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Universal Applicability of Semler’s Plan

Discuss about the Impacts of Transformational Plans on Organizational Performance. 

The dynamic nature of the corporate world only serves to indicate the essence of change and innovation in an organization. The changing trends in consumer preferences, market levels, and policies as well economic status call for a corresponding need for companies to continuously innovate and implement new management methods (Anita, 2010). When the existing structure within an organization fails to enhance the achievement of the key goals and objectives, there is always an inevitable need for either a partial or complete overhaul of the management system. The transition and transformation process is always accompanied by various changes which when inadequately managed can lead to losses and failure. However, the strong will to take a risk despite the eminent challenges is the very character which defines most successful leaders. In this paper, we examine the transformational strategy which was introduced and implemented at Semco by Richard Semler when the company was at the verge of closure. After registering a string of poor performances Semler takes over the mantle of leadership from his father and immediately sets on transforming the organization. He establishes a new leadership structure and management approach in a bid to improve worker motivation and subsequently the overall performance of the organization. The paper shall therefore highlight how this strategy influences worker motivation and the organizational performance. The discussion shall also expound on the universal applicability of Semler’s transformational strategy. Lastly, risks involving the transformational strategy as well as the conflicts which emerged from its installation shall also be analyzed.

The success registered by Semco caused the company to be envied by other organizations. The organizations attempted copy and implement some of the management approaches at Semco (Braisby and Gellatly, 2012). The immediate strategy by Semler involved trimming the company’s leadership structure by reducing the management hierarchy from the initial seven levels to three. The job titles were erased and only the position of the Chief Operations Officer remained. The position was to be occupied on a rotational basis where the worker could democratically elect their leader after every six months.

 As part of the transformational plan, Semler initiated management groups within the organization and each faction was given the responsibility of handling a specific area within the chain of operations. For instance, while one management team dealt with budgets and target setting, the other handled the aspect of manufacturing and production (Stoner, 2013). The other divisions dealt with sales in addition to other organizational responsibilities. The main objective of this strategy was to diversify tasks and hence enhance the effectiveness with which the workers executed their roles. The transformational plan also empowered the workers to take full responsibility of their roles in a democratic environment where they could easily elect their leaders. As such, the workers could hire and fire depending on the level of satisfaction with regards to quality delivery and commitment to duty. The organizational structure at Semco was such that each faction comprised about 150 workers. Each division was led be an individual elected in a democratic pattern by the workers.  As a result, the workers felt more involved in the management process and the liberal environment played a crucial role in enhancing the workers output towards the key organizational goals.

Change and Motivation at Semco

The transformational strategy proved effective. Immediately after its implementation, the company performance scales rose and it started making profits. In addition, the cost of production diminished as the new approaches allowed for sharing of tasks which improved the quality of individual performance. With efficiency within the human resource fraternity, the company improved in performance in the areas of sales, manufacturing and finance. The effectiveness of this strategy attracted other organizations which attempted to copy and implement it into their own organizational structure. However, there are various parameters which tend to change as one moves from one organization to another (Collings and Wood, 2009). These may include; the availability of resources, geographical location, market nature and the human resource fraternity. The changing trends therefore imply that a management approach may be applicable in one organization yet when installed in a different set up may not trigger the same results. Subsequently, the transformational plan implemented at Semco may not be universally applicable.

The various strategies introduced in the new plan played a crucial role in enhancing worker motivation. To begin with, leadership was decentralized hence responsibilities and decision making shared (Daft and Armstrong, 2009). The strategy saw to it that all workers had a hand in the day to day running of the company and could even appoint their own leaders and set salaries. The rotation of leadership therefore played a role in enhancing motivation as individuals had to exhibit exemplary performance to be elected.

According to the motivational theory of equity, motivation of workers may not be achieved solely through salary packaging but by creating a liberal environment where the workers see their roles as the core cause of motivation. The theory further stipulates that workers tend to offer their best when they are treated fairly and in an advantageous manner (Dattilio and Freeman, 2007). Semler’s strategy to empower the subordinates at Semco played a crucial role in enhancing their confidence hence the desire to offer more. Furthermore, the needs motivational theory depicts motivation as a method of increasing the effort of the human resource towards achieving organizational goals. The transformational strategy at Semco comprised a series of steps which effectively triggered the workers to higher levels of commitment towards the company’s objectives. For instance, the plan involved a reward scheme which was based on the level to which the workers achieved the set targets. As a result, the divisions worked round the clock not only to ensure that teams performed best for recognition but also see to it that the set targets in terms of sales and profit were met. This strategy largely enhanced the workers’ motivation.

Possible Sources of Tension

Hackman and Oldham’s job characteristics model outlines the idea that the responsibility given to an individual at a work place serves as a key motivational factor before other factors are injected into recognition scheme. The nature of a job can be designed to motivate a worker through job rotation and change of working conditions (Bernhard, 2008). Semler’s transformational plan involved job rotation in which the occupants of the position of Chief Operating Officer could only do so for six months after which a new individual took over. This strategy highly motivated the workers to remain effective and productive in their delivery as the democratic election to the leadership positions were based on individual performance. The model also outlines that employees are likely to be highly motivated when they experience the meaningfulness of work, have knowledge of the outcome and understand the nature of their responsibilities (Hinings, 2013). To enhance the workers motivation towards effectively executing their duties, the transformational plan involved sharing of profit among the workers. According to the reward structure, each division received 25% of the net profits which would them be shared among the workers according to the outcome of a decision made by a democratically elected committee.

Due to the fact that the transformational plan involved the incorporation of fresh strategies, the initial stages were characterized by a number of challenges (Semler, 1989). The very first strategy involved reducing the number of management layers from the initial seven to three. This process caused a considerable amount of conflict which threatened to hamper the progress of the new plan. The decentralization of leadership was also characterized by the empowering of the subordinates (Cohen, 2008). The workers were accorded a free hand to hire and fire. This strategy caused a stir within the human resource fraternity as some managers felt their authority had been demeaned. As a result, a good number of managers ended up quitting the company hence revealing one of the challenges which accompanied the implementation of the transformational plan.

The associates were allowed to set their own salaries which could lead to issues with integrity and lack of transparency on financial management. Despite the fact that the set salaries would be mounted on notice boards to enhance transparency, the strategy still gave room for financial mismanagement as not audit procedures were set to monitor the process. This liberal environment could see the associates allocate themselves unreasonable amounts hence affecting the other portions of the organizational structure (Giddens, 2008). Lastly, the sudden overhaul of the leadership structure and management style could be considered another cause of tension/conflict. The new strategy resulted in the organization experiencing a radical change which for quite a while influenced operations within the company. The change faced much resistance especially from the middle managers. It is only after it had taken full force that the company began to register an improvement.

Semler’s transformational plan before its implementation looked like an idea out of this world. The initial stages were characterized by fear and uncertainty but he chose to forge ahead. One of the risks was the sudden overhaul of the management system which resulted in a radical change and influence on a good portion of the human resource fraternity (Griffin, 2010). This change would adversely affect the company’s workers as most of them had not been adequately prepared for the transition. The removal of leadership titles was another risky step as the company risked losing the individuals who felt left out by the new management system.

The other risky strategy involved empowering the subordinates and giving them the free hand to hire and fire at will. Despite the fact that this step was meant to enhance motivation, it never augured well with a portion of the human resource fraternity as some of them opted out of the company complaining their authority had been undermined (Harper, 2009). Giving too much power to the subordinates, if not well managed, could lead to the emergence of selfish interests where the divisions could appoint leaders based on their individual leaders and no focus on the organizational goals. However, the transformational strategy adequately countered this possible risk by setting targets and establishing a reward structure based on the achievement of these targets (Siehl, Killian and Perez, 1999). Finally, the associates were given a free hand to set their salaries, a step which could easily lead to financial mismanagement. Due to lack of adequate financial monitoring tools by then, the organization could register losses from this strategy as a result of excessive spending.

Conclusion

The discussion has revealed some of the impacts that implementing a transformational plan may have on a company. Despite the fact that the plans are always meant to enhance organizational performance, the change associated with them may adversely affect the company’s department. This therefore calls for the need to implement the right management procedures hence ensuring the desired results are obtained. From the discussion, we can also deduce that transformational plan may positively impact an organization by arousing the right behaviors and motivational levels among the workers. Selmer’s plan proved effective in the long run due to the extent to which it empowered and motivated the workers to offer their best. After the implementation of the plan, the company’s costs diminished while the level of production increased. These changes could be attributed to the level of motivation within the workforce. Despite the possible source of tension and risks involved, the transformational plan at Semco was effective and caused a turnaround within the company. In the same way, the current global situation may pose various challenges to change and implementation of new plans. However, a strong will to beat all the odds serves as the main reason behind the success of most international organizations around the globe today.

References

Anita, M. (2010) ‘How Much Does Home Country Matter to Corporate Profitability?’. Journal of International Business Studies, 4(1), pp. 142–165.

Bernhard, H. (2008) ‘Six lessons for the corporate classroom’. Harvard

Business Review, 66(5), pp. 12-56.

Braisby, A. and Gellatly, A. (2012) Cognitive Psychology. Oxford: Oxford University Press.

Cohen, M. (2008). ‘Productivity and Efficiency in Human Service Organizations as related to

Structure, size and Age’. The Academy of Management Journal, 23(1), pp. 21--37.

Collings, D. and Wood, G. (2009) Human resource management: London: Routledge.

Daft, R. and Armstrong, G. (2009) Organization Theory and Design. Toronto: Nelson.

Dattilio, F. and Freeman, A. (2007) Cognitive-Behavioral Strategies in Crisis Intervention. New York: The Guilford Press

Giddens, M. (2008) ‘Determining Organizational Effectiveness - another look, and an agenda for research’. Management Science, 32 (5), pp. 514 --538.

Griffin, T., (2010) ‘Information technology, strategic decision making approaches and

Organizational performance in different industrial settings’. The Journal of Strategic

Information Systems, 10(1), pp.101-119.

Harper, S. (2009) ‘Configurations of Organizational Effectiveness and Efficiency’. The

Academy of Management Journal, 36(6), pp. 1345—1361.

Hinings, C. (2013) ‘Returning to the Frontier of Contingency Theory of Organizational and Institutional Designs’. The Academy of Management Annals, 7(1), pp. 393–440.

Norman, T. (2013) ‘Personnel training and development’, Annual Review of Psychology,

22(1), pp. 565–602.

Semler, R. (1989) ‘Managing without Managers’. Harvard Business Review, 1(1), pp. 1-10.

Siehl, R., Killian, D., and Perez, F. (1999) ‘Richard Semler and Semco S.A’. Harvard Business Review. 1(1), pp. 1-16.

Stoner, K. (2013) ‘All in all it’s just another plaque on the wall: the incidence and impact of the Investors in People Standard’. Journal of Management Studies, 40(2),  pp.543–71.

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