Master thesis
Motivation in a
conceptual model of cooperative theories
for strategic management.
Written by student: Bart C. Vergeer (10476040)
Final version, February 4, 2016
Executive Program in Management Studies – Strategy track
University of Amsterdam
1
Statement of Originality
This document is written by Student Bart C. Vergeer who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of Contents
Abstract ... 3
1. Introduction ... 4
2. Literature review ... 6
2.1 Resource based view ... 6
2.2 Role of motivation ... 10
2.3 Management information ... 13
2.4 Professional service firms ... 15
3. Data and method ... 18
3.1 Case environment ... 25
4. Case description ... 28
4.1 The case in practice ... 29
4.2 The theoretical implications ... 44
5. Model of cooperative theories for strategic management... 49
6. Discussion ... 52
7. Conclusion ... 54
8. Sources ... 56
9. Appendix ... 64
9.1 Appendix 1: Interview protocol ... 64
3 0 Abstract
Abstract
The Resource Based View (RBV) has always been an important theory in regards to strategy and determining how organizations were able to be more competitive than others. However with the passage of time and the development of global markets, technologies and complex services, the complexity of resources, capabilities and dynamic capabilities increased as well. One of those complex organizational forms which in the last twenty years seem to have become more and more important is that of the (professional) service firms (PSF), whose operation are mostly based upon capabilities of the human resource. From an RBV point of view a lot of the strategic decisions of PSFs can be explained and yet there are despite all its resources and capabilities outcomes of processes, competition or development which are inefficient or ineffective. Considering motivation as a potential key driver and cause for the both failure and success for the PSF, this thesis set out to understand what role the dynamic resource of motivation plays in the PSF.
The finding of the thesis before you argue that the RBV should take the dynamic resource of employee motivation more in consideration, especially in the modern services focused economy in which more and more core activities of firms rely purely on the capabilities and willingness of human resources. Although this thesis in its case study did show the need for motivation, it also showed that motivation was not necessarily not present, but rather missed alignment. These findings were not made based upon the RBV alone but also based upon insights coming from human resource management and motivational theories. The conceptual model which was created in order to pinpoint the dynamic resource of motivation amidst other resources and capabilities provided useful insights and unconsciously grew to a model which may be more valuable for theorists and practitioners for future dialogue or research. The model’s development was done in order to allow resources, capabilities, dynamic resources, supporting fields of science, and the outcome of all these influences on the organization work together in a logical way. The model could in potential provide practitioners with a prescriptive platform of choices and theories, researchers of the RBV with an overview of potential resource influence and theorist from resources specific fields of science with an idea of the influence on the firm of their focus area. The potential to bridge gaps between different theorists and practitioners is still dependent on further development, but as we lack such a model, it could be an important first step
1. Introduction
During the last four years I have been working in and with professional service firms. Professional service firms (PSF) in my eyes are, when it comes to the creation and acquisition of capabilities and expertise, one of the most knowledge intense commercial firms currently in existence. An example of the intensity with which these firms pursuit expertise and skills which could grant them strategic resources in a specific market is the large amounts of corporate acquisitions and the constant willingness to invest in employees.
On the other hand the PSFs I have experienced also always seem to maintain a paradox, their employee lifecycle is relatively short, even though they invest huge amount resources in their employees (supported by Campion & Malos, 2000 and Malhotra, Morris & Smets, 2010). Another paradox is that the amount of corporate acquisitions that are done is tremendous compared to other business areas, sometimes as much as two a year, but acquisitions do not always lead to a situation in which the new strategic resources work in synergy with the already existing capabilities (which is also shown in research by Greenwood, Hinings and Brown (1994)). This difficulty to work within the firm is not only at times apparent within business departments trying to outcompete each other, but also in the cooperation between support and business departments. And although this behavior is by no means the constant standard, it did interest me, surely all these highly educated people could and perhaps should know better?
Most of the strategic behavior I see within professional service firms can be explained by the Resource Based View, but the paradoxes which can be observed in the PSFs cannot. By doing a case study within the firm on the development of the strategic resource of management information I hope to increase the understanding on the influence of motivation as the dynamic capability of development of management information. With this research I hope to add a new perspective to the constant development of the RBV, showing there is a need for a more in depth understanding on how motivation influences the performance of the organization.
5 1 Introduction
Because this thesis focuses on the dynamic capability of motivation by studying the development of another dynamic capability (management information), the thesis also answers the question on how dynamic capabilities help firms to gain a competitive advantage through innovation / development. A question which according to amongst others Nooteboom (2005) has not been addressed sufficiently.
2. Literature review
Before researching the case, there is a need to create an understanding of the available knowledge on both the subject of the case and the theories which may be applicable. Researching the available knowledge on the subject does not only allow for potential insight which might create useful perspectives which in turn can support the findings, but it also provides means to categorize findings. Although this research does aim to add to the scientific knowledge, it is more prudent and viable in a thesis research to extent existing perspectives than to create an entire new perspective.
The following chapters provide a theoretical understanding into theories which most likely can be applied to the case, also these chapter provide an understanding of the theories which are commonly used in business strategy and which might be extended to answer the research question and be extended to create a new perspective to the RBV.
2.1 Resource based view
The resource based view will be the core of this research because it allows categorization of skills and competences and view them as a potential source for strategic benefit. Using the Resource Based View (RBV) in this research thus allows for finding differences in stakeholders abilities, available (software resources) and educational backgrounds, but also differences in the case phases. Another reason why the RBV is used in this research is that for practitioners in the PSF the RBV is very accessible and applicable to running a company, especially from a strategic point of view. Although as a theoretic approach it can be very useful, the RBV is not often applied to cases. One of the reasons for this particular research has been to do just that, apply the RBV to a case to understand why and how the case developed as it did.
Resource Based View basics
When looking at resources capabilities and tooling, the theory of the Resource Based View (RBV) (Barney, 1991 and Peteraf, 1993) is an important source. Although RBV has been developed extensively throughout the last twenty years, it remains on the whole very abstract, preferring to focus on capabilities and resources in general instead of applying these to cases to provide a clear solution. (Kraaijenbrink, Spender and Groen,
7 2 Literature review
One of the reasons that RBV is considered to be difficult to apply to cases or practice is that the theory in itself was created to be used on organizations as a whole in an attempt to explain why organizations which seem identical and operate in the same market do not necessarily have the same performance. RBV believes that resources play a very dominant role in the ability of firms to compete, Peteraf and Barney believed that certain resources will allow companies to outperform their rivals. They found that these key resource can be identified as being Valuable, Rare, In-imitable, and non-substitutable (VRIN-resources). These characteristics together would create a resource which could provide an organization with the competitive advantage it seeks.
Although management information systems are a resource for the RBV, it is rarely mentioned as being a key resource to the business as it is not a resource which directly creates a competitive advantage. What is mentioned by, for example Kearns and Lederer (2003), is the key role IT departments play in dynamic capabilities like knowledge sharing within the organization.
Current researchers with - Barney and Peteraf as primary sources - mostly use the RBV to explain why companies are successful and how their factor markets allow them to gain a competitive advantage. RBV in its current state rarely closely looks at the ability of resources – especially dependent resources – as constraining for the (dynamic) capabilities of the firm. An instance in which RBV does look at the processes of support department is when the process itself has a direct influence on the ability to compete with other firms.
Although it may seem as if the Resource Based View provides a very limited view, this is not the case! The Resource Based View has been developed in many different areas. This has for example lead to Prahalad’s and Hamel’s (1990) arguments that resources themselves are an important part of the strategy; for the efficient and effective use of resources is key to creating and developing unique resources. Looking closer within organization or as within Resource Based View theories would say looking in the “low church” of RBV. RBV seeks to understand the resources within the organization, resources which can be developed, like capabilities (Dierickx & Cool, 1989), knowledge both explicit and tacit (Grant, 1996) and Dynamic capabilities in order to allow the organization to adjust more effectively to the context in which the organization operates (Teece, 1997). Teece in 2000 also wrote “Dynamic capabilities .. reflect an
organization’s ability to achieve new and innovative forms of competitive advantage despite path dependencies and core rigidities in the firm’s organizational and technical processes”. (Nooteboom, 2006).
Weakness
The resource based view like any theory or perspective has its flaws and critics. Although critics and what they perceive as the RBV’s flaws have been used to improve the RBV, it is important to take the weakness of the current knowledge in regards to RBV into consideration for this research.
One of the most important critiques to the RBV is that because the RBV is so easily applied to the managerial tasks and decisions it is often done so without a clear Strategic Competitive Advantage as a result. Barney in 2001, as one of the RBV’s original creators even clearly stated that the RBV was never intended as a managerial prescription like Nelson (1991) and Rumelt (1984) tried, but rather to provide means to create a theoretical understanding of potential influences of resources on a firms Strategic Competitive Advantage. Although it can be argued that creating an theoretical understanding of how a firm can gain a strategic competitive advantage can also be re-engineered into applying that understanding to create a strategic competitive advantage in a real firm, there are plenty of potential issues and influences in regards to its sustainable competitive advantage. For example are the resources we consider to be VRIN in this industry correct, are there influences which can mitigate the importance of the VRIN, why do different companies operating in the same market make similar decision even though their access to resources is different, how would different strategies and thus VRINs react to each other? As a result RBV Barney (2001) argues that RBV – and indeed all strategy theories - should never lead to managerial prescriptions on how to gain a strategic competitive advantage, it can only aim to understand how organizations have achieved an competitive advantage.
Another important critique is that of the resource layers within a firm, meaning that having a resource which in itself creates the strategic competitive advantage is often created by some sort of capability which creates, sustains and updates that resource. Applying the layered resource concept which the RBV often does then requires any theorist to make a large amount of different choices in regards to which resource actually is the VRIN-resource. Even worse, the preference of the researcher is likely to dictate what
9 2 Literature review
method to create the VRIN, for others it will be the people working (with) the VRIN, for marketers it is likely the way the VRIN and its results is placed in the market etc.. Kraaijenbrink (2010)
Management information as a resource
Management information as a resource can be very important, but it is not something that directly creates a competitive advantage rather it enables the creation and sustainability of VRIN resources which then enable the organization to gain or keep a competitive advantage. Especially the work of Olszak on the interaction of business intelligence & analytics and RBV has been helpful in this chapter to provide a clear theoretical understanding of the influence of management information on the strategic competitive advantage of firms.
Management information as a resource allows key decisions makers to organize the company in the best possible way. It by its nature provides data / information for managers on both the internal and external environment allowing rapid analyzes and insights which allow them to organize the company to what in their eyes is the best possible fit to the environment. Teece in 1997 defined dynamic capabilities as “the key role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational skills, resources, and functional competences to match the requirements of a changing environment” (Olszak, 2014). Management information does fit in the dynamic capabilities as described by Teece in 1997, as management information is playing the key role in empowering management with insights in how to meet and handle the organization’s challenges in gaining a competitive advantage. Perhaps to emphasize, in a dynamic environment a VRIN resource cannot likely provide a sustainable competitive advantage, dynamic capabilities act as a buffer or influencers to deal with these dynamic threats. (Cosik, Shankes, & Maynard, 2012; Eisenhard & Martin, 2000).
2.2 Role of motivation
Motivation plays a very important role in professional service firms, one of the most important reasons for this is the high level of employee involvement in the core business. In fact very few if any at all services would be provided if employees would decide to lay down their work. Also professional service firms - especially those who demand higher rates - also tend to have extraordinary long working hours and skill demands, requiring employees to be motivated or they would simply not be able to stay long within the company. The influence of human capital on the professional firms has already been described by Hitt, Birman and Shimizu in 2000, for this thesis however we wish to focus on the dynamic resource properties of motivation.
Motivation within science has been approached from different perspectives. In terms of goals and relationship management by for example the agency theory. Another perspective is that of the kinds of motivation, for example extrinsic or intrinsic, which focuses more on where motivation originates from. Although motivation from a Human capital perspective can be considered an entire field of science, this research will see motivation by itself as a resource and potential source of difference between report developers.
The agency theory in essence tries to comprehend and explain how a contract or agreement between a principal and an agent is created. The agency theory assumes bounded rationality, meaning that the principal is never fully capable of understanding, comprehending, and programming a contract for every possible situation which may arise as the principal employs the agent. The agency theory explains why hierarchy works or does not work, it does this by explaining what incentives or punishments motivates employees (agents) to do what managers (principals) ask them to do. In the core of the agency theory there is the assumption that agents preferably are not intrinsically motivated to work and are extrinsically motivated. (Eisenhardt 1989)
The Agency theory has often been used in order to explain the issues surrounding contracts and incentives, or why any kind of agent would do something for the principal. Agency theory has been criticized, as being dehumanizing at times, seeing both principals and agents and calculative entities who are only moved by
11 2 Literature review
entity) and the agent in opposing corner, each attempting to represent their personal interests. However as long as there seems to be a deviation from the best route for the firm in development or processes because of reasons that cannot be explained by the transaction cost theory or the RBV; the Agency theory may be a good indication of what is going on. As such, theoretical approaches like that of Eisenhardt in 1989 and later Wiseman (2012), indicate that the Agency theory can be applicable at more levels in the organizational hierarchy. Making the agency theory a theory, which much like the RBV, can explain the choices and directions on multiple levels in the organization, but unlike the RBV explains how personnel goals, rather than environmental influences, affect the effectiveness of processes and potentially the ability to create a competitive advantage.
Motivation is created within individuals, in which often the environment or the gains of the working environment are aligned with the individual’s needs or sense of accomplishments. What these needs are and how they can best be described is done by many perspective, however because of the wealth of knowledge available in this research we will focus on two generalized terms for identifying motivation drivers namely intrinsic and extrinsic motivation.
Intrinsic motivation finds its origins in the personnel drive of individuals to overcome challenges, become better or be competitive. The enjoyment of the action and tackling a challenge itself is the key driver rather than the reward which may be achieved by finalizing the assignment. Extrinsic motivation is the complete opposite, individuals are motivated by the potential reward gained by finalizing the assignment or achieving something. Extrinsic motivation can be seen as the motivation which comes from outside of the individual, if the individual is acting conform externally decided upon goals he or she may receive rewards. Where things get tricky is when the environment starts creating culture which influences the motivation of individuals, in the end the key in these kinds of situations is figuring out what the key motivator is, which is a lot more difficult than it seems as the motivation may come from a sub consciousness level.
When the resource based view was first introduced by Barney Peteraf and others, a different field was also in full development, the Strategic Human Resource Management (SHRM). SHRM is older than RBV but has definitely benefitted from its development, because RBV moved away from focusing strategy based upon external factors and more to the internal resources to create a competitive advantage (Hoskisson,
Hitt, Wan & Yiu, 1999), which obviously was to a benefit of both the development and interest in SHRM (Snell, Shadur & Wright, 2001). One of the trends that can be seen by the conversion of these two fields of science is that Human Resources has been propelled into the interest of both academics and the businesses as a resource which can create competitive advantage (Barney and Wright, 1998). Examples of how SHRM and the RBV have converged can be seen in theories of leadership (Finkelstein & Hambrick, 1996), dynamic capabilities (Eisenhardt & Martin, 2000; Teece, Pisano & Schuen, 1997) and knowledge (Grant, 1996, Leibeskind, 1996).
What is interesting is that soon after the two fields started interacting one of the conclusions which was found was that HR practices could never be a source of sustainable competitive advantage because they are relatively easy to copy (Wright et al., 1994). Rather in order to create a competitive advantage the human capital pool of the organization needs to have both a high level of skill and willingness to exhibit productive behavior (Wright, Dunford, Snell, 2001).
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2.3 Management information
Management information plays a vital role in the research case, as the lack of management information creates the need and urgency for development of this strategic resource. Management information is very important to high level management to make (strategic) decisions, therefore when management information is absent like in the case, high level management tends to be willing to empower rapid change and development with less regards for the costs, which is exactly what happened and provided this research with a case. This chapter will focus on the role of management information within a Professional Service firm and within the case, although it is often viewed from a theoretical perspective, management information theories in this thesis are considered to be a means to understand the case and not a theory which can be extended to answer the research question or create the structure or new perspective for the RBV.
Management information like the term suggests, focuses on providing management with information. Often management information is provided by so called business intelligence tools (also known as BI tools). The key to reporting is considered to be turning data into information / business intelligence, which is then used by decision makers to make strategic decisions. In the end the creation of information can be done either by changing data or adding knowledge to it or by providing representations of data which through their representation or combination allow its viewers to rapidly see patterns and thus immediately create conclusions on what actions to (not) take.
The data which feeds the creation of management information comes – especially in the larger firms – from ERP- systems (Enterprise Resource Planning). ERP-systems are software packages which specialize in handling and storing data which represents transactions, both within and with other firms / entities (Klaus, Rosemann and Gable, 2000). Implementations or changes to the ERP system directly influence the available data and the information systems which are linked to that data. As a result major changes to ERP systems can completely change the available data and management information and spark major discussions in regards to reporting, management information and all strategic issues that is followed by them. (Boonstra, 2006)
Business intelligence - a term which replaced decision support executive information systems and management information systems (Thomsen, 2003) - has always been about creating a better
understanding of the environment regardless of whether or not this is the internal or external environment. This better understanding is created by organizing the chaos of data which is provided by the organization and its external environment. As a result Business intelligence is often considered to be about getting data in and getting data out in the form of clear overviews. (Watson and Wixom 2007)
Business intelligence as a field of science has already started the creation of process steps and requirements in order to allow implementation of business intelligence systems (BI). Olszak and Ziemba (2007) have for example provided a list of requirements for both the implementation and proper use of BI systems. They recognize two stages namely the building of BI and the consumption of BI systems. In order to build a BI system the organization requires to have a culture in the perspective of working with information and information technologies, especially in relation to: information needs, cooperation between users and IT support, the willingness to share information, ability to turn data into information.
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2.4 Professional service firms
Professional Service firms are organizations which unlike classic organization gain their competitive advantage purely through the quality of their intangible asset Human Capital. This is different from most other organization kinds because most organizations are to one degree or another dependent on tangible assets like the raw materials for their products for example (Hitt, Bierman, Shimizu and Kochhar, 2001). Because the case takes place in a professional service firm (PSF) the following literature will provide insight in how resources affect the PSF and how strategy is applied by most PSFs.
Professional Service Firms like audit and consultancy (like in the case) rely heavily on the resource human capital, in fact it is their core business to provide professionals to other firms who then provide services. Although human resources has long been argued as a critical resource to firms the necessity for professional service firms to invest in their employees is far bigger than for any other kind of organization (Pfeffer, 1994). The influence of human resources can be seen (much like the resource management information) as a dynamic resource as it influences multiple essential parts of the company. The Human resource is also a resource which can be seen in layers, on a deeper level with attributed like knowledge management, education, experience, skillsets and of course motivation.
Professional Service firms rely heavily on Human capital in order to provide both the service but also in order to allow the firm to have credentials and thus approach specific niches / areas of the market. As such professional service firms have - when it comes to strategy and gaining competitive advantage - a very distinct focus on Human capital and building skillsets and credentials.
In general there are two possible focus area for increasing market share or gaining a competitive advantage for a PSF: increasing market exposure / penetration, or increasing skills and acquiring their credentials. Keep in mind that professional service are either providing solutions or development for companies, this in practice means that they rely heavily on strong customer relations and their skills to help those potential customers. This in turn means that strategy for a PSF is often a matter of gaining access to new customers or providing customers with new developments or solutions.
Increasing market share allows a professional service firm to increase its potential customers, and increase exposure to potential opportunities. The increase of market exposure can be done in several ways, increasing presence, share knowledge and creating a network with focus group (which is why PSFs often organize conferences), invest in employees with market exposure, create alliances, and so on. In the end the market exposure will only allow a PSF to gain customers and engagements if the reputation and credentials are there. As a result, most Professional Service Firms, focus largely on the acquisition of skills and credentials.
Increasing skills and acquiring credentials can be done in two ways either by actively investing in employees already in the firm, or by buying both skills and credentials through acquisition of employees or groups / firms.
Increasing skill with current employees is often only done when the allocation of those employees makes sense, for example if employees already are active in a growth market and can be managed to high productivity and margins they are not likely allocated. The investment in employees to acquire skills is often done when the skills to be acquired are complementary to already existing skills, or when allocation is considered to be to a far better alternative to a current unprofitable endeavor. Investment in skills are also not taken lightly by most professional service firms, not only because skill training costs time and money but also this time cannot be used for productive work. The cost of time is also the reason why investments in skills is more often done on the junior members of the PSF than on senior member level who can be sold for higher hourly rates.
Acquisition of skill and credentials is done on both the individual level and on group level. On an individual level this is mostly done by recruiting an experienced manager who supplies the firm with the credential and experience, but who can also lead newly recruited consultant in acquiring new skillsets. Sometimes when recruiting is done with a strategic plan it is possible to not only recruit an experienced manager but also have him or her recruit former colleagues who would like to continue working with / for the manager. From a firm point of view acquiring skills and credentials can also be done by taking over small specialized firms, or creating alliances, joint ventures or even combining skills by creating a network organization. This is in any ways following the same trends we are seeing in other kinds of firms, where the risks and costs
17 2 Literature review
are reduced by using a smaller organization and supplementing that organization via a trusted network, this also reduces potential profit as this is now shared among the individual participants in the network.
3. Data and method
The exploratory nature of this thesis makes it a qualitative research, because this research explores a phenomenon experienced and seen by practitioners. The research of an experience or phenomenon also makes it a case study. One of the characteristics of the case study is that it allows proper research into how and why certain phenomenon happen, in effect the case study allows the researcher to answer both why and how something has taken place (Yin, 2003). Case studies are the most appropriate research methods when there is a need to cover or explain the contextual elements of the phenomenon under study, or when the boundaries of phenomenon and the contexts is unclear. (Baxter and Jack, 2008)
Research question
This research hopes to understand the role played by motivation in professional service firms in regards to (indirectly) increasing its competitive advantage. Competitive advantage will be looked at from a strategy point of view using the Resource Based View, both because of its applicability to the strategic behavior of Professional Service firms and because it allows categorizations of software and capabilities (including motivation) in a layered fashion. To understand the role motivation could play within a professional service firm in regards to its strategic development of dynamic or strategic resources, this research aims to answer the following question.
What role does motivation play within the development of (dynamic) capabilities of a professional service firm?The answers that is to be expected is that the younger and yet to proof themselves group of developers in the consultancy are likely more motivated in their effort to gain skills and make a difference. The reason for this expectation has both to do with the need for young professionals to establish themselves and get acknowledgement, another important influence is that the stability of the regular work activities of each of the developers will be a major influence. Support departments for example are by nature less development and change driven than for example the consultants whose core activities are to create change. It is however likely that the truth behind both the lack of development of the Support developers and the
19 3 Data and method
willingness of the consultants to develop their own organization maybe more complex then at this point can be foreseen.
Another expectation is that to all developers the desires of the partners within the professional service firm will be key in their motivation. Not only because the partners are the primary shareholders of the firm but also because they are in effect both the top managers of the core processes and the shareholders, allowing them to throw a lot of political influence around. This political influence influences the career path of consultants, but it also determines the strategy of the PSF in regard to reorganizations of support indirectly.
Although the managerial / political power of the partner is likely going to be important, part of me hopes that the influence of HR theories is larger than the managerial power of the partners. Meaning that the research will be able to find clear evidence of the influence of the Agency theory, intrinsic and extrinsic motivation and perhaps other theoretical concepts which might come up along the way.
A potential risk for this thesis is that because the thesis is looking at motivation which is human resource influence on the project, there will be other human resource influence which will affect the outcome of the project more than in a group of professionals should be expected. Influences like political alliances, friendships or annoyances among important stakeholders.
Hypothesis
The main research question is founded based upon a larger believe that in a more service driven economy, which currently can only exist by knowledge and execution of services by human resources or their designs, the ability of an organization to motivate its employees can be described as a VRIN resource. Even if motivation is a VRIN resource, a firm would never have a sustainable competitive advantage by just keeping employees motivated, it needs more capabilities, some dynamic, sometimes resources. Perhaps more interesting is that these resources need to be different for different areas of the organization, innovation for example is by no means for all organization or organization parts a capability which will lead to a sustainable competitive advantage. This was also mentioned in the reaction of Barney in 2001 to critique of Priem and Butler (2001), as Barney mentions that the RBV needs to be extended in order to truly create an understanding of what creates a sustainable competitive advantage. However the RBV itself is a good perspective to consider and organize processes but there is a need to involve other theories in order to
understand how specific resources need to be organized and handled. From that perspective each major department and processes can be seen as having an optimal configuration of resources which are handled in an optimal fashion.
One of the key modules for departments and major processes is the resource human capital and thus this thesis set out in to see if it can show how the motivation of human resources can influence the organization and its ability to sustainable competitive. Therefore the hypothesis which this thesis will attempt to prove or disprove the following research question:
“Motivation as a dynamic capability has become key to sustainable competitive advantage for any organization which relies on human resources in their core activities.”
In order to test this hypothesis this research will follow the conceptual model shown below (figure 3,1). The goal of the research is to figure out how motivation influences the developers as they create management information for the high level business manager of the professional service firm. In order to do so within the framework of the Resource Based View it is necessary to home in on dynamic capability of motivation first by understanding the other resources. This will be done by looking at the available resources and their capabilities both in the beginning of the case and the progress of each developers group during the case. Then the dynamic capability of motivation and its effect can be researched, by looking at the outcome of development, cooperation in development and cooperation or willingness to cooperate between the departments in terms of sharing resources and requesting help. Last but not least this thesis recognizes that on a deeper level then the RBV is normally willing to go there are specialized fields of science which fuel the motivation of individual employees and the policies that departments create.
21 3 Data and method
Figure 3,1
Sub questions.
The sub questions are established to do two things, first of all they will organize the case descriptions in such a way that it becomes clear how the resources and capabilities of each group of developers changed during the case. Secondly the case will be examined by looking at the underlying motivational drivers which will fuel both motivation and behaviors, this will be done by looking at the behaviors but also by taking a closer look at the motivational drivers the developers perceive. The resulting creation of management information - which is the subject of the case - is part of the dynamic capabilities which allow the PSF to be competitive over time, is the final goal of strategy. However this is a result of motivation in collaboration with other resources and capabilities, the goal of this thesis is to understand motivation and its role as a dynamic capability in regards to the strategic proficiency of the firm.
The conceptual model and its cooperation between theories and the RBV will act as a guide for this thesis. This means that within the case of development of management reporting the first goal is to determine what skills and resources are available to the different stakeholders and how the skills and resources available to the developers will develop, this will follow the perspective of the RBV. Once that has been determined the motivation and cooperation can be looked at more closely looking at more specific field of science.
The first step is to organize the findings of the research in a practical representation events which allow the reader to not only understand the case, but to understand the case in a way that allows the reader to understand why developers had different results. The second step is turn the case describing parts of the case into theoretical explanations and implications for the RBV in regards to motivation.
The case describing sub questions are:
What resources and capabilities had each of the developers to create the management information?
To what extent did each group of developers commit to the creation of the strategic resource?
What was the result of each group of the developers?
How did the different stakeholders work together?
How is motivation different for each stakeholder group?The sub questions in regards to the theoretical explanation and implication are:
What role does motivation play in strategy of professional firms?
How could this knowledge be relevant for the Resource Based View?
How could this knowledge be applied to other cases and by practitioners?Because this thesis focuses on the dynamic capability of motivation by studying the development of another dynamic capability (management information), the thesis also answers the question on how dynamic capabilities help firms to gain a competitive advantage through innovation / development. A question which according to amongst others Nooteboom (2005) has not been addressed sufficiently, this thesis will at least show how the lack of dynamic capabilities will reduce the competitive ability of a firm.
Although not the initial goal of this thesis it became clear that in order to perform a case study on a dynamic capability which can be researched from a lot of other scientific perspectives required me to consider how to use these other fields of science in cooperation with the RBV. Hopefully an interesting side effect could be that the conceptual model created in the hypothesis can be developed into a strong cooperative structure of theories, which at one point can allow theorists and practitioners to create a more specific and explicit understanding of what it takes to be sustainable competitive.
23 3 Data and method
Data acquisition
Data acquisition in the case research will be done by following different methods. First of all primary stakeholders will be interviewed in order to understand their position and motivation in the development process. Initially the primary stakeholders consisted out of the managers (6) and the developer so reporting department (7), interviews with the business developers (7) were done later and because of progressive insight were less formal. The initial interviews will be recorded and written. After that the case will be monitored based upon progress found in both observations in meetings and short interview with developers and business unit managers who would be using the reports. Figure 3,2 (page 24) shows both the interviews and meetings taken into account
The process of developing management information within the professional service firm is a continuous process. For this research this has meant that the case in terms of time had to be limited. Originally the research was limited to a period 1,5 year, during which period the consultancy firm developed its initially required management information. The timing of this case research is essential as at the time the PSF in the case implemented a new ERP-system, which in terms of management information meant that everything had to be redeveloped using a new data model and software with new possibilities and limitations.
Interviews will be conducted in order to acquire information into why each stakeholder group has performed differently and whether or not this difference in performance is caused by difference in resources and capabilities or potentially could have different causes like motivation. Interviews will be conducted in confidentiality, just like the professional service firm will not be mentioned. The interviews with employees of each group will be confidential both to protect the employees and to allow the employees to be forthright without hesitation in regards to the findings or reactions to their opinions.
The interviews will be semi structured, each interviewee will know the subject is in regards to management information development, however the specific nature of motivation will not be named. Rather the interviews will be held in order to find out how management information development efforts are structured in the professional service firm, or at least that is the introduction. By doing this we can create both a clear
overview of the priorities of developers and create an overview of the available resources and capabilities without raising presumptions.
The interview will be semi-structured which in practice meant that throughout the interviews a list of numbered subjects was always present. Allowing to mark whether or not a subject has been mentioned but also using the number in the notes and answers of the interviewee to mark subjects. The list of subject can be found in the appendix. The subjects were grouped and numbered in a way which allowed for rather simple numbering during the interview, and more detailed numbering afterwards, which considerably speeded up the processing of the interviews. The interview protocol / subjects can be found in the appendix.
The interviews will follow the chronological line in which development by different stakeholder groups incurred. By doing so it is most likely that the perspectives of each stakeholder group, its differences and its influence on the case will be best understood. The interviews will focus on the different limitations and output performance of development of management information in order to understand how and why performance differences by each stakeholders group were created. Next to interviews the research uses observations from within meetings and reviews the process continuously with its stakeholders to understand their position and motivation within the process. In total the following amounts of interviews and meetings were taken into account (figure 3,2).
Figure 3,2
In terms of style and reporting method this thesis will be modelled after the stakeholder analysis during an ERP implementation written by Boonstra in 2006. Although Boonstra was researching the impact and influence of stakeholders on a different subject, rather than a specific influence on each of the stakeholders in a development process, the logical sequence and style of writing should provide the structure that allows
Interviews Meetings Support developers 6 4
Managers 7 1
Consultants 7 5
Support developers / Managers N/A 3 Managers / Consultants N/A 7 Support developers / IT / Managers / Consultants N/A 1
25 3 Data and method
3.1 Case environment
The case this thesis will use to research, is the case of development of management information within a professional service firm. This professional service firm is one of the larger firms within the Netherlands and has a global presence, making it within the focus area of accounting one of the larger accounting firms in the world. Next to accounting this professional service firm also provides management consultancy, risk consultancy and fiscal advise. This professional service firms was chosen, because not only it had access to different professionals capable of developing management information, the firm itself was fully cooperative, which in case of these kind of strategic resources is not a given.
The research setup recognizes three different groups and performance periods, during each period a different group was active as developer. These developers were part of departments or specific sub-departments, in order to protect identities of individuals this thesis will refer to the developer by naming their group / department or sub-department. Their relative position in the organization and in regards to each other is shown in figure 3,3.
Figure 3,3
The first group attempting to create reporting development was the Finance support department. This group initiated report development directly after the implementation of the ERP system and had full access to the data and influence on the way the data was organized. The primary report developers within the finance department were the professionals part of the Reporting sub-department. The time and resources of this
department are fully focused on maintaining data flows (including reports) and developing reports for the board of directors of the PSFs and its major business units (Advisory and Audit). The individuals in this supportive reporting department are highly trained in reporting (development) and data modelling, making them the ideal candidate for development of the strategic resource of management reports.
The second group is formed by the high level managers and their technical support. Each of the Business Units in the PSF have very capable high level managers in charge who are both experienced and (financially) enabled experts and have support of experienced and capable technical experts. This group started developing their own reports when the financial Reporting was unable to meet their criteria of what reports should be.
The third and last group which was part of the development process of management information reports were the consultants of IT management consulting, who were part of the Advisory Business units of the PSF. Normally these consultants help clients with their IT challenges including reporting. Reporting itself is not necessary for all the involved consultants their core activity, nor are they knowledgeable about the data modelling of the PSF. The consultants are however experienced solution providers and creators in regards to both IT and reporting.
Within the case there are multiple stakeholders, each with their own characteristics, responsibilities and priorities. The most important stakeholder to the case are the high level managers of the PSF, they are responsible for making strategic decisions in regards to strategy and support partners in their operational decisions in regards to business. These managers as a result require information in the form of management information and are thus the primary pushers for better reports. These managers set the criteria for the reports but also are able to provide facilitating political power and budget for their development.
A second major stakeholder in the case are the members of support developers department. This department has the responsibility to create and guard all the data access authorization and to a very large degree is the only stakeholder group who is responsible for reporting. Although this group in terms of authorizations and interaction with the system developers and the data modelers has the most power over data and reporting they are in terms of hierarchy below the high level managers. This group of support
27 3 Data and method
professionals have the most experience in regards to reporting and the data model of the PSF. Their focus on reporting and thus management information also makes them the most likely candidate to keep the reports that are to be developed operational once they have become available.
Other relative minor stakeholders are the IT department, business consultants and their partners. The IT departments role is one of facilitating the development by arranging access to resources and ensuring all parties understand the capabilities of the involved resources. Business consultants and their partners play a larger role in this case as the consultants actively participates at one point. Keep in mind that the biggest priority for the business stakeholders in general is to create revenue for the PSF and not to solve internal management issues. This in practice means that whenever consultants from the business are focusing on internal projects their activities create double the costs, not only the costs of the consultant but also the lack of revenue created because of the consultant’s allocation to internal projects. As a result the most junior consultants are usually used on internal projects, not only because it is considered a save area to practice and improve their skills, but primarily because of the costs involved. The consultants in the case, are also juniors, or sometimes assistant managers.
What is important to note is that within the current system of the PSF there are two kinds of reporting, that of the monthly financial data and that of current operations. The data for the monthly financial data is easily accessible and is primarily used by the Board of the Directors, while the data used by operational high level management is relatively difficult to acquire. One of the reasons this operational data is difficult to acquire by for example the sheer amount and different layers of data, higher complexity, and time dependent requirements. The Board of Directors is not mentioned as a stakeholders because their reports have been developed and created little challenge.
4. Case description
In the case description the sub questions are used as a framework to describe the major aspects which are likely to influence the case. The framework first focuses on the description and explanation of what happens in the case and then continues to the theoretical perspective and scientific meaning of the case.
The sub questions allow to describe both the practical and theoretical matters surrounding the case. The first part with its case observations and finding creates the understanding needed to explain why the case developed the way it did, providing both an understanding of what activities took place and why. While the second and theoretical perspective provides meaning and categorizes the development in the case in a way that allows the reader to understand and place it within a theoretical framework. Together the case description should not only allow, for understanding of the case in both perspectives, but it should also allow the reader to bridge the gap between theory and practice in order to apply the understanding to their own environment.
Each sub question with a practical perspective ends with an overview on how each group of developers functioned in regards to the sub question, with “++” being the top score and “- - “ being the lowest possible score. Throughout the case three developers are mentioned: the developers of support developers, the managers of the board of directors together with their direct subordinates, and last the consultants.
29 4 Case description
4.1 The case in practice
Resources and capabilities of the developers
The resources and capabilities of the developers involved allow for an overview on how developers themselves started out and progressed during the case from the perspective of the resource based view. Although this chapter approaches the case from a practical side, the available and / or acquired resources and capabilities should still give a pretty good idea on the extent to which the different developer groups were suited to develop the management reporting of the PSF in the first place. While the development in terms of skills and acquisition of resources for each developer group is an indication of their willingness to learn and thus is also an indication of motivation. This chapter answers the following question:
What resources and capabilities had each of the developers to create the management information?This question is important as available resources and capabilities in the end are hugely responsible for development. The resources and capabilities can be described at different moments, by doing so the development of capabilities and acquisitions of resources become visible. Capabilities will be described along the following categories, education level, experience, focus areas in regular work, and capabilities acquired during the case.
The support developers are at the start of the case by far the most experienced and specialized group of developers in terms of management information within the PSF. From an educational point of view most of these developers started out at the level of university of applied sciences, but have trained and sometimes finished academic education during their professional lives. The capabilities of these developers have not changed significantly throughout the case, although like all the other developers there was a change in regard to with which software they would have to work with, this was a change that all developers had to go through.
In terms of resources the developers of Support developers hold all the strings, all the reporting facilities are arranged through support developers, this means software, authorizations and access to data goes through this department. They are also closely connected to the data model and all software in regard to
data extractions, they represent the knowledgebase in this regards and are in close cooperation with the global IT management.
The second group of developers are the managers of the boards of directors from the business units. These managers are experienced consultants and have moved away from working in the core operations to guiding and supporting the core operations in terms of management. Among their tasks are the creation of budget and control of budgets for the departments, deciding on investments and supporting the departments in their management, ensuring that partner in the core business can focus on sales and operations. Their skillsets are often very different and depending on the background in which they were working in the operations. However the manager involved in this case had a background in performance improvement, human resource management, Finance and major reorganization projects. In terms of education the managers had a slightly more educated starting point in the sense that each of them studied at the university rather than universities of applied sciences. However none of them studied specifically in Information Technologies or management reporting, their skills in this area were acquired purely through experience. This group of developers did not became reporting developers by choice but rather because of a need for information they started making excel sheets which turned data into information. In this process they became both used to working with Excel and created a basic understanding of the data model they required to fill their basic information needs. During their professional lives management have trained mostly in regards to leadership financial management and change projects.
The last group of developers are the business consultants, this group is in terms of capabilities perhaps the least experienced. The business consultants especially, in this case, are young professional and mostly consist of junior consultants. The consultants in general are academics and usually have finished a Master of Science as well, although not necessary with a focus point on management information. The consultants in their everyday work are IT consultants with a focus on major ERP systems or in some case Business Information and Analytics tools. Being young professionals they are not as experienced as the other groups of developers and have on average only 1 to 2 years of working experience. They are not familiar with the data model of the PSF, but in some case are familiar with the ERP tool used by the PSF. The primary capability they have is they are used to relative short projects in which they need to acquire information on
31 4 Case description
a company and work with the tools they have available. They are in other words used to adjusting to a new situations and solving issues in IT systems or issues related to IT like management information
For the professional service firm the Support developers consultants are the cheapest to use in internal improvement projects, followed by the business consultants and last the managers. The business consultants may be cheaper in terms of costs than Support developers, but any time invested in internal projects by them also reduces revenue, creating a large cost for the PSF.
The table 4,1,1 shows how each developers group was suited for development of management information based upon their starting characteristics. It is important to note that all the columns are in focusing on the expertise in regards to the specific PSF, so for example although the consultants may have some experience with management information, they have so far not had anything to do with the management information of the PSF. Also “Used to development” column is an indication of the extent to which the developers are used to developing management information, managers of the business units for example have large amounts of experience in change management, but are inexperienced in the creation of managed information, using for example BI tools or templates.
Table 4,1,1
During the case the capabilities and resources available to each of the developers changed, not only because some of the developers became involved at a later stage, but also because there was a need to adjust their skillset to the available resources. (table 4,1,2 shows the capabilities at the end of the case and support the texts below)
Support developers became less and less involved during the case, they to a certain degree felt that they weren’t trusted, and to a certain degree felt that all considering that if the business wants to invest in their own reports that is fine. The support developer did maintain control on all resources, but in terms of development were focusing on maintaining the current data flows and stabilize the existing available
Suited for
development Resources Capabilities
Management reporting expertise Used to development Average Support developers ++ ++ ++ + ++ Managers = - + = = Consultants - + = ++ =
information systems. This meant that in terms of capabilities they were falling behind on the consultants and they also lost connection to the managers in the business which lead to a lesser understanding of business requirements of management information for the business units.
The managers of the business units became slightly more experienced in the development of management information as they learned the limits of the PSF data models and reporting abilities.
The consultants adjusted to the PSF resources and capabilities the most, not only did this adjustment lead to a higher score, but their experience from the consultancy activities allowed them to add additional capabilities to the applicable skillset. In terms of resources the consultants were allowed access to nearly all resource which delivered data and BI tools available to the PSF. The reason they do not have the “++” sign is that at the end of the case it turned out that the support developers and IT-department had kept one essential resource away from the business developers.
Table 4,1,2 Suited for
development at the
end of case. Resources Capabilities
Management reporting expertise Used to development Average Support developers ++ + - - = Managers = = + + + Consultants + ++ ++ ++ ++
33 4 Case description
Commitment to the project
The reason commitment is important is that it explains why effort was (not) put in the project of developing the management information. In order to explain commitment this thesis will describe the influences on the time invested in the project, purely by capabilities of the influence and the formal set priorities. A good indication of these priorities and influences are agreements made in meetings and KPI’s. this chapter answers the following sub-question:
To what extent did each group of developers commit to the creation of the strategic resource?Support developers’ primary goal is to keep the general reporting (pull reporting) from the ERP-system up and running and maintain its authorization scheme, their second priority is to supply the board of directors with management reports and last but not least they need to support the business both in specific inquiries on data but also in reporting. These priorities are set by the overall board of directors, however the department itself together with an attached supervising business controller advice on the reporting strategies of support, in other words support developers specialists advice the board of directors what the support developers specialists should be doing. Although this may sound as something bound to go wrong it is very important for two reasons, first of all in a partner organization or PSF there is a risk that each partner (often financial or strategic experts themselves) have their own specific information demands, secondly the amount of political and social pressure created by the business partners can be overwhelming and thus the board of directors act as a (political) buffer. An important political issue that influence support developers is that within the PSF there is always tension between the different major business units, this tension is most felt on the highest level namely accounting and advisory. The controller which supervises the support developers specialist is the controller for accountancy.
The managers of the board of directors of the business units are in terms of priorities quite clear, the management information is their highest priority as it is part of their support to the partners. That being said the resources they are most willing to use to acquire their management information is time and political influence. Time in regards to their own time or time of those who have been appointed as supporting for their efforts. Political influence is for example used in regard to temporary acquiring business consultants from the business, this is done by acquiring goodwill of the partners involved but also because it helps
junior consultants to know influential people in the board of directors of their business units. When using different resources like for example budget it reduces the profit, which in the PSF is directly linked to the income of the business partners, which obviously does not create a large amount of goodwill.
The business consultants primary priority is to be productive and in time as they reach higher ranks to sell projects, in other words to create revenue for the PSF. Their second priority is to learn and improve their skills in order to become more valuable for the PSF and thus become essential for parts of the revenue. Their third priority is to raise their profile and create awareness of their skills, this is done not only to progress in the organization but also because (especially) as a junior consultants you need to have supporting managers who want to work with you on their projects in order to gain productivity and gain approval to gain rank. It is important to understand that there are a lot of influences on the career of juniors, because of this they are also vulnerable for social and political pressure especially in the beginning of their careers.
During the project the influence and time invested of the different developers changed. Support developers became less and less involved and went from developing and testing all reporting facilities during the implementation to the absolute minimum which is maintaining data flows for existing report and changing authorizations of the developers. Support developers were also responsible for answering or making sure questions of the business were answered in regards to the system or its data.
Managers of the board of directors in the beginning of the project were trying to figure out what kind of support they were going to receive in order to create their specific reports. When after four months after the ERP implementation it became apparent that there were no results or reports that filled their specific operational management information needs, the manager of board of directors of business units started developing their own reports. This was done for two reasons, first of all to fulfil their own information need, but second also to supply business operational leaders with operational management information which they would otherwise acquire by allocating resources away from the core business. In practice the motivation of the managers of the board of directors decided that if support was not supporting the information need for the core process of the PSF they would have to take responsibility for the development. As a result after the initial four months after ERP implementation the managers of the board of directors
35 4 Case description
became the leading developers and they remained on the long run the most involved in the creation and maintaining of management information by setting the requirements and challenging the consultants.
The consultants of the business were involved in the implementation of the ERP system but had absolutely no involvement in the initial four months of reporting development. Support developers and support were unable to call upon their expertise in the field of management reporting as this would take the consultants away from their core activities and cost the PSF a lot of money. Also support developers were hesitant to ask assistance of the business both for political reasons and because their involvement often meant that support developers had to change the way they worked by acquiring new knowledge or changing their activities. The consultants in the business on the other hand were not involved initially for other reasons as well. Each consultant belongs to a department who are judged by their productive hours and income they generate, these KPI’s are very important to them and performing these internal development projects are not supported by these KPI’s. As a result the consultants are often involved in a sort of hit and run fashion, when an issue or the need for a new report was raised the consultants put in a lot of effort in a short time to get the job done and then focused on their core activities again.
The IT-department is also mentioned in the table as the IT-department is supporting the support developers in the maintenance of authorizations, data flows and resource managements. The IT-department was often called upon to provide indications of technical possibilities of resources. Also IT much like the support developers were often involved or asked their opinions or technical solutions but then came back with efforts or answers which the business considered unacceptable. One of the things that in practice often happened was that while the business was looking for the optimal solution of management information and then afterwards improved efficiency of its operation, the support departments worked the other way around first looking at capabilities and capacity of current operations and the possibilities within those limits to develop additional management information.
The following two tables (table 4,1,3 and table 4,1,4) indicate the commitment of the developers group based upon their policies and regular activities and then based upon what happened in practice. The column on personal benefits was created because the performance of individuals in regards to projects is very important as well, but is also something which is under high influence of political powers.
