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TOPIC 6
MANAGEMENT OF
RELATIONSHIPS
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Lecture outline:
Concepts of power, bureaucracy,
authority, responsibility, leadership and
delegation.
Organisational culture
Management of conflict
Issues of business ethics and corporate
governance
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Concept of Power
Power is a complex and dynamic concept and
difficult to define easily.
At a broad level, power can be interpreted in
terms of control or influence over the behaviour of
other people with or without their consent.
Power can also be interpreted in terms of the
extent of the influence which can actually be
exercised over other people.
The most important aspect of power is probably
dependency, Example:
a person can have power over you only if he or
she controls something you desire

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Concept of Power
Power is an inherent feature of work
organisations and is often the underlying reality
behind the decision-making process.
It is central to the framework of order and
system of command through the operation of
bureaucratic structures and the implementation
of rules, policies and procedures.
Lack of power and influence, and office politics,
are among the main sources of managerial
stress within organisation.
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Concept of Power
Management control is the predominant
means by which activities of staff are
guided towards the achievement of
organisational goals.
The exercise of power is that which comes
from a position of formal authority within the
management structure of the organisation
and which legitimises control over
subordinate staff.
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Authority
Is the right to take action or make decisions that
the manager would otherwise have done.
Is the power to hold people accountable for their
actions and to influence directly what they do and
how they do it.
Authority legitimises the exercise of power within
the structure and rules of the organisation.
Enables the subordinate to issue valid instructions
for others to follow.
E.g: Shareholders have ultimate authority over the
use of a companys resources. Legally, they own
the company and exercise control through their
representatives, board of directors.
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Responsibility
An obligation by the subordinate to perform
certain duties or make certain decisions and
having to accept possible reprimand from
the manager for unsatisfactory
performance.
Responsibility cannot be delegated.
Delegating authority can increase the
managers responsibility since there is
additional responsibility for the
subordinates task.
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Delegation
Is the process of entrusting authority and
responsibility to others throughout the
various levels of the organisations.
Delegation can be upwards or laterally or
downwards.
Downsizing and de-layering limit the
opportunities for delegation.

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Bureaucracy
Max Weber designed a hierarchy so that it
effectively allocates decision-making
authority and control over resources
Bureaucracy: a form of organizational
structure in which people can be held
accountable for their actions because they
are required to act in accordance with rules
and standard operating procedures
Founded on a formal, clearly defined and
hierarchical structure.
Red tape and rigidity
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Principle one: a bureaucracy is founded on
the concept of rational-legal authority
Rational-legal authority: the authority a
person possesses because of his or her
position in an organization
Hierarchy should be based on the needs of the
task, not on personal needs
Peoples attitudes and beliefs play no part in
how the bureaucracy operates
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(cont.)
Principle two: Organizational roles are
held on the basis of technical
competence, not because of social status,
kinship, or heredity
Principles one and two establish the
organizational role as the basic
component of organization structure
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Principle three: A roles task responsibility
and decision-making authority and its
relationship to other roles in the organization
should be clearly specified
Role conflict: when two or more people have
different views of what another person should
do, and as a result, make conflicting demands on
that person
Role ambiguity: the uncertainty that occurs for a
person whose tasks or authority are not clearly
defined
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Principle four: the organization of roles in
a bureaucracy is such that each lower
office in the hierarchy is under the control
and supervision of a higher office
Organizations should be arranged
hierarchically so that people can recognize
the chain of command
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Principle five: rules, standard operating
procedures, and norms should be used to
control the behavior and the relationships
among roles in an organization
Rules and SOPs are written instructions that
specify a series of actions intended to achieve
a given end
Norms are unwritten
Rules, SOPs, and norms clarify peoples
expectations and prevent misunderstanding
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Principle six: administrative acts,
decisions, and rules should be formulated
and put in writing
Bureaucratic structure provides an organization
with memory
Organizational history cannot be altered
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Advantages of Bureaucracy
It lays out the ground rules for designing an
organizational hierarchy that efficiently controls
interactions between organizational members
Each persons role in the organization is clearly
spelled out and they can be held accountable
Written rules regarding the reward and
punishment of employees reduce the costs of
enforcement and evaluating employee
performance
It separates the position from the person
It provides people with the opportunity to develop
their skills and pass them on their successors
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The Problems of Bureaucracy
Managers fail to properly control the
development of the organizational hierarchy
Organizational members come to rely too
much on rules and standard operating
procedures (SOPs) to make decisions
Such overreliance makes them
unresponsive to the needs of customers and
other stakeholders
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Leadership
It is difficult to generalise about the meaning of
leadership.
But, we can say leadership is a relationship through which
one person influences the behaviour or actions of other
people.
The changing nature of work organisations i.e. flatter
structure, recognition of the efficient use of human
resources have combined to place growing importance on
leadership.
The nature of management is moving away from the
emphasis on getting results by the close control of the
workforce and towards an environment of coaching,
support and empowerment.
Good leadership involves the effective process of
delegation and empowerment.

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Leadership
Leadership style:
The authoritarian (or autocratic) style
The democratic style
A laissez-faire (genuine) style
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Organisation Culture
Organisational culture is a general concept that is
difficult to define or explain precisely.
Definition:
How things are done around here.
The collection of traditions, values, policies, beliefs and
attitudes that constitute a pervasive context for
everything we do and think in an organisation.
Organisational culture has three elements
shared value; a set norms of behaviour; and
symbols and symbolic activities.
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Cartwright views culture as a system of
management authority.
When accepted by employees, cultural values
increase the power and authority of management
in three ways. Employees
identify themselves with their organisation and accept its
rules when it is the right thing to do;
internalise the organisations values when they believe
they are right; and
are motivated to achieve the organisations objectives.

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Schein suggests a view of organisational
culture based on distinguishing three levels
of culture:
Level 1 Artefacts
It is the most visible level the constructed physical
and social environment.
Includes physical space and layout, the
technological output, writtens and spoken language
and the overt behaviour of group members.

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Level 2 Expoused values
Cultural learning reflects someones original values.
Solutions about how to deal with a new task, issue
or problem are based on convictions of reality.
If the solution works, the value can transform into
belief. Values and beliefs become part of the
conceptual process by which group members justify
actions and behaviour.
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Level 3 Basic underlying assumptions
When a solution to a problem works repeatedly it comes to be
taken for granted.
Basic assumptions are unconsciously held learned responses.
They are implicit assumptions that actually guide behaviour
and determine how group members perceive, think and feel
about things.
Schein suggests that the basic assumptions are
treated as the essence what culture really is
and values and behaviours are treated as
observed manifestations of culture essence.
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Figure: Where an Organizations
Culture Comes From
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The cultural web of an organisation
Source: Johnson, G., Scholes, K. and Whittington, R. Exploring Corporate Strategy, seventh edition, Financial Times Prentice Hall (2005), p. 202. Reproduced with permission from
Pearson Education Ltd.
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The importance of culture
Culture and organisation control:
Culture as the largest organisational control system that
dictates how crazy or idiosyncratic people can be.
Companies have both overt and covert culture that
influences both business and organisation behaviour.
The covert set can be quite dysfunctional and costly. Culture the
assumptions, beliefs, values and norms that drive the way we do
things here is the largest and most controlling of the systems
because it affects not only overt organisational behaviour but also
the shadow-side behaviour.... Culture lays down norms for the
social system. In one institution you had to be an engineer to rise
to the top. There was no published rule, of course, it was just the
way things here. In one bank you could never be made an officer if
you were polyester clothes. Culture tell us what kind of politics are
allowed and just how members of an organisation are allowed to
play the political game.
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The importance of culture
Culture influences the behaviour of all
individuals and groups within the
organisation:
Culture impacts most aspects of organisational
life, such as how decisions are made, who
makes them, how rewards are distributed, who
is promoted, how people are treated, how the
organisations responds to its environment,
and so on.
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The importance of culture
Culture and organisational performance:
Culture is clearly an important ingredient of effective
organisational performance.
In order to aid long-term performance, there are
three main criteria needed to develop a suitable
culture:
it must be strategically relevant;
it needs to be strong in order that people care about
what is important; and
the culture must have an intrinsic ability to adapt to
changing circumstances.

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The importance of culture
In order that leaders can develop, manage and
change their culture for better performance, they
can use three managerial tools:
Recruitment and selection hire people who fit the
companys culture even if this may involve overlooking
some technical skills for a better cultural fit.
Social tools and training develop practices that
enable new people to understand the values, abilities,
expected behaviour and social knowledge in order to
participate fully as an employee and to create strong
bonds among members.
Reward system culture is an organisations informal
reward system but it needs to be intricately connected
to formal rewards. E.g. include staff meetings where
the seating arrangement is in accordance with level of
sales.
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National culture
Culture helps to account for variations among
organisations and managers, both nationally and
internationally.
National differences and cultural reasons raise
concerns about the transferability of organisational
structures, systems and processes and question
the logic of universal best practice.
Hofstede categorise four main dimensions of
national culture: power distance; individualism vs
collectivism; uncertainty avoidance; and
masculinity vs femininity.
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National culture and MCS
Power distance (PD)
High PD cultures are characterised by a high regard for
formally constituted hierarchies and an acceptance that
authority and responsibility for leadership and decision-
making are vested at the upper-levels.
Individualism (IDV)
In highly IDV societies, people are motivated by
individual responsibility and autonomy
In low IDV cultures, there is a collectivist rather than
self-orientation.
Individuals in low PD, high IDV cultures will seek
and respond more favourably to opportunities for
participation in performance-setting decisions than
individuals in high PD, low IDV,
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National culture and MCS
Uncertainty avoidance (UA)
In high UA cultures place greater emphasis on
control through written rules, standardised operating
procedures and formalised planning.
Masculinity (MS)
MS is relevant to the set of performance indicators
used in evaluation (long term vs short term).
In high MS societies greater focus on meeting short
term performance target, and less focus on the
development and well-being of organisational
members.
In low MS preferred multiple performance measures
and less financially oriented indicators.
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What is Organizational Conflict?
The clash that occurs when the goal-
directed behavior of one group blocks or
thwarts the goals of another
Although conflict is often perceived as
something negative, research suggests
that some conflict can actually improve
organizational effectiveness
Can overcome inertia and lead to learning
and change
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Figure: Cooperation and Competition
Among Organizational Stakeholders
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What is Organizational Conflict?
(cont.)
Beyond a certain point, conflict becomes a
cause for organizational decline
Conflict leads to inability to reach consensus
and indecision
Too much time spent on bargaining rather than
acting swiftly to resolve problems
On balance, organizations should be open to
conflict and recognize its value
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Causes of Conflict
Interdependence
Difference in goals and priorities
Bureaucratic factors
Incompatible performance criteria
Competition for scarce resources

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Figure : Relationship Between Conflict
and Organizational Effectiveness
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Managing Conflict:
Resolution Strategies
Organizational conflict can escalate
rapidly and sour an organizations culture
Managing conflict is an important priority
Organizations must balance the need to
have some good conflict without letting it
escalate into bad conflict
Choice of conflict-resolution method
depends on the source of the problem
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Managing Conflict:
Acting at the Level of Structure
Because task interdependence and
differences in goals produce conflict, alter
the level of differentiation and integration to
change relationships
Increase the number of integrating roles
Assign top managers to solve conflict
Rethink the hierarchy/reporting chain to
make sure there is no loss of control

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Managing Conflict: Acting at
the Level of Individuals
Establish a procedural system that allows
parties to air their grievances
Important for conflict between management and
unions
Use a third-party negotiator
Exchange/rotate/terminate individuals
CEOs can also use their power to resolve
conflicts and motivate units to cooperate
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Organisational Ethics
The moral values, beliefs, and rules that
establish the appropriate way for
organizational stakeholders to deal with one
another and with the environment
Derived from the personality and beliefs of the
founder and top management

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Figure : Factors Influencing the
Development of Organizational Ethics
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Corporate Governance (CG)
A CG system can be thought of as the
processes and structures used to direct a
corporation's business.
A key objective of a CG system should be
the enhancement of shareholder value.
Once implemented, an effective CG system
can help to ensure an appropriate division
of power among shareholders, the board of
directors, and management.
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Corporate Governance (CG)
Professional bodies i.e MIA, CIMA develop new
CG guideline in order to restore investor
confidence.
E.g CMA Canada introduce "A Balanced
Scorecard for a Board of Directors,"to the
practice of corporate governance.
The BSC uses a mix of financial and non-financial
performance indicators that address a company's
internal processes, shareholder-value creation,
quality, organizational learning and community
relations to strengthen internal and external
accountability.
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Conclusion
Managing relationship in organisation is important
in order to obtain strategic congruence.
A strategy must match the structure, systems,
people and culture of the organisation.
In addition, each organisational component needs
to fit with the others.
If an inconsistency exists, it is likely that
implementation of the strategy will be affected.
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End of topic 6