O.T. Chapter 1: MANAGING AND ORGANIZATIONS; OPENING, THINKING,
CONTEXTUALIZING
This chapter is designed to enable you to:
• identify the impact that changes in the contemporary world are having on managing and
organization
• be introduced to trends in the digital organizations in which much contemporary managing and
organization occurs
• understand managing and organization as sensemaking
• grasp the managerial rationalities that constitute much contemporary managing and
organization
• familiarize yourself with some significant global shifts for future managing and
organization.
‘When digital transformation is done right, it’s like a caterpillar turning into
a butterfly, but when done wrong, all you have is a really fast caterpillar.’ - George Westerman |
Principal Research Scientist with the MIT Sloan Initiative on the Digital Economy
- Managing and organizations are dynamic elements of the contemporary world, changing rapidly
- What managers do is to make sense of these changes and other stimuli in the environments in
which they find themselves (= sensemaking)
- Sensegiving, sensebreaking, sensemaking (closely allied terms) are constitutive of managerial work,
irrespective of its substantive content.
- Managing as a practice, organizations as goal-oriented collectives
To be organized means being an element in a systematic arrangement of parts, hopefully creating a
unified, organic whole.
Management is the process of communicating, coordinating and accomplishing action in the
pursuit of organizational objectives, while managing relationships with stakeholders, technologies
and other artefacts, both within as well as between organizations.
Management is NOT a neutral activity, it’s also a socio-political activity, which implies the need to
adhere to societal, political and ethical responsibilities
Organizations have different missions (schools and universities = educate people; charity
organizations = support people in need…)
For-profit organizations; Not-for-profit organizations; Organizations supported through taxation as a
public service
(There is growing consensus that the practices involved in organizing share a high degree of
commonality, so the differences in mission are subordinate to the practices involved in managing
and organizing.)
- Organizations are tools: they are purposive, goal-oriented instruments designed to achieve a
specific objective.
- Organizations extend human agency (Perrow (1986))
- Organizations are practical tools for accomplishing their goals (these goals can be as much benign
as more particularistic (Barley (2007))
,- During the post-war era, people were managed through their career aspirations. An inability to fit
in was a sufficient reason for a person’s career aspirations and fitness for available opportunities to
be questioned and restricted.
- Whyte (1956) observed executive behaviour that was risk-averse because no single individual was
responsible for any decision. Consequently, career progression meant authority and a career for life
as long as one kept one’s nose clean.
Large-scale bureaucracies created managerial careers that employed many millions (mostly men)
and these corporations also produced technological innovations in abundance, such as computers,
fibre optics and satellites.
These innovations would creatively destroy much of old corporate America,
Digitalization: the use of digital technologies and of data (digitized from non-digital sources or
originally created as such) to manage organization processes; the new economy of digitalization
started rising from the 1980s, creating the world that we now live in.
Digital nomads: mobile workers armed with a laptop and Wi-Fi, connecting anywhere and choosing
mobility rather than a fixed abode. Many of the jobs of the future are likely to be created and filled
by them. They often go to warmer and less expensive places such as Portugal. However, they create
problems for tax authorities and distort local housing markets (example of Alfama in Lisbon (Bloom,
2018)).
Organizations, who are the clients of such workers, are changing, irrespective of their mission, as a
result of the possibilities afforded by digitalization
- For example, charities earn money through using call centre staff and robot dialing in cheap
labour markets).
Robots are carrying out mundane work, providing opportunities for open/platform-based
collaboration and transactional management that facilitate a market-based form of coordination
making organization less reliant on hierarchies, and on long-term relationships with a trusted
workforce.
There are policy implications for digital developments that might seem surprising.
The objective of policy should be gradually to make labour more expensive.
More expensive labour is not only a personal good for those that receive it but is also an
institutional good.
- In the face of rising costs, those industries that thrive only because of low-cost labour will
either be outsourced to countries where workers have fewer rights and protections, or
increasingly adopt robotics and artificial intelligence (AI).
Bill Gates has suggested that such productivity-enhancing devices should be taxed.
The main argument against taxing robots is that it might impede innovation, but this is the case only
if the option of a low-cost workforce is available: limit the opportunities for that through earnings
legislation and enforcement and the objections would be dissolved.
Enterprises that in the past relied on the super-exploitation of low-cost labour would either die as
they were priced out of the market or would adjust structurally through increasing investment in
productivity enhancements that would improve working conditions, wages and productivity.
,Organizations in the digital age are switching from managing through ‘hard power’ (in the form of
imperative commands) to ‘soft power’ (through indirect methods, such as induction into an
organizational culture, training and strategy workshops, or leadership courses), which are more
subtle management tools.
The stress on managing through practices such as organizational culture is not new.
Peters and Waterman’s (1982) arguments about how to hone the organization tool through
leadership and culture:
- Improvements in productivity and quality would accrue when corporate cultures
systematically align individuals with formal organizational goals.
In government and public sector circles, the view of organization as a cultural tool was led by
something called new public management.
New public management replaces public sector bureaucracy with public managers and citizens with
customers, managed by targets and audits. Its adoption started in the early 1980s. Its reforms were
informed by neo-classical economic theories relating to marketization and increased adoption of
private- sector management techniques.
- Across Anglo-American polities, there has been an underlying assumption that private-sector
business management is better than its equivalent in the public sector, it is widely seen as
being the only tool in the box.
Microeconomic theory anchored in a ‘market-based model’ advocated down-sizing government,
applying private-sector management principles to public-sector administration, viewing citizens as
customers, divorcing policy making from administration implementation and viewing government
as akin to a ‘business within the public sector’ (Box et al., 2001: 611; Kettl, 1997)
The number of American companies listed on the stock market dropped by half between 1996 and
2012.
There has been a decline in corporate jobs which varied from country to country, David (2016)
argues that this decline is a root cause of contemporary income inequality, as well-paid jobs in
career bureaucracies with clear routes to promotions were eviscerated.
At the same time that governments practiced austerity for the masses, they have praised tax cuts for
the elites on the grounds that lower income taxes would encourage economic activity and the
benefits would be distributed in the form of enhanced employment opportunities and a trickle-
down-effect of increased wages paid by more successful businesses.
Ruiz, Peralta-Alva and Puy (2017) argue that tax cuts do not work as expected, they argue that while
lowering tax rates for the rich stimulates the economy, it does so at the great cost of increased
inequality.
If the tax cuts are targeted at middle- and lower-class incomes, there is less overall growth but
reduced income inequality, as those from lower-income households can spend more on life’s
necessities.
Ostry, Loungani and Furceri (2016) argue that austerity not only generate substantial welfare costs
due to supply-side channels, but they also hurt demand – and worsen employment and
, unemployment. The combination of tax cuts and austerity is toxic for national economies and the
majority of people.
Neo-liberal economics can bite hard: given that market metaphors were privileged in their rhetoric,
state expenditure was stigmatized.
Principal agency theory (Jensen and Meckling, 1976): the provision of capital by shareholders is a
risk-based endeavor in which the risks can be minimized if the agents that are managing individuals’
capital at a distance are also themselves shareholders.
- Having principals and agents aligned with a common interest in share values will create
more efficient organizations because they are focused on the privileged goal of increasing
shareholder value.
‘Gangster capitalism’ of the ex-Soviet and state socialist economies: system in which previous
apparatchiks of the state bureaucracies practiced kleptocracy and cronyism on a grand scale as they
rewarded themselves for their previous incumbency and ‘good’ connections with huge bundles of
shares in the newly- privatized industries.
After the fall of the wall in Berlin, capitalism was vindicated as the only game in play, seeing the signs
as positioning liberal democracy and a society of markets as the most rational and evolved form of
human government (Fukuyama (1992))
During the period from the end of the Second World War to 1980:
- Proactive measures such as the progressive taxation of capital income and wealth
- Physical destruction of capital as a result of the war
- Innovation and economic growth
CEO compensation increased a lot throughout the 1980s, exploded in the 1990s and peaked in 2000.
Shareholder value = rationale behind this inequity
As Bauman (2013) argues, the richness of the few does not benefit the many, a sentiment shared by
Freeland (2013), who argues that we are now living in the age of the global plutocracy, as a result, in
part, of `lower taxes, deregulation, particularly of financial services, privatization, weaker legal
protections for trade unions’, all of which `have contributed to more and more income going to the
very, very top’.
Main reasons for the rise of the new global plutocracy (according to Freeland): globalization and
the digital technologies.
An increase in knowledge-intensive work means that organizations have to employ – and manage –
different kinds of employees.
Employees need to be capable of working with sophisticated databases, software and knowledge-
management systems.
Tacit knowledge = enables you to speak grammatically or ride a bike: you can do it but it would be
hard explaining how to a novice.
