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3 Theoretical Strategies that Can Help Real-World Organizations
November 9, 2023
The business world is of full of theories, some even dating back to the early 1900s, when German sociologist Max Weber laid the framework for modern organization theory. Weber’s idealized organizational structure clearly defined responsibilities for workers and controlled their behavior by policy, procedures, and rules.
Today’s professionals have dozens of theories about leadership, management, marketing, effectiveness, and other aspects of business at their disposal. Here is a quick look at three advanced theories that EMBA online students may encounter in day-to-day corporate operations.
1. Business Theory And Management By Objectives
Dr. Peter F. Drucker has been called “the inventor of modern management” for good reason.
Drucker’s Theory of Business maintains that three primary components – reality, business focus, and organizational competence – are linked and must work together for the operation to be successful. Per his theory, crises result not because people are doing the wrong tasks or executing tasks poorly, but because the business’ theory of business – the assumptions that the business was built on and shape the organization’s decision-making – no longer matches reality.
Per his theory, successful organizations understand that continued growth is the key to long-term viability. They study the marketplace, pay attention to shifts in consumer behavior, and adapt to changes.
Drucker also is synonymous with the Management by Objectives Theory (MBO), set out in his 1954 book, The Practice of Management. The three core principles include:
1. An organization’s objectives should be determined in concert with its employees.
2. The objectives should be achievable and measurable, as well as challenging and motivating for the workers.
3. Managers should provide daily feedback and coaching
Most contemporary managers find that MBO works best in entrepreneurial organizations with a competent, self-directed workforce that understands the customer, the business unit, and the overall objectives of the business. Studying administrative policy in an Executive MBA online program can also help determine which theory of management works best for you.
2. Motivation Theory
Based on research by economist Michael Jensen, a professor of business administration at Harvard University, the theory of motivation simply states that people work as hard as you pay them to work – meaning the more you motivate them through pay, the better they’ll produce your good or service.
Psychologist Frederick Herzberg added another dimension to the theory: satisfaction. What made people feel good about their jobs? His research, summed up as Herzberg's Motivation-Hygiene Theory (or Herzberg's Two Factor Theory), indicates that the following motivators are closely tied to job satisfaction:
1. Achievement
2. Recognition
3. Responsibility
4. Growth
5. Advancement
Herzberg also termed the following as “hygiene factors” that cause dissatisfaction:
1. Company policies
2. Supervision
3. Work conditions
4. Salary
5. Relationships with bosses and coworkers
Hygiene factors are extremely important to avoid worker dissatisfaction but do not provide satisfaction simply by themselves. Focusing solely on hygiene factors can lead to employee burnout, or at the very least, reaching a professional plateau within the business, Jensen said.
For motivation theory to truly succeed, businesses need to have a leader who can create space for innovation and application.
The right ideas can only be cultivated in the right culture, according to Jonathan Hogg, head of PA Consulting Group’s people and talent division. “The right ideas inevitably stem from the leaders of organizations,” he said. “They have to create the right conditions and the right focus.”
3. Theory of Disruptive Innovation
Created by Clayton Christensen, named the World’s Most Influential Business Management Thinker in 2011 and 2013, the Theory of Disruptive Innovation holds that smaller companies can break into markets and disrupt their competition to the point of overtaking them.
When Steve Jobs returned to Apple in 1997, he transitioned the company away from concentrating solely on profits. He put total focus on the customers, providing them with something they didn’t know they wanted: groundbreaking machines capable of extreme performance. Jobs disrupted the competition by appealing to a niche market. Once the niche market was hooked on Apple’s new machines and business ethics, other consumers began to pay attention.
Businesses looking to be disrupters in their industry should target segments of the market that more established companies ignore, typically because they are focusing on areas of higher profitability.
According to Harvard Business Review (HBR), mainstream consumers don’t notice disruption innovation until the quality of the disrupting company’s products reaches conventional standards. At this point, the disrupting company can overtake its mainstream or even high-end competitors.
If you want to be a successful disrupter, weigh cause and effect before you have all the data, noted Christensen. Waiting around for secondary resources’ data could result in missing an opportune time to attack the market. For example, no one had data to suggest that Netflix would dethrone brick-and-mortar rental stores such as Blockbuster because a streaming video service hadn’t been presented to the public before. Nevertheless, Netflix, which mailed DVDs when it launched in 1997, became the entertainment giant it is today because it understood how to leverage customers’ appreciation of convenience as well as technological advances.
Christensen also notes that:
1. Marginal thinking can often lead to incremental decisions that don’t add up to anything. Be bold.
2. Making projections before making decisions is fine, just be sure the ultimate decisions are based on plausible assumptions.
3. Creating a statement of purpose that has three parts – likeness, commitment, and metrics – will lead to fewer mistakes in your business practice.
a. Likeness: what a company will look like
b. Commitment and Metrics: the means to achieve the likeness
4. Once your business finds itself on the uptick, don’t hesitate to put money back into upgrading your systems, retooling business models, and responding to competitors.
Value Brought Forth
Learning different business management strategies benefits EMBA students by providing a diverse set of tools to draw from. For instance, a small business owner may leverage the Theory of Disruptive Innovation to provide a foothold in their market, allowing the business to grow rapidly. As the business and staff expand, he or she may utilize elements of motivation theory to encourage and motivate employees and employ the Management By Objective theory to improve organizational performance by having clearly defined objectives that are mutually agreed upon by employees and management. A wide array of strategy tools gives business leaders flexibility to respond to changes both inside and outside their organizations quickly.
About WSU’s Online EMBA Degree
With courses delivered from an executive's point of view, online Executive MBA students at Washington State University study the advanced practices and principles that guide today's most successful business leaders. The program also provides opportunities to expand your professional network. For more information, visit WSU’s online EMBA degree website.
Recommended Reading:
The Do’s and Don’ts of Manager/Employee Communication
Online MBA Degree – Benefits and Expectations
Staying on Top of Challenging Compliance Requirements
Sources:
Forbes: http://www.forbes.com/sites/aileron/2011/12/16/theory-of-business/#79c0fc91a9c9
Acacia HR Solutions: http://www.acaciahrsolutions.com/mbo-still-work/
HBR: https://hbr.org/1994/09/the-theory-of-the-business
Innovation Management: http://innovationmanagement.se/wp-content/uploads/pdf/Theory_of_Business.pdf
