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Last month’s column described the roots of modern budget management systems in the progressive and reform movements that took hold in the beginning of the 20th century. Financial management was a component of the new administrative science, and the relationship between top managers and workers was influenced by the concepts of “scientific management.”
Centralized budget management fits well with scientific management. Frederick Taylor and others of that era argued that work processes could be broken down into their component parts, and managers could analyze the most efficient steps necessary to get a job done. Once they were given detailed instructions, workers could be rewarded (paid more) as their work output increased. Conforming to this philosophy, city managers of the time kept the budget reins tight (as do most today). Leonard White notes in The City Manager (1927) that the professional CEOs had a dim view of the ability of their department heads to manage budgets, and one city manager went so far as to describe his subordinates’ budget estimates as “worthless.”
A half century after the dawn of scientific management, Douglas McGregor published The Human Side of Enterprise. He labeled the traditional view of workers and how they should be managed “Theory X.” McGregor’s description of the assumptions of “Theory X” fit well with Taylorism and scientific management. In that view, human beings dislike work, they prefer to be directed and they avoid responsibility.
McGregor proposed a different way of viewing workers and their motivation. Under his “Theory Y,” work is inherently rewarding, people can in fact exercise self-direction and self-control, and they willingly accept responsibility. As confirmation, Frederick Herzberg, in The Motivation to Work found that while employees could be de-motivated by “hygiene” factors such as low pay or bad working conditions, they are largely motivated by achievement, recognition, responsibility, advancement and work itself.
A common thread in McGregor’s and Herzberg’s work is the idea that employees like having control over their jobs, and in how they approach their work. They are not mere cogs in a machine; a job well-done is a reward in itself, and people need the tools and resources (and permission) that enable them to do good work. Herzberg specifically notes the importance of control of resources—“mini-budgets, tools, etc. that are necessary to do the job”—as a positive factor in motivation.
While another half century has passed since the publication of The Human Side of Enterprise, management scholars seem to have confirmed that the assumptions of “Theory Y” are generally correct, and that following a “Theory X” approach to management–in which employees are assumed to be lazy and stupid and the manager needs to direct their work–is generally bad for an organization. Peter Drucker notes (in a collection of his writings published in 2001), “Self-control means stronger motivation: a desire to do the best rather than just enough to get by. It means higher performance goals and broader vision…That management by self-control is highly desirable will hardly be disputed in America or in American business today…Each manager should have the information he needs to measure his own performance and should receive it soon enough to make any changes necessary for the desired results. And this information should go to the manager himself, and not to his superior. It should be the means of self-control, not a tool of control from above.”
Tom Peters, in Thriving on Chaos, emphasizes the importance of empowering managers and staff, and that the individual’s control over resources (budget and spending) is a critical means of empowerment: “Increased spending authority does not entail a loss of control. To the contrary, it begets more control of the most powerful sort–self-control. Low spending control leads to shenanigans–avoid a $1,000 limit by making an endless stream of $999.95 requisitions. High spending authority says to the worker, or unit boss, ‘I take you seriously.’ The monkey is on his or her back to live up to the trust.”
The results of research have consistently supported the importance of giving staff the tools they need to do the job. The Gallup Organization conducted more than 80,000 interviews with managers and employees of more than 400 organizations over twenty-five years. They found that employees both get the greatest job satisfaction and do their best work when twelve conditions are satisfied. One of them is, “Do I have the materials and equipment I need to do my work right?” For managers, “materials and equipment” are ultimately represented by budget authority.
If that’s the case, have our current budget management systems in fact changed to reflect what we’ve learned about human psychology over the past fifty years? Stay tuned for the answer…
Author: Scott Lazenby, city manager, City of Sandy, OR and adjunct associate professor, Portland State University. [email protected]