The Human Factor in Sustainable Organisations

Question: The key to creating a sustainable organisation lies in the effective management of people. How do we ensure that people are managed effectively?

Introduction

This paper will try and demonstrate that there is no universal rule or way of managing people efficiently and that, in order to ensure that people are optimally managed, one should implement the structure and methods that better suit each organisation and the people in it. It will also propose that people perform better when they are empowered, valued as individuals and are an integral part of a wider group, towards which they feel a sense of belonging and of being an important member.

This rationale is singled-out as the most important because, if people are managed as machines, consequences may be dire (as they have often been throughout history). The key to organisational sustainability therefore lies in valuing and empowering an organisation’s most valuable resource, its human factor. And yet, people should not be treated as “star” individuals and rather be inserted in a wider organisational culture and community.

Probably the simplest definition of organisation is that it is “a group of people with common goals”. According to the Chartered Institute of Personnel and Development (CIPD, 2012), “successful organisations sustain their performance over time in the face of both internal and external challenges. The quest for sustainable organisation performance is therefore relevant across all sectors and industries”. The Forum for the Future defines sustainability as “a dynamic process which enables all people to realise their potential and to improve their quality of life in ways that simultaneously protect and enhance the Earth’s life support systems” (Forum for the Future, 2012). The focus of this paper will therefore be on how to manage people efficiently, enhancing the organisation’s performance while bearing in mind the broader business outlook and the environment.

The historic origins of both the classic motivational theories and more modern theories will be outlined and a very succinct critique of them will be attempted. Then the focus will be on the role of money, stress and power both in organisations and in motivation. The relationship between motivation and leadership will then be established, recent trends analysed, the increasingly relevant role of servant-leadership described and finally a conclusion will be attempted.

 

Historic setting

Organisations have existed since early human settlements and are something that naturally occurs whenever people start to do something together (one of the defining features of human civilisations). Already Confucius and Plato discussed how to organize and maintain a society and Aristotle had significant insights into organisational theory (Witzel, 2012). Charles Handy considered them as “collections of individuals” and as “political systems” (Handy, 1993). It seems, however, that individuals have been only too often left out of the organizational equation until last century, and that employees and labour were for long considered as merely being another input and as a means to an end. This end has been most often the pursuit of profit or the maximisation of return on investment. Employees and labour have therefore historically been shown in the balance sheet as a liability, an expense. Due to this bias, this paper will mostly focus on recent motivational theories for understanding modern organizational behavior.

Historically the structure and methods of organisations have been defined aiming to the pursuit of the maximisation of profit and/or results, with little regard for the human factor within them. There have recently been new avenues of research and a number of companies that are operating differently, creating structures and methods that adapt to the people that compose them, instead of having people adapting to the methods and structures already in place. These organisations display highly positive results, as will be outlined.

What lessons can be learned from this insight and how to empower and motivate individuals, to make them feel valued and part of a wider group? While all organisations are different, there is always value in looking for common systems. This is especially true regarding the issues of belonging and the deeper underlying themes, such as why and what do we work for and what motivates us to do it.

 

Modern theories

Contemporary motivation studies seem to have started with the Hawthorne Studies (1924-1932), in which Elton Mayo conducted a series of experiments involving slight increases or decreases in the lighting of the workspace (Wickstrom, 2006). These changes caused significant increases in productivity and led Mayo to conclude that money and pay were not the only motivators for working. It also confirmed in motivation theory what had already been observed by Christian Doppler in physics in 1842: that the observer affects the observed (Štoll, 1992).

The first contemporary motivation theories were satisfaction, incentive or intrinsic theories (Handy, 1993). Satisfaction theories suggest that individuals do not necessarily work harder or increase productivity if satisfied, but that they do stay longer in the organisation, display higher mental health and tend to have reduced turnover and absenteeism. Therefore, it may be ascertained that satisfied employees lead to more sustainable organisations. Incentive theories (both intrinsic, or self-based and extrinsic or coming from others) defend a reward system in which an individual will increase his efforts to attain a desired reward (the “carrot”). Intrinsic theories defend that reward will come from the work itself, from it being the right work for that person. Among the latter theories we can find Maslow’s Hierarchy of Needs (Maslow, 1943).

Maslow defended that humans have individual behaviours and a set of goals or needs, ranging from basic (food and shelter) to safety, belonging, self-esteem and, finally, self-actualisation needs. These needs become mere motivators when satisfied, and only when one need is satisfied can individuals aspire to satisfying the other needs. An individual can also regress to a more basic state due, for instance, to a divorce or unemployment (Maslow, 1943). Maslow has been criticised by several authors, notably by Gert Hofstede, for being very ethnocentric in his approach and for his view being a very individualistic one (he was North-American). This approach has been compared to collectivist societies, in which the needs of acceptance and community may be greater than individualistic needs (Hofstede, 2005). This latter reasoning is also coherent with the central idea of this paper, that self-actualisation needs can indeed be the needs of a wider group. Roethlisberger and Dickson, known for their extensive research of the Hawthorne experiments, have amplified Maslow’s hierarchy of needs, adding friendship and belonging needs, dependence-independence needs, needs for business and fair treatment and needs for achievement (Handy, 1993). McClelland has identified three major factors influencing an individual (McClelland, 1978): the need for affiliation (building, developing and maintaining relationships, not task-orientated), power (an apparent condition for managerial success) and achievement (moderate and calculated risk-taker, wanting personal responsibility and feedback). Handy has listed these factors as hereditary/early environment, educational, related to the individual’s self-concept or to his/her experience (Handy, 1993). On the other hand, Robert Hadrey, through the study of animal populations, arrived at the conclusion that there were three basic needs, the need for identity, security and stimulation. These needs are very basic and may neglect the more complex nature that human beings have developed throughout evolution (Handy, 1993). It is also revealing that the ambition for being empowered and a need to feel valued (different than a Need for Power) seem to be absent from these studies.

Frederick Herzberg developed an open-ended style of questioning, with few assumptions, leading him in 1959 to his reference book: “The motivation to work”. In it he first introduced his motivation theory that we have animal or hygienic/environmental, short-term factors and human or satisfaction, long-term factors that influence our behaviour in organisations. Herzberg saw giving additional freedom, responsibility, recognition and praise or otherwise rewarding people for their work as common motivators. These motivators can also be coherent with the notion of feeling valued and an important member of a group, especially because Herzberg considers responsibility, recognition, praising and rewarding people for their work are being important motivators (Herzberg, 1993).

Douglas McGregor has later introduced the X and Y Theories (McGregor, 1960), according to which “X” people do not like to work and only do it if they are coerced, persuaded, rewarded, punished or controlled, as with a “stick”. “Y” people, on the other hand, are self-motivated to achieve their own goals and coercion is not effective on them, only a “carrot” is. This may be a very dualist and simplistic approach of human beings, who may have very complex personalities and motivations. Another challenge with this theory and the previous ones is also that they do not seem to make a clear distinction between different types of organisations and labour. And yet, there are substantially different jobs, motivational profiles and aspirations. While we can broadly include people in one of the categories, such as theory Y does with the participative management style, there is an increasing trend towards organisations in which the individual is fully integrated, organisations that function as communities and collaborative entities. These appear not to be fully addressed in contemporary motivational theory.

We will therefore draft an attempt to do so, even if Handy considers that “decentralised organizations are not possible in certain technologies (e.g. process manufacturing)”. He also states that not everyone may want decentralisation or more responsibility and that therefore “the psychological contract often lies at the heart of any change problem” (Handy, 1993). This may prove to be correct, even if the fact that people do not want more responsibility or decentralization may also be most often due to a lack of identification with the company’s values and vision (or its inexistence) and/or in organisations that have a coercive, “X” approach.

Satisfaction at work, or a fulfilled psychological contract, is characterised by a close fit between the organisation’s culture and the individual’s own personal cultural preference. This contract may be coercive, calculative or cooperative (Handy, 1993). The most efficient contract type seems to be the cooperative, one that stimulates the creativity of the individual and his/her alignment with the organisation’s goals. In a cooperative contract there is not much day-to-day control and the individual has more voice in the choice of his/her goals and on how to achieve them. However, the individual’s goals may not be aligned with the organisation’s goals and also not all individuals may want to share the responsibility for achieving the organisation’s goals. Therefore, freedom of entry seems to be a pre-requisite for this type of contract.

Handy has also introduced a more advanced model (Handy, 1993), encompassing all the needs in the theories previously described along with the notion that each individual has its own set of needs. These needs may vary widely and the relative importance of each need may also change over time. Handy considers that the strength or saliency of the need will determine the “E”, the Effort or Energy necessary in order to achieve the expected result, and its instrumentality in reducing the original need. There is evidence that the most important factor in raising performance is quite simply to set objectives. He remembers that Lewitt and Muller have demonstrated in 1951 that “performance improves in relation to the quantity of feedback or knowledge of results” and presents evidence for this reasoning (Handy, 1993). This replicates the seminal results of the Hawthorne Studies and points towards being very important to acknowledge someone’s efforts and making he/she feel valued.

 

The role of Money, Power and Stress in motivation theory

            While money in not especially singled-out in the various theories of needs, it is actually instrumental in satisfying most human needs. Handy argues that money is not a hygiene factor (as Herzberg defends in 1993) but that “equity” is. Equity refers to an individual’s level of pay compared to others within the same organisation (Handy, 1993). More recently, Tim Hartford defended that performance pay encourages performance only when performance can be measured (Human Capital Handbook, 2011). Performance-related pay tends to favour individualistic behaviours when there is a lack of trust, to incentivise short term-ism and temporary performance increases. The same handbook refers to two studies that support this paper’s argument. The first is a 2009 McKinsey Quarterly survey in which the top three performance motivators “were all non-cash incentives: praise from immediate managers; leadership attention and chance to lead projects”, and then a 2004 Watson Wyatt survey where “high performing employees ranked maintaining a positive reputation as their primary motivation”. This survey also states that “studies reinforce the evidence that reward systems often reduce motivation, do not work in creative and cognitive contexts and in many situations cause performance to fall” (Human Capital Handbook, 2011). These findings validate the view that people perform better when valued as individuals, when they feel that they have high reputation and are an important member of a wider group.

Charles Handy has introduced a typology of cultures presenting role, task, power and person cultures, in which the role culture is influenced by the position, the grade one holds. IBM has been frequently portrayed as a typical example of such a culture, where a person has to stick to his/her post and is not supposed to do anything outside its boundaries. The task culture represents what you do, it is one in which the person may sacrifice him/herself to get the job done and there is a risk of less work balance, as with consulting or accounting positions. The power culture is related to what you control and is very suited to labour Unions. Finally, the person culture is based on who you are and you are responsible for yourself. Typical person culture organisations are Barrister’s chambers or hippy communities (Handy, 1993).

Power can be: reward-based (“carrot”), coercive (“stick”), legitimate (laws and legislations), referent (e.g.: Richard Branson, he has an “aura”), or expert (someone who has the knowledge). However, managers may miss status, authentic, charismatic, moral, spiritual or mythical power (Fincham and Rhodes, 2005). Whilst for Max Weber “power is the potential to act”, for Stephen Lukes “power is the ability to prevent other from acting”. And Machiavelli considered that “all power is limited”, while Mary Parker Follet wrote that “control is an illusion”, that it is a shared process (Witzel, 2012). More generally, power depends on who you are, how old you are and where in the organisation you are.

Charles Handy has identified four different types of stress: time, anticipatory, encounter and role (role ambiguity, incompatibility, conflict, overload and underload). He also identified five stressful situations: responsibility for others; innovation stress; boundary spanning or coordinating stress; Relationship stress; Career Uncertainty (Witzel, 2012). These influence individual’s performance and their degree of integration in and alignment with an organisation.

 

Motivation and leadership

There are several ways of aligning the psychological contract and the motivations of employees with the goals and vision for sustainability of an organisation. These include, among others: creating a uniform; attributing rewards; providing training or education; showing them the results and impact of their actions; raising awareness towards sustainability issues; getting employees to know the organisation and letting them drive processes; letting them develop the concept of sustainability and enabling it; making sustainability part of the mission statement; changing people’s mind-sets so that they deal better with uncertainty; simply talking to people about it and also having a leader who is trusted by the other people in the organisation and who will take responsibility, someone with honesty and integrity (Witzel, 2012).

It seems, however, that the crucial question to be answered is if sustainability is a culture in itself or if people are just trying to make the culture of their organisation more sustainable. History is rich in examples of people who have gone to great extents to create amazing works, frequently with no pay or incentive other than an intrinsic or societal recognition. It is therefore crucial to differentiate between the market or professional world and the societal or personal world. When and if an organization is able to create a synergy or – even better – to combine these two worlds into one reality, then it can expect to achieve the very best from its human factor.

Leaders should not underestimate the halo effect. This effect describes a strong tendency for individuals to conform to what is expected from them and to other people’s perceptions of them. As Handy states, “high expectations, if properly communicated, can create a self-fulfilling prophecy” (Handy, 1993).

Daniel Goleman, the author who outlined the six leadership styles (HBR, 2000) proposes that a leader in the successful organisation of the future should probably be predominantly affiliative, authoritative (or visionary), coaching and democratic, ideally varying style according to the circumstances, while maintaining integrity and coherence. This is how he/she can build relationships and successful teams, mobilise individuals towards shared values and goals, improve their performance and align them with the organisation’s culture, generate buy-in and /or consensus, create a sense of direction and encourage change. However, it seems that most CEOs nowadays are more pacesetting (expecting excellence and self-direction) or coercive leaders (demanding immediate compliance), the two styles that Goleman considers may potentially create dissonance and discord. As Goleman also points out, the pacesetting style destroys climate. McClelland’s research in 1998 also demonstrated that climate accounts for 20 to 30% of the variance in an organisation’s performance (HBR, 2000).

 

 

Servant-Leadership

            Even though great leaders throughout history have personified this concept, Servant-Leadership as a term was first introduced in 1970 by Robert Greenleaf, a Quaker from Indiana, USA. While some people may feel uncomfortable with the conception of being a servant because of associations with undignified, menial tasks and work, Greenleaf relates it to supporting the other members of the community (Greenleaf, 2002).

A servant-leader should first and foremost serve and have the following characteristics (Lewis and Noble, 2008): listening (coupled with regular reflection); empathy (assuming the good intentions of others and not rejecting them as individuals); healing (self and others, making people whole); awareness (general and of the self, leading to integrated, holistic positions); conceptualisation (conceptual thinking, beyond day-to-day affairs); foresight (vision); stewardship (commitment to serving the needs of others); commitment to people growth (responsibility to empower); building community (do not make others wrong, hear and understand, say the truth with compassion and acknowledge the greatness within others); trust (the most fundamental principle of Servant-Leadership, underpinning all others).

Servant-leadership is all about building a community in the workplace, making the ego subside and understanding that the only power we have is derived from the people we lead (Lewis and Noble, 2008).

A particularly successful example of servant-leadership with low-skill labour is one in South Africa as explained by Lance Bloch, a servant-leadership trainer and advocate.  Lance gives the example of Delmas coal, a coal-mining venture in South Africa. Through genuine management engagement and a yearlong process of training, workshops, experiential exercises and gatherings or meetings to empower workers and groups, they have transformed this low-skill business from being 20% below target to reaching 20% above target (Lewis and Noble, 2008). This shows that empowering people may be doing well by doing good. It also proved that empowering people and building a sense of community may not only be the right thing to do, but that it is profitable and makes good business sense.

Richard Barret (author on leadership and values) travels the world advocating that leaders should no longer be “the best in the world, but the best for the world”. He has also adapted Maslow’s hierarchy of needs putting Service at the top of the hierarchy (in his Seven Levels of Consciousness model), considering it is the ultimate self-actualisation need (Barret, 2011).

 

Final remarks

            Managing people is one of the most difficult challenges that organisations face and the target of some of the most complex theories in the social sciences. With the increasing globalisation or internationalisation of most economies, the relevance of these studies and theories is ever increasing. As Jean-Paul Sartre famously said “hell is other people” (Witzel, 2012). However, they can potentially be heaven as well, if they are empowered and valued as individuals. Organisations are increasingly complex and multicultural, so no “one size fits all” approach will be sustainable over time. Each organisation should have the specific structure and methods that best suit the environment it belongs to and the people who compose it. Ideally, an organisation should even have different structures, methods and systems in different countries, or at least in different continents. An outstanding leader knows that only by empowering people as hosts he/she may find the way to solve complex, intractable problems and give meaning to people’s lives and work (Wheatley, 2010). This paper has tried to demonstrate that, while human beings are complex individuals to whom no set answer or formula is “the” key, that we perform better in environments where we feel valued and empowered. Increasing evidence shows that we usually perform better when we are a part of a wider group towards which we have a sense of belonging, feeling identified and recognised as individuals.

Bibliography and references

Books

* Barret R. (2011), The new leadership paradigm, Fulfilling books

* Fincham R. and P. Rhodes (2005), Principles of Organisational Behaviour, Oxford: Oxford University Press

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* Hofstede G. (2011), Seven Deadly Sins, available at http://www.geerthofstede.nl/

* Maslow A. H. (1943), A Theory of Human Motivation, Psychological Review

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* Semler R. (1993), Maverick! The Success Story Behind the World’s Most Unusual Workplace, Arrow

* Senge P. et al (2008), The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World, Nicholas Brealey

* Stajkovic A. and Luthans F. (2003), Motivation and Work Behavior, McGraw Hill

* The Human Capital Handbook (2011), Reddy M., Hubcap Milton Keynes, UK

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* Wickstrom G. and Bendix T. (2006), The “Hawthorne effect” – what did the original Hawthorne studies actually show?, Scandinavian Journal of Work, Environment and Health (available at www.sjweh.fi)

 

 

Internet

* CIPD (Chartered Institute of Personnel and Development), 2012: http://www.cipd.co.uk

* Civic reflection, Kathleen Caldwell, 2003: http://civicreflection.org/online_tools/resource_library/mtm_archive/?article=399

* Forum for the Future, 2012: http://www.forumforthefuture.org/