Thesis: How Do Different Management Styles Affect an Organizations Overall Performance?

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¶ … management styles affect an organizations' overall performance?

Different Management Styles and How They Impact Organizational Performance - Literature Review

Today's managers strive to develop and implement the best strategic courses of action which foster economic growth. In their endeavors, being aware of it or not, managers make use of various managerial styles. While one style may have an impact upon operational efficiency, another style might foster a more pleasant working environment. The aim of this paper is to study the available literary works and identify how different management styles impact the organizations' overall performance levels.

Literary Review

The general literary consensus is that the managerial style of the leader impacts the performances of the organization run. Stephen Osborne (2002) is probably the one to offer the most simplistic and clear presentation of the fact. In making his argument, the author of Public Management looks at the output generated by organizations employing the traditional management style and the output of the institutions empowering a mode modern approach to management. The traditional style sees that the leader will make top-down decisions, based on favoritism, lack of consultation and a poor capacity to organize the workload. Within these organizations, the management is focused on structures, the knowledge of the systems employed, procedures, rules and legislation, with little to none emphasis on performance. In the case of the modern style of management on the other hand, the leader is performance-based, meaning that he is focused on training, participation of all staff members, flexibility of the schedules and the tasks, teamwork, problem solving and equity. This second management style fosters superior levels of performance as it is based on both technical skills, as well as "training in organizational and strategic management, negotiation, team work, decision making and leadership" (Osborne, 2002, p.163).

Peter Atrill and E.J. McLaney (2007) identify three types of managerial styles: the budget-constrained style, the profit-conscious style and the non-accounting style and analyze them in terms of employee performances. This approach is useful for the initially posed question as the higher the employee performances, the higher the overall organization performances. In this order of ideas, the authors of Management Accounting of Decision Makers state that the budget-constrained style focuses primarily on the company's ability to meet the budgets. The manager is only interested in achieving the corporate desiderates within the established financial limitations. This style has the disadvantage of reduced performances due to the financial restrictions imposed. It is also imputed that it does not consider other elements of performance, mainly employee performance, which could in the long run lead to superior levels of operational efficiency. The profit-conscious style is more flexible than the previous model and uses data outside the budget constraints to assess and foster organizational performances. Particularly, the profit-conscious management style focuses on the employees' ability to register long-term effectiveness, leading to sustainable future performances for the entire organization. Finally, the non-accounting style does not consider budget and profitability implications upon the overall corporate performance and successes are required and measured from other standpoints.

Another means of looking at the managerial styles and the performances of the organization is given through the lenses of the stakeholder management. Lawrence F. Wolper (2004) addressed this matter in his Health Care Administration and concluded that the various types of stakeholder management impact the organization mostly in terms of the corporate divisions which interact with the stakeholders, but the effects are reduced upon the other divisions which do not come into direct interactions with the various stakeholder categories. A most relevant example in this sense is given by the acquiring and usage of technologies. "Technical performance is dominated by specific skills and abilities related to the technology used by an organization. Although relationships exist in this area of the organization, performance is less reliant on these relationships and more reliant on the ability of organizational members to operate the machinery that make up the technical piece of the organization. Therefore, applying stakeholder management principles to the management of the organization's technology will have a minor effect to the organization's performance" (Wolper, 2004, p.158). The stakeholder management styles can however impact the company's competitive position or its relationship with the micro and macroenvironments, such as its employees, its market research capabilities or its interactions with the purveyors, customers and stockholders, all indicators of corporate performance.

Jeff Madura and Roland Fox (2007) identified the centralized and decentralized managerial systems as being the most relevant ones. In the case of a centralized managerial style, the organizational performance is positively affected as the leader is able to best centralize and reduce costs. On the other hand, the performance can be negatively affected as the central manager may prove unable to comprehend the full information from his subsidiaries and his decisions might be based on poor information and the outcome could be a negative one. The second style, that of a decentralized management, will negatively impact the performances of the overall organization as it will lead to increased costs. The subsidy managers will incline to focus on the benefits of the run entity, rather than the overall well-being of the corporation. However, they will stand increased chances of succeeding at subsidiary level. "To the extent that the subsidiary managers recognize the goal of maximizing the value of the overall [company] and are compensated in accordance with that goal, the decentralized management style can be more effective" (Madura and Fox, 2007, p.5)

The organizational effectiveness is yet another indicator of overall corporate performance and its analysis is relevant in the context of the posed question. Manfred Davidmann (2006) identified two types of managerial styles: the authoritarian style and the participative style. The authoritarian style is based on the assumption that people do not want to work and only do so as they are obliged. The decisions are made top-down and there is a general lack of employee motivation and participation. The participative managerial style sits at the opposite pole and argues that people like to work and they are driven by personal desires to overcome their limits and achieve professional formation. In this light of events then, the authoritarian management style will retrieve reduced levels of performance as the organizational employees will only complete the tasks they are given and achieve reduced levels of organizational effectiveness. The participative style on the other hand, will retrieve high levels of organizational effectiveness, generating higher levels of overall performance and better supporting the company reach its overall objectives. Davidmann also points out that the authoritarian style is most common within large size organization and the participative style is most common within small size entities. This specification is interesting as it reveals that the firm size has a direct impact upon the selected managerial style and also upon the company's overall performances.

A company's performances are directly linked to the on-the-job satisfaction manifested by its employees. In this line of thoughts, it becomes obvious that the manager must be able to stimulate the staff members in order for them to support the organization in reaching its performance goals. Susan Manch, Marcia Pennington Shannon and Joel Henning (2006) have identified four types of management styles: the pacesetter, the democratic, the benevolent dictator and the CEO. Each style has different impact upon corporate performance and this is achieved by their ability to motivate different types of staff members. The pacesetter works hard and rewards top performers; he is able to motivate the acquisitive employees who manifest a fear of failure. The democratic leader will choose the persons he works with based on personal desires; he will stimulate the junior employees and will encourage open discussions. He will motivate those staff members who feel the need to be praised and accepted. Third, the benevolent dictator will create structure, set high goals and delegate wide responsibilities to his subalterns. He rewards top performers and motivates those who seek achievement and approval. Finally, the CEO will also create structure, emphasize on teamwork and pay close attention to details. He will motivate those employees who seek approval and the acceptance within the team.

Michael Ison and Kerry Kempton (2007) also looked at company performance and management styles through the lenses of the staff members. However they only identified two types of management styles, their work is significant for the field as it is well documented and offers insights into areas other that those onto which other authors have not focused. In this order of ideas, Ison and Kempton reveal the controlling style of management and the coaching style of management. The controlling management style is rather autocratic and the leader makes all the decisions. The only task of the subalterns is to implement them. It is believed that the employees only work because they have to and they are not offered any incentives. The coaching management style is based on motivation and encouragement and this leader believes that all employees love their work and are focused on perfecting their skills and abilities.

The table below (adapted from the… [END OF PREVIEW]

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