Hypothesis: "During an economic downturn often management stakeholders resort to the classical management approach; is this arguably the correct course of action?"

 

Classical management style with its hierarchical nature, rigid controlling aspects and centralized command is often the selection in order to "reign in" company activities and take swift and strong decisions from the top management and owner stakeholders. In this phase the financial control stakeholders and employees whose focus is based in these sections rise to the forefront.

 

The features and benefits of the hierarchical approach however come at the expense of the humanistic approach; and although in the short term operational viability may be maintained, the long term drawbacks of a hierarchal approach when compared to other schools of thought are extensive. It is arguable that those companies which through their management approach maintain an environment of innovation, motivation and a cohesive organizational climate are those best positioned not only to survive the uncertainty of a downturn but are also flexible and dynamic enough to take competitive advantage of new opportunities as they present themselves.#p#分頁標題#e#

 

Within the regional construction industry a period of exceptional growth came to an end with the freeze in international financial markets and the resulting halt of the majority of projects. The general market trend within the industry was for a project to matrix management approach (akin to Handy's Net structure and Mintzberg's Adhocracy) where main features of these structures, Kerzner (2006, pp.101-105) lists; project managers maintain maximum project control, strong communication channels, relatively better morale, provision of very rapid reaction time, flexibility in trade-offs (of time, cost and performance), a focal point for out of company, customer relations, independent setting of policies and procedures for each project, minimal conflicts need hierarchical referrals, rapid development of specialists and generalists, stress is shared by team and functional managers. Hence, higher management has more time to focus on organization's strategy.

 

However many companies restructured into hierarchical form including those of the local construction industry, imposing intense cost cutting, accompanied by rapid human resource retrenchment and procurement options, examples: facing financial problems "Al-Hamid Construction Co." in 2005 closed branches and retrieved to Abu-Dhabi, Dewan Elemarah Consultants in 2008 did the same and focused on Dubai and Abu-Dhabi and Emrill (Facilities Managers) changed recently from projectized to a hierarchical structure.

 

Unfortunately the short term financial viability is offset by the onset of the disadvantages of a hierarchical structure once in place which is typified by "principals may insist on certain expenditure controls which themselves slow decision making and thwart innovation and may fall into the trap of Closed Systems which may be able to hone existing routines, but they will lose the capacity to engage in new routines" (Teece, 1994, pp. 200-203).

 

Former UK Prime Minster Margaret Thatcher enhanced privatization, believing that government organizations following the classical school are well known for their inefficiency of performance and slow reaction to changes of market and technology.

 

It has been commented that the classical school was concerned about 'organizations without people' and the human relations about 'people without organizations' (Mullins, 1996, p.53). The systems approach views the organization as a whole and involves the study of the organization in terms of the relationship between technical and social variables within the system. It builds upon the classical and humanitarian approaches to take a more holistic approach to the interconnections between process and humanitarian concerns. Changes in one part, technical or social, will affect other parts and thus the whole system. (Mullins, 1996, pp.55-56) The contingency approach, which can be seen as an extension of the systems approach, highlights possible means of differentiating among alternative forms of organization structures and systems of management. There is no one optimum state. For example, the structure of the organization and its 'success' are dependent, that is contingent upon, the nature of tasks within which it is designed to deal and the nature of environmental influences (Mullins, 1996, p.57). Fundamentally, the schools of thought have moved to a case by case basis for choosing the correct course of action; situations are more complex than first perceived, and the different variables may require different behavioral approaches. The result is the contingency approach to organizational behavior, which means that different situations require different behavioral practices for effectiveness. (Newstrom and Davis, 1997, p.16)#p#分頁標題#e#

 

At this juncture we can summarize that the classical approach temptation with its authoritarian and bureaucratic practices potentially ignoring the essential human element can cause great disadvantages for the stakeholders in the long term. By utilizing a more humanitarian and flexible approach epitomized by the contingency approach which "Unlike the classical and the human relation approaches to the management of organizations, does not seek to universal prescriptions or principles to behavior. It deals in relatives not absolutes." (Cole, 2004, p. 83)

 

With most of the businesses down, the current circumstances give us an opportunity to upgrade the skills and qualifications of employees so that it will be an added advantage once the market competition recovers also motivating and gaining employee commitment (Pollitt, 2009, p.22).

 

Rather than drastic culling of manpower as was evident in the local market an open discourse with the employees could be made as in Europe implemented a system of reduced working hours (Gennard, 2009, p.453) where the staff worked for fewer hours a week and were paid less as compared to a percentage of the employees made redundant.  With less employees made redundant beside the obvious morale and company commitment benefits; once the market turns the entity has the resources to focus upon Internal promotions should be preferred as compared to head hunting. Besides being less time consuming, it's cost effective as executives will be reluctant to switch jobs unless offered a better salary package. Cost expenses can be reduced by using external opportunities to do activities they could carry out in a more cost effective manner; improving organizational efficiency by analyzing procedures and eliminating unnecessary tasks and improving people productivity by providing training mentioned above (Katzenbach and Bromfield, 2009, p.14).

 

Conclusion: The aspects which ensure companies long term viability are nurtured and encouraged by the contingency approach to management. The organizational climate which encompasses the concerns of as many of the stakeholders as possible ensures a cohesive organizational culture which is conducive to not only surviving an economic downturn but emerging stronger and more competitive than before. History shows that companies that continue to invest in their innovative capabilities during tough economic times are those that fare best when growth returns. That's how the U.S. chemicals industry overtook Britain's after World War I, how Sears surpassed Montgomery Ward as the leading U.S. retailer after World War II, and how Japanese semiconductor makers outpaced U.S. companies after the downturn of the early 1980's (Chesbrough and Garman, 2009, p.68). In construction this contingency approach is best supported by maintaining the matrix structure Cole(2004, p.192) indicated that a matrix structure "encourages functional mangers to understand their contributive role in the organization's productive efforts, and thus offsets one of the principal disadvantages of the purely functional form, i.e.; individual empire-building by the functional heads".#p#分頁標題#e#

 

As outlined earlier it is an understandable temptation to impose authoritarian classical management during a crisis, to "adopting a citadel mentality" (Teece, 1994, p.194). It is however not the right course of action to give the stakeholders true value.