Warwick Business School

Assessed Essay

What actions can leader take when trying to improve productivity in their

organizations? Specifically, what are the elements of organizational behavior

that might be controllable? Pick two elements you see as most important to

discuss

Organizational Behaviour

IB96V0

MA Management and Organizational Analysis

Student Id – 1161780

Words 2638

1161780 2

Introduction

For us students, who learn organizational studies, our fundamentals in these studies start with a sole aim

i.e. survival and sustainability of every organization. This objective rests with leaders within those

organizations, who can clearly identify key areas where increasing productivity is essential to meet the set

goals and keep the organization ‘afloat’.

“There appears to be almost universal agreement that the pace of change is accelerating as never

before and that organizations have to chart their way through an increasingly complex

environment”. (Burnes et al., 2003, p.452)

The above quote provides an overview of understanding the environment that the organization operates

in, responding to this how leaders can influence change to bring in operational excellence i.e.

productivity.

Defining productivity:

Many authors have defined productivity as the relationship between output of organizations in terms of

products and services and the inputs used to achieve these outputs. Higher productivity means that fewer

resources are used to create same volume of output thus more efficient is the production process is.

(Prokopenko, 1987, p.3) outlines that, regardless the type of production and type of industry the definition

of productivity remains the same. For the purpose of this essay, I would term productivity interchangeable

to labour productivity; here the later talks about productivity of human capital in organization.

Furthermore, (Giampietro et al., 1993, p.230) Defined and measured through their empirical studies, the

ratio between what amount of work has been done and the cost (wages paid, man hours) involved in

getting that work done.

Outline for the Essay

For the purpose of this essay and an attempt to answer the question briefly, I have taken an

unconventional approach by broadly naming micro (individual), and at macro (organizational) levels of

an organization, where elements of organizational behavior such as technology and structure play

important roles in enhancing productivity. Here, the protagonist is the leader in gathering these factors to

start improving productivity. This can be better understood by the illustration given below -

1161780 3

Controllable elements and their influence on Productivity:

As mentioned in the outline, we have identified technology, specifically, information technology as one

of the key drivers which can induce and improve productivity. Many authors including (Torkzadeha &

Doll, 1999, p.329) have identified “impact dimensions”. These dimensions namely are “task productivity,

task innovation, customer satisfaction and management control” where application of technology within

these dimensions resulted in improvement of productivity.

Information technology is what (Brynjolfsson & Hitt, 2000, p.24) explains helps in reducing costs of

communication, co-ordination and information processing. When we look at an employee and

organizational level of labour productivity, we come across McKinsey’s (Manyika et al., 2009) paper;

their analysis shows us that employees and groups waste up to 50 percent of resources in collaborating

efforts; for instance, set up meetings, travelling and redundant communications. To mitigate these wastes,

we have identified different technological aspects that a leader can induce to bring in improved

productivity. To elaborate further on this notion of technology, we have used different examples (within

industry) to provide an insight how information technology has helped certain organizations improve

upon their productivity.

Case Analysis

Cisco Systems, for an example provided many of its clienteles with tools of collaboration such as video

conferencing systems that enable organizations to reach more customers and suppliers, where as(Manyika

et al., 2009) says “ this helped in shifting large number of in-person meets to virtual interactions”. The

results were as below

“over an 18-month period, the initiative saved Cisco more than $100 million in travel and

business expenses…., Internal surveys showed that 78 percent of the targeted employees reported

increased productivity and improved lifestyles without diminishing customer or partner

satisfaction”. (Manyika et al., 2009)

Moving further, we acknowledged one more company to make our argument for technology stronger, of

that was Procter & Gamble, where (Huston & Sakkab, 2006, p.5) held that, ‘they developed and adopted a

web based IT platforms, in which the company could forge better links with their suppliers and customers

at large’. InnoCentive was one of those platforms that were adopted, it networked with thousands of

contract scientists across the globe to tackle defined scientific problems. Their use of collaboration tools

in specific Enterprise 2.0 “contributed towards increase in involvement of employees in managing data”.

(Panduwawala et al., 2009, p.6), (Hines, 2007) indicated that this collaboration ‘was done through

allowing employees to add and personalize RSS feeds of news and business information’. The results of

these were as below –

1161780 4

“Besides the savings P&G realized from nearly a thousand fewer business trips each month, the

company met its goals of shorter product cycle times and greater product innovation from

external sources”. (Manyika et al., 2009) (Huston & Sakkab, 2006, p.2)

Within both, the above mentioned examples we saw that majority of the technological changes were

brought in by the “change agents” that are the managers and directors. For example, in P&G CEO A.G.

Lafley, we could clearly see, that he went against the “might of company culture” (Cheese et al., 2008,

p.7) and battled an internal resistance to introduce using technologies to collaborate with suppliers and

external partners. The results were seen as below –

“Lafley’s leadership has driven impressive results: 6 percent organic growth in an industry that’s

growing in general only at 2 percent to 3 percent”. (Cheese et al., 2008, p.7)

While A.G Lafley’s, P&G model implemented technology to integrate supply chain systems to improve

productivity and lower production costs, Michael Dell’s, Dell Direct model infused IT and web based

technologies to generate sales, by involving customers to personalize and further, to eliminate

intermediaries by direct retailing models. In (Rangan & Bell, 2002) article, Michael Dell’s leadership

highlight was that he was able identify key growth markets outside USA, implement ‘virtual integration’

by having the best suppliers and to diversify Dell’s products towards more consumer centric products.

Michael Dell was quoted saying “Picking our spots to focus our engines, and driving the

organization behind them”. (McWilliams, 2000)

In his interview with (Woodward, 2009), Michael Dell knew “exactly what the customer wanted when

they wanted it". Furthermore, Dell was quoted “I wouldn't say I'm big on command control….. I am more

inclined to provide frameworks and guidelines”. Here, we come to know Michael Dell emphasized a lot

on collaboration and delegation of work.

Dell is one organization where technology has played an important role in improving organizational and

labour productivity. Here, what we see and what (Rangan & Bell, 2002) saw was a Dell Direct model of

operating this model gave unprecedented customization options to end customers who wanted to buy Dell

computers. This was done interactively through an “online environment of Dell’s website”. The results

were as below.

“The model strengthened Dell’s efficiencies on both transaction and relationship sides of

business. On the transaction side, the productivity of average dell sales rep increased as much as

50%.....On the relationship side spent 60% of their time with customers and 40% doing

administrative works”. (Rangan & Bell, 2002, p.7)

As (Brynjolfsson & Hitt, 2000, p.29) said, commercialization of internet has led to significant decrease in

cost in relation to production. Furthermore, they say that with the use of Web 2.0 tools such as social

networks, video, cloud based services has helped organizations see sizeable improvements in productivity

1161780 5

by bringing together convenience and innovation in terms of product variety right to customers as seen in

Dell.

The reason why we have chosen Technology over all other factors is what (Hostyn, 2011) has clearly

defined in his article “You flip a switch or program a piece of technology to do something, and it does it.

Technology is rational, predictable, and controllable”. As a final adieu to technology, we agree on the

same lines as (Coombs et al., 1992, p.62) who have said that technology has always been interpreted

towards competitive pressures, hereby, which it insures improved capital productivity, production quality

and reducing excessive wastes, but to our understanding, it also has an effect on labour processes and

organization’s employees also. We concur with (Garson, 1999, p.54) by providing the above examples

“that computing (IT) can be managed in organizations by the fact that many organizations, at-least to

some extent, do get the results they desire form information technology” in terms of productivity.

While in the first part, we “branded” technology as one of the influential elements in improving

productivity and the bottom line of the organization, we have also recognized organizational structure as

one of the protagonist in improving and influencing productivity. According to (Mullins, 1999, p.520)

organizational structure is ‘a pattern of relationships between members of the organization and the

positions held by those members within organization’. We agree with Mullins and (Sinclair-Hunt &

Simms, 2005, p.4) that organizational structure provides an overarching framework where all

organizational activities can be planned, controlled and coordinated. Within these organizational

activities, we see an opportunity to improve productivity to ensure that organizations meet objectives and

to finally fit in the ever-changing business environment.

In popular literature, we found (Burns & Stalker, 1961) talking to us about mechanistic and organic

structures of organizations to suit business environments. (Weber, 1947) texts on bureaucratic structures

that defined roles that had hierarchical order of authority, and finally towards more contemporary

structures, like (Heckscher & Donnellon, 1994) book on post bureaucracies namely ‘teams, networks and

virtual’ organizations.

Case Analysis

Here, we chose IBM and their virtual teams to see how those teams have an effect on organizational

performance. Furthermore, to see the actual impact on labour productivity, as said by (Lipnack & Stamps,

1997, p.7) virtual teams is ‘a group of people who interact through interdependent tasks guided by

common purpose” and work “across space, time and organizational boundaries with links strengthened by

webs of communication technologies.” In IBM, they called it globally integrated teams, as one of the

employees (Diab, 2011) said, he was part of a team which spanned across 20 cities 10 countries and 4

continents. These IBM teams worked on sales projects, having to interact with customers in delivering

IBM consulting services. Each team member was given $8000 worth of equipment like laptops and

mobiles to virtualize their sales. This, according to (Fisher, 2000, p.296), led to increased customer

satisfaction, meaning customers felt that these IBM teams were working for them, rather just

“representing the vendor” the resultant here, was increased sales figures and customer loyalty.

1161780 6

According to (Cascio, 2000, p.81), IBM financially saved 40-50 percent on real estate expenses and

doubled revenue per sales person after moving them into virtual environment. Lastly, in terms of

productivity, (Cascio, 2000, p.81) mentions that IBM’s internal studies saw 15 to 40 percent productivity

improvements in employees. Coming back to what we said earlier, we concur with (Hartoga et al., 2007,

p.55) those virtual teams intend towards being more ‘flexible, adaptive and/or project based

organizational structure’ that in other words are ‘organic’. Following through the books of (Fisher, 2000,

p.52) we understood, that even though virtual teams could be departmentalized for example, sales or

finance teams, we understood that these teams could specifically be self-managed teams working, for

example, on one such project and having member chosen specifically for this project. The highlight of

virtual teams in organization structure was highlighted by (Rayner, 1997, p.3) that these teams allowed

greatest organizational flexibility, where employees could work from wherever they chose, and work at

times that they find convenient, thus leading to greater employee participation and improved levels of

labour productivity. Here, better insight into leadership concerns in virtual teams was given by (Symons

& Stenzel, 2007, p.4) where they converse about leaders in virtual teams having three different roles

namely, initiator, scheduler and integrator, we also grasped from the above readings was that since there

is no face to face communication involved in these virtual teams, leader had to be more dominant,

influential and needed to have ‘facilitation skills’.

Moving forward, we choose Sweden’s Hennes Mauritz/H&M, to establish our argument that using the

outsourcing model, outsourcing key business processes could lead to lower operating costs and improved

productivity. What we understood and to what we agree with what (Derose, 1999, p.1) has said, is

outsourcing is ‘the idea of using external resources to meet needs’ and further, to adapt to ‘today’s fast

changing, and competitive world’. Here, H&M specifically took advantage of low cost labour (LCL)

countries like Bangladesh and China, where according to (Kumar & Arbi, 2008, p.74) H&M could take

advantage of low labour costs and tax benefits.

In 1982, H&M opened its first production office in Dhaka capital of Bangladesh. This office, according to

studies undertaken by (Hasan & Alim, 2010, p.62), was a ‘dual internal-external function’ office, where

employees used to co-ordinate orders between the head- office in Stockholm and individual suppliers in

Dhaka. The second function was to assign contracts to individual contractors by using vendor analysis.

This kept in check quality and costs of orders. Furthermore, H&M employed 100 designers to interact

with more than 700 networks of suppliers all over East Asia. The results of outsourcing were as below-

“Operating profits for the year ended Nov. 30, 2007, were up more than 20%, to $2.8 billion, on

sales of $11.9 billion, up 14.5% from the previous year…. In 2008 operating profits will grow by

nearly 15%, to $3.2 billion, and sales will rise 12.6%, to $13.4 billion”. (Capell, 2008)

As seen in IBM, we saw immense potential in structuring the organization by the application of globally

virtualized teams to work on projects. Besides, in Hennes Mauritz, we saw the organization in order to

capitalize and be have competitive advantage in costs of production, the application of outsourcing model

was needed and to structure the company.

1161780 7

Conclusion

To conclude, our essay showed two controllable factors namely Technology/IT and Organizational

structure, we cited numerous examples of cases where both these factors were deployed in order to

improve productivity and further, how leaders within those cases influenced change and directed and

implemented those to factors effectively.

While productivity is not merely the relationship between output and the input, we understood that

productivity could also be increment of sales, rise in customer satisfaction levels or even improvement in

quality of product/service that has to be delivered. Following this, we encounter that productivity is a key

enabler to ‘profit maximization’ goal of any company.

For Technology/IT, we believe that it is the primary enabler of innovation that enables exceptional

productivity and growth. We believe now that this is the time to invest in technology that will position

organizations competitively for decades to come. After reading lots of papers, we see three

transformational trends that are globalization, virtualization and collaboration. While globalization is

about cost and labour arbitrage, organizations look at globalization as a source of growth, talent and

innovation. IT is driving these companies to globalize. Here effective globalization strategy requires

robust virtualization strategy, for example, optimizing resources through reuse. Connecting people and

information, collaboration technology are enabling a whole new business models by providing a platform

for communication that gives employees customers partners and vendors access to information anytime

anywhere . These transformations are truly changing the nature of our work, opportunity in improved

productivity and operational excellence lies here.

For organizational structure, we observe that the markets are ever- growing and becoming increasingly

fragmented and dynamic and the pace of change in almost all them is exponential, we need to find an

organizational structure that allows and where people can respond to it quickly and effectively to those

challenges whilst having an sense of organizational size, strategy and goals. There are no simply

guidelines to choosing the best structure since there are tensions and resistance in all these changes.

Lastly, for the leaders of organizations, the greatest skill is to have a sense of how to manage thesecompeting tensions and the creed of understanding these tensions that creates successful organizations.

1161780 8

Works Cited

Brynjolfsson, E. & Hitt, L.M., 2000. Beyond Computation: Information Technology, OrganizationalTransforimation and Business Perforimance. TheJournal of Economic Perspectives., 14(4), pp.23-49.

Burnes, B., Cooper & West, P., 2003. Organisational learning: the new management paradigm?Management Decision, 41(5).

Burns, T. & Stalker, G.M., 1961. The Management of Innovation. University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship.

Capell, K., 2008. Bloomberg BusinessWeek; H&M Defies Retail Gloom. [Online] (1) Available at:http://www.businessweek.com/globalbiz/content/sep2008/gb2008093_150758.htm [Accessed 23December 2011].

Cascio, W.F., 2000. Managing a virtual workplace. Academy of Management Executive, 14(3), pp.81-90.

Cheese, P., Gossage, W.G. & Silverstone, Y., 2008. Leading and managing change in a multi-polar world.Outlook: Accenture Journal of High Performance business, pp.0-10.

Coombs, R., Knights, D. & Willmott, H.C., 1992. Culture, Control and Competition; Towards a ConceptualFramework forthe Study of Information Technology in Organizations. Organization Studies, 13(51).

Derose, G.J., 1999. Outsourcing: training & education. illustrated ed. American Society for Training andDevelopment.

Diab, P.R., 2011. Philip R. Diab. [Online] Available at: http://philipdiab.com/2011/05/virtual/ [Accessed17 December 2011].

Fisher, K., 2000. Leading self-directed work teams: a guide to developing new team leadership skills. NewYork: McGraw-Hill Professional.

Garson, G.D., 1999. Information technology and computer applications in public administration: issuesand trends. illustrated ed. Hershey, USA: Idea Group Inc.

Giampietro, M., Bukkens, S.G.F. & Pimentel, D., 1993. Labor Productivity: A Biophysical Definition andAssessment. Human Ecology, 21(3).

Hartoga, D.N.D., Keegana, A.E. & Verburgb, R.M., 2007. Limits to Leadership in virtual contexts. TheElectronic Journal for Virtual Organizations and Networks, 6.

Hasan, M.R. & Alim, M.A., 2010. Factors Affecting Supply Chain Management Efficiency in Cross BorderOutsourcing: A case study of H&M and its Outsourcing Operations in Bangladesh. Master DegreeProject: Logistics and Transport Management, Unievrsity of Gothenburg, p.143.

Heckscher, C. & Donnellon, A., 1994. The Post-bureaucratic organization : new perspectives onorganizational change. Thousand Oaks : Sage Publications.

1161780 9

Hines, A., 2007. Web 2.0 inside Procter and Gamble. [Online] CBS Available at:http://www.cbsnews.com/8301-505125_162-28040394/web-20-inside-procter-amp-gamble/?tag=bnetdomain [Accessed 14 December 2011].

Hostyn, J., 2011. Technology is rational, predictable, controllable. People aren’t. [Online] -- [Accessed 13December 2011].

Huston, L. & Sakkab, N., 2006. Connect and Develop Inside Procter & Gamble's New Model forInnovation. Harvard Business Review.

Kumar, S. & Arbi, A.S., 2008. Outsourcing strategies for apparel manufacture: a case study. Journal ofManufacturing Technology Management, 19(1), pp.73-91.

Lipnack, J. & Stamps, J., 1997. Virtual teams: reaching across space, time, and organizations withtechnology. illustrated ed. New York: Jeffrey Stamps.

Manyika, J., Sprague, K. & Yee, L., 2009. Using technology to improve workforce collaboration. [Online]McKinsey & Company Available at: http://whatmatters.mckinseydigital.com/internet/using-technology-to-improve-workforce-collaboration#comment [Accessed October 2011].

McWilliams, G., 2000. System Upgrade: Dell Looks for Ways to Rekindle the Fire It Had As an Upstart.Wall Street Journal, 31 Augustus. p. p. A1.

Mullins, L.J., 1999. Essentials of organisational behaviour. 2nd ed. Essex, England: Pearson Education.

Panduwawala, L., Venkatesh, S., Parraguez, P. & Zhang, X., 2009. Connect and Develop: P&G's big stakein open innovation. UNIVERSITY OF BATH, MSC IN INNOVATION AND TECHNOLOGY MANAGEMENT.

Prokopenko, J., 1987. Productivity management: a practical handbook. 2nd ed. International LabourOrganization.

Rangan, V.K. & Bell, M., 2002. Dell-New Horizons. Harvard Business School, p.24.

Rayner, S.R., 1997. The Virtual Team Challenge. [Online] Rayner & Associates, Inc Available at:http://www.raynerassoc.com/Resources/Virtual.pdf [Accessed 18 December 2011].

Sinclair-Hunt, M. & Simms, H., 2005. Organisational Behaviour and Change Management. Cambridge :Select Knowledge Limited.

Symons, J. & Stenzel, C., 2007. Virtually borderless: an examination of culture in virtual teaming. Journalof General Management, 32(3), pp.1-17.

Torkzadeha, G. & Doll, W.J., 1999. The development of a tool for measuring the perceived impact ofinformation technology on work. Omega: The International Journal of Management Science, 27(3).

Weber, M., 1947. The theory of social and economic orgnanization. New York: Oxford.

Woodward, D., 2009. Michael Dell. [Online] Director Publications Available at:http://www.director.co.uk/magazine/2009/4%20April/Michael_Dell_62_9.html [Accessed 16 December2011].