The impact of some dimensions of management climate on the performance of industrial organizations: a computer simulation study

Abstract

The research procedure employed in the investigation of this question is based upon: 1. The design and implementation of a factorial experiment and its associated tests for statistical significance. 2. The transformation of the model of a business firm from prose to a mathematical-diagrammatic form and in turn, this form to a computerized form.

The findings indicate that work groups do have a significant effect on the performance of industrial organizations and that under certain conditions, the incorporation of work group behavior into the behavioral theory of the firm does seem advisable. This study serves as a demonstrative proof of the feasibility of simulated experiments for socio-psychological studies. the specific results indicate that some dimensions of an employee-oriented managerial climate, e.g. leadership style and low congruence of leadership style, lead to higher levels of organizational performance, while others, such as low cost emphasis, lead to lower levels of organizational performance.

Organizational performance is measured by six criteria: 1. Profit. 2. Sales effectiveness. 3. The ratio of sales revenue to inventory value. 4. Unit cost. 5. Group cohesion. 6. Group pressure.

The five dimensions of managerial climate which are investigated are: 1. The attitudes of foremen and superintendents towards grievances. 2. The amount of emphasis superiors place on the cost performance of their subordinates. 3. The amount of time foremen and superintendents devote to employee-oriented leadership. 4. The degree of similarity between the leadership styles of foremen and superintendents. 5. The attitude of the industrial engineering department regarding the "tightness" and stability of work standards.

The experimentation which is conducted in this study is performed on a complex model of an industrial organization. This model consists of four structural components: the market, the executive levels of the firm, the middle and lower levels of management and the work groups. The market which contains seasonal, cyclical and noise factors, responds to changes in price, promotion and sales effort. Price, output and promotion decision and the supervision of subordinates are the responsibilities of the executive level of management. These decisions and activities are influenced by the levels of sales, costs and profits which the company realizes. the middle and lower levels of management maintain accounting records, prepare budgets, review work standards, evaluate grievances, and supervise their subordinates. Some of the factors which influence this behavior are the past cost performance of the units they supervise, the pressures exerted by their superiors and the current levels of production scheduled. Work groups set production norms, change their cohesion, affect various overhead costs, manufacture the product and generate grievance. Some of the conditions which affect their behavior are their relative pay levels, changes in work standards, the level of production schedule, the behavior of their superiors and their ability to influence their environment. The structure of the model and its content are derived from the actual data furnished by several firms, the findings of published empirical studies and the Cyert and March model of the firm.

In answering the central question, three key points are considered. These are: 1. The effects of work groups, under various conditions of managerial climate, on the performance of the firm. 2. The integration of work group behavior with the behavioral theory of the firm. 3. The feasibility in socio-psychological study of experimental simulation through the use of a digital computer.

The central question investigated in this study is the following: Does a managerial climate which is employee-oriented result in higher levels of organizational performance than a managerial climate which is task-oriented.