I seem to have spent a lot of time on the road over the last couple of weeks – which accounts for the gap since I last posted anything here. However, they do say that travel broadens the mind… In this case, it offered the opportunity to have two contrasting conversations. One was with an old friend who I met at a conference. He was telling me about how his university had just ‘modernized’ its pay and performance structure for professors. Only those rated in the top 10 per cent each year would now get a consolidated increment while those in the bottom 10 per cent would be placed into what is euphemistically known as a ‘performance improvement plan’. This is not an unfamiliar model: some years ago one of my offspring had a temporary job in HR with a financial institution that consisted of fitting the annual performance reviews of middle managers to a normal curve. The top 25 per cent got a bonus and the bottom 25 per cent were fired. Mindful of this, I asked my friend about his personal strategy – he is a well-known scholar in a niche field, producing solid contributions that contribute to the accumulation of wisdom. Would this new, modern pay system incentivise him to more stellar achievements? He responded that it was obvious he had little chance of being rated in the top decile, according to the criteria being used. His main concern was to avoid being in the bottom decile, which he could probably accomplish while working rather less hard. Indeed, he could see ways in which he might get his life back and start enjoying some of the leisure activities that he had sacrificed in recent years. He thought, and this is entirely consistent with the research evidence on performance-related pay systems, that a considerable number of his peers were likely to feel the same way. Set this alongside a chance meeting with a production engineer for a major, international, German company. He talked to me about how his job involved travelling to various plants around the world, spreading the company’s ‘modern’ approach to organization. This was developed, ultimately, from the work of W Edwards Deming, as filtered through Japanese manufacturing companies, especially in the auto industry. It emphasised the collective nature of responsibility for organizational performance, the empowerment of front-line workers and relatively flat pay and managerial hierarchies. In some places, notably China and the US, this was a hard sell. Both countries were used to strongly hierarchical forms of organization where front-line workers were drawn from a reserve army of labour with limited skills and high disposability. Nevertheless, the German company was strongly committed to its model, which had generated a high reputation for the quality of its products, allowing the firm to sustain premium prices and profitability, despite higher labour costs and a strong currency. Customers were prepared to pay the firm’s prices because of the value they placed on its products.
Within a few days, then, I was looking at two competing versions of organizational modernization. The first was informed by the classic narrow rationality of the economist, while the second was informed by the wider interdisciplinary resources of organization studies, drawing on psychology, anthropology and sociology. There is some irony here, in that many universities used to be organized in ways that resembled the German engineering company more than the financial institution. The traditional academic department could be seen as a quality circle and universities had notably lean managements with relatively limited pay hierarchies, particularly where offices rotated. Front-line staff were highly empowered to pursue quality. However, the opportunities presented by this model were poorly understood or developed, partly because of the reluctance of universities to take up the organizational research that was being produced on their own campuses.
As a result, the pathologies of the system, mostly attributable to the slow recognition of various environmental challenges as a pressure for innovation, contributed to a view that these institutions were conservative, complacent and failing to reflect the needs of society. Rather than building on their existing potential, universities, particularly in the UK, have ‘modernized’ in ways that lack any real evidence base. In many ways, they are starting to look like the behemoths of the US auto industry of the 1980s, with highly-paid CEOs buried in their offices looking at numbers rather than at the actual production process and customer experience. This might leave us wondering who will come to play the role of the Japanese carmakers who trashed this model and left the giants struggling to dance. Are universities better organized according to the model of the financial institutions that my offspring had worked for, or the model of a globally successful manufacturing company, using industry-standard approaches. Which of these versions of the ‘modernized organization’ has proved more genuinely successful and sustainable?
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