Topic: Organizational Performance
Publication: Human Resource Management (JAN 2011)
Article: Testing alternative predictions for the performance consequences of middle manager discretion
Authors: A. Caza
Reviewed By: Rebecca Eckart
Today’s organizations are simplifying their hierarchical structures in order to increase efficiency, responsiveness, innovation, and knowledge sharing. In fact, flatter organizations are thought to be associated with a number of advantageous outcomes, one of which includes increased manager discretion. Discretion is defined as the manager’s authority to act, manage, and make decisions in ways that he/she deems most appropriate for the organization.
A core element of flat organizations is the shifting of responsibility and accountability down the hierarchy to lower levels of management. This shift is meant to empower managers to use their own judgment to make decisions that they deem most beneficial to the organization. However, until recently, little research has examined the actual tangible benefits that organizations should receive from increased manager discretion. In a recent study, Caza (2011) examined the effects of perceived managerial discretion on organizational performance. The results suggest that perceived managerial discretion is associated with increased unit performance, but only when managers have the experience to effectively use the increased discretion.
In other words, experienced managers with higher discretion tend to have higher performing units. The author suggests that the empowerment that comes from increased discretion allows those with experience to more effectively manage their subordinates and resources. Without extensive experience then managers are not sure how to effectively use the increased discretion.
This finding provides some guidance to organizations with a flattened hierarchy regarding the amount of discretion to provide middle managers. Increased discretion can be good for organizational performance, but organizations must ensure that empowered managers also have the skills and knowledge (i.e., experience) to effectively maneuver in the more fluid environment. Organizations can increase the likelihood of success through providing managers with additional developmental experiences. These might include job rotations, mentoring relationships, and leadership development training.