Organizations are these days perhaps more than ever having to balance competing demands. We have grown familiar with how even the largest corporations are being called to account by consumers and special interest groups. But there are many more examples.
Workers in the public sector, for instance, used to carry out their jobs with little attention to budgets. Yet now in Britain’s National Health Service, for example, there is an almost daily conflict between the desire of clinicians to provide care to all patients and the need to meet cost restraints. A more recent phenomenon is the social enterprise, where the ultimate aim is to deal with a social issue rather than to make a profit. However, meeting the aims depends on making money so there is a natural tension over how those interests should be balanced. Less remarked upon is the situation of professional firms, such as accountants and lawyers. In recent years, they have responded to client demands to become more commercial. But at the same time they are under pressure to meet their colleagues’ desire for maximising income without threatening the firm’s reputation while also fulfilling the role demanded by the public of controlling the wilder impulses of capitalism.
Those involved in these activities may often feel as if they are on a tightrope without a net. But a study by Dr Michael Smets of Oxford University’s Said Business School and Professor Paula Jarzabkowski of the Cass Business School at London’s City University suggests that the more successful are basing the balancing act on three mechanisms which stop them from focusing on a single demand at the expense of another and also allow them to benefit from how the demands can complement each other as well as create conflicts.
The three mechanisms are:
Segmenting – doing different types of work in different places in order to reduce conflicts and protect independence. Protecting work from scrutiny by those with competing sets of demands reduces conflict. This is why it is important that accountants and other professionals do some of their work at their clients’ premises, but in order to avoid being drawn into being too close to their clients they should ensure that some of their work is done in the office.
Bridging – the process of connecting the segmented practices, typically by using information gained in one area to reassess a decision made in another. Although such an approach enables individuals to prioritize different demands on a case-by-case basis, such flexibility creates the risk of “slippage” so that one set of demands is consistently given precedence. The academics suggest that lack of protection against such slippage has been at the heart of several recent corporate scandals.
Demarcating – provides protection against slippage by ensuring that where there is flexibility to prioritize different demands as required by the situation the overall balance between competing demands is maintained. Such a role can be carried out by an independent, diverse company board challenging the actions of executives. “Where individuals know they will inevitably be held accountable for their actions by stakeholders representing different demands, they are much more likely to factor in the full spectrum in their original decisions,” says Smets.
Rather surprisingly, the authors have come to these conclusions through studying reinsurance underwriters at Lloyd’s of London, one of the world’s oldest financial institutions. Their paper argues that the underwriters are required to balance their need to generate profits and increase market share for their own companies with the ability to operate as members of a tight-knit community. The model built around the three mechanisms is their way of avoiding the trap of becoming too closely identified with one or other purpose. But it goes further, suggests Smets. In constantly weighing up the competing demands, they are “transforming the ‘either-or’ relationship between the seemingly incompatible demands of the market and the community into a ‘both-and’ situation in which they become both more successful competitors and more valued members of the community.”
Smets accepts that the practices identified at Lloyd’s can be found in various forms in other organizations. But he says they are often employed unconsciously and inconsistently and are therefore likely to be ineffective. As a result, he urges leaders in all sectors to develop “a more nuanced understanding of the nature of conflicting purposes within their organizations”. They should apply the model in a more deliberate fashion and so empower staff to balance more effectively the competing demands they might be facing.