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  • Prioritizing Stakeholders for your start-up to reduce uncertainty

    Murphy’s Law seems to follow entrepreneurs more than anyone else – Yes! anything you believe wouldn’t happen, will most possibly happen. So the challenge is really of being able to live through all these experiences and eventually be able to get the business they intend to create see the light of the day. 

    The notion of such unpredictability in what one does is generally called – uncertainty. There is really nothing certain about the entity that entrepreneurs are trying to create. They have a thought about the need for something they believe would be required by someone… Yes! It is only a thought when it starts like many other thoughts! The entrepreneur chases the thought and attempts to create value – economic, social etc out of the thought by manifesting the thought into the realm or reality.

    In the process there are numerous challenges that come in – beginning with the thought – the entrepreneur would need to really see if the intended product/service is something that would be found valuable and useful for people. The second question is really to see if someone could pay for the same! I have mentioned multiple times about the need for early customer engagement in earlier blogs [read here and here]

    The maximum uncertainty would definitely be on the customer‘s end of the chain. The thought that the entrepreneur would have initiated invariably would have come from his/her prior experience/ability/capacity – essentially – the response to the questions: who am I? What do I know? Whom do I know? She/he would also have attempted evaluating what would it take to create something of value and how someone could and then figure out a way to reach out to the person who could not just use but also pay for the same. 

    This mean the maximum uncertainty for a business is not on the customer‘s side of activities and would progressively reduce in the following order – investors, suppliers and employees. The following diagram indicates the same:
     
    High Uncertainty                                                     Least Uncertainty
    Customer    >    Investor      >    Supplier       >        Employee
    The uncertainty in the above context could be understood as containing two components – the predictability of the behavior of each of the stakeholder and second, the effective control on that the entrepreneur could have on the behavior of each of these. We could visualize the spectrum of predictability and controllability to be as below.

    Least Predictability                                              Most Predictability
    Customer    >    Investor      >    Supplier      >        Employee 
    Least Controllability                                             Most Controllability
    Customer    <    Investor      <    Supplier      <        Employee

    An effective approach for an entrepreneur to be able to leverage and grow his/her business would be to reduce the zone of maximum uncertainty and steadily build the other stakeholders commitments to effectively handle the reduced uncertainty. 
    (click on the stakeholder link to be directed to some best practises in finding a better stakeholder)

  • Adam’s Theory of Inequity 3

    In the last byte, we looked at the various strategies one could adopt to handle a situation of inequity in an organization. In today’s byte, we look at some extensions to the equity theory.     

    If we really look at the theory that we have been discussed, it was really inequity that we were setting as the subject matter and not equity itself. As research has progresses, certain revisions have been suggested to this basic equity theory. One such interesting approach has been suggested by classifying individuals based on their preference for equity. These are:

    1. Equity Sensitive
    2. Benevolent
    3. Entitled
    Equity Sensitive people are those individuals who prefer an equity ratio equal to that of his or her comparison other. This sensitivity has a great bearing on the way people spend their free time – it would define whether they would invest the time into the work or do something else.

    Benevolent refers to those individuals who are comfortable with an equity ratio lesser than that of their comparison other. The Entitled on the other hand are people who are comfortable with equity ratio greater than that of their comparison others. The Entitled behavior is generally observed in the younger generation of the affluent families. If we were to call Benevolent as givers, the Entitled could be called as takers.

    We could remember the above using the following diagram.

  • Adam’s Theory of Inequity 2

    In the last byte, we looked at Adam’s theory of Inequity and mentioned that we could continue the discussion in today’s byte.

    When in a situation of inequity, and individual could find one of the seven strategies listed below:

    1. Alter the person’s outcomes
    2. Alter the person’s inputs
    3. Alter the comparison other’s outcomes
    4. Alter the comparison other’s inputs
    5. Change who is used as a comparison other
    6. Rationalize the inequity
    7. Leave the organizational situation
    Within these strategies, a large number of tactics could be tried out. Each tactic comes with its own pros and cons. The selection of a strategy and a set of tactics is a sensitive issue with possible long-term implications. It is essential to consider the consequences when one chooses a strategy and a tactic to handle the inequity.

    Research has indicated that those people who feel that their compensations are equitable have displayed greater job satisfaction and organizational commitment. Thus a lot of the equity theory helps explain important organizational behavior. This theory could also be extended to manage important labor relationships.

  • Adam’s Theory of Inequity

    In the last byte, we looked at demand and contributions as part of social equity theory. In today’s byte, we look at Adam’s theory of inequity.

    Sometimes one finds oneself unmotivated and angry about the compensation/hike that was granted by the organization one worked for.

    If one were to reflect on what could have lead to this discomforting feeling and we map it on to the equity theory, we realize we could develop a output-input ratio based on the expectations and their fulfillment.

    Let us begin by defining an important concept that would follow this ratio that we have just mentioned – Inequity

    Inequity – is a situation in which a person perceives he or she is receiving less that he or she is giving, or is giving less than he or she is receiving.

    Looking back the situation described earlier, a person would examine the contribution portion of the exchange relationship – the individual considers their input (own contribution) in the relationship and their outcomes (the organization’s contribution) in the relationship. We could summarize this in the following diagram:

    In essence, inequity leads to the experience of tension, and the tension motivates people to act in a manner to resolve the inequity – this was proposed by Stacy Adams.

  • Demands and Contributions

    Continuing from the last byte where we continued discussion on Demands and Contributions, we shall look at these in today’s byte too. We shall refer to the diagram in the earlier byte at various points to gain clarity.

    Demands are expectations that parties have on the others in the relationship. Each party in the exchange makes a demand on the other. Organizations express its demands on the individual in the form of goal or mission statements, or job expectation or performance objectives and performance feedback. It is through these formal mechanisms through which people learn about the organization’s demands and expectations.

    Individuals to possess needs that need to be satisfied (we could look back at earlier theories discussed to understand this in greater detail). It is these needs that form the basis of the expectations or demands placed on organization by the individual. It has been found that employees need fulfillment and the feeling of belongingness are both essential to a healthy exchange and have the feeling of organizational membership.

    As the other side of the coin – every demand comes in with some form of contribution. Each party to the exchange makes demands on the other; each also has contributions to make to the relationship.  The demands expressed are satisfied through the contributions made to the relationship. Employees satisfy the organization’s demands using their skills, abilities, knowledge, energy, networks etc. Organization’s contribution in the relation would be in the form of salary, security, benefits, promotions, status, social affiliations etc.

    The question of fairness still remains when we look at this sort of an exchange.

  • Social Exchange and Equity Theory – 2

    In the last byte, we began our discussion on the social exchange and equity theory. We shall continue this discussion in this byte.

    Committed relationships could be seen as having a positive intensity for the parties involved, while the Calculated would typically be between low positive or low negative intensity but the alienated relationships may characterize with high negative intensity.

    Calculated involvement is based on the notion of social exchange in which each party in the relationship depends on certain things of the other and contributes accordingly to the exchange.  Business partnerships and commercial transactions are examples of this. They are found to be working well when both parties involved, this relation will have a positive orientation. When losses occur, or conflicts arise, the relationship has a negative orientation.

    This could be explained by the model developed by J P Campbell et all in their book – Managerial Behavior, Performance and Effectiveness!

  • Social Exchange and Equity Theory

    In the last byte, we looked at the positive energy and full engagement theory and attempted to understand it. In today’s byte, we will look at Social Exchange and Equity theory and attempt understanding it.

    Social exchange theory is based on a central premise: that the exchange of social and material resources is a fundamental form of human interaction. The focus of this theory is that Individuals interact for profit or the expectation of it. Power and Exchange are important considerations in understanding human behavior. Simply put, we could present the behavior of an individual as follows:

    Behavior (Profits) = Rewards of interaction – Costs of Interaction.

    The difference between the Equity and Exchange theories could be looked at as below:

    • Exchange theory is based on the principle that we enter into relationships in which we can maximize the benefits to us and minimize our costs.
    • Equity theory, a variation of exchange theory, holds that exchanges between people have to be fair and balanced so that they mutually give and receive what is needed.  
    The basic theory of extend by Amitai Etzioni who developed three categories of exchange relationships between people:
    1. Committed Involvement
    2. Calculated Involvement
    3. Alienated Involvement.
    We shall attempt to continue understanding the discussion on social exchange theory over the next few bytes.

  • Eustress

    In the last byte, we looked at the criticism on Two-Factor Theory. In today’s byte, we look at Eustress and its influence in motivation.

    Eustress can be defined as a pleasant or curative stress. It is the healthy, normal stress that sometimes gets us to perform to the best of our ability. Research has found that, it is Eustress that enables athletics perform better in competition, it also synchs with one’s attempt to delivering a speech. This positive stress ensures that the speaker is prepared well for the speech and takes greater care to deliver the speech well.

    Eustress is part of the new discipline of positive organizational scholarship that includes study on investing in strengths, finding positive meaning of work displaying courage and principled action and drawing on positive emotions at work. This approach to work enhances hope and optimism and there by health for people at work. The focus in these studies is on the individual’s interpretation of events as a source of motivation.

    Eustress is a manifestation of this broad, positive perspective – people begin to see opportunities when they would otherwise have felt obstacles, they begin to interpret the barriers as challenges in their path. The pressure tends to keep them motivated and not frustrate them in their daily activities.

    We shall continue the discussion on positive energy and full engagement in the next byte.

  • Herzberg’s Two Factor Theory – Criticism

    In the last byte, we looked at Herzberg’s 2 factor theory. In today’s byte, we look at some of the criticisms for the theory.

    While the distinction between the motivational and hygiene factors is interesting to understanding the applicability of motivation theory directly in the design of the organization; there are certain criticisms that have to be noted:

    There exist some factors that cannot clearly be classified into hygiene factors or motivational factor. We have already looked at salary as an example for this dichotomy. It the situational influence that gets the influence defined as a motivational factor or a hygiene factor. This is the first criticism concerning the classification of factors.

    Individual differences like age, sex, social status, education or occupational levels also influence to what extent these factors have an impact. These individual differences are not considered in the theory.

    When we look at organizations, they typically have an internal flow process that would determine what sort of feelings an individual would develop toward the factors. This aspect too is not considered in the 2 factor theory.

    The technique used to identity has been from the critical-incidents method or research, and most of the work here has been done by Herzberg and his students. This is again a criticism sited by experts.

    In spite of these criticisms, the 2 factor theory is extremely useful in the design of work.