The fundamental difference between the control-oriented approach and the value creation approach concerns how work is organized and managed at the different levels in an organization. Companies using the control-oriented approach assume that work should be simplified, standardized, and specialized and that supervision and pay incentives should be used to motivate individuals to perform their tasks well. In essence, the thinking and controlling part of work is separated from the doing of the work.
Value creation oriented work cultures exist in organizations that utilize a fundamentally different approach to managing than the traditional hierarchical approach associated with scientific management. Such approach enables high performance through people. At the heart of this emerging approach is a radically different employer-employee relationship model. Customer orientation and shareholder value creation criteria substitute traditional ways of determining success.
In value creation cultures people are to a large degree self-controlled and self-managed. With the help of leaders who develop a clear vision, mission, and goals, workers are expected to respond in non-programmed ways to changing circumstances. It is about participative management to the nth degree. Workers in those organizations have shed the mentality of agents; they have become owners in their outlook.
Although different researchers and authors have emphasized slightly different features and management practices in describing a value creation oriented organization, they all agree that the essential characteristics are the following: (1) Selective hiring of new personnel. (2) Self-managed teams and decentralization of decision making as the basic principles of organizational design. (3) Collaborative and integrative leadership. (4) Comparatively high compensation contingent on organizational performance. (5) Extensive education and training. (6) Reduced status distinctions and barriers, including dress, language, office arrangements, and wage differences across levels. (7) Extensive sharing of financial and performance information throughout the organization.
We have experienced that employees in value creation cultures do in fact work harder, smarter, more creatively, and more cooperatively than employees in traditional ones. Why is this so? The most important reasons are as follows. Because of these workers’ higher involvement and commitment and their greater control over and say in their work, they work harder (Pfeffer 1998: 33). They also work harder because of contingent compensation that rewards these efforts and because of peer pressure activated in self-managing teams. Because value creation emphasizes developing workers’ skills and competence, these workers’ efforts are also better directed. They also work smarter because of the training and job rotation practices that enhance the opportunity to learn.
Because of the emphasis on teamwork, trusting relationships, and innovation, workers’ efforts are more cooperative and creative. Because this type of environment places greater responsibility on workers at the operational level, it “saves on administrative overhead as well as other costs associated with having an alienated work force in an adversarial relationship with management. In particular, it reduces employment disputes, and thus, saves on the direct and indirect costs of employment litigation.
That people in value creation settings exert higher effort than those in control-oriented organizations is consistent with a body of theory that explains the relationship between worker participation and worker effort (Tomer 1987). The most important psychological insight comes from Chris Argyris, who explained why the demands of hierarchical organization on healthy, mature individuals cause low motivation.
According to Argyris, workers in traditional control-oriented organizations will experience frustration, psychological failure, short time perspective, internal conflict, an orientation to a part of the organization rather than to the whole, and counterproductive informal activities because they have little opportunity to be in control of work situations and to exercise their abilities. Conversely, it is only when an organization enables a member to satisfy one’s higher needs, notably the need for self-actualization, that an individual will get beyond the above difficulties and will have available high psychological energy for organizational purposes.
The essential reason for the superiority of value creation over control-oriented organization involves the distinction between two types of motivation, agent motivation and deep ownership motivation. These in turn involve a distinction between two types of employer-employee relationships. Agent motivation is what moves the employee as agent to do what the employer as principal wants. It involves the use of rewards and penalties, or external control, by the principal. Because of the prospect of the reward, generally involving the satisfaction of lower human needs away from work, the employee is willing to do other than what he really wants to do.
Deep owner motivation is the motivation experienced by employees who are not an agent of anybody and who are “owners” of the organization in much more than the financial/legal sense. Employees motivated in this way experience high psychological energy when their organizations provide them with the opportunity for self-actualization. Deep owner motivation arises when the employee is connected with or bonded with the organization in a deep and meaningful way, sharing a common destiny, mission, core values, and spirit. Such employees are highly involved and committed to the organization; they experience genuine enthusiasm, empowerment, and inspiration.
People in this type of organizational relationship may be able to satisfy their need for self-actualization and experience deep owner motivation. Because these workers are identified with, committed to, and fully participating in the organization, their efforts are expected to be much higher and more effective than those of workers in control-oriented organizations who experience agent motivation. To realize the full potential of a value creation culture requires going beyond imitation of other companies’ best managerial practices; it requires installation of an internally coherent system. The payoffs to such an investment in organizational capital can be great.
Copyright 2011 QBS, Inc.