Organizational Learning and Development

From an Evidence Base

Paul Kearns

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317693123
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

It is now widely accepted that organizational maturity is dependent on being able to reorganize on a continuous basis and learn faster and more effectively than your competitors. Organizations that want to be sure they are competing at the highest level need clear indicators that their organizational learning and development capability is fully functional.

This new book by Paul Kearns focuses on the need for an evidence-based approach to learning and development, bringing together the author's extensive knowledge of HRM and organizational learning with new developments in the field. The book demonstrates how evidence evaluation can improve professionalism in organizational design and development, showing that this approach can create value not just for shareholders, but for employees and society as a whole.

Organizational Learning and Development: From an Evidence Base is the perfect book for postgraduate students studying on evidence-based HRM courses and for the reflective learning and development practitioner.

1

DEVELOPING MATURE ORGANIZATIONS FOR SOCIETAL VALUE

Developing organizations to create value

If you have a long-standing, professional interest in the subject of organizational learning and development (OL&D) you will probably already have heard all about the highly successful Southwest Airlines¹ with its legendary people management and excellent customer service. Another, very profitable, budget airline that does not score so highly on people management or customer service is Ryanair.² Michael O’Leary, Ryanair’s CEO, is infamous for his unashamedly combative and belligerent attitude towards customers. His business model makes its profits in spite of his attitude to customers. Rather than read about his business philosophy though, you can experience it at first hand by trying to book a flight on the Ryanair website.

Once you choose your flights you will have to go through a basic security check³ before you attempt a booking. This obligatory procedure includes having to make a decision whether to skip the video advertisement for Durex®. Only then will the booking process begin in earnest. This is not a quick process because you have to decide on answers to many other mandatory questions. For example, do you want priority boarding, travel insurance, car hire, and are you prepared to pay a supplement for placing your baggage in the hold? If you try to speed the process up, by accepting Ryanair’s default answers, you will automatically incur substantial extra charges. This is the core Ryanair business philosophy in action: advertise ‘cheap’ flights then force the customer to make as many other price decisions as possible. Then charge them extra unless they specifically click ‘no’.

On the day of travel you would be well advised to start queuing at the gate as early as possible; especially if you declined to pay extra for the privilege of priority boarding.⁴ You should also have accurately measured and weighed your single, carry-on bag so it does not exceed your allowance. If it fails to fit into the bag-checking fixture at the gate you will incur another charge of €60 to take it onto the plane. When you board the plane you will have to negotiate several scrums of passengers, who also refused to pay for priority boarding, as they all compete for places to sit. Finally, when you have managed to squeeze into your seat, one of the cabin crew will joyously announce ‘sit back, relax and enjoy your flight’; having done nothing to bring any joy to your journey in what feels like a ‘cattle truck’ with wings. Only then will Ryanair’s final insult, the coup de grace, be delivered: you suddenly realize why ‘sitting back’ was not an optional extra because the seats have been designed to stop you reclining. Bon voyage.

So what has all of this got to do with organizational development? Well, there is not a single element of the entire Ryanair business process that happens by chance; it has been deliberately developed this way. Every single step is part of a profit-making system and Michael O’Leary has nothing to hide. His intentions are made absolutely clear to employees, customers and regulators alike. It is a budget airline that aims to maximize profit by running as many monopolistic routes as possible, at the lowest possible cost. When judged against this conventional criterion of profit he has made it work remarkably well.

Most CEOs, in their heart of hearts, would love to have a monopoly. It makes managing the operation very straightforward. As a monopolist you can charge customers the maximum they can bear when they have no alternative. Where competition does exist on a particular route Ryanair’s relatively low prices, achieved through an obsession with cost elimination, are designed to win without having to compete on levels of customer service. O’Leary does, however, acknowledge that getting the basics right, such as safety and punctuality, are the absolute minimum standards for any airline.

This description of Ryanair’s business model has been given an ‘edge’. It sounds like we are implying O’Leary has done something wrong; but what might that be? The goal of OL&D is to develop an organization, and its people, to create as much value as possible and, put very simply, O’Leary has produced staggeringly good profits but he could have been producing staggeringly good value at the same time. He has needlessly squandered opportunities to provide a much better customer experience. For evidence of how disgruntled some passengers are you can visit their dedicated website – ‘I hate Ryanair’.⁵ If this level of misery and anger represents O’Leary’s version of the market-led, capitalist system then something has gone wrong somewhere.

Making a profit by causing so much unnecessary misery has to be a symptom of very poor organization development, with staff going out of their way to treat customers with contempt.

Such a system produces dire business models and organizational cultures in their obsessive pursuit of raw profits. Banks, which do not have a monopoly, collapsed because they treated their mortgagees with contempt. So what the world needs is someone who really understands how to design and develop organizations that can create the best profits while creating the best value possible. That is OL&D’s definition of its prime purpose. That someone can be you as long as you are passionate about becoming a true OL&D Professional (OL&DP). So why don’t we make a start right now by removing any bias or emotion from our analysis and replacing it with a professional, impartial, objective methodology. Professional, value analysis is always the most clear-headed, most accurate method for analysing organizational effectiveness.

Developing a global value system

Michael O’Leary does not have any pretensions, which is actually a very refreshing change from the type of corporate hype we have all become accustomed to (and he seems to despise). His company does exactly what it sets out to do and, up until very recently, the model has been phenomenally successful. Some customers might hate O’Leary himself, and Ryanair, but despite their emotional response enough of them keep coming back. This is market economics stripped right back to its bare essentials. The conventional view is that as long as a business delivers on its promise, albeit minimal, it is not doing anything wrong or unethical. You, as an OL&DP judging Ryanair, do not need to resort to words such as ‘wrong’ or ‘unethical’ because there is a much simpler and better way to appraise an organization and that is by asking one, crucial question:

Is Ryanair using its people to create as much value as possible for society?

The standard answer to this question, from Nobel prize-winning economist Milton Friedman⁶ (in his seminal New York Times article of 1970 ‘The Social Responsibility of Business is to Increase its Profits’), was that a profit-making company only has one responsibility to society and that is to make a profit. Commentators who have criticized Friedman’s stance, for fuelling naked profiteering, need to make sure they read his article in its entirety; right down to the last word. The very last lines of the last paragraph are a quote from his book Capitalism and Freedom:⁷ ‘there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits.’ But he finishes that same sentence with the proviso: ‘so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’

Friedman fully deserved his Nobel Prize because he was only too painfully aware of exactly what he was saying. His economic theory is sound but bears little relation to the real world. In the real world, especially since 2008, we have all witnessed an increasing number of glaring examples where very large corporations are definitely not ‘staying within the rules of the game’. It is very easy for academia to espouse theories that legitimize the global, capitalist system, knowing full well that the rules are being broken every single day. Profit seeking should be an intrinsically value-based activity but it isn’t because markets are exploited. When Countrywide sold mortgages to people who could not afford them it was making huge profits but destroying value. For Friedman’s theory to work, the number one rule of the game that has to be followed is maximum, societal value creation.

Profitability, on its own, cannot be taken as a measure of organizational success if it does not mean success to society as a whole. Of course society already benefits greatly from profit-making concerns. We need airlines to get us from A to B. But societal value has to be our overarching goal, not just a beneficial byproduct of an increasingly flawed system. We are all part of one global system, whether we like it or not, so it has to be the best we can possibly achieve. This whole system approach means every organization in the system has to work towards the same end. This brings organizational management into the equation and is the point at which O’Leary’s management style comes into question. Any organization can be designed for good or evil ends. Think of Hitler’s SS or certain cults. Some human beings can be shaped, inculcated and even brainwashed to do things that are most definitely not in society’s interests.

The repercussions of Bernie Madoff’s pernicious Ponzi scheme, costing investors an estimated $18 billion, are still being felt in 2014⁸ with JP Morgan incriminated and fined. So to set out to develop organizations that do nothing but good for society might sound naive. It is currently a huge global challenge but what is the alternative – more Ponzi schemes and foreclosures? Capitalism is in danger of becoming just one giant, pyramid scheme with greedy executives getting out, just at the right time, before their crumbling edifices finally collapse. To mount a strong defence against this insidious trend there is a need for a total approach to organizational design and development that comprises a robust theory, strict discipline and simple practice for developing organizations whose goal is societal value.

Value as purpose

If you want to explore what professional, evidence-based OL&D means you have to start by asking about the purpose of the organization. Your ultimate obligation as a professional, believe it or not, is not to any specific corporation (or its shareholders) but to society as a whole; just as a doctor’s ultimate responsibility is always to their patient (for a more detailed argument on this crucial point see Professional HR⁹). The notion that someone who does not ‘stay within the rules of the game’ could be an OL&D professional is a contradiction in terms. From that fundamental premise we build a case for the OL&DP’s role being to ensure that the motivation and behaviour of those who work in, for and with an organization are totally at one with the wider interests of society.

Ryanair’s model does not sit comfortably with this paradigm. Cabin crew are forced to be ‘at one’ with O’Leary because they are indoctrinated from the very start: not by the Ryanair company itself but by contracted suppliers of basic training that march to O’Leary’s tune. Applicants do not become recruits until they have passed their training, which they have already had to pay for themselves.¹⁰ OL&DPs would ask what sort of attitude is necessary to get through such a selection and training procedure; where a significant amount of personal money could be forfeit if they do not bend to the will of the company? Would such applicants be willing to challenge or question the motives behind their basic training? Would any of them have the temerity to raise doubts about levels of customer service? When they start working on the planes would they feel inclined to ask their longer-serving colleagues why they appear to offer so little help to passengers and antagonize them at every turn? Organizational cultures, for good or ill, tend to become self-selecting organisms unless they are explicitly designed to encourage staff to question practices and voice their intelligent views. The whole of society loses out when human intelligence is stifled: history has provided us all with plenty of evidence to support that contention.

If awesome customer experience does not feature in O’Leary’s business philosophy, or financial equations, then there are much bigger questions at stake here. What is capitalism for? Who is it serving? You as an OL&DP have your own professional objective that is on a much higher plane (pun intended) than the proxy measure for performance and ‘success’ that we call profit. OL&DPs strive to create greater value for society through the utilization of the people who make up society; they view it as a perfectly self-reinforcing system. If Ryanair wants to satisfy this condition it needs to start redefining its business ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• About the author
• Foreword
• List of abbreviations
• Introduction
• 1 Developing mature organizations for societal value
• 2 The evaluation challenge: theory and practice
• 3 Making a convincing case for the strategic value of OL&D
• 4 Learning design
• 5 Strategic OL&D is integral to business strategy
• 6 The role of OL&D in a mature organization
• 7 Designing and developing the whole system
• Bibliography
• Index