Management and Organizations: How managers can manage by monitoring of external factors

Management and Organizations: How managers can manage by monitoring of external factors

Introduction

It is important for managers to be able to measure business outcomes. However, it is also important to understand how managers measure performance in order to identify ways in which managers can evaluate or measure performance in a way that contributes to effective management. In understanding how management in an organization functions, it is important to analyze the supra, macro and micro activities of particular organizations functioning in either national or international situations. This is because organizations utilize both external and internal resources to accomplish objectives. The organization draws external resources through its interaction with society.

Managers ought to manage not only based on employees performance, but they also require to consider other factors such as how the organization interacts with external factors to contribute to performance. Such external factors may include societal culture in international markets, competitors and competitive advantage, laws and regulations, technological and political factors. The internal factors on the other hand focus mainly on human resource. It is unproductive for managers to only focus on measuring human resource’s performance and neglect other external factors. Managers require assessing how external factors affect businesses to inform better management. Human resources or employees are not the only factors affecting business performance and thus managers require undertaking a holistic approach in measuring performance. Organizations are part of society and managers ought to factor in the social dynamics that support the existence of the organizations. Managerial decisions influence how organization interacts with the society and the society determines its profitability or collapse. This indicates that performance in an organization is not pegged on employees’ output only but also on external or societal interaction with the organization.

Employees’ output is measurable but external factors may not be measurable because they are dynamic and not static. Even when measurement of performance is crucial to management, it is not always possible to measure external factors. This is because managers may not always be able to predict or measure the extent of how certain external factors may affect the organization. This would call for managers to seek ways of adapting the organization instead of taking a rigid stance about management purely based on performance evaluation. In this case, instead of managers, relying solely on measuring performance they would have to seek ways of adapting the business to the prevailing external circumstances.

Measuring performance is vital to an organization’s profitability or effectiveness but sometimes managers would have to focus on how to adapt the organization to the business environment for it to remain competitive. Measuring performance is an internal function which is necessary for an organization’s success. However, external factors also determine an organization’s success. Thus managers require being diverse to manage the organization by adapting the organization to the external factors as well as implementing changes drawn from performance evaluation. When conducting performance evaluation on employees, managers also require making reference to how external factors influence individual employee performance. This is because it is not only based on the employee’s effort but is affected by external factors such as other individuals in the team and competition from other organizations in the same industry.

Literature review on why managers measure performance

Performance measurement or evaluation focuses on specific activities and their outcomes and it is anchored on practice theory. Practice theory’s empirical approach recognizes the importance of peoples’ actions to organizational outcomes. The theory informs manager’s motivation to focus on employees’ everyday activity. The theoretical approach of practice theory backs managers’ performance evaluation because it requires specific explanation for employees’ activities. It is concerned with evaluating how activities are produced, reinforced and changed for the intended results. The philosophical approach of the theory underscores the reason why evaluating performance is important to a manager. This is because it views activities as the building blocks that culminate in success of the organization (Feldman & Orlikowski, 2011).

Managers use performance units or evaluate the extent to which organization goals are attained say in dollars for a business or in the number of patients receiving quality care in a hospital (Klaas & Donaldson, 2009). They perceive any decline in the number of performance unit as reduced performance. Managers believe that giving evaluations to all employees is important because it sets the stage for success in the business or organization (Randall, 2013). Managers view performance review as the perfect means to translate the high-level company goals into employee’s personal goals and activities required of each of the employees (Barrier, 2008).

Managers use performance evaluations to assist employees to make the connection between their performance and the necessary improvement needed to achieve the high-level goals of the company (Eccles & Serafeim, 2013). Managers emphasize on making the connection because it is necessary in helping the employee to understand how it will be measured. Managers view performance evaluations as ways in which they can strengthen the organization and to help each employee to reach their highest level of capability (Hurst, 2004). Managers require providing the employees with the necessary support because employees who are encouraged to grow are more capable, flexible and open to change that drives organizational success. It is also essential that managers review each employee’s progress, identify and remove roadblocks to success. (Randall, 2013)

Implications: does it benefit employees or not?

Performance reviews inflict pain on employees and managers sometimes offer soft peddled criticisms. This can be fatal particularly when an employee is subsequently terminated for unsatisfactory performance and it can bring suit for wrongful discharge. Additionally, when employees get negative reviews they may blame managers for some forbidden motive such as discrimination and this may cause managers to fail to give the deserved feedback (Torres, 2008). This makes management through measuring performance a somewhat weak. Managers may be put in the midst of constant lawsuits, which divert organization’s resources from productive activities. However, managers can adopt more acceptable means of performance evaluation such as by creating a when a culture of continuous feedback through open communication.

Additionally, performance reviews are inherently destructive and inaccurate because individual performance is heavily influenced by other factors such as other individuals’ performance. Constant communication is more effective than formal review systems. Small organizations are at a unique advantage to avoid performance reviews. Scrapping off performance management is does not mean that it is not important rather, it is more effective when done continually. This is a form of performance management in a way the makes more sense for the company. Employees would advocate for managers to alter the way in which they manage performance from a formal periodic review to a continuous system of constant communication. This way, employees get the chance to express their concerns about other factors that could be affecting their performance in a timely and supportive way (Barrier, 2008).

Practice relevance:  argument on how external factors influence employee performance

Practice theory indicates that organizational action takes place in a social world. It is a practical theory and it is invaluable in influencing organizational change. It emphasizes the micro dynamics of everyday activities and that activities of all participants are important in producing organizational outcomes (Feldman & Orlikowski, 2011). Advocating for management based on assessment of unpredictable and dynamic external factors such as technology or competition, which is uncertain, relies on organizational design’s contingency or organic theory (Klaas & Donaldson, 2009).

Apart from other individuals within an organization affecting employee performance, other external or environmental factors contribute to organizational success. Managers also require exploring into which certain external factors necessitate organizational action. They require assessing how political changes say in government and the resultant policy changes affect the success of the organization. They should also explore economic factors such as interest’s rates, exchange rates and the business climate for investment in certain areas would affect the entire business. They also require evaluating how social changes that for instance affect buying habits affect the organization (Evans & Richardson, 2008).

Managers also need to address how technology such as new products and services would affect the operations of the organization and its success. They also require adapting the organization to new legislations relevant to the organization such as minimum wage policy. Managers of business firms also require paying ample attention to competition dynamics including the current and the potential competitors. This then informs the manager’s response in determining the organization’s core competencies and strategies before evaluating likely actions or strategies (Evans & Richardson, 2008).

These factors influence organizations performance and subsequently the employees’ performance. It is important to for managers to evaluate employees’ achievement of set goals in light of the evaluations of the industry and the competition. Managers are decision makers and they should be able to accurately perceive environmental issues and formulate management strategies (Oswald, Mossholder, & Harris, 2007). Managers can manage organizations better by allowing their perceptions of the external environment and the organizations competitive strengths to inform strategic considerations.

These strategic considerations are informed by dynamic factors, which are unpredictable indicating that managers can manage without measuring. For instance, managers may not necessarily require measuring the actual magnitude of the competition to put in place a marketing plan. Rather, managers adapt the organization to the prevailing competitive environment and recommend certain forms of marketing strategies, product innovation for competitive advantage (Chow, Wu, & Chan, 2009). This is because effective management requires that managers tailor the decision making process to fit the demands of the environment (Payne, 2010). Managers must then in their managerial work devote resources and energy in collecting environmentally relevant information.

Managers require knowledge to make certain decisions within the organization. Obtaining external environment information or knowledge is important because it enable s managers to make perceptual judgments of positive consequence to the organization. They take more ownership of strategy development and share this information with employees. They assist employees to adjust their objectives in line with the organizational goals and they also structure ways in which to support the employees to achieve them. This way, managers are aware of the factors that affect their employees’ performance and are able to adapt their management to support the employees to achieve their targets (Crumpton, 2013).

A manager that not only focuses on the internal environment that is measurable but also the external environment is invaluable to an organization. This type of manager extends the scope of management to external factors and is otherwise referred to as a strategist. A manager who functions based on just the measurable internal factors such as employee performance limits his effectiveness as well as the effectiveness of his organization (Pryor, Taneja, Toombs, & White, 2008).

A manager who is a strategist confronts complex situations emanating from the employees and as well as those emanating from external factors. They use integrative thinking to arrive at solutions that would otherwise not be evident. They are passionate about understanding the present and using it as a foundation for inventing the future (Klarner & Raisch, 2013). They simultaneously develop and execute plans that focus on the short-term success and long-term viability of the organization. They understand that strategic execution is important to both long term and short-term success of the organization (Pryor, Taneja, Toombs, & White, 2008). Measuring performance is a narrow viewed management approach, which focuses on internal predictable and static factors. A strategist approach on the other hand covers a wider scope of activities within the organization. A manager with a wider view is thus more effective than one that takes management purely focused on measuring performance.

Conclusion: ways in which managers can manage through evaluating external factors

Evidently, when managers rely too heavily on internal factors and neglect the external factors that inform organizations strategic direction organizations become ineffective. Managers require a wider view to effectively manage organizations without which an organization is likely to plunge into performance misfit. Organizations do not function in isolation but in a social world with competitors, legal structures, political influences, economic influences, technological advancements or innovations and changing regulations. Managers ought to adapt the organization to these factors accordingly.

One of the ways in which managers can adapt to these external factors in their management is through coordinating activities with other managers in different areas within the organization (Philip, 2011). For instance, a manager in a sales and marketing team coordinates with the research and development manager to conduct surveys on consumer behavior trends. This way the managers understand their competition and tailor their products to better clinch the market. The finance managers coordinate with product development managers to determine which financial factors would affect manufacturing expenditure of certain products. This integrative thinking is a strategic approach seeking to integrate the organization’s competencies with its human resource to attain or retain competitive advantage.

Another way in which managers can adopt a holistic and strategic approach is through involvement in formal strategic planning processes within the organization (Gluck, Kaufman, & Wallack, 2008). Formal strategic planning process gathers together all the top-level managers, the organization’s top executives and employees in a single forum. They air their views about how to achieve the organization goals and consultants are also involved in strategic decision-making. Managers of different sectors within the organization get the chance to understand how different external and internal factors play out to attain the goals of the organization. It is also an important platform to understand employees’ point of view regarding areas that may require improvement within the organization. This is because all participants have a level field to air their views in a professionally, impartial and well-coordinated process. It is an important platform because all the views and suggestions are properly documented and acted upon either as matter of further debate or inclusion into the strategic plan.

Performance reviews conducted in an informal way that involves continuous communication with employees is the most effective way to manage employees. This is particularly effective when the manager includes a strategist approach to management because he is able to offer accurate support to the employees. When managers are armed with information about external factors and internal factors that contribute to organizational success, they include strategic management styles to their previous narrow performance oriented approaches of management. They are empowered to make information that is more accurate because they have a wide understanding of different aspects affecting business or organizational performance. They are also able to assist employees to make better personal and professional development goals because they understand the strategic direction of the organization.

Overall, a manager with a strategist approach to management makes better management decisions than one taking a rigid performance approach. This indicates that employees are better served by a strategist manager who not only focuses on continuous communication to offer feedback on progress but also when such a manager is well informed about the organization’s position in the respective industry or sector. This is because such a manager makes informed decisions is less involved in conflict with employees over inaccurate judgments in appraisals.

References

Barrier, M., 2008. Reviewing the Annual Review. Nation’s Business, 86(9), 1-5.

Chow, w. S., Wu, J. P. and Chan, A. K., 2009. The Effects of Environmental Factors on teh Behavor of Chineses Managers in the Information Age in China. Journal of Business Ethics, 89, 629-639.

Crumpton, L. L., 2013. The Measure of Success. Industrial Management, 27-30.

Eccles, R. G. and  Serafeim, G., 2013, May 1. The Performance Frontier. Harvard Business Review, 50-60.

Evans, C., and Richardson, M., 2008, October 1. Strategy in Action: Assessing the Environment. Manager: British Journal of Administrative Management, 1-3.

Feldman, M. S. and  Orlikowski, W. J., 2011. Theorizing Practice and Practicing Theory. Organization Science, 22, 1240-1253.

Gluck, F. W., Kaufman, S. P., and Wallack, A. S., 2008. Strategic MAnagemnet For Competitive Advantage. McKinsey Quarterly, 2.

Hurst, J., 2004, July 1. Performance Reviews Benchmarking Growth. Supply House Times, 158.

Klaas, P. and Donaldson, L., 2009. Underfits Versus Overfits in the Contigency Theory of Organization Design: Assymmetric Effects of Misfits on Performance. In A. B. al (Ed.), New Approaches to Organizational Design, Information and Organization Design Series (pp. 147-168). Aarhus, denmark.

Klarner, P. and Raisch, S., 2013. Move to The Beat-Rhythms of Change and Firm Performannce. Academy of Management Journal, 56(1), 160-184.

Oswald, S. L., Mossholder, K., and Harris, S. G., 2007. Relations Between Strategic Involvement and Managers’ Perceptions of Environment and Competitive Strenght. Group and Organization Management, 22(3), 343-365.

Payne, M.-L., 2010. A Comparative Study of HR Managers’ Competencies in Strategic Roles. International Management Review, 6(2), 5-12.

Philip, M., 2011. Factors Affecting Business Success of Small and Medium Enterprise (SMEs). Amity Global Business Review, 118-136.

Pryor, M. G., Taneja, S., Toombs, L. A. and White, J. C., 2008. The Impact of Ostrich Managers on Strategic Managemnt. Proceedings of teh Academy of Strategic Management, 7(2), 9-13.

Randall, R., 2013, January 13. Employee Performance Evaluations Important to Company Success. Central Penn Business Journal, 13.

Torres, A. C., 2008, July 28. Emotional Mismanagement. Business Week, 84.

 

 

 

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