“People are our greatest asset”: Human Capital Management

The development of the Management Theory – Relevance in today’s context

In my previous article I explained the scientific management theory written by Fredric Winster Taylor (1856-1915). This was followed by Administrative management Theory also known as Principles of Management by Henry Fayol (1841- 1925), Bureaucracy by Max Weber (1864- 1920), Holistic approach to management by Mary Parker Follett- (1863- 1933) and Organization Theory by Chester Bernard- (1886-1961) along with many others in the Neo Classical School of management. 

Fayol identified the role of the manager include forecasting and budgeting, planning and following a path of action, organizing and building up the structure and resources of an organization, commanding and maintaining activity ,coordinating , bringing together and controlling  and ensuring all confirms. He also defined 14 principles of management that will maximize efficiency of the organization. The 14 principles he identified were Division of work, Authority, Discipline, Unity of Command, Unity of Direction, Subordination, Centralization , Remuneration,  Scalar chain, Structure, equity , security , initiative and esprit de corp ie harmony.

In today’s context almost all these principles are adhered in organizations from the West and the East and in Sri Lanka. Although we speak of no one way of managing an organization in an volatile economy as of today , most organization still follow the principles of management in the same context either in the private sector large organizations or small entrepreneurs and public sector organizations . Only consideration is that the Universal Principles of Management will only work if it can adapt to the culture of a particular country , region or organization.

The performance Evaluation system and the importance of understanding that the management is separate from the Ownership are two other important outcomes that are even practiced in many organizations today.

Why is then people are not treated as Capital ?

Weber on the other hand focused on the authority i.e. why people in organizations obey orders. He categorized this into three areas. Namely Charismatic authority (Personality), traditional authority (precedent) and legal authority (rules and procedures). The authority is assigned to the position and not the person, while work is allocated as per hierarchy of positions with defined areas of competencies. While a formal structure ensures uniformity of decisions and high task specialization. Promotions are based on seniority and merit and rewards for effort is regular.

While the bureaucracy is still practiced in many growing organizations where it helps to communicate effectively across different sections, units, departments effectively the process take a larger time when dealing with customers. Although Customer Service is very important in today’s fast changing business environment i.e. Era of ‘Customer is the King “. Employees tend to follow the  red tape procedures and rules to service the customer at their own connivance i.e. “ Employee is the King “. This has actually resulted in many organizations i.e. Public sector in particular where rule, procedures, administrative guidelines governs a person deviating from the established system.

If so why don’t we recognize this and value our human resources?

Parker focused on the importance of coordination across all sections of an organization. The importance of coordination at the yearly stage of planning and continuously follow the process is important, She also highlighted the importance of having direct contacts with the subordinates and reciprocal decision making. The importance of effective communication, importance of mutual respect and trust with each other , all have clarity on their job roles and objectives and following the scalar of chain in an organization was also important

Today’s most organizations have understood the importance of coordination across all functions and departments but the basic principles  of Parker  are not followed. I have come across many CEOs and heads of functions talk openly saying “ 80% of organizations problems are due to poor communication or miscommunication followed by not trusting the fellow employees with regard to sharing of information “. Organizations that do coordination well have shown better results. After all coordination is a people activity.

Do we recognize this when we value our organization people?

Bernard spoke of organization theories which focus on informal organization that exist within the formal set up. In most instances the informal organization i.e. we call it the clique are very powerful with regard to shaping peoples behaviors’ and   attitudes. This has given rise to the importance of team work in an organization.

Today the informal teams in organizations have a bigger role to play towards organization success. It is up to the leadership to understand these teams’ requirements and shape it to suit the organizational requirements.

This theory also identifies the importance of people power in an organization where formal power does not exist. Have we value this in our organizations?

Let’s focus on the Behavioral  Approach to management in our next issue……

(PhD research student, Management Consultant, Executive Coach, Corporate trainer , lecturer and Company Director, Forward your comments to [email protected] )