Group 14- NER Group PDF

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Assignment Cover Sheet – Semester 1, 2019/20

MT302A

Group Number

Organisation Theory

14

and Practice

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Report Part A: Introduction and ner Group Overview and Analysis Ner Group is a group of companies concentrated in the Basque Region of Spain, however, their reach spans over sixty nations (ner Group, 2019c). The companies within ner Group differ in their industry, products offered, and size (Alvarez Sainz & Apellaniz, 2017; Nerei, 2014). What does connect them is the concept of “ner”, which stands for the New Style of Relationships, or Nuevo Estilo de Relaciones in Spanish (Alvarez Sainz & Apellaniz, 2017; Aretxabala, 2017). “Ner is based on people (the basic pillars of an organisation) who, with communication and information, are organised in self-managed groups and share a future project with trust, freedom and responsibility” (Alvarez Sainz & Apellaniz, 2017). Ner sees people as actual people, not as expenses or even assets, and its people-based orientation extends beyond the organization to include the community and clients alike (Aretxabala, 2017; Alvarez Sainz & Apellaniz, 2017). Not all organizations who practice ner are part ner Group (ner Group, 2019c). In fact, one of the organizations within ner Group, K2K Emocionando, is a company solely dedicated to converting existing firms into ones who embody “ner” (Aretxabala, 2017). Those within ner Group are further connected by their shared mission, uniting features, values, and cultural characteristics (Alvarez Sainz & Apellaniz, 2017; ner Group, 2019c). Today over fifty companies exercise this new style of relationships, twenty-four of which compose the ner Group (ner Group, 2019c). Leading this trend is ner Group founder Koldo Saratxaga. Saratxaga first proved the transformative powers of ner, by using it to lift the coach company Irizar out of bankruptcy and into prosperity (Alvarez Sainz & Apellaniz, 2017). This paper aims to analyse the ner Group in light of traditional organizational practices and theories. It will then compare ner Group to another people-centric organization, Haier. Finally, it will touch on the extent to which ner is realised in practice, its criticisms, and the reasons why ner is not universal across all organizations. Firstly, it can be affirmed that the ner Group is still functioning today. Recently they organized an internet conference where they explained their way of management and answered participants' questions (ner Group, 2019b). This shows that interest that still exists around the new style of relationships and the company itself. As previously mentioned, the organizations that compose ner Group are connected beyond ner to encompass a shared mission, vision, and values. Ner Group’s mission is to be “an association in which diverse organizations, united by the New Style of Relationships, share 1

experiences, synergies and knowledge; join forces to improve, advance, be more efficient, and get better results, and accompany each other on the path of profound cultural change entailed by this (ner) style. It is an association with a clear concern for Society, which wants to achieve a Just and Sustainable Human Development” (ner Group, 2019c). Their vision for the future is mentioned in their mission statement, which is “for organisations to accompany one another on the path to cultural change, which involves the new style of relationships” (Alvarez Sainz & Apellaniz, 2017). Ner Group’s core value is people (Panelfisa, n.d.). Specifically, people are seen to be “the most important and valuable aspect of their organisation” (Alvarez Sainz & Apellaniz, 2017) and “are the basic pillars of the organisation” (Alvarez Sainz & Apellaniz, 2017). Ner Group also values its customers and believes that all decisions made should consider customer happiness (Alvarez Sainz & Apellaniz, 2017; Panelfisa, n.d.). The value placed on customers is not only evident on the “about us” section on the websites of ner organizations (Estudio K, n.d.; Nerei, 2014; Panelfisa, n.d.), but it is also realised in practice. Over threequarters of people surveyed within the ner Group feel that client satisfaction is at the heart of their daily activities (Alvarez Sainz & Apellaniz, 2017). Ner Group also values the Basque region and society at large. This is shown through their donation of both employee time and organizational profits towards activities that benefit society and/or the environment (Alvarez Sainz & Apellaniz, 2017; Panelfisa, n.d.). Finally, ner Group has a set of core principles/values that are in place to guide the actions of employees (Nerei, 2014). These principles are workplace safety, quality, environment, innovation, service, cost, and creativity (Nerei, 2014). Compared to most organizations, ner Group has a very nontraditional organizational structure. This was purposeful, as ner Group believes that traditional organizational structures constrict individual autonomy, and thus people’s passions and thoughts (Aretxabala, 2017). Their structure is relatively horizontal compared to the standard structural forms of process, multidivisional, functional, and matrix. Instead, it encompasses elements of both a horizontal organization and a holacracy. Horizontal organizations are structured for learning (Daft, Murphy & Willmott, 2017), which aligns with ner Group’s principles of innovation and creativity. The elements of horizontal organizations that are present include employee empowerment, a loose hierarchy, decentralized decisions, horizontal communication, and shared responsibilities (Daft, Murphy & Willmott, 2017). The most important type of horizontal linkage within an organization are teams (Daft, Murphy & Willmott, 2017), and ner Group has this in abundance. The design of ner Group is based around teamwork and all members of staff are part of small teams, which may be based around “products, services, regions, clients, or processes” (de Morree, 2017). These teams are self-led, create their own 2

objectives, and are responsible for their own performance (Alvarez Sainz & Apellaniz, 2017; Aretxabala, 2017). By allowing teams to make their own decisions, in combination with the lack of a traditional chain of command, it puts the power in the hands of what ner Group values most, its people (Aretxabala, 2017). Ner group strongly feels that no executive group can make the best decisions for a whole organization, which is why teams have a high level of autonomy (Aretxabala, 2017). The teams are small, to increase accountability, and the goals they make must align with the organization (Alvarez Sainz & Apellaniz, 2017). Each ner Group organization only has five salary levels, which further flattens its organizational structure (Alvarez Sainz & Apellaniz, 2017). In the words of K2K Emocionando member, Pablo Aretxabala, ner Group’s structure emphasizes “self-management and collective intelligence”, along with “the freedom to decide” (Aretxabala, 2017). This is the case because both Saratxaga and Aretxabala believe that a narrow span of control is outdated in today’s ever-changing business environment (Aretxabala, 2017). Although no clear levels of structure could be found for any of the ner Group organizations, the first organization that Saratxaga transformed, Irizar, only has three overarching groups (Joost, 2017). These are the coordination group, customer relations, and manufacturing; within each one are small teams, which is the central element to ner Group’s structural design (Joost, 2017). Ner Group’s structure is very much in line with the newer structural concept of holacracy (Van De Kamp, 2014). As seen in ner Group, holacracy consists of self-led groups, power that is spread throughout the organization, a flat structure, and “purposeful work” (Van De Kamp, 2014). A distinction between the two is that “holacracy aspires to result in a natural hierarchy focused on work instead of individuals” (Van De Kamp, 2014), whereas ner Group is people-centric (Panelfisa, n.d.). Also true to holacracy, the organizations within ner Group operate as a holon (Van De Kamp, 2014). A holon is “an entity that is simultaneously a whole and also part of a larger whole” (Van De Kamp, 2014). The teams within each ner Group organizations are themselves “whole”, as they have a leader, form their own goals, and are relatively autonomous (Alvarez Sainz & Apellaniz, 2017; Van De Kamp, 2014). They are, however, part of a bigger whole, their organization, which is part of an even larger whole, the ner Group. Meaning, that in the literal sense ner Group is a holacracy, as a holacracy means to preside over the structure of holons (Van De Kamp, 2014). Overall, ner Group’s structure is non-traditional and horizontal in nature. It is very similar to a holacracy, only with a people focus. Ner Group is known to have a very strong culture. This can be seen not only in the way they do business, but in their name: New Style of Relationships. Ner was founded by Koldo Saratxaga, a successful Spanish businessman (Bizkaia Talent, n.d.). The main reason for 3

Koldo’s astonishing success is his business philosophy, where people are considered to be the most important and valuable asset of the organisation (Alvarez Sainz & Apellaniz, 2017). The cultural characteristics of ner can be divided into four categories (Alvarez Sainz & Apellaniz, 2017). The first one is involvement (Alvarez Sainz & Apellaniz, 2017). The best way to foster involvement is by working in small groups, so all the different teammates feel integrated (Alvarez Sainz & Apellaniz, 2017). This way, the teams are able to establish their own goals, communicate, discuss or just share ideas. When employees feel like they are an important part of the project, they are more likely to get involved. When the aim is a shared project, it is necessary for the employees to be excited, committed and to consider themselves the owners of success (Saratxaga, Garrigues Walker, & Etxenike, 2007). A survey was carried out in 2015 by BOGA (Basque Studies Consortium Journal) where ner Group employees’ perceptions of the company were analyzed (Alvarez Sainz & Apellaniz, 2017). More than 70% of surveyed people agreed that the commitment of people to the different teams facilitates the correct functioning of the organization (Alvarez Sainz & Apellaniz, 2017). The second characteristic is consistency, which refers to the trust, transparency, and freedom that is put into every worker (Alvarez Sainz & Apellaniz, 2017). Ner’s culture builds a relationship of trust between the employee and the company, as they believe that without trust there is no communication (Alvarez Sainz & Apellaniz, 2017). As a matter of fact, ner is known for their “no fire policy”, meaning than no worker is ever fired (Alvarez Sainz & Apellaniz, 2017; ner Group, 2019a). Instead, they are relocated to another company within ner Group (Alvarez Sainz & Apellaniz, 2017). Transparency is also an important factor in ner (Alvarez Sainz & Apellaniz, 2017). Every employee is required to understand how the business works, which means understanding the basics of the economy. The reason they require this knowledge is because it helps set a more transparent environment. Company financials, salaries, and team results become open in order to achieve a feeling of fairness and trust (Joost, 2017). Mission is the third cultural characteristic (Alvarez Sainz & Apellaniz, 2017). As previously mentioned, ner believes that working in small groups fosters involvement, but this is not the only benefit. Thanks to this, it is easier to set goals and objectives, as well as having a clearer vision of the future. When a project is shared by everyone as a commitment, it adds much more value than resigned obedience (Hamel & Breen, 2008). The last characteristic is adaptability, referring to ner’s supportive attitude towards employees (Alvarez Sainz & Apellaniz, 2017). In addition to the “no fire policy”, ner has also established a “no pay overtime” policy, which is meant to make employees more effective in their daily basis (Alvarez Sainz & Apellaniz, 2017; ner Group, 2019a). Furthermore, the company does not only want employees to be a part of the 4

company, but to feel as they are part of it. This is why a minimum of 30% of the annual profit is shared among employees, proportional to their salary level (Alvarez Sainz & Apellaniz, 2017). Additionally, ner Group has created a common aid fund for employees who are experiencing any critical economic situation (Alvarez Sainz & Apellaniz, 2017). Regarding ethics, ner Group is highly involved in the community. They are not interested in just investing in their community, they also require employees to become involved too (Panelfisa, n.d.). Specifically, each organisation sets aside 2.5% of its results and 2% of employees’ time for social projects of a community nature (Alvarez Sainz & Apellaniz, 2017). The reason behind this is that successful cultural transmission makes values the driving forces moving both leader and members toward the same future, employing the same methods and measures of success along the way (Fairholm, 1994). This can be seen by the multiple charitable events listed on their website. To name a few examples of ner Groups’ actions: ner Group is present in seven schools in Uganda, where they have helped enroll 2.307 Ugandan kids in school (ner Group, 2019a). Throughout the last eight years, they have helped develop 187 ideas and projects, where more than three thousand volunteers have been involved (ner Group, 2019a). Moreover, ner Group is also concerned with the environment. In 2019 ner organized a tree-planting experience, where they planted over 300 trees (ner Group, 2019a). In addition, in their previous tree-planting experiences, ner Group has planted almost 4000 trees (ner Group, 2019a). Apart from this, ner supports renewable energy companies, such as NEXUS Energía, which actually joined the list of companies that are part of the ner Group (ner Group, 2019c). During this course, it was mentioned that “power is to take action, and one way to determine who has power is to observe who benefits, and to what extent, from organizational actions, particularly decisions or actions that are contested” (Pfeffer, 1992). When analyzing ner Group, one can see that power resides in different areas. In the first place, all the people who are part of the organizations associated with ner Group have power. These organizations seek a distribution of power, responsibility, information and decision making, through a structural change in people (ner Group, 2015). Therefore, its organizational structure is based on four different factors: self-managed teams, with leaders chosen by the teams themselves and with no hierarchical relationship; executive direction through the Piloting Team where all team leaders participate; making important decisions through assemblies; and total and absolute transparency, especially in the economic sphere (ner Group, 2015). That is to say, people are the owners of their activity as well as of the decision making that allows developing this activity (ner Group, 2015). It also increases the power of the organization as a whole and multiplies its 5

capacity for innovation, resilience, potential, and knowledge (ner Group, 2015). Moreover, the ner Group disseminates knowledge and experiences generated, openly and freely to the rest of the citizenry, thus generating social empowerment (ner Group, 2015). “A decision process is a set of actions and dynamic factors that begins with the identification of a stimulus for action and ends with the specific commitment to action” (Mintzberg, Raisinghani, & Theoret, 1976). The ner Group imposes the New Relationship Style, where important decisions are taken from a centralized way to a shared way through the communication and collaboration of people (Koldo Saratxaga, 2012). Therefore, vertical structures are replaced by horizontal ones, eliminating the usual hierarchies and the control elements of people, by self-managed teams (Ner Group, 2019c) . In these organizations there are no bosses, the leaders are rotating, and 30% of the profits are distributed among all the workers (Koldo Saratxaga 2012). Additionally, there are no individual bonuses, not even for the commercial enterprises (Ner Group, 2019c). Following McGregor’s behavioural science model studied in this course, people are the greatest asset of these companies and organizations, and they are assumed to be “Theory Y” employees (McGregor, 1960). Therefore, to obtain the greatest efficiency, it is structured so that employees collaborate and decide equally within a group, where all opinions are respected and heard (Ner Group, 2019c). “Conflict is inevitable and yet desirable part of organizational life” (Montgomery, Cook, Wagner, & Hubbard, 2005). One way that conflict can exist is when several people who belong to an organization disagree. It is interesting to analyze this term as well as the policies that can be carried out to resolve it since, in the ner Group, there is no vertical organizational structure (Alvarez Sainz & Apellaniz, 2017). In the field of corporate conflict management, Mary Parker Follett, in Prophet of Management: A Celebration of Writings from the 1920s, explains the concept of management as a process in which democratic governance takes on importance through the commitment and participation of individuals (Alvarez Sainz & Apellaniz, 2017). It tries to understand conflict and its resolution as something constructive through the integration of different interests. The new style of relations considers that conflict should be understood as a constructive and differentiating element in organizations (Alvarez Sainz & Apellaniz, 2017). This links with what was exposed at the beginning of the 20th century by Mary Parker Follett (1925), understanding conflict not as a threat but as a constructive and differentiating element in organizations (Alvarez Sainz & Apellaniz, 2017). Therefore, to resolve conflicts, people will try to find the best solution for all, integrating all existing interests in the organization. Since ner is based on people, the emergence of conflicts between them is much more likely than in other management models. Therefore, the policies 6

in charge of the resolution of these conflicts will be based on adaptability, the implication of people and the consistency of the system of values that characterize this new management model (Alvarez Sainz & Apellaniz, 2017). The staff of ner Group claim to feel important, considered, committed, and responsible within their organization, which facilitates the resolution of conflicts through cooperation and commitment (Alvarez Sainz & Apellaniz, 2017). This shows that despite the high potential for conflicts, their resolution system seems to be effective at minimizing the negative elements of conflicts. Part B: ner Group in Comparison to Haier This research has led to the comparison of the ner Group with Haier, who presents some similarities in terms of organizational structure and practices. Despite a diff...