Squaring the circle
The paradox of the conflict between the short and the long term is not new. However, it is thrown into sharp focus by the new competitive environment. This environment has emphasized the constant presence of the two needs. First, the need to build and retain a resource of talented people. Second, the need to be flexible and minimize costs. Each leads to a distinct attitude towards people. People are a resource to be nurtured, or people are a cost to be incurred as flexibly as possible.
The two needs and attitudes are related to two different types of psychological contract that the organization might have with people. Rousseau (1990) uses the terminology of 'relational' and 'transactional' to describe these contracts. The former is concerned with the ongoing relationship between the organization and the person and seems suited to answering the need for people as a resource. The transactional contract refers to specific exchanges of money for the provision of skill and seems appropriate if people are a cost.
Like the two needs, the attitudes and contracts have existed side by side for at least this century. The period of scientific management saw an ascendancy of people being treated as a cost with transactional contracts. They were labour in industry and cannon fodder in war. Then the human relations period that took hold of management thinking after World War II gave greater priority to people as a resource with relational contracts. They were to be treated to the more sensitive approach of the manager who sees people as intrinsically motivated, and needing the right conditions for them to contribute to organizational objectives. The manager who sees people in this way was labelled as having a Theory Y approach by McGregor (1960), in contrast to the Theory X approach that sees people as a cost needing command and control and galvanized into action by money.
The scientific manager might have acknowledged the resource people provide and the Theory Y manager might have acknowledged the cost they incur. However, it seems fair to say that the attitude of seeing people as a cost dominated the former manager's view, while seeing people as a resource dominated the latter's. The nature of people's motivation