The Automation Control Company Ltd (real name withheld) is a small to medium enterprise based in the Thames Valley area. It operates throughout the UK with a head office in Berkshire and a regional office in Caerphilly, Wales.
It provides technical and manufacturing services, predominately to the water industry. The company employees sixty two staff with three Directors. Eighty percent of the employees are site based with twenty percent being office based providing support and administration.
Because of its small size the company employs one person to manage all aspect of IT throughout the company. This IT Manager has two support staff, one in each office, to assist with any IT issues alongside other duties they are required to perform.
The IT Manager works directly for the managing Director but is also in daily contact with the other two directors and other managers within the company. In addition to IT support the IT Manager also runs several development projects for the company which involve other groups, such as the Systems group and the Accounts department.
Purpose of This Report
The report examines interactive behaviour at work issues relating to the decision to stop all spending on IT equipment and development. It will look at leadership styles, employee and management relationships, employee interaction and other management issues.
Interactive behaviour at work (IBW) is concerned with reciprocal communication between two or more people in the workplace. It is the use of interpersonal communication, networking and influencing (Guirdham, 2002, p.1-5).
Further to this it involves elements of interactions, environment, people, self, others, persuasion, power, relationships, groups, culture and leadership, amongst others.
The issues raised in this report deal with the following themes:
Leadership Style - an appraisal of the MD's style of leadership and the ways in which he delivered his decision.
Communication - the way in which the spending cuts were communicated to staff and the communication between individuals and groups in response to the cuts.
Relationships - investigates the co-operation, competition and conflicts between the key personnel and groups.
2.0 Problem Identification
Severe cash flow problems exist within the company stemming from low profits, poor sales performance and lack of investment capital.
The MD has subsequently declared that no new spend will be available for IT throughout the company.
The only allowed spending will be in the event of existing equipment failure which prevents a person from carrying out their day to day work. In each case this must be approved via the Accounts Manager and will be subject to delays depending on the resources available each month.
Several problems resulting from this action have been identified:
Existing projects that have now been stopped involve members from other groups who have committed their time and resources to these projects.
Employees who have been expecting replacement equipment, such as laptops, have been told they will not now be issued with new equipment for the time being.
Planned software upgrades have been cancelled.
Restricting services have the potential to damage relations between the IT department and the other groups within the company.
3.0 The Background and Cause of the Problem
The company was formed by the existing Managing Director in 1992 as a sole trader. As work increased he took on self-employed staff to carry out operational work while he concentrated on the administrative activities needed to run a small business. In 2001 he made the decision to employ all current self-employed staff on a full time PAYE basis, at the same time he appointed two directors to assist in running the company. Up to this period the MD had been very much a 'hands on' leader who took care to involve himself in all areas of work. Due to the increasing level of work and the numbers of employees, now nearing fifty, he could no long carry out this type of management and had to adopt a different style of leadership which required more delegation and concentration on the higher levels of management.
A 'style' of leadership was adopted, partly by circumstances but also by choice, which had fundamental characteristics:
A determination to provide quality of service and retained customer satisfaction above all else
A vision of 'best of class', to be the best at what they do with recognition from peers, competitors and customers
The promotion of a company as a group, encouraging participation and all working together as a team with shared rewards
Developing a culture of high performance with job satisfaction
For a while this was a successful strategy and combined the MD's passion for quality with his own gregarious nature. While business was good there was a discernable quality about the company that stemmed from a good working environment, a shared confidence in the company's success and general job satisfaction. That is not to say there weren't any problems, there are always some difference of opinions, personality clashes and a certain amount of competition but the style of leadership and management of the company meant that most problems were dealt with in a satisfactory manner and usually resulted from a mature, participative approach.
Difficulties arose, however, when the economic situation in the UK took a downturn. Work was becoming harder to get with more competition and prices being driven down. The company had always been under capitalised and suffered from a lack of fixed assets, it rented its main offices and had little to offer in the way of collateral.
In 2009 the company was in a precarious position, it had falling sales and was approaching the end of some major contracts and had yet to secure new work to replace them. Staff levels were high and administration costs, despite several efficiency initiatives, were becoming out of proportion with the work in hand.
In February 2009 the MD and Directors took the decision to make three employees, from the admin department, redundant. It was a difficult decision and the first time the MD had needed to make such a choice.
It was clear that this, on its own, was not enough to stem the tide of recession.
In July 2009 the MD took several actions in an attempt to reduce costs and manage the worsening cash flow situation. One of these decisions was to stop all spending for IT, unless absolutely crucial.
4.0 Strategic Implications of the Problem
Leadership
When describing a style of management it is often a case of trying to find the 'one best way' (Tronpenaars, 1993), however it is often the case that a combination of style characteristics or traits is required and dependent upon the situation rather than one individual style of leadership.
Under what would previously be described as 'normal' conditions the leadership style of the MD, if applying early models of trait theory, would identify the MD as having a democratic style in which followers are involved in decision making. Further studies produced six leadership styles: coercive, authoritative, affiliative, democratic, pacesetting and coaching (Goleman, 2000). These studies concluded that a mixture of autocratic and democratic leadership, using the most positive aspects of both of these, produced the best results.
Style theory came under criticism as it didn't allow the style to vary according to the situation; it was still pursuing the 'best fit' scenario (Freedman & Stumph, 1980). To overcome the shortcomings of style theory a new approach proposed situational theories of leadership. Here leaders were identified as high task or high-relationship orientated, this was further expanded to adapt to the task maturity of groups. This allowed for the style of leadership to adapt according to the task maturity of the group, that is the less mature the task behaviour (less experienced in carrying out a task) the more a high relationship and low task leadership is required. Conversely the more task mature the group is (experienced in carrying out a task) the more a high task and low relationship leadership is required (Hersey & Blanchard).
This is a useful way of describing the leadership style of the MD, although there is some criticism that this is more a style of management than leadership (Hambleton & Gumpert, 1982). As the company matured (and the MD became more proficient in his role) the more the workforce themselves became task mature. Accordingly the leadership tended to be that of high task and low relationship for the majority of the work force while still applying a high relationship and low task style to new entrants (See Appendix 2).
This still does not take into account the personal qualities of a leader that have so much influence on the direction of and indeed culture within a company, especially a small to medium enterprise where the leadership is in such close contact with the workforce on a daily basis.
Two new definitions of leadership styles were proposed (Burns, 2001) :
(See Appendix 2 for a table showing a comparison of transactional and transformational leadership attributes).
Transformational - this is a collaborative style which includes elements of vision and charisma, participation, long term objectivity, a shared approach and concern for quality.
Transactional - a style which is more guarded, less collaborative and concerned with the 'bottom line' such as products, outputs and costs (Guirdham, p544).
The MD could be described as transformational, and indeed for the most part this was in keeping with his own persona and individual character.
It is the more interesting then that the action the MD took to stop all spending in IT, a core element of the business model, was in itself so out of character. This was a very autocratic decision, more in keeping with a transactional leader than the perceived transformational style attributed to the MD. In retrospect, when we are all so wise, it would seem that this was a direct effect of the critical financial situation the company was in and this resulted in a forced decision that would not normally of been considered in more affluent times.
One could argue that this is a case of a leader adapting different styles of leadership "and the most effective leaders switch flexibly among leadership styles as needed" (Goleman, p87). However it is more likely that the decision was through the pressures of financial crisis rather than a flexible adaption.
Communication
As IT manager I was called into the MD's office for a one-to-one discussion. I had no prior knowledge of what the meeting was to be about but I did have an understanding of the current financial situation, although not to specific details. The MD came straight to the point and said that because of the current situation, which he knew I was aware of, some drastic actions have to be taken. He then said that he was stopping all spending on IT throughout the company starting with immediate effect. There was to be no new spending unless it was considered crucial and only if it was preventing someone from carrying out there day to day tasks. All spending had to be approved by the accounts manager and there may well be some delay depending on the funds available for that monthly period. I questioned the situation with existing projects, proposed spending and maintaining service levels. He told me all projects were on hold, any previously proposed spending must still be approved by the accounts manager before proceeding and that all service levels must be maintained.
Further to this the MD said that I must act with discretion and not go into too much detail with any employees about the cause of the problem as he did not want to spread despondency or feed rumour mongers. It was essential that this be kept within the company and did not give rise to speculation amongst our customers or suppliers. He stressed that it was a temporary situation while other plans were being drawn out and that people should not need to worry unnecessarily. The MD said he was confident in my ability to handle this issue and knew he could count on me to 'make the best of a bad situation'. The meeting was ended on that note.
The situation was difficult and it took a few moments to analyse what had been said in the meeting and prepare to plan how to approach the inevitable problems that would arise.
If these demands from the MD had been sent in the form of a letter or e-mail it may well have been considered almost draconian, again totally out of character with the MD's normal behaviour. However, by having a face-to-face meeting it was possible to pick up on several nuances of body language that indicated some important elements of the conversation. A shrug of the shoulders here indicated the MD was himself pushed into a corner, with few options available. A sigh there showed a shared frustration at the situation. The most telling indicator was the eye-to-eye contact which was for the most part held firmly but on occasions a glance downwards indicated the discomfort felt when giving this news. Of course this is subjective and an interpretation on my part as to the actual feelings of the MD. However, I would defend my observations by saying I have known the MD for over sixteen years in a professional relationship and had built up a reasonable friendship in that period. This gives me an insight into the man's character and behaviour and the ability to judge his appearance with some amount of accuracy.
The importance of a face-to-face meeting (and that being one-to-one) rather than an impersonal written declaration is in its ability to inspire loyalty and a positive response despite personal misgivings on the actual strategy. "An effective ongoing practice, the face-to-face meeting plays a crucial role during times of uncertainty and change" (Guirdham).
Although the MD had acted out of character in giving a formal instruction, without his normal tendency to ask for opinions and criticism, he had still followed several basic rules on employee communication. These were explained by Maureen Guirdham in her seminal work Interactive Behaviour at Work (2006), where she declared that employee communication should:
Communicate not only what is happening, but why and how it is happening
Be timely - telling people what is known as soon as it is known, rather than waiting until every detail is resolved
Be continuous, especially during periods of change or crisis
Link the 'big picture' with the 'little picture'
Avoid trying to dictate the way people should feel about the news
By inference the same basic rules for employee communication should also apply when informing employees of the situation. However there are some difficulties in taking this approach and decisions had to be made on how, when and to whom to inform and to what degree of explanation would be required.
5.0 Alternative Options for Resolving Problem
In this instance there was no opportunity to change the situation, the decision had been made at the highest level and was to be acted upon regardless. The options available were in the main concerned with communicating the situation to employees and maintaining a good working relationship between the IT department and other groups within the company while reducing the risk of rumour mongering and adverse effects on morale.
There were several options available to handle this situation:
Inform all employees that cost cutting exercises were being implemented and any IT issue requiring spending will be dealt with on a priority basis but unlikely to be approved unless it directly affected an employee's ability to work.
Pros: It would involve all employees in one action and reduce the need to continually inform individual employees of the situation.
Cons: It may cause an adverse effect companywide on morale, dissatisfaction, lack of motivation and reduced confidence in the management.
Inform each group (subgroup) leader of the situation and rely on them to control the situation within their group.
Note: There are several departments within the company (accounts, engineering, systems, administration etc.) which in themselves have sub groups.
Pros: Diffuses the situation through dealing with a group leader directly rather than each individual group member.
Cons: Distances the IT Manager from the group members and could result in a resentment factor, blaming the IT group for the problem and damaging future relations.
Identify and deal with current issues in the first instance and then each proceeding case as they arise.
Pros: Reduces the number of people who need to be aware of the situation at one time. Allows direct communication with those involved to ensure a correct and positive message is put across.
Cons: May involve repeating message to different groups. Reduces the time scale in which to process each request.
6.0 Choice of Options
Option 3was decided as the best plan of action. In a bid to avoid unnecessary speculation and reduce rumour mongering the decision was made to identify and deal with current issues in the first instance and then each proceeding case as they arise.
7.0 Implementation of Options
There were several areas where the lack of spending could impact on and where decisions had to be made on communicating the problem to other employees:
Existing projects were now put on hold - this required informing the project leader or group members that work was to stop for an indefinite period.
This involved meeting with all the individuals involved and explaining carefully that a temporary suspension of the project was in place and that priority was being given to operational work rather than development work. The employees involved in these projects are generally skilled technicians who work with certain autonomy and are likely to not only take pride in their work but identify with the work in a professional sense. There was inevitable annoyance at the news that projects were being stopped and while for some it was an inconvenience others were now in a position where they had to reschedule work for themselves and others. The approach taken was to show agreement and sympathy with their situation, identify with them and explain that I was in the same position as them while also explaining that it was a temporary measure while external situations were in a state of flux (regarding the economic downturn).
Employees who have been expecting replacement equipment, such as laptops, have to be told they will not now be issued with new equipment for the time being.
Here a more direct approach was taken as, unless it was a case of equipment failure, most people could carry on without the need for replacement equipment. There was a certain amount of ego massaging here as the people most likely to complain were those who tended to like new equipment because it was new rather than for any actual operational reasons. This should not be underestimated as it can bring resentment and feelings of being hard done by, often resulting in a fall in performance or worse. If someone has been told they were getting a new laptop, for example, and they told all their work colleagues and then did not get one this could bring about a loss of face and a diminished sense of self-esteem.
Planned software upgrades have been cancelled. This affected those employees expecting to have software enhancements or new software in connection with their work.
This was difficult to manage as much of the software updates were concerned with operational tasks. These users were well informed in what the updates/upgrades were and would most likely bring a strong case for their purchase. True to form most complained and insisted on the importance their particular requests using logical arguments to put their case. I have found that in these situations, where you are dealing with confident and skilled people that a certain polite assertiveness will win the day. It is often necessary to reinforce, in a gentle way, that you are here in your capacity as a manager and to be decisive while still showing respect for the employee concerned. This group took the longest amount of time, per person, to deal with.
Restricting services have the potential to damage relations between the IT department and the other groups within the company.
It was important to maintain a state of service to acceptable levels. Fortunately most issues are software or people based, which only require time and no further expenses. Where the odd occasion occurred where hardware was required this was in all cases considered essential to day to day working and was approved without any delay. As a precautionary measure I tended to show a slightly higher profile during this period to enforce the presence of IT support and maintain relations.
8.0 Time Scale for Implementation
This was an immediate problem that required action from the very start. The actual duration of the problem lasted over four months. After this time spending restraints were eased but did not return to the level that had been previously enjoyed. A backlog of equipment requests were dealt with on an item by item bases depending on the priority of the request.
9.0 Conclusion
The situation required a several key elements in order to succeed, or at least not damage the reputation of the IT department or the company, and to avoid unnecessary conflict with employees.
Acceptance of the need to implement the spending cuts.
Minimise opposition to the cuts, carrying out the necessary actions in a professional manner despite personal criticism of the strategy.
A quick decision was required on how to deal with the problems.
Effective communication to groups and individuals involved throughout.
A positive attitude to reduce damage to the company's reputation and prevent lowering of morale and loss of key personnel.
The aim of these meetings was conflict avoidance, not in the sense of ignoring any conflict but in preventing the situation becoming confrontational in the first place. By treating employees with respect and maintaining a polite attitude it was possible to work in an atmosphere of cooperation rather than confrontation.
The difficulty was that there was no room for manoeuvring or compromise of the basic fact that cost cuts were going to be implemented, regardless. So while discussions were held in a polite and reasonable fashion it was always going to be a case of no real gain for the employees - only an agreement to accept the situation or not. Fortunately the strategy of reasoned communication, talking with the employees and explaining the situation to create a better understanding of the problem, appears to have worked for the most part.
It was later established that the reason for implementing such a drastic action was mostly fuelled by impending negotiations with the company's bank manager to raise a substantial lone. It was imperative to show the bank that the company was making cost savings and running efficiently.
I am still under the opinion that a less drastic option and one that would have limited the likelihood of conflict or loss of confidence would have been preferable. I also believe that as a manager I should have maintained some autonomy and been able to purchase items up to a certain value, rather than having to go to the accounts manager with every little item to be purchased.
APPENDIX 1
Number of words 3,872
References
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Goleman, D. (2000) Leadership that gets results, Harvard Business Review, March/April, pp. 78-90.
Guirdham, M. 2002 Interactive Behaviour at Work. 3rd Edition. Prentice Hall: London.
Hambleton, R. Gumpert, R. (1982) The Validity of Hersey and Blanchard's Theory of Leader Effectiveness. Group & Organization Management, Vol. 7, No. 2, 225-242 (1982). http://gom.sagepub.com/cgi/content/abstract/7/2/225. Accessed June 2010.
Trompenaars, F. 1993 Riding the Waves of Culture: Understanding Cultural Diversity in Business. Nicholas Brealey: London
