Magazine article Financial Management (UK)

Management Accounting-Performance Evaluation: Ian Herbert Analyses the Pros and Cons of Employee Empowerment and Discusses the Role of the Management Accounting Function

Magazine article Financial Management (UK)

Management Accounting-Performance Evaluation: Ian Herbert Analyses the Pros and Cons of Employee Empowerment and Discusses the Role of the Management Accounting Function

Article excerpt

The idea of allowing workers to take more responsibility for operational decisions seems to represent the very essence of the modern, dynamic organisation. Tom Peters, the author of bestselling business book In Search of Excellence, put it this way: "If you don't know where your people are today, that's probably a good sign. It means that they're working beyond functional walls."

If a company's management style moves away from top-down command and control to bottom-up empowerment, there are implications for organisational design, employee motivation, management control systems, operational risk and information reporting systems. But, while this "wonder" approach may be appropriate in some situations, at other times managers might still need to supervise and control workers more directly. Elements of these issues also appear in papers P2 and P5.

Giving workers the authority to do their jobs in the way that's most appropriate to their local circumstances has been one of the most significant developments in management thinking over the past 20 years. The basic idea is that those on the front line are best placed to understand changing customer/ production requirements. They should, therefore, have the discretion to react accordingly. Other terms to describe this empowered approach include "participation", "autonomy" and "entrepreneurship" (in the last case, people are encouraged to think and act as though the business were their own). It contrasts with the traditional command-and-control approach, whereby senior managers are assumed to know best and their main task is to decide what to do and tell their subordinates how to do it.

Both approaches have pros and cons depending on, for example, the complexity and variability of local conditions/customer requirements; the competence of the workforce; the ability of the company's information and control systems to retain control; the risks of things going wrong; and the overall strategic objectives.

Empowerment is primarily intended to make the organisation more responsive to changing consumer needs and/or foster employee-driven innovation. It is usually accompanied by a flattening of the managerial hierarchy so that the scalar chain, and hence the communication time between the bottom and the top of the organisation, is shortened. But sometimes such delayering is done simply to save cost--and empowerment can become abandonment.

Empowerment initiatives have been applied widely, from car factories to doctor's surgeries. In essence, they seek to promote flexibility of thought and action among employees. Often this is an ideal to be worked towards, rather than an absolute state. Most people enthuse about the notion. Giving power to those who face the problems at the sharp end of the business feels right intuitively. In my own research, a plant manager explained that "empowerment is like pulling 200 small levers rather than one big one. It's about the company trusting us."

But it can mean different things to different people--and there is scepticism. Another manager in the same company told me: 'I am empowered to solve any problem, as long as I don't spend any money doing it." In other words, senior managers can use empowerment as a convenient way of shifting responsibility without a commensurate increase in discretion over resources. Other studies have raised questions about this issue. According to Adrian Wilkinson ("Empowerment theory and practice", Personnel Review, Vol 27, No 1, 1998), most empowerment initiatives "are purposefully designed not to give workers a very significant role in decision-making but rather to enhance employee contribution to the organisation". He went on to suggest that the term "empowerment" could cover a range of styles (see panel).

Empowerment may involve flexibility in what workers do and how they do it, as long as the output criteria are met. But there may also be times when strong central control is required--for example, when the organisation has to produce cheaper goods than the competition or when a regulatory regime demands conformity to set procedures. …

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