RELATIVISTIC ORGANIZATIONAL DESIGN by Leon J.

Neihouse

Submitted to

Dr. Donald D. White Chairman Department of Management College of Business Administration University of Arkansas at Fayetteville

In Partial Fulfillment of the Requirements of

ORGANIZATIONAL THEORY

April 26, 1983

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Since a maximum of ten components are used to describe each of the nine possible parameters, an employees total performance would result from a theoretical upper limit of 90 components parts. But in actual practice a given position would have only a few components of overriding importance for that position. A computer would compile all input data, determine averages, and graphically display an individuals own position with respect to the average for the total and for each component part thereof. In this way an employee could easily see his or her relative strengths and weaknesses. Because of this feature, this approach is called Relativistic Organizational Design (ROD). PEPS accumulations will be used for bonuses, special awards, and retirement benefits. For advancement and transfer considerations a computer will translate PEPS into advancement points (APOS), keep a running total for each employee, and automatically fill and all vacancies with the applicant having the greatest accumulation of APOS. For ascending organizational levels the same PEPS would result in higher APOS. For example, a lower unit janitor could receive higher annual PEPS than would a higher unit president. The latters annual APOS total would be higher, however, because of the more important organizational position. In addition to PEPS, helper points (HEPS) will be awarded to those who are able to help poor performers improve their performance and corporation points (COPS) will be given to those who complete assignments necessary for organizational success but deemed to be particularly rigorous or odious. Either PEPS, HEPS, or COPS could be perceived as being of overriding importance, depending upon the internal and external conditions existing at a given point in time. One potential problem is that seniority alone could eventually qualify people for higher levels for which they might have no particular aptitude. So all advancement points will decay at some rate determined at the time the points were being earned. In this way performance at some earlier time, say ten or twenty years ago, would no longer be effective in present advancement/transfer possibilities.

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objectives such as employee welfare and social responsibility, although absent through the sixties, are now emerging as major corporate goals. Flamholtz (3) emphasized the design imperative for a control system to influence the behavior of people as individuals, in small groups, and as members of the organization. In his view a control system must coordinate activities, influence the decisions and actions of members, and provide feedback on operations. Several other articles were supportive of a feedback orientation. Morrow (4) found that information feedback was positively correlated to goal attainment; Ivancevich and McMahon (5) found that striving for goals, when coupled with self-generated feedback, tended to maximize performance, satisfaction, and organizational commitment; and Murray (6) found that when employees receive precise feedback higher performance, rapidity of learning, and employee satisfaction follow. Finally, in a survey paper on strategic information flow Bogart (7) hypothesized that feedforward, feedback, and feedwithin are all necessary for an organization to function effectively. In the relativistic design under consideration all performance information would be kept current on a periodic basis. Each employee would generate individual feedback by accessing a computer to determine his or her present position with respect to the average. Group and unit performance would be posted in some conspicuous location. This would permit individuals, groups, and units to make on-line corrections so as to achieve their goals of performance with respect to peers. Feedwithin would be effected by the top individuals, groups, and units sharing their methods and procedures with all others. Feedforward would be accomplished by evaluating the enacted environment and setting organizational goals and performance parameters. These goals, and the manner in which the parameters would lead to their achievement, would be disseminated throughout all organizational levels. Dossett and Greenberg (8) observed that supervisors were less likely to exhibit evaluative biases if employees set their own goals rather than having supervisors involved in the goal setting process. Because of the intrinsic employee goal setting feature and because of computer evaluations, these possible biases would not be found in a relativistic system. Nalbandian (9) brought forth the salient point that any managerial operated appraisal system, no matter how objective, can be damaging to employee self-esteem and sense of competence. In that the relativistic approach removes superordinate evaluation it might be easier for employees to accept low rankings when an impersonal computer simply quantifies their action with respect to peers doing the identical tasks.

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Bhagat (10) stressed that well performing employees are also well satisfied. But when organizational pressure or time limits were involved he found that satisfactory performance was not also indicative of job satisfaction. So, by setting low control points for acceptable performance and by giving employees freedom of self determination to leave time-oriented positions, these satisfaction moderating constraints should be removed from the relativistic design. Segel (11) highlighted the relative ease with which advancement decisions can be made when standard methods are used to evaluate many doing the same work. The relativistic design, recall, requires that the applicant having the greatest accumulation of APOS be automatically assigned to vacant positions. Due to the impossibility of making exact and precise measurements a band will be defined within which all applicants will be considered to be tied in APOS total. Ties would be broken through peer-superordinate evaluation procedures similar to those reported by Segel with the additional requirement that subordinates would also evaluate the candidates for acceptability in the new position. This, then, would resemble an election process with two vital differences. Only objective, quantified performance would make one eligible and different weights would be assigned to superordinate, peer, subordinate votes. Brown (12) reported a trend towards less and less supervision of employees and concluded that freedom from close and burdensome oversight by organizational supervisors is a concept whose time has come. If this is true, it could mean that using a computer as a supervisor will meet with employee acceptance. Rabinowitz, et al (13) believe employees are naturally motivated and constitute a reservoir of commitment, initiative, and good will waiting to be tapped. According to them it only takes appropriate personnel policies, rewards, and communications to unleash this natural resource of ingenuity and enthusiasm. The ROD theory is intended to perform the actions noted above and, hopefully, reap the reported rewards. Relativistic organizational design, then, would seem to be a theoretical approach that incorporates features suggested by the above thirteen articles. The aspect of internal WIN-WIN competition is an additional characteristic, not discussed in these articles, that might prove to be advantageous. The high performers (winners) not only share their methods with all others but also try to help the poor performers (losers) thus making everyone potential winners. If this theory is ever to be given a realistic test a new organization must be started with relativistic techniques used from its inception. In that it is fragmented and has low barriers to

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entry, a franchise business in the arts and crafts market is one possible way to perform this task. A logical name for such a business is Arts & Crafts Enterprises (ACE). Large retail stores would offer arts and crafts supplies and hand-crafted items. Small retail stores would carry the best-selling hand-crafted items from the large stores and would offer ordering and pick-up services for personalized and catalogue items. Display stands in other retail outlets, such as drug stores, would carry inexpensive and fast-moving products of an original design. Schools would teach arts and crafts skills such as painting, pottery, stained glass, decoupage, candle making, macram, etc. A distribution center would provide production, purchasing, inventory control, and warehouse services for all these functions. For a standard management process to be used, a standard structure must be defined. When confronted with an organizational problem of a different type, a father once told his now famous son-in-law that he should have rulers of thousands, and rulers of hundreds, rulers of fifties, and rulers of tens (Exodus 18:21). So, by applying these principles to this situation, a bi-level Moses method can be incorporated into the design of ACE. Using this approach the globe will be divided into one thousand regions with each region further subdivided into ten distribution centers, twenty large retail outlet/school combinations, one hundred small retail stores, and one thousand display stands. The one problem remaining is to determine the level at which franchise independence should occur. Berkhout (14) reported that, for a group to achieve high morale, it must be limited to 40 or 50 individuals. To ensure they remain small enough to avail themselves of this capability, all system units will be designed to have an upper limit of 40 relativistic positions. This, then, would require that for ACE regions, twenty independent franchisees would be incorporated, each of whom would own one large retail store/school combination, five small retail stores, and fifty display stands. This size should permit a large amount of growth before reaching the 40 employee limit. The franchise president would be responsible for overall coordination that would include, but not be limited to, determining the salaries and bonuses of employees, testing new product ideas, setting the selling price for all non-consignment items, choosing the locations for the stores and stands, selecting the product mix from among approved product lines, advertising, hiring and firing employees in non-relativistic positions, and deciding when, during the growth of the business, predetermined relativistic positions would be filled. Once this latter decision was made the president would not have the power to fill it nor to fire or transfer the occupant after it was filled. These decisions would be the prerogative of the computer-based control system.

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ACE operations. Finally, to demonstrate its allegiance to the concept of social responsibility ACE will designate special products whose purchase will result in a predetermined percentage being donated to one or more nonprofit organizations. So the four environment parameters should gauge the relative goodness of fit to the common environment shared by all franchisee businesses. When efficiency, employee satisfaction, and environment all combine to give a total number of performance points there may now be a different winner in the race between President Fast and President Slow. For President Fasts low expenses and high ROE totals might have been achieved with low employee salaries and bonuses. Furthermore, poor personalized product sales could imply inattention to customers. If, therefore, President Fast is operating only from an increase sales and decrease expenses orientation while President Slow is more concerned with employee welfare and customer needs then, when all three factors of total performance are inputted into the determination, President Slow may soon catch and then pass President Fast. The theory needs more development work. All positions within the total system will not fit into the neat and compact form discussed in this paper. Temporary positions must be defined in which no performance points would be awarded, but the employee advancement points would not decay for the period of time in which the position was occupied. Other non-relativistic positions could use MBO techniques with COPS being awarded upon satisfactory completion of agreed upon objectives. Within these constraints Relativistic Organizational Design is intended to provide a self-regulating systematic method for the large scale organization of small independent units. REFERENCES 1. William H. Starbuck and Paul C. Nystrom, Why the World Needs Organisational Design. Journal of General Management, Vol. 6 No. 3 Spring 1981, pp. 3-17. 2. Y.K. Shetty, New Look at Corporate Goals. California Management Review, Winter/1979/Vol. XXII/No. 2, pp. 71-78. 3. Eric Flamholtz, Organizational Control Systems as a Managerial Tool. California Management Review, Winter/1979/Vol. XXII/No. 2, pp. 50-58. 4. Paula C. Morrow, Explorations in Macro-Communication Behavior: The Effects of Organizational Feedback on Organizational Effectiveness. Journal of Management Studies, 19, 4, 1982, pp 441-445.

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5. John M. Ivancevich and J. Timothy McMahon, The Effects of Goal Setting, External Feedback, and Self-Generated Feedback on Outcome Variables: A Field Experiment. Academy of Management Journal, Vol. 25, No. 2, pp 359-372. 6. R. Stuart Murray, Managerial Perceptions of Two Appraisal Systems. California Management Review, Spring/1981/Vol. XXIII/No. 3 pp. 92-96. 7. Dodd H. Bogart, Feedback, Feedforward, and Feedwithin: Strategic Information in Systems. Behavioral Science, Vol. 25, 1980, pp. 237-248. 8. Dennis L. Dossett and Carl I. Greenberg, Goal Setting and Performance Evaluation: An Attributional Analysis. Academy of Management Journal, 1981, Vol. 24, No. 4, pp. 767-779. 9. John Nalbandian, Performance Appraisal: If Only People Were Not Involved. Public Administration Review, May/June 1981, pp. 392-396. 10. Rabi S. Bhagat, Conditions Under Which Stronger Job Performance Job Satisfaction Relationships May Be Observed: A Closer Look at Two Situational Contingencies. Academy of Management Journal, 1982, Vol. 25, No. 4, pp. 772-789. 11. Laurence Siegal, Paired Comparison Evaluations of Managerial Effectiveness by Peers and Supervisors. Personnel Psychology, 1982, No. 35, pp. 843-851. 12. David S. Brown, The Fifth Freedom: Freedom From Supervision. Journal of Systems Management, January, 1982, pp. 6-11. 13. William Rabinowitz, C. Glenn Valentine, Kenneth Falkenbach, Paul Weener, and Jeffrey Travers, Worker Motivation: Unsolved Problem or Untapped Resource? California Management Review, Vol. XXV, No. 2, January 1983, 45-49. 14. Jan Berkhout, The Causes and Consequences of High Morale. Personnel Journal, March 1982, pp. 194-197. 15. Robert E. Quinn and Kim Cameron, Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence. Management Science, Vol. 29, No. 1, January 1983, pp. 33-50.