he current economic model, and also society, is based on organizations. Business organizations, in particular, are in the center of capitalism production system. From Adam Smith’s division of labor to Peter Drucker’s knowledge workers, management theory evolved seeking to understand why people work better together, and how the grouping process occurs. Bradshaw (1998: 16) stated that in essence, “all business is trade”. Following the chain of demand-offer and “make-or-buy” decisions, it seems to be that market governs the production activity. But, as observed by Simon (1995: 273), “a large part of the behavior of the system now takes place inside the skins of firms, and does not consist just of market exchanges”. Roberts (2005: 74) stated that firms are created ‘to coordinate and motivate people’s economic activity’. How this process of coordination and motivation occurs?
Motivation is usually stimulated by rewards systems. When there is a measurable and proper way to assess individual contributions, these systems are an very effective way to have workers doing their jobs well. On the other hand, inappropriate indices are counterproductive, causing conflicts of interest. Also, motivation can come from organizational identification. Kulik (pp 185, in Gilliland et al, 2005) argued that “organizational identification develop a long-term commitment to the organization, and may be more likely to engage in behaviors intended to provide support to the organization”. Since workers spend at least 1/3 of their days inside companies, it became a question of quality of life to find and stay at companies witch we are identified.
This identification could be enhanced by loyalty. More common on Eastern culture, Western companies started to pay attention on it. But how this loyalty is achieved? Reichheld (1996: x) analyzed that “organizational loyalty is principled leadership”. Through leader’s example and commitment in create a healthy workplace, respecting workers opinions and take in consideration their interests, organization can gain the respect necessary to develop this relationship.
Since the authority chain is more practical and easy to occur through effective leadership, we can observe the second point raised by Roberts, coordination. According to Simon (1996: 288), “organizations, through the authority mechanism, provide a means for coordinating the activities of groups of individuals in ways that are not always easily achieved by markets.”
Considering the division and specialization of labor the coordination of efforts, together with motivation, contributes to increase the production process efficiency. Coordination also helps to improve communication process and a better adequation between workers’ and business’ goals. Southwest Airlines focused on creating this relationship first with its workers. After have motivated employees, they started to expand its culture to customers, with leaded to a market dominance of 60%. We can cite also Google, as a company that created an excellent workplace, with highly motivated people, and hired top-leaders such as Vinton G. Cerf, and Eric Schmidt to coordinate the company to the success it is today.
As students of Management, we have to understand these key organizational mechanisms and its influence on society and modern firms. Managers are a fundamental piece on this process. In this ecosystem, managers earn workers’ loyalty, use rewards systems to motivate efficiency and productivity, promote organizational identification and coordinate all this factors to achieve strategic objectives. Understating our roles in organizations and how its affect business activity, we will be more prepared to face the challenges that will appear in our career.
Bradshaw, H.H (1998) 4×4 Leadership and the purpose of the firm. New York: Haworth Press
Gilliland, Stephen W. et al (2005) What motivates fairness in organizations. New York: Information Age Publishing
Reichheld, Frederick F. (1996) The Loyalty effect: the hidden force behind growth, profits, and lasting value. New York: Harvard Business School Press
Roberts, John (2007) The Modern Firm: organizational design for performance growth. New York: Oxford University Press
Simon, H. (1995) ‘Organizations and Markets’ Journal of Public Administration Research and Theory, 5 (3), pp. 273-294