Arcelor-Mittal Steel and Iron Company: Organizational Behaviour

Introduction

Organisations have become a very important part of our society in recent years. They play a very important role in directing and organising the activities of society members in achieving common goals that are beneficial to all. It is out of this prominence that organisational behaviour as an academic branch have emerged and assumed a central place in academic circles. Organisational behaviour studies analyse the behaviour of individual in the organisations, their motivations and strategies that can be used to make them more productive. The role of the managers is to ensure that the goals of the organisation are met, and this they do by organising the activities of the employees and directing them towards these goals. As such, they are one of the groups in the society attaching a lot of importance to organisational behaviour studies.

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This paper is going to analyse Arcelor-Mittal from an organisational behaviour perspective. The management style that is adopted by the organisation will be analysed, together with the motivation of the employees. These are just some of the details that the writer will address in this organisation.

Objectives of the Study

The major objective of this paper is to analyse Arcelor-Mittal from an organisational behaviour perspective. To achieve this, the writer will be guided by several specific objectives. These are as listed below:

  1. Arcelor-Mittal: A Brief Background
  2. Organisational model in Arcelor-Mittal
  3. Organisational theories and Arcelor-Mittal
  4. Employee motivation in Arcelor-Mittal

Arcelor-Mittal Steel: A Brief Overview

Lakshmi Mittal is the chairman of Arcelor-Mittal. He is also the chief executive officer of the company. He was the owner of Mittal Steel before the company merged with Arcelor to form Arcelor-Mittal. The company is run by a group management board. Lakshmi is the chairman of the board. Aditya Mittal, his son, is also a member of the board. He doubles as the company’s Chief Finance Officer. The other members are Michel Wurth, Gonzalo Urquijo, Sudhir Maheshwari, Christophe Cornier and Davinder Chugh.

There is also a board of directors, and this is made up of eleven members. It is this group that is tasked with the duty of supervising the operations of the company on a day-to-day basis. This board is made-up in line with the principles enshrined in the memorandum of understanding that was signed by Arcelor and Mittal during the merger. This was on 25 June 2005.

Organisational Models and Arcelor-Mittal

There are generally four organisational models adopted by firms in contemporary society. Before addressing the specific model that is adopted by Arcelor-Mittal, t is important to have a background of the others in order to contextualise Amalcotas’.

Custodial Model

According to Hamilton (2008), this is a form of organisational model where the managers offer a protective form of supervision. The managers are interested in safeguarding the resources of the company, and as such, their orientation can be regarded as been towards money. Generally, the employees are happy under this model as they are promised financial and other economic rewards. The manager’s aim is to acquire the passive co-operation of the employees. This means that they are not involved so much with the firm, and their only motivation is the economic rewards that had been promised.

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Collegial Model of Organisation

Most scholars regard this as the most progressive of all organisational models (Davis 2007). It is practiced in most organisations that are to be found in advanced societies. The model is generally employee centred, and management works in close collaboration with the staff (Davis 2007). In fact, the two can be viewed as working in a team, with all the members involved in the decision making process. The staff serves the interests of the organisation, while on its part, the organisation tries to address the interests of their employees.

Supportive Organisational Model

As the name suggests, support is the major facet of this model. The managers’ aim is to provide the employees with leadership that is geared towards supporting their efforts (Kisner 2008). On their part, the employees focus on participating in the organisation and performing the roles that they have been allocated. The status and recognition needs of the employees are met by the management (Kisner 2008). For example, those employees who are exemplary tend to be promoted, and hence having their status elevated. They are also recognised by been rewarded, monetary and otherwise.

Autocratic Organisational Model

This is perhaps one of the most ancient of all organisational models. It is also considered as the least favourable of them all by those who advocate for humanistic approaches. Power is the central theme of this model (Davis 2007). The managers are given powers and authority while the employees are reduced to mere followers. The aim is to make the employees obey the authority of the boss and be dependent on the same. They are rarely involved in decision-making processes, and all they have to do is follow the directions that are handed down on them from the managers. They are not supposed to question the rationality of any of the decisions made by the managers. This is viewed as one of the most undemocratic form of management around.

The subsistence need of the employees is satisfied by the organisation through the managers (Davis 2007). As much as they get their salary and wages, the management is of the view that the employees should deliver. Instead of relying on the organisation, the employees depend on the manager or the boss. They aim to satisfy them. This is because the manager has been given authority by the organisation to penalise the employee if they deem that the required level of obedience is not met.

This form of model has been hailed as the best tool to adopt when decisions need to be made quickly. This is especially so in times of crisis, when the time for consultation is not available. It is also an effective model when there are new employees who need to be inducted in the policies of the company, and as such, require definite directions from the authorities. The clear directions that are provided make it possible to avoid role confusion. This is because it is made clear to the employee what the organisation expects from them, and what the organisation will be offering in return for obedience and productivity.

Autocratic model has the lowest level of employee enthusiasm relative to the other models. The employees resent the constant supervision, and they feel that they are alienated from the firm since they are not part of the decision-making machinery.

Arcelor-Mittal Organisational Model

The organisational model practiced by Arcelor-Mittal can be described as autocratic. The managers have the authority to fire employees-or recommend the same-when they feel that they are not adhering to their authority. The organisation relies totally on their managers to instil discipline to the employees, and that is the reason why they have conferred a lot of authority on them.

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All the employees have to do is obey the orders that are passed down on them by the managers. This mode of management can be regarded as an adoption of Fredrick Winslow’s scientific model. This is because the managers set clear tasks to their employees, and expect the employees to undertake those tasks without question. The rules are systemic, and rarely are there deviations from the policies of the company.

Lakshmi seems to be the one who holds the largest sway in the company. He is the one who heads the group management board. Despite the fact that the board of directors makes the decisions that are used to run the company, it is the management board that is closely related with the running of the business. When Lakshmi is not around, his son takes over from him and controls the decisions made by the board.

Justifications for the Management Model

The company have justified its adoption of this model to manage its workers by stating that under the circumstances, it is the best one.

The Company is Relatively Young

The managers cite that the company is relatively young, having been in existence for the past few years when Mittal merged with Arcelor. This means that the employees themselves are also relatively new to the system, and require guidance before they can learn the policies of the company. This is best achieved by giving them clear directions, and not burdening them with responsibilities of participation in decision-making processes (Walonick 2009).

Before the company could establish itself in the market, discipline is needed on the part of the employees. This is the only way that it can establish a niche for itself in the competitive service market. Discipline, the managers claim, is best instilled in the workers if they are guided with a firm hand, and autocratic system provides this firm guidance (Walonick 2009).

This form of management seems to have worked for Arcelor-Mittal. It is the world’s largest steel company. It is the market leader in related industries such as steel production for the automotive industry, construction, household appliances and packaging. This market position has been achieved by the company’s management structure and the acquisition of several steel companies in many parts of the world.

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High Level of Discipline Needed

The line of business this firm is involved in calls for high levels of discipline on the part of the employee. This is given that client satisfaction is the major priority. Arcelor-Mittal seems to put the wellbeing of the client before that of the employee, and that is the reason why it is more interested in satisfying the client than it is on satisfying the employee.

If democracy were to be adopted in the firm, it is likely that the employees will attempt to rule themselves, and they will challenge the authority of the managers. This is considered as lack of discipline, and it will be counter productive as far as customer satisfaction is concerned. The employees will defy the authority and directives of the managers if they feel that they are not in accordance with their expectations.

Decisions Need to Made Fast

In a laissez faire form of governance, every member of the organisation has the right and obligation to contribute to the process of decision-making. Decisions that are made without involving every member are considered as undemocratic and unacceptable. This is despite the fact they may be made from the best of intentions, and may be sound decisions. A lot of time is needed to consult widely on the issue. A lot of time is also wasted, as disputes are been resolved. This is because it is hard to come up with decisions that satisfy every person, and those who feel oppressed will always lodge complaints.

The managers at Arcelor-Mittal claim that decisions need to be made and implemented on a short time basis, and as such, there is little or no time for consultations. The industry is in a continual state of change, and if time is wasted, the company may be overtaken by events. This is the reason why the employees have to go with the decisions that have been already made for them.

Positive Effects of this Model in Arcelor-Mittal

For the past few years, the company has experienced the benefits of this form of management model. This is the only reason why they do stick to it, despite the constant criticism that they face both from within and without.

Leaders in the Industry

Arcelor-Mittal. is one of the leaders-if not the leader-in its line of steel industry. This has been brought about by the high levels of discipline among the employees. The employees are focused to deliver on the goals of the organisation, and diversions such as confrontations with managers are rare. They spend a lot of their time working on the clients’ projects, and at the end of the day, satisfaction is accrued on the part of those clients.

In 2007, the company’s revenue was US$105.2 billion. It produced steel at about 116 million tonnes. This was 10% of the amount of steel that was produced in the world that year. In 2008, the company’s market capitalisation stood at $35.37 billion.

Minimal Levels of Disputes

The roles and expectations of each member of the organisation are made explicitly clear. There are no role conflicts or indecisions on the part of the employees (Whetten & Zald 2008). This has made it possible for the employees to co-exist peacefully with their co-workers. There is reduced rate of conflicts between the managers and the employees. This is because the employees know what they are expected to do by the managers. They are aware of the fact that if they do not obey the authority, they may be sacked from their positions, or undergo other forms of disciplinary actions. The employees find it easier to exit the company on their own volition rather than confront the managers. This has increased productivity since the managers and the staff can concentrate on other matters related to the core business instead of engaging in conflicts.

Negative Effects of the Management Model

Papa, Daniels and Spiker (2008) opine that it is rare to find a management model that has no downsides, as much as it may have advantages. This is no different to this model adopted by Arcelor-Mittal.

High Rate of Employee Turnover

The managers agree that the level of employee turnover at Arcelor-Mittal is higher than the industry’s average. On August 2009, the firm conducted a survey to determine the level of employee turnover as compared to other companies engaged in the same line of business in London. The firm found that the rate of their employee turnover was forty-eight percent more than the average in the industry. This has been attributed to the management style at the firm. Even if the rate of employee turnover is high in their line of business, it is higher in Arcelor-Mittal as indicated by the results of the survey.

Even the employees who are hired on contractual terms seem to be in a hurry to exit the company. Less than twenty percent of the employees who had been hired on contract ever come back for another contract. The company may have a positive reputation as far as the clients are concerned, but it performs dismally when it comes to reputation among potential employees. Another survey revealed that less than fifteen percent of potential employees wish to join Arcelor-Mittal. the survey was conducted on campus students and people seeking employment in the industry. This poor performance has made it hard for the company to attract highly qualified professionals, who ends up been employed by the competitors.

High Levels of Employee Dissatisfaction

Arcelor-Mittal is perhaps one of the firms that have the highest number of dissatisfied employees in London. An internal survey conducted by the company in May 2009 in an effort to come up with its strategic plan found that sixty two percent of the employees would rather be working for another employer. The major reason cited for this dissatisfaction was the harsh treatment that was meted out on the employees by the managers. The employees complained that they feel alienated from the company, and they feel that their opinions and interests do not matter to the managers.

Bauman (2007) is of the view that autocratic model of management produces one of the lowest rates of employee satisfaction. In this light, it is not surprising that the internal survey came up with those results. When employees need to have their opinions count, autocratic is the least desirable form of management.

Abuse of Power by the Managers

It is said that power corrupts even the virtuous of all souls. This seems to be the case in Arcelor-Mittal. the managers have been known to go overboard in exercising their authority, threatening to terminate the employee of those employees who did not follow their rules. Jordan, Ashkanasy and Ascough are of the view that autocratic managers have little or no concern to the wellbeing of their employees, and they are one of the most abusive of all leaders (2007). It is the interplay of this abuse of power and the strict rules espoused in the company’s code of ethics that leads to high levels of employees’ turnover and dissatisfaction of the few who are left.

Team Management and Dispute Resolution

Despite the high-handedness that the managers adopt when dealing with their employees, dispute do arise between the employees themselves and between the employees and the managers. The disputes are first resolved on the team level. Each manager, as earlier indicated, is in charge of a team of a varying number of employees. These teams are more or less autonomous from the others in the company. When a dispute arises between the employees in one team, it is referred to the manager. The manager resolves it, with the aim of reconciling the employees. Most of the disputes arise from confusion of roles, where one team member is seen as encroaching on another’s territory. This is despite that fact that the managers try as much as possible to clearly delineate the duties. In such a case, the manager resolves the dispute by re-stating the roles of each of the members. If a dispute occurred between members of different teams, it is resolved by a joint effort between the two managers concerned.

Conflicts between managers and their employees are referred to the senior manager. However, employees prefer not to resort to this mode of dispute resolution because in most of the cases, the managers are always regarded as been on the right side, and the employee is blamed.

Organisational Theory and Arcelor-Mittal

A closer look at the management style of Arcelor-Mittal as an organisation will reveal that Theory X and Theory Y are the most prevalent. Mangelsdorff (2009) holds that each organisation has a unique management style, and it is a reflection of the managers’ personality and the culture of the organisation. The personalities of Amalcotas’ seem to be similar to some extent, and they subscribe to this theory more than to any other.

Theory X and Y

This theory was formulated by Douglas McGregor as he sought to analyse human motivation (Theis-Berglmair 2009). The theory is made up of two different theories, which are combined to come up with one. McGregor advises against regarding these theories as “two different ends of the same continuum” (Hayes and Barnes-Holmes 2006). Rather, he advises that they should be regarded as “two different continua” in their own rights (Hayes and Barnes-Holmes 2006). This means that an individual may subscribe to theory X, yet be part of Theory X and Y at the same time.

Theory X

This theory holds one of the most pessimistic views on human nature in relative to other theories of motivation. According to this school of thought, individuals are inherently, and by nature, lazy (Warwick 2009). This been the case, they will avoid work as much as possible, because they are not only lazy, but they also dislike working. The managers believe that the employees, for them to deliver, need to be closely supervised and controlled. That is the reason why they will implement strict rules that are to be followed. Control of the employees is achieved through a hierarchy of authority, and the powers at each hierarchy as one moves down reduces, such that the people at the bottom of the pyramid, who happens to be the employees, have least power (Papa et al 2008).

Theory Y

This theory is more optimistic and humanistic than X. the managers regard employees as motivated individuals who possess self-control (Starbuck 2009). The employees derive pleasure and satisfaction from their work, and their motivation is self-actualisation. Instead of evading responsibilities, these employees will seek them out. It is as a result of this attitude on the part of the managers that communication channels between them and their employees are open.

Amalcotas: Theory X Managers

The managers in this organisation can only be regarded as believers in theory X. they are of the view that their employees will never take the initiative and be responsible, and that is the reason why their duties are clearly set out and spelt. They believe that their employees hate work. As such, they need to be closely supervised so that they can deliver. To this end, Arcelor-Mittal has conferred a lot of authority on the managers so that they can control these employees.

Control in Arcelor-Mittal is exercised through a well-developed and defined hierarchy. The board of directors is the most powerful, and it makes decisions that are then passed down to the senior managers. The senior managers then pass them down to the managers who are in direct contact with the employees. The authority is scaled down at each level, and the employees hold the least or no power at all. It is strongly held that the employees are motivated by money, and nothing else. Perhaps it is out of this line of reasoning that Arcelor-Mittal has emerged as one of the institutions that highly compensates their employees. It is assumed that as long as the employee is paid their salary-and good salary at that-they will always deliver (Miner 2002: Walonick 2009).

Despite the high levels of salary, Arcelor-Mittal still finds it hard to attract and retain the best of employees. This is an indication that the employees are not only motivated by money, but by an interplay of many other factors. If money were the only motivation, potential employees would have been crowding the company seeking opportunities.

Organisational Culture

Every organisation has its specific mode of culture different from others in the industry. This involves the interaction between the employees, interaction between the employees and the organisation and such other matters. The employees do interact with each other on a personal basis. This especially happen when they are taking breaks, and they congregate on the company’s cafeteria. Friendships between the employees are a common thing. However, the interaction between the employees and the managers is at minimal. The latter takes their meals in booths specifically reserved for them in the cafeteria. They only interact with the employees on a professional level. As such, it is hard to find friendships mushrooming between the employees and the managers.

Communication between the employees and the management usually takes place during weekly meetings that are held on the team level. Usually, the meetings are one-way communication channels as it is made up of managers handing down orders to the employees. It is very rare for employees to raise grievances with the managers during these meetings. The top-notch managers rarely meet the employees. They use the lower managers to pass their orders down. Other forms of communication occur as the team members are engaged in their works. If something that needs to be communicated to Arcelor-Mittal staff arises within the week before the meetings, the managers communicate it through memos and other forms of communications to thee team members.

Conclusion

Motivating Arcelor-Mittal Employees

In conclusion, it is important to look at the strategies that are adopted by Arcelor-Mittal in motivating their employees. From the above discourse on management theories, it is obvious that the managers adopt Theory X as the major guide in motivating their employees. It is a fact that money is part of motivation as far as employees are concerned. However, it is fallacious to assume that it is the only motivator. There are other needs to be satisfied, and employees seek ways to satisfy them. For example, recognition and appreciation is such emotional and psychological needs of the employees. They will tend to gravitate towards organisations that will satisfy these needs, as much as the money need is satisfied. Arcelor-Mittal satisfies the financial need, but relegates the rest to the backburner. As a result, the employees move out to seek companies that will satisfy the rest. From this perspective, it is important then to note that a balance needs to be attained in satisfying the needs of the employees to motivate them.

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