Dynamic Business Models in a Changing Landscape

Problem Statement: Should an Organisation Moving in a Fast-Moving Business Environment Adopt the Scientific or the Human Relations Model of Management?

Business models are the framework on the basis of which an organisation operates. Fendt et al (2003) compare it to the concept of paradigm shift put forward by Kuhn where even a small shift can lead to significant change. Models depend on the kin of values that an organisation depends on and ultimately, the approach of management a manager believes in.

In present day, rapid changes with respect to consumer behaviour, market and increasing liberalisation has forced managers to approach dynamic business models. In the light of this, it becomes important to step back and examine the traditional forms of management which have been used by organisations so far.

Peter Drucker’s book Management: Tasks, Responsibilities, Practices, published in 1974 brought about the revolutionary change in management science. It was at this juncture that management academia began to question the traditional forms of organisation (Boddy, 2016). The pre-existing models of management are very much operational, still. However, newer models of organisation, based on the changing consumer base are coming into foray. This paper will discuss the relative advantages and disadvantages that two popular management models; scientific and human relations models, have over each other. Based on that, it will lay out what kinds of business have a greater advantage when it comes to the present fast moving business environment.

Understanding a Dynamic Business Environment

The contemporary business environment’s quality of being extremely dynamic offers it an advantage as well as a disadvantage. Delen and Pratt (2020) classify them as problems and opportunities. The volatility of the market makes for unpredictable problems which can lead to significant losses, while at the same time, it can lead to opportunities arising unexpectedly. However, it is the former that is the cause of concern to a manager. Reeves and Diemler (2011) discover that in 1960, the percentage of companies falling down the top three rankings was 4%. In 2008, it increased to 14%. The strategies to develop working models for organisations, thus, are not operating on the same assumptions that they did before. It is not that consumer needs have changed radically, it has got more to do with the environment in which these needs existed has changed radically. For example, milk is one such product which has not seen a reduction in demand over the decades. However, the milk industry has seen numerous changes in preference in its target consumer base. New Zealand based dairy company Fonterra announced in 2019 that it is taking initiatives to invest in an artificially developed milk variety, anticipating the increasing rise in milk demand and the inevitable inadequate supply in the future. The company has planned to work in tandem with a US-based biotech company in creating milk that doesn’t come from plants or animals but is equal in nutrition (Newsroom, February 27 2019).

This is a prime example of a company anticipating and changing its approach based on a dynamic and fast-moving business environment, but its effects remain to be seen.

Considering Scientific and Human Relations Model of Management

The scientific theory of management was first propounded by Frederick Winslow Taylor in his seminal work titled ‘The Principles of Scientific Management’. Published in 1909, Taylor was the forward a systematic theory of management based on scientific principles. According to Taylor’s theory of management, meticulous mapping out of each worker was done and clear boundaries between tasks were drawn. The most well-known example of the successful implementation of Taylor’s design was the assembly line design implemented by Henry Ford (Boddy, 2016). The aspect of initiative was also important in scientific management, whereby individual workers are provided with incentive in order to motivate them to work. A similar approach was put forward by Thomas Gilbert in his book Human Competence: Engineering Worthy Performance (1978) where he elucidated the difference between actual and potential for performance improvement (PIP) (Chyung, 2005).

The Human Relations model was initially propounded by Mary Market Follet and Elton Mayo. The basic premise of the theory lay in the fact that individual work and incentive wasn’t enough, to solve a problem people needed to work in groups. A rigid division of labour processes only leads to machination of individuals (Follet, 1920), while a group working environment makes the workers rely on each other’s creativity and engage in cooperation. A similar effect was discovered by Elton Mayo, while experimenting on a group of workers with a task. The Human Relations model emphasises on the camaraderie that workers share, which led to an increase in the productivity and any attempts at squashing this camaraderie would lead to a loss on the part of the management (Hyde et al, 2009; Boddy, 2016).

Which Model is More Relevant Now?

While it has been agreed upon by academics, time and again, that a single model of management may not universally work for every organisation, at this juncture, it becomes important to examine which model works best in today’s fast-paced business environment. Several theorists have argued that in the contemporary market settings, Taylorism and scientific models is inadequate to deal with employees and the rapid market changes. Taylor, in his own words, classified workers as having “insufficient mental capacity”. The premise on which Taylor’s scientific management is based is that workers need to be shown the ropes because they do not have the capacity to operate on their own and based on their own skills. The real way to increase productivity is through intervention in the organisation structure (Wagner-Tsukamoto, 2008). Of course, several organisations in the present date are moving away from just improving their organisational structure and also concentrating on improving employee satisfaction. Sine 2004, Netflix’s approach towards employees’ holiday been flexible, not following the traditional paid and unpaid holiday structure. Netflix employees are allowed to take as much time off as they want, the responsibility of determining whether or not the employee has put in a requisite number of hours in the office is the responsibility of the employee itself (Bloomberg, April 13 2012). Netflix’s management has realised that by placing this responsibility on the shoulders of the employees themselves, they are incentivising them to improve their productivity and reach their target of getting holidays. This structure has clearly worked for them as Netflix reported a growth in revenue from 20.5 billion dollars in 2019, growing from 1.67 billion dollars in 2009 (Statista, February 14 2020). A defining factor of scientific management theory was the adaptation of the human with the machines. The advent of newer forms of technology was leading to a watershed moment in history and also putting forward the problem that was the coexistence of the workers and the machines. While Taylor’s concern was right at that time, it can be safely said now that business organisations are well into the age of technology in the present times (Derksen, 2014). The problem in contemporary environment is that it is saturated with options and business are not only looking to be an attractive option to customers, they are also looking to be an attractive place to work for employees. Google’s work environment, over the decade, has increasingly tried to incorporate elements of purpose and happiness in their employees and it is a part of their strategy in attracting talented potential employees (CNBC, May 2 2018). A pertinent issue with workers across the world has been with regards to working conditions. In 2019, 48,000 automobile workers in General Motors began a strike against the working conditions they were facing. The strike resulted in substantial losses for the company, and they had to cede to several demands put forward by the workers (Vox, October 25 2019). In the light of this, scientific management has failed to take into account the socio-cultural factors which make for group dissatisfaction and the coming-together of these groups which can cause significant loss to the business and the workers themselves. The solution to this problem was put forward by Chester Barnard (1938) who postulated that a manager’s job was not just to recruit employees and communicate through a chain-of-command. A good organisation came from transparent and open communication with all the employees. He emphasised on the importance of workers getting financial compensation, but also elucidated that non-tangible compensations, like recognition and laudation, are also important in guaranteeing the smooth functioning and worker satisfaction in a business organisation (Gabor and Mahoney, 2013). Hence, although scientific models of management is still relevant and a widely used model, it has to be used in tandem with the human relations model. The issue of productivity lies more in the employees than the machines, in the contemporary situation and hence human relations model will yield better results.

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