Organisational Change and Job Security
Organisational Change and Job Security
Introduction
Organisational change frequently results in undesirable developments within a company including but not limited to apprehension and anxiety among employees and the management (Probst 2002), uncertainties (Rudisill & Edwards 2002), plant closures (Staufenbiel & König 2010), and job losses (Schumacher et al. 2015). Such was the case with Pharmaco, a leading British Pharmaceutical and chemical company that was forced to undertake a major organisational change programme in the 1990s owing to strong competitive pressures. A high level of uncertainty hung over the future of the company and as a result, the management was forced to either close or sell of a number of its plants and divisions, culminating in lost jobs by hundreds of its employees. After Pharmaco had been taken over by Drugco, another leading foreign-owned pharmaceutical multinational, redundancy was inevitable. This took atoll on employees’ job security. The essay seeks to explore employee motivation and job satisfaction during the period of uncertainty and change using Maslow’s and Herzberg’s theories of motivation. An attempt shall also be made to examine steps that Pharmaco could have taken to mitigate the impact of feelings of job insecurity on its workforce. Further, Pharmaco’s HRM strategy shall be explored to determine how well it supports the company’s business strategy. Finally, the importance of job security and employees commitment to performance shall be determined.
Case Summary
Pharmaco was initially a leading British pharmaceutical and chemical company but during the 1990s, the company encountered strong competitive pressures, and had to undergo a major organisational change. Part of this organisational change entailed closing some of the plants, while other plants and divisions were sold off. As a result, hundreds of jobs were lost. What remained of Pharmaco was later taken over by Drugco, another leading foreign-owned pharmaceutical multinational, in a hostile bid. A high level of uncertainty surrounded the chemicals and pharmaceutical operations of the newly acquired company. As Pharmaco prepared for what would be a hostile takeover, a consultancy firm that the company had employed advised that the workforce be reduced by 250 as part of the restructuring. This caused friction between the company management and the workers union. There was also growing concern among other employees about future job security. The takeover bid was informed by among others, the need to develop and manufacture new products as the patent for most of Pharmaco’s existing products had expired, and the need to cut down costs. However, employees complained about the way the management managed insecurity brought about by the takeover bid, uncertaintities and job loss. In particular, the management was taken to task over its inability to reassure the remaining employees about the future of their jobs. The management was also accused of failing to keep employees informed about the future of the company by not adopting meaningful employee involvement and communication processes. Workers union also had limited powers and as such, it could not effectively represent employees’ voice. The company was also facing internal competition as sites competed against each other for products and resources. There was increasing loss of trust between the management and employees as employees remonstrated being dissatisfied with their jobs due to poor motivation.
Discuss employee motivation and job satisfaction, during this period of uncertainty and
change at Pharmaco using: a. Maslow’s theory (15 marks) b. Herzberg’s theory
At a time when a company is undergoing change or faced with a period of uncertainly, employee are often not sure whether their jobs are secure either in the short or long-term (Silla et al. 2009), and if the new changes made will affect the way employees have been doing their work. The modern business environment demands that organisations change constantly in order to remain competitive (Vander Elst et al. 2011). Even as they endevour to do this, it very important that organisation motivate and engage their employees. In today’s constantly changing and competitive environment, it is vitally important for organisations to engage (Amabile & Kramer 2011). Employees who are engaged and motivated utilize their abilities and talents to the maximum as they endevour to contribute to the welfare of the organisation (Levy 2003). If this is not done, organisations risk losing profits and competitiveness (Bruce 2011). Employee motivation is especially vital and demanding when organisations are faced with economic uncertainly or during periods of rapid change (Pink 2009).
Oftentimes, employee morale may plummet significantly owing to insecurity occasioned by change, mostly at times of organisational downsizing or restructuring (Amabile & Kramer 2011). Additionally, the management may at times find it hard to motivate employees in case they are working as temps or contracts (Miller et al. 2002). Engaging employees when accompany is facing turbulent times is crucial. Lockwood (2007) contends that employees who demonstrate the highest level of commitment are 87% less likely to depart the company and perform 20% better than their colleagues with low commitment. This is a clear indication of the association between performance and employee engagement.
Watson Wyatt (2002) conducted two separate studies to determine level of employee commitment. In one study, dedicated and loyal employees (those with high commitment) performed 47% better than low-commitment employees, while in the other study, high commitment employees perfumed 200% better compared to low commitment employees. Besides recording high performance, highly engaged employees are also more likely to provide innovative solutions that in turn enhance the effectiveness of the company in solving problems (Scarlett 2008). It is important therefore that an organisation to establish ways to fully engage its employees when faced with uncertainties, for increased commitment and positive results both in the short and long term.
Various theories have been proposed to enhance employee motivation and job satisfactions when organisations are facing a period of uncertainly and change. These are: Maslow’s theory and Herzberg’s theory.
Maslow’s theory
Maslow’s theory of needs revolves around how as individuals we satisfy different personal needs as it relates to their work. Maslow postulated that individuals follow a general sequence of recognizing and satisfying needs. Maslow further observed that once an individual has fulfilled his physiological needs like hunger and thirst, they will then prioritise on safety needs (stability, protection, security), love and belongingness, esteem, and self-actualisation, in that order (Kaur 2013). In terms of job satisfaction, various literatures on the topic of motivation indicate that individuals often encounter difficulties in constantly articulate communicating what they want form it. Employers have embraced Maslow’s hierarchy of needs theory in ensuring that as an individual rises through the ranks in the organisation, they provide or supply opportunities that will satisfy their needs ranked higher on Maslow’s pyramid. At a time when Pharmaco was faced with a period of uncertainty and change, employees were no longer content with satisfying their need for belongingness, but were now concerned abut job security and stability. This shows a decline in Maslow’s hierarchy of needs sequence. Since redundancies aimed to reduce costs as one way of dealing with increased competition, downsizing was inevitable. Even the remaining workforce had to contend with competition for resources and manufacture of new products with the other plants. Consequently, employee motivation was poised to be low, as they were unsure of how secure their jobs were.
Herzberg’s theory
Herzberg’s theory of motivation is based on a two-dimensional pattern of factors that impacts on an individual’s attitude towards work. Herzberg postulated that factors like supervision, company policy, working conditions, salary, and interpersonal relations are hygiene factors, as opposed to motivators. The theory holds that when hygiene factors are absent, this could lead to job dissatisfaction (Herzberg, Mausner & Synderman 2011). However, presence of hygiene factors does not create satisfaction or motivate the employees. Herzberg further identified recognition, advancement, achievement, responsibility, and work itself as particularly strong indicators of job satisfaction. Herzberg linked the five motivators (satisfiers) to positive outcomes in job performance even as the hygiene factors (or dissatisfiers) were constantly seem to yield short-term changes in job performance and attitudes, which rapidly reverted to its former level (Herzberg et al. 2011). With regard to the Pharmaco case study, the management registered their frustration with employees for not being actively involved in running the business. The management took very few steps to manage insecurity, such as the use of temporary workers as a buffer for permanent employees. This is likely to have demotivated the employee further, while the lack of involvement of employees in the change process affected their morale and productivity negatively.
What steps could Pharmaco take to minimise the impact of feelings of job insecurity on its workforce?
An increasingly large number of employees and organisations have had to contend with the issue of job insecurity in recent years. According to Gallie et al (2016), the high prevalence of job status insecurity is linked to different employment, labour market, and individual characteristics than the factors that impact on insecurity about a likely job loss (Probst & Brubaker 2001). Richter, Naswall and Sverke (2010) have explored the negative effects of employee uncertainty over their likely job loss. At an individual level job insecurity affects the well-being and health of employees (Probst 2000). On the other hand, work attitudes and behaviours could suffer negatively from an organisational context. Apparent job insecurity could result in a direct effect on all these kinds of behaviours. For instance, when an employee feels that their job could be at risk, there is the tendency to start searching for another job and go about their work at the organisation with less zeal seeing as they do not envision a future there (Everitt & Healthcock 2013). Redundancies compel employees to harbor negative feelings about the organisation leadership, and honesty of communication. Should this trend linger on for longer, it could have negatively affect employees’ health, performance and engagement (Probst 2006).
Redundancies at Pharmaco reduced the workforce significantly with the remaining workforce expected to realize similar production levels as the old workforce. No motivation was given to the employees to this effect. Employees were also feeing unsafe and insecure because they did not know what plans the organisation had for them in the next few years. Although employees showed no interest in actively participating in the running f the business seeing as they blamed the management for current uncertainties and job losses, the management did little in the way of reducing the employees’ feelings of continuing job insecurity. While the management deemed it fit to resort to temporary workers as a means of reducing the likely job loses, employees in employees especially those in pharmaceuticals expressed their concern about the likely effect off working arrangements in the high-speed new facilities. More importantly, the management failed to devise meaningful employee involvement and communication process.
There are certain key steps that Pharmaco could have taken in order to reduce the impact of feelings of job insecurity on its employees. As Heery and Salmon (2002) opine that the ambiguity and uncertainly linked to the experience of job insecurity is by far the most stressful aspect to employees. In the same way, a number of scholars have on the need to retain a sense of control when handling stressful situations (Anwar, Aslam & Tariq 2011; Crawford & Nahmias 2010). Akpan (2013) maintain that when managing the likely experience of job insecurity, it is important that the management endeavour to inform employees of the likely criteria to be applied in developing redundancy decisions. Had Pharmaco done this, this would have gone a long way in minimizing and negative effects associated with job insecurities, as well as improve individual employees’ perceptions of workplace control (Probst 2005). Pharmaco should also have endevoured to provide its employees with sufficient information regarding the possible future outcomes of their jobs and the company, thus minimising job insecurity. The management ought to have developed norms to promote seeking for help or information with the sharing of concerns and worries and problem-solving. Nonetheless, one can only hope to reduce job insecurity by encouraging information-seeking if appropriate information exists. Good communication between the management and employees is also important in minimizing feelings of job insecurity among employees. A study conducted by Kuhnert and Lahey (1988; cited by Mmadike 2005) revealed that employees in firms faced with work shortages and lay-offs felt more secure when the management kept them informed of the likely criteria for basing such decisions, as it enabled them to evaluate their individual position in the firm.
How well do you think Pharmaco’s HRM strategy supports its business strategy?
Globalization of capital markets and individual companies over the past few decades has resulted in a total transformation of the business landscape. Firms have had to endure local and international competition. In a bid to respond to global competition, organisation have turned to new technologies as a means of offering lower-cost and better solutions for their customers (Wright 2008). In addition, organisations are feeling the heat of global capital markets on the need to educe costs and innovate. The combination of these trends has compelled organisation to ensure improved effectiveness in the management of their assets, and more so human assets. In the case of Pharmaco, increased competition has compelled the organisation to restructure, lading to the closing and sale of some of its plants. The remaining operations had to be acquired by DrugCo. This move was meant to enable Pharmaco reduce its operating costs as a means of remaining competitive in a changing business environment. The company also intended to develop new products as the patents of most of their existing products had already experienced. In order to realise these goals, Pharmaco’s HR strategy involved redundancies in which the company was forced to layoff part of its workforce. At the same time, the firm replaced some of its permanent employees with temporary employees as a means of dealing with the issue of job insecurity occasioned by the downsizing activity. Wright (2008) defines HR strategy as “a system of human resource practices for a particular job or collection of jobs aimed at the best employees’ performance possible to meet the firm’s ultimate goals.” (p. 3). This definition underscores the system of HR practices as these are vital for employee performance. The design and implementation of HR strategies should be specific for a given set of jobs or job. From the case study, the need for innovations and cost reduction can be identified as two of the Pharmaco’s business strategies,. However, the means of achieving these strategies involved laying off employees, which ended up affecting their job security and performance because the decision was not communicated effectively. According to Wright (2008), HR strategies need to simultaneously focus on building skills, motivation and behaviour for a successful business strategy (Wright 2008, p. 1). However, from the case study, there is no evidence of Pharmaco having made steps towards building the skills of their employees. In fact, the strategies adopted by the company were likely to jeopardise their job security as opposed to developing their skills. Employees were also kept in the dark about plans by the company to downsize and the management did not communicate effectively on such decisions. Towards this end, we could argue that Pharmaco’s HRM strategy does not support its business strategy.
How important are job security and employee commitment to performance?
Employee commitment and job security are regarded as the most controversial but significant aspects o in human resource management (Lee & Chen 2013). Employee commitment is largely associated with work motivation, work value, and work involvement. In other words, motivated employees are more likely to be involved directly in their work and also attach a lot of value to it. At the same time, one can examine employees’ work performance by determining their level of satisfaction and commitment that they derive from performing their respective jobs. Various studies have endeavoured to establish the link between employees’ behaviours and attitude in the workplace and work commitment (Maxwell & Steele (2008). McClurg (1999) reports of an association between employees’ performance efficiency and behaviour with work attitude and commitment. According to Meyer and Allen (1997), the multi-dimensional nature of employee commitment means that it encompasses such diverse aspects as employees’ willingness to apply more effort in aid of the firm, employees’ loyalty, a willingness to stay with the firm, and abiding by the firm’s values. The level of motivation among the employees of a firm has a huge influence on employee commitment, and this is vital for inducing “a positive employee attitude towards the job” (Lee & Chen 2013, p. 197). In the absence of motivation, employee feel short-changed and that the effort that they put in accomplishing their jobs does not count much (Morrison & Robinson 1997). Bratton and Gold (2007) opine that employee commitment is proportionate to employees’ participation in or attachment to the firm where they work. Employee commitment is thus important seeing as it establishes in employees shall improve their performance in the firm or leave their jobs (Bull 2005). Work turnover and performance as a result of organizational environment is a key concern for the management of most organisations and specifically, among human resource managers (Freund & Carmeli 2003). This problem is largely down to lack of job security and stability for employees, who are by far one of the most vital assets in the firm. For this reason, many firms have deemed it necessary to promote employees’ commitment to their work, to the organisation’s ambitions and values, as well as to a strong job ethic.
Conclusion
Increased competition in the business world has compelled organisations to implement certain changes aimed at increasing their competitive advantage. This may include among others, embracing high levels of innovation and reducing operating expenses. Pharmaco was faced with a similar challenge in the 1990s at a time when its operating expenses were too high and the patents to most of its products had almost expired. This compelled the company’s management to institute certain organizational changes meant to facilitate the development of new products and to reduce operating costs. As a result, the company was forced to sell or close some of its plants and eventually, the remaining operations were taken over by Drugco, another leading foreign-based pharmaceutical company. The takeover bid came with certain challenges like redundancies in which the workforce had to be reduced. However, the management did not effectively communicate these changes with employees and consequently, they felt anxious and apprehensive regarding the future of the company. This also culminated in loss of job security and declining work commitment. It would have been better if the management had kept employees fully informed about the likely criteria upon which such decisions were based. Such a failure also indicate that the firm’s HRM strategy does not suit its overall busies strategy. Considering that job security and employee commitment are vital to organisational performance, it is important for an organisations to be seen to promote the commitment of its employees’ to their jobs, to the firm’s ambitions and values, and a strong job ethic.
Reference List
Akpan, CP (2013),’Job security and job satisfaction as determinants of organisational commitment among University teachers in cross river state, Nigeria’, British Journal of Education, vol. 1, no. 2, pp. 82-93.
Amabile, T & Kramer, S (2011), The progress principle: using small wins to ignite joy,
engagement and creativity at work, Boston Mass.: Harvard Business Review Press.
Anwar, MS, Aslam, M & Tariq, MR (2011),’Temporary Job and its Impact on Employee
Performance’, Global Journal of Management and Business Research, vol. 11, no. 8, pp. 23-28.
Bratton, J & Gold, J (2007), Human Resource Management: Theory and Practice, 4th Edition,
Basingstoke: Palgrave Macmillan.
Bruce, A (2011), Manager’s guide to motivating employees, 2nd ed., New York NY: McGraw
Hill.
Bull, IHF (2005. The relationships between job satisfaction and organizational commitment
among high school teachers in disadvantaged areas in the Western Cape. [online]. Available at:
http://etd.uwc.ac.za/xmlui/handle/11394/267 (Accessed 16 March 2016).
Crawford, L & Nahmias, AH (2010),’ Competencies for managing change’, International
Journal of Project Management, vol. 28, no. 4, pp. 405-412.
Everitt, J & Heathcock, L (2013). Job Security & Employee Engagement: Managers Can Make A Difference. [online]. Available at:
http://www.eremedia.com/tlnt/job-security-employee-engagement-managers-can-make-a
difference/?__hstc=43953530.f4b67a7dea4d522f11d179fdde1e734f.1458162167544.14581621
7544.1458162167544.1&__hssc=43953530.1.1458162167546&__hsfp=3934916710&_ga=1.1
0087860.324310331.1458162138# (Accessed 16 March 2016).
Freund, A & Carmeli, A (2003),’An Empirical Assessment: Reconstruct Model for Five
Universal Forms of Work Commitment’, Journal of Managerial Psychology, vol.
18, no. 7, pp. 708-725.
Gallie, D, Felstead, A,Green, F & Inanc, H (2016). The hidden face of job security. [online[. Available at: http://wes.sagepub.com/content/early/2016/01/29/0950017015624399.full (Accessed 15 March 2016)
Heery, E & Salmon, J (2002), The Insecure Workforce, London: Routledge.
Ivancevich, JM, Schweiger, D & Power, FR (1987),’ Strategies for managing human resources
during mergers and acquisitions’, Human Resource Planning, vol.10, no.1, pp. 19-35.
Herzberg, F, Mausner, B & Synderman, BB (2011), The Motivation to Work, New Jersey:
Transaction Publishers.
Kaur, A (2013),’Maslow’s Need Hierarchy Theory: Applications and Criticism’, Global Journal
of Management and Business Studies, vol.3, no. 10, pp. 1061-1064.
Lee, CC & Chen, CJ (2013),’ The Relationship between Employee Commitment and Job
Attitude and Its Effect on Service Quality in the Tourism Industry’, American Journal of
Industrial and Business Management, vol. 3, pp. 196-208.
Levy, PL (2003), Industrial/Organisational Psychology, Understanding the workplace, Boston:
Houghton Mifflin.
Lockwood, NR (2007),’ Leveraging Employee Engagement for Competitive Advantage: HR’s
Strategic Role’, HR Magazine, pp 1-11.
Maxwell, G & Steele, G (2008),’Organizational Commitment: A Study of Managers in Hotels’, International Journal of Contemporary Hospitality Management, vol. 15, no. 7, pp. 362-369.
Miller, JE, Walker, KE, Drummond, KE & Hoboken, M (2002), Supervision in the Hospitality
Industry, 4th Edition, Hoboken, NJ: John Wiley & Sons.
Mmadike, CU (2006),’Job satisfaction and Productivity among University Academics’, Journal
of Educational Management, vol. 5, pp. 146-152.
McClurg, LM (1999),’Organizational Commitment in the Temporary-Help Service Industry’, Journal of Applied Management Studies, vol. 8, No. 1, pp. 5-26.
Meyer, JP & Allen, NJ (1997), Commitment in the Workplace: Theory, Research, and
Application, Thousand Oaks, California: SAGE.
Morrison, EW & Robinson, SL(1997),’When Employees Feel Betrayed: A Model of How
Psychological Contract Violation Develops’, Academy of Management Review, vol. 22, no. 1, pp. 226-256.
Pink, DH (2009), Drive: the surprising truth about what motivates us, New York NY: Riverhead
Books.
Probst, TM (2000),’Wedded to the job: Moderating effects of job involvement on the
consequences of job insecurity’, Journal of occupational health psychology, vol. 5, pp. 63-73.
Probst, TM (2002),’ Layoffs and tradeoffs: Production, quality, and safety demands under the threat of job loss’, Journal of Occupational Health Psychology, vol. 7, pp. 211-220.
Probst, TM (2005),’ Countering the negative effects of job insecurity through participative decision making: Lessons from the demand-control model’, Journal of Occupational Health
Psychology, vol. 10, pp. 320-329.
Probst, TM (2006). Job insecurity and accident under-reporting. Paper presented at the 21st annual meeting of the Society for Industrial and Organizational Psy-chology, Dallas, TX.
Probst, TM & Brubaker, TL (2001),’ The effects of job insecurity on employee safety outcomes: Cross-sectional and longitudinal explorations’, Journal of Occupational Health Psychology, vol.
6, pp. 139-159.
Richter, A, Näswall, K & Sverke, M (2010),’ Job Insecurity and its Relation to Work-Family Conflict: Mediation with a Longitudinal Data Set’, Economic and Industrial Democracy, vol. 31, pp. 265-2.
Rudisill, JR & Edwards, JM (2002),’ Coping With Job Transitions’, Consulting
Psychology Journal, vol.54, pp. 55-64.
Scarlett, K (2008). What is Engagement? [online]. Available at:
http://scarlettsurveys.com/employee_engagement.cfm (Accessed 16 March 2016)
Schumacher, D, Schreurs, B, Van Emmerik, H & De Witte, H (2015),’ Explaining the relation
between job insecurity and employee outcomes during organisational change: A multiple group
comparison’, Hum. Resour. Manage.. doi: 10.1002/hrm.21687.
Silla, I, De Cuyper, N, Gracia, FJ, Peiro, JM & De Witte, H (2009),’ Job insecurity and well
being: Moderation by employability’, Journal of Happiness Studies, vol.10, pp. 739-751.
Staufenbiel, T & König, CJ (2010),’ A model for the effects of job insecurity on
performance, turnover intention, and absenteeism’, Journal of Occupational and Organizational Psychology, vol. 83, pp. 101-11.
Vander Elst, TV, De Cuyper, N & De Witte, H (2011),’ The role of perceived control in the relationship between job insecurity and psychosocial outcomes: outcomes: moderator or
mediator?’, Stress and Health, vol. 27, pp. 215-227.
Watson Wyatt Worldwide (2002). Employee Commitment Remains Unchanged. ? [online]. Available at: http://www.watsonwyatt.com/research/respub3.asp (Accessed 16 March 2016)
Wright, PM (2008), Human Resource Strategy: Adapting to the Age of Globalization, Alexandria, VA: SHRM Foundation.
