A Critical Analysis Of Agency Theory And Deterministic Theory In Enhancing Business Performances

The Role of Efficient Managers in Business

Question:

Discuss about the Role Of Managers In Shaping Organizational Outcome.

The role of an efficient manager is not only to control the entire process of business by implementing different effective strategies and policies. Organizations in order to get a positive outcome in terms of revenue as well as recognition tend to focus on the performance level of employees. Work becomes monotonous when the employees do not get any motivation and cooperation from the managers. Therefore, the managers have to play a major role in achieving the success of business. This very specific study has provided in-depth critical analysis on how agency theory and determinist theory leave a major impact in getting positive outcome from the organization. The study has focused to evaluate the impact of agency theory in enhancing business performances.

As emphasized by Cummings and Worley (2014), every organization in order to run their business process in the market has to set a proper goal or target. It is undeniable that there is a difference between business goal and employers’ desire. At the same time, business principals and agency has to maintain a proper relationship for achieving the success. On the other hand, deterministic theory is defined by numerous eminent scholars in various ways in an argumentative way. Deterministic theory indicates that business experts should have the capability of determining the business goal. This particular concept has been highly criticized by many scholars. As per the point of view of those scholars a company while maintaining their business wings cannot determine their target or goal. They can fix an expected goal based on which employees are directed towards the services. This very specific study has focused to evaluate an in-depth overview about the contribution of various aspects of agency theory as well as deterministic theory for getting organizational outcome.

Agency theory leaves major impact in rendering satisfied revenue growth for the business organization.  As per the point of view of Wong and Laschinger (2013), organizations have to face immense challenges in order to maintain a proper balance between goal and desires. In many cases it has been observed that companies fail to meet the business target parent companies have to face challenges in maintaining a good rapport with the agencies due to the lack of cultural barrier as well as psychological barriers. In order to get a positive business outcome the employers need to maintain proper organizational structure by directing the managers properly towards business goal. Principals should have a concern about the estimated target fixed by the agencies. In addition, the employers may provide required resource to the agencies so that the organization can reach the business target. Fleenor et al. (2014) stated that the organizational managers of every single agency should have individual desired target so that they can direct the employees towards reaching the business goal. A particular business organization is constituted with employees of different cultural and psychological backgrounds. The role of managers is to provide equal co-operation and support to every single employee. Agency theory enables that business managers of every single agency have to maintain effective communication with the principal so that they do not have to face difficulties in meeting target.

Impact of Agency Theory and Deterministic Theory in Business Performances

As per the concept of agency theory an individual agency or subordinate company has to think about the success of others. If a particular subordinate fails to perform well due to technological barrier or any other reason the other agencies have to spread their hands in showing a co-operative outlook and overachieving the business target. Hoon Song et al. (2012) stated that the principal does not have to face difficulties in overcoming the loss done by underperforming agency. Therefore, as per the theoretical concept of agency managers of every single organization have to perform well in order to meet an overall target of business.

The primary goal of agency theory in maintaining corporate governance is to maintain effective relationship between principal and agents. Ford and Richardson (2013) stated that problem arises when the level of interest between the principal and agents differ at a certain point of view. For an example, the primary business objective of Inditex is to follow autocratic form of leadership style at the workplace so that the managers can change their organizational policies for overcoming any kind of sudden crisis. Uterque is the successful and leading agency under the governance of Inditex. As per the business policy of Uterque managers’ participative form of leadership style is the most effective strategy for getting good performances from the employees. However, as per the business concept of Uterque managers, the leaders should never impose their own decision on the employees.

Nielsen and Randall (2013) stated that employees can get flexibility in sharing their point of view regarding the business goal. As a result, they can get enough inspiration in performing well for further progress. However, instead of working under Inditex the company like Uterque intends to follow different leadership style for the further progress of business. As a result, the internal relationship between the principal and agency is not very strong. This particular relationship has rendered a major negative impact on the overall business performances. The revenue growth of Inditex has been decreased due to the lack of effective performance of Uterque. This very specific study has focused to evaluate through agency theory that both the principals and agencies should maintain proper communication for meeting business target. Nielsen (2013) opined that managers are the most concerned persons who can maintain the work harmony of two different structural bodies. As per the strategies formed by principal the agency manager should maintain the work trend within organization.

Failure of Companies Due to Lack of Co-operation with Agencies

Different conspicuous scholars have provided various argumentative opinions regarding the concept of deterministic theories. As per the point of view of Donate and Pablo (2015) every organization has to determine the business goal and objective before staring the business. The responsibility of managers is to provide appropriate guidance and direction to the concerned employees so that they can meet the business target. As a result, the organization becomes successful in achieving the estimated target of business. This very specific concept has been interpreted by numerous eminent research scholars in different ways. As per the opinion of Jacobs et al. (2013), business experts can make strategies and policies in order to reach expected target. While running the wings in different geographical markets the employees as well as managers have to face innumerable difficulties both internally as well as externally. Therefore, the experts should not make any determination regarding achieving the goal. Deterministic theories are constituted with different aspects as well as components that help the business managers to direct the employees for achieving business success. However this very specific part has focused to make an in-depth critical evaluation about the impact of different deterministic theories for rendering the success of business.

Resource dependency theory enables the business managers on how to get positive business outcome by depending on the resources. Alegre and Chiva (2013) opined that managers would be able to perform well only when they would get sufficient resources for achieving the business target. Resources that are highly needed for controlling the entire process of business include human resource, technological resources, physical resources and financial resources. Human resources is one of the most significant factors based on which the success of business is highly dependent. Managers in order to meet a business target need well structured team who would be able to provide effective services amidst large number of barriers. Technological resource is highly needed that enables the organization to maintain chronological data record. Von Krogh, Nonaka and Rechsteiner (2012) stated that the managers in order to keep a constant control over the entire business process have to be accustomed with the advancement of technology. In addition, the managers have to know how to overcome sudden technological barriers so that the entire rhythm of business does not get affected. This very specific study has provided in-depth overview on how resource decency theory evaluates the importance of financial resources for achieving the peak of success.

Resource Dependency Theory and Business Success

Krasnikov and Jayachandran (2013) opined that the managers in order to get business outcome should focus on the performance level of every individual. If an individual employee is not competent enough in performing well that individual employee should be provided training and development session. The role of an efficient business manager is to identify the employees who need training for performance enhancement and refer them to the concerned human resource department. However, in order to provide an effective training and development session the organization should have proper financial resources so that the employers can afford money for the purpose of training and development.

However, after evaluating the different components of resource dependency theory it can be evaluated that resource plays an important role in motivating the managers for maintaining their performance level. This very specific concept is one of the major aspects of deterministic theory. In order to determine the business objective and goal the organization needs to have sufficient resources. As stated by Tangirala  and Ramanujam (2012), the business managers of Iconic in past few years have faced innumerable challenges in maintaining their e-commerce supermarket chain due to the lack of sufficient technological equipment as well as efficiency. In comparison to the number of employees the organization like The Iconic did not invest sufficient number of advanced technology. As a result, customers’ service was getting affected day by day.

Institutional theory implies that in order to gain the competitive advantage the business organizations need to focus on maintaining an effective internal structure. Along with maintaining the proper management hierarchy the organization has to focus on keeping up proper organizational behavior and culture. Managers need to make an effective communication with the employees. The managers need to make an effective interpersonal communication with every single employee in order to know their personal issues at the workplace. Hu et al. (2012) stated that in order to maintain the workplace flexibility the business managers need to focus on implementing flexible leadership style for communicating with the employees directly. Democratic form of leadership style enables the employees in following a proper leadership style with the help of which both the managers and employees can equally participate in making collective decision. Employees automatically tend to show their courageous attitude for performing well towards the business services.  Therefore, using participative form of leadership style at the workplace is a form of business strategy with the help of which managers get best endeavors on behalf of the employees for reaching the business goal.

Importance of Proper Financial Resources in Training and Development of Employees

After evaluating the various aspects of deterministic theories it can be concluded that managers should not determine business goal and objectives while running the business in market (Nielsen 2013). As per the changing needs and demands of the customers the business managers have to face immense difficulties for fulfilling the customers’ desire. Institutional theory is one of the most effective ways of encouraging both the managers as well as employees for providing effective services. Rycroft-Malone et al. (2014) opined that employees would like to perform well after getting motivational approaches from the managers as well as business leaders by implementing deterministic theories.    

Conclusion:

The overall study has focused to make an in-depth overview about the role of managers in shaping organizational outcome. Different forms of theoretical concepts have been discussed in this very specific study by highlighting the contribution of managers. Numerous eminent scholars have provided their own opinion regarding the importance of deterministic theories as well as agency theory for enhancing the performance level of managers has been critically evaluated in this specific study. After making an in-depth critical analysis it can be concluded that initiation of the strategic choice theory will help the organization to have more choices to select from. On one hand, agency theory enables the managers for making a relationship between principals and agency.  On the other hand, the organization tends to follow deterministic theory for setting a proper business goal and objective.

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