Corporate Assessment (Routledge Revivals)

Auditing a Company's Personality

Adrian Furnham, Barrie Gunter

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317499572
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

Corporate Assessment, first published in 1993, looks at four types of company audit and provides a pragmatic, readable guide for managers. The authors show how assessment of a company in terms of its culture, climate, communications and customers can enhance management vision and lead to recommendations designed to improve employee satisfaction, motivation, loyalty and performance. Insight is provided into the kinds of measurement tools and assessment techniques that are available, and the authors offer recommendations for the use of these instruments, and how best to utilize the information they can produce.

This book will not only be of interest to managers who need to assess their companies, but to students of business, organizational psychology, and human resource management.

1 Management audits

INTRODUCTION

This book is concerned with the practice and, where it exists, the theory of auditing employees’ perceptions of their organization’s culture, climate, communications and customers. Most organizations have a plethora of ‘statistics’ of differing kinds by which they measure operational performance and provide prospective and retrospective data and on the basis of which they hope to make rational business decisions. The quality of organizational planning and decision-making is therefore partly a function of this information.

It has often been said that a company’s most valuable asset is its employees. Audits, such as those described in this book represent procedures designed to find out what an organization’s employees think, how they behave, and what they value.

Many organizations carry out audits on various aspects of their functioning and performance. Here are some examples:

The total company Getting indices like return on investment, sales revenue by product group, profit as a percentage of production/marketing/distribution costs, market share, debtor-to-sales ratio, asset utilization, and so on.

Production trends Doing audits of departmental production costs, material conversion rates for major product groups, direct labour costs per department, by skill, and machine utilization.

Sales and marketing trends Doing separate audits on such things as the market share of various product groups, competitive position, and market segmentation.

Administrative audits On monitoring costs, and efficiency in terms of the ratio of administrative staff to production workers.

Research and development audits On issues like profit gained, direct contribution to profit or rate of product growth or decline in the company of amount of innovation and development.

Relationships between resources and results Where resources are capital investment, administration, marketing and product costs, and results are profit or production and sales revenue.

The audits just listed tend to comprise hard financial, marketing, or production data. They are used by companies to provide a systematic and objective account of their internal functional efficiency and their external business effectiveness. These, however, are not the kinds of corporate audit we will be discussing in this book. Our primary concern will be with audits which use softer currencies, namely the perceptions, values and self-reported behaviours of employees. Such audits attempt to be just as systematic as their ‘harder’ counterparts, but are based on what are essentially subjective data. The nature of the issues addressed by this second family of audits – monitoring, measuring, and defining corporate culture and climate and closely associated communications and customer care systems – is often more qualitative than quantitative, although we will describe research techniques which can yield valuable corporate data in a quantifiable form. Indeed they can be treated as ‘hard data’.

The corporate audits we will discuss provide a means of gathering perceptual data about organizations. They are ‘democratic’, in that they ‘poll’ either the entire work-force, or a respectable and representative sample of it. They can provide information such that management may begin to realize they have a problem before it reaches epidemic or unmanageable proportions. It is important to stress, even this early in our exposition, that auditing corporate culture or climate is not without its potential drawbacks. The mere fact of a survey will not in itself resolve an organization’s problems. Indeed, mismanaged, a survey can cause problems all of its own, or serve only to exacerbate those which already exist. Sometimes, organizations may set up barriers to doing an audit for fear of how it may backfire on them. These barriers to adopting audits take many forms, and may not always be clearly and openly articulated. The most frequent objections are:

• ‘Audits have insufficient benefit, in that they are time-consuming.’

• ‘I know my people; the grapevine keeps me pretty well and accurately informed. Hence audits are unnecessary.’

• ‘There are much better and simpler alternatives, like MBWA (management by walking about) and I hear the reactions of the company then.

• ‘They are simply too expensive.’

• ‘This organization [or department] is too small to warrant a full audit.’

• ‘Publishing of the results would probably mean a serious loss of (informational) power on the part of management.’

It is true that the act of surveying can influence attitudes. This is more frequently the case if organizations use them only rarely. Employee audits are often provoked by fashion, but some organizations have been doing them annually for twenty years or so, and use audits to calculate various indices that are very important in their strategic planning. Such audits can provide companies with important benchmarks about how they are doing over time. Some more adventurous companies use audits to measure or benchmark themselves against other close corporate performers. There are, in fact, various groupings of companies who share employee survey data from responses to questions they all agree to carry in their surveys. By doing so they obtain valuable comparative data which is most helpful in interpreting the causes of their specific results.

THE ROLE OF THE PERSONNEL FUNCTION

Pendleton and Furnham (1992) believe that the judicious use of human resource and organizational behaviour audits could substantially enhance the power, prestige and professionalism of personnel directors. They asked, ‘Why do very few chief executives come from personnel backgrounds?’ For most service companies and many in other sectors, the salary bill is the single largest revenue expense, yet those whose principal function is advising on human resource management rarely make it to the top.

One clue is to be found in their history. The background of the personnel specialist usually derives from one of these main areas: administration, welfare and industrial relations. Each of these functions is changing. Administration is becoming increasingly computerized requiring less specialized knowledge of procedures but more knowledge of systems; ‘Welfare’ is seen as anachronistic, though its function remains important, even in those companies in which the synonym ‘counselling’ is also avoided. Industrial relations, in much of the industrial world, is tending to operate in a greater spirit of co-operation. This is especially true in Europe and America, where many managers seem to have understood that entire industries could die unless conflict is replaced by collaboration, in increasingly competitive markets. Thus, many traditional personnel functions are becoming redundant or have changed completely.

Other reasons for personnel’s apparent decline are more often self-inflicted:

Personal attributes Many current personnel specialists are gentle, ‘caring’ characters who are asked to help with damage limitation when tough decisions have had to be taken. They are widely consulted on how to implement redundancy programmes in a sensitive way, but are frequently unsuited to taking the tough decisions themselves.

Reactivity Coming from an administrative background, other personnel specialists have a detailed and reactive approach to work, and find it difficult to make a contribution to the creation of future strategy, even when the creative use of human resources may make the most enormous difference to a company’s competitive strength. They are neither used to nor trained in strategic planning, nor frequently in any sort of collection and analysis of data. If the language of business is money, the alphabet must be numbers. Some personnel departments, of course, collect extensive data (which they analyse) on absenteeism, performance appraisal and payrolls, but less on attitudes, behaviours and values.

Information Unlike their colleagues in operations, research and development or finance, they frequently lack important sources of management information which will guide senior managers’ decision-making. The operations director brings information about throughput, delivery times and distribution. The finance director will bring management accounts and details of unit costs; the sales director will have data about revenue; the marketing director will be able to detect trends in the market place to which the company needs to respond. Yet the personnel director very often brings little more than an intuitive feel for morale or misleading data drawn from exit interviews about why people leave the company (when what they really need is clues about why they stay). The personnel departments which have carefully thought through the information their senior colleagues need in order to guide their decision-making are disconcertingly few. A properly designed and executed organizational audit (e.g. exploring the climate or communications in a company) could provide just the information required.

Invisibility It is all too frequently difficult or impossible to detect the effect of the personnel department. If the sales department fails, the revenue goes down. Most other departments’ effects are readily discernible and their impact is immediate. However, if their administrative duties were to continue, it would be hard to detect much of an impact of the closure of many personnel departments. This does not mean that the company would not be harmed, but that the effect might be attributed to other factors, such as a downturn in the market or an insensitive decision taken by senior management. If a benchmark audit is conducted concerning employees prior to the introduction of a change programme, with a follow-up audit to quantify the effects of that programme, all under the charge of personnel, then a significant organizational role for the personnel department more readily emerges.

Pendleton and Furnham (1992) have argued that, by acting as an internal consultant, personnel managers can perform their function more efficiently. The former has many case studies which demonstrate the efficacy of this position. Thus, corporate audits can be seen as crucial instruments in helping professional human resource people with three problems they frequently face:

1 Development As markets change, organizations need to change. Helping to develop the organization and its work-force requires a great deal of skill and insight which it would be legitimate for many line managers to seek in the personnel function. Personnel specialists should be at the forefront of planning, monitoring and implementing much-needed change. Audits (before and after change) help monitor the efficacy of organizational change programmes and can suggest which facets of the organization need most attention, when and how.

2 Tracking With most major business decisions there are consequences for employees. But what mechanisms currently exist to keep senior managers in touch with the thoughts and feelings of others in the organization? Those who advocate management by walking about (MBWA) imply that managers will automatically discern that which is important. But this does not take into account the difficulties of tracking the mood of a large and complex organization. Devising sensible tracking systems, i.e. regular audits, to challenge the monopoly of the more numerate disciplines, is an important need.

3 Strategy The need to use human resources creatively and to come up with increasingly compelling reward schemes which do not contribute to salary inflation, is ever present. Organizations need performance-related strategies which are logical, coherent, future-orientated and integrated both with other departments’ plans and the overall business plan. Strategy, however, has to be information-based, and it is the corporate audit which can supply this information.

Corporate human resources audits are seductive; they often sell themselves. It is not hard to believe in them. There is a persuasive logic in attempting to acquire real, accurate, representative feedback upon which to make decisions. Indeed, the results of audits frequently give impetus to strategic planning (Sayle, 1988). This faith is well-founded if the audits are properly designed and analysed. The argument that they are expensive is relatively easily and justly counteracted by the proposal that ignorance is even more expensive.

There has been a significant growth in corporate human resources audits over the past decade or so (Walley, 1974). This has come about for two reasons:

1 Demand Line managers, corporate planners and chief executives have quite rightly demanded to know what the culture, climate, and communications are like in their organization (or part of it) before engaging on some plan of action. There is a growing realization that it is only the naive or foolish who presume to know, or who don’t care.

2 Supply A growing army of single consultants as well as numerous well-established firms are selling their expertise in survey design and analysis. Some have repackaged old ideas in more fashionable terminology, and others have adapted old measures to fit new purposes. These salesmen have done a good job in convincing organizations of the need for such corporate audits.

THE HEALTH AND ILLNESS OF ORGANIZATIONS

Since the beginning of this century psychologists and psychiatrists have attempted to devise a parsimonious but sensitive and robust system to classify mental illness. Over the years a recognized international nomenclature has arisen and the taxonomy of mental states and their attendant behaviours been refined. Whilst it is untrue to say that there is universal agreement and acceptance of the latest offering (DSM III), it is probably fair to state that each succeeding attempt yields greater consensus as to the applicability of the system.

For some time management scientists and other students of organizational behaviour have wondered if some of the ideas from psychology – the study of the behaviour of individuals – might not be equally usefully applied to organizations – collections of individuals. Although there are inherent problems in ‘borrowing’ terms and concepts from other disciplines, there is also much to be gained, at least in the initial period of conceptual development. In adopting the terminology of individual psychology, organizations have at various times been described as ‘neurotic’, ‘healthy’ or ‘unhealthy’.

Kets de Vries and Miller (1984) have argued that there are striking similarities between the neurotic behaviour of individuals and the practices of ailing and failing businesses. In such companies, strategy, structure and organizational climate often reflect the neurotic styles and fantasies of the top echelon of managers. More specifically, the neurotic characteristics of these executives seem to create uniformities of organizational culture, which in turn foster common neurotic organizational styles.

These writers identified five such neurotic styles for organizations, which had formerly been well established in the psychoanalytic and psychiatric literature: dramatic, depressive, paranoid, compulsive and schizoid. Each style has its specific individual characteristics, predominant motivating fantasies and associated dangers, and each was found to have its organizational counterparts in the structure, strategic behaviour and climate of a number of troubled companies. We will examine each of these company personality types in more detail.

The dramatic organization

Dramatic firms are hyperactive, impulsive, dramatically venturesome and dangerously uninhibited. Their decision-makers live in a world of hunches, intuition and impressions rather than facts, as they haphazardly address an array of disparate markets. Their dramatic flair encourages the top people to centralize power, reserving their prerogative to initiate bold ventures. Audacity, risk-taking and diversification are major corporate themes. Instead of reacting to the business environment, top decision-makers attempt to create their own environment. Entering some markets and leaving othe...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures and tables
• Preface
• 1 Management audits
• 2 Measurement issues
• 3 Corporate culture
• 4 Corporate climate
• 5 Communication audits
• 6 Customer audits
• 7 The role of audits in organizations
• References
• Index