Situation San Diego Utilities Company, a privately owned utility company, has been faced with an expansion of its facilities resulting in financial inefficiencies. President Robert Delgado has requested a review of all operating standards. He requested that John Givens and Hilda Hirsh provide a broad outline of management by objectives (MBO) performance standards that would identify key standards with which to control performance.
Three years ago, San Diego Utilities, under the direction of a management consulting firm, implemented a system of management by objectives (MBO) for the purpose of evaluating department managers, sales engineers, and consumer service employees. The advantage of such a system of controls is that top management can very rapidly scan a printout and detect any trouble spots in the department.
Givens and Hirsh attempted to set the standards as if the personnel were working at a normal pace. After review, Givens and Hirsh raised the performance level on several items. Their justification was that if a standard can be achieved without a challenge, it is probably too low. Delgado had specifically asked for goals that were not easily attainable. There was a certain amount of negative reaction, but in the end the departments agreed.
During the past year, however, a significant degree of dissatisfaction has emerged. In the first year participation was encouraged and rewards were obtained. The employees set their goals high and productivity increased. Now, however, problems are being reported in the evaluation of performance, and many managers are claiming that the standards set by Hirsh were too tight or unfair. The president said, “Yes, we have had a few operating problems, but no system is perfect.” Hirsh noted that the consumer department had exceeded their monthly labor cost standards, so she called Bill Walton and “red-lined” his performance report.
Walton hit the roof. He called Givens and said, “The system is grossly unfair and inaccurate as a measure of performance. The real objective is to control total costs. My department has done this, even though we were over in labor costs. There was a heavy snowstorm last month with lots of frozen lines, and we had to get people out there on overtime. The real need is to maximize customer service and to keep costs to a minimum, which we have done.”
Two other department managers complained that the system was unfair, and several engineers are threatening to resign. In their complaints to Givens, they pointed out that it appeared that Hirsh was only looking for failures to report, under the cover of the MBO system. Robert Delgado thought: We may need to take another look at our system; maybe MBO doesn't work in a utility. Analysis It is an inevitable fact that conflict could occur within any group or organization. Conflicts could arise whenever disagreements exist in a social situation over issues of substance or whenever emotional antagonisms create frictions between individuals or groups. The parties in the abovementioned situation are interdependent and both parties need considerable time dealing with conflict, including conflicts in which the manager or leader is directly involved as one of the principal actors (Kotter, 1982). In dealing with conflicts, effective communication is a very vital tool in resolving it.
The structural variables in the said situation are culture, time and, most emphasized, communication. The entrapments that were identified are work, relationship and conflict traps. An effective leader should learn to curtail conflict on one hand and to design or to allow its influence on the other, becoming increasingly wise in determining the need for each.
Also, keeping conflicts from getting out of control requires communication between participants. Managers need to assure the staff that open sharing can be safe and in their best interest as long as there is respect shown to each other. Thus, open communication should continue until there is consensus (Levine 1998, p. 286). Thus, the process variables that are vital are the conformity and the agreement of both parties’ integrative orientations.
Before a manager can respond effectively to a conflict, he or she needs to understand the real nature of that conflict and who is involved or what the source of the conflict is. Although most conflict occurs when a person’s superior or peers send conflicting expectations to him or her, it is possible for intrapersonal role conflict to emerge from within an individual, as a result of competing roles taken. For example, I have outlined 4 problems in the abovementioned case of San Diego Utilities:
1. Western Utilities Company, a privately owned utility company, faced financial inefficiencies due to company’s expansion of its facilities and something has to be done to improve operations standards.
2. When a system of management by objectives (MBO) was set at higher standards, the personnel are complaining that it is “unfair or too tight” and some even threaten to resign.
3. The negative reaction of personnel when their goals were set at maximum standards.
4. Hirsh might have set the MBO standards too high that the personnel could hardly meet.
The first two issues are intangible issues and the last two are the tangible issues. Here, conflict may provide a clue that a critical problem between two departments needs to be resolved rather than allowed to worsen. This is why leaders need perception, cognition and emotion to deal with these issues. Unless issues are brought into the open, they cannot be fully understood or explored.
Once intergroup conflict emerges, it creates a motivating force encouraging the two groups to resolve the conflict so as to move the relationship to a new equilibrium. Viewed this way, intergroup conflict is sometimes escalated —intentionally stimulated in organizations because of its constructive consequences.
The transformations during escalation may be desirable to de-escalate it — intentionally decrease it because of its potentially destructive consequences. The managerial challenge is to keep conflict at a moderate level (where it is most likely to stimulate creative thought but not interfere with performance). Conflict should not become so intense that individual parties either hide it or escalate it to destructive levels (Newstrom & Davis, 2004). This is why the leaders in San Diego Utilities need to focus on Coercive and Legitimate Power Bases for both parties to attain compliance over the MBO procedures.
In this case, we will identify the causes of conflict in the San Diego Utilities:
1. Most of the personnel might not be aware about the advantages of the MBO. 2. Hirsch’s expectation might be too high that she doesn’t realize that the personnel are already hard up in meeting her standards. 3. The lack of open communication between the evaluators and the personnel in assessing the system’s advantages and disadvantages. To resolve the conflict above, the management should formulate some probable solutions to correct cognitive errors and conform to group pressures by:
1. Finding a new system that would be easier and better than the MBO system. 2. Replacing Hirsh with other personnel who are more able to oversee and evaluate the MBO. 3. Conducting regular assessments that would enable all managers and evaluators to build an open communication and interaction regarding the MBO system. 4. Resetting the standards to a more tenable and acceptable level that both parties will agree on. 5. Personnel and the evaluators should be directly addressing the person regarding their complaints and not hold personal grudge when it comes to work.
Within the listed solutions, in the concept of negotiation, the best alternative should be the win-win solution. The most feasible among the alternatives above are the last three (Alternative 3, 4 and 5), these are the best alternatives to negotiated agreement (BATNA). The San Diego Utilities management should not easily give up when problems arise in implementing a new system because it is just natural since everyone is still adjusting to it. The whole company should do regular assessments that would enhance the flow of communication within the company.
Questions should be directed to proper people, so that they could change for the better. Finally, the whole company could also conduct consolidation activities that would enhance the relationships of their people, like acquaintance parties or socials. The company needs to enhance its organizational culture so that employees would support and understand each other, instead of bearing professional grudge or exhibit negative reactions when adjustments, like the MBO system, are implemented.
In this case, integrative orientation in negotiation is most applicable. The managers need to integrate situational approaches that can be used to enable leaders to tailor their styles of resolving conflict to the interests of those involved. The analysis of the type of conflict is to determine the causes, both direct and indirect. The better we understand a conflict, the more effectively we can help resolve it.
Also, effective communication and knowing what skills should be enhanced is very vital because organizational conflict is now considered inevitable and a positive indicator of how effective the organization is managed. Essentially, leaders and managers are required not only to recognize situations that have the potential for conflict, but they also have to deal with these situations holistically so that they will best serve the needs of both the organization and the people involved
References Kotter, J. P (1982). The General Managers. (New York: Free Press). Levine, J. M. (1998).Chapter 12 Group Socialization and Intergroup Relations. In Intergroup Cognition and Intergroup Behavior, Sedikides, C., Schopler, J., & Insko, C. A. (Eds.) (pp. 283-304). (Mahwah, NJ: Lawrence Erlbaum Associates). Newstrom, J. W. & Davis, K (2000). Organizational Behavior: Human Behavior at Work, 11th ed. (Boston: McGraw-Hill/Irwin.