). According to Hamel and Prahalad, core competences are those that `(1) [m]ake a disproportionate contribution to ultimate customer value, or to the efficiency with which that value is delivered, and (2) [p]rovide a basis for entering new markets.` (Hamel and Prahalad, HBR, pp.164-5).Starting with resources, the question is how to develop resources into competences, acknowledging that this process turns out to be a complex one. Following Hamel and Prahalad (1994), key to turn resources into capabilities is the leverage of resources: The ways to transform are concentrating, accumulating, complementing, conserving and recovering resources. The profit deriving from resources and competences depends on `their abilities to establish a competitive advantage, to sustain that competitive advantage, and to appropriate the returns to that competitive advantage` (Grant, 2002, p.152). The extent of the competitive advantage established derives from scarcity and relevance of resources, the sustainability of the competitive advantage depends on durability, mobility and replicability of resources, and appropriability rests on property rights, relative bargaining power, and embeddedness of resources (Grant, 2002, p.153). After identifying the gap between desired goal and current position, a company may plan how to bridge the gap. Profitability depends on rents, resources, routines and replication. Thus, replicating competences and developing new capabilities supports an adaptive market strategy. Top down analysis shows that the strategic planning process – embracing vision, performance goals, strategic plans, and external analysis – ceases into organizational capability assessment –capability gaps are identified – and at last ends in human resource management focusing on managing individual competencies (Grant, 2002, p.170). There is a four-step-plan for analyzing resources and capabilities: First, aiming at establishing a competitive advantage for a company, resources and existing capabilities need to be identified. Second, the linkages between resources and capabilities should be explored. Third, the company`s resources and capabilities are to be appraised in terms of strategic importance and relative strength. Fourth, strategy implications need to be developed in relation to strengths, and in relation to weaknesses. Thus, to sum up, ideally resources develop to capabilities, which have the potential for sustainable competitive advantage, and after having identified gaps, a strategy is developed and executed (Grant, 2002, p.175). Then, there are some issues to be considered: Priorities in resource allocation need to be identified, stakeholders need to be managed in a balanced way, performance measures should be implemented, and last but not least human resource management should become effective in terms of recruitment, selection, training and development. But, there are some relevant organizational cultural issues which include existing subcultures, tensions between internal teams and groups, and concerns about congruence of new strategy and existing organizational culture.Most of the cultures have more than one aspect – heterogeneous mixture of functions, roles and understandings determine different perspectives of how to look at them. If paradigms and culture change is to be changed, Johnson (1992, pp.28-36) suggests to change both `hard` elements – structure, systems, control – and `soft` elements – stories, rituals and symbols.
People in the organization
Achieving results through the efforts and engagement of other people is linked to awareness of dealing with people. The area of human resource management embraces four fields: human resource flow,performance management, work design and employee involvement. First, the right number of persons with the required skills and experience need to be hired to serve the organization`s goals. Company policies need to meet expectations of staff, for instance development and fair treatment, all of which need to be congruent with law. Second, a company needs to control and monitor staff behaviour and performance. Clear objectives should be agreed on, feedback loops need to be provided, and training and coaching system needs to be installed. Organizations should also seek to motivate people to stay with them, meet goals and, at best, exceed goals. Third, the way in which work is structured and organized includes the nature of the task, its scope, technology, and people serving it. Following Beer et al. (1985, p.570) job content is affected by task technology, supervision, management policies and practice, and people and their skills. Work systems at both extremes embrace control-based work system and commitment-based work system: for instance, the first highlights narrowly defined jobs, and work under close supervision, whereas the second stresses broadly defined jobs, and high levels of employee involvement (Beer et al., 1985, p.583). And fourth, employee involvement can happen in two contrasting categories – representative involvement where staff deals on their behalf with management via representatives – and direct employee involvement that focuses on communication between managers and employees. Thus, human resource management does not only affect personnel specialists, but any manager. Therefore, performance needs to be measured, ideally by numbers for the sake of easy comparison. The principal criteria for assessing human resource management embrace building human capital, cost-effectiveness, commitment and motivation, goal congruence and ethical acceptability. First, attracting, keeping and developing staff is central to building human capital. Knowledge and skills needed by the organization help people prepare for future requirements. Sometime some people are not very happy with permanently adopting knowledge and skills to changed circumstances. But, as the concept of life-long-learning suggests, persons who agree and feel happy with training and coaching usually learn easier than others. People who refuse to accept permanent updates of both knowledge and skills find themselves outdated and others being `state-of-the-art`. Thus, it is crucial encourage staff to learn, try something new and in case of failure, not to blame people. Second, cost-effectiveness concentrates on costs and benefits of human resource management. Direct costs can be identified with relative as, for example costs of a training program including training staff, room rental, and equipment. Indirect costs also can be reckoned, for instance the cost of time lost by workers for other activities. But, assessing outcomes and benefits turns out to be complex and hard to judge. Third, commitment and motivation deeply affect performance. People in organizations as well as in other communities develop relationships with other persons. Therefore, the relationships can be used to foster the application of skills and knowledge, and to care for easier learning processes due to friendly atmosphere within the company. Often the question arises who should be responsible for motivation – the employee or the company? Fourth and finally, ethical acceptability helps to support better performance. Ethics relates to kinds of behaviour within the company, ethics for instance define standards of internal fairness. In contrast, morals deal with the appearance of the company in relation to the outer world, for example Chief Executive Officers of companies declare goals to the public and ways to achieve them, e.g. furniture producers declare to reject child labour to appear philanthropic. Companies of middle and big size usually create policies on diversity to demonstrate that they welcome people regardless age, gender, religion, sexual orientation, and race. Key stakeholders such as shareholders, employees, customers, and the wider public community observe these values from different and differing perspectives. To succeed, a company needs to address the needs and wants of multiple stakeholders.
US-born psychologist Chris Argyris (*1923-) has contributed to the theory of organizational learning significantly. He is well-known for his models of single-loop and double-loop learning and how they can be applied in organizations. His 1990 published book `Overcoming Organizational Defenses`offers ways to diagnose organizations.Argyris states `[m]orale, satisfaction, and loyalty` to be the `guideposts for building and maintaining the human side of organizations`(Argyris, p.xi). He continues that in `a defensive organization it is possible to have high morale, satisfaction, and loyalty because the participants can, without fear, distance themselves from their responsibility to organizational excellence` (p.xi).But, Argyris states that `in order to achieve organizational excellence, learning, competence, and justice are a much more realistic foundation than are morale, satisfaction, and loyalty` (p.xi). Learning deals with the kind of how to reveal and correct failures, especially those that are complex and have massive impacts on profit, processes and people. Competence as he defines it deals with the ability of solving current and future problems. Justice depends on a set of values and rules addressing all staff regardless hierarchical position or function. Organizational defenses are revealed as Argyris wants to `make the undiscussable discussable` (p.xii). The focus of his book is on errors that are less easily detected and usually are designed by people. He calls the designed error `second-order error` as it grounds on first-order error. Designed errors evokes ineffectiveness and `violates the core of managerial stewardship` (p.xii). Argyris explains that employees `are not aware of producing error while they are doing so. The other answer is that the individuals know they are producing an error but have figured out a way to make the error look as if it was not an error` (p.xiii). Do know people the job with all possible implications – or do they know their piece of work they are responsible for? Argyris suggests that people `have learned to act skillfully, and the result is incompetence` (p.xiii). The existing `defensive defenses … permit a lot of fancy footwork to occur when the issues are serious and threatening …` (p.xiv), so, Argyris highlights the barriers an organization keeps alive to exercise this `underground management activity` (p.xiv).