Automated Organizations: Development and Structure of the Modern Business Firm (Contributions to Management Science)

Contributions to Management Science For further volumes: http://www.springer.com/series/1505 . Nelio Oliveira Auto...

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Contributions to Management Science

For further volumes: http://www.springer.com/series/1505

.

Nelio Oliveira

Automated Organizations Development and Structure of the Modern Business Firm

Professor Nelio Oliveira Pontifical Catholic University of Minas Gerais - PUC Minas Av. Dom Jose´ Gaspar, 500 Corac¸a˜o Eucarı´stico 30535-901 Belo Horizonte - MG Brazil [email protected]

Original edition “Organizac¸o˜es automatizadas - Desenvolvimento e estrutura da empresa moderna” published in 2007 by Livros Te´cnicos e Cientı´ficos Editora S.A. ISBN 978-3-7908-2758-3 e-ISBN 978-3-7908-2759-0 DOI 10.1007/978-3-7908-2759-0 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2011936635 # Springer-Verlag Berlin Heidelberg 2012 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Printed on acid-free paper Physica‐Verlag is a brand of Springer‐Verlag Berlin Heidelberg Springer‐Verlag is a part of Springer Science+Business Media (www.springer.com)

To my mother To my wife To my daughter

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Preface

This is a descriptive work. This information needs to be initially provided for two reasons. First, it takes into consideration the large number of people who look into books to discover infallible techniques, secrets and magic formulas for success in business and management. If such formulas exist – that I do not believe – the reader will not find them here! Secondly, it considers the managers, students, researchers and other interested people who seek to unravel the intricacies of organizational life carefully. These people should be alerted to the fact that this study has the primary intent of portraying a reality, and not of advising or prescribing the most appropriate forms of management for specific situations. The ‘Management’, area of knowledge related to organizations, has come a long way since initial studies were performed in this field; consequently, there is currently a set of theories, principles, and especially concepts that qualify it as a mature science. Therefore, whenever there are changes and new realities in the world of organizations, descriptive studies should first be carried out to understand these changes and later, in prescriptive intent, alternatives to the actions of managers should be presented. Unfortunately, the opposite situation is often seen: prescriptions are provided before understanding the reality. Based on this idea, this study aims to contribute to the understanding of the changes that have occurred in companies, given the questioning of organizational models that had prevailed until recently. At a certain point in time, some scholars began observing profound changes not only in organizations, but in society as a whole, and began writing about them. In this endeavor, they proposed the Post-industrial, Post-capitalist, Knowledge, Informational, Post-bureaucratic, Post-Fordist society, and so on. Important works were generated mainly for its initiation, though many more empirical investigations were required. This fact is justified because the change process was in its starting phase, presenting many future possibilities, much conceptual confusion and little homogeneity in social and organizational reality. Many optimistic words were written, followed by criticism and skepticism. However, little was actually known on what was happening in society and in businesses. vii

viii

Preface

Since this pioneering and somewhat confusing period, many studies followed, researches were conducted and theories presented. Studies intending to clarify and give a better understanding of the process that followed have appeared; however, despite the noble intention of capturing organizational reality and questioning the validity of old theories, the studies appeared loosely and without connection with each other. This fact generated isolated works and several theoretical constructs were created. There is no question about their importance, but the reality for many remains as confusing as in the beginning, at the time of the pioneering studies. Thus, this book was written with the intention of linking several of these works and theories, combining them in a way to better characterize today organizations and, specifically to present a model for a new type of organization that has emerged and expanded in the business world. The present study came up mainly from my recent academic studies; however, my curiosity about the subject was born long ago, specifically in an organizational practice in which I often felt bewildered in the face of changes in the firms I labored in. Bewildered by not understanding what was really going on. I hope the description helps! Nelio Oliveira

Acknowledgements

I would like to thank everyone who, directly or indirectly contributed to the realization of this work: ‐ The professors of Business and Management of PUC Minas by reviewing my original writings, mostly Andre´a Alcione de Souza, Armindo dos Santos de Souza Teodo´sio, Denise de Castro Pereira, He´lvio de Avellar Teixeira, Jose´ Wanderlei N. Silva, Maria de Fa´tima Pereira Rossi, Rodolfo Antoˆnio Lopes, Ronaldo Andre´ Rodrigues da Silva, Se´rgio Silveira Martins e Simone Nunes. ‐ The professors of PUC Minas of other areas of knowledge that helped, especially in clarifying concepts, mostly Marcelo Pereira de Mendonc¸a, Jean Max Tavares (Economics), Maurı´cio Tannus Dias (Psychology), Atenı´ster Tarcı´sio Rego (Automation), Marcelo Franco Porto, Rosilene Ribeiro da Mota (Information Systems), Maria Ester Saturnino Reis e Antoˆnia Maria da Rocha Montenegro (Sociology). ‐ The professors of UFMG who, with their teachings, alerted me to the complexity of the changes that have taken place in organizations, mostly Allan Claudius Q. Barbosa, Antoˆnio Luiz Marques, Fernando Coutinho Garcia, Jader dos Reis Sampaio, Lu´cio Fla´vio Renault de Moraes, Marco Aure´lio Rodrigues, Marlene Catarina de Oliveira Lopes Melo, Mauro Calixta Tavares, Solange Maria Pimenta, Suzana Braga Rodrigues, Talita Ribeiro da Luz e Ze´lia Miranda Kilimnik. ‐ The managers and other professionals of several organizations who provided valuable information which supported this work, mostly Alexandre Magno de Abreu, Cleber Silva de Amorim, Herick Pires Marques, Francisco Carlos Barros, Jacqueline Anasta´cia dos Santos, Ma´rcio Jose´ de Souza Chaves, Mauro Pimenta Azevedo, Nilceu Jose´ Oliveira, Paulo Roberto Nolli e Rodrigo Pimenta Sizenando. ‐ Daniela Rino Mendes Bok for helping in this English language version. ‐ Those who have written on Business, Management and Organizations and who sought to do so rigorously and with the intent to improve society. This work was only possible due to the studies that have preceded it.

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Contents

1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Part I

Traditional Structures

2

Organizational Structure, Format, Shape, Design and Architecture . . . . 2.1 Structure and Characterization of Organizations . . . . . . . . . . . . . . . . . . . . . . . 2.2 Basic Elements of a Structure: Differentiation and Integration . . . . . . . 2.3 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 10 12

3

Types of Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Initial Concerns with Structure: Prescriptions for an Ideal Format . . . 3.2 Bureaucracy: An Attempt to Describe an Organizational Format . . . . 3.3 Informality and the Strengthening of the Classical Structure . . . . . . . . . 3.4 The Questioning of the Pattern: Structuralist Studies . . . . . . . . . . . . . . . . . 3.5 Classifications of Structures: Contingency Approach Researches . . . . 3.6 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 15 17 19 21 22 24

4

Henry Mintzberg’s Five Basic Configurations . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 The Consistency in the Formation of Structure . . . . . . . . . . . . . . . . . . . . . . . 4.2 Structural Possibilities, Coordination Mechanisms and Contingency Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 The Main Configurations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 The Simple Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.2 The Machine Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.3 The Professional Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.4 The Divisionalized Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.5 The Adhocracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Final Comments on Structures and on the Five Configurations Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27 27 28 30 30 31 32 34 35 36 37

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Contents

Part II 5

6

7

Changes in the Situational Factors

Automation and Its Consequences for Organizations: From Fordism to Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 The Use of Machines in Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 The Fordist Production Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Numerical Control Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 The Automation in Processing Production Firms . . . . . . . . . . . . . . . . . . . . . 5.5 Information Technology and Automation in Organizations . . . . . . . . . . 5.5.1 Information Technology and the Automation in Manufacturing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.2 Information Technology and Information Systems . . . . . . . . . . . . 5.5.3 Information Technology and Automation in Service Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.4 Summary of the Consequences of Information Technology-Based Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Organizational Environment: From Continuity to Dynamism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Environmental Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Changes in the Environmental Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Changes in the Macro-environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.2 Changes in the Micro-environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Changes Related to the Behavior of the Environmental Factors: Complexity and Dynamism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Organizational Strategy: From Integration to Specialization . . . . . . . . . 7.1 Organizational Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Traditional Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Strategic Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.1 New General Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.2 New Functional Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3.3 The Responsibility for Developing the Strategy and the Strategy Development Process . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Final Remarks on Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41 42 44 46 48 53 54 55 56 58 60

65 66 68 68 74 76 77

83 83 85 87 88 91 94 95 95

Contents

Part III 8

9

xiii

Internal Changes

New Organizational Possibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Antecedents of the New Organizational Possibilities . . . . . . . . . . . . . . . . 8.1.1 Management by Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.2 Strategic Business Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.3 Work in Teams and Parallel Organizations . . . . . . . . . . . . . . . . . . 8.1.4 Quality of Work Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.5 Organizational Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.6 Matrix Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.7 Strategic Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 New Management Technologies and Models, New Structure Possibilities and Forms of Change Management . . . . . . . . . . . . . . . . . . . . . 8.2.1 Total Quality Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.2 Lean Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.3 Reengineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.4 Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.5 Network Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.6 Learning Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.7 Entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.8 Human Resource Strategic Management . . . . . . . . . . . . . . . . . . . . 8.2.9 Competency Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.10 Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.11 Downsizing and the Flattening of Structures . . . . . . . . . . . . . . . . 8.3 Final Comments on the New Organizational Possibilities . . . . . . . . . . . 8.4 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Coordination Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 Culture, Norms and Values in Organizations . . . . . . . . . . . . . . . . . . . . . . . . 9.1.1 Initial Discussion on and Antecedents of the Studies of Culture in Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.2 Informal Organization and the Introduction of Values in Organizational Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.3 Organizational Culture and Its Recent Studies . . . . . . . . . . . . . . . . 9.1.4 Cultural Changes and Indoctrination . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.5 Criticism to Aspects Related to Organizational Culture . . . . . . 9.1.6 Culture as a Coordination Mechanism: Final Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2.1 The Use of Firm or the Use of the Market . . . . . . . . . . . . . . . . . . . . 9.2.2 Types of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2.3 The Increasing Use of Contracts as a Coordination Mechanism: Final Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

103 103 104 104 105 105 106 106 106 107 108 108 110 111 111 112 113 114 115 116 116 117 118 123 123 123 124 126 127 128 130 131 132 134 135

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9.3 Interests, Power, Conflicts and Politics in Organizations . . . . . . . . . . . . 9.3.1 Favorable Conditions for the Use of Politics as a Coordination Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3.2 Politics as a Coordination Mechanism in Organizations: Final Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part IV 10

135 136 139 139

The Automated Bureaucracy and Its Variations

The Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 Description of the Basic Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1.1 The Operating Core . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1.2 The Middle Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1.3 Support Staff and Technostructure . . . . . . . . . . . . . . . . . . . . . . . . 10.1.4 The Strategic Apex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2 Conditions for the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . 10.2.1 Technical Factors Concerning Production and Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2.2 The Environment for the Automated Bureaucracy . . . . . . . 10.2.3 Strategy of the Automated Bureaucracy . . . . . . . . . . . . . . . . . . 10.2.4 The Use of Coordination by Contracts . . . . . . . . . . . . . . . . . . . . 10.3 The New Organizational Possibilities and the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.1 Participatory and Incremental Changes in the Automated Bureaucracy: OD, TQM, and Learning Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.2 Concerns with People in the Automated Bureaucracy: Competency Management and Health, and the Strategic Management of People . . . . . . . . . . . . . . . . . 10.3.3 Social Responsibility in the Automated Bureaucracy: Corporate Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.4 Radical Changes in the Automated Bureaucracy: Reengineering and Downsizing . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3.5 External Integration, Alliances, Partnerships, Outsourcing and Network Organizations . . . . . . . . . . . . . . . . . 10.4 Problems Associated with the Automated Bureaucracy . . . . . . . . . . 10.4.1 Technical, Financial and Marketing Problems in the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4.2 Human Problems in the Operating Core . . . . . . . . . . . . . . . . . . 10.4.3 Problems at the Middle Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4.4 Problems at the Strategic Apex . . . . . . . . . . . . . . . . . . . . . . . . . . .

147 147 147 159 161 162 164 164 166 168 172 173

174

174 175 176 177 177 178 179 182 183

Contents

11

10.5 Other Issues Related to the Automated Bureaucracy . . . . . . . . . . . . . 10.5.1 Unemployment and Precariousness of Work . . . . . . . . . . . . . 10.5.2 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5.3 The Automated Bureaucracy and the Changes That Occur in Other Relationships in Society . . . . . . . . . . . . 10.6 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

185 185 187

Variations of the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 The Automated Bureaucracy in Service Organizations . . . . . . . . . . 11.2 The Automated Bureaucracy and the Changes in the Professional Bureaucracies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3 The Automated Bureaucracy and the Small Firms . . . . . . . . . . . . . . . 11.4 The Automated Bureaucracy and Processing Production Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5 The Automated Bureaucracy and the Adhocracy . . . . . . . . . . . . . . . . . 11.6 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

201 201

Part V 12

xv

188 189

206 209 212 214 216

To Finish

Final Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 The Existence of the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . 12.2 The Automated Bureaucracy as a Descriptive Structural Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3 The Search for Consistency in the Appearance of the Automated Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 The Automated Bureaucracy as a Supplement to Henry Mintzberg’s Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5 A Seventh Configuration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.6 The Limitations of This Study and the Need for Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.7 The Adhocratic Future That Didn’t Arrive . . . . . . . . . . . . . . . . . . . . . . . 12.8 The Automated Bureaucracy’s Positive and Negative Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221 221 222 222 222 223 223 224 225 226

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

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List of Figures

Fig. 5.1 Fig. 5.2 Fig. 6.1 Fig. 6.2 Fig. 8.1 Fig. 8.2 Fig. 10.1

Similarities at the extremes – automation continuum and the structural features considering Joan Woodward work . . . . . . . . . . . . Automation in manufacturing firms by using information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organization and environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Macro-environment and micro-environment . . . . . . . . . . . . . . . . . . . . . Management by Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Planning and Strategic Management . . . . . . . . . . . . . . . . . . . Automation in manufacturing firms by using information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49 56 67 67 104 107 150

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List of Tables

Table 2.1 Table 3.1 Table 3.2 Table 3.3 Table 4.1 Table 4.2 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 6.1 Table 7.1 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 9.1 Table 9.2 Table 9.3 Table 9.4 Table 9.5

Elements of organizational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . Main diferences between classical authors concerning organizational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The questioning of the structuralist studious . . . . . . . . . . . . . . . . . . . . Main variables discussed in contingency theory studies . . . . . . . Main coordination mechanisms according to H. Mintzberg . . . . Mintzberg’s configurations and the coordination mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Traditional production possibilities by using machines . . . . . . . . Immediate uses of information technology in the automation of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Automation in service operations – types . . . . . . . . . . . . . . . . . . . . . . . Automation in service operations – areas . . . . . . . . . . . . . . . . . . . . . . . Types of automation and some of its effects – summary . . . . . . . Environmental complexity and instability . . . . . . . . . . . . . . . . . . . . . . Organizational strategies – summary . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic aspects of Total Quality Management . . . . . . . . . . . . . . . . . . . Aspects related to the current strengthening of entrepreneurship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Human resources management and human resources strategic management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Practices of the downsizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational culture: main elements of the concept . . . . . . . . . Criticisms related to organizational culture . . . . . . . . . . . . . . . . . . . . The use of firm or the use of the market . . . . . . . . . . . . . . . . . . . . . . . Types of contract according to the transaction cost economics approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Possibilities of emerging political coordination in organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 17 22 23 29 36 43 54 57 58 60 68 94 109 114 115 117 126 130 133 134 138

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xx

List of Tables

Table 10.1 Table 10.2 Table 10.3 Table 10.4 Table 10.5 Table 10.6 Table 10.7 Table 10.8 Table 10.9 Table 11.1 Table 11.2 Table 11.3 Table 11.4 Table 11.5

.

Activities carried out by workers at the Automated Bureaucracy’s operating core . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Worker’s profile in Automated Bureaucracy . . . . . . . . . . . . . . . . . . The coordination by values and norms: main types used in Automated Bureaucracies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managers’ functions and roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in the technostructure and in the support staff . . . . . . . Strategic apex’s functions and roles . . . . . . . . . . . . . . . . . . . . . . . . . . . Conditions for emerging the Automated Bureaucracy . . . . . . . . . Changes regarding the contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problems associated with the Automated Bureaucracy . . . . . . . . Automation in service operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Automation in Professional Bureaucracies . . . . . . . . . . . . . . . . . . . . Automation in small firms: possibilities . . . . . . . . . . . . . . . . . . . . . . . Main changes in processing production firms . . . . . . . . . . . . . . . . . Changes in Adhocracies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156 157 159 160 163 164 172 173 185 203 209 211 214 215

Chapter 1

Introduction

From the very beginning of organizational studies, the task of pointing out more appropriate models, forms, and types of organizations has been of general concern. This concern is evidenced by both descriptive and prescriptive objectives. In the first case, scholars have attempted to explain the phenomenon of organizations that have strengthened with time, mainly after the so-called Industrial Revolution. In the second case, other scholars have appeared with more pragmatically intentions, presenting rules, paths, or formulas for success in forming and maintaining organizations. Whether for descriptive or prescriptive objectives, the initial trend was to present a unique and universal form for the organizations. On the one hand, it would appropriately explain modern organizations (descriptive character), and on the other, it would reveal the key to organizational success (prescriptive character). In this period, the bureaucracy characterized by Max Weber, the rational organization of labor advocated by F. W. Taylor, and even Fordism, which was based on the practices employed by Henry Ford, can be highlighted. Over time, however, other studies questioning the notion of a unique and universal type of organization have appeared. Several typologies began to emerge, and, as a result, studies with increasing complexity and methodological rigor have been presented. In the 1970s, following such a trend of complexity and as a result of several studies and researches, Henry Mintzberg offered an organizational taxonomy comprising five basic configurations. Such configurations would explain the forms used in organizations, in accordance with a large number of conditions and structural possibilities. In addition to characterizing the Simple Structure related to small organizations and the bureaucracy with its variations related to the large organizations, the author also described in his mentioned taxonomy an organic structure, not bureaucratic, by using the concept employed by Alvin Toffler: the Adhocracy. According to Henry Mintzberg, the Adhocracy would be an appropriate structure for innovation and for dynamic and complex environments, and, in Alvin

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Toffler’s vision, it would set itself as a structure standard, and even substitute bureaucracy as a major model for large organizations. Considering the recent changing scenario, several changes have been imposed on organizations, which, in order to survive, have had to adopt more flexible structures and keep themselves away from the classical model that used to characterize many large firms. Thus, many have argued that the bureaucratic form of organization has become a hindrance for the firms which – from a certain moment – would have to survive in a dynamic and complex environment. Thus, the Adhocracies and their variations would tend to strengthen as post-bureaucratic, post-Taylorist, post-Fordist organizational forms. However, the several organizational changes that have occurred do not confirm most forecasts made regarding the end of bureaucracy. Conversely, several of these changes go opposite the forecasts, and structures based on Adhocracy are not suitable for many firms. Thus, despite many predictions of an adhocratic future, formal organizations have not easily lost their major bureaucratic features. Instead of being extinguished, bureaucracy has seemingly adapted and has proved itself able to survive by capitalizing on the several advantages its format has always offered, mostly in production that shows certain standardization and gains in scale. In the face of the new conditions, a new variation of bureaucracy, as the other variations pointed out by Henry Mintzberg, emerges. A different form of organization other than that used by large traditional companies, although it cannot be characterized as an Adhocracy. A kind of organizational structure that seems to be increasingly established both in industry and service activities. A configuration that, in this book, is called the Automated Bureaucracy. From this viewpoint, the aim of this book is to characterize the Automated Bureaucracy and to describe the situations in which it has been strengthened up to the point of substituting many times the traditional bureaucratic structures of large companies. In view of a theoretical construction, this book does not intend to refute previous works but to supplement them, mainly that of Henry Mintzberg and its organizational model of five configurations. For this, Chaps. 2 and 3 review the literature on types of organizations, and Chap. 4 deals with Henry Mintzberg’s basic organizational configurations. These chapters are based on the theoretical construct related to organizational structures and formats, which is the support for the characterization of the Automated Bureaucracy. This first part of the book is understood as essential, since it intends to review important contributions that have made possible the development of studies of organizations and structures, and to clear up relevant concepts as well. The second part, composed of Chaps. 5–7, deals with the main contingency factors, or situational factors, pointed out in the literature as influential for organizational structures: technology, environment, and strategy. This part discusses how such factors or variables have behaved along the history of organizations, as well as the recent changes they have gone through. Each variable is discussed separately for didactical reasons and by virtue of the cited authors usually emphasizing only one of these factors in their studies. As for technology, specifically, it is worth noting that the discussion is made on technologies of production related to

1 Introduction

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automation because of the relevance of such subject to the discussion of the Automated Bureaucracy. Still in relation to the contingency variables, it is worth mentioning that the present work attempts to keep its distance from deterministic ideas pervading many works on organizations. In this respect, the idea of congruence, or consistency, i.e., the idea that a structure emerges in search of an internal and external equilibrium, is accepted. This is discussed all through the book, especially in the chapter dedicated to Henry Mintzberg’s taxonomy. The third part of the book, comprising Chaps. 8 and 9, discusses changes in organizations and their structures in the face of changes in contingency factors. Some of these are considered revolutionary, when compared with traditional organizational forms; others are simply taken as slight alterations, merely searching for adaptations. Chapter 8 is dedicated to new organizational possibilities, i.e., new management technologies, new structural possibilities, new models of change, and new management models. This chapter is based on the descriptive and prescriptive works of several authors, and network structures, outsourcing, Total Quality Management, and Reengineering are some of the subjects discussed. Chapter 9 introduces one of the major factors for the emergence of what would be a sixth organizational configuration: the possibility of alternative coordination mechanisms scarcely discussed in the literature. Therefore, the importance of this chapter should be immediately recognized. This chapter presents a discussion on organizational culture, values, and norms, subjects that, despite having been focused on by many authors, are still somewhat polemical, mainly when their relevance as a coordination mechanism is taken into account. This chapter also discusses the possibility of using coordination by contract in firms – a coordination mechanism much discussed in economics literature, but scarcely approached in organizational studies. Political coordination equally deserves some attention in this chapter. Such new coordination mechanisms jointly with new conditions and new organizational possibilities allow the emergence and strengthening of the Automated Bureaucracy, which is discussed in the fourth part of the book. This configuration is characterized in more detail in Chap. 10, and some of its variations are discussed in Chap. 11. As to this part, an important observation should be made: in characterizing Adhocracy, Henry Mintzberg emphasizes that, because such format is new and there is little knowledge on it, the characterization might not reflect very well the structure that was intended to present. The same can be said in the case of the Automated Bureaucracy. It is a recent phenomenon that, in practice, is still under consolidation. Moreover, due to its complexity, further studies are necessary for its better definition. What is proposed here is a preliminary model of this organizational format. The academic community and the public in general shall consider the validity and relevance of this work with time. However, some methodological aspects should be pointed out here. It should be highlighted that the text is based on the works of well-reputed scholars in business administration as well as on the results of recent research works. As mentioned before, it is an attempt to supplement and update previous works, notably Henry Mintzberg’s taxonomy of the five basic

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configurations of organizations. Therefore, the methodology used here is basically the same as that used by Mintzberg, i.e., research results in addition to a recovery of the theoretical literature. In the search for methodological practices that complement this work and, above all, with a view to make this book a good source of learning, examples gathered from diverse papers and surveys, in addition to the experience of this author in several organizations, are shown all through Chaps. 10 and 11. With these examples, some cases are used in an attempt to make this book better understood and more didactical. Considerations on the book notes should also be highlighted. As this work is a theoretical review and a synthesis of a subject, further discussions and controversies do not appear in the main body of the book. This was done with the intent of not making it a boresome, tiring read and full of questionings as well, which would make its reading a hard task. This is a quite complex work, and going further in such matters would make it even more complicated. As in any scientific work, however, debate and controversy must not be kept aside, unless one wishes to stick to a unique, blinkered way of thinking without a real perception of reality that must rely on several thoughts and opinions for its understanding. Therefore, other polemical discussions and viewpoints are mentioned in the final notes of each chapter. In some cases, these notes will convey further explanations of subjects and terms referred; in other cases, contrary viewpoints; and still in other cases, some notes will refer the reader to other sources of information and opinions on specific subjects. This type of presentation is not new, but it is important to make it explicit especially for those readers who are not familiar with such an exposition of ideas.

Part I

Traditional Structures

Chapter 2

Organizational Structure, Format, Shape, Design and Architecture

This work describes a new configuration based on studies on organizational structure and its variations, such as organizational format, shape, design, project and architecture. Thus, this chapter presents basic concepts on the organizational structure as well as its main elements and functions. The primary objective is to introduce the subject and show the importance of the structure approach in describing different kinds of organizations. It is important to emphasize that despite the association of the term “organizational structure” with the studies of the so-called structuralist school, research on organizational structure has been reinvigorated by the emergence of other schools of thought, as shown in this and the following chapters. Therefore, a review of traditional structuralist authors is necessary, but some studies of more recent influence are discussed here as well. The extent of this review demonstrates the current and renewed condition of the studies related to this subject.

2.1

Structure and Characterization of Organizations

In characterizing an organization, various social, economic, legal, and marketing aspects may be considered. It may be observed, for instance, if the organization is public, private or non-governmental; if it belongs to the primary, secondary or tertiary sector; if it is an individual firm (individual ownership) or an anonymous society (corporation); if it is of national, regional or global actuation, and so on. Internally, several aspects may also be examined to characterize an organization: size, physical location of workers and equipment, technology, financial peculiarities such as gross revenue, and the behavioral and cultural characteristics of the staff, among others. One way of describing organizations that has received much attention in the literature on organizational theories is the one of the organizational structure

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studies. Through such studies the disposition of units, departments, positions, groups and staff within a firm, and the existing relations among them are explored.1 The studies of organizational structure deal with the disposition of units, departments, positions, groups and staff within a firm, and the existing relations among them.

One of the several advantages of this perspective is that it offers an appropriate explanation of how organizations, apart from attaining the size and complexity that they have these days, have survived and accomplished their objectives or functions.2 In truth, in a structuralist perspective, the balance, or the equilibrium, between the division of labor and the integration of the parts responsible for the divided work, may be identified as the principal factor for the existence of modern organizations.3 It is important to emphasize that the division of labor and the maintenance of interaction among the parts responsible for divided work are not new phenomena in history. Since the start of the Industrial Revolution, however, the magnitude of such phenomena has been unprecedented, which is of great importance to studies on organizational structure.4 To reinforce even more the idea of organizational structure and to present its functions, three recent concepts may be cited. They have been offered by authors who had certainly been influenced by the first structuralists, as well as by other schools of thought that have enriched the field, such as the behavioral, the systemic, and the contingency approaches.5 They are seemingly different concepts, but, in fact, they present great complementarity, as seen below. To James A. F. Stones and R. Edward Freedman, organizational structure refers to how the organization’s activities are divided, organized and coordinated.6 In this concept, an attempt is made to synthesize the ideas presented in the first studies of management and their emphasis on words such as “activities” and “tasks”. Placing greater importance on behavioral aspects, Lex Donaldson considers structure as the “recurrent set of relationships between organizational members”.7 These relationships, says the author, refer mostly to authority and subordination, types of behavior required in rules and decision-making processes. The influence of the humanist and the behavioral approaches may be found in this concept, due to the importance given to the word “relationship”. Richard H. Hall, recalling several authors’ definitions, posits in his studies that structure is the distribution of people in certain social positions that shape their relations with other people. The structure would thus be responsible for modeling what occurs in an organization. This author affirms, however, that beside this effect of molding the organization, the contrary effect is also true, that is, structure, at the same time that influences the organization, is influenced by the several events that occur in it. This observation is important in demonstrating the mutable condition of a structure.8 In his work, R. Hall moreover identifies functions of the organizational structure, such as producing and ensuring results, minimizing or regulating individual influences upon the organization, and establishing a context in which power is exercised and decisions are taken.

2.1 Structure and Characterization of Organizations

9

Hence, from these authors, especially the last, it is drawn the conclusion that a structure presents the following functions9: 1. Technical function – to present more appropriate ways to accomplish a given task in order to produce a certain outcome; 2. Relational function – to regulate and establish behavior and decision-making policies. 3. Power regulation or regulatory function – to regulate authority and subordination.10 These concepts and functions are the result of various researches accomplished on this subject after years of study. Such subject, incidentally, continues to grow, reaching greater complexity and drawing wider concern. Currently, therefore, more complex and dynamic expressions may be encountered in the field, such as organizational design, organizational project, and organizational architecture.11 The concept of organizational architecture, for instance, does not ignore the origins on the first studies of structures, but it encompasses characteristics and aspects that were not emphasized before, such as the organizational culture and the informal organization. The work of David A. Nadler, Marc S. Gerstein, and Robert B. Shaw on organizational architecture emphasizes exactly this point.12 To these authors, studies on organizational structure should neither be limited to just the formal aspects such as work and authority relations, nor just to the behavioral patterns of the organization’s participants, but should also include aspects related to norms, values, and informality.13 Grounded on works of organizational culture, these authors emphasize that the concept of organizational structure is restrictive, whereas organizational architecture presents other aspects such as values and the basic principles of participants. This addition of variables enriches the subject even more, making it possible to incorporate one more function to the organizational structure, considering the discussion of the organizational architecture. Besides the three functions that have already been mentioned, i.e., the technical, the relational, and the power regulation, a fourth has been added: the cultural or values formation function.14 4. Values formation function – to present values, norms, beliefs, assumptions, dispositions and shared principles. As to this last function, it should be pointed out that it is neither being proposed that the structure is a simple consequence of the organizational culture, nor is the contrary being posited, that is, that culture is a consequence of the structure and its diverse aspects. Recalling R. Hall, who states that structure models and is modeled by other organizational elements, it is assumed here that there is a mutual influence among the parts that compose a structure. Organizational structure and culture interact in a mutual building.15 Finally, it is worth to emphasize that, regardless of the term used – architecture, format, or project – the organizational structure is deemed here the disposition of

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parts in an organization and the relations among them. Such parts can be seen in the people, positions, groups, departments, units, areas, and so on. Each one engages in specific activities (specialization), and interacts with other parts.

2.2

Basic Elements of a Structure: Differentiation and Integration

In view of the definition of the organizational structure earlier presented – parts that maintain interactions – two basics elements may be highlighted: differentiation and integration. Differentiation is related to the division of labor that happens in organizations, i.e., the organizations present, through the division of labor, certain levels of differentiation. In practice, this can be seen in the specialization that is acquired by the individuals in certain positions, as well as in the specialization of areas, units, and departments. Many reasons may be pointed out to justify differentiation in an organization. Paul R. Lawrence and Jay W. Lorsch, who are references in the discussion of this theme, emphasize that internal differentiation is caused by external factors. According to these authors, the more differentiated the environment which the organization operates in is, the more differentiatedly the organizational structures itself. Thus, this differentiation happens so that the organization may “relate” better with the environment in terms of resources and information supply as well as the distribution of its products.16 Differentiation can also be justified in terms of efficiency, which is considered here as the best use of resources that takes an organization to a higher level of productivity, profitability, and so on. In this respect, classical studies in economics and management always considered that a greater division of labor would lead to an increase in organizational efficiency through individual and group specialization.17 Beyond these technical aspects, division of labor (differentiation) is many times justified for maintaining power relations that are deemed “appropriate”. That is, differentiation presents advantages once it regulates the interests of an individual and subordinates them to collective interests. Thus, greater control by the organization over the individuals’ work takes place. In this respect, there are many discussions on the fact that with the great division of labor that happened in large organizations during the twentieth century, workers were deprived of knowledge and autonomy, and as a consequence, of power in facing up the organization.18 The hierarch, considered also a form of labor division, can be offered as example, because it has direct influence in maintaining power relations that are deemed appropriate. Whether it occurs to develop a better relation with environment, to achieve greater efficiency, or even to maintain power relations as deemed appropriate,

2.2 Basic Elements of a Structure: Differentiation and Integration

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differentiation in organizations, in practice, is a phenomenon that presents itself as a gradation of higher or lower levels. This gradation refers to the condition in which work is divided in an organization. The more the work is divided within an organization, the greater the differentiation is. At the opposite end, the less the division of labor is, the less the organization’s differentiation is as well. However, when differentiation occurs in organizations, it is possible for the parts (positions, functions, units, department, etc.) to lose the capability to maintain internal relationships. The risk of decisions, actions or behaviors taking different paths would then arise, making impossible thus the development of relations for the accomplishment of the various objectives or for the emergence of the structural functions.19 Given this possibility of losing interactions, there must be a reverse process – a contrary force that gathers separate efforts. Such mechanism prevents differentiation from becoming inappropriate and enables the parts to maintain relations. This force, element, or mechanism is known as integration.20 Integration is responsible thus for uniting efforts or for maintaining interactions among parts toward the accomplishment of organizational objectives or structural functions. It is also referred to as coordination, and it happens through, for instance, an individual in a specific position (such as a manager), through instructions and procedures, through the training of participants, or even through informal communication.21 By using these coordination mechanisms, divided work can become united. It should be emphasized, however, that integration, or coordination, must not prevent differentiation, i.e., in organizations the two phenomena must occur. As a matter of fact, the stronger the differentiation is, the stronger the integration has to be (Table 2.1). It may be seen from this discussion that differentiation and its gradations, as well as integration and its several possibilities, have been the main areas of interest in studies on organizational structure. They have been used to characterize organizations and to present models, classifications, and typologies, and thus structure studies have become more and more diverse, achieving nowadays greater complexity and wider reach.

Table 2.1 Elements of organizational structure Differentiation – Relates to the specialization presented by positions, groups and departments – Occurs as a function of external complexity, in the pursuit of efficiency, and even as a form of work control – Presents as a continuum: higher or lower levels

Integration (or coordination) – Refers to efforts to unite what was divided by differentiation – Occurs as a function of differentiation: the greater the differentiation is, the stronger the integration has to be – Presents as types or categories, for instance, by the manager, through instructions or procedures, through informal communications, among others

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2 Organizational Structure, Format, Shape, Design and Architecture

Notes

In fact, the concept of structure varies according to the author, the use and, mainly, the field of knowledge in which it is used (BASTIDE, Roger and others. Usos de sentidos do termo estrutura. Sa˜o Paulo: Editora Herder, 1971). In this book, structure is considered as a set, or a system, in which the parts keep certain interaction between each other. Such definition is grounded, for example, in VIET, Jean. Me´todos estruturalistas nas cieˆncias sociais. Rio de Janeiro: Edic¸o˜es Tempo, 1967, mainly, in the section that deals with structuralist methods in Sociology and in complex organizations. 2 The discussion on the organizations’ objectives always raises considerable theoretical controversy. Within the pure structuralist perspective, it is not appropriate to consider the existence of (external) objectives for structure. (VIET, Jean. Me´todos estruturalistas nas cieˆncias sociais. Rio de Janeiro: Edic¸o˜es Tempo, 1967 or Gouldner, Patos metafı´sico e a teoria da burocracia. In ETZIONI, A. Organizac¸o˜es complexas. Sa˜o Paulo: Atlas, 1973). Considering the structural functionalism, Talcott Parsons argues that the organization have to achieve specific goals (PARSONS, Talcott. Sugesto˜es para um tratado sociolo´gico da teoria da organizac¸a˜o. In: ETZIONI, A. Organizac¸o˜es complexas. Sa˜o Paulo: Atlas, 1973). Amitai Etzioni makes comments on this aspect and considers the objective (s) as a function of the structure (ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972). The Barnard-Simon theory of organizational equilibrium considers the importance of incentives or payments to the various participants in the organization (cited in MARCH, James G. e SIMON, Herbert A. Teoria das organizac¸o˜es. Rio de Janeiro: FGV, 1972). Recent studies emphasize the importance of several stakeholders related to the organizations (FREEMAN Edward. Strategic Management: a stakeholder approach. London: Pitman Publishing, 1984). Thus, these objectives are admitted here whether as a function of the organizations, goals to be achieved or interests of participants or stakeholders. 3 ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972. 4 Discussions defending, justifying and even criticizing division of labor are seen in sociological or organizational theory for long time. Emile Durkheim, in work on division of labor in society, considered it as a phenomenon originated from living in group. (DURKHEIM, Emile. A divisa˜o do trabalho social. Brası´lia: Martins Fontes, 1977). Adam Smith approached it as a factor that increases productivity (SMITH, Adam. A riqueza das nac¸o˜es. Sa˜o Paulo: Nova Cultural, 1988), and he was followed by classical theorists of management. Karl Marx alerts about the use of division of labor to control workers (MARX, Karl. O capital: crı´tica da economia polı´tica. Sa˜o Paulo: Nova Cultural, 1988). Here, the division of labor is pointed out just as a social and organizational reality, and for a long time it has been alerted for the many problems incoming from the high division of labor in firms. 5 Among such approaches, emphasis can be given to the systems approach that, in some respects, expanded the structuralist approach, offering other important concepts such as open and closed systems, inputs, outputs, subsystems, etc. 6 STONER, James A. F. e FREEMAN, R. Edward. Administrac¸a˜o. Rio de Janeiro: Prentice-Hall, 1995. 7 DONALDSON, Lex. Teoria da contingeˆncia estrutural. In CLEGG, S. (org.) Handbook de estudos organizacionais. Sa˜o Paulo: Atlas, 1999. 8 In the first aspect, distribution of people in certain social position, Richard H. Hall retrieves Peter Blau and, in the second aspect, the mutable condition, he bases his arguments on Stewart Ranson, Bob Hinings and Royster Greenwood (HALL, Richard H. Organizac¸o˜es, estruturas e processo. Rio de Janeiro: Prentice-Hall, 1984). 9 It is important not to confuse functions of structure with goals of the organization, an aspect which is discussed above. 10 A theoretical review of such functions is not done here, but it can be pointed out the influence of management classical authors as the first function, the influence of human relations theorists as the second, and, as the third function, the influence of theorists who introduced the issue of power in organizational studies as those linked to the Conflict Theory, the structuralist theorists and even some authors of the contingency and neo-contingency approach.

2.3 Notes 11

13

In this respect, it is worth alerting to the feature of science in advancing and assimilating new studies and discoveries that do not contradict previous ones, but clear, complete and extend their reach. 12 NADLER, David A. GERSTEIN, Marc S. SHAW, Robert B. Arquitetura organizacional. Rio de Janeiro: Campus, 1994. 13 It is important to present two comments: first: in practice, these authors even up the terms informal organization and organizational culture (NADLER, David A. GERSTEIN, Marc S. SHAW, Robert B. Arquitetura organizacional. Rio de Janeiro: Campus, 1994). Second: despite several criticisms, studies on organizational culture entered the management studies, and currently, any organizational intervention has taken this aspect into account, which is discussed in Chap. 9. 14 The idea of culture in organizations has showed much influence of Anthropology theorists’ studies who consider culture as having tangible elements, such as technology, utensils, tools, etc., and intangible elements. In this book, emphasis is given to intangible cultural aspects such as values and norms. (LARAIA, Roque de Barros. Cultura: um conceito antropolo´gico. Rio de Janeiro: Jorge Zahar, 2002; SOUZA, Edela Lanzer Pereira. Clima e cultura organizacionais: como se manifestam e como se manejam. Porto Alegre: Edgar Blucher, 1978 and BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992). 15 In Chap. 9, there is a deeper discussion on the relation between structure and culture. Comments on the fact that “organizational culture” would emerge from the imposition or even the goals of specific individuals or group are also discussed. However, it can be said since now that if some “values” are initially imposed by a group or individual to an organization, after some time, those values tend to change, as such organization remains. 16 It is important to alert that Paul R. Lawrence & Jay W. Lorsch presented differentiation in terms of departments or units and, in this book, such term is used in the level of jobs and positions also. (LAWRENCE, Paul R. LORSCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973). 17 This aspect can be seen in Adam Smith’s and in Frederick W. Taylor’s work (SMITH, Adam. A riqueza das nac¸o˜es. Sa˜o Paulo: Nova Cultural, 1988 and TAYLOR, Frederick. W. Princı´pios de Administrac¸a˜o cientifica. Sa˜o Paulo: Atlas, 1984). 18 Discussion on control over work or even over worker can be seen in Karl Marx’s studies. Alvin W. Gouldner also addresses this aspect by citing Carl Dreyfuss’s work of 1930s and, discussions on it can be seen in Andre´ Gorz ou Henry Braverman. (GOULDNER, Alvin W. Patos metafı´sico e a teoria da burocracia. In ETZIONI, A. Organizac¸o˜es complexas. Sa˜o Paulo: Atlas, 1973; GORZ, Andre. Crı´tica da divisa˜o do trabalho. Sa˜o Paulo: Martins Fontes, 1980 and BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987). 19 It can be explained, for example, by the phenomenon of bounded rationality (SIMON, Herbert. Comportamento Administrativo: estudo dos processos deciso´rios nas organizac¸o˜es administrativas. Rio de Janeiro: FGV, 1979). 20 This term was used also by Paul R. Lawrence & Jay W. Lorsch, however, according to such authors, it had long been used in discussions on organization. (LAWRENCE, Paul R. LORSCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973). 21 Integration, or coordination, mechanisms have been discussed by several authors for a long time. Along this book, several discussions on them are made, mainly in Chaps. 3, 4 and 9.

Chapter 3

Types of Structure

As in the previous chapter, theoretical considerations on organizational structure are put forward herein. However, in this chapter, the principal types of structure discussed in organizational theory are reviewed from the initial studies, in which a unique and ideal format was defended, up to the contingency approach typologies, in which several other structures are admitted. The main objective is to demonstrate the situational aspect of the structure; that is, the possibility of having several formats according to different external situations and internal factors. This is necessary not only to discuss the principal forms that organizations assume until the present time, but also to alert to the possibility of other structures that may emerge as new situations arise.

3.1

Initial Concerns with Structure: Prescriptions for an Ideal Format

The concerns with organizational structure are frequently associated with scholars who were influenced by the structuralist movement in social science and in sciences in general. Because of these scholars, the discussion on structure has become a solid field of organizational studies and an approach that has generated remarkable works in management theory. However, discussions on the arrangement of units, departments, and positions, as well as their relations can be seen in earlier authors. The pioneer age in management theory, referred to as the classical period, is characterized by a number of prescriptive works in which many authors, engineers, executives, consultants, and others sought to present the most appropriate way to “build” and manage an organization. Perhaps this prescriptive quality came about due to some important characteristics of that period, such as the establishment of modern firms and the lack of studies to guide the managers at that time.

N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_3, # Springer-Verlag Berlin Heidelberg 2012

15

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3 Types of Structure

Like the other pioneers in management, Frederick W. Taylor1 defended the maximum division of labor, as the consequent specialization would bring about higher organizational efficiency. He advocated that, in order to attain the benefits of maximum division of labor in terms of efficiency, work should be divided into the simplest tasks possible and the ideal position should be one that had a minimum amount of tasks. In accordance with the concepts discussed in the previous chapter, he defended the maximum differentiation. Furthermore, according to F. Taylor, specialization should not be restricted to the operative level but should reach the supervisory level. He supported functional supervision, in which the workers responsible for the operations would be subordinated to several supervisors, each one a specialist in a particular function related to management or in a similar set of functions. There should be, for instance, separate supervisors responsible for production, quality, planning, and for other functions that would be considered important and necessary at the supervisory level and that could be subjected to division of labor. Being a little more rigorous in terms of structure, Henri Fayol also supported the division of labor but only insofar as it does not become nonfunctional. For him, a division of labor would have “limits which experience and a sense of proportion teach us may not be exceeded”.2 In addition, he was against the functional supervision proposed by F. Taylor as, according to H. Fayol, the command unity principle should prevail; that is, there should not be more than one superior for each subordinate. In his opinion, duality of command would be a “perpetual source of conflicts, very grave sometimes.”3 Hence, in his opinion, functional supervision would not be an appropriate management practice. The horizontal division of labor at the supervisory level should be restricted to functional areas (departments), with supervisors in charge of their respective departments in accordance with the command unity principle. As an alternative solution to the problem of specialization at the supervisory level, H. Fayol suggested the line-staff structure. In this structure, some administrative functions would be undertaken by the immediate superior of the worker (line), while other administrative functions would be carried out by an office or group in charge of advising and supporting the worker. Planning or quality control, for instance, could be staff functions within a firm. Thus, by implementing such separation, some administrators (managers) would have authority over the workers, while others (staff) would only be in charge of supporting and advising them. Division of labor at the supervisory level would then be realized, without breaking the command unity, one of the management principles according to H. Fayol.4 Apparently, there is also a difference in opinion between these two classical authors concerning the types of integration, i.e., coordination mechanisms. F. Taylor, a proponent of rational organization of labor, gave more emphasis to coordination through routines and previously stipulated procedures, with time-andmotion analysis and the consequent standardization as the most important coordination mechanisms. In contrast, Henri Fayol, considered until today as one of the fathers of management, was more concerned with coordination by the supervisor,5 a person in charge of harmonizing the divided organizational efforts (Table 3.1).6

3.2 Bureaucracy: An Attempt to Describe an Organizational Format

17

Table 3.1 Main diferences between classical authors concerning organizational structure Taylorism Fayolism – Maximum division of labor – Division of labor but only insofar as it does not become nonfunctional – Division of labor at supervisory level – Line-staff structure (functional supervision) – Integration, or coordination, through routines – Integration, or coordination, by the and previously stipulated procedures manager

Despite the above-mentioned differences – functional supervision versus line-staff structure, and integration through routines versus integration by the supervisor – the majority of classical studies acknowledges maximum division of labor as a means to attain benefits regarding efficiency, including better use of resources, higher productivity, or the accomplishment of work the best way possible according to the expected results. Incidentally, such choice of the means to attain a particular end was one of the bases for the first important characterization of organizations in terms of structure: the bureaucracy.7

3.2

Bureaucracy: An Attempt to Describe an Organizational Format

Discussing bureaucracy, as well as it was made with structure, is not an easy task. Although it has been a well-discussed subject since the works of Max Weber8 and others, and in spite of having its basic points well assimilated by sociological and organizational theory, its practical implications in organizations are far from simple to be understood. This fact holds true in both organizations with traditional structures and those with modern ones. With regard to traditional structures, one of the aspects that deserve discussion is the relation between bureaucracy and the classical theories earlier discussed. Due to several aspects in common, the Weberian studies on bureaucracy are often considered as part of classical management studies. Such similarities can be noted when the main bureaucracy characteristics presented by M. Weber are analyzed, among which are: division of labor and specialization, rules, regulations and standardized procedures, and a stable hierarchy. Bureaucracy thus includes differentiation through division of labor, as well as integration based on standardization, as defended by F. Taylor, and based on the manager, as pointed out by H. Fayol. However, in considering Weber’s works as part of the classical management movement it does not seem proper due to the scope of his studies and his approach to a kind of organization that was becoming increasingly stronger in (modern) society. His complex analysis shows a wider concern than the prescriptions presented by classical theorists. In truth, he made a descriptive work and, at the same time, presented many explanations for the strengthening of bureaucracy in society. According to M. Weber, bureaucratic organizations have become stronger over time legitimated by their merit and rationality. In terms of merit, bureaucracy is

18

3 Types of Structure

supported by domination based on knowledge or technical ability, contrary to previous forms of domination based on tradition (family names, for example) or even charisma (personal characteristics of certain individuals). With regard to rationality, bureaucracy is seen as an organization in which the adequacy of the means to attain an end is emphasized; that is, in which there is better use of resources.9 On analyzing Weber’s work, some bureaucracy characteristics can be pointed out, such as10: • • • • • •

Rules and regulations Hierarchy of positions or jobs, and consequent authority Official documents and formal communication Specialized training Standardized procedures Impersonality

Taking into account these characteristics and analyzing it reversely, it can be said that in terms of structure, the prescriptions made by classical management authors, such as F. Taylor and H. Fayol, sought to apply bureaucratic features in firms. In fact, they defended the strengthening of the bureaucratic format in organizations: a structure with a legitimate power based on merit and rationality. It should be pointed out, however, that the classical authors concentrated on management as they focused specifically on the administration of organizations. Each classical author highlighted particular aspects of bureaucracy, thus the Taylorist bureaucracy and the Fayolist bureaucracy could be conceived. In the former, for example, the use of routines or standardized procedures (for performance) in each position to achieve integration was defended. In the latter, the use of a manager or hierarchy was emphasized. In both, division of labor and specialization were defended.11 The strength of the Weberian bureaucracy as an organizational structure model becomes reasonable given the structural functions proposed in the previous chapter. As mentioned in that chapter, a structure should be seen as the distribution of parts and the interaction between those parts, and that it should perform the following functions: 1. Technical function – to present more appropriate ways to accomplish a given task in order to produce a certain outcome. 2. Relational function – to regulate and establish behavior and decision-making policies. 3. Power regulation or regulatory function – to regulate authority and subordination. 4. Values formation function – to present values, beliefs, assumptions, disposition, and shared principles. Regarding the technical function, some features of the bureaucracy that were previously mentioned can be pointed out: hierarchy of positions, specialized training, and standardized procedures. Through such specialization, procedures, and hierarchy, the bureaucracy offers a solution so that the work is done, the products are produced, or a certain result is presented.

3.3 Informality and the Strengthening of the Classical Structure

19

Concerning the relational function, the bureaucracy responds with the following characteristics: rules and regulations, official documents, formal communication, and impersonality. Thus, within the bureaucratic structure, relationships happen in an impersonal way; that is, based on the job or position that an individual occupies. Such relationships must be based on rules and regulations, and the communication must be formal; i.e., it must be explicit or clearly expressed. With regard to the power regulation function, the characteristics of the hierarchy of positions, or even the rules and regulations could be pointed. However, in the analysis of authority, the most important aspect is to understand its basis or origin, i.e., the source of its legitimacy. In this respect, the power in a bureaucracy comes from merit (meritocracy), knowledge, and expertise, as opposed to emanating from inheritance or charisma. The values formation function is perhaps the one that presents the greatest difficulty in being analysed considering the Weberian bureaucracy features. In the characteristics drawn from M. Weber, there is no principle, at least explicitly, that deals with this issue or that presents this function in the bureaucratic structure. In this respect, the work of the author could go further, especially taking into account that he assumed two possibilities when defining rational social action: rational considering the goals and rational considering social values. In addition, these two possibilities could even occur together.12 In truth, M. Weber conducted studies on the importance of social values in the establishment of relations in society, including the strengthening of bureaucracy.13 With regard to this aspect, The protestant ethics and the capitalism spirit 14 can be cited. In such study, M. Weber presented a discussion on the strengthening of capitalism in regions in which protestant values were esteemed, mostly the ones related to asceticism, as well as the work and its fruits as signals of salvation and grace. Thus, it could be inferred that the strengthening of bureaucracy with its many advantages could therefore also be associated with such social values. However, in general, whether in Weber’s studies or in the prescriptions of classical management authors, comments on values are presented with greater consideration for their external aspects than their internal ones15; that is, the values internally assumed by an organization are those that have come out from the society in which it has been installed. Thus, a values formation function could be questioned in an organization and its structure. The key to understanding such a function in large bureaucratic organizations came later, with the studies on human relations and structuralism theorists’ discussions on informal relations.

3.3

Informality and the Strengthening of the Classical Structure

Despite slight differences in opinion on the best way to structure an organization, the classical management authors who contributed to the bureaucracy establishment, as discussed previously, were mostly in agreement when it came to the basis

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3 Types of Structure

for the ideal format. They concurred that the ideal structure should be grounded on principles such as division of labor and its consequent specialization, as well as the standardization of procedures and centralization of the decision-making process (through a manager, for example) in order to attain integration. Any exceptions that were noticed were taken as idiosyncrasies, or even anomalies, that should be corrected. The works of the scholars of the so-called human relations school brought to light some elements that until that moment had not been considered in organizational theory, for instance, the informal organization. This set of relations had not been taken into account by classical theorists, who viewed the organization as a perfect machine. In such workplace, their prescriptions and consequent formality should explain and control everything that happened or that could happen.16 Following the work of theorists on the human relations approach, other organizational aspects besides formality were taken into account. However, “humanist” considerations had little effect on the management theories grounded in classical or bureaucratic principles. In the practice of firms, the above-mentioned informal relations, despite being considered a natural aspect of human relationships, end up receiving specific “treatments” so as to not hamper the perfect machine of the formal organization.17 Roughly speaking, what guided these treatments was the following thought: If, according to the researches of human relations scholars, workers need to maintain deeper relations with each other as a normal aspect of human nature, then we must provide occasions and spaces for informal interactions to take place, such as coffee breaks, social meetings, parties, etc. However, these informal relations must happen extrinsically to the work; that is, they must not affect the way work occurs, as it has been formalized in rationality and efficiency principles, and must not be modified. Thus, human relation studies have not brought about significant changes to the manner in which organizations are explained or structured. Rather, the bureaucratic ideal and its variations remained, mostly the Taylorism and its rational organization of work, as well as the Fayolism and its use of the manager as an integration mechanism. The only alterations were the use of some “treatments” in order to assimilate the human aspects brought to light by human relations scholars. In this regard, actions more extrinsic to the work and often deemed manipulative were used. Actually, other works, such as those of Chester I. Barnard and Mary P. Follet, have also brought new perspectives to organizational studies. However, these works had little effect on management theory and business practices, especially in terms of structural explanations and prescriptions.18 Nevertheless, within the current organizational realities, there is an effort to revisit these works, as well as those of some important theorists linked to sociological studies of organizations that had also little influence on organizational practices during their time: the structuralists.

3.4 The Questioning of the Pattern: Structuralist Studies

3.4

21

The Questioning of the Pattern: Structuralist Studies

Despite the initial concerns with organizational structure among classical management theorists and, mostly, of M. Weber, a considerable number of works about this subject emerged from theorists who were influenced by the structuralist approach in social sciences. Such approach emphasizes the possibility of the complex phenomena being seen as a structure, i.e., parts that interact with each other. Following the works of these theorists, sociological studies on organization intensified, and the organization came to be seen as a social phenomenon instead of merely a simple (economic) instrument designed to achieve goals that are external to it.19 From these authors likewise it emerged a number of questions on the bureaucratic structure and the “harmonious” practices established from the studies on human relations. In brief, such studies contest the Weberian bureaucracy, valorize the informality in the formation of structures, and defend conflict as an important element in organizations. As for the challenge to the Weberian bureaucracy as a descriptive model of an organizational structure, using ideas from human relation theorists, structuralist scholars described the organization as a set of social relations with the structure as the result of formal and informal internal relationships, as well as relations external to the organization. Thus, the static and often deemed functionalist aspect of the bureaucracy would be nonexistent in organizational practice.20 Concerning informality, scholars bearing structuralist influence pointed out its role in shaping the structure of an organization. As previously discussed, the human relations approach ultimately led to the development of specific practices to ensure that the informal relationships did not interfere with the formal organization. Structuralists argued against these practices, which to some extent are manipulative; they consider informal relationships not as an anomaly but an essential factor in shaping the organizational structure.21 With regard to conflict, structuralists believe it should be considered not only as a reality within organizations but also as an important element for the firm to adapt and survive.22 In summary, authors bearing structuralist influence challenged the Weberian bureaucracy as a descriptive model of a real organization and, although not explicitly, dismissed classical prescriptions such as those in Taylorism as a consequence. Similarly, they argued against what they deemed manipulative practices, which were derived from the works of human relations scholars. From their considerations thus, it can be inferred that there is no single structure that can represent organizations and can be used as a recipe for the formation of firms. In fact, they proposed some classifications of organizations23; however, they did not submit typologies or kinds of organizational structures as, in line with their structuralist foundation, they viewed structure as a product of the various relationships associated with the organization: formal, informal, internal, and external ones (Table 3.2). In some respects, it can be said that the first discussions about a values formation function for structure began with these theorists, although not strictly. A culture or

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3 Types of Structure

Table 3.2 The questioning of the structuralist studious Main structuralist considerations – Denied the existence of an ideal format (bureaucracy) – Informed about the importance of informal relationships in shaping structures – Advised on the importance of conflict for organizations’ adaptation and continuance – Warned about manipulative practices from human relations school studies

the values considered valid by the organization’s participants would arise from their coexistence and their informal relationships. It is perhaps by virtue of it that these authors are cited when organizational values formation aspects are so discussed today.24 However, despite the theoretical importance of their works, these structuralist scholars did not exert significant influence on the business practices of their time. Rather, the supporters of the traditional format had much greater influence in business circles.25 This is perhaps due to the descriptive character of the works of structuralists, the complexity of their studies, and the fact that they challenged the classical view of organizations that prevailed at that time by emphasizing informality, interests, and conflict, which are considered taboo in many business circles until today.26 Thus, the classical organizational structure based on bureaucracy and its variations, such as Taylorism and Fayolism, continued to have a bigger following. This changed, however, with the emergence of researchers who did not cling to aspects deemed controversial, as did the structuralists, but were grounded in important empirical works. These researchers, who presented alternative ways of structuring organizations and classifications acceptable in business circles, developed the contingency approach.

3.5

Classifications of Structures: Contingency Approach Researches

The contingency theory of structure, which emerged based on previous organizational studies and the systems approach, and supported by several empirical works,27 dealt a major setback to the classical organizational prescription by proposing that different structures may be appropriate for certain situations. As Lex Donaldson states, “the study of organizational structure witnessed a paradigm change when the classical management school was overthrown by the new paradigm of contingency theory.”28 The main aspects emphasized by contingency approach scholars with regard to structure were the nonexistence of a single and ideal model able to describe and prescribe an organization, and the existence of several conditions, or variables, that would lead to the emergence of different formats. With regard to the first aspect, the contingency approach researchers demonstrated the existence of various structures that would be not just anomalies but formats appropriate for the organizations that use them. This fact was against the classical opinion that an ideal and unique format

3.5 Classifications of Structures: Contingency Approach Researches

23

exists. In terms of the second aspect, the researchers presented variables external to the structure that would lead to an appropriate format. The environment in which the organization operates, the technology it uses, and the strategy it has chosen were the key variables pointed out. Regarding the latter aspect, the contingency theory studies can be considered quite different from those of structuralists, as they emphasized external aspects as producers of the structure, while the structuralists’ put greater emphasis on internal relations.29 Regarding environment, the works of Tom Burns and George M. Stalker, as well as Paul R. Lawrence and Jay W. Lorsch are the most cited in the literature. Based on their research, T. Burns and G. M. Stalker30 noted the existence of two basic types of structures: mechanistic and organic. The first, with classical and bureaucratic features, would arise in stable and predictable external conditions. The second, a more flexible structure, would emerge in unstable and changeable environmental conditions. P. R. Lawrence and J. W. Lorsch,31 by using the concepts of differentiation and integration, emphasized that these two elements of structure should be adapted to the environment in which the organization is inserted. With regard to technology, the research organized by Joan Woodward in English industries is especially cited.32 By using the definition of the three basic types of production technology – unit production, mass production, and continuous process production – this researcher concluded that, in each of these types, there were particular structural features, which, if followed by the firms, would result in adequacy and business success. Concerning strategy, the main references are Alfred D. Chandler’s works.33 In a study that emphasized the changes implemented internally by large firms, this economic historian noted the importance of strategy in the formation of an organizational structure; that is, certain organizational formats would arise to make possible certain organizational strategies. The strategy would thus be an intermediary element in the influence of the environment on the structure. Hence, the organization would have a choice and not be a passive recipient of the environmental influence (Table 3.3).34 Other remarkable studies, such as the works of Charles Perrow and James Thompson,35 have since followed, and then the contingency theory has gained strength in both the theoretical environment and business practice. On the other hand, the contingency theory also encountered criticism, such as the determinism in the relation between contingency variables and the structure, the methodology used in researches, as well as the lack of confirmation by further studies. However, in general, the importance of these works for organizational Table 3.3 Main variables discussed in contingency theory studies Variables References Environment Paul R. Lawrence and Jay W. Lorsch’s studies on differentiation and integration; Tom Burns and George M. Stalker’s studies on mechanistic and organic structures Technology Joan Woodward’s studies considering types of technology employed: unit production, mass production, and continuous process production Strategy Alfred D. Chandler’s studies on large companies

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studies is unquestionable. In addition, the great legacy of the contingency theory is that of presenting several factors that influence the structure of an organization apart from efficiency and even informal relations. Other works on organizational structures have followed this increasingly complex line, including those of Henry Mintzberg, which is examined in the next chapter since it is the basis for the discussion of a sixth format, the main goal of this book.

3.6 1

Notes

TAYLOR, Frederick. W. Princı´pios de Administrac¸a˜o cientifica. Sa˜o Paulo: Atlas, 1984. FAYOL, Henry. Administrac¸a˜o industrial e geral. Sa˜o Paulo: Atlas, 1984. p. 45. 3 FAYOL, Henry. Administrac¸a˜o industrial e geral. Sa˜o Paulo: Atlas, 1984. p. 49. 4 After H. Fayol, the line-staff structure was studied by many other theorists, such as Lyndall Urwick (DALE, Ernest e URWICK, Lyndall. Organizac¸a˜o e assessoria. Sa˜o Paulo: Atlas, 1971 or URWICK, Lyndall. Elements of administration. London: Pitman Pub, 1974.), and apparently has been more applied in organizations than Frederick W. Taylor’s functional supervision. 5 Coordination is one of the elements of manager’s function according to Henry Fayol (FAYOL, Henry. Administrac¸a˜o industrial e geral. Sa˜o Paulo: Atlas, 1984). 6 Maybe, the difference in opinion between these authors with respect to the coordination mechanisms was due to the fact that the two authors had their professional experiences in different workplaces: F. W. Taylor in industries and H. Fayol in mines. 7 Amitai Etzioni, when analyzing bureaucracy, indicates Max Weber as the most influential founder of structuralism (ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972). 8 WEBER, Max. Ensaios de Sociologia. Rio de Janeiro: Ltc Editora, 1982 and WEBER, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. vol. 1 e 2. 9 Two comments – first: Max Weber nominated such type of domination as rational legal domination. However, the “legal” aspect has the function of materializing the rationality (Weber, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. Vol 1 p. 147). Second: only a superior authority can define who has the merit to occupy a position, not the subordinates as it occurs in charismatic domination. 10 WEBER, Max. Ensaios de Sociologia. Rio de Janeiro: Ltc Editora, 1982 and WEBER, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. Although other features could be presented, these features are highlighted considering the objective of this work. 11 Max Weber argued that, by using bureaucracy, the specialization principle would be implemented (WEBER, Max. Ensaios de Sociologia. Rio de Janeiro: Ltc Editora, 1982 p. 151). 12 WEBER, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. 13 WEBER, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. 14 WEBER, Max. A e´tica protestante e o espı´rito capitalista. Sa˜o Paulo: Editora Martin Claret, 2002. 15 As for values in classical scholars’ studies, it can be mentioned the discussions of several authors on the protestant principles influencing Frederick W. Taylor, as well as his concerns about waste in society at his time (TAYLOR, Frederick. W. Princı´pios de Administrac¸a˜o cientifica. Sa˜o Paulo: Atlas, 1984). Huw Beynon comments on some values that influenced Henry Ford’s management style (BEYNON, Huw. Trabalhando para Ford: trabalhadores e sindicalistas na indu´stria automobilı´stica. Sa˜o Paulo: Paz e Terra, 1995). 16 MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996. 17 Discussions on its little effect on managerial practices or even on manipulation generated from the human relations approach can be seen in ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972; MOUZELIS, Nicos P. Organizacion y burocracia: un analisis de las teorias 2

3.6 Notes

25

modernas sobre organizaciones sociales. Barcelona: Peninsula, 1975; PERROW, C. Ana´lise organizacional. Sa˜o Paulo: Atlas, 1972; BRAVERMAN. H. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987, and, more recently, CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000. 18 In the introduction of a recent book that reviews Mary Parker Follett’s ideas, Peter Drucker informs the general ignorance of her work for a long time, including from his part. (GRAHAM, Pauline. Mary Parker Follet, profeta do gerenciamento: uma celebrac¸a˜o dos escritos dos anos 20. Rio de Janeiro: Qualitymark,1997). Otherwise, comments on her work can be seen in classical studies such as in URWICK, Lyndall. Elements of administration. London: Pitman Pub, 1974. As for Chester I. Barnard, it can be said that the influence was larger in the management theory. However, his influence on organizational practices mainly in structural terms was very little. 19 Articles of Talcott Parsons, Alvin W. Gouldner, Philip Selznick and Peter Blau discussing this matter can be seen in ETZIONI, Amitai. Organizac¸o˜es complexas. Sa˜o Paulo: Pioneira, 1972. 20 Some criticisms of bureaucracy as a good descriptive model of modern organizations: Robert Merton presented the bureaucratic dysfunctions; Alvin W. Gouldner presented organizations with different degrees of bureaucratization; Philip Selznick alerted to the need of adaptation, emphasizing the importance of external aspects to the formation of organizations and their structures; and Peter M. Blau presented discussion on the dynamics of bureaucracy. (GOULDNER, Alvin W. Patterns of industrial Bureaucracy. New York: Free, 1964; SELZNICK, Philip. TVA and the grass roots: a study in the sociology of formal organization. New York: Harper & Row Pub, 1966; MERTON, Robert K. Sociologia: teoria e estrutura. Sa˜o Paulo: Mestre Jou, 1970; BLAU, Peter M. and SCOTT, W. Richard. Organizac¸o˜es formais. Sa˜o Paulo: Atlas, 1970. See also articles of these authors in ETZIONI, A. Organizac¸o˜es complexas. Sa˜o Paulo: Atlas, 1973). 21 In addition to Robert Merton, Alvin W. Gouldner and Philip Selznick, who are cited in the preceding note, comments on this matter can be seen in ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972; MOUZELIS, Nicos P. Organizacion y burocracia: un analisis de las teorias modernas sobre organizaciones sociales. Barcelona: Penı´nsula, 1975 and PERROW, C. Ana´lise organizacional. Sa˜o Paulo: Atlas, 1972. 22 ETZIONI, Amitai. Organizac¸o˜es modernas. Sa˜o Paulo: Pioneira, 1972; MOUZELIS, Nicos P. Organizacion y burocracia: un analisis de las teorias modernas sobre organizaciones sociales. Barcelona: Peninsula, 1975; and PERROW, C. Ana´lise organizacional. Sa˜o Paulo: Atlas, 1972. 23 Amitai Etzioni’s classification is one of the most cited in literature. (ETZIONI, Amitai. Analise comparativa de organizac¸o˜es modernas: sobre o poder, o engajamento e seus correlatos. Rio de Janeiro: Zahar, 1974). 24 It can be cited, for instance, PETERS, Thomas J. and WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper 7 Row, 1983. 25 The emergence of the neoclassic approach proves the importance of classical approach for management theory and practices. (CHIAVENATO, I. Teoria geral da administrac¸a˜o. Sa˜o Paulo: Makron books, 1998). 26 This is discussed in Chap. 9 that deals new coordination mechanism. 27 It is worth emphasizing that, besides the previously mentioned works, contingency studies was strongly supported by socio-technical approach and researchers such as Eric L. Trist and Kenneth W. Bamforth of the Tavistock Institute of Human Relations. (On socio-technical approach, see BIAZZI Jr., Fabio. O trabalho e as organizac¸o˜es na perspectiva so´cio-te´cnica: a convenieˆncia e a viabilidade da implementac¸a˜o do enfoque so´cio-te´cnico nas empresas. Revista de Administrac¸a˜o de Empresas. Sa˜o Paulo, v. 34, n.1. p. 30–37, jan./fev. 1994). 28 DONALDSON Lex. Teoria da contingeˆncia estrutural. In Clegg, S. (Org.) Handbook de estudos organizacionais. Sa˜o Paulo: Atlas, 1999. p. 106. 29 It can be said that external influences on structure were discussed by some structuralist authors, such as Philip Selznick, Peter M. Blau and W. Richard Scott (SELZNICK, Philip. TVA and the grass roots: a study in the sociology of formal organization. New York: Harper & Row Pub, 1966

26

3 Types of Structure

and BLAU, Peter M. and SCOTT, W. Richard. Organizac¸o˜es formais. Sa˜o Paulo: Atlas, 1970, and papers of such authors in ETZIONI, A. Organizac¸o˜es complexas: estudo das organizac¸o˜es em face dos problemas sociais. Sa˜o Paulo: Atlas, 1973). Talcott Parsons is an important reference in this subject. 30 BURNS, Tom e STALKER, George Macpherson. The management of innovation. London: Tavistock Pub, 1966. 31 LAWRENCE, Paul R. e LORSCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973. 32 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977. Better discussion on her work is presented in Chap. 5, which deals technology of automation. 33 CHANDLER Jr., Alfred D. Strategy and structure: chapters in the history of the industrial enterprise. Cambridge: MIT Press, 1962; CHANDLER Jr., Alfred D. The visible hand: the managerial revolution in America business. Cambridge: 1977; and CHANDLER Jr., Alfred D. Scale and Scope: the dynamics if uindustrial capitualism. Crambridge: Bleiknap, Harvard University, 1994. 34 In this respect, as Thomas K. McCraw comments, although Alfred D. Chandler had influenced Paul Lawrence and Jay Lorsch’s contingency approach, he was against the idea of organizational passivity in the face of environment. In his work, the contingency idea refers to the structure in relation to strategy and not strategy in relation to the environment. (McCRAW, Thomas K. Alfred Chandler: ensaios para uma teoria histo´rica da grande empresa. Rio de Janeiro: Editora da FGV, 1998). 35 DONALDSON, Lex. Teoria da contingeˆncia estrutural. In CLEGG, S. (org.) Handbook de estudos organizacionais. Sa˜o Paulo: Atlas, 1999.

Chapter 4

Henry Mintzberg’s Five Basic Configurations

Within the organizational structure approach, this work is based mainly on the typology of organizations offered by Henry Mintzberg.1 Actually, it is a proposal to supplement that classification, due to the new conditions that have come up nowadays for organizations, the new structural possibilities, and the new work coordination mechanisms. Therefore, this chapter has the main objective of commenting on the studies of that author, discussing, mostly, his classification for organizational structures. It is worth emphasizing that, despite several Henry Mintzberg’s ideas about structure being presented herein, the only aspects that were extracted from his work were those that could contribute to this book.

4.1

The Consistency in the Formation of Structure

The most noticeable feature of Henry Mintzberg’s work on structure and what makes his typology one of the most appropriate classifications for organizational formats is its multivariate aspect. In his analysis, the author does not limit himself to a unique factor for the emergence of structures, as it could be seen in the works of many previous authors. His method for defining organizational formats takes into account the different variables identified in the literature and, thus, his work identifies the main structures from the analysis of these variables altogether. In this aspect, for Henry Mintzberg, the formation of a structure involves an interference of contingency factors and structural various possibilities (or design parameters), including the work coordination mechanisms. A format would emerge, therefore, in the search for consistency among internal structural possibilities and contingency factors, that is, in the attempt to achieve structural harmony, internal and externally.2 Thus, his work on structures examines various structural possibilities, including different coordination mechanisms and contingency factors. In the end, in view of the consistency idea, or his extended N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_4, # Springer-Verlag Berlin Heidelberg 2012

27

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4 Henry Mintzberg’s Five Basic Configurations

configuration hypotheses, five main structures or the five configurations that represent the formats used by organizations until recently are presented.3

4.2

Structural Possibilities, Coordination Mechanisms and Contingency Factors

Several structural possibilities, or design parameters, identified in organizational literature are discussed in Henry Mintzberg’s work. They include the basic parts of an organization, specialization, formalization, grouping (departments), planning and controlling systems, liaison devices, centralization and decentralization. Among these structural possibilities, the work coordination mechanisms, i.e., the possible means of integration, stand out. According to that author, there are five mechanisms that are necessary to join the work that was divided from the differentiation phenomenon: the standardization of work processes, the standardization of outputs, the standardization of skills, direct supervision, and mutual adjustment. In the standardization of work processes, instructions or previous descriptions of procedures are used, as in manuals, flowcharts, rules etc. The central idea is to employ a number of routines and, through the types of behavior that come to follow these routines, the union of divided efforts and the security of a final and expected result or the organizational objectives would be achieved. This coordination mechanism has correspondence with the formalization of the bureaucratic organization and, also, with the prescriptions supported by F. W. Taylor’s rational organization of work. The standardization of outputs is used in some organizational situations in which it is difficult to standardize the means by which work should be done, due to uncertainty and the great number of decision possibilities. In such situations, the standardization of work processes turns out to be compromised and the best way for the work to be accomplished must be chosen by the performer when it happens. Thus, an alternative to ensure integration is to determine specific targets or goals, and to present them to individuals or to groups, leaving to the workers the responsibility for achieving these targets or goals.4 The standardization of skills is a kind of coordination based on the workers’ knowledge and ability. These skills, acquired over time mainly in training or academic programs, offer performers a great qualification or competence that would ensure the appropriate execution of activities in accordance with organizational objectives. It is appropriate for complex works in which extensive division is not possible. When this coordination mechanism is used, some highly qualified individuals are seen accomplishing the proposed work. It is a type of activity similar to the “artisanal” one, prior to the Industrial Revolution and the great division of labor that has occurred since then. The activities of medical doctors, teachers, lawyers, consultants etc. are some examples. In these cases, some division of labor happens once there are specialists responsible for specific areas, such as

4.2 Structural Possibilities, Coordination Mechanisms and Contingency Factors

29

marketing or finance teachers, geriatricians, pediatricians and surgeons, tax or criminal lawyers, etc. Nevertheless, the great division of labor as that seen in the Tayloristic form of work doesn’t happen. Direct supervision is based on the concentration of decisions in a person who has considerable knowledge of the work to be done, to an extent that would enable him to coordinate employees’ actions properly. By observing the tasks already done and the situation that is presented, this person, a great expert in the process, would then be responsible for directing his subordinates’ actions. He would be, thus, much more than a controlling manager as in the standardization of work processes coordination. It is through him that the union of efforts and the achievement of organizational objectives would be ensured. It is worth emphasizing that this type of coordination is widely supported in Henri Fayol’s studies on management and has shared with the standardization of work processes the position of prime coordination mechanism in classical structure, having been used by most companies throughout the twentieth century. Mutual adjustment is a freer coordination mechanism, without formalization or centralization. It occurs in highly complex and dynamic, or uncertain, situations in which it is necessary for performers to have much contact with each other and, thus, to be able to “discuss” informally how activities should be done under such a circumstance. Thus, the choices are made as the work unfolds. Mutual adjustment is materialized in the large amount of information exchanged and in decentralized decisions taken from this information. It is seen in work in teams or in project work and has theoretical bases in studies concerning organic firms.5 The decision on what and how to do it can be considered joint as it occurs through several participant performers and the high level of communication maintained between them (Table 4.1). It should be made clear here that each coordination mechanism, in the same way as other structural factors, has its applications, advantages and disadvantages depending on the situation or organization. Standardizations, for example, are suitable for static (or unchangeable) works, bringing, in those cases, great efficiency to the process. Direct supervision and mutual adjustment are appropriate for more dynamic (or changeable) works and situations in which formalization by standardization is impossible to achieve. Work complexity may also influence the Table 4.1 Main coordination mechanisms according to H. Mintzberg Examples Main coordination mechanisms Standardization of work Using procedures, instructions or routines to be followed by workers processes Standardization of outputs Establishing targets, goals or specific objectives to be achieved by workers Standardization of skills Using workers’ competence, qualifications, ability and knowledge Direct supervision Using a coordinator manager Mutual adjustment Using informal communication and great information exchange between the workers

30

4 Henry Mintzberg’s Five Basic Configurations

definition of the type of coordination. Although direct supervision provides some dynamism for the process, mutual adjustment is the best coordination mechanism when the situation becomes very complex because of the diversity of information and opinions that arises from the participation of several individuals in decision making. Beyond that, the standardization of work processes, despite being suitable for static situations, is not so for complex jobs, and then, standardization of skills is more appropriate in this case. Thus, several considerations can be made and there is no best coordination mechanism for all situations. In addition to the structural possibilities, Henry Mintzberg’s work features analyses on contingency factors. In this respect, the author emphasizes the age and size of organizations, the technical system used by the firm, and the environment in which it is inserted. Even the factor of power is considered. He presents many discussions on how such contingency factors affect structure based on a large number of remarkable researches, mostly, of the contingency approach.6

4.3

The Main Configurations

Sustained by his analyses on the structural possibilities, including the coordination mechanisms, and on contingency factors, Henry Mintzberg presented five basic configurations that would explain how organizations had structured themselves in face of the realities that were present till that time: the Simple Structure, the Machine Bureaucracy, the Professional Bureaucracy, the Divisionalized Form, and the Adhocracy.

4.3.1

The Simple Structure

The Simple Structure is a format that can be seen in small firms, presenting, as its most noticeable feature, the centralization of decision in the strategic apex. The direct supervision, which is its main coordination mechanism, is undertaken by such level that makes decisions in a non-standard manner. Due to the company’s youth, the owners’ will, or even some environment hostility, small firms that use this structure have not reached a high degree of bureaucratization, thus presenting little differentiation (little division of labor) and little formalization. Despite being centralized, this format is organic in the operating core, where several workers without specific functions wait for the strategic apex’s decisions before beginning work. The strategic apex makes decisions based on the owner’s personal experience, often intuitively. This proprietor – a charismatic leader, founder and entrepreneur – has a great deal of knowledge of his firm and its business and directly manages his subordinates, often confusing the life of the organization with his personal life. Even with the existence of an intermediate level in the firm, centralization remains strong.

4.3 The Main Configurations

31

It is a structure that emerges in “adventurous” firms, presenting flexibility, versatility and innovation in its environment or in its business. It can also be said that this versatility coincides with the entrepreneur’s capability of processing information. As he knows enough of his firm and its business, he is able to think strategically about them. It is important to emphasize, however, that such thinking often happens more intuitively than analytically. The firm size and its differentiation depend, therefore, on the ability of this administrator to receive internal and external information and to decide on them. Despite this versatility, firms that use this structure cannot deal with complex environments due to their low differentiation. To do so, they would have to become larger and then divide, creating specialized, formalized and standardized departments and positions. Consequently, the structure would change. Incidentally, such small organizations, according to H. Mintzberg, are often seen as if they did not have structure, due to the fact that important classical features, such as specialization, standardization and formalism, are not used in such firms, as opposed to what happens to firms that have been bureaucratized.

4.3.2

The Machine Bureaucracy

The Machine Bureaucracy described by Henry Mintzberg is the configuration that is the closest to the bureaucratic model presented by Max Weber. It coincides, thus, with the organization defended as ideal by classical theorists of management, especially in Taylorism. Used by large industries and large service firms, it presents high formalization, specialization and centralization, and the standardization of work processes is its main coordination mechanism. Companies that use this structure provide a standardized production at a large volume, but with low variety. In addition to its theoretical bases in the Weberian bureaucracy, the Machine Bureaucracy’s main features can be also seen in the descriptions of mass production companies by Joan Woodward and in the descriptions of mechanistic firms by Tom Burns and George M. Stalker.7 In the operating core, this structure presents, as its main features, extensive division of labor, standardization, routine and formalization of behavior. The intermediary managers carry out three basic functions: subsidiary coordination, to resolve problems not solved by the standardization of work processes; the linkage between the performers and the analysts that are responsible for standardization; and the linkage between the strategic level and the operational one, creating sectorial plans (downwards) and transmitting relevant information (upwards). The strategic apex of the Machine Bureaucracy is the part of the structure that holds great power and assumes a centralizer role regarding decisions. It is the only part of the organization compounded of generalist managers, although low entrepreneurial functions are demanded from them. Indeed, these managers “are concerned in large part with the fine tuning of their bureaucratic machines” and in “just keeping the structure together in the face of its conflicts”.8 The strategic decisions are also

32

4 Henry Mintzberg’s Five Basic Configurations

the responsibility of this apex, while their implantation relies on the intermediate (tactical) or operational levels. This structure also presents some particular characteristics related to the support units. According to Henry Mintzberg, two types can be highlighted: the technostructure and the support staff. The technostructure is composed of analysts who are responsible, among other functions, for the standardization of the operating core activities. Despite imposing no formal power over other individuals (in hierarchy), they show great, but informal, power in practice. For this reason, Henry Mintzberg considers it the key part of this structure. The support staff is composed of a large number of units that provide support for the other units in the organization. Its work, as the name suggests, does not interfere, modify or change the operating core activities. Security, food and cleaning services, as well as presence and payment control, are some example that can be cited. Regarding the analysis of contingency factors, this configuration emerges in mature organizations that operate in simple and stable environments. In this aspect, an observation must be made: it is through internal differentiation (division of labor) that an organization converts external complexity into simple internal tasks and, therefore, large companies are able to operate in more complex environments than are small businesses (Simple Structure).9 However, if the work becomes even more complex and there is no possibility of the work being divided, or even if the environment becomes more dynamic, the need for other types of coordination and structure arises. Still regarding contingency factors, according to Henry Mintzberg, it is possible, for a technical regulator system to routinize work and therefore allow formalization. The use of this technology, however, cannot lead to an automation that would “displace a workforce dominated by unskilled operators”.10 Henry Mintzberg also presents other interesting considerations about this organizational format. One of them concerns the linkage between this type of structure and the development of capitalism, as well as the rise of the mass consumption society that demands and uses cheap goods and services that are produced in large scale.11 He also discusses the several problems related to this type of structure, such as the dissatisfaction at work, the difficulties of reaching coordination at the intermediate level, the accumulation of decisions in the strategic apex, and the misadjustments between the formulation of strategies and their implementation.

4.3.3

The Professional Bureaucracy

The Professional Bureaucracy is a typical structure of organizations composed of professionals who have high qualification and great control over their work. Thus, its main coordination mechanism is the standardization of skills that comes with the qualifications of the professionals. It occurs in institutions such as universities, hospitals, consultancy firms, and craft production firms, among others, where the decisions on the activities rely, primarily, on professionals who are responsible for

4.3 The Main Configurations

33

the work itself, that is, on the operating level. This fact causes extensive decentralization in these organizations owing to the autonomy of professionals such as doctors, teachers, consultants, etc. Other important aspects pointed out in Henry Mintzberg’s work is that these professionals, in addition to the training they have received, have also been submitted to indoctrination and are highly committed to their areas of expertise, e.g., medicine, education or law. Due to this fact they come to be more engaged with their areas of knowledge than with the organization in which they work. By considering the importance of these professionals, their power is enormous in this kind of firm. Autonomy and decentralization are characteristics of these organizations so that the professionals can decide in complex situations, which would be impossible in the case of the standardization of work processes, for example. Thus, the operating core is the strongest part, presenting the greatest importance in this type of organization. In this structure, the intermediate functions (middle line) are hardly noticeable, many times being undertaken by committees formed by the operating core professionals. In the same way, the strategic decisions are often made under the influence of these professionals and, indirectly, of the decisions that come from their respective professional associations on the outside concerning the areas of knowledge (medicine, law, education, etc.). The strategic apex is thus responsible for enabling collective decisions and representing the organization before the environment. Henry Mintzberg emphasizes, also, the importance of professional entrepreneurs in the development of strategies in the Professional Bureaucracy, which leads to the most significant changes in this type of organization. An interesting aspect concerns the roles of the support staff. This part of the organization, which has functions of serving the professionals, maintains a significant role in this structure, despite its limited power. As examples, the hospitals’ administrative services, the universities’ offices among others can be pointed out. Actually, the support staff presents itself as a form of parallel organization to the professionals’ organization, and it shows a structure based on the Machine Bureaucracy. Therefore, in a Professional Bureaucracy, two structures can be noted: one that is well decentralized, in which decisions are made through the operating core professionals’ autonomy, and another with centralization and standardization characteristics, comprising the support staff. It should be emphasized that this second structure, despite its characteristic and marked role, is weak and deemed less important, having the function of serving the operating core professionals. In terms of contingency factors, the Professional Bureaucracy emerges in stable situations, but with a complexity that makes impossible the division of labor as in case of the Machine Bureaucracy. Thus, it is necessary to leave the decisions concerning operating activities to a person who is knowledgeable about them. Still as for the contingency factors, it is important to point out that, according to Henry Mintzberg, technology (automation) presents a secondary role in this organization, especially in the work of the professionals who use it as a simple tool. To some extent, the professionals may dislike technology, because it can bring about rationalization of their skills and division of labor, thus removing their autonomy

34

4 Henry Mintzberg’s Five Basic Configurations

and hampering their relationship with clients. This aversion to the use of technology, of course, cannot be true for workers of the support staff who have a job similar to that of the Machine Bureaucracy. In addition to the features mentioned above, other important considerations are made by Henry Mintzberg on this type of structure, especially with regard to its problems. A loose coordination mechanism based on the professionals’ skills, a lack of institutional control and even an external control on the professionals, and the difficulty of the organization in dealing with innovation are some of the problems highlighted. On the last aspect, however, it should also be pointed out that with this structure, the organization can deal well with complex problems, since they are not in dynamic situations.

4.3.4

The Divisionalized Form

The Divisionalized Form is a structure used by companies that operate in diverse markets. It presents a central office (headquarters) and, subordinate to it, divisions that operate in various markets. The divisions are not just departments grouped by functions such as those that appear very commonly in Machine Bureaucracies. Rather, they are related to types of products and customers, or even geographical regions, and each one has its own functional areas such as production, purchasing, sales and personnel departments. In some cases, there are functional areas considered strategic that are subordinated directly to the central office and that offer assistance to the divisions, such as the legal and the planning departments.12 Thus, two structure levels can be seen in these organizations: one that connects the central office to the divisions and another related to each division. In this case, the divisions can be presented in formats such as the Machine Bureaucracy, the Professional Bureaucracy, or even the Simple Structure. According to H. Mintzberg, however, the Divisionalized Form suits better structures based on the Machine Bureaucracy due to the ease of controlling the results, which is enabled by such relationship. This is, by the way, the main coordination mechanism in this type of structure: the standardization of outputs. In this structure, the central office decentralizes many decisions to the divisions and controls the result that they should present. Some autonomy, therefore, is given to the division managers, providing them great freedom to operate in their respective markets. However, this power is circumscribed and contingent to the apex strategic decisions (central office), such as those regarding the allocation of resources, the definition of the expected outputs and, of course, the choice of division managers. Some contingency factors for the birth of a Divisionalized Form can be cited, such as size and age. However, the main reason for the development of this structure is the strategy of operating in diverse markets. Such diversification can occur by customer, geographical region, or mostly, by the type of product that the company produces. Thus, seeking to expand and operate in different markets, but,

4.3 The Main Configurations

35

at the same time, being unable to standardize the performances due to a greater complexity than that which appears in a Mechanic Bureaucracy, the organization structures itself in divisions that are coordinated and controlled through results by headquarters. Henry Mintzberg in his work points out several advantages of this type of organization. It is worth mentioning the great autonomy given to the divisions’ managers to perform in their markets, the risk dispersion, and the stimulation of continuous improvement. Moreover, in addition to other disadvantages, this structure does not present great innovation capability when compared with independent businesses (entrepreneurial ones); it may protect unprofitable business; and also present problems regarding the relationship between the central office and divisional managers.

4.3.5

The Adhocracy

The fifth configuration proposed by Henry Mintzberg is grounded on the organic firms discussed by contingency theory researchers. To distinguish it, the author uses the term “Adhocracy” that was popularized by Alvin Toffler in 1970s. The Adhocracy is a structure suitable for ad hoc works, that is, activities that are made for specific cases that were not foreseen, not previously established, determinated or defined. Thus, it can be inferred that this structure is the opposite of the bureaucratic one, since there is no standardization of tasks, skills or even outputs on it. The main coordination mechanism is the mutual adjustment so that professionals gather in teams or project-based works. It differs from the Professional Bureaucracy in reason of the coordination not occurring only through the ability of qualified professionals, but by using joint work and teams, often multifunctional ones, which allows great creativity and innovation. In this structure, there is not an extensive division of labor, differentiation, formalization nor emphasis on planning and control. Flexibility is the most important result in this type of structure, which presents constant changes. It is a structure typical of companies that work by projects and for specific products to specific situations (ad hoc), and that, therefore, require creativity and innovation in their production. In order to reach this condition, this format sometimes uses matrix structures with double command.13 The managers in this structure are more concerned with the linkage between the teams than with the coordination – as it occurs in the direct supervision – or the control – as it happens in the standardization of work processes or outputs. They become team members acting “more as peers than supervisors, their influence deriving from their expertise and interpersonal skill rather than from their formal position”14. Yet regarding the administrative component, the work of supporting the operating level assumes some significance, but the technostruture, essential in the Machine Bureaucracy, loses its relevance in the Adhocracy once there are no tasks to standardize. The strategic apex assumes importance in external

36

4 Henry Mintzberg’s Five Basic Configurations

relations to ensure the flow of projects for the Adhocracy, but it has little importance in the formulation of strategies. As for contingency factors for the formation of Adhocracy, according to Henry Mintzberg, in addition to the youth of the firm and the frequent modifications in the production and in the product, a complex and dynamic environment can be cited, that is, an environment in which the many variables involved are in constant change.15

4.4

Final Comments on Structures and on the Five Configurations Model

As it has been discussed since chapter two, structure studies have offered inestimable contributions to explain the organizational phenomenon. In addition, they have presented more appropriate types or formats of organizations for specific situations. Since the emergence of concerns with this subject, these studies have grown richer, attaching more variables and relations, enabling the development of classifications such as Henry Mintzberg’s – a refined classification that, even being concise, takes into account in its making the several variables related to the issue identified in the literature. Overall, the five configurations proposed by Henry Mintzberg can explain quite well the traditional structures, with a situational vision and, at the same time, without the determinism of some contingency studies that hold only to one variable as the definer of the structure. The congruency idea is used in which the search for internal and external harmony in face of various factors that influence an organization is emphasized. Beyond that, intermediate formats were presented in the model, in addition to the five basic structures (Table 4.2). Despite the importance of his typology, however, Henry Mintzberg’s model, as with all the organizational study, deserves to be revisited and, if it is necessary, updates and supplements have to be done by virtue of the changes that occur internally and externally to organizations. In this respect, it must be said that since he made his classification, changes have emerged many times in a radical way, presenting, inclusively, the possibility of questioning the existing models for organizational structures. This is true especially taking into account the Machine Bureaucracy, once regarded as reference for large organizations. Thus, other structure possibilities arise in face of the changes that are present, especially considering Machine Bureaucracies. Table 4.2 Mintzberg’s configurations and the coordination mechanisms

Configuration Simple Structure Machine Bureaucracy Divisionalized Form Professional Bureaucracy Adhocracy

Main coordination mechanism Direct supervision Standardization of work processes Standardization of outputs Standardization of skills Mutual adjustment

4.5 Notes

4.5 1

37

Notes

MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979 and MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. Indeed, the second is a summary of the first, and is addressed, according to the author, to managers. 2 It can be said that Henry Mintzberg gathers structuralist and contingency approach positions. 3 Better explanations on the configurations can be seen in Henry Mintzberg’s later work, where various management schools of thought are defined, including the configuration school (MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000). 4 This coordination mechanism is linked to Peter F. Drucker’s Management by Objectives (DRUCKER, Peter. F. Pra´tica da administrac¸a˜o de empresas. Sa˜o Paulo: Pioneira, 1981). 5 This is discussed in the Chap. 3 considering contingency approach and, mainly, Tom Burns’ and George Stalker’s work. The unit production firms studied by Joan Woodward and the semiautonomous groups presented by the socio-technical school are also important references. (BURNS, Tom e STALKER, George Macpherson. The management of innovation. London: Tavistock Pub, 1966; WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977 and BIAZZI Jr., Fabio. O trabalho e as organizac¸o˜es na perspectiva so´cio-te´cnica: a convenieˆncia e a viabilidade da implementac¸a˜o do enfoque so´cio-te´cnico nas empresas. Revista de Administrac¸a˜o de Empresas. Sa˜o Paulo, v. 34, n.1. pp. 30–37, jan./fev. 1994). 6 The use of the term “even” can be justified considering the analysis presented in Chap. 9, in which it is pointed out that the factor power is, many times, avoided in organizational studies. 7 This is discussed in Chap. 3 considering contingency studies. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977 and BURNS, Tom e STALKER, George Macpherson. The management of innovation. London: Tavistock Pub, 1966). 8 MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979. p. 321. 9 This is not a conclusion presented by Henry Mintzberg. This can be drawn from discussion on internal differentiation as a result of external differentiation, as mentioned in previous chapters, considering Paul Lawrence e Jay Lorsch’s work (LAWRENCE, Paul R. LORSCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973). 10 MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979. p. 326. 11 Better discussion on this subject is presented in Chap. 6. 12 This format has theoretical basis in Alfred Chandler’s studies, mentioned in Chap. 3. 13 The matrix structure is better discussed in Chap. 8. 14 MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979. p. 440. 15 H. Mintzberg presents also possible variations for Adhocracy, including the continuous process production firms studied by J. Woodward. In this respect, maybe Henry Mintzberg was influenced by what Joan Woodward called similarity at the extremes, that is, project firms and highly automated companies present similar organic characteristics. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977). This is better discussed in Chap. 5.

Part II

Changes in the Situational Factors

Chapter 5

Automation and Its Consequences for Organizations: From Fordism to Information Technology

Along with strategy and environment, production technology can be cited as one of the most important variables when analyzing the formation of an organizational structure. In fact, it was considered by contingency approach theorists as one of the determinants of the formation of the structure and, in Henry Mintzberg’s classification, one of the aspects to be observed when searching for structural consistency. In the same way, automation, one of the main variables related to production technology, deserves increasing emphasis in structural analysis. This chapter, therefore, has the principal goal of presenting the main automation technologies that were and that are being used in organizations. It also examines some of their effects in production processes, in the organization of work, and in structures. In this respect, it was decided to broach the automation technologies related to Fordism, numerical control (NC), continuous process production, and the production processes that use modern information technology (IT). These technologies were chosen due to the impact they have had in organizations, as well as them being the most cited in the literature on the subject. Specifically concerning information technology, the production processes related to manufacturing, to information systems, and to service operations are discussed. It should be emphasized, however, that the greatest impact of these processes on the structure is more elaborately detailed in Chap. 10, which is dedicated to the description of the Automated Bureaucracy. Three important observations should be made before this chapter goes any further. First, discussions on production technologies not related to automation could be held in this chapter.1 It was decided, however, to treat only the automation technologies due to the significant changes this variable has gone through in recent years and to the effects these changes have had on the structural modifications that have occurred in the large Machine Bureaucracies. Second, an automated process is considered as one in which a certain system has some control over its own activity, with little interference from man, which can be found throughout this chapter. Third, although some technical considerations are made here, such is not the purpose of this chapter, as it is more concerned with discussing the impacts of automation

N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_5, # Springer-Verlag Berlin Heidelberg 2012

41

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5 Automation and Its Consequences for Organizations

technologies on production processes and on the relationship between man and his work, as well as on other important aspects for organizational structure analysis.

5.1

The Use of Machines in Firms

It was during the period well known as the Industrial Revolution that the various conditions that enabled the extensive use of machines in organizations emerged. Since then, the use of machinery has been increasing, progressively displaying variable and complex forms both in its technical aspects and in its consequences for the world of work. This complexity and variety, by the way, entail various typologies. To achieve the objectives of this chapter, two classification methods on the use of machines in organizations are considered: the first is based on the possible changes in production and in the final product,2 the second on the analysis of a major or minor substitution of man in operations, including in production control.3 From the first classification, fixed systems and flexible systems may be noted. Fixed systems are those in which the machinery is made specifically for a particular task, or even for the production of a specific product. In such a case it is very difficult, complicated, or costly to change the system in order to perform functions other than those initially planned. These systems are, therefore, prepared for manufacturing, or processing, with little possibility of changes in the tasks or in the final results. On the other hand, flexible systems are those in which some machines with great condition of movement are able to manufacture various products or carry out various functions. These machines can execute, under the control of an expert operator, several tasks and present diverse kinds of results or products. From the second classification it may be noted a continuum in which, at one extreme, machines are used only as tools to help the activities of the workers, and at the other extreme, machines have the great possibility of internal control, needing operators only with subsidiary functions. In the latter case, the operator acts in the few situations in which the system is not capable of self-control. This classification, therefore, presents two extremes related to the possibilities of automated work. In the systems in which machines are used as tools for human activities, work not subject to automation emerges, whereas in the systems in which machines are used to replace the worker in execution and in control, automated work comes up.4 Despite the two classifications being different and supported by different variables – the possibility of changes in the production and products for the first, and replacement of the operator, even in the production control, for the second – in organizational practice, until recently, a coincidence between the two classifications could be observed. In flexible systems, workers in charge of operations and their control could be seen, whereas in fixed systems, the operation decisions and their control were inserted into the system itself.5 In the case of flexible systems, the so-called production machine tools such as lathes and milling machines, among others, can be offered as examples. Such

5.1 The Use of Machines in Firms

43

machines present some diversification in movement and carry out a wide range of tasks under the performance of a qualified professional. In the processes in which they are used, there are many production possibilities. A lathe, for instance, can do axles, bushes, and screws of several types and sizes, and these production possibilities rely on an operator who has a great deal of knowledge of the machinery and the production techniques related to it – a professional, inclusively, who has gone through years of training. In the case of fixed systems, or fixed machines, production is based on the use of equipment that enables the making of goods, practically, in a sole and immutable manner, which is typical of traditional mass production, or even of the continuous process firms.6 Variations in a product would require, in this case, substantial changes in the system, inclusively, with the possibility of the entire modification of the machinery. In this type of production, man is viewed as a machine appendage. The control, to some extent, lies in the mechanical, electrical, or whatever system it is, and the workers, primarily in the case of mass production, have little knowledge of the entire process and its goals.7 Assembly lines and petrochemical plants are examples that can be offered for fixed systems. Therefore, it can be considered that machines used to present, until recently, two main possibilities, with intermediate situations between them: flexible systems with great control by the operator, and fixed systems or fixed machines with little control by the operator, i.e., great automation (Table 5.1). In organizational practice the choice between the two systems, and even the intermediary possibilities, depends on several aspects. A brief discussion can be held by using the two principal variables used in manufacturing operations analysis: production volume and variety (or patterns) of products.8 In flexible systems, the manufacturing of products of a wide variety, or of different patterns, can always be done. Until sometime ago, however, these systems could offer neither the highvolume production nor the consequent economy of scale in production that was the strategy used by large firms for a long time.9 On the other hand, despite generally requiring huge investment and having low production flexibility, fixed systems always used to offer appropriate return in the case of high demand for one or just a few patterns of products. That is, the economy of scale used to compensate the huge investments and the low variety in production. Table 5.1 Traditional production possibilities by using machines First possibility Second possibility Changes in production and Fixed system: little capability of Flexible system: great capability in the final product changing production and in of changing production and the final product in the final product Control by the worker and Little control by the worker and Great control by the worker and automation high automation little automation Examples Equipment used in oil refining Machine tools such as lathes and and in mass production milling machines assembly line, among others

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5 Automation and Its Consequences for Organizations

This last aspect led organizations that performed at high-demand businesses to establish the first important type of fixed and automated system: the Fordist production line.10

5.2

The Fordist Production Line

Despite the importance assumed by the machine since the beginning of the Industrial Revolution, it was with the Fordist production line, or the Fordist assembly line, that machinery changed the practices regarding mass production in various organizations. It brought to these organizations the production with gains in large scale, as well as several changes to the work organization and to the various relationships that have arisen in society.11 Briefly, it can be said that the automated system that emerged with the assembly line developed by Henry Ford differentiates from the Taylorist work process due to the introduction of mechanisms to ensure that the materials to be worked on, or that will suffer any production action (an assembly, for example), are not moved by the individuals involved in the process. The parts or materials are submitted by the system to the workers to perform their tasks at a previously established time, thus releasing them from the responsibility of transporting these parts or materials, and from the possibility of changing the transportation time. For those who are not familiar with such a process, just imagine a conveyor belt that transports the pieces to be performed by workers who are arranged in line. Each individual executes a predetermined task on the pieces that are presented him at a specific ‘conveyor belt time’. Obviously, the task to be performed by the worker must be accomplished during a determined period of time, otherwise the entire line will be stopped and other workers will be made to wait.12 Many variations of this concept are possible, particularly concerning the transport mechanisms: conveyor belts, hooks, tracks, etc. However, the basis of the system is the same: pieces being transported in a previously defined movement and processed, or worked, by individuals who perform specific tasks within the Taylorist principle that the ideal position would be that in which the occupant executes the lowest possible number of tasks. The explanation presented here may seem much too simple in terms of engineering. In this respect, it should be emphasized that the development of the assembly line by Henry Ford was not, really, a great technological progress, whether in mechanics, hydraulics, or electricity. As Huw Beyon13 points out, the technology used in Fordism, in its basic principles, was known for a long time, and the line could not be considered a great invention in terms of engineering. However, in terms of management and organization of the work process, it was considered an important improvement and a great technological differentiation that was followed, later, by other automobile firms as well as companies in general. The consequences for production were tremendous, and, wherever it was introduced, productivity was

5.2 The Fordist Production Line

45

led to very high levels. In the beginning, as Huw Beyon emphasizes, Henry Ford was deified as a god who had brought the miracle of abundance.14 Other elements of the Fordist production line can be pointed out, such as the concern with standardization and the use of dedicated or specialized machines.15 In the first case, for individuals to accomplish their work along the production line, or assembly line, the parts or materials to be worked must be standardized, following, for example, some specific measures. Thus, in the Fordist production system, prior standardization of materials is required, so that, at a certain moment, these materials can be assembled in the line. That happens, naturally, in addition to the standardization of work along the line.16 As for the use of specialized machines, the Fordist system widely utilizes machines that, unlike the machine tools, perform predetermined operations, or a quite well-defined function. Mechanical presses and drill presses are examples of such equipment that can be controlled by an individual or by the system itself. The use of these machines, by the way, demonstrates that the Fordist system can present automation not only in the transposition of pieces, but also in some simple tasks along the production line. Thus, companies that use Fordist automation present differences, inclusively in terms of (high) productivity, when compared with others that have high-volume production processes but that are not automated. In terms of organizational structure, however, both types of companies are supported on the classic format, that is, they are based on the bureaucratic model and on its variations, mainly on Taylorism. The use of the Fordist system, in fact, is an improvement of that model, bringing to it more advantages. This is true when considering the several analyses made in the previous chapters. The coordination of activities, for example, remains based on the standardization of work processes, whether in the manufacturing of parts or in their assembly on the production line. It should be noted, however, that in this type of production, there is no need for so many formal instructions concerning confection or the assembling of the parts. In the same way, there are not so many instructions concerning work time. The line and the machinery themselves are largely in charge of the standardization and of establishing the work time. In this system, the possibility of variations in production due to the operator’s perception is minimal. Indeed, the worker is obligated to accomplish the task according to the specifications of the system and in the time that the machinery moves the piece, otherwise production may get stuck. With regard to the functions of structure, many aspects can be analyzed. Among the technical aspects, there is an extensive division of labor, which makes the workers responsible for simple tasks, being the final result intended by the production line that is largely responsible for the standardization of procedures. The major difference is the less effort spent in coordinating and controlling that the system offers to the management. By using such system, a manager can monitor the performance of more workers, that is, there is an increase in the so-called span of control.17 In the relational aspects, there is, in the same way as in Taylorism, an attempt to remove relationships that are not related to production and that do not happen through vertical communication between supervisor and workers. Informal

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5 Automation and Its Consequences for Organizations

communication between workers is considered harmful, because it could interfere in production. According to Huw Beyon, life inside Henry Ford’s factory was characterized by men working in silence and in isolation, even while resting.18 With respect to the maintenance of power relations that are deemed “appropriate” within classical principles, companies that use the Fordist automated system are grounded on merit-based power so typical of bureaucracy. It is assumed that in the organization the chiefs have the highest qualification and merit and, hence, their use of power is legitimate, a fact that is extensively discussed in the chapter on structure. In practical terms, the manager, or even a group of experts (technostruture), is responsible for decisions in this structure. In terms of values and shared principles, similar to what is discussed in bureaucracy, this type of work organization is justified much more by external aspects than by internal ones.19 The progress of society, the technological innovation, and the abundance of products are some of such external aspects.20 Thus, within a structural analysis, it can be said that organizations that use the Fordist automated systems utilize, basically, the Machine Bureaucracy configuration. Due to this fact, indeed, Henry Mintzberg has not established a specific configuration for them. After all, characteristics such as standardization of work processes, subsidiary use of direct supervision, existence of controller chiefs, centralization in decision making, and few lateral communications can be seen in such companies. Finally, it should be emphasized that, despite the use of this kind of production by diverse types of companies, the Fordist automation system has only been possible in fixed systems (assembly line and specialist machines), that is, in production with low variety. In flexible production (of wide variety), machine tools with many production possibilities and which give more control to the operator were traditionally more used, at least until the emergence of another important automation technological development that has brought some change to this situation: the numerical control.

5.3

Numerical Control Technology

As in Fordist automation, the emergence of numerical control technology has brought a deepening to the division of labor, higher formalization and standardization, more possibilities for production control, and more decision centralization. Unlike Fordist automation, however, this technology has arisen in companies that used to employ flexible production systems and that presented more organic structures. As discussed at the beginning of this chapter, in flexible systems, machine tools are traditionally applied and there are operators who have a great deal of control over these machines within a certain number of possibilities of movement.21 It should be pointed out that these controllable movements are not so many and that there are deadlines for production, drawings of the pieces to be followed, and some basic instructions according to which the workers are to perform. Nonetheless,

5.3 Numerical Control Technology

47

the worker in this type of operation has a certain freedom to decide on the most suitable production manner, even on the time for its confection. The standardization of the work process could be applied to such a low-scale, or low-volume, production, but by doing so it would not be financially feasible because the implementation and maintenance costs would exceed the benefits. It would be a mistake to use an entire system of standardization, including a technostructure, just to produce one product to meet the demand of only one client. Thus, standardization used to be low in this type of production, and many decisions on the best manufacturing manner would fall upon the operator, who is a highly qualified worker on that specific machine production process and knowledgeable of the production goals. The emergence of numerical control (NC) machines brought changes in some of these flexible production systems, modifying in many respects the work process. According to Nigel Slack and others,22 in its original use in the 1950s, a control system on machine tools using perforated paper tapes was developed. These tapes provided instructions that, through a system adapted to the machine tool, made the machine produce in accordance with prior instructions, mostly with regard to speed and movement direction. As those authors emphasize, machines do not use perforated paper tape today, instead they employ computerized instructions (computer numerical control – CNC). The basis of these systems, however, is the same. There is a machine tool, flexible in terms of production possibilities, which has an external system – the tape reader or the computer – which enables prior control over its operations. Through this outside equipment, the machine, and eventually the production, does not remain under the operator’s control, but under a parallel mechanism connected to the machine that can be previously programmed by experts by using perforated tapes or computers. Through this method, inclusively, files of tapes or instructions to be used when necessary can be kept. In addition, substitutions and combinations can be made. The use of such mechanism has brought about higher standardization and an increase of productivity in some flexible systems. In addition, naturally, greater possibility of control over the operator’s work has been achieved, taking much of the power to decide on the various production process steps away from him.23 The need for operators with years of preparation inclusively decreased because the numerical control-based automated systems took their place in much of their decisions and manual control of the machine during the production process.24 Thus, despite the difference in the use of this type of automation when compared with Fordism – numerical control is only suitable for flexible systems – there is, in the same way, an effort to use many classical management principles such as extensive division of labor and higher formalization and standardization. In addition, communication and relationships considered undesirable are avoided and the centralization of decisions is made possible, which can be seen within the manager’s work or in the expert staff who are responsible for elaborating the instructions on tape or on computer. As a result, with this type of automation, several features of the “machine bureaucratic structure” emerge in organizations which, previously, used to utilize just structures with organic characteristics.

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5 Automation and Its Consequences for Organizations

Nevertheless, for a long time now, a type of production automation has emerged, bringing many different structural characteristics for the organizations that make use of it. In fact, it is a peculiar kind of automation suitable only for certain products turned out by processing production firms.

5.4

The Automation in Processing Production Firms

Processing firms are established due to some special conditions, mostly regarding the features of the products they produce.25 Oil refineries and other petrochemical plants, power companies that generate and transmit electricity, as well as paper mills are examples of these types of firms. They present operational differences compared with the traditional forms of production by virtue of their products, during the processing, not being of defined units. Gasoline, kerosene, and other chemicals, for example, are not processed in a specified amount. A refinery does not produce a liter of gasoline and then produces another liter afterwards. The gasoline production in a refinery is carried out continuously and the amount of product is established at the end of the process, often in the delivery of the product to the customer. Electric power is sold per kilowatt-hour, but a firm does not produce a kilowatt-hour at a time. Its production is done uninterruptedly in a hydroelectric or a thermoelectric plant. Due to this production feature, processing companies are often called continuous process production companies. Nigel Slack and others argue that this type of production is associated with “inflexible technologies” and “highly predictable flow” in which “products are inseparable and produced in an endless flow.”26 As for the first characteristic mentioned, it should be pointed out that this kind of production takes place in large manufacturing plants with fixed systems that present almost no flexibility. It can also be considered the most inflexible production technology in comparison with Fordist line or machine tools. It employs large machines that require, equally, large investments. Thus, this type of operation can be seen in plants that have automated production with very little human action during the process. Obviously, the technology used, until recently, was linked only to mechanics and electricity. As for the second and the third characteristics identified by those authors, as discussed previously, this type of production does not occur in operations in which there are products of pre-defined quantities to be turned out. Cars, clothes, furniture, or toys, for example, have never been produced continuously at an uninterrupted flow. Processing production applies only to specific products that can be processed in a continuous manner such as gasoline, electric power, or paper. The main theoretical basis used for discussing the work organization and structure in these organizations can be found in Joan Woodward’s work, in which several companies are compared considering three types of manufacturing operations: (1) unit production and small batch, that is, flexible production with low volume that often uses machine tools; (2) large batch and mass production, that is, with high volume and using Taylorist or Fordist systems; and (3) continuous process production.27

5.4 The Automation in Processing Production Firms

49

For Joan Woodward, firms with continuous process production have a type of operation appropriate for bulk products, such as liquid and gaseous ones, and even when using traditional technologies related to mechanics and electricity, they employ complex automated systems with high prediction and production control. Regarding the effects of this type of automation in production process and in structural characteristics, J. Woodward emphasizes various aspects related to what she particularly calls similarities at the extremes. In the results of her researches, she notes that, although there is an automation continuum coming from unit production firms, passing through mass production companies and reaching processing firms, structural features do not accompany this sequence. Indeed, there is a great similarity between the unit production firms and the continuous process firms in various structural aspects – by virtue of which, therefore, comes the similarities at the extremes. For the author, the more firms presented operating characteristics similar to those of mass production, the more there were structural aspects such as standardization and centralization, among others, that is, characteristics of the Machine Bureaucracy. On the other hand, the more firms distanced themselves from mass production, shifting to the unit production or to the continuous process production, the more it could be seen organic characteristics such as low standardization and centralization (Fig. 5.1). To be more precise, the author found more delegation and decentralization in processing companies than in mass production companies; there was a narrow span of control in unit production firms as well as in processing firms, and there still was, in processing industries, more informal relationships among workers and between them and their immediate supervisor. Another interesting aspect concerns the qualification of administrators. More highly qualified supervisors and managers were found in processing companies when compared with those in mass production firms. In the same way, more skillful workers were found once they are required higher qualification according to the duties to be carried out in this kind of organization. By comparing the types of production, J. Woodward points out that in mass production companies, workers are responsible for specialized and standardized Type of production

Automation features

Organic structural features

Bureaucratic structural features

Unit production (Flexible, low volume and with the use of machine tools). Mass production (high volume and with the use of Taylorism and Fordism systems) Process production (continuous and automated production)

Fig. 5.1 Similarities at the extremes – automation continuum and the structural features considering Joan Woodward’s work

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5 Automation and Its Consequences for Organizations

tasks, with no decisions being required of them in the production process. The few existing skilled workers have little influence on the production itself and take care of the maintenance of equipment. In unit production firms, however, workers are subject to little division of labor and less job specialization, and thus have a more significant role and a more decision-making power over the work itself. In processing production firms, despite the workers not acting effectively in production as in unit production firms, they are responsible for monitoring and maintaining the automated production flow, thus having some influence over it. Due to this fact, Joan Woodward argues that the extremes of technology – unit production and processing operations – tend to present more organic systems or structures, in contrast to the mechanistic structures of the center of technology, that is, the mass production. The author points out several other aspects in processing firms with respect to the organizational structure. Within the aim of this book, the difference between executive and support functions, job rotation, different qualification requirements, social roles of directors, and the presence of decision-making groups or committees should be emphasized. Regarding the difference between executive and support functions, according to J. Woodward, the line-staff-based structure,28 i.e., command-advisory, is quite well distinguished in mass production companies. Thus, executive and advisory roles are well defined and specialized, with distinct units and positions created for them. By contrast, the author had trouble in finding a distinction between executive and advisory responsibilities in processing firms. Indeed, the line-staff structure was hardly found in these companies, and when it appeared, the tasks were not easily defined. For this case, the author gives examples of planning and implementation activities being carried out by the same people and activities such as quality tests being made by the operators themselves. Where job rotation is concerned, the author noted the high possibility of shifts between managers at the various functions. These permutations were not only restricted to positions related directly to production. Administrators could also be exchanged between production areas and development laboratories, or even positions in the personnel department. They carried out new functions knowing that, in the future, they could be exchanged again to the production area. According to the author’s own words, it could be seen “specialisms rather than specialists” in processing firms while rotation was uncommon in mass production companies.29 With regard to qualifications, although J. Woodward noticed more qualification requirements in processing firms compared with mass production companies, such qualifications would be different when compared with unit production firms. Because the workers do not perform, directly, as production agents, being responsible only for maintaining the automated production flow, worker qualifications in processing companies have different characteristics. The worker needs a “perceptual and conceptual” skill “in that over a period of time he has to absorb great deal of information and to act on it continuously.” In the author’s view, skills different from “motor skill and manual dexterity” that are required from professionals of unit production firms .30

5.4 The Automation in Processing Production Firms

51

With regard to the maintenance of social relations, Joan Woodward points out that in processing companies, the managers have more social functions than technical ones when compared with managers in mass production companies. Since the operations are mostly controlled by the automated system, management duties are mainly focused on ensuring involvement, participation, and the social relations that aim at maintaining production. In this kind of organization, conflicts are more common, but the administration is responsible for ensuring they are used by workers for the maintenance and development of the organization. A different situation is noted in mass production companies, where the technical and specialized functions of managers tend to stifle the conflicts and to control the individual and specialized workers’ performance. These social functions of the administration in processing firms can even reach the values and norms arena, or even the symbolic context, especially at the highest levels of the organizational hierarchy. By observing the functions exercised by the chief executive of a processing company, the author states: He emerged more clearly as the ritual head of the firm; he was the key figure in its organization, spending almost half his time on the formal social functions so important to its corporate life. Technically he seemed to be in a decision-making vacuum, the decision-making in which he was involved being of the subjective non-programmed type mainly associated with human relations. Organization, industrial relations, and public relations were his primary concerns, and any problems relating to these aspects of management were quickly communicated to the top of the hierarchy.31

Besides the aforementioned feature related to the great possibility of informal communication between workers and managers, another aspect that can be emphasized in this kind of organization is the existence of collective decisionmaking. Joan Woodward states that in processing firms, collective decisions and those made by commissions happen more frequently. In the case of the chief executive, he could be seen more as the leader of a decision-makers’ group and not a single decision-maker. Due to these structural features, in Henry Mintzberg’s typology, processing firms are classified as a special type of Adhocracy.32 The main reason seems to be the similarity at the extremes phenomenon, that is, processing companies in the same way as unit production firms present great organic characteristics. Therefore, for Mintzberg, the structure adopted in processing firms features more adhocratic characteristics than bureaucratic ones. Henry Braverman’s considerations on processing firms offer criticisms related to the possibility of decentralization, more autonomy, and higher qualification in those companies.33 For H. Braverman, the functions in this type of firm, in general, do not require skillful workers. In the same way as in other types of modern companies, the worker does not know the production process, and his activities are restricted to those related to peripheral tasks, or dead work.34 For H. Braverman, although the division of labor is lower in these types of firms, the modernization of equipment reduces the time demanded to prepare the workers and they suffer control by the automated system, and, ultimately, control by the organization and its administration.

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Emphasizing other aspects of this kind of organization, and even citing Joan Woodward’s work, Harry Braverman warns of the lack of status in society and of the low wages to which employees of processing companies are subject. As a consequence he questions the possible conclusion that workers in this kind of organization would be more valued, and also the assertion of some who claim that, in the future, with the use of more automation in production, the worker would have more autonomy and higher salaries. Thus, it is difficult to make structural analyses for companies that use processing automation technology. These companies cannot be considered Machine Bureaucracies due to the low standardization and the existence of much informality as well as some decentralization. On the same way, the difference between this kind of organization and the organic and flexible unit production firms is visible. The difficulty is even greater considering the few studies related to this kind of organization when compared with those studies related to mechanized production firms and organic ones. Despite such hardship, however, some conclusions with regard to the structure can be presented. In technical terms, a production arrangement based on automated systems can be seen and that presents professionals who are responsible for maintaining the flow and are subject to a low division of tasks. The standardization is noted in the automated production, but it is quite low given the tasks of such professionals who are in charge of keeping the flow. Relationships arise more easily, including informal ones. For issues related to power, in this kind of organization, much decentralization of decisions inclusively through committees can be noted. Nevertheless, such decisions are peripheral and related only to the maintenance of the production flow. There is, thus, little autonomy to change the production methods, or even the timing of the tasks. Regarding formation of values, compared with the traditional production and the automated systems discussed thus far, this type of structure most emphasizes the cultural and symbolic aspects. Actually, much of the management work is dedicated to keeping values and principles that encourage workers’ participation, involvement, membership, and commitment. This feature may result from the fact that, in these structures, the administration cannot rely on coordination based on standardization or even on direct supervision. In interesting considerations on the future of this type of automated production, Joan Woodward emphasizes that the use of processing operations would tend to increase and would not be restricted only to bulk products, or to those that present no defined units during processing. There would be a tendency for such operations to replace, in many sectors, the traditional mass production. Actually, according to the author, this was already happening in the sectors of steel production and engineering pieces production. Similarly, it was happening at certain stages of traditional mass production firms, as in packaging for instance. Obviously, this tendency of increasing the use of processing operations faced limits in automation technology only related to mechanics and electricity. These limits were intrinsic to technology and were related to economic viability, given the large investments required. However, such perspective has begun to become reality with the emergence of new types of automated production related to information technology.

5.5 Information Technology and Automation in Organizations

5.5

53

Information Technology and Automation in Organizations

Recently, new forms of automation supported by developments related to information technology (IT) can be seen in the world of the organizations.35 As a result, just as it had happened in the previous types mentioned, these new forms of automation are expected to bring changes to production processes, work organization, and even organizational structures. That considered, it is appropriate, initially, to cite three immediate uses of information technology in the automation of operations: (1) the computer numerical control in flexible systems; (2) automation with some flexibility in systems that used to use fixed technology; and (3) integration of the various systems. With regard to flexible systems, it is worth remembering that, since the advent of numerical control technology, the transference of control from the operator to a system that is external to the machine has occurred in machine tools. This happened with the use of perforated paper tape containing operation information. Today, with information technology, such transference of control is more widely applied due to the fact that computer numerical control (CNC) machines offer more possibilities of movement and are subject to programmable changes, including the exchange of tools for machining. Thus, despite presenting the same principle of numerical control machines with perforated paper tape, CNC machines make it possible to achieve higher levels of productivity and greater flexibility in production.36 The consequences of the use of information technology in fixed automation systems are much more visible and present deeper changes. These fixed systems, with the employment of this technology, happen to present an external control, similar to the numerical control systems. In the language of automation professionals, it is common to say that the control shifts “from hardware to software”.37 To better explain this change, it is necessary to first present an important concept in automation: the actuators. In automation engineering, actuators are “devices that convert signals from controllers into actions required by the system.” 38 They are pneumatic, hydraulic, and electric devices (e.g., pneumatic and hydraulic pistons and electric motors) that carry out the work within a certain control. It can be said that such devices are, in fact, substitutes for labor in the execution of tasks. They move parts and materials, lifting, pushing, spinning them, and so on. It happens that in the aforementioned types of automation of fixed systems, control is embedded in the actuators as they were previously programmed, given they were manufactured for very specific purposes. Thus, equipment related to Fordism and the traditional processing firms present actuators with previous control, making impossible changes be implemented through external control devices. To obtain any production change (modifying a product, for example), it would be necessary to substitute actuators or some of their components.39 With information technology, the control, effectively, moves to systems that are external to the actuators. In fact, the actuators remain the same: pneumatic and hydraulic pistons, electric motors, etc. However, through connections to systems that use information technology, rapid changes in production process are attained

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Table 5.2 Immediate uses of information technology in the automation of operations Uses of IT in automation of operations Computer numerical control in flexible systems Automation with some flexibility in systems that early used fixed technology Integration of the various systems

without the need for modifications of these actuators. In this way, an external control is obtained in the traditional fixed systems, similar to the flexible systems based on numerical control, and consequently the emergence of assembly lines with some production flexibility, industrial robots, and production flexible systems, among other possibilities can be seen.40 Substantial changes in working processes in terms of the use of information technology in integration can be seen as well. The interconnection between the various production systems through mechanisms that are external to equipment becomes possible by means of IT.41 This interconnection can also occur between the equipment responsible for the production and other areas of the organization such as material supplying, cost controlling, accounting, planning, etc. (Table 5.2). Thus, with the three immediate uses of information technology in automation, several manufacturing possibilities arise – possibilities that could not have occurred before, when there were only forms of technologies related to electricity and mechanics, which are seen today as quite limited. The principal possibilities can be presented considering manufacturing operations, information processing, and service operations, as follows.

5.5.1

Information Technology and the Automation in Manufacturing Operations

As for manufacturing operations, or materials processing, major developments in IT-based automation include computer-aided design (CAD), computer-aided manufacturing (CAM), flexible manufacturing systems (FMS), and a wider and integrative concept known as computer-integrated manufacturing (CIM). CAD technology, as the name suggests, helps the accomplishment of drawing and design tasks, enabling professionals in charge of such activities to speed up their work. Three-dimensional visualization, images in different perspectives, rotation of drawings, and the possibility of performing virtual simulations that substitute some tests and modifications in prototypes are some resources that CAD offers designers.42 Considering the change from internal control (in the actuators) to an external one of the main production system, as earlier discussed, CAM technology uses various possibilities such as CNC machines, industrial robots, and automated transporting systems. Perhaps the pinnacle of this concept is the FMS, in which a set of various types of technology related to CAM are interconnected in a single system.

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55

According to Nigel Slack and others,43 FMS uses numerical control workstations, loading/unloading devices, transportation and handling of materials’ devices, and a computer-based central control system. The advantage of this flexible system is precisely the variety of products that it can turn out. In addition to this variety, with FMS, as William Stevenson states,44 the productivity level of repetitive systems is reached. Obviously, the flexibility obtained is limited as it covers only similar products in which the variety is not so wide. CIM technology is a wider concept. According to Nigel Slack and others,45 while CAM and FMS are only related to the transformation process, CIM also integrates other areas such as CAD, and production and maintenance planning, among others. August Scheer46 presents production planning and control, computer-aided projects, computer-aided planning, computer-aided production, quality assurance by computer and maintenance as part of CIM. These systems are integrated into an automated single system. William Stevenson47 points out that more comprehensive systems may connect the areas of planning, purchasing, inventory control, manufacturing control, and distribution. That is, CIM can still integrate manufacturing production processes with other areas of an organization and even to external systems, linking to suppliers and customers. With respect to such integration, however, it is necessary to discuss a different perspective of IT application, a notion that is related not only to manufacturing, but one that also concerns the processing of information.

5.5.2

Information Technology and Information Systems

IT-based automation can be seen widely in organizations if other areas beyond the production department are considered. Such automation can include, for example, the stocks of materials that are required for production and even departments that are not directly linked to production such as finance, accounting, sales, and human resources management sectors. In this regard it is necessary to discuss more complete and comprehensive models related to information processing or information systems. Kenneth and Jane Laudon48 identify four levels of utilization of information systems in organizations: operational, managerial, strategic and the one of knowledge. Considering the objective of this chapter, a brief analysis on the operational level can be made. In this respect, in addition to information systems that integrate the various tasks related to the production and that enable concepts earlier discussed such as CAM and CIM, it is important to present some information system technologies that enable the integration of activities related to other areas of the organization. Among them are the concepts of materials requirement planning (MRP), manufacturing resource planning (MRPII), and enterprise resources planning (ERP). These concepts follow basically a historical application sequence. The first concept, MRP, practically embraces aspects such as planning and control of the materials needed for production, and the final concept, ERP, which is

56

5 Automation and Its Consequences for Organizations

ERP Supply

Sales CIM

Suppliers

CAD Design and project Customers

Planning and control CAM/FMS Production

Human Resources

Finance and Accountability

CIE-ERPII-ECM-eERP E-BUSINESS

Fig. 5.2 Automation in manufacturing firms by using information technology

broader, interconnects production to other areas such as finance, supplies, sales, and even human resources management.49 Regarding the connection of an organization to customers and suppliers, several possibilities emerge. Today, systems can be used to allow suppliers’ access to the inventory of a buyer firm. Similarly, a connection with clients who can order products and, in this action, interfere directly in the production of the organization, can be seen. The Internet is a powerful tool that is used to make these processes easier. Concepts such as the computer integrated enterprise (CIE), e-commerce, e-business, electronic partnerships, extraprise resource planning (ERP II or XRP), enterprise commerce management (ECM), and the extended enterprise resources planning (eERP) are some names used to define these integration possibilities that are being employed by firms50 (Fig. 5.2).

5.5.3

Information Technology and Automation in Service Operations

The automation in manufacturing companies using forms of technology prior to information technology, such as in Fordism, in processing firms, and even with numerical control machines, was not followed by automation in service operation firms. Mostly seen in such workplaces were work organizations dedicated to diverse and specific services that were performed by quite well-skilled workers. Sometimes, when there was large demand for a certain service and there was the possibility of its standardization, the bureaucratic and mechanized work based

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57

mainly on Taylorism used to be seen.51 In fact, automation was not used and the few machines employed were restricted to some mechanical, electrical, and electronic equipment that just speeded up the work process, such as electronic calculators and typewriters. With information technology, however, automation in service organizations has become a reality. This automation appears basically in three major fronts: in the development of new equipment, in the automation of the service itself, and in the connection with support areas. In the first case, a wide range of equipment has been developed with IT, and is being used in service operations, helping and improving services offered in areas such as commerce, health, transport, etc. Examples include the equipment for diagnosis and treatment in hospitals and personal computers in general and the various applications of such equipment. In this case, the use of IT results in an improvement of human work in organizations, with the equipment presented as instruments or tools to better employee performance, like the old machines based on mechanical, electrical, or electronic technology. In the second case, an automation of the work itself appears in substitution of the labor force in the execution of tasks. Automatic machines for parking control and for sales, and equipment used in bank services are some examples.52 Unlike the first case, in which automation is used only as an instrument, in this case the employment of IT comes radically to modify the work process, replacing the human being in the execution of the tasks and in his control over them. People who remain in the operations are moved to activities of monitoring system and multiple tasks. In the third case, there is, by means of IT, the connection of the firm’s main operation to other internal areas in the organization such as finance, human resources management, sales, accounting, etc., as it happens when the use of ERP in industries. Similarly, it is possible to connect with external systems belonging to suppliers and customers, like the CIE and the e-business aforementioned53 (Table 5.3). Table 5.3 Automation in service operations – types New equipment Automation of work Integration Machines or systems that Automation of the work itself, Connection of the main support and improve replacing much of the labor operation to other internal services in areas such as force in the execution of the areas such as finance, commerce, health, tasks human resources, sales, transport, etc. accounting, etc. as it happens with the use of ERP in industries They are presented as It comes to radically modify It is possible also the instruments or tools that the work processes, connection with external improve the worker’s replacing human beings in systems such as suppliers performance the execution of tasks. and customers, like the CIE Workers who remain are and E-Business moved to monitoring activities or executing multiple tasks E.g.: equipment for diagnosis E.g.: automatic machines for and treatment in hospitals parking control and for and personal computers and sales, and equipment used their various applications in banking services

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5 Automation and Its Consequences for Organizations

Table 5.4 Automation in service operations – areas Back office Front line Area in which the automation is Area in which automation is harder to happen because it presents easier to happen, because it intense contact with the customer and/or the large diversity presents activities without of tasks. When automation occurs, it appears in three or with little contact with situations, according to Nigel Slack: clients, and often features • Activities without interaction between client and technology routines and standardization (hidden technology), such as check-in at airports and hotels • Activities in which there is a passive interaction, as in the case of equipment of health diagnostic and treatment (e.g.: radiology). • Activities in which there is active interaction, such as ATMs and sales machines.

In addition to this analysis on the possibilities of the use of IT, another aspect should be examined with respect to the automation of service operations: the areas more and less subject to automation. Traditionally, one way to classify service operations is to base the classification on interaction with the client, which results in two distinct sections: one related to activities that involve a lot of contact with clients, called front line, front office, etc.; the other related to activities that have little contact with clients, known as back office, support positions, and even staff positions. It happens that activities of the first kind have always been subject to a large diversity of tasks due to the frequent contact with the client. On the other hand, support activities have been subject to more routine and standardized tasks. Thus, support or back-office activities, in principle, are more easily automated compared with front-office activities.54 However, even current front-line activities can undergo changes related to automation. Concerning this aspect, three possibilities arise according to Nigel Slack and others: (1) activities that present no interaction between technology and the client; (2) activities with passive interaction; and (3) activities with active interaction.55 In the first case, automation technology is applied, but the client is not aware of its use (hidden technology), as in an airport or at a hotel check-in. In the second, the client is aware of the technology, but exerts no influence over it, as in the equipment of health diagnosis and treatment (e.g., radiology). In the third case, there is an influence of the client on the technology, as at the ATMs (cash dispensers) of banks and sale machines (Table 5.4).

5.5.4

Summary of the Consequences of Information Technology-Based Automation

By virtue of being, to some extent, a recent phenomenon and due to the diversity of possibilities that it can present, the consequences of IT-based automation in terms of production changes are not yet so clear. However, some observations can be made from the analysis earlier done, mainly when IT-based automation is compared

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59

with the other types of automation also previously discussed, such as Fordism, continuous production, and numerical control-based systems. Regarding substitution of labor, Fordist automation employs many workers in production tasks, and automation is, in many cases, restricted to the movement of pieces or materials that will be assembled or undergo another production action.56 In processing firms with the traditional forms of technology related to mechanics and electricity, automation causes substantial labor substitution in the production process itself. However, this occurs only for some kinds of products that are processed in bulk or products without a defined unit, as it can be seen in oil refining and in paper milling. With IT-based automation, substantial labor substitution in the processing of products with defined units becomes possible. That is, the processing of products is nowadays achieved through automated mechanisms, with a great deal of substitution of workers in the tasks of manufacturing and assembling of parts, in which, formerly, only Fordist automation could be used, with little substitution of labor. Thus, attained is a production similar to that which happens in processing companies and in organizations related to the confection of products not subject to continuous production, as in the manufacturing of auto-parts, mechanical parts, clothes, and furniture, among others. Another interesting aspect that should be mentioned is that the traditional automation, based on Fordism or on processing firms, offers high production volume, but low production flexibility. On the contrary, with IT-based automation, a high volume of production and some production flexibility can be attained. In this respect, IT-based automation gathers the high productivity of the continuous production process and the flexibility offered by the numerical control automation. Considering the two comments made in relation to labor substitution and flexibility, it can be said that, with IT, it is possible to achieve an automated production that removes workers from the production (typical of the processing firms’ automation) and has some flexibility (typical of numerical control automation) for products which previously had to be made in mass production (typical of Fordist automation). Specifically for service operations, in many cases the development of tools that improve the performance of various professionals is obtained with IT. However, as a more radical change in this workplace, a removal of labor from various service operations is attained nowadays with new forms of automation, likewise in manufacturing processes. Such a situation was not possible with the use of only the forms of technology related to mechanics and electricity. Finally, it should be mentioned that through information processing or information systems based on IT, an integration of systems never possible before is achieved, whether in manufacturing or services operations. This integration happens internally regarding the various areas such as production departments and support areas, and externally with clients and suppliers (Table 5.5). These are some initial conclusions that can be drawn from the analyses of the possibilities of production with the use of IT-based automation. For this book, however, it is necessary to analyze not only production possibilities, but also the

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Table 5.5 Types of automation and some of its effects – summary Type of Types of products Production Production Internal Substitution of labor automation volume variety and in production external integration Fordism With a defined unit High Low Low Low and medium (p.s.: in the transport of pieces and when using fixed machines) NC With a defined unit Low High Low Medium Processing Without a defined High Low Low High unit (in bulk) IT With or Without a High Medium High High defined unit

consequences for the work organization and, mostly, for the organizational structure. To make such a structural analysis, not only the technology must be taken into consideration, but also the many variables involved. Thus, the next chapters present considerations about environment and strategy so that, together with the analysis of new kinds of organization and new coordination possibilities, it will be possible to characterize the structure that emerges with the use of these new forms of automation technology that are based on IT.

5.6 1

Notes

Besides Joan Woodward’s work, which is discussed in this chapter, two classical references concerning this analysis are: THOMPSON, James D. Dinaˆmica organizacional. Sa˜o Paulo: McGraw-Hill, 1976, and PERROW, C. Ana´lise organizacional. Sa˜o Paulo: Atlas, 1972. 2 This classification is presented in many books on Operation Management. It has origins in James D. Thompson and Frederick L. Bates, according to CHIAVENATO, I. Teoria geral da administrac¸a˜o. Sa˜o Paulo: Makron books, 1998. 3 This classification was presented by Henry Braverman considering James R. Bright’s work. In such classification, 17 possibilities are shown: from a more instrumental use of machines to highly automatized systems. (BRAVERMAN. H. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987). 4 According to Harry Braverman, James R. Bright did not use the term automation, but just mechanization. Harry Braverman, however, considers this classification related to automation. (BRAVERMAN. H. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987). 5 Even analyzing the machines that used traditional numerical control and that enabled certain automation of flexible systems, such coincidence can be deemed as true. This is discussed in this chapter. 6 These are terms used by Joan Woodward in his classification of structures considering the production technology applied. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977).

5.6 Notes 7

61

These controls that shift from operator to the system, or the machinery, in fact, are decided and drafted by the organization and its management staff, who whether are the managers themselves or a group of experts in charge of organizing the production (technostructure according to H. Mintzberg). 8 See, for instance, SLACK, Nigel and others. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997. 9 This aspect is discussed in the chapter on strategy (Chap. 7). 10 The fordist production line is considered here as a form of automation because it uses systems, albeit utilizing mechanical or electrical technology, that work with little human control, which is discussed along this chapter. William Stevenson considers Fordism as a fixed automation system. (STEVENSON, William J. Administrac¸a˜o das operac¸o˜es de produc¸a˜o. Rio de Janeiro: Ltc Editora, 2001). 11 Two comments should be made. First: not every mass production system can be considered as an automation system. When the transport is manually carried out by workers, there is no automation. Fordism can be considered as a form of automation because some mechanisms replace the man at least in the task of transportation; second: Fordism is considered also a model of economic and social development according to the Regulation Theory. Such model emphasizes external aspects to the organization, involving increases in salaries, increases in demand, increases in production and, again, increases in salaries (Virtuous Circle of Fordism). For better discussions of the Regulation Theory, see BOYER, Robert. A teoria da regulac¸a˜o: uma ana´lise crı´tica. Sa˜o Paulo: Nobel, 1990. 12 Benjamin Coriat offers appropriate explanation on Fordism production system. (CORIAT, Benjamin. El taller y el crono´metro: ensayo sobre el taylorismo, el fordismo y produccio´n en massa. Madrid: Siglo Veintiuno Ed., 1993). 13 BEYNON, Huw. Trabalhando para Ford: trabalhadores e sindicalistas na indu´stria automobilı´stica. Sa˜o Paulo: Paz e Terra, 1995. 14 Obviously, many criticized this form of production, like what happened in the case of Taylorism. 15 CORIAT, Benjamin. El taller y el crono´metro: ensayo sobre el taylorismo, el fordismo y produccio´n en massa. Madrid: Siglo Veintiuno Ed., 1993. 16 Such concern with standardization is also discussed in chapter on strategy (Chap. 7). 17 The span of control refers to the number of subordinates who reports to one manager. Control is the function related to the inspection of work accomplishment. These two concepts are presented in FAYOL, Henry. Administrac¸a˜o industrial e geral. Sa˜o Paulo: Atlas, 1984. 18 Obviously, workers always found ways to circumvent this situation, as claimed by Huw Beynon (BEYNON, Huw. Trabalhando para Ford: trabalhadores e sindicalistas na industria automobilı´stica. Sa˜o Paulo: Paz e Terra, 1995), and pointed out by the human relations approach theorists when considering the informal relations, as discussed in previous chapters. 19 Huw Beynon mentions some values supported by Henry Ford that should be followed by workers as the rightness in moral and the concerns with health and a life conducted orderly and honestly (BEYNON, Huw. Trabalhando para Ford: trabalhadores e sindicalistas na indu´stria automobilı´stica. Sa˜o Paulo: Paz e Terra, 1995). However, it can be questioned if, in fact, these values, although defended by Henry Ford, were those which led to the development of Fordism in society. 20 As mentioned in another note of this chapter, considering the Regulation Theory, there is also a model of socioeconomic development referred to as Fordism. These two systems, the production system and socioeconomic system, support each other (See, for instance: BOYER, Robert. A teoria da regulac¸a˜o: uma ana´lise crı´tica. Sa˜o Paulo: Nobel, 1990). 21 Nigel Slack uses the term degrees of freedom of movement. A traditional press drill, for example, has one degree of freedom of movement: up or down. A lathe has two: inside and outside, and along the piece. (SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997). 22 SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997.

62 23

5 Automation and Its Consequences for Organizations

Despite the apparent contradiction, considering the mention at the beginning of this chapter, it should be emphasized that more flexible systems kept on presenting operations with less automation. See about it in Chaps. 4 and 11 (on Adhocracy). 24 Harry Braverman presents extended comments on this system as bringing repetition to work, greater control over workers, and the use of less skilled workers with lower salaries, among others (BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987). 25 Other conditions can be cited and are discussed below such as a market that presents a high and regular demand. 26 SLACK, Nigel and others. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997. p. 136. 27 This is mentioned in Chap. 3 considering Joan Woodward’s work. 28 This is discussed in Chap. 3 (on types of structures), considering Henri Fayol’s arguments. 29 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977. p. 74. 30 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977. p. 72 e 73. 31 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Editora Atlas, 1977. p. 195. 32 As informed in Chap. 4, Henry Mintzberg has proposed a classification of five basic structures and also intermediate types. In the case of processing production firms, he classified them as a type of Administrative Adhocracy. 33 BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987. 34 The author uses the concept of dead work from Karl Marx. 35 Manuel Castells points out three main types of technology linked to this concept and that are driving new forms of automation in organizations: microelectronics; computing (hardware and software) and telecommunications (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001). 36 Nigel Slack states that the current NC-machines do not do much more than the traditional ones they replaced. They do better and cheaper (SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997 p. 255). 37 Interviews with professionals were used here. 38 SIMA, Arnaldo Ferreira. Tecnologias CIM: equipamentos utilizados no controle de sistemas produtivos. In: COSTA, Luis Sergio S. e CAULLIRAUX, Heitor M. (org.). Manufatura integrada por computador: sistemas integrados de produc¸a˜o, estrate´gia, organizac¸a˜o, tecnologia e recursos humanos. Rio de Janeiro: Campus, 1995. p. 180. (Free translated from the original in Portuguese). 39 It could be argued that in traditional automation, there are some external controls with the use of electrical systems. However, such controls do not offer the possibility nowadays presented by IT-based systems. 40 According to Mark Davis and others, industrial robots are substitutes for human activities in highly repetitive tasks. (DAVIS, Mark M. AQUILANO, Nicholas J. CHASE, Richard B. Fundamentos da Administrac¸a˜o da Produc¸a˜o. Porto Alegre: Bookman, 2001. p. 81.) 41 Again, it is important emphasizing the great limitations of electrical–mechanical systems in integrating great number of operations when compared with current IT-based systems. 42 SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997; COSTA, Luis Sergio S. e CAULLIRAUX, Heitor M. (org.). Manufatura integrada por computador: sistemas integrados de produc¸a˜o: estrate´gia, organizac¸a˜o, tecnologia e recursos humanos. Rio de Janeiro: Campus, 1995; and DAVIS, Mark M. AQUILANO, Nicholas J. CHASE, Richard B. Fundamentos da Administrac¸a˜o da Produc¸a˜o. Porto Alegre: Bookman, 2001. 43 SLACK, Nigel and others. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997. 44 STEVENSON, William J. Administrac¸a˜o das operac¸o˜es de produc¸a˜o. Rio de Janeiro: Ltc Editora, 2001. 45 SLACK, Nigel and others. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997. 46 SCHEER, AUGUST-WILHELM. CIM: evoluindo para a fa´brica do futuro. Qualitymark ed., 1993.

5.6 Notes 47

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STEVENSON, William J. Administrac¸a˜o das operac¸o˜es de produc¸a˜o. Rio de Janeiro: Ltc Editora, 2001. 48 LAUDON, Kenneth C. e LAUDON, Jane P. Sistemas de Informac¸a˜o. Rio de Janeiro: Ltc Editora, 1998. 49 COLANGELO FILHO, Lucio. Implantac¸a˜o de sistemas ERP: um enfoque de longo prazo. Sa˜o Paulo: Atlas, 2001 and NORRIS, Grant. E-businesss e ERP: transformando as organizac¸o˜es. Rio de Janeiro: Qualitymark, 2001. Actually, the shift from one concept to the other is not so simple as presented here. It demands radical changes, including in the network settings, centralized and decentralized processing, client–server network, etc. Better discussions on this subject can be seen in O’BRIEN, James A. Sistemas de informac¸a˜o e as deciso˜es gerenciais na era da internet. Sa˜o Paulo: Saraiva, 2001. 50 The term CIE used in SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997; e-commerce, e-business and electronic partnerships are pointed out by Grant Norris as steps considering a supplier-customer interconnection (NORRIS, Grant. E-businesss e ERP: transformando as organizac¸o˜es. Rio de Janeiro: Qualitymark, 2001) and ERP II, ECM and eERP are mentioned in COLANGELO FILHO, Lucio. Implantac¸a˜o de sistemas ERP: um enfoque de longo prazo. Sa˜o Paulo: Atlas, 2001. 51 Harry Braverman discusses Taylorist methods being used in office work (BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987). 52 James and Mona Fitzsimmons present several examples of automation in commerce, public utilities, government services, financial services, as well as services related to health, restaurants, transport, communication, education, hotels and leisure. (FITZSIMMONS, James A. FITZSIMMONS, Mona J. Administrac¸a˜o de servic¸os. Porto Alegre: Bookman, 2000). 53 The use of ERP in service operations and commerce is discussed in COLANGELO FILHO, Lucio. Implantac¸a˜o de sistemas ERP: um enfoque de longo prazo. Sa˜o Paulo: Atlas, 2001. p. 24. The use of MRP in service operations is discussed in DAVIS, Mark M. AQUILANO, Nicholas J. CHASE, Richard B. Fundamentos da Administrac¸a˜o da Produc¸a˜o. Porto Alegre: Bookman, 2001. p. 517. 54 The classification of service activities into back-office and front line can be seen in SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997; BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998; and FITZSIMMONS, James A. FITZSIMMONS, Mona J. Administrac¸a˜o de servic¸os. Porto Alegre: Bookman, 2000. The last authors discuss a higher possibility of automation in the back-office activities. 55 These three possibilities are discussed by Nigel Slack as “customer processing technologies” (SLACK, Nigel and others. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997). 56 Fordist automation being used as a way to standardize and even control workers’ performance time is discussion in other part of this chapter.

Chapter 6

The Organizational Environment: From Continuity to Dynamism

The environment in which a firm operates has always been considered one of the most important influences in the shaping of a firm’s organizational structure, whether by means of a strategy intentionally developed by management or by influences management had not foreseen.1 Moreover, in the same way that changes have occurred to businesses with regard to the automation technology that they use, substantial changes in the environment that influence organizations have occurred as well. This chapter discusses those changes. The works of great thinkers from the 1960s to the present are reviewed herein. Some of these thinkers are respected for their courage to present future trends, others for characterizing and summarizing quite well the past and the present situations concerning the world of organizations and society as a whole. The reader will note the great influence of Manuel Castells’ work on this chapter, not only for the innovative ideas he presents, but mainly for the synthesis, the theoretical and empirical bases, and the updated discussions. At this point, however, three important observations should be made. Firstly, many of the topics discussed here have already received exhaustive theoretical discussions and a lot of debate. These include the high dynamism of the environment, the increasing competition, the emergence of more selective and demanding customers, the economic and financial globalization, information technology, etc., At the risk of becoming a little repetitive, some considerations about the main environmental factors and variables that influence organizations, as well as their recent changes, have to be made. Secondly, in the presentation of environmental changes, further discussions as to their causes are not made. Discussing changes in society is not the main purpose of this book. Thus, to avoid making this chapter too long and controversial, and so as not to distract the reader from the objectives of this work, detailed considerations on the causes of environmental changes are not presented here. It is hoped that this fact does not lead the reader to consider such position as naturalism in the speech or to consider this chapter as much too simplistic. It is known that changes in society cannot be seen as just natural facts, but products of several factors, which include the actions of key and political actors. Thirdly, although the environmental analysis should take into account a particular N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_6, # Springer-Verlag Berlin Heidelberg 2012

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organization, this chapter makes generalizations, because the intention is to present common aspects that have been discussed by several authors, and not specific issues concerning specific firms. As the goal of the book is to present the Automated Bureaucracy, the trends that lead to the possibility of alternative forms of organization are discussed, especially those related to bureaucratic and mechanized formats. After all, those are the structures that are undergoing the biggest changes, being driven to a format based on the Automated Bureaucracy.

6.1

Environmental Factors

Concern with the environment has been gaining space in management theory over time. Early organizational studies put little or less emphasis on this aspect. It can be supposed that the internal attention to production processes and organization of work were of the utmost importance, and thus it was only when internal knowledge reached some level that outside influences became a major concern. Similarly, it can be presumed that as the number of works on the environment increased, it was realized that the organization could not be understood, nor could many of its problems solved, without taking into account factors external to the organization. Some pioneers of the study on the environment and its influence on organizations can be cited, such as those related to the structuralist approach.2 In general, however, concerns with this matter received great impulse with the advent of the systemic approach, with the studies of researchers of the contingency approach and the work of authors on the areas of planning and strategy3 (Fig. 6.1). Thus, it is understood today that it is impossible to study organizations and their structures without considering the environment in which they operate. And discussing the effect of the environment on organizations is not a simple task because of the number of external factors that influence or may influence an organization. A model often used by scholars and consultants who work with planning and strategy is that which divides the environment into two: the macro-environment and the micro-environment.4 The macro-environment includes the variables of influence more general to organizations, i.e., of which impact is not limited to a specific organization. It includes, for example, the economic, political, social, and cultural variables to which organizations are subject. The micro-environment, on the other hand, includes those elements closest to a specific organization and with more direct influence on it. Customers, suppliers, and competitors, as well as governmental agencies, are typical elements of this environment. While these elements of the micro-environment directly influence the organization in its ability to obtain resources and offer products, the macro-environment variables have indirect influence by affecting the micro-environment of a specific organization (Fig. 6.2). An environmental analysis based on this model thus consists of enumerating the factors, elements or variables, of the micro-environment and the macro-environment that can impact on organizations, and also of discussing their respective influence.

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67

ENVIRONMENT

ORGANIZATION AND ITS STRUCTURE

Fig. 6.1 Organization and environment MACRO-ENVIRONMENT MICRO-ENVIRONMENT ORGANIZATION AND ITS STRUCTURE

-

Customers Suppliers Competitors Other

Variables - Economic - Social - Political - Cultural - Other

Fig. 6.2 Macro-environment and micro-environment

Within the objectives of this chapter, beyond the enumeration of the factors and the discussion on their influence or possible influence on an organization and its structure, it is important as well to analyze the environment in terms of complexity and instability, or dynamism.5 Complexity is defined here as the amount of environmental factors that influence or may influence an organization. That is, the more factors that influence or may influence an organization, the more complex the environment is. For example, if an organization has a great diversity of clients and different types of suppliers, if it is subject to much competition, to a wide range of legal aspects, if it is involved with many technological aspects, etc., the more complex is the environment presented to it. Otherwise, the simpler is the environment. Instability, or dynamism, deals with the behavior of the variables or elements that have influence on the organization in terms of change and, above all, unpredictability. In this respect, by using again the concepts employed by Henry Mintzberg, an unstable or dynamic environment is not defined as synonymous of variable. A dynamic environment is one in which the changes happen unpredictably or unexpectedly.6 A steady growth of demand, for example, does not characterize a dynamic environment. Thus, the more changes happen in an unpredictable or unexpected way, the more unstable or dynamic the environment related to the particular organization is (Table 6.1). Finally, it is worth emphasizing that although a rational and analytical process of analyzing the environment for the definition of strategy and structure is often defended, the environmental influence, as already stated, happens regardless of

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Table 6.1 Environmental complexity and instability Complexity A complex environment presents many factors or variables influencing an organization.

Instability An unstable environment undergoes many unpredictable changes.

such analysis or a strategic decision. Thus, in descriptive studies of organization and structure, unintentional or even informal influences must be taken into account, not just the typical rational and prescriptive analysis pointed out by many scholars of planning and strategy.7

6.2

Changes in the Environmental Factors

To analyze the changes that have occurred in the environment that influence modern organizations, it is important, before anything, to define the periods of comparison. After all, changes deal with a passage from an initial state to a final one. The initial stage could be defined as that period following the so-called Industrial Revolution, the prior period related to the rise of capitalism, or even what is called Modernity. Within the scope of this work, however, the initial stage is defined as the period that helped to produce and develop the large industrial company. Many features of such a large manufacturing company have been mentioned in this work. It was a company that used the bureaucratic and mechanized structure, work organization connected to Taylorism, automation technologies related mainly to Fordism, and strategies of gains in scale and in scope.8 The kind of environment that fostered the development of such a company has been given several names, such as Industrial Society, New Industrial State, Industrial Capitalism, and Second Wave, among others.9 What is considered the final stage in the analysis of changes is the period of today’s society which comprises a number of characteristics pointed out by many authors from different approaches and concepts, such as the Knowledge, Post-industrial, Postcapitalist, and Informational Society, among others.10 In general, despite the conceptual differences, which are not discussed in this work, similar features considering the various factors that influence organizations can be drawn from such authors.11 To facilitate the analysis, the micro-environment and the macro-environment, previously defined, are discussed separately, considering their main elements or factors that influence the formation of a strategy or types of organizational structures.

6.2.1

Changes in the Macro-environment

6.2.1.1

Information Technology

With regard to changes related to information technology, separate analyses of process technology and product technology should be made. The first case involves

6.2 Changes in the Environmental Factors

69

an examination of the technology used in a production process to make a product or to perform a specific job, i.e., the technology used to produce goods and services. The second case entails an examination of the technology that is offered to customers and society for their use or consumption through the products, i.e., the technology embedded within a product.12 As for process technology, much is discussed in the previous chapter on automation and its various forms. Basically, in the past, there was a dependence on technologies related to electricity and mechanics; today there is the increasing importance of information technology in production processes. Obviously, the use of IT does not eliminate the use of previous technologies; rather, it potentiates them. Low flexibility, high costs, limited use to certain production sectors, and the possibility of only small integration, can be pointed out as main features of process technologies related only to mechanics and electricity. Currently, with the use of IT, many of these characteristics are changing: there is an increase in production flexibility; automation reaches sectors that presented low use of technology in the past, such as services and trade sectors; it is cheaper and more accessible when compared with previous technologies; and it enables integration between the various production systems and between them and the support areas, and with suppliers and customers. In the analysis of product technology, substantial changes concerning the use or consumption have taken place as well. As pointed out by Peter Drucker, the technologies that drove the economy over the twentieth century were related to steel, electricity, organic compound products, building materials, as well as the internal combustion engine and its various applications such as automobiles, tractors, and appliances.13 Currently, the economy of many countries is being driven by information technology and its uses, such as those related to computers, mobile phones, and, of course, products with mixed technology related to mechanics and electricity in addition to IT.14 The new electronic devices and the computerized changes in cars and other machines exemplify such mixed-technology products. Information technology makes possible, thus, the birth of new products for new uses and consumption. In this respect, it is worth emphasizing that the products arising from information technology do not meet only specific uses and consumption, but varied needs, creating even new possibilities. Manuel Castells emphasizes this fact by claiming that the previous technologies could be viewed just as tools to be used whereas “the new information technologies are not simply tools to be applied, but processes to be developed”,15 i.e., when using products from IT, things not imagined at the time the product was formed can be created. The flexibility of uses and consumption is enormous, and in practice “users and doers may become the same”.16 These aspects lead IT, and its products, to become a new impetus for the economy. Manuel Castells defines such new economy that is driven by information technology as the information economy.17

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6.2.1.2

6 The Organizational Environment: From Continuity to Dynamism

Economic Changes: The Global Economy, Economy of Services and of the Third Sector

With respect to economic changes that have had significant impact on organizations, in addition to the above considerations on information technology and “informationalism”, other aspects can be noted, such as the phenomenon of globalization, the greater importance of the service sector, and the strengthening of the third sector. Economic globalization is the passage of an economy based on national economic relations to a global economy.18 Overall, economic relations, until recently, gave priority to relationships maintained internally to national; international economic relations appeared in a subsidiary and residual way. Even international trade was characterized more by trade between countries than between economic agents, whether firms or individuals. Currently, however, there are significant changes in this economic configuration, with relations between actors from different regions of the planet emerging more and more.19 These relations are seen in the transfer of goods and services, of labor force, or even of financial capital (capital flows).20 Obviously, globalization does not occur in the same way in all societies. Manuel Castells comments on this subject considering limits of globalization, regional differences, and even sectors that are not subject to this phenomenon.21 In the first aspect, the full integration of markets does not happen, creating limitations on the flow of capital and of the labor force. In the second aspect, M. Castells points out regional differences, mainly due to policies carried out by national governments. In the third, although it affects, directly or indirectly, the lives of all, globalization does not reach all economic processes, all territories, or every human activity. Another phenomenon that has occurred mainly in economically developed countries is the change in the economic profile, with the tertiary sector or that of service assuming greater importance than the secondary sector in several respects. This is similar to what happened in the past, when the secondary sector achieved greater importance than the primary sector. The term widely used, Post-industrial Society, comes precisely supported in this aspect.22 The information economy or knowledge economy can be seen as part of the tertiary sector of the economy and assumes prominent position in this development.23 Finally, another economic phenomenon that, increasingly, can be seen in society is the development of social activities or the third sector (i.e., neither public nor private). Due to various factors, the economic growth of those activities that deal with aspects related to social issues can be noted today. Non-governmental organizations (NGOs) have emerged with many different roles in many different segments, as in the defense of the natural environment, in cultural activities, in actions regarding healthcare and education, etc., Among the most important causes for the development of these third-sector activities are the increase in awareness in society regarding the social aspects and the difficulty of the actions of governments in dealing with these issues.24

6.2 Changes in the Environmental Factors

6.2.1.3

71

Changes in Government: Lower Economic and Social Performance

Despite the peculiarities of each country, another environmental factor that has had significant impact on modern organizations concerns what is commonly discussed today as the lower actuation by national governments in social and economic activities.25 In general, national governments carry out not only typical functions in relation to politics, keeping peace and order, protecting individual rights, and defining macroeconomic policies, among others, but also functions as strong economic and social agents.26 National governments act to maintain healthy economic situations, due to the doubts on market as the sole regulator of the economy, the consideration of the importance of maintaining a robust welfare state in order to avoid undesirable social consequences, and the necessity of offering opportunities for everyone to participate in the economy and in the market. Effective macroeconomic actuations (fiscal and monetary policy), presence in the productive sector, re-distributive actions, and public service are some practices usually applied.27 Besides the polemic involved and the national peculiarities, governments are currently experiencing problems in maintaining these actuations. Firstly, they encounter difficulties in regulating the economy considering the global reality, as their power is restricted to the national level. Secondly, maintaining social activities becomes complicated due to aspects related to globalization in the broad sense and a growing public deficit. In fact, the criticism regarding the capability of governments to maintain effective social actions and to enable appropriate income redistribution is not new, and they have become larger given the new global realities and the growth of public debt, i.e., the financial difficulties in maintaining it.28 In the face of these changes regarding governments’ actions, organizations are presented with opportunities in the social sphere, as well as a greater responsibility to society for such social actions. In the first case, as discussed above, organizations are increasingly operating in the service sectors formerly occupied by governments. This can happen through for-profit firms, or even nonprofit organizations of the third sector. It is important to point out that some organizations have started to fill the gaps left by governments. In the second case, even the firms not directly linked to the third sector are being obligated to collaborate in social actions to maintain healthy social relations, which would prevent the possible adverse consequences of economic globalization and the lowest performance of governments.29 In this respect, firms’ responsibility occurred in the past mainly through the government which, collecting taxes, exercised such role. Now, in the face of the lower performance of the state, firms are expected to act to minimize the unintended consequences of social and economic changes. It is worth emphasizing that this occurs in proportion as society itself demands this new business posture.

6.2.1.4

Changes in Workers’ Profile

Substantial changes with respect to the characteristics of the labor force available and employed by organizations may also be noticed. Until recently, the great part of the

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workers employed by firms presented low skills, low qualification and the need to fulfill their basic needs (food and security, for instance) as main features.30 The general increase in workers’ qualifications is a recent fact. Till some decades ago, even in developed countries, the majority of the population did not present high qualifications. In some undeveloped countries, such reality is still present, but there is tendency to change. The low qualification was presented by workers coming from rural areas or even those already socialized in an industrial culture. Such a low-skilled and low-qualified work force, by the way, could be maintained for a long time in firms and could even be seen as appropriate due to the low qualification requirements of the traditional forms of production based on Taylorism and Fordism. Currently, an increase in the qualifications of workers has been noted, as has an increase in the workers’ demands regarding work, considering aspects such as autonomy and the use of potentialities. In fact, discussions on the increase in the qualifications of employees and in their demands have emerged since the 1960s in developed countries.31 Today, however, unlike in the past, in addition to the fact that this qualification process has advanced a lot, a higher qualification has become appropriate for the new work organization featured in the informational and global economy, in jobs related to the service sector, and in the work of the third sector. Ultimately, such high qualification becomes one of the requirements of organizations in relation to employees.32 In addition, intense discussions on the types of skills and qualifications that are required today have taken place – a qualification other than that requested from the worker in Taylorist processes, but a different qualification used before the Industrial Revolution and that was related to the me´tier employees, or the craftsmen, who had knowledge and skills of the entire work process.33

6.2.1.5

Regionalism, Tribalism, Individualism, Search for Identity, and Global Diversity

Economic globalization can be considered as part, or even just one dimension, of a wider movement in which, according to Anthony Giddens, there is an “intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa”.34 This movement has resulted in the growing importance of groups, as it appears in the regionalism and tribalism, and in the increased role of individuals in their particular behavior. Two causes can be cited for the emergence of this phenomenon. First, this phenomenon can be seen as an immediate consequence of what could be called, according to John Naisbitt, a global paradox, in which “the bigger the world economy, the more powerful its smallest players”.35 Within this perspective, given the globalization process, international relations are undertaken by small actors, apart from that between nations. Thus there is major participation of organizations, units or branches of organizations, small businesses, and even individuals or entrepreneurs in international relations. As John Naisbitt states, “as the world integrates economically, the component parts are becoming more

6.2 Changes in the Environmental Factors

73

numerous, smaller and more important. At once, the global economy is growing while the size of its parts is shrinking”.36 Second, this phenomenon can be seen as an opposition, a contrary force, a reaction or resistance to globalization process. From this perspective, as the social relations become more global, there is the need for individuals to identify with something smaller and more accessible, whether a project or a set of values or norms (of a group, for example). Some liberation movements can be pointed in such direction, such as those related to religion, including the fundamentalists, and those aimed at provoking social changes such as the feminist, homosexual, and ecological movements, among others.37 In many regions, by the way, those social movements, groups, and individuals can take the place of the state in various activities, since the latter’s performance has been diminished in many areas. Moreover, although the reasons for this phenomenon may be the most diverse, the consequences are the same: the renaissance of local cultures more regionalized and localized habits and customs, and the emergence of more personalized habits.38 It is also worth adding a remark on this phenomenon: the concept of tribes or groups that present particular cultures, habits, and behavior goes beyond space and even time. Similarities appear between individuals of many parts of the world, connected now not only by economic globalization but by advances in communications and information made possible currently by the information economy and tools such as the Internet.39

6.2.1.6

Ecological Concerns and the Rational Use of Natural Resources

Another phenomenon that seems to gain strength in society and that has a direct impact on organizations concerns the rational use and preservation of natural resources. This means a change of attitude towards the use and management of these resources. The period related to the formation and strengthening of large organizations can be characterized by the abundant use – often seen today as irresponsible – of the planet’s resources. It has often been argued that developed countries achieved their level of development through the indiscriminate exploitation of natural resources. Today, a greater awareness regarding environmental issues seems to reach much of society.40 This awareness, by the way, is associated with the phenomenon discussed previously, which related to individual and collective response to the globalization or as a result of it.41 Along with social pressures arising from ecological awareness, and even considering the prospect of shortages of resources, the development of new technologies for the better use of resources and nature conservation, and the development of new products with recycled or reused materials take place. Such situations lead organizations to new possibilities. On the one hand, business opportunities arise; on the other, there are greater demands for accountability in the use of resources that are now scarce.

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6.2.1.7

6 The Organizational Environment: From Continuity to Dynamism

Concerns on Ethics, Human Rights, and Social Responsibility

Actions and perspectives of practices that show greater concern for aspects such as ethics, human rights, and social responsibility are increasingly noted in society.42 Several reasons can be given for these actions and perspectives, especially those related to major global communication and the movements of contraposition, reaction, and even those resulting of the emergence of the global society. In the first aspect, practices that violate individual and collective rights anywhere in the world become, today, widely known in a short time. The practices deemed illegal or unethical may not be new in history, but there is currently a greater possibility of they becoming generally known by virtue of the ease in communications. The spread of this information leads to movements, protests, and other actions aimed at the elimination of such practices. In the second aspect, following the so-called global paradox, the actions of groups and individuals in the pursuit and maintenance of behaviors considered ethical and responsible can be noted. Many of these practices are seen in the perspective of being the only saving actions of a society that has experienced the phenomena of globalization and “informationalism”, including some negative consequences linked to social exclusion, polarization of wealth, poverty, exploitation, global crime, social upheaval, terrorism, etc.,43 Some of these actions can be seen even as practices that fill the gap left by the previous movements linked to political concepts such as left wing and right wing.44 Whatever the reasons, there is the performance or prospects of action by society, individuals, and groups, formal or not, with this objective. And companies and their representatives are called, also, to collaborate.

6.2.2

Changes in the Micro-environment

Although micro-environmental analysis relates to a particular organization or even a particular economic sector, some observations can be made regarding changes in micro-environmental factors for firms in general, especially for the large bureaucratic and mechanized companies. 6.2.2.1

Increased Competition

Until recently, one of the main features of the major national economies was the existence of a few large companies that dominated markets and that presented a very safe situation in their areas of business.45 The difficulty other firms faced in seeking to enter these markets occurred for various reasons, whether related to strong competitors, or financial and technological causes. Thus, the market was characterized by the comfortable situation of large enterprises, achieved through certain differentials – in price, in product, etc. – and appropriate planning.46

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75

This comfortable situation of companies dominating markets in many economic sectors has changed lately, whether in the traditional sectors of the economy or in the new areas that are driving economies nowadays, such as those linked to services and the information or knowledge economy. The main causes for this development are related primarily to previously discussed phenomena such as globalization and information technology. In the first case, with globalization, new (global) competitors are entering sectors before dominated by just a few companies. Moreover, there is also a large flow of financial capital (financial globalization) looking for profitable investments. This promotes the creation of new firms and, as a consequence, increases competition. In the second case, with information technology, there is a spread in the use of new production technologies by enterprises, mainly due to the decrease in the cost and greater accessibility of such technologies when compared with the previous production technologies linked only to mechanics and electricity. As a result, an increasing number of firms now operate or may operate in a given geographical area or in a certain business, changing situations of monopoly or oligopoly, or even increasing contestability.47 For the firms related to services and mainly to “informationalism”, the aspects cited are even easier to verify considering the global market, the more accessible technology, and an innumerable number of entrepreneurs in these new businesses. Therefore, the market is more competitive than in the past, when it was dominated by large companies. Global society in its various aspects and the largescale spread of information technology are leading thus an increase in competition or at least its prospect (increase in the contestability) for the majority of organizations.

6.2.2.2

Increased Possibilities in Supply and the Integration with Suppliers

If the changes discussed in this chapter, especially those regarding the macroenvironment, may cause an increase in the competition, they may also most likely lead, on the other hand, to supply for the organizations. Until recently, large organizations adopted strategies related to production integration due to several aspects, mainly the great difficulty in obtaining and maintaining a secure supply. There were not many firms that could provide inputs and services, and thus many activities were carried out internally, because of the difficulty of external supply. Currently, a reversal of this situation has been noted and, as a result, organizations may now increasingly rely on suppliers for inputs and services that were previously carried out internally.

6.2.2.3

Changes in Consumption

The great emphasis on domestic markets, large companies dominating these markets, low competition, the use of traditional technologies, and production standardization led society to mass and standardized consumption. Although

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there were some differences in cultural aspects or in individual needs and desires, what prevailed until recently was a largely standardized consumer behavior. Changes related mainly to increased competition have led to changes in consumption habits. Thus, more selective and demanding customers as well as a more customized demand have been noted. Thereafter, aspects of marketing assume greater importance for organizations. As pointed out by Peter Drucker, the current situation presents a shift in which knowledge of the market, i.e., knowledge of the real needs and desires of the consumer, is more important than technological advantage.48 With the use of the concepts of the marketing management philosophies presented by Philip Kotler and Gary Armstrong, there has been a shift in emphasis, from the attention given to production and product to the concern for observing and meeting needs and desires.49 As a result, consumers are presented with greater possibilities of choice in buying. In the same way, a demand for quality and price, and for products that can meet needs more specifically, are noted. Customization is now a practice that deserves attention within business’ strategies.

6.3

Changes Related to the Behavior of the Environmental Factors: Complexity and Dynamism

As informed at the beginning of this chapter, in examining environmental changes, besides enumerating factors or variables and analyzing the way each one impacts/ affects organizations, it is also important examining the environmental changes in terms of complexity and instability. As for complexity, it is worth emphasizing that the environment was never presented in a simple way for organizations, especially with regard to large bureaucratic and mechanized organizations. In fact, organizations have always dealt with the complexity of the environment in two ways: by choosing environments where it is simpler to operate and/or simplifying the environment through internal differentiation. In the first way, quite typical of small businesses, the organization chooses environments that are simpler to play in so as to better understand the behavior of the variables involved.50 In the second case, by using division of labor, large companies are able to understand and relate to the complex environment in which they operate.51 Regardless of these two possibilities, by chosing a simpler environment in which to operate and/or by using internal differentiation (division of labor), for the present work, there have been no significant changes with regard to complexity. The environment has always been complex, and thus continues to be. Organizations – in fact, their management – still have to apply to one or the two possible ways to face the complexity: choosing simpler environments to better understand and control the variables, and/or differentiating to better relate to the external complexity. With regard to instability, or dynamism, the situation is quite different. Although it may be said that the changes in the environment have always been constant, it should be pointed out that the changes always presented in a continuous or incremental way, featuring an environment of certainty, stability, and

6.4 Notes

77

predictability.52 The small economic, technological, and even political changes, and the social, cultural, and consumption standardization, in addition to a steady rise in demand, can be mentioned as features of this incremental period. This complex but stable environment, by the way, may be indicated as the environment that enabled the development of the bureaucracy and mechanized structures typical of large organizations.53 It turns out that it has been a long time since a shift in this incremental and predictable behavior of changes in environmental factors has occurred. Uncertainty is now a constant companion of organizations as has never happened before.54 This dynamic environment has emerged because of various reasons, many of them pointed out in this chapter. These include the rise of new technologies, many of them, inclusively, do not meet specific needs, but varied needs, creating new possibilities (information technology); social and cultural diversity, which is seen also in consumer behavior (end of standardized consumption); fierce competition with the constant entry and exit of new businesses; and various laws and constant changes related to the various countries and regions where the firms are now operating (globalization), among others. In summary, the environment that presented until recently a complex behavior, but with some stability, now presents also a dynamic or unstable behavior with changes appearing discontinuously, unpredictably, and uncertainly. Given this more complex and dynamic environment, the various changes in the variables and elements of the macro-environment and the micro-environment discussed throughout this chapter, and the changes in automation technology discussed in the previous chapter, pressures for change in organizational structures can be noted. Many structural changes, however, do not occur passively. An intermediate element is also important: an organizational choice, conscious or not, which enables the change. This is the focus of the next chapter.

6.4 1

Notes

Comments on these possibilities are presented in Chap. 7, on strategy. Anyway, it can be said that strategy is an intermediate element between environment and the organization, including its structure. 2 Philip Selznick and Talcott Parsons are references in this aspect. 3 The systems approach considers the organization as an open system, once it keeps strong interaction with the environment it operates. Thus environmental, or external, changes lead to internal changes, including changes in the structure (KATZ, Daniel, KAHN, Robert L. Psicologia social das organizac¸o˜es. Sa˜o Paulo: Atlas, 1976). The contingency approach presents researches showing the influence of the environment on the organizational structure (BURNS, Tom and STALKER, George Macpherson. The management of innovation. London: Tavistock Pub, 1966 and LAWRENCE, Paul R. and LORCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973). Scholars of strategy and planning offer many prescriptive models to analyze the environment and to make decisions based on such analysis.

78 4

6 The Organizational Environment: From Continuity to Dynamism

This division can be seen in many studies on planning and in basic and general manuals on management (See, for instance, TAVARES, M. C. Planejamento estrate´gico: a opc¸a˜o entre sucesso e fracasso empresarial. Sa˜o Paulo: Harbra Business, 1991 and BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998). 5 As for environment, other variables can be analyzed. Henry Mintzberg, for instance, besides complexity and dynamism, analyzes market diversity and hostility. Richard Hall analyzes homogeneity/heterogeneity, stability/instability, concentration/dispersion, domain consensus/ dissensus and turbulence. (MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995; HALL, Richard H. Organizac¸o˜es, estruturas e processo. Rio de Janeiro: Prentice-Hall, 1984). 6 MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 7 This aspect has been warned since Philip Selznick’s pioneer studies (SELZNICK, Philip. TVA and the grass roots: a study in the sociology of formal organization. New York: Harper & Row Pub, 1966). 8 Structures better discussed in the following chapter. 9 These are names used by many authors that are mentioned along this chapter. 10 These are names used by many authors that are mentioned along this chapter 11 As for such periods, two important comments should be made: First: specific events or even specific moments separating the two periods cannot be pointed, i.e., it cannot be precisely delimited when a period ended and the other began. In the same place and at the same time, features of the two periods can be seen together. Homogeneity is presented in this chapter to make easy the presentation of the topics. Second: Although the elements presented in this chapter are treated as conditions or causes for the birth and development of organizational structures, it is important to point out that, either in past or in present, these elements are also affected by organizations. After all, organizations are a constituent part of society, and they influence and are influenced by the environment as well. 12 Such difference between process technology and product technology can be seen in many books on operation management such as SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997. 13 DRUCKER, Peter F. Uma era de descontinuidade. Rio de Janeiro: Zahar editors, 1974. 14 This is referred to as informacionalism (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001). 15 CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001, p. 51 (p. 32 in the original in English). 16 Such Manuel Castells’ comment reminds of Alvin Toffler’s prevision on the incoming of the “prosumer”: the same person would be consumer and producer (TOFFLER, Alvin. A terceira onda. Rio de Janeiro: Record, 1980). 17 Manuel Castells states that “productivity and competitiviness of units or agents in this economy (by it firms, regions, or nations) fundamentally depend upon their capacity to generate, process and apply efficiently knowledge-based information”. See: CASTELLS. Manuel. The Rise of the Network Society, the Information Age: Economy, Society and Culture. Vol I. Cambridge, MA; Oxford, UK: Blackwell. p. 66. 18 Globalization can be discussed through many perspectives, not only the economic one, as it can be seen in Anthony Giddens and Alain Touraine (GIDDENS, Anthony. As conseq€ ueˆncias da modernidade. Sa˜o Paulo: Editora UNESP, 1991 and TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003). However, the economic perspective is emphasized here. In other parts of this chapter, other perspectives related to globalization are highlighted. 19 As alerted at the beginning of this chapter, the possible causes of environment changes are not discussed here. However, as for globalization, impossible not to mention the importance of politics and economic agents linked to the Washington Consensus. 20 CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001 and FURTADO, Celso. Capitalismo global. Sa˜o Paulo: Paz e Terra, 1999.

6.4 Notes 21

79

CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001. The increasing importance of the tertiary sector has been alerted in many studies for long time. (See, for example, BELL, Daniel. O advento da sociedade po´s-industrial: uma tentativa de previsa˜o social. Sa˜o Paulo: Cultrix, 1977; TOFFLER, Alvin. A terceira onda. Rio de Janeiro: Record, 1980). Jeremy Rifkin has recently criticized the capability of the tertiary sector in generating jobs in society (RIFKIN, Jeremy. O fim dos empregos: o declı´nio inevita´vel dos nı´veis dos empregos e a reduc¸a˜o da forca global de trabalho. Sa˜o Paulo: Makron Books, 1995) Manuel Castells criticizes simple analyses concerning the passage of an industrial-based economy to a service-based one. He alerts to the diversity and complexity of the tertiary sector and to the diverse changes that have happened in each one depending on many factors. (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001). 23 Many times, the information economy is not considered part of the tertiary sector, but an independent one: the quaternary sector. 24 In terms of management and business, discussions on the increasing importance of the tertiary sector can be seen in Peter Drucker as well as in Jeremy Rifkin (DRUCKER, Peter F. Sociedade pos-capitalista. Sa˜o Paulo: Pioneira, 1994; RIFKIN, Jeremy. O fim dos empregos: o declı´nio inevita´vel dos nı´veis dos empregos e a reduc¸a˜o da forca global de trabalho. Sa˜o Paulo: Makron Books, 1995). 25 As alerted in earlier notes, causes for the environment changes are not discussed here, however, as for criticism on the effectiveness in governments’ performance, various economic and political agents can be mentioned and the Washington Consensus is a reference in this aspect. 26 Many times it is referred to as Keynesian state, welfare state or positive state (CASTELLS, Antoni. Los limites del estado del bienestar tradicional. In: Crisis economica y estado del bienestar. Madri: Instituto de estudios fiscales, 1989; MAJONE, Giandomenico. Do estado positivo ao estado regulador: causas e conseq€ ueˆncias de mudanc¸as no modo de governanc¸a. Journal of Public Policy, v. 17, part 2 may-august 1997, pp. 139–167 and TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003). 27 Practices discussed, for example, in CASTELLS, Antoni. Los limites del estado del bienestar tradicional. In: Crisis economica y estado del bienestar. Madri: Instituto de estudios fiscales, 1989. 28 These aspects can be drawn from CASTELLS, Antoni. Los limites del estado del bienestar tradicional. In: Crisis economica y estado del bienestar. Madri: Instituto de estudios fiscales, 1989; MAJONE, Giandomenico. Do estado positivo ao estado regulador: causas e conseq€ueˆncias de mudanc¸as no modo de governanc¸a. Journal of Public Policy, v. 17, part 2 may-august 1997, pp. 139–167; TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003; FURTADO, Celso. Capitalismo global. Sa˜o Paulo: Paz e Terra, 1999; CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001 and OSBORNE, D. e GAEBLER, T. Reinventando o governo: como o espı´rito empreendedor esta´ transformando o setor pu´blico. Brası´lia: M. H. Comunicac¸a˜o, 1977. In fact, the discussion on this subject is very controversial. Events such as the economic crises of 2008 show the fragility of excluding governmental regulation and even its economic action. 29 These adverse consequences are alerted, for example, in CASTELLS, Manuel. Fim de Mileˆnio. Sa˜o Paulo: Paz e Terra, 2000; GIDDENS, Anthony. As conseq€ ueˆncias da modernidade. Sa˜o Paulo: Editora UNESP, 1991 and TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003. 30 Low qualification when compared with nowadays workers and with the old artisans characterized by Benjamin Coriat, that is, the typical workers of the period before the great division of labor that took place in the modern organizations. (CORIAT, Benjamin. El taller y el crono´metro: ensayo sobre el taylorismo, el fordismo y produccio´n en massa. Madrid: Siglo Veintiuno Ed., 1993). Basic needs are those related to worker survival as the physiological and the safety needs. 31 This phenomenon, which emerged in developed countries in 1960s and 1970s, was caused mainly by the dissatisfaction of skilled workers facing taylorized ways of work (HELOANI, 22

80

6 The Organizational Environment: From Continuity to Dynamism

Roberto. Organizac¸a˜o do trabalho e administrac¸a˜o: uma visa˜o multidisciplinar. Sa˜o Paulo: Editora Cortez, 1994). 32 Peter Drucker and Jeremy Rifkin alert for this fact (DRUCKER, Peter F. Sociedade poscapitalista. Sa˜o Paulo: Pioneira, 1994 and RIFKIN, Jeremy. O fim dos empregos: o declı´nio inevita´vel dos nı´veis dos empregos e a reduc¸a˜o da forca global de trabalho. Sa˜o Paulo: Makron Books, 1995). However, Manuel Castells warns of the large difference between businesses within the tertiary sector in terms of qualification requirements, i.e., some services still require low-skilled workers while others require workers with higher qualifications. (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001). 33 Current discussion on the concept of competence goes in this direction. (see, for example, ZARIFIAN, Philippe. Objetivo competeˆncia. Sa˜o Paulo: Atlas, 2001. 34 GIDDENS, Anthony. The Consequences of Modernity. Stanford: Stanford University Press, 1990, p.64. 35 NAISBITT, John. O paradoxo global. Rio de Janeiro: Campus, 1994, p. 4. 36 NAISBITT, John. O paradoxo global. Rio de Janeiro: Campus, 1994, p. 9. 37 CASTELLS, Manuel. O poder da identidade. Sa˜o Paulo: Paz e Terra, 2002 and TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003. 38 Movements in this direction have arisen for long time, mainly those that appeared in Europe and USA in 1960s and 1970s. Obviously, at that time, the reality and the causes were different from the movements related to tribalism and regionalism. However, several similarities can be seen in both cases as the global and ecological awareness, the more qualified people involved, etc. 39 NAISBITT, John. O paradoxo global. Rio de Janeiro: Campus, 1994. 40 The conferences that took place in Rio de Janeiro in 1992 (RIO92) and in Kyoto in 1997 can be considered landmarks in this direction, either in their symbolic aspects (mainly considering the first), or when it comes to the legal and economic consequences for the signatories of the agreements reached (mainly considering the second). 41 Manuel Castells believes that the two facts are associated, however, he does separate analysis for them due to their distinguishing features and importance. (See: CASTELLS, Manuel. O poder da identidade. Sa˜o Paulo: Paz e Terra, 2002). 42 John Naisbitt sees this fact as reality and gives several examples of it. Alain Touraine sees it as an inevitable fact. Manuel Castells discusses the matter in terms of perspective of it to happen, even demonstrating hope for it to occur. (NAISBITT, John. O paradoxo global. Rio de Janeiro: Campus, 1994; TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003; CASTELLS, Manuel. Fim de Mileˆnio. Sa˜o Paulo: Paz e Terra, 2000). 43 These negative aspects are discussed exhaustively in CASTELLS, Manuel. Fim de Mileˆnio. Sa˜o Paulo: Paz e Terra, 2000). 44 GIDDENS, Anthony. The Consequences of Modernity. Stanford: Stanford University Press, 1990 and TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003). 45 Discussion on this aspect can be seen in Alfred Chandler’s, Harry Braverman’s and John Kenneth Galbraith’s work. These authors noted that economic and marketing control mechanisms were replaced by administrative ones undertaken by large companies. (GALBRAITH, John Kenneth. O novo estado industrial. Sa˜o Paulo: Nova Cultural, 1988; BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987; CHANDLER Jr., Alfred D. The visible hand: the managerial revolution in America business. Cambridge: 1977). 46 GALBRAITH, John Kenneth. O novo estado industrial. Sa˜o Paulo: Nova Cultural, 1988. 47 The theory of contestable markets advanced classical concepts related to market structure such as perfect competition, monopoly, oligopoly and so on (BAUMOL, W. J.; PANZER, J. and WILLIG, R. Contestable Markets. New York: Harcourt Brace Jovanovich, 1982). 48 DRUCKER, Peter F. Sociedade po´s-capitalista. Sa˜o Paulo: Pioneira, 1994. 49 KOTLER, Philip e ARMSTRONG, Gary. Princı´pios de marketing. Rio de Janeiro: Ltc Editora, 1999. 50 Aspect discussed in chapter 4, mainly in the item dedicated to the Simple Structure.

6.4 Notes 51

81

Aspect discussed in chapter 2 by using mainly Paul R. Lawrence and Jay W. Lorch’s work (LAWRENCE, Paul R. LORCH, Jay W. As empresas e o ambiente. Petro´polis: Editora Vozes, 1973). 52 Peter Drucker argues that the development achieved in the twentieth century occurred within an economic and technological continuity, and the changes that have emerged, although many, were related to a stable environment, because there was great predictability. (DRUCKER, Peter F. Uma era de descontinuidade. Zahar editors. Rio de Janeiro 1974). Charles Handy uses similar concepts of continuity and discontinuity of the environment. For a different analysis of discontinuity, especially in terms of modernity and post modernity, see Alain Touraine and Anthony Giddens (GIDDENS, Anthony. The Consequences of Modernity. Stanford: Stanford University Press, 1990; TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Editora Vozes, 2003; HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996). 53 See, for example HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996). 54 Aspect discussed since the 1960s. See, for example, DRUCKER, Peter F. Uma era de descontinuidade. Rio de Janeiro: Zahar editores, 1974. Charles Handy is a more recent reference HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996.

Chapter 7

Organizational Strategy: From Integration to Specialization

As informed in the initial chapters, besides environment and technology, strategy has always been one of the variables most frequently mentioned in the literature as having great impact on the formation of organizational structures. Thus, this chapter focuses on strategy. Initially, comments are made on the main elements of the concept, and then the traditional strategies used by large companies until recently are presented. At the end, there are discussions on the new strategies proposed in management literature and found in organizational research, which are already being used by many firms in the face of the environmental and technological changes discussed in Chaps. 5 and 6. Two observations should be made before proceeding with this chapter. First, strategy is not considered here just as a passive reaction to a particular environment or even to a certain technology. Above all, it is a choice, whether by an individual or a group.1 Thus, environment and technology influence, but do not determine, strategy. Second, some generalizations that are made below are necessary, but they must be taken with some caution. Special cases deserve separate treatment, and it is not possible to do that in this study. After all, this is not a book on organizational strategies.

7.1

Organizational Strategy

Like other subjects related to organizations, several similar concepts can be presented for organizational strategy. In most of them the influence of the idea of rationality that prevailed in classical management studies may be noted. In this respect, the following elements are enclosed in a possible concept: strategy is a rational and conscious process, under the responsibility of one person or a group of people, in the face of some situations that are present, and that culminates in a decision that will guide the others that will follow.2 In this rational and conscious process that has been traditionally cited in the literature on strategy, the managerial function of planning, especially one of its N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_7, # Springer-Verlag Berlin Heidelberg 2012

83

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7 Organizational Strategy: From Integration to Specialization

most advocated kinds, namely strategic planning,3 should be taken into account. In this regard, a well-elaborated process is advertised, involving certain steps that should be followed, such as the adoption of a mission statement, the analysis of opportunities and threats, and the setting of goals, among others.4 Thus, a rational and conscious process would be used in the development of a strategy, as advocated by classical (and neoclassical) authors. Regarding the responsibility for the strategy, it has traditionally rested on the organization’s top levels, whether on the chief executive, a special committee, or somebody else. There can be variations, such as on the strategic management in which the managers of the tactical and even the operational levels are called to collaborate in the process.5 In addition, the importance of advisers and analysts may also be noticed due to the influence of these experts on the apex decision-making.6 The feature mentioned in which strategy is conceived given the situations presented refers to the environmental analysis. Such analysis is conducted internally and externally to the organization, and thus in the forming of the strategy, external variables such as those already discussed in the previous chapter, plus the internal situation of the organization, must be taken into account.7 Finally, the strategy is a decision that will guide subsequent decisions, i.e., the choices that will follow within the organization must consider the strategy, contributing to its attainment and thus achieving consistency in the administration. In this respect, therefore, the strategy can be regarded as a “prime law” to be followed by others.8 In addition to these elements discussed as part of the concept of strategy, another element is often cited: its importance. More than being a constituent element of the concept of strategy, however, this aspect should be considered a quality derived from the previous characteristics, especially that which states that the strategy is a decision that will guide the subsequent decisions, that is, a prime law to be followed by others. From this point of view, the strategy is the most significant decision within an organization or in the administrative process.9 It is developed through a rigorous process (or so it is supposed to be), it is more difficult to change, and it should influence succeeding decisions at all levels, positions and departments along the time, hence, such importance. Another necessary aspect of strategy is its validity, i.e., its reason for its existence (raison d’etre). This is important especially in an age when environmental changes are so many that the validity of having a strategy could be questioned. In this respect, two comments should be made. Firstly, the importance of formulating strategy is closely linked to the importance of doing the planning. Besides being, according to Henri Fayol,10 the first function of management, planning has assumed an important role for large industrial companies. As posited by John K. Galbraith, such companies throughout history have found themselves obligated to undertake planning due to the time and the capital invested, and the need for high internal organization.11 Secondly, because of the current environmental situations, an administration without a strategy becomes one without reference and the organization one without direction. Over time, the higher dynamism of the environment and the increase in competition, among other situations, have placed importance and even greater validity on strategy.

7.2 Traditional Strategies

85

As pointed out by Cynthia Montgomery and Michael Porter “the advances in strategic planning could not have come at a better time. . .” and “. . .the need for sound strategies is no longer a luxury but a necessity.” 12 Thus, several methods to improve the rational process of formulating strategy have been presented. Some methods emphasize general aspects, others competition, clients, pioneer efforts and innovation.13 A discussion of these approaches and methodologies is not intended here. What is presented is an analysis of the main strategies used by large organizations, their changes over time, and the prospects of structural changes in the face of them.

7.2

Traditional Strategies

In the organizational literature and in management practice, concerns with strategy or strategic planning in general have always been linked to the large and machine bureaucratic organization.14 This may have happened due to the importance that this type of firm assumed in the world of organizations until recently. In this respect, strategy was based mainly on standardization, economy of scale and scope, and reduction of transaction costs. Concerning standardization, the main reference comes from Fordism.15 In some parts of this book, mostly in Chap. 5, Fordism is mentioned as a type of fixed automation system; in other parts, it is referred to as a structural variation within Taylorist and bureaucratic principles.16 However, an analysis of Fordism can also be made in terms of organizational strategy. In this respect, Henry Ford used basically a general strategy of large-scale production that could place in the various markets an inexpensive product that would be consumed also in large scale.17 To make this strategy possible, besides the development of the assembly line, H. Ford adopted a production strategy, or functional strategy, of standardizing production. Such strategy could not be considered a novelty, as it applied the original ideas of Taylorism and others; however, standardization under Fordism reached an amazing level, as the use of the assembly line required a high standardization for pieces. With this standardization in the production process, pieces that were prepared at different times and places could be perfectly fitted together along the assembly line. As a result, an unimaginable increase in productivity and a decrease in costs were attained, as well as the cheapening of products, what led to a higher demand for these products. Thus, the general strategy of large-scale production of cheap products that were also consumed on a large scale became possible. It should also be pointed out that within the strategy of Henry Ford, standardization was not limited to production, but also extended to the product offered to the customer. Overall, Fordist production was concentrated on a model that would make possible the offering of a cheap product to the customer. This strategy, which focused on standardization, both in production and in the product, was appropriate, and with some future changes, exerted influence on firms over time. Its limitations emerged when it was faced with high complexity in the supply

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and in the markets in which the firm operated. Then issues such as diversity gained importance.18 Thus, to explain the huge growth of some companies during the twentieth century, other strategies beyond standardization should be discussed. The reference comes from Alfred D. Chandler’s work on economies of scale and scope.19 According to this author, the large industrial companies, in general, pursued, in their path of development, the achievement of economies of scale, economies of scope, and reduction of transaction costs – three concepts that are closely related to each other, but that allow separate definitions. The economy of scale is reached when unit cost is reduced by means of an increase of production and distribution. The economy of scope is obtained when the same facility is used to produce or distribute more than one type of product or service.20 Transaction costs occur when goods and services are transferred from one unit to another. Such transfer can happen within the same firm or between firms or even between firms and individuals. Thus, the reduction of these transaction costs is obtained when a greater efficiency in this transference is achieved.21 To achieve economies of scale and of scope and to reduce transaction costs, organizations adopt basically functional strategies, or production strategies, linked to the establishment of large industrial complexes, vertical integration, and horizontal integration. The use of large production facilities makes it possible, in a large industrial complex, to achieve a higher production volume and to turn out several kinds of products and services using the same resources, thus attaining economies of scale and of scope. Vertical integration includes actions aimed at controlling the entire production chain, through the creation or the acquisition of firms responsible for supplying inputs, producing, selling, distributing, and doing even research and development. These actions would bring about a reduction in transaction costs once there is safety and efficiency in the supply of inputs, and in the distribution to the customers. In addition, vertical integration would hinder the entry and the growth of competitors, and would allow an important link with clients to provide much information about the product and customer satisfaction. Horizontal integration includes actions related to geographic expansion and product diversification. In the first case, by acquiring or establishing firms (branches), the organization would advance into new markets. In the second, by offering new products, the organization could increase the number of its customers in a given region. Thus, the firm could again obtain economies of scale and, especially, of scope through the use of the same facilities for different products and services. The horizontal integration comes into being through the divisional structure (or Divisionalized Form, according to H. Mintzberg) and the use of branches.22 In short, industrial companies with large facilities and that are vertically and horizontally integrated, used to present suitable conditions for achieving economies of scale and of scope, and for reducing transaction costs.23 Obviously, as Alfred D. Chandler warned, the use of such strategies would depend on the effect of technology and of the markets on the firm.

7.3 Strategic Trends

87

In addition to these traditional strategies adopted by large companies, another strategy that appeared subsidiary in such firms should be mentioned: the entrepreneurial one. This strategy, unlike the strategies of standardization and of using incremental changes, is related to innovative and creative behavior. It is a very risky strategy and an absorber of profits, a strategy in which large and long-term returns are pursued.24 As for this entrepreneurial strategy in large companies, Alfred Chandler emphasized that, in certain situations related to market changes and technological progress, it could be successfully used in the case of “pioneers.” However, given the environment faced by large companies engaged in reaching economies of scale and of scope, the existence of pioneers as well as the possibility of new entrants was insignificant.25 Still regarding this strategy, H. Ansoff pointed out that even the firms that used to be concerned with technological innovation had incrementalism as their main strategic feature, and entrepreneurial behavior used to be seen as secondary for them.26

7.3

Strategic Trends

With the recent environmental changes and the new technological possibilities faced by large companies, it is supposed that the strategies they use should also change. After all, if the environment and technology do not determine the strategy, such variables present, at least, a significant influence on it. Thus, new strategic trends have been proposed and defended. Some authors, for example, have supported a radical break with the traditional strategies. Others have argued for a move forward, given the increasing competition, more selective customers, globalization, and information technology, among others. In general, a shift of concern from the internal to the external can be seen in the formulation of new strategies. Michael Hammer justifies this fact by emphasizing that today, unlike in the past, the supply is greater than the demand.27 In the previous situation, in which there were always more people inclined to purchase than there were available goods and services, the concern was more internal and with the production. Nowadays, according to that author, the attention has begun to change from production and the products to the customer and the market.28 In face of the discussion made earlier, new trends in strategy can be noted, whether in general terms or in functional (production) terms. In the first case, macro-strategies, i.e., decisions made with the environment as the major concern, can be pointed out. In the second case, strategies more focused on the inside of the firm in order to implement the macro-strategies can be cited. Such distinction between general and functional strategies is used by Cynthia A. Montgomery and Michael Porter and was used previously when traditional strategies were presented. It is particularly useful once it provides clues to draw conclusions on new organizational structures.29

88

7.3.1

7 Organizational Strategy: From Integration to Specialization

New General Strategies

In terms of general strategies, the literature presents basically the strategies that emphasize a major concern for the customer, personalized and flexible service, constant innovation, the search for competitive advantages, and the concerns with social aspects and with international markets.

7.3.1.1

Major Concern for the Customer

Although the client is often declared as the reason for the existence of firms,30 the strategic concerns, as mentioned earlier, used to be always more linked to internal aspects and to production.31 Even when some external aspects were emphasized, attention to the customer used to be relegated to the background, once the issue of competition was considered of major importance.32 However, works defending strategies that include a greater attention towards the customer and for the market can be seen today. Such studies claim that firms have to focus first on the clients’ needs and desires and thus serve them offering greater value in products and services.33 In this aspect, a strong relationship with the client is defended.34 Some factors already discussed in the chapter on the environment can be cited as causes for this fact: the customers’ higher demands, the increase in competition, and even a shift in power between the producers and the consumers, by virtue of the supply being now greater than the demand.35 Furthermore, there is today more advanced management technology that enables a deeper understanding of the customers’ needs through researches on purchasing and consumption behavior.

7.3.1.2

Personalized Service

It was pointed out in the chapter on environmental changes (Chap. 6) that in spite of globalization, which has brought about the prospect of a global standardization of habits and customs, a global paradox can also be noticed, in which society is divided into groups that present differences in many of their habits and customs. These differences indeed can reach the ambit of groups and even the individual sphere. As a result, consumer behavior is presenting less standardization or, at least, certain peculiarities. This fact, together with the high demands from customers as discussed in the previous section, makes standardized customer services a hindrance to fulfilling the client’s needs. Thus, the concern for customers today should reach the ambit of groups and even of individuals. Operating nationally or globally, firms have to think of a more personalized customer service. By using the concepts presented by Philip Kotler and Gary Armstrong,36 firms should shift from actions aimed at mass marketing, to segmentation and personalized service. The objective changes in order to fulfill the needs

7.3 Strategic Trends

89

of groups and individuals, and thus the policy that the customer has to conform to production is not longer employed, but the contrary. It should be noted that personalization, sometimes called customization, taken strictly would cause the entire production process to focus on meeting the needs of only one particular customer. In most cases, considering the costs, this situation could cause production to become economically unviable. Today, however, mass customization is possible. Through such concept, the client can be served in a more individualized way by means of alterations in basic models without prejudicing production in terms of costs, what would make production economically unviable.37

7.3.1.3

Emphasis on Competition and on Competence

Specific strategies aimed at competition can also be noticed as a new trend in business decisions, and the search for competitive advantage has advanced much from its original concept that was concerned just with the “war” against competitors. Today, forces related to customers, suppliers, and new entrants, among others, are taken into account.38 Contestability and sustainability are also aspects to be observed in strategies related to competition.39 With these new approaches, more complex and well-prepared models are constructed, allowing a wider analysis and a better understanding of the reality in which the organization operates.40 Another way of explaining the competitive ability of a firm deals with the analysis of its core competencies.41 In accordance with this approach, organizations should find some distinctive characteristics. Such features would be some internal factors linked to knowledge, learning, and involvement. They would act as an inner bond or strength. Beyond distinguishing a particular company from others, these core competencies would be responsible for satisfying the customer when he uses the firm’s product or service, and would also enable the organization to operate in a wide range of markets. After determining its core competencies, an organization should reinforce and develop them.

7.3.1.4

Continuous Innovation

Innovation is another strategic tendency. The reasons for its use are diverse, and many of them are discussed in the chapter on environment (Chap. 6), such as the differences noticed in clients’ behavior, the constant changes in their habits, the modern advances in information and other technologies, and the new materials and products that emerge, as well as other changes that occur currently concerning an increasingly dynamic environment. It is also important to consider that innovation presents a fundamental competitive importance, since it satisfies the needs of customers, offering them major value, thus enabling the firm to outperform its competitors.

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Innovation presents several possibilities: the introduction of new products or even modifications in current products, modifications and improvements in production processes, and expansion into other markets or segments, among others. It is interesting to note that the strategy that is focused on innovation revives a strategy that is not new, but which used to be used only secondarily by large companies in the past: entrepreneurial strategy.42 Unlike in the past, however, innovation requires more than just putting resources into a new business43; it calls for the engagement and participation of workers in its implementation.

7.3.1.5

Social and Environmental Responsibility, Ethics and Civism

Social and environmental responsibility, ethics, and even civism are other concerns that can be noted today as necessary for business strategies. This may have happened because of the attention given by society to environmental issues and social exclusion, among others. Thus, organizations are called upon to collaborate in solving problems associated with these matters.44 According to Philip Kotler,45 many reasons can justify the actions of firms that show attention to social impacts as, for instance, the search for motivation among employees, the avoiding of lawsuits, favorable publicity, and the attraction of clients who express social concerns. In addition, P. Kotler points out that due to the similarity of various products, civic image may become an important distinctive aspect in cases in which the differences between products are small, thus influencing the consumption decision. Socially responsible practices can be the most diverse,46 but it is important to point out that the present arguments related to this topic emphasize that such practices have to be included in the firm’s strategy, and must not be confined to practices that are sporadically implemented at certain critical moments.47

7.3.1.6

Concern for Operating Internationally

Finally, the last but not the least important general strategic tendency that can be mentioned as used by firms is the major concern for operating internationally. As already mentioned in Chap. 6, globalization is a phenomenon that has exerted major impact on organizations today, whether of market, economic, or financial aspects. Given this fact, firms have to operate currently in the context of global performance, whether actively or by defending their national positions in view of global competition.48 It is worth emphasizing that the current international strategies present various possibilities besides the previous ones linked only to the geographical expansion. A firm can export, authorize firms of other countries to manufacture its products, make use of international franchising, or establish joint ventures.49

7.3 Strategic Trends

7.3.2

91

New Functional Strategies

Functional strategies are those strategies used by firms to carry out general strategies, or the macro-strategies, discussed above. Many of them can be mistaken for new structural possibilities, but they are not the same thing. Functional strategies enable a link between the macro-strategies and the structure of an organization. With respect to such functional strategies, discussions on the choice of the firm size, the focus on the core business, flexibility in production, use of automation based on information technology, relationship with suppliers and customers, and investment in qualifications and health can be presented, as follows.

7.3.2.1

Concern for Being Small

Unlike the concern of traditional strategy for “being large,” the interest in firms today in “being small” has been much discussed. The large company achieves economies of scale and of scope, but due to its growth it can become too rigid, encountering problems of adaptation and flexibility, and thus may not be fast enough in a dynamic environment. Practices related to downsizing and reducing hierarchical levels,50 among others, make this strategy work. It is important to point out that more important than being physically small, the idea is to create mechanisms to think and act as small.51 This strategy meets two other already cited needs: the greater concern for the customer and the continuous search for innovation. Entrepreneurial environments, for instance, require agile firms that do not present much formality or internal complexity, and this situation is ideal for small businesses.52

7.3.2.2

No Vertical or Horizontal Integration, Outsourcing and Dedication to the Core Business

Similar to the previous and often occurring a mutual influence between the two strategies, the decision related to the concentration of activities has gained strength. Actually, this strategy does not mean that a firm should devote itself only to one product, one service, or even one market. The idea is broader and more complex, and is linked, in most cases, to the concept of core business. In practice, however, even the concept of business may not be so clear.53 One of the possible proposals is for the company to focus on elements in which it presents competitive advantages so as to achieve, according to James Quinn and Frederick G. Hilmer, “a definable preeminence and provide unique value for customers”.54 The macro-strategy pointed out earlier on core competencies may also be an appropriate reference in this respect. An important consequence of such concentration is the tendency of a less vertical integration, which would lead, apropos, to an increase in the outsourcing

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of activities carried out previously in the company. The advantages are clear, since profits are maximized when there is investment in areas where the company is really good; the firm becomes stronger against the competition, and it takes advantage of suppliers’ expertise; the firm also gains flexibility in the face of frequent changes (strategy of being small).55 Obviously, strategies related to outsourcing remove the benefits that made companies become vertically integrated in the past, i.e., gains in scope and security in supply.

7.3.2.3

The Advantage of Being Large, and the Importance of Mergers, Acquisitions, Partnerships and Alliances

Despite the defense of downsizing and being small, the traditional strategy of becoming large and enjoying the many advantages of this situation still finds supporters.56 And this support is seen in the organizational reality, where there is a frequent movement of mergers and acquisitions.57 However, significant differences in this situation can be seen when compared with past strategies. According to Manuel Castells, although the importance of large firms can be verified, there is a “crisis of the traditional corporate model of organization based on vertical integration, and hierarchical, functional management”.58 That is, acquisition movements or the deployment of branches by large companies in order to achieve security of supply or reduction in transaction costs cannot be seen. There is growth, however, within the same business or in activities related to core competencies.59 Specifically in terms of reducing transaction costs, there are movements towards the formation of partnerships and alliances, i.e., a company gains a certain security in its supply chain through agreements and contracts, and not through practices related to vertical integration.60 Still on this strategy that encourages the growth of companies, it should be noted that, in addition to reaching economies of scale and of scope related to the traditional strategies, there are other gains. Notably, the movement of growth is aimed also at increasing the bargaining power over suppliers and other actors in society.61

7.3.2.4

Flexibility in Production

Contrary to that strategy used in Fordism, production flexibility gives two important advantages to firms: it provides a personalized service to the customer and it enables modifications in products to meet changes in consumption patterns.62 Thus, adopting such a strategy allows the implementation of several mechanisms that enable some flexibility in operations, even in companies that have production with gains in scale. The mentioned mechanisms are often linked to changes in technical

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93

aspects, but it is important to point out that social development in the firm is also necessary. This strategy related to flexibility is applied today together with the following functional strategy.

7.3.2.5

Intensive Use of Technology

Information technology has enabled some production conditions that were unimaginable to the organizations until some time ago. This new possibility is discussed, apropos, in Chap. 5, on automation technologies. Thus, firms’ strategies today cannot fail to consider the great advantages that come from this fact. Besides the traditional benefits associated with a decrease in costs and an increase in productivity and quality, there is the possibility of manufacturing flexibility. The main defenses for the intensive use of IT can be found in Michael Hammer’s and James Champy’s work on Reengineering.63 In addition to this benefit linked to production, the use of IT and its important characteristic of enabling high integration of systems, provides another important functional strategy for organizations: integration with customers and suppliers.

7.3.2.6

Integration with Suppliers, Distributors and Customers

One of the means a firm uses to maintain security and reduce costs in the production chain, but without maintaining a large organization by vertical integration, is that related to more intense relationships with suppliers, distributors, and even customers. This connection is strengthened with the wide use of IT-based systems that link a company to its external elements.64 In practice, the integration with suppliers enables an increase in just-in-time actions, in which they can even manage the stock of the purchasing company. The integration with customers can encourage their loyalty, prevent the entry of competitors, provide information on changes in consumer behavior, help generate new products, and enhance distribution and promotion actions, among others. In certain cases, the customer can even participate in the production process when he makes an order.

7.3.2.7

Investments in Human Resources and Concerns on the Human Capital

For a long time, scholars have been drawing attention to the importance of considering human factors in management, but priority has always been given to the technical aspects related to tasks and results. Today, however, more effective strategies focused on the human factor and the social relations within the company have strengthened. The central idea is that an organization cannot invest only in the

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7 Organizational Strategy: From Integration to Specialization

Table 7.1 Organizational strategies – summary General Traditional (Considering – Economy of scale Fordism and Alfred D. – Economy of scope Chandler’s work) – Reduction of transaction costs Trends (Considering the several – Major concern for the authors cited in this chapter) customer – Personalized service

– Emphasis on competition and competence – Continuous innovation – Social and environmental responsibility, ethics and civism – Concern in operating internationally

Functional – Standardizing production – Large industrial complexes – Vertical integration – Horizontal integration – Dedication to the core business (being small) – Participation in mergers, acquisitions, partnerships and alliances (being large) – Flexibility in production – Intensive use of technology – Internal and external integration – Investments in human resources and concerns on the human capital

technical system to achieve its goals. Thus, there is a shift in attention from tasks and results to people and their relationships. Human capital, organizational learning, organizational excellence, generation of competences, as well as the strategic management of human resources and people management are some expressions related to such strategy.65 In the same way, there are also concerns today about workers’ health. In this respect, the monitoring of stress and other occupational diseases that used to not be considered in traditional forms of management can now be mentioned66 (Table 7.1).

7.3.3

The Responsibility for Developing the Strategy and the Strategy Development Process

In addition to discussing strategic trends, it is also important to comment on possible changes related to the responsibility for developing the strategy as well as the process of developing such strategy. In terms of responsibility, it was emphasized at the beginning of this chapter, where the elements of the concept of strategy are presented, that the duty for developing the strategy was traditionally placed on positions at superior levels, especially on the chief executive. Today the transference of such responsibility to positions of other hierarchical levels is being increasingly verified. That considered, it is expected that the prescriptions of some scholars linked to the concept of strategic management are in fact materializing in company practices. In addition to this

7.5 Notes

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transfer of responsibility to lower levels, there is also a greater division of responsibility between the positions at the superior levels. Thus, boards of directors or of executives are increasingly being asked to participate in the formulation of strategy.67 With respect to the strategy development process, recalling again the elements presented for the concept of strategy at the beginning of this chapter, rationality and awareness in the process are some characteristics traditionally emphasized. Recently, however, descriptive studies have shown that, in practice, the strategy develops not necessarily in a rational and conscious process, as advocated by scholars influenced by classical and neoclassical approaches. This is especially true for the new scenarios marked by discontinuity, dynamism, and uncertainty. These studies demonstrate the importance of issues such as learning, politics, organizational culture, and even intuition as factors of great influence on the process.68

7.4

Final Remarks on Strategies

It can be noticed from the discussion made in this chapter that several new trends have emerged and those strategies related only to standardization, installation of large industrial complexes, and vertical and horizontal integration have been questioned by several authors or, at least, received new elements. Future studies, like those made by Alfred D. Chandler, will show which of these trends will prevail. Actually, it will happen if in a future analysis on the present time, the uniformity reached in studies made in the past will be achieved. For this work, however, it is enough to present these strategic trends so that internal modifications that make such strategies possible can be discussed in the chapter that follows.

7.5 1

Notes

Even in Alfred D. Chandler’s work, the contingency aspect refers to structure in relation to strategy, not strategy in relation to environment. (McCRAW, Thomas K. Alfred Chandler: ensaios para uma teoria histo´rica da grande empresa. Rio de Janeiro: Editora da FGV, 1998). John Child’s work on strategic choice is also an important reference in this regard (CHILD, John, Organization structure, environment and performance: the role of strategic choice. Sociology, January 1972 vol. 6 no. 1. pp. 1–22). 2 Among the major references to the traditional concepts of strategy, it can be mentioned H. Igor Ansoff and Russell Ackoff, who are cited throughout this chapter. 3 To understand the distinction between planning, strategy and strategic planning, see, for example, BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. H. Igor Ansoff and Mauro Calixta Tavarez present distinction between planning, financial planning, long term planning, strategic planning and strategic management in an interesting historical sequence (ANSOFF, H. Igor. Administrac¸a˜o estrate´gica. Sa˜o Paulo: Atlas, 1990 and TAVARES, Mauro Calixta. Gesta˜o estrate´gica. Sa˜o Paulo: Atlas, 2000). 4 The steps may be presented differently depending on the author, but, in general, there is great similarity between them. This can be seen in the work of various authors on strategy.

96 5

7 Organizational Strategy: From Integration to Specialization

Strategic Management is better discussed in the chapter on new organizational possibilities (Chap. 8). 6 This fact is emphasized in Chap. 4, where the Machine Bureaucracy is discussed. 7 H. Igor Ansoff and Edward McDonnell use the term "strategic" not only considering its importance in decision-making, but mainly considering its importance in making a connection between the company and its environment. (ANSOFF, H. Igor. McDONNELL, Edward J. Implantando a administrac¸a˜o estrate´gia. Sa˜o Paulo: Atlas 1993). 8 Thomas Bateman and Scott Snell define strategy as “a pattern of actions”. (BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. !124). 9 Russell Ackoff discusses the importance of strategic planning, differentiating it from the tactical one. (ACKOFF, Russell L. Planejamento empresarial: Rio de Janeiro: Ltc Editora, 1976). 10 FAYOL, Henry. Administrac¸a˜o industrial e geral. Sa˜o Paulo: Atlas, 1984. 11 GALBRAITH, John Kenneth. O novo estado industrial. Sa˜o Paulo: Nova Cultural, 1988. 12 MONTGOMERY, Cynthia A. e PORTER, Michael E. (org.) Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998 p. XI (introd.). 13 This aspect is discussed in MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000. 14 This fact is alerted, for example, in GOLDE, Roger A. Planejamento pra´tico para pequenas empresas. Colec¸a˜o Harvard de Administrac¸a˜o. Sa˜o Paulo: Nova Cultural, 1986. 15 CORIAT, Benjamin. El taller y el crono´metro: ensayo sobre el taylorismo, el fordismo y produccio´n en massa. Madrid: Siglo Veintiuno Ed., 1993; BEYNON, Huw. Trabalhando para Ford: trabalhadores e sindicalistas na indu´stria automobilı´stica. Sa˜o Paulo: Paz e Terra, 1995 and CHANDLER Jr., Alfred D. Desenvolvimento, diversidade e descentralizac¸a˜o. In: McCRAW, Thomas K. Alfred Chandler: ensaios para uma teoria histo´rica da grande empresa. Rio de Janeiro: Editora da FGV, 1998. 16 Fordism is considered also a economic and social development model according to the Regulation Theory. Such model emphasizes external aspects to the organization, involving increases in salaries, increases in demand, increases in production and, again, increases in salaries (Virtuous Circle of Fordism). For better discussion of the Regulation Theory, see, e.g. BOYER, Robert. A teoria da regulac¸a˜o: uma ana´lise crı´tica. Sa˜o Paulo: Nobel, 1990. 17 The distinction between functional and general strategy is explained ahead and is used in MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. According to Philip Kotler and Gary Armstrong, the marketing management would be focused on the production (KOTLER, Philip e ARMSTRONG, Gary. Princı´pios de marketing. Rio de Janeiro: Ltc Editora, 1999). H. Igor Ansoff and Edward McDonnell use the term “production mentality” (ANSOFF, H. Igor. McDONNELL, Edward J. Implantando a administrac¸a˜o estrate´gia sa˜o Paulo: Atlas 1993). 18 CHANDLER Jr., Alfred D. Desenvolvimento, diversidade e descentralizac¸a˜o. In: McCRAW, Thomas K. Alfred Chandler: ensaios para uma teoria histo´rica da grande empresa. Rio de Janeiro: Editora da FGV, 1998. 19 CHANDLER Jr., Alfred D. Strategy and structure: chapters in the history of the industrial enterprise. Cambridge: MIT Press, 1962; CHANDLER Jr., Alfred D. The visible hand: the managerial revolution in America business. Cambridge: 1977 and CHANDLER Jr., Alfred D. Scale and Scope: the dynamics of industrial capitalism. Cambridge: Belknap, Harvard University, 1994. 20 CHANDLER Jr., Alfred D. Scale and Scope: the dynamics of industrial capitalism. Cambridge: Belknap, Harvard University, 1994. 21 A more detailed discussion on transaction costs is presented in the chapter on new coordination mechanisms (Chap. 9), more specifically in the discussion on coordination by contracts. 22 Aspect discussed in Chap. 4.

7.5 Notes 23

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CHANDLER Jr., Alfred D. Strategy and structure: chapters in the history of the industrial enterprise. Cambridge: MIT Press, 1962 and CHANDLER Jr., Alfred D. Scale and Scope: the dynamics if industrial capitalism. Cambridge: Belknap, Harvard University, 1994. 24 An important influence on the discussions of entrepreneurship lies in Joseph Schumpeter (SCHUMPETER, Joseph A. A teoria do desenvolvimento econoˆmico. Colec¸a˜o Os Economistas. Sa˜o Paulo: Nova Cultural, 1988). Discussion on entrepreneurship as a subsidiary strategy can be seen in ANSOFF, H. Igor, DECLERCK, Roger P., HAYES, Robert L. Do planejamento estrate´gico a` administrac¸a˜o estrate´gica. Sa˜o Paulo: Atlas, 1981. p. 48 and ANSOFF, H. Igor. McDONNELL, Edward J. Implantando a administrac¸a˜o estrate´gia. Sa˜o Paulo: Atlas, 1993. 25 Aspect discussed in CHANDLER Jr., Alfred D. Scale and Scope: the dynamics if industrial capitalism. Cambridge: Belknap, Harvard University, 1994. 26 ANSOFF, H. Igor DECLERCK, Roger P., HAYES, Robert L. Do planejamento estrate´gico a` administrac¸a˜o estrate´gica. Sa˜o Paulo: Atlas, 1981. p. 48. 27 HAMMER, Michael. A esseˆncia da nova organizac¸a˜o. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 28 This is discussed in the chapter on environment, considering the typology presented by Philip Kotler and Gary Armstrong. There is an increasing shift in the focus of marketing management from the production concept and product concept to the marketing concept (KOTLER, Philip e ARMSTRONG, Gary. Princı´pios de marketing. Rio de Janeiro: Ltc Editora, 1999). 29 MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 30 Peter Drucker emphasizes that in any enterprise, the results do not come from inside the company but from external elements as the consumer, or client. (DRUCKER, Peter F. Management and the world’s work. Harvard Business Review, v. 66, n. 5, Sept-Oct, 1988, pp. 65–76). 31 Aspect discussed, for example, by Michael Hammer (HAMMER, Michael. A esseˆncia da nova organizac¸a˜o. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997). John K. Galbraith alerts for the fact that in the industrial society the "worksheets" would be more important than the market. (GALBRAITH, John Kenneth. O novo estado industrial. Sa˜o Paulo: Nova Cultural, 1988). 32 Aspect discussed in RIES, Al e TROUT, Jack. Marketing de guerra. Sa˜o Paulo: McGraw-Hill, 1986. 33 CREINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000; OHMAE, Kenichi. Voltando a` estrate´gia. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998, as well as HAMMER, Michael. A esseˆncia da nova organizac¸a˜o. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 34 CREINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000. Regis McKenna advocates a closer relationship between the firm and the costumer. This author is against traditional strategies based only on promotion (advertising and sales, mainly). He advocates that it is important not only to discover customer needs and meet them, but also keep a close dialogue with the customers so that the firm can better serve them. (MCKENNA, Regis. Marketing de relacionamento: estrate´gias bem-sucedidas para a era do cliente. Rio de Janeiro: Campus, 1992). 35 Aspects discussed in chapter on environment (Chap. 6) and in a previous note using Michael Hammer’s comments. 36 KOTLER, Philip e ARMSTRONG, Gary. Princı´pios de marketing. Rio de Janeiro: Ltc Editora Editora, 1999. 37 MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. p. 96.

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PORTER, Michael E. Estrate´gia Competitiva: te´cnicas para analise de industrias e da concorreˆncia. Rio de Janeiro: Campus 1986. 39 These concepts have economic origins and have been used in new models of strategic analysis as it can be seen in GHEMAWAT, Pankaj. Vantagem sustenta´vel. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998 and MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. 40 Despite his critical position on the subject, Henry Mintzberg mentions models more advanced and complex than the earlier ones concerning the preparation of Strategic Planning. 41 PRAHALAD, C. K. E HAMEL, Gary. A competeˆncia essencial da corporac¸a˜o. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 42 Ric Duques and Paul Gaske declare the necessity of reviving the entrepreneurial spirit (DUQUES, Ric e GASKE, Paul. A grande organizac¸a˜o do futuro. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997). 43 Considering the idea that entrepreneurial strategies absorb profits in order to allow the firm to advance into new markets or launch new products. (ANSOFF, H. Igor DECLERCK, Roger P., HAYES, Robert L. Do planejamento estrate´gico a` administrac¸a˜o estrate´gica. Sa˜o Paulo: Atlas, 1981). 44 It is important to mention the ISO certifications related to social and environmental responsibilities, such as ISO14000 and SA8000. 45 KOTLER, Philip. Competitividade e cara´ter cı´vico. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 46 Philip Kotler offers several examples on levels regarding the social concerns of the firms (KOTLER, Philip. Competitividade e cara´ter cı´vico. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997). 47 Fact alerted in PARSTON, Greg. Produzindo resultados sociais. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 48 LEVITT, Theodore. A globalizac¸a˜o dos mercados. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998 and OHMAE, Kenichi. Gerenciando em um mundo sem fronteiras. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 49 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. 50 TOMASKO, Robert M. Downsizing: reformulando e redimensionando sua empresa para o futuro. Sa˜o Paulo: Makron books, 1992. 51 According to John Naisbitt, Jack Welch would be one of the proponents of this strategy (NAISBITT, John. O paradoxo global. Rio de Janeiro: Campus, 1994). Some mechanisms to put such strategy in practice can be seen in DUQUES, Ric e GASKE, Paul. A grande organizac¸a˜o do futuro. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 52 Aspect discussed in Chap. 4 especially on the Simple Structure. 53 The definition of the firm’s business relates to the definition of a customer’s need that the firm meets according to Theodore Levitt (LEVITT, Theodore. Miopia em marketing. Colec¸a˜o Harvard de Administrac¸a˜o, vol. 1. Sa˜o Paulo: Nova Cultural, 1986). On the other hand, Henry Mintzberg criticizes such concept (MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000).

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QUINN, James Brian e HILMER, Frederick G. Esseˆncia competitiva e terceirizac¸a˜o estrate´gica. In: MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. p. 72. 55 QUINN, James Brian e HILMER, Frederick G. Esseˆncia competitiva e terceirizac¸a˜o estrate´gica. In: MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. 56 CHANDLER Jr., Alfred D. A lo´gica duradoura do sucesso industrial. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 57 CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001. 58 CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001. p. 178. 59 Interesting article approaches the subject in some industries. See: PADUAN, Roberta. Grande e´ Bonito. Revista Exame, 29/06/2003. 60 BOWERSOX, Donald J. Os benefı´cios estrate´gicos das alianc¸as logı´sticas. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998; HAKANA, Martin E. HAWKINS, Bill. Organizando para a vito´ria contı´nua. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997; ASHKENAS, Ron. A roupa nova da organizac¸a˜o. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997; BLEEKE, Joel e ERNEST, David. Colaborando para competir. In: MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. 61 This aspect is better discussed in the chapter on coordination mechanisms (Chap. 9), more specifically in the discussion on coordination by contracts. Such subject is discussed for long time in organizational studies as it can be seen in, for example, PERROW. Charles. Sociologia de las organizaciones. Espan˜a: McGrall-Hill, 1991. 62 STALK Jr, George. Tempo: a pro´xima fonte de vantagem competitiva. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 63 HAMMER, Michael e CHAMPY, James. Reengenharia: revolucionando a empresa. Rio de Janeiro: Campos, 1993. 64 McFARLAN, f. Warren. A tecnologia da informac¸a˜o muda a sua maneira de competir. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998 and HANAKA, Martin E; HAWKINS, Bill. Organizando para a vito´ria contı´nua. In: THE PETER DRUCKER FOUNDATION. A organizac¸a˜o do futuro: como preparar hoje as empresas de amanha˜. Sa˜o Paulo: Futura, 1997. 65 Several authors discuss the subject, as for example ULRICH, Dave. Os campeo˜es de recursos humanos. Sa˜o Paulo: Futura, 1998. 66 Wandeley Codo discusses three recent movements that tend to replace earlier management models: quality, participation and mental health (CODO, Wanderley. Qualidade, participac¸a˜o e sau´de mental: muitos impasses e algumas saı´das para o trabalho no final do se´culo. In: DAVEL, Eduardo e VASCONCELOS, joa˜o (org.) Recursos Humanos e subjetividade. Petro´polis: Vozes, 1995). 67 GOOLD, Michael e CAMPBELL, Andrew. As melhores maneiras de formular estrate´gias. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998; ANDREWS, Kenneth R. A responsabilidade dos diretores pela estrate´gia corporativa. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998; DRUCKER, Peter. F. A corporac¸a˜o sobrevivera´? Revista Exame, 18/05/2003.The concept of strategic management is also a reference here. The concept of corporate governance also supports the idea of shared responsibility in the making of the major decisions in organizations. In this case, the firm’s decisions have to consider not only the shareholders but also other stakeholders in

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society (social responsibility). (LODI, Joa˜o Bosco. Governanc¸a Corporativa: o governo da empresa e o conselho de administrac¸a˜o. Rio de Janeiro: Elsevier, 2000; STEINBERG, Herbert e HLLQVIST, Bengt. A dimensa˜o humana da Governanc¸a Corporativa: pessoas criam as melhores e piores pra´ticas. Sa˜o Paulo: Editora Gente, 2003). 68 MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000 and MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991.

Part III

Internal Changes

Chapter 8

New Organizational Possibilities

Environmental conditions and the kinds of automation that prevailed in the past together with traditional strategies led to the emergence of organizational structures that are so well systematized in Henry Mintzberg’s model of basic configurations. Among such configurations, emphasis may be given to the Machine Bureaucracy and its variation, the Divisionalized Form, as the formats that were of extreme importance in society, characterizing, along the way, the so-called Industrial Society. However, in view of the changes in automation technology, in the environment, and in the organizational strategy as outlined in the previous chapters, organizational changes have occurred and are discussed by several authors as new management technologies, new structural possibilities, new change models and new management models. And given the emergence of such new organizational possibilities, the Machine Bureaucracy may be questioned as a model for the large companies, whether industrial or service-oriented firms.1 This chapter thus presents a brief description of these new organizational possibilities once some of them become part of or are utilized in firms that use the structure based on the Automated Bureaucracy, while others have a direct relationship with such new organizational format. Initially, however, it is presented some organizational proposals that have caused some organizational modifications in large companies, but not to the point of substantially changing their formats based on the machine bureaucratic structure. Such modifications are considered here as antecedents of the new organizational possibilities.

8.1

Antecedents of the New Organizational Possibilities

Despite being defended by many as the ideal organization model for large mass production companies, the machine bureaucratic structure has been criticized since its emergence. Various scholars have censured its extreme concern with the means, its harmful centralization of decision, its several problems in relation to human aspects, and its lack of flexibility, among others. Due to these criticisms, several N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_8, # Springer-Verlag Berlin Heidelberg 2012

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proposals have emerged, notably those of greater attention to the goals and the decentralization of decisions, the Quality of Work Life, the work in teams, and the use of matrix structures and the interventions based on Organizational Development.

8.1.1

Management by Objectives

Management by Objectives (MBO) had Peter F. Drucker2 as its major exponent who, in the 1950s, presented a critique of models of management that were based only on the bureaucratic patterns. Drucker saw the excessive concern among managers with the means, or the process, and not with the organizational goals as one of the biggest problems within firms. He stated that three “forces” contributed to this: specialized work, hierarchy, and the differences of perspectives among managers. Drucker prescribes, as a solution, that the managers at any level should know the organizational objectives and their duties in achieving these objectives. Thus, they could manage based on such results (Fig. 8.1). Despite being much criticized for its emphasis on control based only on results, without taking other organizational aspects into account,3 MBO has undoubtedly had great influence on management practices. It can be considered, for example, one of the forerunners of the modern forms of management based on results, as well as of Strategic Planning and Strategic Management. Moreover, MBO is used as a reference in the development of performance evaluation tools that are based on results.4

8.1.2

Strategic Business Units

Strategic Business Units (SBU) constitute a new structural possibility developed mainly in the 1960s onward as an alternative to the traditional grouping by functions, and even by divisions.5 H. Igor Ansoff6 argued that the complexity attained by many companies, with a wide variety of products and operations in many markets, led them to engage in different businesses. As a result, many organizations had difficulties in seeing these Traditional management problems

Solutions from the Management by Objectives

Excessive concern with the means due to: - Specialized work; - Hierarchy; - Differences of perspectives among managers.

Managers at any level should know: - Organizational objectives; - Their duties in achieving these objectives.

Fig. 8.1 Management by Objectives

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105

products and markets clearly, in managing them strategically, and in verifying those that had better or worse returns. By using the SBU concept it is placed in the various units of a firm the responsibility not only for operational or tactical decisions, but also for strategic decisions. These units, therefore, should be responsible for analyzing the environment and defining the strategies in their respective areas of operation, also known as the Strategic Business Areas (SBA). Like others, this concept has spread and has been used by several firms,7 notwithstanding the criticism of many of its basic principles, especially concerning the dangers of too much decentralization.8

8.1.3

Work in Teams and Parallel Organizations

Due to the limited flexibility of by bureaucratic structures, one organizational practice that has gained great importance is the use of work in teams, whether temporary (group-task) or permanent (parallel organizations). Basically, in such teams, a group of people, often from different areas of a company, become involved in solving problems and in presenting proposals for change.9 Interconnecting functions among departments and innovation are the main reasons for the use of this new structural possibility.10 Nowadays, employing such teams is usual in many firms, and their principles are incorporated into other more recent managerial technologies and methods.

8.1.4

Quality of Work Life

Quality of Work Life (QWL) can be considered a great movement that has taken place in Europe and the United States, mainly from the 1970s on, which attempts to reduce turnover and absenteeism rates as well as increase productivity through workplace improvements. The development of theories of work motivation and satisfaction as well as the various social pressures that emerged during the mentioned period are often cited as the origins of such movement.11 In practice, QWL features various techniques such as job enlargement and enrichment as well as the creation of semi-autonomous work groups. In addition, it has led to some improvements that are extrinsic to the worker’s activities, such as better pays and melioration in security and in social environment.12 Despite its limited application when compared with other organizational technologies, QWL has generated powerful models of organizational monitoring and intervention,13 as well as the construction of production plants using several of its assumptions.14 Until now, it has led to interesting researches and offered support for interventions.15

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8 New Organizational Possibilities

Organizational Development

Similar to the previous technology, Organizational Development (OD) is considered a great movement that has significantly influenced bureaucratic organizations toward achieving greater flexibility and a better utilization of human factors.16 It has received significant theoretical influences and therefore includes the most diverse elements in its possible concepts. In general, however, it may be noted that Organizational Development emphasizes group works and the development of individuals at work, and it is grounded on humanistic values.17 Stephen Robbins points out that Organizational Development is based on paradigms of human and organizational growth, collaborative and participatory processes, and on a questioning “spirit”. It uses techniques such as sensitivity training, survey feedback approach, process consultation, team building, intergroup development and appreciative inquiry.18 It can be said that like the practices related to work in teams and QWL, Organizational Development concepts and actions are incorporated today in modern business practices and in several new organizational technologies.

8.1.6

Matrix Structures

Traditionally, bureaucratic organizations have kept relatively simple ways of grouping (departmentalization) in their structures, whether based on functions (finance, production, research, marketing, etc.), divisions (e.g., product or geographical area.), or others. By adopting these types of departmentalization, the firms have followed the unity of command principle, as defended by Henri Fayol.19 Alternatively, however, a mixed way of grouping has been developed by some organizations in response to specific situations. Called matrix structure, this mixed way of grouping breaks with the unity of command principle by placing workers in a dual supervision (a functional manager plus a project manager, for example).20 For some time, much attention was given to this way of grouping, and some defended this concept as a more advanced way of structuring departments, mostly at the operating level. However, it should be noted that the matrix is a way of grouping typically used in Adhocracies.21 Such practice in mass production companies may be questioned or, at least, of limited use.

8.1.7

Strategic Management

The idea of Strategic Management was conceived mainly from Strategic Planning works. Two main reasons can be given for the development and application of this

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Problems of the traditional Strategic Planning

Solutions from the Strategic Management

- Limitations of the strategy apex in knowing all the changes, the dynamism, and the complexities of the organization and the environment in which it operates - Difficulty of implementing Strategic Planning due to several reasons, specially the resistance of individuals in the organization

- Combines planning and management in a single process. - Lower levels are summoned to participate in the development of the Strategic Planning - Managers of lower levels should undertake their own planning in accordance with it

Fig. 8.2 Strategic Planning and Strategic Management

concept. First, the limitations of the strategy apex, responsible for preparing the Strategic Planning, in knowing all the changes, the dynamism, and the complexities of the organization and the environment in which it operates. Second, the difficulty of implementing Strategic Planning due to several reasons, specially the resistance of individuals in the organization.22 By using Strategic Management, the organization combines planning and management in a single process, seeking to get the various organizational levels involved in the planning and sharing responsibility for its implementation.23 In practical terms, the lower levels are summoned to participate in the development of the Strategic Planning of the organization and then to undertake their own planning in accordance with it (Fig. 8.2). Similar to other management concepts, Strategic Management is currently well incorporated in organizational practices and its principles are widely applied.

8.2

New Management Technologies and Models, New Structure Possibilities and Forms of Change Management

With environmental changes exerting increasing influence on firms, and the technological and strategic changes being more and more employed, doubts over the use of structures based on the machine bureaucratic format in organizations have intensified. As a result, the above mentioned innovations have not been sufficient to meet the new challenges. Therefore, new organizational possibilities have emerged, known often as new management technologies and models, new structural possibilities and new forms of change management. Notably, among them, there are Total Quality Management, lean production, the Reengineering and outsourcing movement, network organizations, the learning organization, the defense of entrepreneurship movement, Strategic Management of People, competency management, empowerment, and downsizing.

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8.2.1

8 New Organizational Possibilities

Total Quality Management

Total Quality Management (TQM), which is mainly based on Japanese management methods, has spread to the Western World in recent decades. It presents significant differences from the traditional machine bureaucratic forms of management. In terms of strategy, among others, there is a strong orientation towards client’s satisfaction. In operational terms, it praises the involvement of all workers and departments in the implementation of such ends. In addition, in conducting the said strategy and the employees’ participation, it applies the kaizen, a Japanese cultural principle that advocates the continuous pursuit of improvement in processes, products, and their quality.24 It is worth emphasizing that in TQM the resulting changes are based on incrementalism and participation. In the first aspect, there is the continuous search for innovation (kaizen) by adopting small changes over time. In the second, there is the involvement of the various organizational levels in such incrementalism, including the formation of several total quality groups.25 Yet with regard to the participation and the use of group works, it is interesting to note the similarities between TQM and some western management technologies, such as Organizational Development, that try to escape traditional and bureaucratic forms of management.26 Both models, for example, emphasize the search for innovation as well as to lessen resistance of the participants towards changes. Despite some eastern roots, however, which can be seen in the influence of Japanese cultural peculiarities, and despite the differences in strategic and operational terms from the traditional forms of management, some western classical management and bureaucratic principles may be noticed in TQM, such as the search for quality in products and processes and the widespread use of standardized procedures.27 Some criticism of this management model may mostly be made in relation to the difficulty or even the infeasibility of its transfer to western workplaces that have very different values and culture from the East. In addition, it can be also criticized the “fad” that followed its appearance once many has defended the use of TQM unconditionally, regardless of the reality of the organization treated28 (Table 8.1).

8.2.2

Lean Production

Also of Japanese influence, it has recently emerged a form of work organization that breaks in several respects with the principles of management linked to the Machine Bureaucracy. Often called Toyotism, lean production aims at meeting the needs of mass production firms that seek to increase their productivity and their flexibility through a better match between production and quality as well as the elimination of the “slacks” derived from the bureaucratic structures.

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Table 8.1 Basic aspects of Total Quality Management Similarities with classical and Differences with classical and bureaucratic forms of bureaucratic forms of management management Strategic Strategic – Search for quality in products and – Strong orientation towards client’s satisfaction processes Operational Operational – Widespread use of standardized – Involvement of all workers and departments in the procedures implementation of the strategy In general – The kaizen - continuous pursuit of improvement in processes, products, and their quality

In the bureaucratic types of production, mainly in the machine type, there have been slacks between the stages of operations so that such stages were better set. These slacks could be in the form of intermediate stocks and reserve labor, among others. In order to reduce and even get rid of these slacks, the lean production presents a production process (and a structure) that requires better employee’s performance in terms of productivity and quality, based mainly on the variety of functions, or multifunctionality (e.g. to produce, to check, and to take care of the maintenance of equipments). Organizational novelties such as just-in-time, kanban, among others, are technologies used in this new model of work organization. Moreover, the firms that employ lean production generally make use of some practices also utilized in TQM, such as quality improving groups and even the principle of kaizen. Additionally, this type of production is often accompanied by high automation and a reduction of hierarchical levels (downsizing). James Womack, Daniel Jones and Daniel Roos,29 important exponents in the description of this form of work organization, point out the main features of the lean production model, specifically (1) decisions being made at the low levels; (2) the use of multifunctional teams responsible for several tasks, including quality checking; (3) production in small batches from the requests or orders (just-intime); and (4) an external supply system in which suppliers are treated as partners in order to assure commitment and loyalty.30 Thus, some principles of the Machine Bureaucracy, such as specialization and centralization, are questioned in Japanese models, either in lean production or in TQM, which may lead to various consequences. James Womack, Daniel Jones and Daniel Roos highlight the increase in productivity as well as better quality and flexibility. Moreover, these authors declare that the lean production model allows a greater commitment and satisfaction of workers. It may be gathered from their statements that it would be a form of work organization more appropriate to human nature that pursues responsibility, competition, and challenges. On the other hand, several criticisms on this form of work organization can be made, especially regarding the intensification of human labor under the argument of making better use of labor.31

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8 New Organizational Possibilities

Reengineering

Aiming to attain the same objectives of the earlier practice, such as an increase in productivity, quality and flexibility, but through very different paths, Reengineering has emerged. The organizational models of Japanese influence and the Organizational Development adopt small or incremental changes, in order to achieve better assimilation by the organization and gain the workers’ commitment. Due to various factors, however, especially those related to the economy, new technological possibilities, and western cultural characteristics; some companies have made use of changes characterized by speed, radicalism, and imposition to reach substantial alterations in work organization. A basis for discussion of Reengineering can be seen in the works of Michael Hammer and James Champy,32 who defend this change model. Broadly speaking, these authors declare the invalidity of organizational models based on specialization, support rapid and complete changes in production processes, and defend the intensive use of information technology. Specifically for information technology, they advocate its use not only to automate the existing processes and procedures, but to modify the production processes as well. In practical terms, some elements should be observed in the implementation of Reengineering, such as organization based on results (to organize around outcomes), the various tasks gathered and assigned to a person or a team, major autonomy and responsibility given to the performers, and the use of automatic controls.33 According to Michael Hammer and James Champy,34 Reengineering would lead to certain changes that could be: from functional departments to process teams, from simple tasks to multidimensional ones, from controlled persons to empowered ones, from training to education, from supervisor managers to coaches, from hierarchy structures to flattened arrangements, and from controller executives to leaders. In a subsequent work, Michael Hammer35 discusses some effects of Reengineering for workers. These consequences include the following: the transition from worker to professional; the emergence of a new form of work organization based not on task, but on results or on the process, resulting in significant gains for the individuals; that the worker starts to carry out broad and complex tasks, being required to understand and assimilate all issues related to the organization, such as the business goals, the customers’ needs, and the sequences of processes; the job becomes more challenging and presents more autonomy, providing the worker authority to make decisions, and entailing more responsibility for the results; requirement of more qualification from the employee as well as a change in his attitude toward the work; a greater satisfaction and remuneration based mostly on results as a compensation. As with other management practices, Reengineering has not escaped criticisms, mainly due to its radicalism, authoritarian aspect, intensification of work, its lack of

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concern with the firm’s social aspects, its disregard for previous studies and research on organizations, technological determinism, and even the high cost of its implementation.36

8.2.4

Outsourcing

As a direct result of adopting the strategy of concentrating on its core business, a firm transfers to others – in other words, it outsources – some activities that it otherwise would have undertaken. This transfer of activities would bring some advantages concerning gains in specialization, such as higher productivity and quality, and in addition the possibility of flexibility within the business.37 One of the major difficulties in the application of outsourcing would be the determination of the activities to be outsourced. What can be seen, in practical terms, is the outsourcing of non-central activities, or those not related to the firm’s main production process, the outsourcing of support activities and even the outsourcing of back-office activities, i.e., those that do not involve contact with clients. Transport, security, food, cleaning and telephone services as well as training, maintenance and development of software are some examples. However, the outsourcing of some activities that could be seen as typical and linked to the main production process may happen. This fact occurs when the firm has no competitive differentials in such activities or products. The outsourcing of several production phases that are carried out frequently by automotive manufacturers is an example.38 It is worth emphasizing that besides the search for competitive advantages, other circumstances contribute to a firm’s decision to outsource: the possibility of finding suppliers, the ease of controlling the supply through information technology, and even an environment of trust and loyalty between the companies involved.

8.2.5

Network Organizations

In simple terms, a network organization can be defined as a system composed of independent firms that carry out specific functions but present an interdependence or complementarity among them.39 However, the discussion of network organizations needs further clarification, particularly with regard to their origin and the level of structure analysis. As to their origin, the birth of network organizations can basically be seen as stemming from both the outsourcing movement and the formation of alliances between different companies.40 From the first stem the firm can keep a large number of suppliers and at the same time be itself a supplier of other firms, resulting in the creation of an organization that consists of several independent firms. The existence of a principal mother company centralizing the major decisions can be

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also seen in this type of organization. From the second stem, a network organization emerges from strategic alliances in which firms build relationships in pursuit of common objectives. Often seen as partnerships, such alliances can be forged between firms with different businesses or even between competitors that may join forces in a particular situation to achieve common goals, such as the development of a new technology, the entry into new markets, and the reduction in production costs.41 With regard to the level of structure analysis, it should be pointed out that the network organization can be seen as a large system that includes smaller independent systems (or subsystems). Thus, a separate analysis of the smaller systems (units) and of the large system (the net) can be made.42 In the unit-level analysis, firms with different structures can be part of the same network, for example, bureaucracies, adhocracies, or small businesses with simple structures. In the network analysis, the discussions seem to emphasize two aspects: contractual relationships and trust relationships. Thomas Bateman, for example, not disregarding the confidence that should exist in relations between firms, states that the network members are brought together by contracts and are paid by the results obtained (market mechanisms), i.e., they are not brought together by hierarchy and authority.43 Marc S. Gerstein, by using the concept of organizational architecture and emphasizing informal aspects, comments on the importance of interpersonal relationships, collaboration, and trust in the formation of a network organization. For Marc Gerstein, it is a very difficult structure to construct and to maintain, since its development takes a long time as its success depends very much on people and a complex set of interpersonal relationships created over time.44

8.2.6

Learning Organizations

In view of the demands for an innovative and flexible organization and based on strategies aimed at the development of human resources, or for a better utilization of the so-called human capital, the ideas related to the concept of learning organizations have gained strength. Briefly, the concept of learning organization is linked to the notion that an organization is able to obtain knowledge and changes itself to take advantage of such knowledge, including the acquisition of new knowledge.45 Learning organizations can also be seen as a result of a large theoretical construction forged by supporters that praise human aspects beyond technical aspects in firms as well as scholars of organizational change. Thus, despite its complexity and certain abstraction, the concept has gained wide acceptance considering the long theoretical path to its development.46 In practical terms, the goal is that the organization has the staff engaged in the acquisition of internal or external knowledge, either related to success or to failure, in search of personal and organizational development. According to Stuart Crainer, in a learning organization, the action of learning is continuous, affecting and involving all members of the organization.47

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Despite such wide acceptance, however, doubts have arisen with regard to its application and its limitations. In the first aspect, it should be emphasized that putting the concept into operation is not simple.48 The definition of learning organization itself goes in the opposite direction to the development of general models of implementation.49 In the second aspect, in addition to issues of time and costs, it can be highlighted that, from the incremental decisions that arise with the use of the learning organization principles, the firm would take the risk of being deprived of a unified strategy, losing an appropriate existing strategy or even being led to use a wrong strategy.50

8.2.7

Entrepreneurship

Although many consider entrepreneurial capability as one of the most important aspects for the development of capitalism,51 entrepreneurship had long been relegated to a secondary place in organizational studies and even in organizational practices, considering the strengthening of the large bureaucratic companies along the twentieth century.52 Nowadays, however, due to various environmental changes, different forms of management require that entrepreneurial behavior become important again.53 Thus, an increasing number of studies and research on this matter can be found leading to current discussions on the following aspects: areas of actuation, possible types, and entrepreneurial skills. With respect to areas of actuation, entrepreneurship expands especially in processes subject to outsourcing, in new businesses and in the growth of personalized services. In the first case, the outsourcing movement presents opportunities not only for large organizations, but also for individuals or groups that wish to provide services to firms that outsource part of their activities. In the second, new businesses emerge, especially those related to new types of technology, and the development of information systems and software (computer programs) is an example of these new businesses that strengthen entrepreneurship. For the third case, it should be emphasized that given the cultural and social changes discussed in Chap. 6, the customers are becoming prone to a more personalized consumption. To meet such demand today, opportunities for the new entrepreneurs arise. As for the types of entrepreneurship, in addition to the traditional kind – independent entrepreneurs – there are novel types such as entrepreneurs supported by firms and the concept of intrapreneurship.54 The traditional kind includes the people who, for various reasons – such as dissatisfaction with work in companies, social exclusion, necessity of independence and challenge – venture into an enterprise. In the second case, there are those who, supported by the firm in which they used to work for, succeed in running an own account business. The support from the main firm can occur, for example, in an economic sector or business in which the firm is interested but is not inclined to directly perform or invest much. Experience and professional contacts can also be offered by the firm as support.55 In the case of

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Table 8.2 Aspects related to the current strengthening of entrepreneurship Areas of actuation Possible types Entrepreneurial skills Outsourcing Independent entrepreneurs Behavioral aspects New businesses Entrepreneurs supported by firms Business start-up technology (business plan) Personalized services Intrapreneurship Traditional management (to maintain the business)

intrapreneuship (the internal entrepreneurship), it should pointed out that, more than just a possibility, entrepreneurial behavior is becoming almost a requirement to get a job within a firm. This concept is in line with the current tendency to search for pro-active and committed workers who are able to propose changes and innovations aimed at the survival and development of the organization.56 With regard to entrepreneurial skills, the studies nowadays comprise three main trends57: behavioral aspects, business start-up technology, and technology to conduct a business. In the first aspect, there are studies of attitudinal and behavioral changes aimed at developing capabilities related to innovation. In the second, tools to support the creation of businesses are discussed, with emphasis on the so-called business plan. In the third, traditional management aspects are the focus, considering that, after setting up a business, it is necessary to manage it and often the entrepreneur does not have such ability (Table 8.2). Finally, it is important pointing out that the growth of entrepreneurship is often justified by issues related to unemployment. In regions where the job opportunities decrease, mostly due to automation, entrepreneurship presents an alternative. In this respect, however, it is important also to emphasize that entrepreneurship carries limitations in the creation of employment and in increasing the demand in society.

8.2.8

Human Resource Strategic Management

As for human resource management in the Machine Bureaucracy, the existence of departments or sectors specialized in carrying out tasks to support other managers in the organization could be widely seen in large companies. These departments were responsible for such activities that, for several reasons, used to be kept internally in the firm, and not acquired from the market.58 As examples, activities such as recruitment and selection, salary management, and training can be cited. To line managers, regarding human resources management, functions related mainly to command and work control were assigned. Needless to say that in this work place, human resource management was considered of secondary importance, showing little influence on strategic decisions. As a result of the changes that have occurred in the environment as well as in organizational strategies and technologies, as described in this book, and even considering the new organizational possibilities discussed in this chapter, some

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Table 8.3 Human resources management and human resources strategic management Human Resources Management Human Resources Strategic Management Line managers Activities of command and work A more involved participation in the control management of people, actuating in activities earlier assigned to support areas Departments of Carry out tasks to support other Outsourcing of non-essential human resources managers such as recruitment activities and selection, management of Automation of the routine activities jobs and wages, training, etc. Internal advising or consulting to the line managers considering their new activities

changes in functions and roles of the various professionals within a firm with respect to human resource management are now required. From line managers, it is expected a more involved participation in the administration of people. In practical terms, beyond the traditional functions of command and control, active participation in the processes of recruitment and selection, training, monitoring satisfaction, and obtaining functional involvement and commitment is presumed. For the traditional departments of human resources, the main changes are the automation of the routine activities, outsourcing of non-essential activities, and the emergence of functions related to internal advising or consulting to the line managers considering their new activities in the management of people59 (Table 8.3).

8.2.9

Competency Management

Given the changes in worker performance, doubts have been raised regarding the traditional forms of work education.60 In general, such education has always been used to be guided by the assimilation of concepts pedagogy and by training practices. In the first case, related mostly to schools or specialized centers, a great gap between what is learned in such institutions and what is actually required within the new work reality has been noted. In the second, it has been observed that many of the traditional training practices, offered by firms for particular performances, found no more correspondence in present jobs that are increasingly multifunctional and require “reflexibility.” Thus, these two forms of workforce education would not correspond to the current needs of organizations and employees as well as to the needs of society as a whole.61 As Philippe Zarifian points out, in the new organizational reality, the worker has to assume new responsibilities and a greater “reflexibility” at work, that is, he must be always questioning and showing a critical view in a constant search of learning.62 In brief, it’s pursued a workforce education that is able to effectively respond to the new realities of the organizations, combining formal education or learning with learning at work.

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Within this concept, the discussion of competencies has drawn increased attention in the world of the organizations in recent years, and firms have shown constant interest in practices aimed at preparing people for the new forms of work. Actually, this interest is not limited only to firms. Governments, unions, and other organizations have also shown interest and contributed to the generation of competencies, since this element is today considered of crucial importance not only for organizations, but also for jobs generation and economic and social development.63 Similar to some concepts discussed above, however, there is certain difficulty in making the management of competencies work. The basis of the concept itself, which requires that its validity is realized and checked in worker practice, makes difficult the construction of general models, like the concept of learning organizations. Thus, despite its wide theoretical acceptance, there are problems in implementing the concept in organizations.

8.2.10 Empowerment Considering the new forms of work organization discussed in this chapter and mostly the necessity of employees to have some autonomy in their work, concepts such as empowerment have gained acceptance. The concept of empowerment calls upon managers to transfer part of their authority and responsibility to subordinates, thus breaking with traditional forms of management based only on command and control. According to supporters of empowerment, two major comments on this concept should be highlighted.64 First, empowerment is not just the application of traditional practices related to delegation of tasks. Second, as Peter Barth points out, it is not just about giving power to people, but rather about allowing people to make use of the power, knowledge, skills, and motivation they already have.65 Thus, according to Stuart Crainer, through empowerment it is pursued the elimination of restrictions that prevent a worker doing his job more efficiently.66 Despite the existence of certain models of implementation of this concept, its importance in practice is linked more to a management policy in which there is an attempt that the managers, who are accustomed to traditional forms of management based on command and control, change their leadership by offering better performance conditions to the workers within the new organizational realities

8.2.11 Downsizing and the Flattening of Structures As a result of processes such as Reengineering, outsourcing, IT-based automation, and lean production, structural changes have occurred toward reducing the number of positions, departments, and even the hierarchical levels. This organizational

8.3 Final Comments on the New Organizational Possibilities Table 8.4 Practices of the downsizing Aimed at workers who remain in the firm Inplacement Retraining Personal support and advice

117

Aimed at workers who do not remain in the firm Outplacement Voluntary separation incentives Retirement incentives Support for new business

phenomenon, often known as downsizing, has recently been seen in many firms, and consequently a large number of layoffs has been noticed as its immediate result. In fact, large dismissals may happen in firms at any time as a result of various factors such as economic crises and decrease in sales. However, as these massive layoffs have become common due to the adjustment of most firms to new production realities, several studies have attempted to understand their causes, describe their problems as well as help to manage the process as a whole. In this last aspect, problems caused by massive layoffs would be related not only to the dismissed workers, but also to those who remain in the firm. Regarding this fact, the “managed downsizing,”67 which takes dismissal into account, has drawn the interest and attention of organizations. Some practices within this new organizational reality can be cited: outplacement, the support for new business, voluntary separation incentives, and retirement incentives. Furthermore, there are still various actions aimed at those workers who remain in the firm, such as inplacement, retraining, and personal support and advice. The latter actions are important considering that dismissal processes can bring about perceptions of injustice and insecurity for those who remain in the firm68 (Table 8.4).

8.3

Final Comments on the New Organizational Possibilities

The new organizational possibilities, either the new management models, the change models, or yet the new types of structure and organization of work, presented in this chapter may seem bewildering to some in terms of concepts and mainly in terms of practical application. It happens that given the recent changes that have occurred in society and in the world of organizations, studies and proposals have gone diverse directions. Indeed, the new organizational possibilities constitute descriptive and prescriptive models that attempt to understand the new organizational realities and provide means to new forms of management. Some of the concepts discussed here show many common aspects in practice as, for example, TQM and lean production. Some of them present complementarity, such as management of competency and empowerment. And others, yet, are somehow contrastive, such as TQM and Reengineering. Similarly, there are supporters and critics for each of the possibilities discussed here. Notwithstanding, most of them are truly relevant and show empirical validity, and thus, should not be neglected. On the contrary, they are the basis for the understanding of new types of organization.

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In Chap. 10, where the Automated Bureaucracy is characterized there are many mentions of the new possibilities discussed herein. Moreover, an accommodation between them is pursued, and explanations are made on how such possibilities are being used in this new organizational format. Before that, however, it is necessary to analyze one of the key aspects to understand the Automated Bureaucracy: the new coordination mechanisms that have emerged in organizational means.

8.4 1

Notes

Bringing together these different phenomena on a single name (new organizational possibilities), and even using the term "new" to practices that have been used for many years can be considered an error by many. However, it is emphasized that, as for new possibilities, this chapter considered the various internal changes outlined in the management literature, which have arisen as a result of strategic, technological and environmental changes pointed out in previous chapters. 2 DRUCKER, Peter F. Pra´tica da administrac¸a˜o de empresas. Sa˜o Paulo: Pioneira, 1981. 3 LEVINSON, H. Administrac¸a˜o pelos objetivos de quem? Colec¸a˜o Harvard de Administrac¸a˜o. Nova Cultura, 1986. 4 For performance evaluation based on results, see, for example, WETHER Jr., William B., DAVIS, Keith. Administrac¸a˜o de recursos humanos. Sa˜o Paulo McGraw-Hill, 1983. 5 Grouping by functions is used typically in Machine Bureaucracies. Grouping by divisions is used in Divisionalized Form (see Chap. 4). 6 ANSOFF, H. Igor. McDONNELL, Edward J. Implantando a administrac¸a˜o estrate´gia sa˜o Paulo: Atlas 1993. 7 Research conducted in Brazil in 123 large companies shows great use of this form of structure rather than functional departmentalization and divisional structure. (HOLLANDA, E. L. & MORAES, W. F. A. Perfil organizacional de grandes empresas privadas brasileiras: uma imposic¸a˜o do mercado? In: Anais Enanpad. Porto Alegre: Anpad, 1996). 8 Some criticisms can be seen in BARTLETT, Christopher A. e GHOSTAL, Sumantra. Use suas subsidia´rias para o alcance global. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 9 The discussion on groups and teams can be seen in many manuals of organizational behavior such as BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992. In addition to the studies of social psychology, the discussion on work in groups can be also seen in socio-technical approach (1950s), and its studies on semiautonomous groups being used in mining activities (BIAZZI Jr., Fabio. O trabalho e as organizac¸o˜es na perspectiva so´cio-te´cnica: a convenieˆncia e a viabilidade da implementac¸a˜o do enfoque so´cio-te´cnico nas empresas. Revista de Administrac¸a˜o de Empresas. Sa˜o Paulo, v. 34, n.1. pp. 30–37, jan./fev. 1994). Despite their different application purpose when compared to the semiautonomous groups studied through socio-technical approach, groups and teams are also used in bureaucracies. 10 MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 11 On origins and importance of QWL, see, for instance, HUSE, E., CUMMINGS, T. Organization development and change. Minnesota: West Publishing, 1985 and HACKMAN, J. R., e OLDHAM, G.R.. Work Redesign. Illinois: 1979. 12 Several models can be mentioned (WALTON, R. E. Quality of working life. What is it? Sloan Management Review. V. 15, n 1, pp. 11–21, 1973 and HACKMAN, J. R., e OLDHAM, G.R.. Work Redesign. Illinois: 1979). The semi-autonomous groups do not have the same functions

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of the teams described in the previous item. The teams are responsible for interconnection, innovation etc. The semi-autonomous groups are responsible for the production itself and were studied by the socio-technical approach in the 1950s. (BIAZZI Jr., Fabio. O trabalho e as organizac¸o˜es na perspectiva so´cio-te´cnica: a convenieˆncia e a viabilidade da implementac¸a˜o do enfoque so´cio-te´cnico nas empresas. Revista de Administrac¸a˜o de Empresas. Sa˜o Paulo, v. 34, n. 1. pp. 30–37, jan./fev. 1994). 13 Evolution of the concept and intervention models can be seen in NADLER, D. A. e LAWLER, E. E. Quality of work life: perspectives and directions. Organizational Dynamics. V. 11, nº 7, pp. 20–30, 1983. 14 Topeka, Kalmar e Tarrytown are some examples cited in literature (See: GUEST, Robert H. Quality of work life: learning from Tarrytown. Harvard Business Review. July–Aug, 1979, pp. 76–87). 15 Studies and research on QWL can be found until today. Eda Fernandes’ recent work examines the importance of monitoring QWL in Total Quality Management. Research conducted recently has found QWL principles being used in organizational practices related to organizational climate. (FERNANDES, E. Qualidade de vida no trabalho: como medir para melhorar. Salvador: Casa da Qualidade, 1996 and OLIVEIRA, N. Clima organizacional: discusso˜es metodolo´gicas da implantac¸a˜o de uma pesquisa no Banco do Brasil. Anais do Enanpad. Foz do Iguac¸u: Anpad, 1999). 16 BENNIS, W. Desenvolvimento organizacional. Sa˜o Paulo: Edgard Blucher, 1972; BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992; ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. 17 With respect to the influences mentioned, according to Edgar Schein, the OD suffered influences from Kurt Lewin’s model; systems, human relations and structuralist approaches; clinical, industrial and counseling psychology; and theories related to decision making, intergroup conflict, competition between groups, negotiation and power relations (SCHEIN, E. Psicologia organizacional. Rio de Janeiro: Prentice-Hall, 1982). 18 ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. 19 This is discussed in Chap. 3. 20 See, for instance, MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 21 MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 22 ANSOFF, H. Igor. McDONNELL, Edward J. Implantando a administrac¸a˜o estrate´gia. Sa˜o Paulo: Atlas 1993; TAVARES, Mauro Calixta. Gesta˜o estrate´gica. Sa˜o Paulo: Atlas, 2000 and BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. 23 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. 24 These principles can be seen in TQM’s classical authors and in manuals of management (see for instance DEMING, W. Edward. Qualidade: a revoluc¸a˜o da administrac¸a˜o. Rio de Janeiro: Marques-Saraiva, 1990 and BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998). 25 Quality control circles (QCC). 26 This aspect is emphasized in FLEURY, Afonso e FLEURY, Maria Tereza Leme. Aprendizagem e inovac¸a˜o organizacional: as experieˆncias de Japa˜o, Core´ia e Brasil. Sa˜o Paulo: Atlas, 1997. 27 Afonso and Maria Tereza Fleury discuss Western influences on TQM. Samuel Certo emphasizes the origin of TQM in America. Stuart Crainer emphasizes the importance of W. Edwards Deming and Joseph Juran in the birth of TQM (FLEURY, Afonso e FLEURY, Maria Tereza Leme. Aprendizagem e inovac¸a˜o organizacional: as experieˆncias de Japa˜o, Core´ia e Brasil. Sa˜o Paulo: Atlas, 1997; CERTO, Samuel C. Administrac¸a˜o moderna. Sa˜o Paulo: Prentice Hall,

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2003 and CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000). 28 FLEURY, Afonso e FLEURY, Maria Tereza Leme. Aprendizagem e inovac¸a˜o organizacional: as experieˆncias de Japa˜o, Core´ia e Brasil. Sa˜o Paulo: Atlas, 1997; WOOD, T. Fordismo, toyotismo e volvismo: os caminhos da indu´stria em busca do tempo perdido. In WOOD, T. (coord). Mudanc¸a organizacional. Sa˜o Paulo: Atlas, 2000; WOOD, T. e CALDAS, M P. Inovac¸o˜es gerenciais em ambientes turbulentos. In: WOOD, T. (coord). Mudanc¸a organizacional. Sa˜o Paulo: Atlas, 2000. 29 WOMACK, J. JONES, Daniel, ROOS, Daniel. A ma´quina que mudou o mundo. Rio de Janeiro: Campus, 1992. Other reference is STALK Jr, George. Tempo: a pro´xima fonte de vantagem competitiva. In: MONTGOMERY, Cynthia A. e PORTER, Michael E. Estrate´gia: a busca da vantagem competitiva. Rio de Janeiro: Campus, 1998. 30 In the lean production, groups are used not only in the improvement of quality and in the pursuit of innovation, but also in the performance the tasks. In many respects this kind of production is similar to the use of semi-autonomous groups studied by scholars of socio-technical approach and defended by the theoreticians of QWL and OD. This form of group-based production used in lean production is called, often, cell production, according to Thomas Bateman (BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 464). 31 Stuart Crainer criticizes the form the lean production is deployed in certain companies. He criticizes the concern just in the production increase and in the reduction of the workforce. Moreover, he points out that this type of work organization is not appropriate for certain companies and presents problems when it comes to innovation. (CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000). 32 HAMMER, Michael e CHAMPY, James. Reengenharia: revolucionando a empresa. Rio de Janeiro: Campos, 1993. 33 HAMMER, M. Ale´m da reengenharia: como organizac¸o˜es orientadas para processos esta˜o mudando nosso trabalho e nossas vidas. Rio de Janeiro: Campus, 1997. Only the aspects considered important for the analysis of work organization are cited here. 34 HAMMER, Michael e CHAMPY, James. Reengenharia: revolucionando a empresa. Rio de Janeiro: Campos, 1993. 35 HAMMER, M. Ale´m da reengenharia: como organizac¸o˜es orientadas para processos esta˜o mudando nosso trabalho e nossas vidas. Rio de Janeiro: Campus, 1997. 36 Criticisms on Reengineering can be seen in many authors such as CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000 and BJUR, W. e CARAVANTES, G. R. Reengenharia ou readministrac¸a˜o: do u´til e do fu´til nos processos de mudanc¸a. Porto Alegre: Age, 1995. 37 For advantages, disadvantages and problems related to outsourcing, see PAGNONCELLI, D. Terceirizac¸a˜o e parceirizac¸a˜o: estrate´gias para o sucesso empresarial. Rio de Janeiro: D. Pagnoncelli, 1993 and OLIVEIRA, Marco A. Terceirizac¸a˜o: estruturas e processos em xeque nas empresas. Sa˜o Paulo: Nobel, 1994. 38 Discussion on activities subjected to outsourcing can be seen in OLIVEIRA, Marco A. Terceirizac¸a˜o: estruturas e processos em xeque nas empresas. Sa˜o Paulo: Nobel, 1994. 39 The term varies depending on the emphasis and the author. Thomas Bateman, for instance, uses the term network organization, Manuel Castells, uses network enterprise and Charles Handy uses federal organization (BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998; CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001; HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996). 40 Manuel Castells states that the network enterprise has risen in the outsourcing promoted by a large company, without the existence of this large company, and also in the formation

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of strategic alliances (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001). 41 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 266; KILLING, Peter. E se o rival for um parceiro? In: HSM Management. nov./dez. 2002. pp. 133–136. 42 NADLER, David A. GERSTEIN, Marc S. SHAW, Robert B. Arquitetura organizacional. Rio de Janeiro: Campus, 1994. Manuel Castells also makes this distinction when he defines network enterprise as “that specific form of enterprise whose systems of means is constituted by the intersection of segments of autonomous systems of goals” (CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001. (p. 187 book in English)). 43 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. 44 GERSTEIN, Marc. S. Das burocracias mecaˆnicas a`s organizac¸o˜es em rede: uma viagem arquitetoˆnica. In NADLER, D. A. Arquitetura Organizacional: a chave para a mudanc¸a empresarial. Rio de Janeiro: Campus, 1994. Marco A. Oliveira also, in study on outsourcing, discusses this issue (OLIVEIRA, Marco A. Terceirizac¸a˜o: estruturas e processos em xeque nas empresas. Sa˜o Paulo: Nobel, 1994). 45 According to David Garvin, “a learning organization is an organization skilled at creating, acquiring, interpreting, transferring and retaining knowledge and purposefully modifying its behaviour to reflect new knowledge and insights” (GARVIN, D. A. Building a learning organization. Harvard Business Review, v. 71, n. 4, pp. 78–91, July/Aug. 1993). 46 Stuart Crainer presents comments on this aspect using quotations from Chris Argyris’s studies on learning to Peter Senge’s Learning Organization. Henry Mintzberg presents comments on antecedents of Learning Organization, considering the studies on incrementalism and Chris Argyris’ studies (CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000 and MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000). 47 CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000. 48 FLEURY, Afonso e FLEURY, Maria Tereza Leme. Aprendizagem e inovac¸a˜o organizacional: as experieˆncias de Japa˜o, Core´ia e Brasil. Sa˜o Paulo: Atlas, 1997. 49 SENGE, Peter M. A quinta disciplina: a arte e a pra´tica da organizac¸a˜o que aprende. Sa˜o Paulo: Editora Best Seller, 1998. 50 MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000. 51 This aspect is discussed by Joseph Schumpeter, and even by Max Weber considering the “capitalist spirit” (SCHUMPETER, Joseph A. A teoria do desenvolvimento econoˆmico. Colec¸a˜o Os Economistas. Sa˜o Paulo: Nova Cultural, 1988 and WEBER, Max. A e´tica protestante e o espı´rito capitalista. Sa˜o Paulo: Editora Martin Claret, 2002). 52 As discussed in the chapter on strategy, H. Ansoff points out the importance of entrepreneurial behavior for capitalism in the nineteenth century. For him, that was the period in which the modern company appeared. However, after this period, the entrepreneurial behavior has become secondary when compared with the competitive behavior. The companies engaged in competition, and sought to get profit from the environment through a process of exchange based on efficiency, enlarging the market actuation and offering better prices. Entrepreneurship became thus dominated by the competitive behavior. 53 This aspect is emphasized in ANSOFF, H. Igor DECLERCK, Roger P., HAYES, Robert L. Do planejamento estrate´gico a` administrac¸a˜o estrate´gica. Sa˜o Paulo: Atlas, 1981. 54 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 208 e 268. 55 BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 217.

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BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 268. 57 ˜ ES, Liliane de Oliveira. Empreendedorismo no currı´culo dos cursos de graduac¸a˜o GUIMARA e po´s-graduac¸a˜o em Administrac¸a˜o: ana´lise da organizac¸a˜o dida´tico-pedago´gica destas disciplinas em escolas de nego´cios norte-americanas. Anais Enanpad.Salvador: Anpad, 2002. 58 These reasons are discussed in the chapter on strategy, such as security of supply, economies of scope and, as Henry Mintzberg argues, the need of control. (MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995). 59 These new roles and functions related to Human Resource Management can be seen in many studies, including ULRICH, Dave. Os campeo˜es de recursos humanos. Sa˜o Paulo: Futura, 1998. 60 The term management by competences appears recurrently in the organizational literature. In this regard, it is important to emphasize that there is a difference between the managing by competence and the competency management, which is not often outlined in literature. Likewise, the discussion of competencies can occur in the individual or in the organizational level. In the latter case, the discussion is on the core or the essential competencies of the organization, often discussed in the context of strategy. The discussion on the competency management treats both the individual and organizational competencies. Regardless of that, in this part of the book it is emphasized the individual competencies, their generation and monitoring, which is related to the training and development and the performance evaluation, traditional functions of Human Resource Management. 61 ZARIFIAN, P. A gesta˜o da e pela competeˆncia In Semina´rio internacional: educac¸a˜o profissional, trabalho e competeˆncias. Rio de Janeiro: CIET, nov. – 1996 and BARATO, J. N. Competeˆncias essenciais e avaliac¸a˜o do ensino universita´rio. Brası´lia: Universidade de Brası´lia. Mimeo, 1998). 62 ZARIFIAN, P. A gesta˜o da e pela competeˆncia In Semina´rio internacional: educac¸a˜o profissional, trabalho e competeˆncias. Rio de Janeiro: CIET, nov. – 1996. 63 In generating competencies, differences between countries can be also seen. In some countries there is greater action by governments, in other, by private organizations, and so on. Each country tries to adapt the concept to its reality (see: DUCCI, M. A. El enfoque de competencia laboral en la perspectiva internacional. In Formacion basada en competencia laboral: situacion actual y perspectivas. pp. 15–26, 1996). 64 Ken Blanchard and Peter Block are two supporters of this concept (BLANCHARD, K. CARLOS, John P. e RANDOLPH, Alan. Empowerment. Rio de Janeiro: Objetiva, 1996 and BLOCK, Peter. Stewardship: regeˆncia. Sa˜o Paulo: Record, 1995) Stuart Crainer cites Rosabeth Moss Kanter as another important reference (CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000). 65 This sentence is mentioned in the introduction of BLANCHARD, K. CARLOS, John P. e RANDOLPH, Alan. Empowerment. Rio de Janeiro: Objetiva, 1996. 66 CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000. The author, inclusively, differentiates the term empowerment from delegation. 67 Thomas Bateman presents comments on rightsizing citing M. Hitt, B. Keats, H. Harback e R. Nixon (BATEMAN, Thomas S., SNELL, Scott A. Administrac¸a˜o: construindo vantagem competitiva. Sa˜o Paulo: Atlas, 1998. p. 262). 68 TOMASKO, Robert M. Downsizing: reformulando e redimensionando sua empresa para o futuro. Sa˜o Paulo: Makron books, 1992.

Chapter 9

New Coordination Mechanisms

Henry Mintzberg’s classification of organizational structures, as discussed in Chap. 4, is primarily based on the five work coordination mechanisms he presented: direct supervision, mutual adjustment, and standardization of work process, of skills, and of outputs. These mechanisms could even be regarded as traditional types of coordination, since they are widely recognized among authors and managers as ways to achieve integration of the work divided within firms. Beyond these five coordination mechanisms, however, others have been explored in organizational studies for some time now, with some of them even more emphasized and defended in the face of new ways of organizing the work in firms. Thus, the purpose of this chapter is to discuss variables that were given little consideration in the literature, and even in organizational practice, as ways of coordinating work, despite the fact that they have been studied for a long time in management literature. Specifically, the types of coordination based on values and norms, on contracts, and on politics are discussed.

9.1

Culture, Norms and Values in Organizations

Although culture and its intangible aspects, including norms and values, have been considered as part of organizational reality for a long time now, this issue raises yet many questions, and thus deserves some initial remarks.1

9.1.1

Initial Discussion on and Antecedents of the Studies of Culture in Organizations

In Chap. 2, where some concepts of organizational structure are presented, it is pointed out that one of the functions of such phenomenon is to provide a set of N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_9, # Springer-Verlag Berlin Heidelberg 2012

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norms, values, beliefs, assumptions, and shared principles. It is also emphasized that culture, including norms and values, cannot be regarded as a cause for the birth of a certain type of organizational structure, or the contrary, as a passive consequence of a particular structure. It is an integral part of the structure, occurring mutual influence between the two phenomena. The organizational structure and the culture influence each other in a mutual construction. Actually, the relationship between values and structure has been analyzed for a long time, especially considering the external aspects, i.e., the relation between the values held by a society and the structures of its organizations, forms of work organization, and even production relations. In this respect, historically, the works of Karl Marx and Max Weber can be highlighted. To Karl Marx, for example, production relations determine other relations in society, whether in the world of work or in other social phenomena. However, to make these social relations accepted by society, a set of values, ideas, and even “illusions” are created so that such social relations are deemed natural and normal, leaving hidden their real causes in the existing production system.2 This “ideology” is then created to maintain a social awareness of acceptance of existing production relations and the various social relations resulting from them. Presenting a critique of Marx’s economic determinism in explaining the formation of social relations, Max Weber emphasized the importance of aspects related to culture. Relying mainly on his work on the influence of the Protestant Ethic in the development of capitalism, M. Weber pointed out that in analyzing the formation of social relations, including production relations, factors such as values or, according to him, the “disposition of men to accept certain types of practical rational conduct”, should be also taken into account, in addition to economic issues.3 Thus, despite the different points of view, there is in the work of these authors a distancing from simplistic and deterministic positions that consider culture just as a cause or as a consequence of structures. To K. Marx, values are not a simple consequence of production and work relations, but a secondary support to them. To M. Weber, values are not the cause for social relations, but an important stimulator that, together with other factors, contributes to the formation of the social relations. However, by analyzing only these two authors, discussions on the link between values and structure would be restricted to just the external aspects of organization, i.e., between the values held by society and the production relations or the existing organizations. Discussions on internal values or on organizational culture, and its connection with structure and forms of work organization emerged in subsequent studies, specifically in the human relation approach.

9.1.2

Informal Organization and the Introduction of Values in Organizational Studies

Although the term “culture”, or even “values”, had not been emphasized by scholars associated with the human relation approach, it can be said that the organizational

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studies related to this matter originated with authors who were influenced by the Hawthorne Research.4 In their works emerged discussions on the non-formal, or non-foreseeable, relations occurring in organizations, referred to as informal relations.5 These informal relations are those that develop in organizations and are not defined in the set of procedures previously determined and explicitly communicated, or even those that are not part of the established hierarchical relations. The conclusions drawn from the Hawthorne Research and others that followed showed that such informal relations influence diverse behaviors in organizations, including the group’s production level.6 As a result, several studies were undertaken for the purpose of ensuring that these informal relations do not interfere with the pursuit of organizational goals or objectives. Evidently, the scope of the works based on the human relation approach was very limited, and at times the studies were even deemed manipulative.7 Later came in-depth discussions about informality by theorists who carried structuralist influence.8 From them it was posited that the organizational structure is a result not only of formal, or bureaucratic elements, but also of internal informal aspects. According to such structuralist theorists, the importance of informal relations was such that they would be responsible for changes in the ideal bureaucratic structure.9 For some of these scholars, the informal relations could practically be considered the reason for existence of some organizations. Amitai Etzioni, for example, in his classification of organizations, emphasizes the existence of normative organizations in which participation and control are based on aspects such as “internalization of directives accepted as legitimate”. In addition, in such normative organizations, “leadership, rituals, manipulation of social and prestige symbols, and resocialization are among the more important techniques of control used”.10 Obviously, for that author, such features would be limited to just certain types of organization, which he referred to as normative, such as religious and political organizations, hospitals, and universities, among others. The typical capitalist organizations would have the financial aspect as the basic type of involvement, participation, and control. Despite the emergence of discussions of informal aspects in organizational studies and even considering their importance in the formation of structure, in practical terms this theme used to be regarded as of second importance in the actuations of management. Sometimes, these informal aspects were simply ignored, and other times, they received manipulative treatment so that informal elements, considered for some as undesirable and harmful to the organization, could be controlled. This was the emphasis of management practices, at least until these informal aspects began to be seen as important elements for achieving organizational objectives, a realization that came about mostly through the studies on organizational culture.11

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Organizational Culture and Its Recent Studies

At a certain point many organizational studies began to focus on the culture of organizations. As a result, the discussion on informality, values, and norms has occupied a more prominent place in management studies and in business concerns.12 There are several possible concepts of organizational culture, and many of them have been influenced by anthropological concepts of culture.13 J. Bowditch and A. F. Buono, in a book on organizational behavior, consider culture as “the shared pattern of beliefs, assumptions and expectations held by organizational members, and their characteristic way of perceiving the organization’s artifacts and environment, and its norms, roles and values as they exist outside the individual.”14 Stephen Robbins, also in a book on organizational behavior, defines culture as a “system of shared meanings held by members that distinguish the organization from other organizations.”15 Thus, from these authors, two important features of organizational culture can be pointed out: it is a particular set of characteristics of an organization adopted by its members, and it distinguishes the organization from other organizations. Another way of understanding organizational culture comes from Edgar Schein’s concept, who presents it as a system of values that a group adopts once such values are deemed important or valid.16 Within this concept, it is assumed that the culture of an organization is developed from the time the attitudes and behaviors are considered valid and useful or even helpful to the group. By virtue of this, these values are attached to the group’s habits, are deemed adequate and appropriate, and in a certain respect are considered even natural. Edgar Schein’s concept is enlightening and very useful, as it presents culture not only in its static aspects, but also in its dynamic ones, i.e., its origin, formation, and possible changes over time. After several studies, this issue nowadays has gained certain importance in organizational studies. It can be said that an organization has a certain culture or even a set of values or intangible characteristics. Such features are shared by the group and distinguish it from other groups. These characteristics are attached once they are considered valid and appropriate at a certain time by the group’s members (Table 9.1).17 This importance, by the way, is not limited to only descriptive studies on the subject, but also extends to prescriptive works with more pragmatic purposes. Stephen Robbins, despite offering comments on the descriptive aspects related to organizational culture, posits that studies on the subject are important as organizational culture defines the boundaries of the organization, provides a sense of Table 9.1 Organizational culture: main elements of the concept Main elements Characteristics adopted by the members of an organization That distinguish it from others That were developed overtime by virtue of being considered valid and useful or even helpful

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identity, facilitates commitment, and enables the stability of the social system. S. Robbins summarizes by saying that organizational culture is the social glue that helps keep an organization united and serves as a marker of meaning and as a control mechanism that guides and shapes the attitudes and behaviors of employees.18 The author also emphasizes the importance of studies on culture in organizational changes and in mergers and acquisitions. Thus, although some studies on culture have a descriptive aspect and are concerned mostly with the understanding of such phenomenon, many of the studies are important in discussing the prospect of handling or changing such culture.

9.1.4

Cultural Changes and Indoctrination

If organizational culture, including its aspects such as norms and values, is an organizational reality and if it is a significant factor that serves as the glue that can help or hinder organizations, the prospect of “managing” such culture becomes very important. Although many studies do not demonstrate this intention openly, this aspect may be noticed in organizational studies and even in management actions. Thus, as a result of the initial works on informal relations and those studies related to organizational culture that followed, the number of publications concerning how to “manage” values and norms has progressively increased. The practices of organizational change grounded on Kurt Lewin’s work are examples that can be offered. Through these practices, the purposes of managing organizational aspects related to values, and not just the technical aspects, are pursued. According to K. Lewin, it is necessary in the change process to strengthen the so-called driving forces of change and to minimize the restraining forces for change. The studies on Organizational Development (OD)19 that followed, also influenced by the work of K. Lewin, were in the same way change processes that took into account aspects related to organizational culture.20 In his concept for the OD, Warren Bennis states that in seeking to adapt to new markets, technology, and challenges, and to a changing world, changes in attitudes and values would be necessary, in addition to changes in the structure of the organization.21 Apparently, however, the efforts to change cultural aspects are being more emphasized today. Several authors and many managers have advocated the “management” of culture as essential for effective management.22 This is particularly noticeable when the techniques or models of Japanese influence, such as Total Quality Management (TQM) or the lean production, are considered. In them, in addition to practices concerning technical aspects, like the Taylorist and its standardization, the emphasis on cultural aspects may be found. In his book Theory Z, William Ouchi presents several features of Japanese firms such as participative and collective decision making, lifelong employment, low specialization, and slow promotions. In addition, these firms develop subtle skills of managing people.23 For William Ouchi, a number of values and beliefs developed by owners, employees, customers and government regulators operate as a type of

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control and coordination for the work. Such elements would be useful in attaining coherence, especially in the case of changes that occur in the firm. According to W. Ouchi, these values would be communicated through a common culture shared by the key managers and, to some extent, by all employees.24 These characteristics of Japanese management were found in several successful U.S. companies that W. Ouchi called type Z firms or organizations.25 In those firms, according to W. Ouchi, the implicit and the explicit can work together,26 and thus important decisions are made based not only on explicit mechanisms. Following this line related to the importance of culture and values in management, and doing so in a more clear and persuasive manner, are authors such as Tom Peters and Robert Waterman.27 In their book In Search of Excellence, the authors discuss management practices considered as high standard and question the existing rationalism in organizations, especially with regard to its limitations.28 For these authors, several aspects are adopted by firms of high standard, such as the positive disposition for action, closeness to the customer, an administration that allows autonomy and initiative, productivity through people, simplicity, and rigidity and, at the same time, flexibility, among others. However, the most important aspect in their work is the emphasis on culture and values. Reviewing and praising the works of Chester I. Barnard and Philip Selznick, Tom Peters and Robert Waterman comment on human nature that needs a set of values to guide a person’s actions. For these authors, in practice, the rationality that is much advocated by the classical theorists and management courses is not the reason for the success of firms. Rather, the reason that makes firms of high standard to succeed is the capability to work in imponderable and unanticipated conditions, developing practices considering the reality that is presented to them at a given time. Still according to these authors, at critical moments the firm needs a set of values that encourage innovative actions and do not penalize the risk, error, and experiment that happen through the informal organization. However, along with the progressive increase of ideas that give prestige to the knowledge and the management of values and cultural aspects, severe criticisms of these studies and practices have emerged as well. These criticisms take several directions.

9.1.5

Criticism to Aspects Related to Organizational Culture

Despite the prestige that topics related to culture and values have gained in organizational studies lately, and the importance they have assumed among many managers, works on such subjects have also provoked sharp criticisms. The criticisms are related especially to the concept and the existence of the organizational culture, its importance to management, the possibility of its management, its negative aspects, and the manipulative character. Concerning the existence of an organizational culture, the criticisms in general focus on two areas: the lack of uniqueness and the imposition of a group. In the first

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case, the use of the term “organizational culture” is questioned as there would not be a significant difference between firms that would lead to conceive particular cultures.29 The capitalist and industrial society culture would be shared by firms and, thus, possible differences noticed among such firms would be only superficial and could not lead to characterize organizational cultures. In the second case, it is argued that the particular features of an organization would be imposed by a group on all members of the organization. Such group would be composed of people who hold the power during a period of time (owners, top management or even a technostructure’s workers). This group would impose a series of conditions that would be accepted by individuals within the organization not because these conditions are deemed more appropriate, but because the employees would have to accept them to keep their jobs. Such elements, therefore, would not be aspects of a culture, but temporary impositions accepted by individuals in the organization.30 As for the criticisms related to the importance of the subject, it is noted that some managers simply ignore the relevance of aspects related to values and culture in managing an organization. These intangible aspects, which require great subjectivity to be understood, may seem to many as something secondary and even unimportant in a firm’s reality. This attitude occurs mainly in managers with classical and economic influence. Tom Peters and Robert Waterman warn of the fact that many managers fail to understand and to observe the importance of values and culture within the firm. The organizational analysis that considers just the rational and economical assumptions is enough for them.31 Regarding the possibility of managing culture, the discussions include the costs and the unforeseeable results. Here it is important to remember that culture is forged over time from situations and actions that the group assumes to be valid. Attempts to modify such elements32 can take a long time and entail high costs, and can be an exhausting experience for the individuals involved.33 In addition, management actions aimed at cultural change cannot achieve the expected results, since culture is the product of a set of facts and events that permeate the entire organization, and therefore it would be impossible for a specific group to control the modifications and the results.34 As to the negative aspects related to the subject, the criticisms are related especially to the search by some for the so-called strong culture. In this respect, as the culture or values serve as the glue that unites individuals in an organization, the same can curb questioning attitudes and behaviors and can result in a rigid organization. In case the firm needs to implement a substantial change, this strong culture would make such implementation impossible.35 Changes within an environment of strong culture would lead only to incremental modifications rather than revolutionary ones. Finally, as regards the manipulative character, organizational practices aimed at managing culture are many times considered just a manipulation and an attempt to justify the work relations and work organization. Such manipulation would have reason in the pursuit of involvement and commitment from workers.36 This manipulative aspect concerning culture is often associated with the Marxist idea of

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Table 9.2 Criticisms related to organizational culture Main criticisms Concept and existence – Lack of uniqueness: there would not be a significant difference between firms that would lead to conceive particular cultures – Imposition of a group: differences would be imposed by a group on all members of the organization. Such group would be composed of people who hold the power during a period of time (owners, top management or even technostructure workers) Importance to management – Aspects related to values and culture would not be important in managing, since the only important issues would be the rational and economical aspects Possibility of its management – High costs: time and efforts to manager it – Impossibility of foreseeing results due to the large number of variables involved Negative aspects – Maintaining a strong culture could curb questioning attitudes and behaviors and result in a rigid organization leading only to incremental changes, not to revolutionary ones Manipulation – Its practices would be actions aimed at reaching involvement and commitment from workers to the existing work relations and work organization (Ideology)

ideology, in which certain values are created just to support the existing production relations (Table 9.2).37 Despite these criticisms, however, the subject has found a place in management practices and organizational studies, and currently it is impossible not to consider it. It is important inclusively to discuss the reasons for its emergence and its gaining of strength in these studies and practices.38

9.1.6

Culture as a Coordination Mechanism: Final Considerations

Although discussions on culture, values, and norms have been gaining a more prominent place in organizational studies since their first appearance in studies on informal relationships, consideration of these elements as a coordination mechanism has been seen in more recent works. Overall, the traditional coordination mechanisms discussed in Henry Mintzberg’s work – direct supervision, mutual adjustment, and standardization of work process, outputs and skills – have always been the most common paths used to achieve integration within firms. Values, norms, and culture have always had a supporting role considering such traditional methods of coordination. Actually, H. Mintzberg addresses the possibility of using such elements as a coordination mechanism (standardization of norms) in his Missionary Organization, a sixth configuration he proposed.39 This Missionary Organization, however, was not well characterized by H. Mintzberg, and has even been criticized for not being observed in the reality of organizations.40

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It should be supposed that this supporting role of values and norms within the organizational reality cannot be justified simply due to the myopia of the managers or even of scholars of organizations. It happens that the situations that used to be presented to organizations and their structures until recently led to a secondary concern for such aspects. If the environmental, technological and strategic conditions faced by the large machine bureaucratic structures are considered, the five traditional coordination mechanisms cited were always the most appropriate ways to reach integration. However, given the new environmental realities, information technology, and new organizational strategies, maybe values and norms are not being used only as support for the other ways of integration, but as the main coordination mechanism.41 In this respect, they could be used to replace the formality so characteristic of mechanized bureaucratic organizations.42 Thus, the use of values and norms as the main coordination mechanism in organizations would be noted. Not only as a way to gain commitment, minimize conflicts, or bring peace and harmony to the organization, as applied by managers influenced by the human relations approach. Not as the way presented by Henry Mintzberg in his proposal for a sixth configuration, the Missionary Organization. But in a structure that cannot rely on the traditional coordination mechanisms any more, as these do not provide the necessary integration given the new environmental conditions, the new types of technology, and the new strategies to which organizations are subjected.

9.2

Contracts

Up to this part of the book, whether in this or in previous chapters, the discussions on coordination mechanisms suppose forms of production and collective work that occur within the organization. In practice, however, a firm can decide not to produce internally every item it uses in its production, but to acquire the work or the result of work that is produced by other firms or individuals. In such context of relationships kept between different firms or between firms and individuals who do not maintain stable relations, the traditional coordination mechanisms discussed by Henry Mintzberg – direct supervision, mutual adjustment, standardization of skills, work process, and outputs – do not provide the integration necessary for the collective work to take place suitably. Such traditional coordination mechanisms are effective only in the context of strong, stable, and enduring relationships concerned in the traditional concepts of organization and organizational structure, that is, within a certain firm. In the same way, the type of coordination discussed earlier, which is based on values and norms, does not satisfy the relationship that occurs between companies. For that to happen, it would be necessary for the organizations involved to have shared values; in addition, their mission and objectives should be the same. Such

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situation would be impossible in practice, especially in a capitalist society that calls for individualism and competition.43 In the case of works that are divided between firms, integration seems to occur mainly through contracts, a type of coordination that receives more specific consideration in this topic. To discuss this coordination mechanism, however, it is necessary first to examine the possibility of internal or external production.

9.2.1

The Use of Firm or the Use of the Market

In the chapter on strategy (Chap. 7), the formation of large organizations is analyzed, mostly considering their pursuit of economies of scale and of scope. In the same way, the strategy of vertical integration that leads the firm to hold on to various steps of the production process, i.e., to produce internally goods or services that could be acquired externally, is also presented. Certain factors can be identified as causes for the choice of vertical integration as a strategy. Among them are those discussed by the transaction costs economics (TCE)44 approach, as well as the considerations on power relations and trust relations between organizations. The transaction costs economics approach sees the phenomenon of organizations considering reasons of efficiency related not only to reduction in production costs (as in the case of economies of scale and of scope), but also to reduction of the costs that occur when goods and services are transferred from one production unit to another within the same firm, or even between firms or between individuals.45 These costs, according to Oliver Williamson, would be linked to bounded rationality and opportunism.46 In seeking to reduce such transaction costs a firm can opt for a production based on hierarchy or to purchase from the market. In the first case, the hierarchy, there is an internal production by using the traditional organization that assumes certain continuity and some degree of stability in relations. These organizational relations are thus a possible solution for reducing transaction costs.47 In the second case, the acquisition from the market, the production occurs externally to the firm through other agents, whether firms or individuals. As in the previous option, purchasing the products of these agents is an alternative for a firm to reduce transaction costs. In view of these two options, the reasons for using the market or the hierarchy are discussed in the transaction costs economics approach. As posited by Oliver Williamson, three factors would be important in determining the use of internal or external production: uncertainty, transaction frequency, and specificity of the product.48 The more these factors are present, that is, the greater the uncertainty, the higher the transaction frequency and the higher the specificity of the product, the more the firm is led to choose internal production aimed at reducing transaction costs. On the other hand, the less these factors are present, the more the firm is led to external production to reduce transaction costs.

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Table 9.3 The use of firm or the use of the market Possibilities Justifications considering Other justifications (according to Charles the transaction costs Perrow) approach Use of the market: Uncertainty Necessity of getting a better market acquisition of Transaction frequency positioning; bargaining power in the face products or Specificity of the product of customers, suppliers and employees; services from elimination of competitor; government other firms grants and tax benefits; and support of powerful groups that have financial interest. (The firm would be led to opt to use internal production) Use of the firm: (The more these factors are Necessity of trust (the more loyalty, good internal present, the more the will and collaborative relations between production firm is led to choose firms are esteemed in the society, the internal production) more the option for the acquisition from the market would prevail)

In addition to the considerations presented by the transaction costs economics approach, other reasons could be used to justify the use of the market (external production) or the use of the hierarchy (internal production). Charles Perrow, giving reason for the use of vertical integration by firms, points out, in addition to transaction costs economics, factors related to power relations and trust relations between organizations.49 In the first case, opting for internal production, i.e., using the hierarchy, the firm becomes large and may reach an economic importance that would allow it to obtain various benefits such as better market positioning; bargaining power in the face of customers, suppliers and employees; elimination of competitors; the possibility of government grants and tax benefits; and the support of powerful groups that have financial interests, among others. In the second case, by using the market and, ultimately, contracts, the organization loses the strong social glue, which is characteristic of the internal relations, and its many advantages, especially those related to values-based elements discussed in the previous item.50 In this respect, it is important to point out that in those societies in which loyalty, good will and collaborative relations between companies are esteemed, and not just self-interest and opportunism, the situations lead to the option for the market (not internal production).51 Thus, many reasons that lead to the decision to use the hierarchy (internal production) or to use the market (external production) can be presented: reasons concerning reduction of production costs (economies of scale and of scope), reduction of transaction costs, best positioning and pursuit of power in the face of various social actors, and conditions of trust and loyalty within the society under consideration. By opting for the market, that is, the acquisition of work done externally, the prime coordination mechanism used is the contract, including its possibilities (Table 9.3).

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Types of Contracts

A contract is an agreement in which two or more people stipulate rights and obligations between themselves or, even, an instrument that embodies such agreement.52 By virtue of its importance, it has its characteristics and classifications discussed in Economics and Law.53 Specifically for the analysis of the contract as a coordination mechanism, it is necessary to invoke economic theories and, again, the transaction costs economics approach. Considering the discussions offered by such approach, the use of contracts aims at reducing ex ante and ex post transaction costs.54 Ex ante transaction costs include costs related to drafting, negotiating, and safeguarding an agreement. Ex post costs include costs related to monitoring and ensuring the agreement. Despite recognition of the incompleteness of contracts, the concern with them is to reduce the ex ante and ex post transaction costs. Oliver Williamson presents four basic types of contracts: the classical, the neoclassical, the bilateral relational, and the unified relational.55 Classical contracting is found when the market is used in simple relations that supposedly will not generate effects for a long time. Neoclassical contracting is seen in relations that suppose certain effects for a long time and thus includes other relations such as arbitration, regulation, etc. Bilateral relational contracting is noticed when it produces some stability in relations, including negotiations and certain continuity in the agreement. Unified relational contracting corresponds with the relations that occur within a certain firm (using the hierarchy). Oliver Williamson also offers a model that connects his classification of contracts and the three elements pointed out earlier as influential in choosing between the use of the hierarchy and the use of the market, i.e., uncertainty, transaction frequency, and specificity of the products. The more these three elements mentioned are present, the more the choice leads to more rigid contracts, such as the unified relational contract. The less the abovementioned factors are present, the more the choice falls to classical contracts. Intermediate situations will lead to the use of contractual relations of the neoclassical and relational types. Thus, according to that author, the four contractual possibilities are used depending on the organization in question and its relations with other organizations or individuals, and it is important to analyze, in this respect, the factors of uncertainty, transaction frequency, and specificity of products (Table 9.4). Table 9.4 Types of contract according to the transaction cost economics approach Classical Neoclassical Bilateral relational Unified relational Found when the market Seen in relations that Noticed when it Corresponds with is used in simple suppose certain produces some the relations that relations that effects for a long stability in relations, occur within a supposedly will not time and thus including certain firm generate effects for includes other negotiations and (using the a long time relations such as certain continuity in hierarchy) arbitration, the agreement regulation, etc.

9.3 Interests, Power, Conflicts and Politics in Organizations

9.2.3

135

The Increasing Use of Contracts as a Coordination Mechanism: Final Remarks

Although the choice between external acquisition and internal production is a situational decision of a particular organization, some considerations regarding the large organizations with structures based on the Machine Bureaucracy can be presented herein, inclusively, in terms of trends. In the past, in order to achieve congruence with the technological and environmental variables, the traditional strategy focused on vertical integration used to be adopted. Thus, the coordination by contracts used to be of minor importance in such organizations. However, environmental, technological, strategic, and even organizational changes have emerged and thus a reverse in this situation is happening and leading firms to give emphasis to the coordination by contracts. As for the environment, if the organizations are currently facing stiff competition, the number of potential suppliers, on the other hand, is increasing. As for technology, various possibilities of integration between firms arise with the information technology. Concerning strategy, increasingly being noticed are trends of concentration in core business or in core competencies, outsourcing of non-essential activities, and formation of partnerships with suppliers, among others. Moreover, among the new organizational possibilities, presented in Chap. 8, the network organization is another tendency. Thus, given these new situations, new strategies, and new structures, it is supposed that many activities that used to be carried out in the past by the large mechanized and bureaucratic firms are nowadays being acquired from the market. As a result, there is the prospect of the increasing use of coordination based on contractual relations. By using the typology of contracts of Oliver Williamson, there would be an increased possibility of using contracts of the classical, the neoclassical, and especially the bilateral relational types, instead of using only the unified relational contracts (hierarchy).

9.3

Interests, Power, Conflicts and Politics in Organizations

Discussions on interests, power, conflicts, and politics in organizations are not new.56 Even before classical management studies, there were already discussions on these themes, mainly presenting external causes for the formation of organizations.57 The studies on bureaucracy, for example, emphasize the importance of power based on merit for the formation of modern organizations, as opposed to those forms of power based on personal aspects (charisma) or on inheritance (tradition).58 With the development of organizational studies, several works made room for a discussion of these issues. Some of them even emphasized internal aspects. Chester I. Barnard, Herbert Simon, Richard Cyert, James March, Andrew Pettigrew, and Charles Lindblom are some of those scholars who may be cited as important in the consolidation of the discussion of power, interests,

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conflicts, and politics within organizations, and not just in their external aspect related to the formation of organizations.59 Thus, the organization nowadays is also considered a place for power, interests, conflicts, and politics. In the second chapter, on structure, power is presented as one of the functions of the structure, i.e., the organization, in addition to the technical, relational, and values formation functions, has to regulate the authority and subordination or, as Richard Hall puts, it has to establish a context where power is exercised and decisions are made.60 Therefore, the importance of power in the definition of structures, or even the association between the variables of power and structure, must be considered.61 However, despite the existence of a number of studies discussing the subject, and despite there already being some agreement on the organization as a place of interest, power, conflict, and politics, in organizational practice little space is devoted to discussions of these matters as compared with the debates on the technical, relational, and currently of-values aspects.62 This fact may be due to the fear of admitting this characteristic of organizations, the possibility of challenging the “constituted authority”, preconception, lack of knowledge about this as one of the functions of the organizational structure, and the avoidance of unnecessary friction, among others. Thus, within firms, in most cases the simplistic notion that the organization is a place where the interests are shared is evoked. According to Gareth Morgan, “the idea that organizations are supposed to be rational enterprises in which their members seek common goals tends to discourage the discussion or attribution of political motive. Politics, in short, is seen as a dirty word”.63 As a result, issues concerning power and interests, and considering the organization as a place where conflicts and politics relations occur, are hidden and little, or never, discussed within organizations. The meritocratic constituted authority as emphasized by the bureaucracy studies is simply assumed. This fact is even more true if the mechanized format of the large industrial companies is taken into account. Relations concerning interests and power that do not fit into this reality are treated as the many other informal relations, that is, they are neither assumed nor admitted, and are even guided so as to not disrupt the formal organization.

9.3.1

Favorable Conditions for the Use of Politics as a Coordination Mechanism

If to admit themes such as power and interests within an organization presents great difficulty, taking politics as a mechanism of coordination is much more difficult. It can be said that such possibility is not conceived within the firms and, even, not discussed in management courses. This happens despite the fact that there is abundant literature on negotiation and disciplines associated with this theme in such courses, and it is known that negotiation involves conflict of interests, being that an instrument of politic coordination.

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Nonetheless, considering the organizational literature, interesting observations on politics as a mechanism of coordination can be drawn. In this respect, political organizations and even politics as a subsidiary coordination in some traditional structures, in public organizations, in the relations kept between organizations, and in the modern management models based on participation, can be mentioned. Henry Mintzberg, in his two principal works on organizational structure, does not see politics as one the main coordination mechanisms, despite presenting power as a contingency factor along with environment, strategy, and technology.64 In later work, he draws attention to the existence of Political Organizations. Unfortunately, the author does not present a complete characterization of these Political Organizations compared with the other formats: he just presents it as not having a dominant part, coordination mechanism, or stable form of centralization or decentralization.65 According to that author, some of such organizations would be temporary, particularly during difficult periods of change, while others could be more permanent, as in the case of a government agency separated by different forces or, even, a moribund company that is protected from market forces.66 Other formats described by that author present politics as a possible coordination mechanism, but only subsidiarily. The Professional Bureaucracy that has standardization of skills as the main type of coordination is an example. In these organizations, the power of professionals is great and thus, the positions taken by these professionals are constantly based on personal interests. As a consequence, many organizational decisions are made in a collective way with the participation of such professionals. As stated by Henry Mintzberg, the Professional Bureaucracy has a “democratic administrative structure”.67 Indeed, although there are no collective decisions at the operational level or even at the strategic apex, at the intermediate level the decisions are made collectively. In the Machine Bureaucracy, despite the greater concern with the technical aspects, the possibility of political coordination occurs mainly in the organization’s strategic apex. In this case, such coordination mechanism can be seen in collective decisions made by committees or boards (of directors, for example), and also in the various practices used by managers at the highest levels.68 In addition to the aforementioned situations, the importance of political coordination in public organizations is also worth emphasizing. In this type of organization, because of the great importance of external agents, there is high possibility of a political interference occurring in organizational decisions, and thus the possibility of political coordination is higher compared with other organizations.69 Another possibility of conceiving politics as a means of coordination emerges in the relationships between organizations or between organizations and individuals. In this case, although contracts are assumed as the main coordination mechanism, aspects related to the interests and power that are inherent in such relationships must be taken into consideration due to the lack of a formal hierarchy linking the parts. The importance of power and interests in such a situation is discussed in the previous item given the comments of Charles Perrow70 and can also be found in the studies of Henry Mintzberg on strategy.71 In the latter aspect, this author

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highlights in such studies the influence of power in the formulation of the strategy, whether considering the relations that occur within the firm or those relations between the firm and the environment. The importance of observing aspects concerning interests, power, conflict, and politics in the relationships between organizations and considering relations with the environment may justify the studies, books, and topics related to negotiations in business or management courses. In research presented in the 1960s, Henry Mintzberg identifies ten roles of management; among them, the role of negotiator requires managers to be responsible for representing the organization at major negotiations. Recently, studies have appeared discussing politics in organizations especially given the new management models based on participation. Paulo Motta,72 discussing the ways of participation in organizations, points to two possibilities: the direct and the indirect participation. In the first case, the author cites practices such as participative planning, quality control circles, and the processes in group for decision and action. Such experiences focused on participation in the workplace would have reasons in the pursuit of harmony, satisfaction, involvement, commitment, mobilization of efforts, and development of varied skills, among others. In the second case, the indirect participation, the author cites practices such as the company committees, the co-management, and the self-management. These experiences would be focused on participation in the institutional or corporate level through collective representation of employees or the professional classes. However, despite the increasing discussion on politics considering these new management models, many questions have been presented.73 In the case of direct participation, it is often argued that such participation is limited to certain areas, dependent on higher limits and goals, and in some cases, presents superficial, manipulative, and domination-related aspects.74 In the case of indirect participation, the main considerations relate to the stage of maturity of society in general, including the employers’ and employees’ community (Table 9.5).75

Table 9.5 Possibilities of emerging political coordination in organizations Possibilities Main coordination mechanism – In Political Organizations Subsidiary coordination mechanism – In Machine Bureaucracies: noticed in collective decisions made by committees or boards (of directors, for example), and also in the various practices used by managers at the highest levels – In Professional Bureaucracies: collective decision at the intermediate level – In public organizations – Between organization and between organizations and individuals – In participatory forms of management (direct and indirect)

9.4 Notes

9.3.2

139

Politics as a Coordination Mechanism in Organizations: Final Considerations

Despite these possibilities pointed out above, the political coordination as a main coordination mechanism seems still far from being a reality in organizations. In other words, it is difficult to conceive of an organization as a place where the divided work is integrated or coordinated by political relations. Political coordination will continue to occur in restricted environments and in spaces dedicated specifically to it, as in assemblies, employee unions, the legislative chambers, and so on, that is, in environments where democratic situations and certain equality among participants are supposed, which do not happen in traditional organizations in our society. Besides, technical constraints, such as the search for efficiency, so valued in our society and in our organizations, may be seen as obstacles to the use of such coordination mechanism that, inevitably, leads to conflicts and negotiations. Thus, an important function for politics in organizations should be considered, but not as the main coordination mechanism as in the case of the five types discussed by Henry Mintzberg (mutual adjustment, direct supervision, and the standardization of work process, of results, and of skills), and even in the case of the types discussed in this chapter (contracts, and values and norms). Its function seems to be restricted to maintaining reasonable levels of interests satisfied so as not to disturb the aforementioned coordination mechanisms, that is, as a dynamic process of regulating conflicts.

9.4 1

Notes

The discussion on culture in organizations has been very influenced by Anthropology’s theorists. Among them, some consider culture as having tangible elements such as technology, utensils, tools, etc. and intangible elements. In this study, emphasis is given to the intangible aspects of culture such as values and norms. (LARAIA, Roque de Barros. Cultura: um conceito antropolo´gico. Rio de Janeiro: Jorge Zahar, 2002; SOUZA, Edela Lanzer Pereira. Clima e cultura organizacionais: como se manifestam e como se manejam. Porto Alegre: Edgar Blucher, 1978; BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992). 2 In his studies, Karl Marx uses the concepts of superstructure and ideology. Better discussions on this subject can be seen in The German Ideology, where the author also discusses the importance of intellectuals dedicated to the abstract work (writers) in the formation of ideology. (MARX, Karl. A ideologia alema˜. Sa˜o Paulo: Grijalbo, 1977). 3 WEBER, Max. A e´tica protestante e o espı´rito capitalista. Sa˜o Paulo: Editora Martin Claret, 2002. p.32. In Essays in Sociology, Max Weber emphasized the influence of some values in the formation of structures such as the idea of mass democracy and the importance of rationality. (WEBER, Max. Ensaios de Sociologia. Rio de Janeiro: Ltc Editora, 1982. pp. 138–157). It should be pointed out that M. Weber considers values as supporters and not as causes of social and production relations. 4 Such research took place from 1927 to 1932 at Western Electric Company in Chicago. (MAYO, Elton. Problemas de un civilizacion industrial. Buenos Aires: Galatea-Nueva Vision, 1959).

140 5

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Discussion on the human relations approach and on the informal relations can be seen in ETZIONI, A. Organizac¸o˜es complexas: estudo das organizac¸o˜es em face dos problemas sociais. Sa˜o Paulo: Atlas, 1973. 6 MAYO, Elton. Problemas de un civilizacion industrial. Buenos Aires: Galatea-Nueva Vision, 1959 and ETZIONI, A. Organizac¸o˜es complexas: estudo das organizac¸o˜es em face dos problemas sociais. Sa˜o Paulo: Atlas, 1973. 7 This is discussed in Chap. 3, considering structuralist authors (See, for instance, ETZIONI, A. Organizac¸o˜es complexas: estudo das organizac¸o˜es em face dos problemas sociais. Sa˜o Paulo: Atlas, 1973), as well as other studies such as: BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Editora Guanabara Koogan S/A, 1987. 8 This is discussed in depth in Chap. 3. 9 This is discussed in Chap. 3. 10 ETZIONI, Amitai. Analise comparativa de organizac¸o˜es modernas: sobre o poder, o engajamento e seus correlatos. Rio de Janeiro: Zahar, 1974. p. 72. It is worth noting that many of the current studies and research on commitment are based on theoretical forms of involvement discussed by Amitai Etzioni: calculative, alienative, and moral commitment (See, for instance, BASTOS, Antonio Virgı´lio Bittencourt. Os vı´nculos indivı´duo-organizac¸a˜o: uma revisa˜o da pesquisa sobre comprometimento organizacional. In: Anais Enanpad. Canela: Anpad, 1992). 11 According to Amitai Etzioni, these aspects related to values would be more important in normative organizations. (ETZIONI, Amitai. Analise comparativa de organizac¸o˜es modernas: sobre o poder, o engajamento e seus correlatos. Rio de Janeiro: Zahar, 1974. p. 72). 12 This moment cannot be precisely defined. Several works have been important in the strengthening of the studies of culture and values in organizations, since those related to human relations and structuralist approaches. Herbert Simon can be considered also an important reference. This author emphasizes aspects related to values, indoctrination, identification etc. and their importance in decision-making in organizations. (SIMON, Herbert. Comportamento Administrativo: estudo dos processos deciso´rios nas organizac¸o˜es administrativas. Rio de Janeiro: FGV, 1979). 13 Maria Tereza Leme Fleury and Moema Miranda de Siqueira summarize the influence of various theoretical approaches (not only the anthropologic one) in the concept of organizational culture (FLEURY, Maria Tereza Leme. Cultura e poder nas organizac¸o˜es. Sa˜o Paulo: Atlas, 1989; SIQUEIRA, Moema Miranda. Cultura e organizac¸o˜es pu´blicas. Revista do Servic¸o Pu´blico. Ano 47. Volume 120. Numero 2. Maio-agosto 1996). 14 BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992. p. 182. 15 ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. p. 498. 16 SCHEIN, Edgar. Organizational culture and leadership. San Franscisco: Jossey-Bass Pub, 1992. It is worth noting that this concept of Edgar Schein accords with concepts in Anthropology. (See also: LARAIA, Roque de Barros. Cultura: um conceito antropolo´gico. Rio de Janeiro: Jorge Zahar, 2002). 17 Again, it should be emphasized that in this study, only the intangible aspects of culture are being considered. 18 ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. p. 503. 19 This is discussed in Chap. 8. 20 Edgar Schein emphasizes such influence (SCHEIN, E. Psicologia organizacional. Rio de Janeiro: Prentice-Hall, 1982). 21 BENNIS, W. Desenvolvimento organizacional. Sa˜o Paulo: Edgard Blucher, 1972. 22 MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996; ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. 23 OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986.

9.4 Notes 24

141

OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986. 25 Companies other than those discussed by Douglas McGregor in his X and Y theory. (McGREGOR, Douglas. O lado humano na empresa. Sa˜o Paulo: Martins Fontes, 1999). 26 OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986. 27 Gareth Morgan and Stuart Crainer point these authors as typical representatives of this movement. (MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996 and CRAINER, Stuart. Grandes pensadores da Administrac¸a˜o: as ide´ias que revolucionaram o mundo dos nego´cios. Sa˜o Paulo: Futura, 2000). 28 PETERS, Thomas J. e WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper 7 Row, 1983. 29 AKTOUF, Omar. O simbolismo e a cultura de empresa: dos abusos conceituais a`s lic¸o˜es empı´ricas. In: CHANLAT, Jean-Franc¸ois. O individuo na organizac¸a˜o: dimenso˜es esquecidas. Sa˜o Paulo: Atlas, 1996. 30 AKTOUF, Omar. O simbolismo e a cultura de empresa: dos abusos conceituais a`s lic¸o˜es empı´ricas. In: CHANLAT, Jean-Franc¸ois. O individuo na organizac¸a˜o: dimenso˜es esquecidas. Sa˜o Paulo: Atlas, 1996. 31 PETERS, Thomas J. e WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper 7 Row, 1983. 32 Recruitment and selection, socialization of novices, and behavioral changes would be the main forms (BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992). 33 BOWDITCH, J. L., BUONO, A. F. Elementos de comportamento organizacional. Sa˜o Paulo: Pioneira, 1992. 34 MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996. It is important emphasizing that this criticism is totally different from that one done by those who do not believe in the organizational culture concept. 35 MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000; ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999. 36 AKTOUF, Omar. O simbolismo e a cultura de empresa: dos abusos conceituais a`s lic¸o˜es empı´ricas. In: CHANLAT, Jean-Franc¸ois. O individuo na organizac¸a˜o: dimenso˜es esquecidas. Sa˜o Paulo: Atlas, 1996 and MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996. 37 The term ideology is used here in the Marxist sense, in which a set of ideas are used to justify the existing production relations. This is discussed at the beginning of this chapter. 38 The emergence of the neocharismatic leadership approach should be mentioned here. This approach is being mentioned, even in current books on organizational behavior, and emphasizes elements related to value in leadership on the contrary to only concerns with processes and relationships, demonstrated by situational or contingency theories of leadership. 39 This proposal is presented in his books on both organizational structure and strategy. 40 With respect to these criticisms, Tom Peters and Robert Waterman can be mentioned (PETERS, Thomas J. and WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper Row, 1983). 41 Tom Peters and Robert Waterman argue that the current organizations have to base on three pillars, one of which refers to the values (PETERS, Thomas J. e WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper Row, 1983). 42 Stephen Robbins states that culture can substitute formalization (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999).

142 43

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The importance of trust and loyalty in relations between firms in Japan is mentioned in several works, and the zaibatsus are an example of such reality (see, for instance, OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986). 44 Ronald Coase and Oliver Williamson are important references (WILLIAMSON, Oliver e. MASTEN, Scott E. Transation cost economics. London, Edward Elgar publishing limited, 1995 volume I e II and WILLIAMSON, Oliver. The economic institution of capitalism: firms, markets, relational contracting. New York: Free, 1985) Discussions on such approach can be also seen in PERROW (Charles. Sociologia de las organizaciones. Espan˜a: McGrall-Hill, 1991). 45 Chandler Jr., Alfred D. Scale and Scope: the dynamics of industrial capitalism. Crambridge: Bleiknap, Harvard University, 1994. 46 According to Herbert Simon’s concept of bounded rationality, decision is influenced by perception, amount of information available, probability of future events, individual interests and others (SIMON, Herbert. Comportamento Administrativo: estudo dos processos deciso´rios nas organizac¸o˜es administrativas. Rio de Janeiro: FGV, 1979). As for opportunism, see discussion in WILLIAMSON, Oliver and MASTEN, Scott E. Transation cost economics. London, Edward Elgar publishing limited, 1995 volume I and II and WILLIAMSON, Oliver. The economic institution of capitalism: firms, markets, relational contracting. New York: Free, 1985. 47 Besides the studies of the Transaction Costs Economics approach, discussions about the advantages of using the hierarchy instead of market can be also seen in CHANDLER Jr., Alfred D. The visible hand: the managerial revolution in America business. Cambridge: 1977. 48 WILLIAMSON, Oliver. The economic institution of capitalism: firms, markets, relational contracting. New York: Free, 1985. 49 PERROW. Charles. Sociologia de las organizaciones. Espan˜a: McGrall-Hill, 1991. 50 Marco A. Oliveira, in a study on outsourcing, alerts to such danger (OLIVEIRA, Marco A. Terceirizac¸a˜o: estruturas e processos em xeque nas empresas. Sa˜o Paulo: Nobel, 1994). Tom Peters and Robert Waterman state that a healthy internal competition can replace market advantages (PETERS, Thomas J. e WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Editora Harper 7 Row, 1983). 51 This necessity of loyalty between organizations is emphasized by William Ouchi and also discussed by Charles Perrow (OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986 e PERROW. Charles. Sociologia de las organizaciones. Espan˜a: McGrall-Hill, 1991). 52 FERREIRA, Aure´lio Buarque de Holanda. Diciona´rio Aure´lio da lı´ngua portuguesa. Rio de Janeiro: Nova Fronteira, 1995. 53 In Law and in some Economics approaches, internal organizational relations are often considered just as contractual relations. 54 WILLIAMSON, Oliver. The economic institution of capitalism: firms, markets, relational contracting. New York: Free, 1985. 55 WILLIAMSON, Oliver. Transaction-cost economics: the governance of contractual relations. In: WILLIAMSON, Oliver and MASTEN, Scott E. Transaction cost economics. London, Edward Elgar publishing limited, 1995 volumes I e II. 56 Concepts of these terms are not presented here. In this study, it is important discussing politics as a possible coordination mechanism. 57 Discussion on organizations as an instrument to attain interests can be seen in the literature of classical economists and in Marxist literature. 58 WEBER, Max. Economia e Sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. volumes I e II and WEBER, Max. Ensaios de Sociologia. Rio de Janeiro: Ltc Editora, 1982. 59 These are some of the authors mentioned when discussing such subject (MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991; MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996 and MINTZBERG, Henry, AHLSTRAND, Bruce

9.4 Notes

143

e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000). 60 HALL, Richard H. Organizac¸o˜es, estruturas e processo. Rio de Janeiro: Prentice-Hall, 1984. 61 In his classification of structures, Henry Mintzberg discusses the relation between power and structure, and considers power as a contingency factor (MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995). 62 MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996; MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991 and MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001. 63 MORGAN, Gareth. Imagens da organizac¸a˜o. Sa˜o Paulo: Atlas, 1996. p.146. 64 MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979 and MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 65 MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001.p. 156. Henry Mintzberg has studies on power and politics in organizations. See, for instance, MINTZBERG, Henry. The organization as political arena. Journal of Management Studies. v. 22, pp. 133–153, 1985. 66 MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000. 67 In addition to Henry Mintzberg’s comments on this matter, an interesting study conducted in British universities can also be mentioned. (MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979. p. 358 and RODRIGUES, Suzana Braga. Processo deciso´rio em universidade: teoria III. IN: Revista de Administrac¸a˜o Pu´blica. v. 19, n. 4, out/dez, 1985. pp. 60–74). 68 In the presentation of processing production firms made in the chapter on technology, the use of collegial decisions at the strategic level is discussed. Likewise, in the chapter on strategy, the growth of collegial decisions in formulating strategy is discussed. Classical text of H. Edward Wrapp discusses political features in top managers’ work (WRAPP, H. Edward. Bons gerentes na˜o tomam deciso˜es polı´ticas. In: Colec¸a˜o Harvard de Administrac¸a˜o. v. 28. Sa˜o Paulo: Nova Cultural, 1986). The current discussions on Corporate Governance show the need of observing political aspects in major organizational decisions. (LODI, Joa˜o Bosco. Governanc¸a Corporativa: o governo da empresa e o conselho de administrac¸a˜o. Rio de Janeiro: Elsevier, 2000 and STEINBERG, Herbert e HLLQVIST, Bengt. A dimensa˜o humana da Governanc¸a Corporativa: pessoas criam as melhores e piores pra´ticas. Sa˜o Paulo: Editora Gente, 2003). 69 Paulo Motta emphasizes that studies related to power in organizations are more common in public administration (MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991). 70 This discussion on the importance of aspects related to power in relations between organizations is discussed earlier in this chapter considering Charles Perrow’s arguments (PERROW. Charles. Sociologia de las organizaciones. Espan˜a: McGrall-Hill, 1991). 71 MINTZBERG, Henry e QUINN, James Brian. O processo da estrate´gia. Porto Alegre: Bookman, 2001 and MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000. 72 MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991. 73 MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991. 74 MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991; LIMA, Maria Elizabeth Antunes. Os equı´vocos da exceleˆncia: as novas formas de seduc¸a˜o na empresa. Petro´polis: Vozes, 1996; CHANLAT, Jean-Franc¸ois. Modos de gesta˜o, sau´de e seguranc¸a no trabalho. In: DAVEL, Eduardo e VASCONCELOS, Joa˜o (org.) Recursos Humanos e subjetividade. Petro´polis: Vozes, 1997. 75 MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991.

Part IV

The Automated Bureaucracy and Its Variations

Chapter 10

The Automated Bureaucracy

From the discussions made in previous chapters on environmental, technological, and strategic changes, on the new organizational possibilities, and on the new coordination mechanisms, what is proposed in this work as a new structure that has gained strength in the world of organizations can be presented. This configuration deserves so to be highlighted and it is proposed here as a supplement to Henry Mintzberg’s classification. In many cases, it presents itself as an alternative to the Machine Bureaucracy that was, until recently, the format most used by large companies that operate with high production volume and low production variety. The presentation is made, as far as possible, by following the same steps taken by Henry Mintzberg in his characterization of the five traditional organizational configurations.1 Differences appear, however, due to the peculiarities of the Automated Bureaucracy. Comparisons with the Machine Bureaucracy are inevitable, which does, in fact, make it easier to understand the model proposed here. In the same way, comparisons with other types of structures are made, notably with the format used by processing production firms as characterized by Joan Woodward.2

10.1

Description of the Basic Structure

Descriptions are made separately for the operating core; for the administrative component, which includes the middle line, the support staff, and the technostructure; and for the strategic apex.

10.1.1 The Operating Core With respect to the operating core, considerations can be made on the use of automation in the organization, on the high integration that emerges in the N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_10, # Springer-Verlag Berlin Heidelberg 2012

147

148

10

The Automated Bureaucracy

organization, on the activities assigned to workers, on the profile required of employees, and on the coordination based on values and norms.

10.1.1.1

Automation and the Machine Firm

Firms that utilize the automated bureaucratic structure, in its most complete format, have an operating core that looks more like a machine and a physical system than a social organization.3 This occurs due to the level of automation that is achieved in these firms, where a complex of interconnected equipment that, indeed, performs the activities can be observed. The operations are carried out, therefore, by a number of automatic machines that use, intensively, information technology as well as traditional types of technologies related to mechanics, hydraulics, pneumatics, and electricity.4 By using systems associated with the concepts of Computer-Aided Manufacturing (CAM), Flexible Manufacturing Systems (FMS) and, particularly, Computer-Integrated Manufacturing (CIM),5 such companies automate much of their operating core and, as an immediate consequence, use less labor in the processing as compared with the Machine Bureaucracy that employs intensive labor in production.6 In this respect, the Automated Bureaucracy looks a lot like the processing production firms characterized by Joan Woodward.7 It may be recalled from the chapter on automation (Chap. 5) that oil refineries and other petrochemical companies as well as paper milling firms can be cited, among others, as examples of processing firms. In such companies, through systems based on mechanics and electricity, the production of certain products in an automated and continuous way has been possible for a long time now. Although this applies only for products that have no defined units during production, processing-based operations, as stated by Joan Woodward, were spreading out to other products or other production stages of traditional production, such as canning or packaging. Nowadays, with information technology, it is possible to achieve a production similar to the continuous one for other kinds of products. Thus, processing production is emerging in some companies that, until recently, did not use automated systems, whether due to technical inviability or to economic issues.8 Obviously, production for these new products is not continuous such as what happens in oil refining or paper production in which no defined units are produced. The consequences for production, however, are very similar, especially with regard to the replacement of labor in the operations.9 In addition to this high level of automation in the operations, the Automated Bureaucracy also features control and monitoring sensors that provide several different types of information. This fact enables controlling centers based on microprocessing technology to carry out adjustments, which leads, thus, to greater production control through the system itself and, again, to a higher degree of labor substitution.

10.1

Description of the Basic Structure

149

Flexibility is another interesting aspect of the operating core of the Automated Bureaucracy. The automation used in Fordism and in traditional processing companies offers high-volume production, but little production flexibility. That is, the operations in companies that utilize these types of automation are suitable for production in large volume, but with low variety. In such cases, to make possible the production with some variety, big changes in equipment would be necessary, which often renders the production impractical. Therefore, more flexible forms of production that bring a wider variety of products traditionally employ universal machines or even numerical control (NC) machines, that is, forms of production that are different from those that use automated processes based on Fordism or on processing firms. Despite being established in many companies that formerly utilized fixed equipment, the Automated Bureaucracy, by using information technology, achieves production flexibility through rapid changes. Thus, a wider range of products can be offered to customers. In practical terms, these changes occur through modifications in programs (software) and even through small adjustments in equipment, making it possible to achieve a production that, despite the large volume, offers more variety than what is allowed by the Machine Bureaucracy. In this respect, as discussed in the chapter on technology (Chap. 5), the Automated Bureaucracy gathers in its operating core the advantages of the earlier types of automation. It is possible to have an automated production (typical of processing firms), with some flexibility (typical of numerical control) for products that previously had to be made only in mass or batch processes (Fordist systems).10 Obviously, the use of automation in production, whether by CAM, FMS, or CIM, will depend not only on technological issues, but on other situational aspects as well, whether environmental or strategic, such as the demand for production flexibility by the customer, the need for a competitive edge in the face of competition, reduction in the price of machines and equipment, the possibility of credit lines, and certain characteristics of labor in the region where the firm is established (aspects better discussed throughout this chapter). These situational issues can lead, inclusively, to the possibility of integrating production with other internal systems that are not related directly to production and/or even with elements that are external to the firm.

10.1.1.2

Integration of the Various Systems

Another feature of the firms that use the Automated Bureaucracy structure is the high integration of their various systems through information technology. In the main operations, the pinnacle of this integration occurs by CIM, which connects the various phases of the production process, removing also human activities from these tasks, that is, from the connecting systems. In this respect, it is important to point out that the traditional production, even while showing some level of automation, employs labor to connect the production stages, whether in the movement of materials, in the feeding of equipment with inputs, and even in the transfer of

150

10

The Automated Bureaucracy

information between the various steps and stages of the process. With CIM, the human tasks of moving materials, feeding inputs, transferring information, and even controlling these integrations are removed.11 The integration, by the way, is not restricted to production. Besides appearing in operations and connecting their stages, the integration also occurs between the various sectors and systems that are not directly related to production. By means of information systems technology based on the concept of Enterprise Resource Planning (ERP), for example, it is possible to achieve a connection between production and its various stages, and the various sectors within the firm such as those responsible for inventory control, billing, accounting, cost control, human resources, etc.12 The integration can go even further in firms with an Automated Bureaucracybased structure, leading to a linkage with external elements. In this respect, the firm is connected with its suppliers and its customers through information systems technology associated with the concepts of e-commerce, e-business, and electronic partnerships. The customer, for example, may have a direct influence on the production process, inclusively in real time. Similarly, suppliers can be provided with information on inputs needed, also in real time (Fig. 10.1).13 However, as in the automation in the main operations, the technological possibilities just presented are not enough for the integration between the various internal and external elements to occur in certain organizations. These limitations are discussed in more detail in a further item concerning the conditions for the formation of the Automated Bureaucracy. Nevertheless, some aspects can be cited here, such as the economic sector in which the firm operates, the firm’s investment

ERP Supply

Sales

CIM Suppliers

CAD Design and project Customers

Planning and control

CAM/FMS

Production

Human Resources

Finance and Accountability

CIE-ERPII-ECM-eERP E-BUSINESS

Fig. 10.1 Automation in manufacturing firms by using information technology

10.1

Description of the Basic Structure

151

capacity, the availability of suppliers and customers that are able to participate in the integration, and the availability of qualified workers, among others. Additionally, the company’s strategy is an important factor for integration to occur. These aspects, along with other technical conditions, encourage or limit the automation and integration that are offered nowadays by the existing technologies. The discussion on automation and integration in organizations that make use of the Automated Bureaucracy structure inevitably leads to some important questions in relation to work organization and structure. What are the activities assigned to people in the operations within these firms? How is labor divided and how is coordination carried out in this organizational format?

10.1.1.3

People in the Operating Core and the Coordination Mechanism

Regarding the people in the operating core of an Automated Bureaucracy, it is necessary to comment on the activities that are now assigned to workers (considering that the production is carried out by automated systems), the profile required of workers in this new workplace, and the main coordination mechanisms used in this structure.

Human Activities In an analysis of human activities in the operating core of the Automated Bureaucracy, two settings should be considered initially: firms that have not adopted automation in all their processes and firms that have adopted automation in all their processes. Where the first setting is concerned, it should be emphasized that although information technology has offered conditions for automation to an extent that has not occurred throughout the history of organizations, this possibility has limits and must be analyzed considering not only the technical context but also the environmental and the strategic. Thus, many processes in a firm may not be automated, whether in the main operations or in the integration of systems internally and externally. In such cases, human activity is still extensively employed, as it happens in other structures, especially in the Machine Bureaucracy. As a consequence, work that is subject to the traditional conditions of routines (instructions), rules, and superior orders as characterized in previous chapters can be noted. That is, there is much division of labor and the coordination happens mainly through the standardization of work processes and through the direct supervision. In some cases, the operations use cells of workers and semi-autonomous groups, in which job enlargement and job enrichment take place. These practices are inherited from the new organizational possibilities, such as the Quality of Working Life (QWL) and even the Organizational Development (OD), which are discussed

152

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The Automated Bureaucracy

in Chap. 8. They are used to bring about improvements in the workplace, in an attempt to decrease turnover and absenteeism rates as well as to increase productivity.14 Production processes in an auto parts firm In a visit to an auto parts firm, certain production processes were seen, as follows: In a department responsible for the pressing of steel plates, despite the use of large mechanical presses and the existence of quite simple tasks, which were conditions that could lead to much automation, a lot of human activity was linked to production. Some workers were responsible for feeding the presses with the steel plates and starting the machines, while others stayed on the other side of the machines, removing the pieces that were being produced. Some presses were placed in line, enabling a sequence in the operations, characterizing not only a Taylorist system, but a Fordist system as well. In the department responsible for welding, robots were found. Some workers were seen feeding the robots with materials to be welded, monitoring the operation, removing the welded parts, and checking the quality. These tasks were not assigned to different workers. Rather, one worker carried out all the activities per robot. In addition, there was a wide diversity in production, i.e., different types of pieces were being turned out. The use of cells or semi-autonomous groups that decided on the order of operations, the position of each worker, and other aspects could be seen in this department where some automation with the use of robots occurred. Found in locus

However, a possibility that is gaining more and more acceptance in operating sites that presents little automation is the lean production. As discussed in Chap. 8, on new organizational possibilities, the lean production aims to meet the needs of mass production companies that seek to increase their productivity and their flexibility by means of a better match between production and quality and through the elimination of “slacks” that have been inherited from the traditional bureaucratic structures. In the operating core of a firm that makes use of lean production principles, a production process emerges requiring better performance from the employees in terms of productivity and quality, based mainly on the variety of functions or multifunctionality.15 In the second setting, which is related to firms that have had their processes automated making use of CAM, FMS, CIM, ERP, and customer–supplier connections, a total labor removal does not happen despite the reduction of human activities. The activities that arise, however, are very different from those that are predominant in the Machine Bureaucracy. Three main types of activities can be noted in the operating core of the Automated Bureaucracy: (1) monitoring and intervention, (2) maintenance, and (3) general improvements. For the first group of activities, monitoring and intervention, tasks similar to those in traditional processing production firms can be seen. In such organizations, the main concern is to keep the system functioning. Thus, there are workers responsible for maintaining the machines’ workflow. In other words, workers are in charge of monitoring the system and intervening in aspects the system cannot act on by itself.16 At the Automated Bureaucracy operating core, similar tasks take place. Workers are responsible for observing production to ensure the constant flow of operations, and for intervening in the system when necessary.17

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Automation in a steel tube industry Years ago, in a visit to a large steel tube company, a large number of workers were seen in the production process. These workers were arranged in certain positions and were responsible for the tasks of handling materials, loading them, pushing them, putting them in drilling machines, gathering them, etc. These activities were very exhausting and were happening at a workplace characterized by a lot of heat, noise, pollution, and with a high possibility of accidents. Recently, in a visit to the same company, it was noted that the mentioned processes had been automated. A large complex of equipment now turned out the tubes and was being controlled by systems based on information technology. In comfortable rooms, protected from noise, pollution, and the danger of accidents, workers were responsible for observing systems, using for this task monitors that presented different schemes, workflows, tables, layouts, etc. Information on measures, production speed, temperatures, and material composition was offered to them so that production could be maintained at a determined pace and at a specified quality. Images of production were also offered via cameras located at key points throughout the production system. If any aspect was seen as compromising production, interventions could be made by the operators using manual controls. Found in locus

It should be emphasized, however, that although such activities have similarities with those that take place in traditional processing production firms, in practice, they present differences mainly due to the technology involved, the amount of available information, and the interconnection of systems. Traditional processing firms use types of technology related mainly to electricity and mechanics, the information available is limited, and the concerns for production are more specific because the systems are not so interconnected. In the Automated Bureaucracy, on the other hand, the employee in charge of monitoring and intervening must have knowledge of a more complex technology in terms of instrumentation (the information technology), there is more information available, and the employee must think about the consequences on the various systems that are now interconnected. Therefore, such employee’s performance must not be so specific.18 The second set of activities consists of tasks related to maintenance, whether preventive or corrective. In their basic principles, they are activities well known in processing production firms and in the Machine Bureaucracies that use a large number of machines and equipment. It can be said, however, that in these traditional companies, maintenance activities are considered of minor importance or are less visible as the number of employees assigned to them is small compared with the workers of the main operations.19 In these firms, maintenance activities basically entail carrying out repair tasks in the case of corrective maintenance, or making periodic inspections in the case of preventive maintenance. As it could be expected, these maintenance activities, whether preventive or corrective, can also be seen in the Automated Bureaucracy. In the first case, the tasks involve inspecting equipment and accomplishing preprogrammed changes. In the second case, maintenance workers remain on call, accompanying the workers responsible for monitoring and intervening. Their job is to observe the equipment in operation, and to step in when the production stops due to malfunctions of systems or when such malfunctions are about to occur. In addition, it is worth emphasizing that, in the same way as for the activities of monitoring and intervening, in this new workplace, the activities of maintenance reach a higher level of complexity when

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compared with those of traditional firms, due to the use of sophisticated equipment based on information technology and the various interconnections that may occur. Moreover, there are variations: small maintenance works, for example, can be performed by the workers who are in charge of the monitoring and intervening activities, and sometimes maintenance activities are outsourced.20 As for the third set of activities that can be observed in the Automated Bureaucracy operating core, there is the responsibility for general improvements. These activities may be considered an organizational novelty, as they are not seen in traditional organizations, whether in processing firms or in the Machine Bureaucracy. In such companies, when changes and improvements in procedures and in the workflow are necessary, the responsibility for carrying them out lies on a specific sector: the technostructure. As Henry Mintzberg explains, this sector is composed of analysts in charge of studying new situations and presenting new work procedures to be followed by the operating core workers.21 This sector exists since the operating core workers are subject to a high division of labor and usually do not hold extensive expertise that would enable them to carry out such improvements. Moreover, from Taylorist ideas, what has been left to workers is the responsibility only for performing tasks, not for their conception, or planning, whether for efficiency reasons or due to necessity of work control. In the Automated Bureaucracy, however, the employment of experts of a technostructure would present several disadvantages. In the first place, these experts are not really needed when the operating core workers, who are in charge of the activities of monitoring, intervention, and maintenance, are considerably knowledgeable in the process, being able, therefore, to offer suggestions for improvements. In the second place, as seen later, Automated Bureaucracies operate in more dynamic environments than those in which Machines Bureaucracies do, what demands that internal changes occur more quickly in the former organizations. Thus, it would not be advisable that the tasks of analysis, diagnosis, and proposal of changes happen just in a distant department that is not involved directly with the operating core. Consequently, in order to have little modifications in the operating core, the Automated Bureaucracy adopts the practice of participatory and incremental changes inherited from Organizational Development (OD) and from Total Quality Management (TQM), as discussed in the Chap. 8, on the new organizational possibilities. That is, teams composed of operating core workers are created and are responsible for proposing changes and improvements, analyzing the viability of these proposals, and, often, implementing them. Much of the responsibility for changes is, thus, at the operating core with the involvement of its workers in these activities.22 Given this new set of activities, however, some comments on their limitations and on workers’ involvement should be made. For the first aspect, it should be emphasized that the power of the operating core workers to modify processes is limited only to decisions over incremental changes and does not cover radical or profound ones. As discussed later, radical decisions relate to Reengineering and do not suppose large organizational participation. Sometimes, even the decisions on incremental changes that occur in the operating core must actually have the

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accordance of an advising and supporting area or of a superior level. As discussed in Chap. 9, the forms of management based on participation are restricted to certain areas and are subject to limits and superior goals. As for the second aspect, which concerns involvement, it should be emphasized that the Automated Bureaucracy needs a greater involvement of the operating core workers. Participation in the processes of changing and improving the systems in which they work is a practice used, also, to bring about such involvement, offering thus a greater possibility of engagement of workers in operations and, ultimately, in the organization.23 In addition to these three main activities that can be seen in the Automated Bureaucracy operating core, i.e., monitoring and intervention, maintenance, and general improvements, there is a possible fourth set of activities: the responsibility for modifications in production. This group of tasks has not been considered here as a main set of activities like the others, not because it is less important, but because, in practice, it may present several possibilities. Indeed, sometimes, the responsibilities of such activities rest upon people from outside the operating core. As already discussed, the Automated Bureaucracy presents a certain production flexibility that enables more variety in production when compared with the traditional Fordist forms of operation, either mass or batch production. This variety is achieved through two types of alterations: small modifications in production equipment and modifications in the instructions that command the system (software).24 In the case of small modifications in production equipment, the responsibility for such tasks generally lies on the maintenance people or, when the equipment are very simple, on the workers in charge of monitoring and intervention. In practical terms, small adjustments are made in machines, especially in the actuators (e.g., pneumatic and hydraulic pistons and electrical motors). In the case of modifications in the instructions that command the system (software), the possibilities are wider. Sometimes these tasks are carried out by the same employees who are responsible for monitoring and intervention, other times by different people, whether managers or those from other sectors.25 This happens not only because of the complexity of the work and of the organization itself, but also because of security issues wherein separating the tasks between different people is recommended. Many times, operators in charge of monitoring and intervening are not allowed to change system settings. Issues related to bounded rationality and opportunism are taken into account, and thus, to avoid any harm being done to the organization, the activities of monitoring and the activities of modifying the system command instructions are assigned to different people. Finally, it is worth emphasizing that, in more interconnected production systems, where the firm has a strong link with its suppliers and its customers, modifications in the command instructions can be made from the information set directly by the customer or any recipient of the production. In summary, there are three basic types of activities for workers in the operating core: (1) monitoring and intervention, (2) general improvements, and (3) maintenance. Moreover, there is the possibility of a fourth set of activities: (4) modification of production. In practice, these activities can be carried out by the same people

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Table 10.1 Activities carried out by workers at the Automated Bureaucracy’s operating core Monitoring and Maintenance General Modifications in intervention improvement production To maintain the To carry out repairs To propose changes and To carry out small production to the system improvements, modifications in flow (to (corrective analyze the viability equipment and observe the maintenance), of these proposals, instructions that system and and tasks related and, often, command the system intervene in to preventive implement them. (software) in order to aspects it maintenance Teams composed of reach production cannot act on operating core alterations (production by itself) workers are created flexibility). Sometimes, and are responsible such activities are carried for such incremental out by individuals changes outside the operating core

or by different people resulting then in some division of labor. The way in which these activities are carried out will depend on the complexity of the technology and of the organization as in the case of large companies. In great complex systems, for example, it is almost impossible to concentrate the work of monitoring and intervention and of maintenance in just one person. It should be emphasized, however, that the division of labor does not happen at the level that can be seen in the Machine Bureaucracy. The high division of labor is harmful to the performance of workers considering the organizational objectives at the Automated Bureaucracy operating core, because workers must hold many skills and perform various tasks.26 This is even more true for the activities of general improvements. In such tasks, the most common practice is to include all workers involved in the operating core: those in charge of monitoring and intervention, those in charge of maintenance, and those in charge of modifications in the production (Table 10.1). The Operating Core Workers’ Profile Given the new activities assigned to individuals at the operating core of the organization with a structure based on the Automated Bureaucracy, differences can be noticed in the profile required of the workers when compared with the traditional Fordist production firms. In a Machine Bureaucracy, the worker often carries out simple tasks considering the job specialization resulting from the extensive division of labor. For such performance in this type of workplace to happen, what is required is an employee who respects the rules (coordination by standardization of work processes) and who obeys superiors (coordination by direct supervision). Higher qualifications are not required, and when present, they may even be a problem for the worker to keep working in the firm because of the dissatisfaction that may come up. This dissatisfaction could generate a high level of absenteeism and turnover, in addition to low productivity.27

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In an Automated Bureaucracy, this obedient profile no longer exists, as the worker must monitor and intervene to keep the system running, and must also present suggestions to improve the processes and products. In addition, all those activities happen within interconnected processes that can influence other systems in the firm and affect customers and suppliers. Even when compared with the workers of traditional processing production firms, the requirements are different,28 as in the following examples: (1) greater systemic and conceptual skills in order to have a better understanding of the several interconnected processes; (2) capability of innovating in order to make improvements to the processes and the organization as a whole; and (3) knowledge of information technology, whether on equipment (hardware) or programs (software), among others. Two concepts are important concerning the analysis of the profile of a worker in the Automated Bureaucracy: multifunctionality and competency. As for the first concept, the need for a multifunctional worker has long been discussed, mainly from Japanese forms of work organization such as the lean production. Such a worker should not be a specialist dedicated just to a specific task, but someone able to perform a wide range of tasks or functions. To do so, such a worker is required to have broad knowledge in relation to the various aspects that may affect his performance or, even, the organization’s business. A wide variety of technical and conceptual skills would be thus demanded. In an Automated Bureaucracy, there is a need for such a multifunctional profile because the worker must perform in a non-specialized manner.29 As for the second concept, competency, according to Philippe Zarifian, an employee is required not only to have simple technical training aimed at the objective aspects of the work and related to the required profile of some jobs, but also to assume new responsibilities and major reflexivity in the work, i.e., constant questioning and a critical view, at continual learning (Table 10.2).30 Considering these changes in the activities and in the profile required from the workers, a question should be asked: What would ensure that the work would be actually accomplished? Or, within the structural approach: What would ensure the coordination of the work divided in the operating core of a firm with a structure based on the Automated Bureaucracy?

Coordination in the Operating Core The Machine Bureaucracy presents the standardization of work processes as the main coordination mechanism and the direct supervision (using a manager) as a subsidiary mechanism for unforeseen situations. The Automated Bureaucracy Table 10.2 Worker’s profile in Automated Bureaucracy Multifunctionality Competency Wide variety of technical and conceptual skills

Responsibility and reflexivity (questioning and critical view and continual learning)

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reduces the importance of these coordination mechanisms. The tasks that could be standardized are mostly automated, and the tasks that cannot be standardized are left to the worker to decide on his own, as it is not convenient that he waits for specific instructions from a superior. Interventions and corrective maintenance tasks, for example, are hardly standardized or even coordinated by the immediate superior. Monitoring and intervening often depend on the worker’s individual decisions considering his competencies and the situation that he faces. The impossibility of standardization and of direct supervision becomes even clearer for activities related to general improvements. Even when controlling the number of proposals presented and offering rewards for suggestions, there are limits to management actions in this case. It has long been known that under such circumstances intrinsic motivation elements are much more effective than extrinsic motivational aspects, whether negative (penalties) or positive (rewards).31 The other traditional coordination mechanisms could even be used in the operating core of the Automated Bureaucracy. The standardization of results, for example, may be used to verify the quantity produced by the automated system. The standardization of skills may be used within the new concept of competency, and the mutual adjustment may be used by the teams when suggesting improvements. These coordination mechanisms, however, have many limitations in an Automated Bureaucracy and are often appropriate only subsidiarily. Thus, in the Automated Bureaucracies, great importance is placed in one of the new types of coordination discussed in Chap. 9: the coordination by values and norms. As stated in Chap. 9, values and norms, and the culture as a whole, had always been treated as having a secondary role in organizations so that they would not hinder the traditional coordination mechanisms. Recently, however, an increasing tendency to use and defend them as a main coordination mechanism, even if not explicitly, has been verified.32 In Automated Bureaucracies, certain values and norms are used, and every worker is ultimately requested to internalize them.33 Such values and norms can be divided into two kinds: specific and general.34 In the case of the specific, there are some values and norms that are related to a particular organization, such as the importance of maintaining the production flow and the necessity of intervening for the production flow to happen, the importance of satisfying internal and external clients, the responsibility for the organization’s mission in the face of the society’s demands, and other values and norms that are specific for each firm.35 For the general, there are values and norms that are not linked to a particular organization and that are common to the several Automated Bureaucracies that emerge in society, such as the requirement for continuous training and education, and for being an entrepreneur, looking constantly for changes and improvements.36 Therefore, there are values and norms that are defended in such firms, and it is intended that they be adopted by workers in a way that can be used as a work coordination mechanism. The main idea is to create a set of shared values and norms to guarantee the production flow, and continuous improvement and competitiveness, among other things.

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Table 10.3 The coordination by values and norms: main types used in Automated Bureaucracies Specific General The workers are responsible for: The workers are responsible for: – Maintaining the production flow and – Training and educating themselves intervening in it continuously – Satisfying internal and external clients – Being entrepreneurs, looking constantly for changes and improvements – Undertaking the organization mission in the face of the society’s demands – Undertaking other values and norms that are specific for each firm

In the case of the forms of work organization in which tasks are not fully automated and that still demand a lot of human activities, the importance of coordination by values and norms can be verified. It mainly happens once work cells, semi-autonomous groups, and lean production are utilized in these workplaces. In such cases, the multifunctional work and the participation in certain decisions require that the employees identify with the organization and internalize its values and norms. In addition, in these forms of work organization it can be found activities related to general improvement in which all employees are requested to submit suggestions for change, discuss them, and take responsibility for the implementation of several of them (Table 10.3).

10.1.2 The Middle Line Among the activities assigned to middle line managers in the Machine Bureaucracies, the main tasks related to the workers are verification of compliance with rules, standards, and procedures (control function), and coordination of the work (direct supervision) subsidiary to the standardization of the work processes that is the main coordination mechanism. Despite the appearance of more participative forms of management in organizational studies after the 1960s,37 in practice, authoritative and controlling types of management have always been used in the Machine Bureaucracy. In an organization with a structure based on the Automated Bureaucracy, managerial activities are different. There is no room for coordination by direct supervision as the decisions must be made largely by the workers in their scope of action. The importance of the control function is also decreased mostly due to the reduction in the number of standards, rules, and procedures to be verified. The automated system itself is responsible for controlling much of the employees’ performance, preventing inappropriate actions from happening. Moreover, within the concepts of Total Quality Management and lean production, the control is transferred to the worker himself or to the team, with everyone being responsible for checking quality.

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Even if it is argued that today, in automated firms, managers are monitoring production by means of remote systems, it should be agreed that such control cannot be compared with the forms of monitoring applied in traditional companies.38 In the latter, any move or behavior considered informal could be seen as harmful to the organization, deserving immediate corrective treatment.39 Thus, in general, the manager in an Automated Bureaucracy is expected to carry out new functions and to play new roles, among which are to support the employees’ new activities and to encourage the participation, involvement, and attitudes related to creativity and innovation.40 These would be activities aimed at dealing with skilled workers who have the autonomy to decide on the interventions, who need to be innovators, and who must be committed to the organization. These managerial functions and roles are important as the coordination based on values and norms is used in the Automated Bureaucracy structure and the managers have the duty to maintain and reinforce them.41 An autocratic manager, as can be seen in Machine Bureaucracies, is not necessary any more; what is needed is a facilitator for the employees’ performance.42 Given this situation, a large number of papers defending a more humane, democratic, and participatory managerial actuation can be currently seen in the literature. It is important to point out that it has not been come to conclusion that more democratic types of leadership are better than autocratic ones. According to situational and contingency leadership theories, it can be said that the situations that arise in the Automated Bureaucracy nowadays demand a less autocratic leadership.43 The concept of empowerment goes along with these new managerial responsibilities. Through this concept, managers are required to transfer part of their authority and responsibility to the subordinates, so that their administration breaks with traditional types of management that are based only on command and control. This transference of authority and responsibility happens because workers have to make many decisions in their scope of action in order to maintain the work flow and, also, to submit proposals of general improvements. Another change in the work of managers in comparison with traditional kinds of firms is the expansion of their activities, caused by the reduction of the tasks allocated to the sectors of advising and supporting, as discussed below (Table 10.4). Table 10.4 Managers’ functions and roles Machine Bureaucracy Verification of compliance with rules, standards, and procedures (control function) Coordination of the work (direct supervision) subsidiary to the standardization of the work processes that is the main coordination mechanism

Automated Bureaucracy Support to the new workers’ activities: encouraging participation and involvement, creative and innovative attitudes (maintaining and reinforcing the values and norms) Enlargement of their activities, caused by the reduction of the tasks allocated to the sectors of advising and supporting

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10.1.3 Support Staff and Technostructure In his work on structures, Henry Mintzberg presents two possibilities for the activities of advising and supporting in a Machine Bureaucracy: (1) the technostructure and (2) the support staff. In the first case, some workers (analysts), despite not carrying out functions in the operating core, are responsible for tasks that are essential for production. Examples include the preparation of routines and procedures for the employees to follow, the planning of work, the carrying out of small changes, the recruitment and training of staff, and so on. Thus, for Mintzberg, it is a group that holds great power in that structure, mostly informally. As for the second case, the support staff, there are many activities in the Machine Bureaucracy that, despite not being considered as the firm’s principal activities, are carried out internally because of issues concerning the need of control and security in supply, reduction of transaction costs, and even gains in economy of scope. Thus, activities such as security services, cleaning, restaurant duties, and attendance and payment control, among others, are internally carried out by specific departments in order to provide a constant and guaranteed service and obtain gains in activities other than those that would be deemed principal to the firm. It is interesting to point out that, in spite of not holding much power as in the case of the technostructure, the support staff that is responsible for these activities can reach large dimensions depending on the company in question. With the emergence of the Automated Bureaucracy, there have been considerable changes in these two advising and supporting areas. Where the technostructure is concerned, an elimination or reduction of many of its traditional functions can be noticed.44 Many of the routines happen to become “embedded” in the automated systems, whether in the mechanisms (hardware) or in the programs (software). Thus, the function of preparing instructions and procedures considerably loses its importance. Actually, a reasonable demand for these activities can occur in the establishment of the cited automated system. However, as most of those tasks may occur only in the implementation, some of the professionals responsible for them may be hired only at the time of the need or the tasks can be even outsourced. With regard to the activities of planning of work and the incremental changes, or the small modifications that are needed in any firm, they increasingly become the operating core’s responsibility. Thus, the line manager and his team come up to assume great part of those functions. As for activities such as recruitment, selection, and training, a similar situation can be verified. Within the concept of Strategic Human Resources Management, or Strategic Management of People, line managers or the operating core supervisors are called upon to become more engaged in these processes. In practical terms, managers and other employees of the operating core can be increasingly seen participating in processes related to human resources management such as the selection of new employees. Specifically for training, there is also great participation of the operating core workers in the identification of qualification needs and, inclusively, preparing projects for training. In addition, other functions also related to human resources

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management such as performance appraisal and organizational climate assessment are, increasingly, becoming the responsibility of line managers and their teams.45 As result of these changes, many of the technostructure’s functions are eliminated or reduced, and this sector’s activities are requested to be linked, in fact, to advisory or internal consulting.46 In this respect, despite the transfer of the responsibility for many activities from the technostructure to the operating core, a consulting arrangement is often necessary by reason of the line managers not usually being skilled in these new roles. The decision on people management, for instance, falls to line managers and the activities related to consulting are assigned to the human resources departments. The same thing happens to other traditional activities of the technostructure. The responsibility lies with the operating core teams and an internal consultant comes in to help them. Concerning the other area responsible for activities of advising and supporting, the support staff, there is also a reduction in the number of functions resulting mostly from automation and the outsourcing of some processes. In the first case, with information technology, several support activities have undergone automation, such as attendance control and payroll management. As for outsourcing, the transfer of many support activities to other firms can be seen for two main reasons. First, with the outsourcing, the company can focus on its core business and maintain an automatic control of its activities, acquiring, in addition, greater production flexibility. Second, there is nowadays an increased possibility of finding firms that can offer these support services. Thus, by purchasing from these firms, efficiency is increased and transaction costs are reduced. Regarding the increase in efficiency, it becomes clear that, as the service is the core business of the supplier firm, a higher level of productivity can be achieved. Regarding reduction in transaction costs, it is worth remembering that if there is a greater possibility of supply, there is less uncertainty, which makes the firm opt for the external acquisition instead of producing internally.47 Consequently, in the Automated Bureaucracy, the trend is to outsource activities related to support areas and maintain internally only small sectors that are responsible for the liaison with contracted firms. These sectors or even positions would be responsible for controlling the services provided by the contracted firms considering this new division of activities between firms that is coordinated through contracts (Table 10.5).48 Finally, it is worth pointing out that support activities that are deemed important and that require security in supply are kept inside the firm. Some maintenance activities, as discussed earlier, may deserve this treatment and thus are not outsourced, especially those related to the maintenance of important production equipment. The maintenance activities that are not considered so may be outsourced.

10.1.4 The Strategic Apex Similar to what happens in traditional companies, the strategic apex is very important in the Automated Bureaucracy as this strategic apex deals with the most important

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Table 10.5 Changes in the technostructure and in the support staff Activities of advising and supporting in a Activities of advising and supporting in a Machine Bureaucracy Automated Bureaucracy Technostructure Technostructure – Creation of routines and procedures for the – The creation of routines and procedures employees to follow decreases due to the automated work – Planning of work – Other activities also decrease becoming the – Recruitment and training of staff operating core’s responsibility – Small changes – This sector is requested to carry out activities linked, in fact, to advisory or internal consulting Support staff Carrying out of activities considered not the firm’s principal ones but that are kept internally due to the need of control and security in supply, reduction of transaction costs, and even gains in economy of scope. For example: security services, cleaning, restaurant duties, and attendance and payment control, among others

Support staff Reduction in the number of functions resulting mostly from automation and the outsourcing

decisions in terms of impact on the various sectors of the firm and in terms of longlasting consequences. Decisions on the intensive use of information technology, radical changes, downsizing, outsourcing, the election of the firm’s mission, its core business and its core competences, and the forging of partnerships with other companies, among others, are some of the decisions that fall upon the strategic apex. However, despite the importance of the apex, various modifications may be seen in the Automated Bureaucracy in comparison with the Machine Bureaucracy.49 First, the apex has less influence on the lower levels considering the operational and the tactical choices, i.e., the decisions that are deemed incremental are effectively delegated to lower levels. The concern with “the fine tuning of their bureaucratic machines”,50 as in the case of the Machine Bureaucracy’s strategic apex, decreases in the Automated Bureaucracy’s apex. This situation is in line with current concepts such as empowerment. Many operational decisions, by the way, are less influenced by the organizational apex simply because these activities have been outsourced. Second, there is more sharing in strategic decision making. The complexity and dynamism of the environment and a major accountability to the various stakeholders in society justify this sharing, which occurs by means of collective deliberations or the participation of the lower levels in decisions. In the first case, there are groups, boards, or councils responsible for the major decisions. The concept of corporate governance is a reference concerning this situation.51 The second case, the concept of Strategic Management highlights, in which the various levels are called upon to cooperate in the development of the strategic plan and then to make their own in accordance with such strategic plan.52 As a third change related to the strategy apex, the function and the symbolic role of a social planner have been strengthened.53 With respect to social planners,

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Table 10.6 Strategic apex’s functions and roles In a Machine Bureaucracy In the Automated Bureaucracy Important decisions in terms of impact on the It remains the responsibility for the important various sectors of the firm and in terms of decisions. However, collective deliberations long-lasting consequences and the participation of the lower levels in decisions emerge “The fine tuning of their bureaucratic Less influence on the lower levels’ decisions machines” (according to H. Mintzberg) Symbolic role of a social planner has been strengthened

administrators at this level have to devote more time to social actions, including political ones, than to technical matters. As for the symbolic role, as values and norms acquire more importance in the Automated Bureaucracy, the apex administrators have to be aware that they must become models of work, morale, effort, and dedication that will be spread in the entire organization – not like the old captains of industry who were seen by some as super heroes, or by others as exploiters of workers through the surplus labor, but as just, devoted men who, through work, can achieve their goals as well as the organizational objectives (Table 10.6).54

10.2

Conditions for the Automated Bureaucracy

In the same way that certain conditions were necessary for the appearance of traditional structures, some circumstances are also necessary for the emergence of the Automated Bureaucracy. Within the congruency perspective and even the Configuration School coined by Henry Mintzberg, a structure arises as a result of a harmony, or a balance, between internal and external factors. Specifically for the Automated Bureaucracy, some of these circumstances are similar to those related to the Machine Bureaucracy, such as the strategy of obtaining economies of scale. There are new situations, however, that make possible the emergence of this new structure. These situations are discussed in the previous chapters, mostly in Chaps. 5–7, and can be summarized in technical, environmental, and strategic terms.

10.2.1 Technical Factors Concerning Production and Automation The Automated Bureaucracy emerges primarily in organizations that have undergone automation processes and a large removal of labor from the production itself.55 For this to happen, the organization makes intensive use of information technology as well as traditional types of technologies related to electricity and

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mechanics. As mentioned at the beginning of this chapter, the firm needs to employ automation systems in production such as those related to the concepts of CAM, CIM, and FMS. Furthermore, it needs an internal integration by using automated systems based on the concept of ERP, and an external integration with automation based on concepts of e-business, electronic partnerships, etc. Therefore, a production that is automated and both internally and externally integrated is possible. However, besides these possibilities of automation concerning information technology, the emergence of the Automated Bureaucracy is conditional on other technical aspects related to production, especially considering the features of the operations and the inputs as well as the technology used by suppliers and customers.56 With regard to the characteristics of the operations, the Automated Bureaucracy emerges in firms that present a high production volume, but with a production variety that is not very wide. In the first aspect, the high volume, to automate the production it is necessary to obtain gains in economies of scale in order to compensate the investments. In the second aspect, the low variety, it should be pointed out that although IT has enabled more production flexibility than that seen in Fordism or in traditional processing firms, this flexibility is limited, as are the production variations. The confection of products in these firms to respond to a more specific demand with low volume would lead to constant changes in programs and in equipment, which could leave the production uncompensated. Thus, in such cases, systems with little automation and operations by units, e.g. use of machine tools, or the automated systems based on NC are still used.57 This is discussed in the next chapter that deals with adhocratic production firms in which the automation is more instrumental and does not result in a removal of labor. Another important factor to be noted where operating features are concerned is the complexity of the task. According to Benjamin Coriat, the simpler and more repetitive the movement is, more automation can replace labor and eliminate it.58 Thus, the simpler the task is, the easier it is to automate the system, and thus, the higher the possibility for an Automated Bureaucracy to emerge. Otherwise, if there are very complex tasks, automation is not feasible, and the Automated Bureaucracy does not emerge. Benjamin Coriat, incidentally, cites assembling as the most difficult operation to be automated because of its complexity. This fact can explain why several activities in automotive companies continue to demand much labor when compared with other mass production firms.59 Regarding inputs, certain features have to be present to allow the automation. At a butchery, for example, the activities of boning and preparing the cuts still use little automation. In general, these tasks are accomplished manually, with workers carrying out the tasks using knives. There is division of labor in which a worker is responsible for boning or cutting certain parts of the animal. Automating this process is difficult due to lack of standard in inputs and due to the fact that there is no equipment that removes the meat from the bone, maintaining its original conditions.60 The following processes in these firms such as the production of sausages and beef burgers and even the packaging can be automated quite easily. With respect to the technology used by suppliers and customers, it should be pointed out that the external integration, necessary for the emergence of the

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Automated Bureaucracy in its most complete format, can occur only when the types of technology utilized by the parts involved, i.e. between a firm and external actors, are compatible. Otherwise, despite the occurrence of some internal integration, externally, the integration may not happen. In addition to these technical aspects related to production and integration, other aspects should be taken into consideration, such as the firm’s capacity to invest in technology and the existence of more favorable alternatives (opportunity cost). In the latter case, what can be offered as an example is the situation in emerging countries such as India or China that have a lot of available labor, a fact that can become an attractive alternative to automation. Thus, if certain technical conditions such as those aforementioned are not present, automation does not happen and it is utilized the traditional production systems that feature intensive use of labor and organizational structures, high division of labor and coordination by standardization of work processes and by direct supervision. In some cases, large numbers of workers are employed in operation systems based on cells and lean production, as discussed earlier.

10.2.2 The Environment for the Automated Bureaucracy Besides the technical factors already mentioned, the existence of some favorable environmental conditions is necessary for the emergence of an Automated Bureaucracy. Obviously, similar to the large traditional companies, this type of structure emerges in environments that present high demand for certain products or, ultimately, great interest in a certain business.61 This fact allows the high-volume production that enables the installation of equipment that automates operations. However, there must be also other environmental factors related to the high level of competition nowadays, the more individualized and integrated consumption behavior, and the existence of appropriate suppliers and workers with some qualification level. As for the high level of competition, which includes global competition, and the more individualized consumption behavior, it can be pointed out that these two elements bring to firms, in addition to concerns about price and quality, the demand for some production flexibility and for the ability to change products. The Automated Bureaucracy fits this new environment as it is able to offer products with appropriate price and quality and to make changes that are not possible in machine bureaucratic structures – changes that are achieved through automation systems based on IT and the new workers’ activities, mainly those related to general improvements and modifications in production. Still with respect to customers, integrated purchasing is another environmental situation favorable for the emergence of the Automated Bureaucracy. The use of the internet or similar systems in shopping, for example,62 offers a situation conducive to such integration, since it enables the automated and integrated production that arises within a firm with this new structure. The flexible production that is now required, by the way, is made possible with this integrated purchasing behavior.

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Where suppliers are concerned, in order to present its production features, the Automated Bureaucracy needs an environment that offers a reliable supply as well as conditions of integration. Only this way will the Automated Bureaucracy have a guaranteed and just-in-time supply that ensures its integrated and automated production. Sometimes, when these conditions are not present in the supply, the firm influences the environment by encouraging the appearance of suppliers. The automobile sector is a reference in this respect. Companies of this economic sector that aim to acquire most of their parts externally, mainly through pre-assembled modules, require an appropriate supply chain. When they do not find one, they encourage the establishment of suppliers or the movement of such suppliers from other regions to make possible the just-in-time supply.63 Incentives given to former workers for the creation of supply firms is another option used to achieve a situation of secure supply. The actions by firms to encourage entrepreneurship are references in this aspect. Besides achieving a reliable supply and appropriate technical conditions, such incentive can also prevent problems caused by dismissals due to outsourcing. To be able to operate, the Automated Bureaucracy also needs an environment that offers a certain form of labor. It is worth remembering that, as discussed in previous items, the activities assigned to employees in this new structure present significant differences in relation to traditional types of production. Thus, workers are required to be more qualified and to have greater commitment to the organization. The concept of qualification, apropos, is related to the new concept of competency and not just to the technical training that just prepares specialists.64 Still with regard to qualification, it is interesting to point out that, in the same way as in the case of supply, when such qualifications are not found in the environment it may often happen that the firm acts toward generating the required competencies. The current concept of Corporate University is one example of an action aimed at this direction.65 In addition to these factors, in the analysis of the environment presented to the Automated Bureaucracy, comments on the dynamism and complexity of the environment are necessary. In the first case, the Automated Bureaucracy emerges in environments that are less stable than are presented to the traditional Machine Bureaucracy. This dynamic environment is materialized in, for example, the changes and diversification in consumer behavior, the differences and the changes in the legislation of countries and regions in which the firm operates, and the constant technological changes, among others. This kind of environment requires more flexibility as well as the ability to innovate from the firm. Thus, the Automated Bureaucracy operates in an environment that shows greater turbulence compared with the favorable environment for the traditional Machine Bureaucracies. It is important to emphasize, however, that such environment is not as dynamic and entrepreneurial as those in which small firms with the Simple Structure operate; and not as innovative as those in which firms by projects, organic firms that present adhocratic structure, operate.66 In terms of complexity, the Automated Bureaucracy can be said to operate in an environment similar to that of the Machine Bureaucracy. In this respect, the

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Automated Bureaucracy also makes use of differentiation, i.e., various departments and positions, to deal with some external complexity.67 Actually, it often operates in less complex environments as it outsources many activities, what allows it to concentrate on its core business. Seemingly, in order to achieve a greater ability to innovate, the firm seeks to reduce the complexity of the environment in which it operates, similar to what happens in small firms with the Simple Structure.68 Thus, under certain environmental and technical conditions, a company with an Automated Bureaucracy structure can emerge instead of the traditional Machine Bureaucracy.

10.2.3 Strategy of the Automated Bureaucracy Traditional firms with structures based on the Machine Bureaucracy and even on the Divisionalized Form, in trying to generate gains related to economies of scale and of scope and to reduce transaction costs, use basically the strategies of establishing large production plants, and horizontal and vertical integration.69 Due to the environment in which Automated Bureaucracies operate, they have to alter these strategies and, in some cases, must choose opposite ways, as in the case of business concentration and outsourcing that present contrary to vertical integration. From a recollection of the trends described in Chap. 7, some general and some functional strategies can be mentioned as used by the Automated Bureaucracy.70 Among the general strategies are the major concerns with the client, with the competition (even in an international context), with innovation, and with social responsibility. For functional strategies, there are the major attention to human resources, with the intensive use of automation and information technology, with production flexibility, with integration with suppliers and customers, with participation in partnerships, alliances and even mergers, and mainly with the business concentration – strategies that deserve some discussion here. In traditional enterprises the concern with the client used to be much more a matter of declaration than of practice, as more importance was given to the production and its planning. Nowadays, however, the actions of organizations have turned to favor this element, mostly due to the competition, inclusively worldwide. In this respect, besides the concerns on price, quality and even on serving the clients in a more personalized way, the Automated Bureaucracy increasingly attempts to achieve customer loyalty, creating a close relationship so as to obtain a more constant and enduring flow of sales for its production. Actions aimed at strengthening the company’s name and its brand materialize the concern of building customer loyalty.71 The concept of Customer Relationship Management (CRM), which is undertaken with modern IT-based systems, is another example that can be offered and that demonstrates the great care firms take with customers nowadays.72 To achieve customer loyalty, the Automated Bureaucracy goes further. It carries out actions not just regarding its clients, but also society as a whole. In this respect,

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actions related to social concern, such as those that demonstrate social responsibility and that show respect for the community can be mentioned. Examples of the first case are actions towards rational use of resources and recycling, and aimed at avoiding pollution among others. In the second case, there are actions related to cultural and artistic events, as well as regarding improvement of the quality of life.73 Whether seeking to enlarge its markets, or just to defend its position, the Automated Bureaucracy attempts, increasingly, to operate globally. This may not be considered a novelty for the large and traditional companies that used to adopt strategies of obtaining gains in scale and of horizontal integration. For the Automated Bureaucracy, however, not acting globally can cause its extinction, as it is in a situation of constant threat in the face of the new global possibilities. Thus, it stands for a global performance, whether in an active way or in defense of its national position against competition. In this regard, the Automated Bureaucracy presents many possibilities beyond mere geographical expansion so common for the traditional companies. It can achieve its objective by exporting, by giving permission (rights) to firms in other countries to manufacture its products, by franchising, by establishing joint ventures, or even through the traditional way, i.e., by establishing subsidiaries abroad.74 In general, innovation cannot be cited as among the strategies used by firms with traditional Machine Bureaucracy-based structures because of the stable environment, with just incremental changes, in which they used to operate. As discussed earlier, however, the Automated Bureaucracy operates in a dynamic situation and therefore it is imperative for it, within its strategies, to engage in constant innovation. Specifically in the microenvironment, innovation capacity is now considered a competitive differential for winning the customer and overcoming competitors. In this respect, the consequent improvements can happen not only in the products that are offered to the environment, but also in the internal processes. As for the attention to human resources, it is important to mention that the traditional companies used to treat workers simply as replaceable parts.75 Some discussions on labor relations are made at the end of this chapter, but in general, it can be argued that the maintenance of appropriate relations with unions and paying correct attention to labor laws were always enough for the large organizations to avoid having major problems with their human resources. The Automated Bureaucracy cannot play this way. To perform in a high-technology environment that is highly integrated by information technology and to seek constant innovation requires a different profile for employees, and currently, one of the greatest challenges for organizations is to find such employees and to keep them committed to this new structure and its new activities. Although there may be a great number of people seeking employment in traditional activities, it is not easy to find and retain employees with the level of qualifications and competency required by the Automated Bureaucracy. The various practices related to the Strategic Management of Human Resources, or to People Management, are used in the Automated Bureaucracy, and thus the concern with people occupies a prominent place among its strategies. As for technology, it becomes quite clear that one of the first issues of concern to an organization with a structure based on the Automated Bureaucracy is

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information technology.76 To automate, the firm needs to be up to date with this technology and its applications. Beside an increase in productivity, this attention to IT allows the firm to be flexible and to achieve production integration with suppliers and customers, two other typical strategies of the Automated Bureaucracy. Through production flexibility, the firm is able to maintain a more segmented service, or even a personalized one. Through the integration with customers, the firm can identify their needs and desires, satisfy them in real time, within a just-intime basis, and still achieve their loyalty.77 Through the integration with suppliers, it is reached reduction of stock, security of supply, and decrease in costs.78 It is worth remembering that both the production flexibility and the integration with customers and suppliers are achieved not only through automated systems based on IT, but also through the new activities of employees, i.e. monitoring and intervention, general improvements, and modifications in production. Still with respect to information technology, it should be pointed out that the concern in keeping up to date with such technology arises from the fact that firms need to have products that can be inserted into the so-called information economy. According to Manuel Castells, within this reality many products present various possibilities of use, including the creation of other products or offering new possibilities of use that come from changes made by customers.79 Thus, developing products that enable insertion into this information economy is a constant concern in the Automated Bureaucracy. By forming partnerships and alliances, and by mergers and acquisitions, the Automated Bureaucracy aims to operate globally and, even, to defend its position against current or future competitors. Moreover, through such measures the firm seeks to obtain greater bargaining power before suppliers and customers, as well as other advantages resulting from major size and great economic power.80 Specifically where mergers and acquisitions are concerned, it should be emphasized that, currently, they are movements towards horizontal integration rather than vertical integration, as the latter seems to be a strategy being increasingly abandoned by the Automated Bureaucracies.81 If vertical integration, with its advantages related to the reduction of transaction costs and gains in scope, was one of the main strategies used by large and traditional companies, the Automated Bureaucracy by contrast applies a strategy concentrated on its core business, outsourcing many activities that, in past, were carried out within the firm. Outsourcing happens for support activities and even for activities that take part of the main production process. In this regard, the attentions turn to the core business or yet to the activities in which the firm presents core competencies.82 “Focus” is one of the words most used to justify these actions. However, the reasons for an Automated Bureaucracy to use this strategy can be better analyzed considering three main aspects: the search for better competition conditions, the current easiness in getting supply, and the limits of automation.83 In the first case, given the competitive environment in which it operates, the Automated Bureaucracy needs to concentrate on that area in which it is really competitive. The option is to focus on what is deemed a positive differential considering the society, the customers, and the competition, and thus, the firm

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can present better conditions for competition. In this respect, with the business concentration, the Automated Bureaucracy can present better conditions for innovation and flexibility and also attain major responsiveness in the face of external changes that may arise. In the second case, the easier supply, it is important to note that if nowadays there is a greater possibility of getting supply, including globally, the Automated Bureaucracy does not need to keep so many activities internally, as what used to happen in traditional enterprises, either for security or for reduction of transaction costs. In many cases, external acquisition is appropriate so as to benefit from the competition between suppliers, and as a consequence to purchase products from those who offer distinctive competencies in such activities.84 As for the third aspect, the limits of automation, it becomes clear that, despite the current great possibilities of production, integration, and flexibility allowed by IT, restrictions may be noted. Many of them are discussed later in the item reserved for technical conditions for the emergence of the Automated Bureaucracy. Specifically for the case of limits related to the characteristics of the operations, it must be pointed out that very complex operations are an obstacle to automation.85 Therefore, keeping many different activities internally increases complexity, hindering automation, flexibility, and integration, whether internal or external. Thus, because of these cited factors – better conditions for competition, easier supply nowadays, and the limits of automation – the Automated Bureaucracy turns to the business concentration, outsourcing many activities that used to be kept internally. These activities may include those related to support activities, part of the technostructure that is not deemed strategic, and part of the production process that the firm does not consider as its core business or principal activity, that is, the activities in which the firm does not consider as having core competencies. It is worth emphasizing, however, that, as discussed in the item related to environmental situations, the strategy of concentration depends on the existence of suppliers that present appropriate supply conditions.86 Outsourcing in a butchery enabling automation In visits to butcheries, it was noted that one of them, which specialized in the production of sausages, had decided to outsource the activities of boning the meat. Because conditions that would enable the automation of these activities were limited, the company had simply stopped performing such tasks internally. The firm decided to acquire the meat, already deboned, from the market. The existence of supply in the region and the need to automate the process of producing sausages were the major factors that had weighed in the decision. Found in locus Vertical integration in a pasta factory: the decision to not outsource In a visit to an alimentary pasta producer, it was noted that the firm had just gone through high automation and had outsourced various support activities and even activities previously considered related to the production process. However, it maintained internally the operations of milling, during which the wheat is ground and mixed with other inputs. The option to purchase the ready mix externally had been considered before, but because of the importance of milling to the production and the nonexistence of an appropriate supplier, the company had decided to maintain this stage of production internally. Found in locus

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Table 10.7 Conditions for emerging the Automated Bureaucracy Technical Environmental Strategic IT-based automation High demand for certain General products High volume production High level of Major concerns with the clients; competition competition (even in an international context); innovation; and social responsibility Moderate production Integrated and moderately Functional variety personalized purchasing behavior Operations with tasks Reliable and integrated Major concerns with the core business; originally done in supply participation in partnerships, alliances simple and repetitive and mergers; production flexibility; movements intensive use of automation and IT; internal and external integration; and Inputs’ features that More qualified labor force major concerns with human resources allow automation Technical compatibility A moderately complex and with suppliers and dynamic environment clients that requires some flexibility and innovation

In short, for the emergence of firms with structures based on the Automated Bureaucracy, besides the technical and environmental conditions cited, there must also be, in the organization, the strategies discussed above. Among them, the business concentration must be emphasized, which leads to the increasing use of a new coordination mechanism: the contract (Table 10.7).

10.2.4 The Use of Coordination by Contracts The strategy of large and traditional companies related to vertical integration, that is, to give priority to internal production instead of acquiring it externally, led to the emergence of large machine bureaucratic structures and their mechanism of coordination based mostly on the standardization of work process and on direct supervision. Given the business concentration strategy and the consequent outsourcing of various activities, the Automated Bureaucracy inverts this situation and presents part of the production as being acquired externally, which means that it uses the market more than it does the hierarchy. Thus, much of the divided work does not happen internally, but between different firms, and the traditional coordination mechanisms do not offer guarantees in such cases. To solve this problem, a mechanism of coordination that is little discussed in management studies is employed: the coordination by contracts. Based on the discussion in Chap. 9, in accordance with the transaction costs approach, contracts can be classified into four basic types: (1) the classical contract, which is seen when the market is used in simple relations that do not imply effects

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Table 10.8 Changes regarding the contracts Machine Bureaucracy Automated Bureaucracy Unified relational contracts (internal relations Besides the other three, there is an increase in with the use of hierarchy) bilateral relational contracting, that is, more stable, lasting and close relations with Classical and neoclassical contracts (external suppliers acquisition with neither stable relationships nor continuity in agreements maintained)

for long time; (2) the neoclassical contract, which is seen in relations that present the possibility of some effects for long time and, therefore, other parts may be used for arbitration, regulation, and so on; (3) the bilateral relational contract, which is seen when there is some stability in relations, including a certain continuity in the agreement and continual negotiations; and (4) the unified relational contract, which coincides with the relations that occur within a certain firm (using the hierarchy). Firms with traditional structures based on the Machine Bureaucracy employ, basically, the two extremes of the classification, i.e., the unified relational contracts (internal relations with the use of the hierarchy) and, when necessary, the classical and neoclassical contracts, since stable relationships and continuity in the agreements with suppliers are not maintained. On the other hand, due to outsourcing, the Automated Bureaucracy uses more stable external relations with suppliers and, thus, there is an increase in bilateral relational contracting. As a result of such closer relations, various possibilities arise in practice: a reduction in the number of suppliers; long-term agreements, maintenance of terms with mutual obligations in the contract, including even the sharing of risks and benefits; collaboration and technical support, more intensive sharing of data and information, joint development of projects and products; and joint search for problem solving, establishing of joint goals, sharing of space, in addition to, of course, the great disposition of the parts toward making these relationships more intimate, friendly, and transparent. Obviously, such practices will occur as the relationship between customer and supplier becomes closer (Table 10.8).87 It is worth pointing out that, besides such intensification in the relations with suppliers, other strategic actions discussed in this chapter lead to the growth in the importance of coordination by contracts in an Automated Bureaucracy, notably those actions aimed at building partnerships and alliances. Thus, this is the other reason for the major concern with bilateral relational contracting that requires stable relations, which includes continual negotiations and certain continuity on the agreement.

10.3

The New Organizational Possibilities and the Automated Bureaucracy

In Chap. 8, the new organizational possibilities in terms of types of change, of structure, and of management are discussed. In this chapter, some of these new organizational possibilities are cited to better present the Automated Bureaucracy.

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Furthermore, it is important to make more specific comments on them regarding their relationships with the Automated Bureaucracy. This is important because several of these new possibilities are part of the Automated Bureaucracy or are being used in it.

10.3.1 Participatory and Incremental Changes in the Automated Bureaucracy: OD, TQM, and Learning Organizations One of the most noticeable features of the Automated Bureaucracy compared with the traditional structures that produce with high volume and low variety is the continuous search for improvements. Indeed, as the Automated Bureaucracy operates in a more dynamic environment, changing is imperative for its survival. In organizational theories, there have been discussions for a long time now about changes, including the description of their process, prescriptions of more appropriate types, and, especially, debates over the resistance to them. Starting from Kurt Lewin’s88 ideas on group dynamics, passing through Organizational Development and afterwards Total Quality Management (and kaizen), there has been an emphasis on more participatory change practices that could bring about the involvement of the people who participate in the processes, an increase in the work satisfaction level, a decrease in resistance to change, and consequently, a greater possibility of implementation. Therefore, the Automated Bureaucracy incorporates such techniques and encourages the participation of low-level workers in changes. After all, they know the process and are able to offer suggestions, analyze them, and implement those that can bring good results to the organization. Permanent and temporary groups, formed by workers at all levels and sectors concerned with innovation, then emerge in such firms. These groups present suggestions for change and, often, implement them, stimulated by the administration that makes use, for instance, of rewards to the teams.89 The coordination of values and norms, discussed earlier, is an important factor in this aspect as well. With regard also to the management of change, the concept of learning organizations gains much importance in the Automated Bureaucracy. The central idea is to spread internally the attitudes and behaviors aimed at learning to learn and not only the acquisition of static knowledge for restricted use. As a result, conditions in the Automated Bureaucracy enable it to remain constantly in a position to innovate.

10.3.2 Concerns with People in the Automated Bureaucracy: Competency Management and Health, and the Strategic Management of People The activities within the Automated Bureaucracy differ significantly from the traditional forms of work related to the extensive division of labor and

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standardization. Similarly, the profile required of the employee subject to these new activities is different. Conceptual skills, attitudes towards innovation and learning, as well as knowledge of information technology are required. This profile is not easy to find in the labor market. In addition, keeping such workers is a challenge for the management. Thus, actions that demonstrate major attention to people are essential to the Automated Bureaucracy in a way that does not happen in traditional firms. In accordance with the concept of Strategic Management of People, the Automated Bureaucracy considers these actions priorities. Among the more visible practices in this direction, are those related to qualification and competency management, the models of management concerned with physical and mental health, satisfaction monitoring, and practices that encourage empowerment, that are cited in Chap. 8 on new organizational possibilities.

10.3.3 Social Responsibility in the Automated Bureaucracy: Corporate Citizenship The Automated Bureaucracy shows great attention to social responsibility, and in this respect adopts both passive and active practices towards fulfilling such responsibility. Passive practices are those that are not harmful to society and that carry out responsible production that minimizes, for example, the damaging effects on nature. Active practices are those aimed at improving the quality of life in the community, such as the promotion of volunteerism among employees in actions regarding health and qualifications, among others. It is important to mention that such socially responsible practices present a permanent character, and not just sporadic actions. These actions bring advantages to the Automated Bureaucracy in its relationship with clients, society, and workers. In the case of clients and society, by demonstrating social responsibility the firm highlights its name and brand, which increases the possibilities for gaining the loyalty of customers. In the case of workers, with these socially responsible practices, the Automated Bureaucracy shows to its employees that the organization is important for society and, in doing so, avoids difficulties in getting the commitment of employees. Indeed, the involvement required for this type of structure will not be achieved if the employees perceive the firm is bringing harmful effects to society and to nature, or it is not concerned with actions that could minimize potential troubles in society and nature. Thus, by encouraging workers to participate in social activities and in voluntary actions, the Automated Bureaucracy facilitates their commitment with the firm and increases the possibility of generating, in them, communication skills and critical awareness, among other things.90 Moreover, it is expected that undesirable actions based on opportunism tend to be lower among workers who are involved in voluntary actions due to the constant practice of social conscience and ethics.

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10.3.4 Radical Changes in the Automated Bureaucracy: Reengineering and Downsizing Some companies are created and shaped based on an Automated Bureaucracy structure. Often, however, companies with structures based on the Machine Bureaucracy go through transformations that lead them toward structures based on this new configuration. In this case, achieving improvements and innovation does not involve small changes, but large and radical changes in the work organization and in the structure in the face of a new and complex reality. In the case of small and adaptive alterations, as already discussed, the workers who are involved in the production process are made to participate. Such participation takes place through practices of incremental changes inherited from Organizational Development and Total Quality Management. These participatory practices, however, cannot be used in alterations that bring about radical changes in the activities of an employee. In this case, the firm makes use of radical alterations and does so without the participation of workers in these change processes based on Reengineering and downsizing. As explained in Chap. 8, Reengineering is a change process characterized by speed, radicalism, and imposition, which brings about substantial alterations in the work organization. Downsizing is a process of reducing positions, departments, and even hierarchical levels in a firm, which results in a decrease in the number of workers. According to Paul Strebel91 and his model of changes, the greater the external force for change and the greater the internal resistance to it, the more changes such as Reengineering, restructuring, and downsizing are required. This is precisely what happens when a Machine Bureaucracy undergoes a transformation into an Automated Bureaucracy. Its administration carries out imposed, radical, and quick changes based on Reengineering and downsizing. Through these measures the automation of processes is reached, and changes in the forms of work, in the configuration of positions and departments, etc., are realized. All this happens from changes that occur without the participation of workers, as with their participation the changes would not be likely to occur. Thus, the radical change, whether Reengineering or downsizing, is not a frequent practice within an Automated Bureaucracy. It occurs in the implantation of the structure. After that, incremental and participatory changes begin to be seen, such as those that are based on models earlier characterized, such as Organizational Development, Total Quality Management, and the learning organizations.92 Reengineering impeding the use of quality groups In a visit to an organization going through many changes that would lead it to high automation in operations, it was discovered that, up to the start of the mentioned changes, the firm had applied many management principles based on Total Quality Management (TQM). Quality groups were responsible for the small modifications that occurred in the firm. Since the start of changes related to automation, however, the use of these management practices had been suspended. Found in locus

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10.3.5 External Integration, Alliances, Partnerships, Outsourcing and Network Organizations The Automated Bureaucracy and the network organization are quite different structures, especially taking into account the level of the analysis.93 However, the emergence of the two formats presents an intimate relation. Actually, it can be said that the strengthening of one leads to the strengthening of the other, for two reasons. First, from the emergence of organizations structured as Automated Bureaucracies, companies seek to dedicate themselves to their core business or to the known core competencies and to outsource various activities. Hence, the possibility and even the need for closer relationships with suppliers and customers arise, especially in the case of the intermediary consumer. Second, by using this new structure, companies tend to make alliances and partnerships with several other firms in search of a better position in a fierce, competitive environment. Thus, mainly due to these two reasons, the relationships between firms is strengthened and then presented is a system formed by independent firms that have specific functions: a network organization.94 It is important to emphasize that in these network organizations it can be seen the integration of information by using information technology and the use of coordination by contracts of the bilateral relational type, with characteristics related to greater stability in relations, including negotiations and some continuity in the agreement.95

10.4

Problems Associated with the Automated Bureaucracy

In many respects, the Automated Bureaucracy can be seen as an evolution of the Machine Bureaucracy, presenting better conditions for adapting to the environmental changes that have been taking place in society in recent years. Concerning this new reality, such format achieves high internal and external congruency, for which it can be considered a new type of organizational structure. Like the other structure configurations, however, it faces many organizational problems which deserve attention. Actually, many of its problems have not been well discussed in the organizational literature thus far. Many of them are related to shifts in structures, especially from the Machine Bureaucracy to the Automated Bureaucracy. Thus, it is expected that, when this organizational format is consolidated in society and when progress is seen in the researches on this matter, the associated problems will be more easily explored. Nevertheless, for now, some of them can be presented, such as those related to technical, financial, and of-marketing aspects; and human problems in the operating core, in the middle line, and in the strategic apex. At this point, however, an important comment should be made: some of the issues discussed below are inherent problems of the structure, whereas others are

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problems that may arise in the structure. In the first case, the problems are related to intrinsic features of the format such as the low variety of production. They cannot be solved and the administration can just live with them by using corrective actions or, even, choosing to perform in situations and environments that do not highlight these problems. In the second case, the problems are solvable or, even, minimized as they are not inherent to the structure. This is the case, for example, of the difficulty in getting employees involved in certain situations. Despite this possibility of separation, for practical reasons, the discussion of the problems associated with the Automated Bureaucracy that follows is not made taking into account such distinction, as it is not so easy to distinguish them in the routine of organizations.

10.4.1 Technical, Financial and Marketing Problems in the Automated Bureaucracy As for the main technical, financial, and marketing problems of an Automated Bureaucracy it can be pointed out those related to the limits and limitations of automation with respect to inputs and products, possible difficulties in supply, difficulties in forecasting revenues, the necessity of constant sales, high numbers for investment, and difficulty in evaluating the investment return. Some of the aspects concerning the limits and limitations of technology are addressed in the discussion on the operating core and, mainly, on the technical conditions for the Automated Bureaucracy.96 Specifically for inputs, it can be pointed out that the normal functioning of automated systems requires standardization and quality. Thus, one of the problems that can arise in a company with such automated structure refers to variations of the inputs, that is, lack of quality in the inputs. When this occurs, there are difficulties of processing, breaks in the system, constant intervention by the operators, and other problems.97 With regard to products, as discussed earlier, the Automated Bureaucracy presents some production flexibility which is, however, quite limited. Thus, this structure is not suitable for high-variety production, for which adhocratic structures are the most appropriate. Regarding supply, it is important to mention that the Automated Bureaucracy operates within a network of companies in an integrated way, which demands appropriate relationships between the firms involved. The maintenance of such relationships is not so simple; it requires constant negotiations, well-suited contracts, competent suppliers, and non-opportunistic behavior, among others. As for revenues and sales, it should be emphasized that by virtue of operating in a united system without slacks, the Automated Bureaucracy must not be subject to a wide variation between the planned and the achieved revenue. Given the dynamic and competitive environment in which it operates, this fact may be highlighted as a major problem for these firms. In her work on types of structures, Joan Woodward

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states that, in processing firms with automated systems, the central and most important sector would not be that related to project or production, but that related to marketing, because of the necessity of keeping constant sales in order to maintain and compensate the use of the automated system. The same seems to apply to the Automated Bureaucracy, which demands a small margin of error in the sales forecast. With regard to costs, despite the decrease in the prices of information technology products in recent years, the spending on automation, which includes the qualification of workers and the time to adapt, among others, is still very high, especially when specific systems are installed. This situation is even more complicated because such spending is difficult to evaluate in advance, that is, there is great difficulty in determining the real spending to install the entire system previously, mainly due to the need for adaptations to the specific situation of the organization. Considering the aforementioned aspects – the high spending for installation, the difficulty in making forecasts, the small acceptable margin for variation in revenues, and the competitive environment in which the firm operates – the Automated Bureaucracy presents problems in evaluating the investment return. Thus, in financial terms, a firm with such a structure operates in a much more delicate situation when compared with those firms with a structure based on the Machine Bureaucracy. Well-prepared studies concerning a realistic definition of costs and a constant monitoring of demand alterations are key actions of the Automated Bureaucracy, especially taking into account the fact that in dynamic environments, the use of past dates and information presents many limitations, since they quickly lose their validity.

10.4.2 Human Problems in the Operating Core The human problems in the operating core of a firm with a traditional structure based on the Machine Bureaucracy are associated, mostly, with the dissatisfaction of an employee who is subject to the great division of labor and to simple and very standardized tasks. In such reality, he is not granted the power to decide or control his activities, there is no variety of skills being used, and the use of his potential is not required. In this workplace, there is little possibility of self-actualization at work.98 In some companies, in addition, the social environment also causes dissatisfaction, as informal relationships can be curtailed. These problems have been described for long by several authors and are even used to justify actions of improvement in the workplace as in the Quality of Work Life movement with its practices of job enrichment and enlargement, and improvements in the social environment, among others.99 With the Automated Bureaucracy, substantial changes can be seen in the work organization of the operating core, and, thus prospects for the solution of problems earlier discussed emerge as well as other problems do.

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With regard to the problems of traditional firms, it should be noted that with the new work organization that emerges with the Automated Bureaucracy, there is less division of labor, use of more skills by workers, and even some power of decision given to workers. Authors of Total Quality Management and lean production defend such forms of work organization since they bring, among other advantages, more opportunities for self-achievement by the employee.100 Obviously, when Fordist and Taylorist firms on one side and Automated Bureaucracy operations on the other side are compared, and some objective aspects are considered, such defense cannot be contested. However, the analysis may not be so simple, and other comments should be made in this respect. First, although the worker can intervene in the system in accordance with his competency, he is still subject to a predefined and automated system of operations, and his duty is just to keep such system running, not to change it in its essence. Thus, his actions of monitoring and intervening are confined to the automated system, or the automated bureaucratic system, which leads, therefore, to question the possible control over the work that is offered to him. Second, with regard to the power of changing, which happens generally with continuous improvement teams, it should be remembered that such teams effect just small changes that do not affect, again, the essence of the functioning of the automated system and, in the same way, the work to which the workers are subject. The really important decisions are not delegated to operating core workers. Third, when subjective aspects are taken into account, in certain situations a worsening in the previous scenario can be inferred since the employees in this new type of structure are more qualified and competent, and thus they may require greater use of their skills and potential, which are not offered by the Automated Bureaucracy.101 Thus, besides the fact that the changes are not so profound, the objective analysis is not sufficient so that conclusions can be drawn. In fact, it can be said that definitive conclusions on this subject will hardly be presented due to the large number of variables involved and the difficulty of making comparisons between the two situations. After all, the world has changed, the firms have changed, and the worker has changed as well. In several aspects, the analysis of the problems of autonomy may be less important than others that can be seen in the Automated Bureaucracy operating core. Notably, issues concerning higher demands and larger charging, overload of work, diseases related to stress and burnout, lack of confidence, difficulty in maintaining the appropriate level of commitment, emergence of opportunistic behavior, and practices related to the concept of individual strategies can be discussed. The production arising in an Automated Bureaucracy, made closely and without slack by machines, calls also for tight labor work without gaps. The requirements and charges, therefore, are greater. In fact, workers are asked to give full dedication of both body and mind to the work during the entire time they are available to the firm. Even in their activities of observation and monitoring, during which some slack might occur, they concentrate all the time on the operations. Taking into account the coordination by values and norms that is used, the worker has now internalized the need to maintain the flow and to worry about it constantly. As for

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the Automated Bureaucracy, the work often continues beyond the company’s physical environment, because the worker takes it outside in his mind. Work at home and the constant availability to the company aggravate this situation, bringing even more overload.102 In the classical literature and practices of management, the effects of fatigue were always taken into consideration. The studies did not have a physiological character, but they were concerned with observing effects in reduced productivity. In the case of the Automated Bureaucracy, fatigue emerges often in another context: in stress and burnout.103 Indeed, the worker may not frequently show a decrease in productivity until a distinct manifestation or a sudden occurrence happen. In this respect, the burnout may be compared to the boiling frog story that tells that if a frog is placed in water that is heating slowly, it does not feel the difference in temperature and so dies.104 Therefore, constant monitoring of these problems in an Automated Bureaucracy is necessary, by using, apropos, methodologies different from those used by classical managers in relation to the simple observation of decrease in productivity.105 As for the difficulty in maintaining the appropriate level of commitment and the occurrence of opportunistic behavior, the Automated Bureaucracy depends highly on the worker’s active attitude. Such attitude can be seen when the worker intervenes appropriately or even presents proposals for improvements that will really bring benefits to the organization. Therefore, in the Automated Bureaucracy, a problem noted by Henry Mintzberg on the Professional Bureaucracy may arise: the difficulty of dealing with opportunistic professionals who are not committed to the organization. Obviously, over time, the lack of commitment and the opportunistic behavior presented by the worker will be detected, but the time for verification can be long enough to cause serious damage. The difficulty in obtaining commitment may get worse due to inappropriate labor relations or to the restructuring process that happened earlier in the organization. In the first case, the traditional conflict between capital and labor, in many areas, present often badly resolved, which does not lead to an appropriate maturity in the relationships. In the second case, restructuring processes using Reengineering and downsizing often bring about a breach of trust that takes years to be repaired. Thus, when such situations are present, it is more difficult in the Automated Bureaucracy to obtain the commitment necessary for new activities and even for coordinating the work by means of values and norms.106 A last problem that can be noticed in Automated Bureaucracies comprises practices related to the concept of individual strategies.107 Although the studies concerning this issue are often received skeptically by some scholars, such studies are apparently growing in management studies.108 Maybe, they will tend to grow even further with the strengthening of Automated Bureaucracies that use the coordination based on values and norms.109 In this new organizational structure, workers are requested to internalize, or to introject, certain principles in order to ensure the coordination of the divided work. These principles include those aimed at maintaining the work flow, concern for the customer, and constant attention to innovation and qualification, among others. It turns out that these principles are

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often “pushed on” employees, without their consent or even their awareness (introjections). They apparently assume such principles only to keep their jobs. The effective involvement may not happen, and individual behaviors that are deemed harmful or dysfunctional to the organization can even arise – practices facing a system that is considered unfair, or even as a way of bringing some psychic balance. Thus, it can be supposed that if in the past, firms used to keep a social assistance sector to maintain appropriate levels of extrinsic satisfaction in the work, the challenge for the future may be to keep sectors concerned with the worker’s psychological health.

10.4.3 Problems at the Middle Line In the Automated Bureaucracy, changes in management activities are also noticed. The manager is no longer expected to be a controller, as what happens in coordination by standardization of work processes, or even a sole decision-maker, as in coordination by direct supervision – situations that occur in traditional firms. In this new structure, it is necessary for the manager to encourage proactivity, creativity, participation, and commitment from the group. Moreover, the new manager must assume some duties that in the past were assigned to the areas of advising and supporting, such as the planning and organization of the work, or even people management. In this respect, the greatest difficulty for the Automated Bureaucracy is to get managers to assume their new roles and functions and assimilate knowledge and skills that are not so specific. With regard to the difficulties in assuming new functions and roles, two important elements should be emphasized. First, the years of autocratic management in the history of organizations may become an impediment to the application of new forms of management. This situation will only be reversed with a long-term and major change in the culture of organizations, as well as in the culture of society as a whole. Second, many management courses are not updated to the new organizational realities; they emphasize technical aspects and the old forms of management a lot and, therefore, do not generate managerial competencies for the new organizational conditions. Difficulties in working in teams, in sharing power, in working with internal consultants, and in managing conflicts are some consequences of this lack of qualification.110 Regarding the assimilation of knowledge and skills that are not so specific, managers must not only present competencies in their specific areas, but must also show competency in other areas in order to carry out duties that, in the past, were the responsibility of the areas of advising and supporting. Again, resistance in the face of these new functions and difficulties in acquiring these skills can be seen. Specialization is still very influential, even at the management level. This fact can be linked to Robert Katz’s comments when he says in a classic article that, among the management skills, the conceptual one, or that of general knowledge, is the most difficult to develop.111

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There is, in addition, another important problem related to managers that may arise, especially after transition periods: distrust. As with the problems pointed out earlier regarding workers in the operating core, Reengineering and downsizing can lead to negative effects on the body of managers, especially with the decrease of hierarchical levels. Restoring the trust of managers after those processes presents a challenge to the Automated Bureaucracy.

10.4.4 Problems at the Strategic Apex Some of the problems that arise at the strategic apex are not so different from those related to the middle line, as they are associated mainly with lack of preparation and adaptation to new activities. In this respect, what can be emphasized are the difficulties in sharing power and in working in teams and in councils, in assuming the role of social planner, in networking, and in managing in imponderable situations in which non-traditional kinds of decision making and solutions to problems are often required. Although the major decisions remain at the apex, in this type of organization some power must be shared with the lower hierarchical levels. It happens that this approach meets with opposition from executives who cling too much to power. They simply resist giving up power. This occurs despite the years during which the participation of lower levels in the major decisions through the so-known Strategic Management has been defended. Still with regard to decision making, even the most important decisions that remain under the responsibility of the apex are increasingly being transferred to collective and council discussions within practices related to the concept of Corporate Governance. Again, the difficulty experienced by executives in participating in this form of collective decision making can be seen. The image of the chief executive as a hero and lone decision maker is still a problem for the Automated Bureaucracy.112 As for the activities of the social planner, notwithstanding the more than 70 years that have passed since Chester I. Barnard’s original ideas on this subject,113 this function is still despised by many apex managers. The role of symbol for subordinates is still more difficult to accept even though more than 40 years have passed since Henry Mintzberg’s work emphasizing this as one of the roles to be assumed by a manager.114 Again, the lack of preparation among managers to carry out their new functions and roles within the organization is highlighted here. The image of the executive as a strategist and technician is the emphasis in the training for executives. Other difficulties of the strategic apex pertain to the new executive’s duties in their relations within a net organization. In a traditional environment, the relations between firms are quite assertive, appearing most of the time in negotiations of the win-lose type,115 i.e. the executives and negotiators use negotiation strategies following the principle of take everything you can no matter the consequences for

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the other part. In the new situation of net structure that arises from alliances and partnerships and the integration between suppliers and customers, the other part cannot be treated as an enemy. Thus, the bargaining strategy must change. Maintaining more lasting and stable relationships with other firms through bilateral relational contracts requires new ways of conducting negotiations, especially of the win-win type, in which returns for both parties involved are sought. Even in the case of large companies that, in principle, would present a better position to bargain, the consideration with small firms that depend often on large companies must be taken into consideration. Finally, as a last problem related to the strategic apex, there are those difficulties concerning the new decision-making methods and the new way of solving problems. For decision making, it should be noted that, despite some criticisms along the history, the rational models on managerial and strategic decisions always used to be the most defended, and, therefore, management courses always emphasized decision models based on flows, decision trees, tables, graphics, and environmental analysis.116 Indeed, these models have had reasonable validity for traditional organizations. For the Automated Bureaucracy, however, the decision making must take into account other methods as well, such as those related to behavioral, political, incremental, and responsible decision-making models.117 Thus, it is expected that with the strengthening of this new organizational structure, these models, which have been discussed in organizational researches for a long time, will be more emphasized and will receive more importance in management courses. Specifically for problem solving, in this new organizational workplace, elements related to imponderability and intuitive thinking present increasing importance. Intuition is a thinking process that is used in decision making and that guides several major organizational decisions.118 In the case of the Automated Bureaucracy, considering the extremely dynamic and discontinuous environments in which it operates, the executive must be able to accomplish his activities, together with his social and symbolic roles, in situations where decisions based on traditional methods for problem solving are not sufficient. Intuitive ability and complex reasoning are therefore required. It happens that there are many barriers to the discussion of these issues. In certain circles, such elements that are associated with imponderability and intuition sound unscientific, and may be deemed irrational and even illogical. Moreover, even those who discuss such topics know the difficulty in developing competency related to intuitive thinking. Paulo Motta, making several considerations on decision making and warning of the importance of intuition in modern decision making, emphasizes the necessity of practicing lateral thinking to develop such intuition. Constant questioning (including what concerns one’s own life), diversification in personal and professional life, variety of interests, experience in various environments, search for new information, and living with unusual situations are some of the practices suggested by the author in his book on management development.119 Current discussions on complexity theory and chaos theory in organizations also seem to be attempts to help managers in facing this new reality (Table 10.9).120

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Table 10.9 Problems associated with the Automated Bureaucracy Technical, financial and In the operating At the middle At the strategic marketing problems core line apex Limits and limitations of Higher demands and Difficulty in getting Difficulties of automation with overload of work the managers to managers in respect to inputs and assume new roles sharing power products and functions and and in working in assimilate teams and in Possible difficulties in Diseases related to stress knowledge and councils, in supply and burnout skills that are not assuming the role Difficulties in Lack of confidence, so specific of the social forecasting revenues mainly after planner, in restructuring networking, and processes in managing in The necessity of Difficulty in maintaining imponderable constant sales the appropriate level situations in of commitment which nonHigh numbers for The opportunistic traditional kinds investment behavior of decision Difficulty in evaluating The practices related to making and the investment return the concept of solutions to individual strategies problems are often required

10.5

Other Issues Related to the Automated Bureaucracy

The presentation made earlier of some possible problems that arise or may arise in a firm with a structure based on the Automated Bureaucracy emphasizes issues internal to organizations. However, the emergence of this new structure is part of a larger social and economic reality and, in the same way a firm is influenced by the environment, the firm also influences the reality and the society into which it is inserted. In this regard, discussions on unemployment, the new labor relations, and the changes in the other social relations that take place in society can be emphasized.

10.5.1 Unemployment and Precariousness of Work One of the most discussed socioeconomic issues concerning the emergence of firms that are increasingly automated is unemployment. Thus, it could be argued that the strengthening of the Automated Bureaucracy would cause widespread unemployment in society.121 Indeed, nobody can dispute that, at a certain production level, the firms that use the Automated Bureaucracy structure operate with much less labor than do their corresponding Machine Bureaucracies. Therefore, it could be inferred that the advent of this new type of firm would cause unemployment,

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whether in the case of a traditional firm that has become an Automated Bureaucracy, or in the case of a new firm that was established using this new configuration. Similarly, with the strengthening of this new format, discussions on another negative consequence for society can be seen: the precariousness of work. It has been said that the work in many firms, especially in firms that produce the services or products that are outsourced by the large companies, offers lower benefits and less stability when compared with the traditional work situation, that is, several (labor) losses and insecurity for the workers can be seen.122 However, the discussion on unemployment and the precariousness of work is sensitive and requires further debate considering the issue in a broader analysis. Much was argued at the beginning of the Industrial Revolution, for example, on the mechanization of production and its terrible consequences in terms of unemployment for some regions, especially in the countryside. However, not without conflicts, society has adjusted to the new reality. In a sense, it has accepted and adapted to the new forms of work with their positive and negative consequences. Thus, it can be inferred that with the emergence of the Automated Bureaucracy, the same thing will happen. Society will allow or not its strengthening and will adapt and receive its benefits as well as its problems. The creation of mechanisms to minimize the undesirable consequences, such as unemployment and the precariousness of work, should therefore be analyzed not only with the focus on firms. Obviously, it is expected that organizations will increasingly incorporate social responsibility in their strategies; however, other social actors will join the debate and the actions that will follow. Actually, some organizations are taking measures to minimize the devastating consequences of massive dismissals resulting from downsizing and Reengineering processes, such as retirement plans and encouraged internal and external replacement. Sometimes, organizations even try to keep agreements with the outsourced firms to minimize the insecurity effects.123 Regarding social concern, however, the cited practices are modest measures with a very limited reach as they address just the major attention at maintaining a certain level of trust, internally or externally, to the firm. Therefore, it is expected that firms, governments, and other actors of society will, together, propose and implement actions aimed at minimizing the effects related to unemployment and the precariousness of work. Some authors present some social alternatives to the problems cited, such as the increase of employment in the service sector and even in the so-called third sector.124 The discussion on entrepreneurship, recently rekindled, turns not only to meeting the outsourcing movement, but to the idea of generating employment in society. This idea of entrepreneurship generating jobs and even creating demand meets with some criticisms, but within current management technologies it is an interesting proposal.125 What is emphasized here is that the responsibility for unemployment and the precariousness of work may not be imputed only to the emergence of the Automated Bureaucracy. This type of structure that is strengthening in the world of organizations is a social phenomenon as are several others. The responsibility for taking measures to minimize negative effects is that of society and its various

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actors – governments, firms and entrepreneurs, labor unions and workers, nongovernmental organizations and various groups – who must pursue such intent jointly. It is important to think that the previous situation will not return and it is not worth remembering with nostalgia a time when there used to be, in large industries, a lot of work for a large part of the population, and certain stability of employment could be seen.126

10.5.2 Labor Relations Throughout this book, in the various characterizations of types of structures or organizations, there has been no space dedicated to discussions on labor relations. Even in the chapter on environmental changes this topic does not receive consideration. This is not because such subject is of little importance for organizations, for the administration, or even for the study of organizational structures. Rather, the main reasons are related to the complexity of this subject and, mostly, to the great situational aspect with which it is concerned. Even in the reality characterized by large companies with structures based on the Machine Bureaucracy, labor relations varied greatly from region to region, country to country, and even from organization to organization.127 In such reality it could be seen, for example, labor relations based on negotiations between the interested parts, with labor unions, employer associations, confederations of trade unions, and other possibilities appearing many times in such situations. Government acting as a regulator was often noted as well. Such regulation happened through the enactment of laws to regulate the relationships and to guarantee minimum rights for workers, the part deemed generally the weakest in the labor relationship. In the new reality into which the Automated Bureaucracy is inserted, in general, there are discussions on changes in labor relations. These relations are now influenced by a reality based on less stable jobs, outsourcing, less rigid positions, flexibility in the time and in the place of work, as well as unemployment, insecurity, etc. The studies concerning this subject, despite not being consolidated, suggest some possibilities.128 In the case of trade unions, there are discussions on the reduction of their power to act and negotiate, on their new strategies, and on decentralized negotiations, among others. With regard to legislation and the government’s role, changes can be seen that are aimed at bringing about flexibility in labor laws, given that labor laws, for the most part, were issued in the reality of traditional organizations, more stable relationships, more precise job descriptions, and more rigid schedules, among others. Obviously, the changes in legislation do not occur without a countermovement that seeks to defend historical benefits earned by employees. What is clear is that despite the discussions that have been made, as in the earlier reality related to the large Machine Bureaucracies, the subject concerned with labor relations in general will continue presenting much complexity and will vary greatly depending on the organization, the region, and the country.

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Another important aspect to be observed with respect to labor relations is that such relations can also be viewed as a situational element for the birth of an Automated Bureaucracy. The emergence of such structure often in regions with little industrial tradition (the green fields) has its cause in the strategy of escaping from situations where trade union activities are strong and even from a situation where many laws make production costly.129

10.5.3 The Automated Bureaucracy and the Changes That Occur in Other Relationships in Society The relations that individuals maintain with their work cannot be seen in isolation from others that occur in society. Relations in organizations are part of a larger set of connections that the individual holds, and there is a mutual interference in which the work relationships influence the relationships of other social spheres and vice versa. Thus, considering the changes that occur in organizations, there are also prospects for change in the connections maintained between individuals and other social spheres such as the family and social groups. Obviously, the changes in work do not determine alone the emergence of new social situations, but they work together with others for the emergence of new social arrangements. In The Corrosion of Character,130 Richard Sennett makes a discussion on the social changes resulting from the flexible forms of production and their aspects related to the low durability and volatility in the relations between individuals and organizations. The lack of long-term relationships, according to him, could lead to difficulties in the strengthening of ties of loyalty, commitment, and purpose in society. Along with this, the author makes considerations on aspects such as the lack of understanding of the work and the collective sense of failure, among others. The author expresses yet great concern over the emergence of a society that, given the new forms of work, does not favor the strengthening of character that, according to him, comes from the other, the interdependence, and the conflict. With respect to these statements, two considerations should be made. These do not necessarily contradict Richard Sennett, but may complement his positions. First, there is a transition period during which new forms of work arise and share the space and time with the previous types. Thus, the problems that come with these new forms of work may be exacerbated in the case of individuals who have lived or were socialized in earlier forms of social relations, whether at work or in society as a whole. Second, individual features must be considered in the analysis, as the consequences of new forms of work for people are different just as they were in the case of traditional forms of work.131 Anyway, changes are expected as a consequence or as a reaction to the new types of relationships that have emerged with the new forms of work, either with regionalism, tribalism, communitarianism or yet with the birth of various and different social movements that fill the space left by the prior stable social relations maintained between individuals and organizations.132

10.6

10.6 1

Notes

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Notes

MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979 and MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 2 This kind of firm is discussed in several parts of this book, mainly in Chap. 5. See also: WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977. 3 As discussed ahead, some firms use mixed formats: Automated Bureaucracy and traditional structures, mainly the Machine Bureaucracy. 4 This form of production is often treated as a closed system, i.e., it does not keep relations with external elements – in this case, the workers – in its normal operation. 5 Such concepts are discussed in Chap. 5. 6 Although many firms use automation based on IT, such form of automation, and the resulting removal of workers, happen mainly in mass production firms. Discussion on this fact is presented in the item dedicated to conditions to the Automated Bureaucracy and this fact is alerted, for instance, in CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: o impacto socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989. 7 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pra´tica. Sa˜o Paulo: Atlas, 1977. 8 References of cases of industries that underwent automation and consequent high removal of workforce are many, and presented along this chapter. 9 Two important comments: First: The Automated Bureaucracy does not present the same structure of the processing production firms featured by Joan Woodward, and the causes for its emergence and its organizational consequences are different as well. Discussion on consequences of IT in processing production firms is presented next chapter. Second: As alerted by Benjamin Coriat, many workplaces do not lose features of traditional work. Thus mass production firms do not change completely into continuous production firms. B. Coriat notes these aspects in types of production that happen in auto industries that use robots (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: o impacto socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). 10 The discussion on flexibility using IT-based automation is presented in Chap. 5. 11 The discussion on integration using IT-based automation is presented in Chap. 5. 12 The concept of ERP is discussed in Chap. 5. 13 Such concepts are discussed in Chap. 5. Automaker sector offers appropriate example of supplier–client integration (ZAWISLAK, Paulo Antonio e MELO, Aure´lia Adriana. A indu´stria automotiva no Rio Grande do Sul: impactos recentes e alternativas de desenvolvimento. In: NABUCO, Maria Regina; NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A Editora, 2002; MARTIN, Scott B. e VEIGA, Joa˜o Paulo C. Globalizac¸a˜o dos mercados, localizac¸a˜o produtiva e relac¸o˜es interfirmas: o caso das montadoras alema˜s nos EUA nos anos 1990. In: NABUCO, Maria Regina, NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A Editora, 2002 and LACERDA, Juliana Subtil. Novos padro˜es de organizac¸a˜o da produc¸a˜o e de relacionamento na indu´stria automotiva: o caso da General Motors em Gravataı´. In: Anais Enanpad. Atibaia: Anpad, 2003). 14 The use of semi-autonomous groups is mainly grounded in socio-technical approach, considering researches made by the Tavistock Institute of Human Relations. Such approach had influenced many techniques, practices and other approaches that have followed such as the Quality of Work Life. 15 The automaker industry presents again as an example. Due to several factors, the firms of this economic sector do not fully automate their production processes and often make use of lean production. (See: CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: o impacto socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989; LEAL, Rosangela Maria de Almeida Camarano. Novas tecnologias no setor automotivo: o saber relacional em questa˜o. Belo Horizonte:

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UFMG, 2001 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o) and SANTOS, Cle´a Maria Quaresma, MORAES, Lucio Flavio Renault e KILIMNIK, Ze´lia Miranda. Qualidade de vida no trabalho, estresse ocupacional e sistema just-in-time: um estudo de caso no setor automobilı´stico. Anais Enanpad. Foz do Iguac¸u: Anpad, 1999). 16 Joan Woodward noted these tasks in processing production firms. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pra´tica. Sa˜o Paulo: Atlas, 1977). 17 Philippe Zarifian, analyzing changes concerning automation, considers the importance of events, or unexpected situations that could arise and that would demand human intervention. (ZARIFIAN, Philippe. Objetivo competeˆncia. Sa˜o Paulo: Atlas, 2001). Benjamin Coriat mentions new tasks in automation systems related to vigilance-control-direction (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). David Nadler, discussing new forms of work, reports activities disappearing in a place and appearing in another (NADLER, David A. GERSTEIN, Marc S. SHAW, Robert B. Arquitetura organizacional. Rio de Janeiro: Campus, 1994). Two interesting empirical works report such activities: SOARES, Roza´lia Del Ga´udio e PIMENTA, Solange Maria. O Homem e a ma´quina: de operador a expectador. In: Anais Enanpad. Floriano´polis: Anpad, 2000 and FERREIRA FILHO, Nelson. Sistema fechado, atividade aberta: quando os automatismos na˜o funcionam. Belo Horizonte: UFMG, 2003 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). 18 Such comparison is done with traditional processing production firms, not with modern processing production firms that are discussed in the next chapter. 19 Joan Woodward noted such activities also in mass and batch operations. H. Mintzberg defines maintenance work as support activity in Machine Bureaucracies. 20 Benjamin Coriat’s work is a reference concerning maintenance activities and changes in traditional industries. (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). Item ahead present some discuss on outsourcing of maintenance activities. 21 MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 22 The sole use of IT is not enough for developing innovation. Some organizational mechanisms are also necessary (See: MOTTA, P. R. Transformac¸a˜o organizacional. Rio de Janeiro: Qualitymark, 2000). A research in the banking sector shows that the use of IT led to an increase in productivity but not in innovation, considering workers perception (PEREIRA, Maria Tereza Flores e BECKER, Joa˜o Luiz. O impacto da tecnologia de informac¸a˜o (TI) sobre o processo de trabalho individual: estudo em um grande banco brasileiro. In: Anais Enanpad. Atibaia: Anpad, 2003). Philippe Zarifian alerts for activities of innovation assigned to workers (ZARIFIAN, Philippe. Objetivo competeˆncia. Sa˜o Paulo: Atlas, 2001). Groups dedicated to quality are other example. Groups dedicated to creativity and innovation in institutionalized programs can be seen in researches such as: SOARES, Roza´lia Del Ga´udio e PIMENTA, Solange Maria. O Homem e a ma´quina: de operador a expectador. In: Anais Enanpad. Floriano´polis: Anpad, 2000 and LEAL, Rosangela Maria de Almeida Camarano. Novas tecnologias no setor automotivo: o saber relacional em questa˜o. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). 23 Participation brings about smaller resistance to changes and also involvement from workers, aspects alerted for long time in management theory, mainly, in behavioral approach. 24 This aspect is discussed in the chapter on automation (Chap. 5). 25 Benjamin Coriat noted hierarchical difference between workers responsible for operations and people responsible for programming equipment (See: CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). 26 In many cases, the border between intervention and maintenance activities is tenuous and not clear. In visiting a food firm and a metal foundry industry, it was noted that maintenance activities were assigned to the same workers responsible for maintaining the production flow.

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Aspect discussed in literature for long time, as in QWL movement (see Chap. 8). Research conducted in two auto companies that presented different levels of automation found that the use of workers with the same education level didn’t work. The company with less automation had to employ workers with lower education. (See: CARLEIAL, Liana; GOMES FILHA, Maria Lucia de Figueiredo e NEVES, Lafaiete Santos. A gesta˜o da forc¸a de trabalho na indu´stria automotiva: uma primeira aproximac¸a˜o a partir dos casos da Renault e da AudiVolks. In: NABUCO, Maria Regina, NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002). Visiting an auto industry that present different types of production processes, from Taylorist processes to robotic processes, the same problem was reported to this author by managers. 28 The discussion on qualifications for working in traditional processing production firms raises some controversy. Joan Woodward, for example, warned of the necessity of conceptual skills for workers in such workplace. Harry Braverman, on the other hand, questioned the need for highly qualified workers in such companies. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977 and BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Guanabara Koogan S/A, 1987). 29 Benjamin Coriat reports the need of multifuncionality at work (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). 30 ZARIFIAN, Philippe. A gesta˜o da e pela competeˆncia In: Semina´rio internacional: educac¸a˜o profissional, trabalho e competeˆncias. Rio de Janeiro: CIET, Nov. – 1996 and ZARIFIAN, Philippe. Objetivo competeˆncia. Sa˜o Paulo: Atlas, 2001. 31 F. Herzberg’s work is a reference in this matter and was followed by other studies. (HERZBERG, Frederick. One more time: how to motivate employees? Harvard Business Review, v. 46, n. 1, pp. 53–62, Jan./Feb. 1968). 32 This can be seen in OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986 and PETERS, Thomas J. e WATERMAN Jr., Robert H. Vencendo a crise: como o bom senso empresarial pode supera´-la. Sa˜o Paulo: Harper e Row, 1983. Henry Mintzberg uses the concept of indoctrination and he warns of its importance in some types of work such as where the jobs are sensitive or remote or when strong loyalty is required. For the sixth organization, Missionary, he proposes the socialization or the standardization of norms as the main coordination mechanism, and the indoctrination as the main design parameter. (MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995). 33 New management models that incorporate cultural elements are discussed in: PIMENTA, Solange Maria (Org). Recursos humanos, uma dimensa˜o estrate´gica. Belo Horizonte: Editora UFMG, 1999). 34 Considering specific values, the term organizational culture can be used, but as for general values, the existence of an organizational culture can be questioned, since they are values common to the whole society including the various organizations (see criticisms of the concept of organizational culture in Chap. 9). 35 Values concerning the maintenance of the production flow are discussed since Joan Woodward’s work on processing production firms (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977). Values concerning customer satisfaction and firm’s mission can be seen, for example, in OUCHI, William. Teoria Z: como as empresas podem enfrentar o desafio japoneˆs. Sa˜o Paulo: Nobel, 1986. Many authors currently highlight issues concerning indoctrination, ideology and introjection being used by organizations. Benjamin Coriat can be mentioned in this aspect (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). Stephen Robbins, in his work on organizational behavior, discusses the concept of organizational citizenship, in which the employee would be considered a good citizen when he makes positive statements about the work of his group and the firm, helps colleagues in their teams, volunteers to work overtime, avoids unnecessary conflict, shows himself careful with the company assets, among

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others (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). 36 There is now a large literature on this. Most of them even may be challenged by their “empiricism” and connection with the so-called self-help literature. 37 The references come from Douglas McGregor and Rinsis Likert, and practices of OD and semiautonomous groups (LIKERT, R. Novos padro˜es de administrac¸a˜o. Sa˜o Paulo: Pioneira, 1979; McGREGOR, Douglas. O lado humano na empresa. Sa˜o Paulo: Martins Fontes, 1999). 38 Such remote monitoring was found in a petrochemical company in which managers have access to the company’s production system from their homes. 39 Corrective treatments for informal relations are discussed in Chap. 3. 40 These roles could even be required in traditional organizations (see, for instance, MINTZBERG, Henry. Trabalho do executivo: o folclore e o fato. In: Colec¸a˜o Harvard de Administrac¸a˜o. Sa˜o Paulo: Nova Cultural, 1986), but apparently they did not have the importance discussed here. 41 Such importance is discussed in MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. 42 Rosabeth Moss Kanter is one of the references in regarding new functions, skills and roles of a middle manager, and discusses this subject in the situation of innovation and entrepreneurship. (KANTER, Rosabeth Moss. O gerente intermedia´rio como inovador. Harvard Business Review, agosto, 2004). 43 As for situational or contingency leadership, models of Fiedler, Vroom and Tannembauem can be mentioned. Moreover, neocharismatic leadership that emphasizes aspects of value and norms are also references. (See discussion on this in ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). 44 Research that examines the trajectory of the function of O & M in several firms along a period of ten years found that this area had a significant decrease in its activity and importance, and its activities were distributed among other areas of the organization. As main causes, the study indicates, among others, changes in forms of management and the advent of information technology. (CALDAS, Miguel P. O triste destino da a´rea de O&M. Revista de Administrac¸a˜o de Empresas, Sa˜o Paulo, v. 39, n. 2, pp. 6–17, abr/jun.1999 and CALDAS, Miguel P. O triste destino da a´rea de O&M II, Revista de Administrac¸a˜o de Empresas, Sa˜o Paulo, v. 39, n. 3, pp. 6–16, jul./set.). 45 Practices such as the participatory selection and 360 performance evaluation are some examples. 46 Consulting and advisory activities are known and discussed for long time in management theory. In Machine Bureaucracies, positions and departments related to them always used to carry out many functions and held enormous power, questioning the expression “consulting and advisory” (MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979). 47 This is discussed in the chapter on new mechanisms of coordination (Chap. 9), more specifically, coordination by contracts and transaction cost approach. Opting for external acquisition, coordination by contracts assumes greater importance, more specifically, bilateral relational contracts. 48 In Chaps. 8 and 9, discussions about outsourcing and coordination by contracts are presented, and the sectors or activities which are the easiest to be outsourced are also discussed with emphasis in activities related to support. 49 Some of these changes are discussed in Chap. 7 on strategy. 50 MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979, p. 321. 51 The increasing interest in issues related to Corporate Governance demonstrates also the search for dividing responsibilities on the major decisions in organizations (LODI, Joa˜o Bosco. Governanc¸a Corporativa: o governo da empresa e o conselho de administrac¸a˜o. Rio de Janeiro: Elsevier, 2000). 52 In traditional but highly automated processing production companies, according to Joan Woodward, collegial decisions at the top used to be used. The great power assigned to Chief

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Executive Officers – CEO’s – throughout the history of organizations is now rather lower. A recent article by Peter Drucker presents discussion on this aspect: top managers’ new roles, more consensual decisions, and also the questioning of the figure and the power of the CEO’s (DRUCKER, Peter. F. A corporac¸a˜o sobrevivera´. Revista Exame, 18/05/2003). In the chapter on strategies (Chap. 7), changes in the strategy decisions are discussed, especially concerning the involvement of lower-level managers in the decisions as well as decisions of councils. 53 Similar to what happened to managers in traditional processing companies according to Joan Woodward (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977) and the head figure of Henry Mintzberg’s manager roles (MINTZBERG, Henry. Trabalho do executivo: o folclore e o fato. In: Colec¸a˜o Harvard de Administrac¸a˜o. Sa˜o Paulo: Nova Cultural, 1986).. Peter Drucker’s article also treats this issue (DRUCKER, Peter. F. A corporac¸a˜o sobrevivera´. Revista Exame, 18/05/2003). 54 Theories on neocharismatic leadership discussed today meet this aspect. (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). 55 According to Henry Mintzberg, the Machine Bureaucracies exist “only so long as these do not displace a work force dominated by unskilled operators” (MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979, p 326). 56 Concepts from Production Engineering such as limits and limitations of automation help to understand this aspect (FERREIRA FILHO, Nelson. Sistema fechado, atividade aberta: quando os automatismos na˜o funcionam. Belo Horizonte: UFMG, 2003 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). 57 This limitation is discussed in Chap. 5, where the CN-based automation technology is presented as the only automation technology that enables high variety in production. Benjamin Coriat stated that the work related to high machining is performed by CN-based machines (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). 58 CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989. 59 CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Ed. Busca Vida, 1989. Stages of the operation related to the auto body, for example, can have greater automation, and stages related to the final assembly can not. (ZAWISLAK, Paulo Antonio e MELO, Aure´lia Adriana. A industria automotiva no Rio Grande do Sul: impactos recentes e alternativas de desenvolvimento. In: NABUCO, Maria Regina, NEVES; Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002 and NEVES, Magda de Almeida; OLIVEIRA, ˜ O, Na´gela Aparecida. A complexa montagem de um veiculo: a Andre´ Mourthe´ e BRANDA Mercedes-Benz em Juiz de Fora. In: NABUCO, Maria Regina; NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002). 60 In the future, automation processes that solve this problem can be developed, which does not invalidate the considerations made here, i.e., the need for some standardization and quality of inputs that allow automation. 61 The concept of business used here refers to the corresponding consumer need that the organization has to meet (LEVITT, Theodore. Miopia em marketing. Colec¸a˜o Harvard de Administrac¸a˜o, v. 1. Sa˜o Paulo: Nova Cultural, 1986). 62 When the customer does not keep systems that allow integration, the Automated Bureaucracy often makes use of some expedients such as sellers using devices equipped with IT-based systems that allow remote communication and consequent integration. 63 Among the possibilities of supply in the automotive sector, new physical arrangements can be seen, besides those based on industrial districts. Industrial condominiums, modular condominiums (firms use areas of the automaker) and modular consortiums (firms share the same buildings with the automaker) are some of these new physical arrangements.

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(ZAWISLAK, Paulo Antonio e MELO, Aure´lia Adriana. A indu´stria automotiva no Rio Grande do Sul: impactos recentes e alternativas de desenvolvimento. In: NABUCO, Maria Regina, NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002). 64 Aspect discussed in Chap. 8 on new organizational possibilities. 65 Corporate universities can be considered as “a strategic umbrella for the firm’s total education requirements for all employees and also external stakeholders” (Jeanne Meister cited by JUNQUEIRA, Luiz Augusto Costa Curta e VIANNA, Marco Aure´lio Ferreira. Capital intelectual, gesta˜o do conhecimento e universidade corporativa. In: BOOG, Gustavo G. Manual de treinamento e desenvolvimento da ABTD. Sa˜o Paulo: Makron Books, 1999). 66 Comments on this aspect are presented in Chap. 4, devoted to Henry Mintzberg’s configurations. 67 Differentiation to deal with external complexity is discussed in the Chap. 3 considering Paul R. Lawrence and Jay W. Losch’s studies (LAWRENCE, Paul R. LORSCH, Jay W. As empresas e o ambiente. Petro´polis: Vozes, 1973). 68 This aspect is discussed in Chap. 4. 69 This aspect is discussed in Chap. 7. 70 This aspect is discussed in Chap. 7, considering the functional strategies. 71 Frederick Reichheld, author of The Loyalty Effect and Loyalty Rules, defends loyalty as a strategy not only with customers but also with workers. 72 With regard to maintaining a close relationship with the client, Regis McKenna is one of the most cited authors (MCKENNA, Regis. Marketing de relacionamento: estrate´gias bemsucedidas para a era do cliente. Rio de Janeiro: Campus, 1992). The concept of Customer Relationship Management – CRM is now widely discussed in the literature related to strategy and information systems. 73 Aspect discussed in Chap. 7 on strategy. 74 See chapter on strategy. 75 This is discussed in Chap. 3 on types of structure. 76 Often, decisions related to the use of IT are not considered a strategic issue, but only an instrument, or means to it, that make the strategy possible. However, the use of IT in here is being considered strategic, even a functional aspect (see Chap. 7). The existence of the Chief Information Officer – CIO is evidence that decisions related to IT are of strategic importance and not just operational. 77 The concept of Customer Relationship Management – CRM can be cited again as an example. 78 Research with 209 companies that use ERP systems emphasizes their advantages, especially in terms of improvements in the relations with suppliers (SACCOL, Amarolina Zanela, PEDRON, Cristinae Dreber, LIBERALI NETO, Guilherme, MACADAR, Marie Anne e CAZELLA, Silvio Ce´sar. Avaliac¸a˜o do impacto dos sistemas ERP sobre varia´veis estrate´gicas de grandes empresas no Brasil. Revista de Administrac¸a˜o Contemporaˆnea, v. 8, n. 1, pp. 9–34, Jan./Mar. 2004). 79 This aspect is discussed in Chap. 6 considering Manuel Castells’ studies. 80 Some of these advantages are discussed in the chapter on new forms of coordination, item 9.2, considering especially Charles Perrow’s comments. 81 This was discussed in the chapter on strategy considering Manuel Castells’ comments. 82 Charles Handy presents this situation as the shamrock organization: the first leaf represents the organization’s core staff, the second represents outsourced workers and, the third represents temporary or part-time workers or contractors. (HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996). 83 Other reasons can be given. Some of them, by the way, are questionable, as they show only opportunistic behavior by firms. Research done in Brazil, for example, shows that many companies outsource activities just for the reduction of costs. Precariousness of work and reduction of wages and benefits are other consequences of this process. (See, for instance, ´ JO, Maria Vale´ria Pereira. Caminhos e descaminhos da terceirizac¸a˜o. In: Anais ARAU

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Enanpad. Floriano´polis: Anpad, 2000 e BICUDO,Valeria Rosa. Terceirizac¸a˜o na Petrobra´s: Implicac¸o˜es Sociais, Gerenciais e Polı´ticas. In: Anais Enanpad. Atibaia: Anpad, 2003). 84 The existence today of easier supply and the choice between internal production and external acquisition are aspects discussed in Chaps. 6, 7 and 9. 85 CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989. 86 Research conducted by Maria Valeria Pereira de Arau´jo shows that companies do not outsource ´ JO, Maria for several issues, among them the lack of qualified and trusty suppliers. (ARAU Vale´ria Pereira de. Caminhos e descaminhos da terceirizac¸a˜o. In: Anais Enapad. Floriano´polis: Anpad, 2000). Research conducted by Sandro Cabral, that discusses late process of outsourcing in Brazilian’s companies when compared to developed countries’ companies, points out that lack of specialized suppliers is an important hindrance for outsourcing (CABRAL, Sandro. Estrate´gias de desintegrac¸a˜o vertical: um olhar sob a perspectiva de custos de transac¸a˜o. In: Anais Enanpad. Atibaia: Anpad, 2003). Transaction cost approach, discussed in chapter on new coordination mechanisms, presents aspects that would restrict outsourcing: uncertainty, transaction frequency and specificity of the product. 87 Research in the automotive sector in Brazil and in United States show progress in these relations, appearing several of these practices (LACERDA, Juliana Subtil. Novos padro˜es de organizac¸a˜o da produc¸a˜o e de relacionamento na industria automotiva: o caso da General ˆ ngelo Rodrigues Motors em Gravataı´. In: Anais Enanpad. Atibaia: Anpad, 2003; GOLDONI, A e SOUZA, Lucy Aparecida. Evoluc¸a˜o do relacionamento de fornecedores de ferramentas de corte no segmento de usinagem da cadeia automotiva brasileira. In: Anais Enapad. Atibaia: Anpad, 2003; MARTIN, Scott B. e VEIGA, Joa˜o Paulo C. Globalizac¸a˜o dos mercados, localizac¸a˜o produtiva e relac¸o˜es interfirmas: o caso das montadoras alema˜s nos EUA nos anos 1990. In: NABUCO, Maria Regina, NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002). 88 Kurt Lewin is considered one of the pioneers in the studies on changes. (LEWIN, K. Teoria de campo em cieˆncia social. Sa˜o Paulo: Pioneira, 1965). 89 LEAL, Rosangela Maria de Almeida Camarano. Novas tecnologias no setor automotivo: o saber relacional em questa˜o. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Engenharia ˜ O, da Produc¸a˜o); NEVES, Magda de Almeida; OLIVEIRA, Andre´ Mourthe´ e BRANDA Na´gela Aparecida. A complexa montagem de um veı´culo: a Mercedes-Benz em Juiz de Fora. In: NABUCO, Maria Regina; NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002. 90 Research conducted by Rosa Maria Fischer and Andre´s Pablo Falconer shows the importance of such activities in developing skills related to interpersonal ones, leadership, communication, creativity and working in teams as well as creating a positive organizational climate. (FISCHER, Rosa Maria e FALCONER, Andre´s Pablo. Voluntariado empresarial: estrate´gias de empresas no Brasil. Revista de Administrac¸a˜o, Sa˜o Paulo v. 36, n. 3, pp. 15–27, jul/set 2001). 91 STREBEL, Paul. Escolhendo o caminho certo. In: Financial Times. Dominando administrac¸a˜o. Sa˜o Paulo: Makron, 1999. 92 Henry Mintzberg and Quy Nguyen Huy discuss the corporate revolution as a kind of change that goes through a radical phase, but then it requires systematic changes to consolidate the process (MINTZBERG, Henry e HUY, Quy Nguyen. Reforma, revoluc¸a˜o e rejuvenescimetno. HSM Management 41, nov-dez 2003). This fact may explain the results of a research conducted in UK companies that show that Reengineering would tend to be less used in the future, as opposed to other practices related to change, such as the culture of learning and TQM (LOIOLA, Elizabeth, TEIXEIRA, Joa˜o Carlos, NERIS, Jorge Santos e RIOS, Mino Correia. Padro˜es de adoc¸a˜o de praticas inovadoras de produc¸a˜o e organizac¸a˜o no Brasil. In: Anais Enanpad. Atibaia: Anpad, 2003).

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Discussions on the level of the analysis of the structure can be seen in NADLER, David A. GERSTEIN, Marc S. SHAW, Robert B. Arquitetura organizacional. Rio de Janeiro: Campus, 1994. 94 Network organization is discussed in Chap. 8, on new organizational possibilities. 95 Types of contracts and the increasing use of bilateral relational contracts are discusses in Chap. 9. 96 Limitations are expected events; limits are unforeseen occurrences (FERREIRA FILHO, Nelson. Sistema fechado, atividade aberta: quando os automatismos na˜o funcionam. Belo Horizonte: UFMG, 2003 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). 97 FERREIRA FILHO, Nelson. Sistema fechado, atividade aberta: quando os automatismos na˜o funcionam. Belo Horizonte: UFMG, 2003 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). 98 Obviously, these situations vary greatly according to the firm and even the individual (see, discussion in HACKMAN, J. R., e OLDHAM, G.R. Work Redesign. Illinois: 1979). 99 This aspect is discussed in Chap. 8. 100 This aspect is discussed in Chap. 8. 101 These issues concerning limitations on autonomy can be found also in studies such as: SOARES, Roza´lia Del Ga´udio e PIMENTA, Solange Maria. O Homem e a ma´quina: de operador a` expectador. In: Anais Enanpad. Floriano´polis: Anpad, 2000; NEVES, Magda de ˜ O, Na´gela Aparecida. A complexa Almeida; OLIVEIRA, Andre´ Mourthe´ e BRANDA montagem de um veı´culo: a Mercedes-Benz em Juiz de Fora. In: NABUCO, Maria Regina; NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002; LEAL, Rosangela Maria de Almeida Camarano. Novas tecnologias no setor automotivo: o saber relacional em questa˜o. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o). Cesar Souza points out that ERP is used to achieve centralization in the organization (SOUZA, Ce´sar Alexandre, VASCONCELOS, Eduardo Pinheiro Gondim. Tecnologia da Informac¸a˜o e centralizac¸a˜o organizacional: um estudo de caso de implementac¸a˜o de sistema ERP. In: Anais Enanpad. Atibaia: Anpad, 2003). Research using Hackman and Oldham’s model of Quality of Working Life, carried out in a banking institution that had undergone restructuring process, found an increase in the variety of activities carried out by workers, but maintaining the worker’s level of autonomy (OLIVEIRA, Ne´lio. Mudanc¸a organizacional e qualidade de vida no trabalho: um estudo comparativo-temporal em ageˆncias do Banco do Brasil S/A. Belo Horizonte: UFMG, 2002. (Dissertac¸a˜o, Mestrado em Administrac¸a˜o)). 102 Several authors emphasize the current overload at work. Benjamin Coriat emphasizes that even in automated systems that would require less human activity, the number of interventions of the workers in the process is high (CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: o impacto socioeconoˆmico da automac¸a˜o. Sa˜o Paulo: Busca Vida, 1989). Rosangela Leal alerts to the fact that the employee keeps his thinking at work even when at rest at home (LEAL, Rosangela Maria de Almeida Camarano. Novas tecnologias no setor automotivo: o saber relacional em questa˜o. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Engenharia da Produc¸a˜o)). 103 Two comments: First, studies on psychological problems coming from work are not new, but many of these problems are intensified with the new forms of work. Second, stress sometimes is regarded as having positive consequences. Here the stress is considered only as a process in which the internal mobilization goes beyond the physical or mental capacities of men (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). Burnout is considered a psychological syndrome resulting from chronic high stress at work. ´ lvaro. Exausta˜o emocional no trabalho. Revista de Administrac¸a˜o, Sa˜o Paulo v. (TAMAYO, A 37, n. 2, pp. 26–37, abr./jun. 2002). Nicole Aubert proposes another concept: professional neurosis (AUBERT, Nicole. A neurose profissional. In: CHANLAT, Jean-Franc¸ois. O indivı´duo na organizac¸a˜o: dimenso˜es esquecidas. Sa˜o Paulo: Atlas, 1996. v. II).

10.6 104

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Indeed, this author has never made such experience with the frog, and hardly the result would be that described in the story. However, as that story is often cited and provides a good example, it is used here then. 105 The model of stress of C. L. Cooper and R. Payne is an important reference (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). 106 There are several reports of feelings of terror and loss of confidence among workers at companies that have undergone downsizing and reengineering processes. 107 Studies that deal with this issue are the most diverse, but they are all grounded on individual strategies in the face of situations of work. Some of them also deal with the theory of selfregulation. Paul M. Muchinsky presents a discussion on goals of individuals and their actions to achieve them, or even change these goals when they are difficult to be reached (MUCHINSKY, Paul M. Psicologia Organizacional. Sa˜o Paulo: Pioneira Thompson Learning, 2004). Christopher Dejours is a reference on the subject (DEJOURS, Christophe. Uma nova visa˜o do sofrimento humano nas organizac¸o˜es. In: CHANLAT, Jean-Franc¸ois. O individuo na organizac¸a˜o: dimenso˜es esquecidas. Sa˜o Paulo: Atlas, 1996. v. I.). Researches provide examples of these individual strategies, such as negative patterns of behavior ranging from extended time of rest until the sabotage of the equipment and colleagues. These practices can appear even not consciously (see, for instance, MELO, Marlene Catarina O. L. Estrate´gias do trabalhador informa´tico nas relac¸o˜es de trabalho. Belo Horizonte: UFMG, 1991(relato´rio de pesquisa) and SPERLING, Luciana Grandi. Expectativas e estrate´gicas de auto-regulac¸a˜o dos gerentes frente a processos de reestruturac¸a˜o e modernizac¸a˜o: um estudo em organizac¸o˜es da administrac¸a˜o pu´blica indireta. Belo Horizonte: UFMG, 2002 (Dissertac¸a˜o, Mestrado em Administrac¸a˜o)). 108 Criticisms appear on themes such as introjection, subjectivity and individual strategies. Often this is because some of them support themselves on theoretical basis and methodologies that are questioned within the mainstream of management studies. 109 Mauricio Dias Tannus, grounded on L. Festinger’s theory of cognitive dissonance, alerts to the problems of modern management models and the negative consequences to individuals and organizations (DIAS, Mauricio Tannus. Pedagogia das organizac¸o˜es e sau´de do trabalhador nos novos modelos de gesta˜o. In: SAMPAIO, Jader dos Reis (org) Qualidade de vida, sau´de mental e psicologia social: estudos contemporaˆneos II. Sa˜o Paulo: Casa do Psico´logo, 1999). Some research can be cited presenting individual strategies aimed at adaptation and survival in modern workplaces that have undergone restructuring, and that can be seen as dysfunctional for the organization as, for example: ROCHA, Denilson R. A. O poder dos indivı´duos: estrate´gias de sobreviveˆncia e auto-regulac¸a˜o frente a` dominac¸a˜o das organizac¸o˜es. Belo Horizonte: UFMG, 2000 (Dissertac¸a˜o, Mestrado em Administrac¸a˜o); MELO, Marlene Catarina O. L. Estrate´gias do trabalhador informa´tico nas relac¸o˜es de trabalho. Belo Horizonte: UFMG, 1991 (relato´rio de pesquisa) and SPERLING, Luciana Grandi. Expectativas e estrate´gicas de auto-regulac¸a˜o dos gerentes frente a processos de reestruturac¸a˜o e modernizac¸a˜o: um estudo em organizac¸o˜es da administrac¸a˜o pu´blica indireta. Belo Horizonte: UFMG, 2002 (Dissertac¸a˜o, Mestrado em Administrac¸a˜o). 110 Tom Peters is an author who, in his lectures, criticizes the Management courses. Henry Mintzberg, has recently written a book dealing with the matter. 111 KATZ, Robert. As habilidades do executivo. Colec¸a˜o Harvard de Administrac¸a˜o. Sa˜o Paulo: Nova Cultural, 1986. 112 SENGE, Peter; FABIOLA Nobre e TAITO Nobre. Abram ma˜o do poder. Revista Exame, 06/08/ 2003. 113 BARNARD, Chester. As func¸o˜es do executivo. Sa˜o Paulo: Atlas, 1971. 114 MINTZBERG, Henry. Trabalho do executivo: o folclore e o fato. In: Colec¸a˜o Harvard de Administrac¸a˜o. Sa˜o Paulo: Nova Cultural, 1986. 115 Win–lose and win–win negotiations can also be called distributive and integrative negotiations, respectively. See on this, for example, in LEWICKI, Roy L., SAUNDERS, David M. e MINTON, John W. Fundamentos da negociac¸a˜o. Porto Alegre: Bookman, 2002.

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This aspect is mentioned in chapter on strategy. Summary of the decision-making models cited here can be seen at OLIVEIRA, Ne´lio. Models and styles of decision-making: a research together with “Banco do Brasil” managers regarding the concession of credit to small rural entrepreneurs. In: Anais Balas. San Diego: Balas, 2001. 118 According to S. Robbins, intuitive decision making can be considered as the one in which there is an unconscious process resulted from experience, not operating necessarily independently on rational analysis (ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999). 119 MOTTA, P. R. A cieˆncia e a arte de ser dirigente. Rio de Janeiro: Record, 1991. 120 Several studies have discussed the application of principles of the chaos theory and the complexity theory in management. (See, for instance, WOOD Jr., Thomaz. Teoria do caos e administrac¸a˜o de empresas. In: WOOD, Thomas. (coord). Mudanc¸a organizacional. Sa˜o Paulo: Atlas, 2000). 121 One of the references on this discussion is Jeremy Rifkin, who in 1995 published the book O fim dos empregos (RIFKIN, Jeremy. O fim dos empregos: o declı´nio inevita´vel dos nı´veis dos empregos e a reduc¸a˜o da forc¸a global de trabalho. Sa˜o Paulo: Makron Books, 1995). In a recent interview, this author stated that he was very conservative when writing his book and the forms of automation have brought a level of unemployment higher than he imagined when he wrote it. (RIFKIN, Jeremy. Entrevista concedida. Revista Voceˆ SA, 13/11/2004). 122 Several studies emphasize the precariousness of work currently as ALVES, G. O novo (e preca´rio) mundo do trabalho: reestruturac¸a˜o produtiva e crise do sindicalismo. Sa˜o Paulo: Boitempo Editorial, 2000. In the case of outsourcing, jobs in the contractor or subcontractor firms sometimes have lower benefits and worse working conditions than those found in companies that had outsourced their activities. Several research give evidence to this fact, e. g.: BICUDO,Valeria Rosa. Terceirizac¸a˜o na Petrobra´s: Implicac¸o˜es Sociais, Gerenciais e Polı´ticas. In: Anais Enanpad. Atibaia: Anpad, 2003. 123 Interesting article discusses this fact occurring in a large petrochemical company: Petrobra´s: mudanc¸as no rh, terceiros ganham status. Revista Exame, 10/12/2003. 124 RIFKIN, Jeremy. O fim dos empregos: o declı´nio inevita´vel dos nı´veis dos empregos e a reduc¸a˜o da forc¸a global de trabalho. Sa˜o Paulo: Makron Books, 1995. 125 It is worth noting the various actions of governments and organizations in promoting entrepreneurship today. 126 CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Ed. Busca Vida, 1989. 127 This environment in which the large Machine Bureaucracies have strengthened is often characterized by labor relations scholars as Fordism, a model of economic and social development, according to the Regulation Theory. There would be, according to such theory, a virtuous circle on the creation of employment and income and an increasing demand (BOYER, Robert. A teoria da regulac¸a˜o: uma ana´lise crı´tica. Sa˜o Paulo: Nobel, 1990). 128 CARVALHO NETO, Antonio Moreira. Relac¸o˜es de trabalho e negociac¸a˜o coletiva na virada do mileˆnio. Petro´polis: Vozes, 2001; CARVALHO NETO, Antonio Moreira; CARVALHO, Ricardo Augusto Alves. Sindicalismo e negociac¸a˜o coletiva nos anos 90. Belo Horizonte: IRT/ PUC Minas, 1998; NABUCO, Maria Regina. Relac¸o˜es de trabalho contemporaˆneas. Belo Horizonte: IRT/PUC Minas, 1998. 129 This is discussed, for example, in CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Ed. Busca Vida, 1989 and in NABUCO, Maria Regina; NEVES, Magda de Almeida e CARVALHO NETO, Antonio Moreira. Indu´stria automotiva: a nova geografia do setor produtivo. Rio de Janeiro: DP&A, 2002. 130 SENNETT, Richard. A corrosa˜o do cara´ter. Rio de Janeiro: Record, 1999. 131 The research conducted by A. N. Turner and P. R. Lawrence in 1950s, which presents differences between workers that came from rural and urban areas, is a reference on this matter. The studies of J. R. Hackman and G. R. Oldham on work redesigned in 1970s took this 117

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fact into account (See: ROBBINS, Stephen. Comportamento organizacional. Rio de Janeiro: Ltc Editora, 1999 and HACKMAN, J. R., and OLDHAM, G.R. Work Redesign. Illinois: 1979). 132 CASTELLS, Manuel. Fim de mileˆnio. Sa˜o Paulo: Paz e Terra, 2000; CASTELLS, Manuel. O poder da identidade. Sa˜o Paulo: Paz e Terra, 2002; GIDDENS, Anthony. As conseq€ ueˆncias da modernidade. Sa˜o Paulo: Editora UNESP, 1991; TOURAINE, Alain. Poderemos viver juntos? Petro´polis: Vozes, 2003.

Chapter 11

Variations of the Automated Bureaucracy

In the previous chapter, the Automated Bureaucracy is presented as a possible substitute mainly for the Machine Bureaucracy, which used to be the format most used by large industries around the twentieth century. It happens that in the same way that such companies have experienced pressure from new environments, new automation technologies, and new strategies, forcing them to make structural changes, other types of organizations have also gone through such pressures. This chapter therefore discusses the emergence of the Automated Bureaucracy in other types of organizations or, at least, the emergence of some of its main features in these organizations. The characteristics of the Automated Bureaucracy in service organizations and in the traditional processing production companies are analyzed. In addition, by using Henry Mintzberg’s basic configurations, some changes in the Professional Bureaucracy, Simple Structure and Adhocracy are discussed.

11.1

The Automated Bureaucracy in Service Organizations

Despite the great emphasis that has always been placed on studies of the organization of work and the structure of industries, the emergence and strengthening of Machine Bureaucracies were not restricted to just manufacturing firms. Instead, this organizational structure was also consolidated in some businesses related to service operations, which encountered contingency factors similar to those faced by large traditional industries, such as high demand, standardized services, standardization of operations, and gains related to scale and scope, among others. Thus, in their search for internal and external consistency, some service organizations have adopted this structure typical of large industries. Sectors such as banking and postal services are common examples of large service organizations with structures based on the Machine Bureaucracy.1 It happens that the changes in the contingency factors affecting large and traditional industries have also occurred in these large service organizations. N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_11, # Springer-Verlag Berlin Heidelberg 2012

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Among these changes in contingency factors are fiercer competition, including at the global level, greater demands from customers, and automation based on information technology. As a consequence, in service companies, structural changes have occurred aiming at internal and external consistency; thus, they are led towards the implementation of an automated bureaucratic structure, as it has happened in large industries. As in the large industries, automation and a high rate of labor force substitution take place at the operating core of these service organizations. Recalling the discussions made in Chap. 5, by using information technology in services, three conditions are possible: (1) the emergence of new equipment that facilitate work, (2) the automation of the service itself, and (3) the connection among the various internal areas and between the organization and external elements. In the first condition, automation brings about minor changes in the work organization, and new equipment is used as a tool to upgrade the worker’s skills. The increasingly sophisticated machines that help improve performance include personal computers (PC) and computer applications, optical bar code readers that control the entry and exit of products (purchase and sale), telemarketing systems, copying machines, and multifunction calculators.2 Such equipment and automation are widely used in firms with traditional structures, where they cause little change in the work organization and structural characteristics. However, as for the other two possibilities, that is, the automation of the service itself, and the connection among the different internal areas and between the organization and the environment, substantial changes in the organization of work and the organizational structure are involved. Among those, there are high substitution of the labor force; multifunctionality; changes in the workers’ profile; use of coordination by norms and values; and the emergence of tasks related to monitoring, intervention, maintenance, and general improvements. In the analysis of structural changes in such firms, it is also necessary to take note of other considerations. In service operations, apart from the analysis of volume and variety, it is also important to analyze the interaction with the client. In view of this analysis, two basic types of work can be highlighted: the back office (or support positions) and the front office (or front line). The former involves tasks that require little interaction with the client; the latter, also called customer service, concerns tasks that entail great interaction with the costumer. Between the two, it seems there is greater possibility for automation in the back office, which presents more routines and procedures, and even less variations caused by the little contact with clients.3 Thus, the major modifications in the organization of work and structure occur in the departments that carry out backoffice activities. These changes include a major reduction in the labor force and the emergence of tasks related to monitoring and intervention. However, even in areas of front-office activities, changes in terms of automation also take place.4 As a result, some labor force substitution happen, and by means of the integration by information systems, there is even the prospect of the new activities encompassing tasks formerly carried out by back-office departments (Table 11.1).

11.1

The Automated Bureaucracy in Service Organizations

Table 11.1 Automation in service operations Types New equipment that facilitates work Automation of the service itself, and high substitution of the labor force

Integration among the various internal areas and between the organization and external elements

203

Sectors Back office: – Greater possibility for automation due to the existence of routines and procedures, and less variations caused by the little contact with clients Front office – Less possibility for automation due to the existence of a few routine tasks and the service diversity coming from the intense contact with clients

In the banking sector, for example, the changes discussed above can be noted. Banks, traditional companies that use the machine bureaucratic structure in providing services, have gone through pressure related to global competition, higher demands from costumers, and the automation of operations.5 As a result, there are changes in the organization of work and in the structure of these companies that lead them to become Automated Bureaucracies. Departments related to the back office (no contact with the customer), formerly responsible for activities such as internal accounting operations, debiting from or crediting to client accounts, analysis of client financial data, and preparation of contracts, among others, are those more highly subject to automation and, consequently, a drastic reduction in the number of workers and the emergence of tasks related to monitoring and intervention.6 Currently, the few workers in these departments are responsible for the conference and regulation of transactions in several accounts, whether those of customers or internal ones for accounting reconciliation; that is, monitoring and intervention activities. These transactions, previously handled by the back office, are now carried out by front-office workers or directly by the client (through automatic cash dispensers/ATMs or the Internet), leaving the back office to handle only the interventions deemed necessary (inconsistencies). The automation of frontline activities (customer service) in the banking sector has resulted in the reduction of the labor force and brought about changes in the activities of the remaining employees. Instances of labor force substitution in the provision of banking service include ATMs/automated cash dispensers used directly by the customers, debits carried out directly in commercial establishments, and Internet transactions handled by the clients themselves.7 As for the changes in the activities, the use of terminals connected to the various departments of the firm and the availability of diverse information enable front-office workers to carry out various tasks, making the organization of work different from one that is based on specialization. As previously mentioned, the activities performed by frontline workers and even by the customers eliminate the need for many tasks formerly performed by back-office workers, such as debit and credit transactions in customers’ accounts.

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Automation in the banking sector A – Previous situation The cashier of a bank branch receives a check from a client for servicing. After verifying the client’s account, the cashier notifies the client of the lack of funds in his account. After receiving some comments from the client on the need for money, the cashier directs the client to the front office manager. The manager talks to the client and notes the need and the possibility of giving him a loan. The client provides the documentation necessary to obtain the loan, and the front office manager directs him to the back office manager. In this department, some analysis and various calculations are carried out. A contract is written consisting of the loan amount, value and term of the installments, warranties, etc. After the client signs the contract, the credit is registered in the client’s account by a back office clerk. The client can then request the money from the cashier. The cashier gives the money to the client, authenticates the check, and sends it to the back office where the debit is registered in the client’s account. B – Current Situation I The cashier of a bank branch receives a check from a client for servicing. After verifying the client’s account using an on-line terminal, the cashier notifies the client of the lack of funds in his account, but also of the existence of a pre-approved credit that the client can use for loans after signing a previously prepared contract. The client agrees, signs the contract, and gets the money. The cashier registers the credit (loan) and the debit (withdrawal) in the client’s account. This bank employee, through his terminal, has other information on the client and may also sell insurance, a capitalization plan, or some other banking service. C – Current Situation II A bank client goes to an ATM to withdraw money. He notes the lack of funds in his account, but he verifies through the machine that there is a pre-approved loan for him, which he can avail simply by entering a password on the terminal. He carries out the operation and withdraws the money. The registers in his account are made simultaneously. Found in locus

The postal sector also offers appropriate examples of the structural changes that are characteristic of an Automated Bureaucracy in companies with service operations. Customer service in a post office, like that in a bank branch, is facilitated by automated systems. Using an electronic terminal, an attendant serving a client can gain access to different information, and can thus offer a great variety of services and even perform tasks formerly handled by back-office departments, such as initiating the process of sending a package by attaching a barcode label on it and registering it through the terminal. The various procedures, diversions, or transfers that are conducted until the effective delivery to the recipient are made and controlled automatically from the code registered by the attendant. Clients can also track the shipment through electronic terminals or the Internet. As with the banks, the internal departments (back office) are the ones that go through major changes in a postal service organization. One of the typical activities in this organization is the sorting of envelopes or packages by destination region. Currently, automated equipment carry out this separation, thus replacing much of the labor force. The workers who remain involved in this activity are responsible for feeding envelopes and packages into the equipment, and mainly for monitoring and intervention in case of problems related to the task, such in case of the system being unable to identify the destination.

11.1

The Automated Bureaucracy in Service Organizations

205

The postal service can also offer an appropriate example with regard to the limits of automation, as discussed in the previous chapter: the clear difficulty of making changes in the postman’s work. Although the delivery of mail has many standard and routine features, his tasks can hardly be automated and still require a substantial labor force to carry out. In addition to the reduction in labor force, and the emergence of monitoring and intervention activities, especially in the back office, other features typical of Automated Bureaucracies can be also noted in the service organizations presented as examples (banking and postal), such as flexibility in production, multifunctionality, and teams focused on continuous improvement. Through the use of automated systems, a clerk in a bank branch or post office, for example, is able to offer a great variety of services to a customer without having to direct him or her to another attendant or department. Furthermore, after the possible radical changes have taken place in these firms, in-house groups responsible for continuous and incremental improvements emerge.8 Automation in back office activities in the postal service The department responsible for sorting letters at a postal service company offers a typical example of automation in back office activities with high substitution of the workforce and changes in the functions of the workers. In general, this department is in charge of receiving letters from various offices of a region, and sorting and directing them to other regions according to the destination. Until recently, a huge number of employees could be seen in this department sorting letters. Sitting in front of cabinets with many bins, these workers would read the destination informed in the letter, identify the region of destination, and place the letter in the appropriate bin. Currently, in these departments, machines that “read” and sort the letters have replaced many workers. Employees who remain in these departments are responsible for feeding the equipment with the letters, solving problems in it, and driving those letters in which the equipment has difficulty identifying the region of destination. Found in locus

In particular, with regard to integration in service firms, such as with the ERP systems used in industries, information systems enable linkage among the diverse operating core sectors, as well as between these and the support areas. As for external integration, several examples can be drawn from the previous discussion, such as the use of automated cash dispensers (ATMs) installed in bank branches and public places, or even when a customer accesses both banking and postal services through the Internet. External integration in postal service Currently, at the postal service, the client can monitor, by using the Internet, the various stages involved in the moving letters and packages mailed, controlling, inclusively, the arrival at the destination. Found in locus

Given the foregoing discussion, it can be noted that large service companies with high volume and low variety of operations are subject to changes that lead them to a structure based on the Automated Bureaucracy. Of course, these changes are subject to the situations and limits discussed in the previous chapter and occur more emphatically in back-office.9 In such workplace, similarly to what happens in industries, activities related to monitoring and intervention emerge. In contrast, in

206

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Variations of the Automated Bureaucracy

frontline activities, which entail more interaction with the customer, the automation is more instrumental and does not modify the organization of work too much. However, multifunctionality and greater use of skills also arise in these activities. A parallel can be noted between the frontline activities in service firms and the tasks less subject to automation in the industries discussed in the previous chapter. In both cases, there is less labor force substitution and use of the so-called lean production. In addition to possible changes in the operating core, and internal and external integration, the other changes discussed in the previous chapter also take place, such as those related to the administrative component, including the support areas and the middle managers, and focusing on the core business. In the first case, there is a decrease in the work of support staff and the technostructure, and an increase and diversification of the activities of middle managers. In the second, there is a tendency for the firm to concentrate on its core or essential activities, outsourcing many of the activities related to support or those in which the firm does not demonstrate great ability or competitiveness. This focusing happens also due to the greater possibility of obtaining supplies and becoming a facilitator of automation, integration, innovation, and flexibility of services.10 Finally, it should be emphasized that in the Automated Bureaucracies in service organizations, the various problems related to overload, stress, difficulties in obtaining commitment, and the harmful practice related to the concept of individual strategies, emerge.11

11.2

The Automated Bureaucracy and the Changes in the Professional Bureaucracies

The Professional Bureaucracy, as described by Henry Mintzberg, is a typical structure used by organizations such as universities, general hospitals, consulting firms, law and accounting offices, and craft production firms. In general, it consists of a body of highly skilled workers, and its activities are basically coordinated through the standardization of skills. Considering only these two aspects, it can be inferred that in these organizations, a structure based on the Automated Bureaucracy is unlikely to emerge. Such situation occurs because for these skilled workers, information technology is regarded more as a facilitator of the work, i.e., a tool that enhances workers’ skills. This is the case, for example, of the various devices that facilitate the diagnostic and medical interventions or systems that help teachers present their work in distance learning courses and teleconferences. Other examples can be offered, including activities considered as secondary, such as the completion of medical records by doctors and the filling out of record books by teachers. In such cases, the work is made easier through specific software accessed on personal computers and/or designated terminals.

11.2

The Automated Bureaucracy and the Changes in the Professional Bureaucracies

207

In summary, despite some incremental changes, automation does not bring about substantial changes in the work of professionals.12 Obviously, even higher qualifications are required, and although the time it takes to accomplish tasks is reduced and activities are performed more precisely, the work itself remains the same. However, this type of organization also has a number of activities related to mechanized bureaucratic work. Such routine and standardized activities are carried out by workers who provide support to skilled professionals, as in the case of the administrative staff in hospitals and universities, as well as the departments responsible for financial activities, personal services, cleaning services, and so on. Due to their particular features, these activities have experienced automation, reduction in labor force, and the emergence of tasks related to monitoring and intervention. Some tasks formerly carried out by these support units can now even be carried out by skilled professionals as they perform their secondary activities. A teacher, for example, performs some tasks previously carried out by internal departments (support units) when filling out his report book in a IT-based system (software), thus modifying, and even reducing, the activities of the university’s offices. In the same way, by filling out electronic medical records with the patient diagnosis, prescriptions, and treatment protocol, a doctor accomplishes tasks formerly assigned to support units, thus shifting the activities of these departments to monitoring and intervention, and even reducing their tasks. Integration can also occur with other sectors and even externally. Besides the integration with typical support areas, such as the secretaries, high integration can emerge with financial services, accounting, and purchasing units, as well as with sectors that offer technical support, with customers (or users), and with suppliers. The grades that the teacher registers in an electronic report book, for example, can be e-mailed automatically to the student concerned. The teacher can also input into the IT-based system information assigned literary readings, homework, and exercises, which can then be transmitted to students. By uploading information on an upcoming lecture, a teacher can simultaneously invite students, and request an auditorium and the necessary equipment from the internal departments. The support work in Professional Bureaucracies can also be reduced by the actions of the customers (or the users). In the case of the lecture, students can register as well as access information on the speaker and other relevant data. A student can electronically enroll in a specific subject, and he can, through automated and integrated systems, simultaneously perform many tasks previously carried out by the university offices and other departments, such as the registration of his or her name in the teacher’s electronic report book, the issuance of a payment order, etc. Thus, the university offices, formerly responsible for many of these activities, now become tasked only with monitoring the process and making interventions when necessary. The changes in the activities within a hospital can also be offered as examples. A medical doctor who registers information in an electronic medical record influences and reduces the tasks of various units of technical support, such as the nursery, laboratory, pharmacy, operating room, etc. He also affects the financial services and purchasing departments, among others. In some cases, information regarding the

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patient’s condition, treatment protocol, and even other matters of concern, such as billing, can be provided to clients and their families. Automation in a university Case I Currently, after contacting a lecturer, a professor registers a lecture on the information system of a university. When this is done, the auditorium and equipment needed for the lecture are automatically reserved, and a communication is sent to students. They receive the information and can register by using the same system in the lecture. Case II Currently, a student can enroll in a certain subject by using the information system of a university and the internet. When he does so, his name is placed in the teacher’s electronic record book, and the university’s financial department may issue an order for his payment in a bank. Case III Currently, a teacher in the university registers the grades of his students in the teacher’s electronic record book. His students receive such information immediately, by email or a message in the mobile phone service. Found in locus

Automation in hospitals When a patient is received at a hospital, his record is registered on the information system of the hospital. After the examination, the doctor registers his diagnosis in the system. The system offers suggestions for treatment and he chooses the most suitable for the case. By making this choice, the doctor influences various sectors of the hospital such as the pharmacy, the nursery, the laboratory, etc. He also affects sectors such as financial and accounting, among others. Found in locus

All of the situations described are possible in these organizations. They reduce activities in support areas in a Professional Bureaucracy, and shift the remaining activities to mainly monitoring and intervention tasks. Thus, as in the examples of changes proposed in the previous chapter, automation and integration emerge in the operating core and in support areas in Professional Bureaucracies. Obviously, the major impact of the changes on the organization of the work and the structure occur in the support departments, emerging thus more qualified workers, multifunctionality, and coordination based on norms and values in those areas. Among the skilled professionals in the operating core, such as doctors, teachers, consultants, lawyers, etc., only minor changes occur in their work, which continue to be coordinated primarily through the standardization of skills. In the same way, concentration on the core business and outsourcing take place, since there are more possibilities of supply and better ways of its control through information technology. In addition to tasks clearly related to support, such as cleaning, feeding, security services, etc., activities that could be viewed as typical but that are not related to the organization’s core competency can also be outsourced. In a hospital, activities related to technical support, such as laboratory activities, pharmacy tasks, and radiology, pathology tests and physiotherapy are examples of what can be outsourced (Table 11.2).13

11.3

The Automated Bureaucracy and the Small Firms

209

Table 11.2 Automation in Professional Bureaucracies Professionals’ activities Support units’ activities More difficulty to be automatized Easier to be automatized Technology is presented instrumentally, not Reduction in labor force, integration, tasks bringing about substantial changes in the related to monitoring and intervention work emerge

Evidently, several of the problems concerning the Automated Bureaucracy mentioned in the previous chapter also occur in the Professional Bureaucracies that have gone through automation. The more serious problems, however, are linked to the skilled professionals in the operating core, particularly considering their peculiar features. According to Henry Mintzberg, because of their qualifications, skills, and knowledge, and the coordination based on the standardization of skills, such qualified professionals in organizations with this structure hold great power, and they will resist everything that can be seen as a threat to this power, including automation.14 The professionals resist the technology because it can bring about rationalization and division of labor, removing their autonomy and interfering with their relationship with customers. Of course, this aversion to the use of technology is not found in workers that carry out support activities, who have jobs similar to those of a Machine Bureaucracy. Thus, difficulties may arise due to the power held by skilled professionals when the deployment of automated systems and the resulting new tasks. In practical terms, they can boycott or refuse to use electronic processes, irregularly delegate tasks to other people, mainly workers in the support sectors, or even under-utilize the possibilities offered by the system.15 Perhaps these problems, likewise discussed in the chapter on the Automated Bureaucracy, can decrease over time. In future activities, the professionals who are being currently qualified may present less aversion and resistance to the use of technology. In this regard, specific disciplines may be included in the educational curricula of these professionals to help address and assuage this problem.

11.3

The Automated Bureaucracy and the Small Firms

By using only the traditional types of production technology related to mechanics and electricity, the use of automation in work processes was always restricted to large companies, basically due to two main reasons: cost and rigidity. In the first aspect, automation based on traditional technologies always had a high cost both in its deployment and maintenance. This fact precluded the use of automation by small firms that generally present low investment capacity and difficulty in obtaining the large returns necessary to pay for such investments. In the second aspect, as discussed in earlier chapters, small firms have, among their main advantages, an organic structure that enables them to change rapidly in order to operate in different environments or face environmental changes.16 Automation, at least within the bounds of previous technologies, could deprive them of this advantage, rigidifying

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the organization of their work and their structure. Thus, high automation with traditional technologies never took place in small businesses as it did in large firms. Today, however, there is a higher possibility of change in this situation because of information technology. Specifically, this is due to: first, the decrease in the costs of acquisition and maintenance of the technology, and second, the possibility of production flexibility that the technology offers. Thus, small industries and small service firms, including small retailers, today find themselves faced with the prospect of automating many of their activities. In the same way, as discussed throughout this and in the previous chapter, several modifications are expected in these organizations, such as a lesser use of labor force, internal and external integration, demand for higher qualification and commitment from workers, personalized service to clients, etc. In this regard, however, some observations should be made, especially concerning automated equipment used as tools, low automation in production activities, and automation in support activities.17 In the first case, many of the automated machines that use information technology are presented only as tools, albeit sophisticated tools, to be used by operators. They improve the performance of the workers but do not bring about substantial changes in the activities that the workers perform. Electronic scales that print the product code, weight, and price, as well as electronic cash registers and bar code readers, among others, are examples of equipment used by small firms today that do not substantially change the work done. Obviously, its use requires higher qualification of the worker, but it does not alter the essence of the organization of work. In the second case, it is important to mention that it is still difficult for small firms to automate the operating core so that high integration occurs due to the same reasons that prevented automation in organizations that used to use traditional technologies: cost and rigidity. Costs are incurred in the operating core because the work has some peculiarities that require the development, construction, and maintenance of information systems and equipment specific to the firms’ activities. Again, the large investment necessary would pose a problem for a small firm with low capacity to invest and obtain substantial returns. With regard to rigidity, information technologybased automation can limit, or even take away, an organization’s flexibility, which is a crucial competitive advantage of small firms. Thus, automation that causes substantial changes in the main activities of the operating core is not very common. Although information technology is less expensive and offers greater flexibility when compared to traditional technologies, the high rates of labor force removal and production integration, both important features associated with the birth of an Automated Bureaucracy, do not happen in these organizations. As for the third case, similar to what occurs in Professional Bureaucracies, there is a large possibility of automation of support activities in small firms. In these firms, however, the reasons for such automation are quite different. It turns out that the support activities of most small businesses, such as those related to purchasing, inventory control, billing, etc., have many similarities. This fact makes possible the development of a large number of software and systems that perform such activities and that are easily found in the market. Such software is developed for general use

11.3

The Automated Bureaucracy and the Small Firms

Table 11.3 Automation in small firms: possibilities New equipment Automation in production activities Sophisticated instruments or Difficult for small firms to tools that improve the automate the operating core workers’ performance Do not reduce tasks nor High cost hampers development, substantially change the construction and maintenance activities of systems and equipment specific to the firm’s activities

E.g.: Electronic scales that print Automation, even with the product code, weight, and information technology, can price, as well as electronic limit, or even take away, the cash registers and bar code organization’s flexibility, a readers, among others crucial competitive advantage of small firms

211

Automation in support activities Easier to be automatized

Systems and software developed for general use are easily found in the market and can perform such activities with certain adjustments E.g.: purchasing, inventory control, billing, etc.

and, with certain adjustments, can be used in the support activities of most small businesses. These support activities, i.e., those that are peripheral to the principal activities, are precisely the main set of activities that has gone through automation in small firms. Thus, given the use of automated equipment merely as tools, the low possibility of automation in core activities, and the high possibility of automation in support activities, the organization of the work and the structure of small businesses do not change substantially. Organicity and dynamism, coordination based on direct supervision, and the centralization of decisions at the strategic apex are still the most noticed aspects seen in these firms. With regard to the centralization of decisions, it is important to mention the most significant problem regarding automation in these firms: the resistance of some owners (Table 11.3). In this respect, the Simple Structure, which is used by small businesses, relies entirely on the figure of the owner-manager who coordinates the work through direct supervision.18 Although he or she can be seen as an entrepreneur who focuses on finding opportunities and making changes, the automation of some activities, even those related to support tasks, may stir up his or her fear of losing some power and control. Owners agree many times to automation only to adhere to the trend or because of either external or internal pressure. As a result, resistance, lack of commitment and necessary involvement in the deployment of automation, and impatience for immediate results, among others, can occur.19 The situation can become aggravated when the firm has a history of unsuccessful experiences in the deployment of new processes that have been poorly managed and did not go through appropriate adjustments. In this respect, it is worth emphasizing that even existing general-use software suitable for most small businesses, some modification to fit the organizational reality may be required.20 Some observations should also be made on the consequences of the emergence of large Automated Bureaucracies and the onset of the so-called information

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economy in these small businesses. In the first case, given the outsourcing movement that has emerged with the birth of Automated Bureaucracies, there are now enormous opportunities for small companies to engage in activities formerly carried out by large vertically integrated Machine Bureaucracies. Support activities as well as those that are not considered essential or part of the core business are being transferred, often to small firms. The current discussions on entrepreneurship present, among other reasons, a clear prospect of outsourcing that comes with the emergence of companies with organizational structures based on the Automated Bureaucracy. These large companies, as discussed in the chapter on new organizational possibilities (Chap. 8), support and encourage the formation of small suppliers. Much of this support is offered even to former employees.21 In the case of the information economy, many opportunities for small businesses arise. Due to their flexibility and dynamism, these small firms are under better conditions to perform various activities in this new economic sector. The development and maintenance of software and systems, as well as repairs of equipment are among the new activities in this respect. With regard to the increase in the number of small firms as a result of the outsourcing movement, one final observation should be made. The need for large companies to be integrated externally requires that small firms automate some of their processes. However, as aforementioned, such automation occurs mainly in peripheral processes that are part of the support activities, not in the main activities of the operating core.

11.4

The Automated Bureaucracy and Processing Production Firms

In the chapter on automation technology (Chap. 5), some space is dedicated to the presentation of the processing production firms, including a discussion of their structural aspects. In the said presentation, the main reference is Joan Woodward’s work, which provides an analysis of organizational structures given the 3 types of production technology used by firms: unit production, mass production, and processing production.22 The chapter also includes a discussion of Henry Mintzberg’s proposal, which considers the structure used by processing production firms as a special type of Adhocracy that employs high automation. Considering the various possibilities pointed out in the chapter on the Automated Bureaucracy (Chap. 10), changes are also expected to occur in processing production firms. For these large companies, however, it is important to remember that even in their traditional forms, high automation in the operating core and less use of the labor force had already been noted. Monitoring and intervention activities, the need for commitment to maintain the production flow, the social roles of managers, and other typical aspects of Automated Bureaucracy used to already be common in such companies. Thus, it can be assumed that the changes in this type of

11.4

The Automated Bureaucracy and Processing Production Firms

213

organization would be smaller compared with those that occur in large Machine Bureaucracies. Nevertheless, changes have arisen in this workplace, especially with regard to increased automation with the new IT-based systems of monitoring and intervention, the integration of systems internally and externally, and the outsourcing of various activities. With regard to the first case, in the traditional form, workers in the operating core of processing production companies are divided into two groups. The workers in the first group remain in rooms, and are responsible for monitoring operations through huge electrical panels and informing the second group of workers on the need for intervention. The workers in the second group are responsible for visually monitoring the machinery and manually intervening in their operation based on their observations and the information coming from the workers in the monitoring rooms (the first group). Currently, the use of information technology has not brought about extreme changes in the processing since automation has existed and continues to be present in traditional equipment that employs mechanical and electrical actuators (pneumatic and hydraulic pistons, and electric motors, for instance).23 However, significant changes have taken place due to the IT-based systems of monitoring and intervention, which allow for better conditions for workers.24 In practical terms, various traditional monitoring equipment, including large electrical panels, have been replaced by modern monitors that offer much more information to the worker and in a more user-friendly manner. A worker is able to monitor more stages of the production process simultaneously. As a result, there is a decrease in the number of workers engaged in these activities, that is, in the workers of the first group cited in the previous paragraph. Furthermore, for these workers there emerges the possibility of carrying out remote intervention through the equipment available to them, thus rendering some unnecessary tasks traditionally carried out by workers of the second group, resulting in a reduction in its labor force. Yet for the automation of production, it is important to mention that in traditional processing production firms, some peripheral tasks in the operating core always employed some labor force despite the high automation present in the main operations. Such tasks include feeding the equipment with materials, removing the finished products, etc. For these activities, there is now a strong possibility of automation, causing a radical change and a high substitution rate of the labor force in the operations.25 Concerning integration, likewise what happens in the Automated Bureaucracies, processing production companies achieve considerable internal linkage, not only between the production processes stages, but also between the production and the support areas. It is enabled through the new systems of monitoring and intervention. External integration completes the picture, enabling the company to link up with suppliers and customers. In the case of outsourcing, it can be noted that processing companies, as well as other firms, have taken advantage of the wider access to supply, transferring to other companies many of the activities that were previously done internally. This move also satisfies their need to focus on their core business. Some of these activities

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Table 11.4 Main changes in processing production firms Traditional processing production firms New processing production firms Activities of monitoring and intervention by Activities of monitoring and intervention by using technology related to mechanics and using Information Technology, reducing electricity; then the operating core labor force Activities not linked to the firm’s core business Internal and external integration are kept internally Outsourcing of many activities that are not linked to the firm’s core business or that are not considered as firm’s essential competencies

are clearly linked to support tasks; others are part of the production process but are not among those the organization considers its core competencies (Table 11.4).26 Thus, considering that the organization of their work does not change substantially, it can be said that, with less trauma than old Machine Bureaucracies, processing production firms acquire Automated Bureaucracies features: a decrease in the number of workers, intensified automation through new systems of monitoring and intervention, and the outsourcing of various activities. The various problems discussed in the previous chapter also emerge, such as overload, stress, difficulty in achieving commitment, harmful practice of individual strategies, among others. Moreover, it is important to mention that there are other aspects involved, such as limits of automation and the high costs involved in the process of change. Changes in a processing production firm In an oil refinery, the following changes were noted: Before the implementation of IT-based systems, workers in monitoring rooms observed large electric panels, on which dials and small electric lamps offered information on the production flow. Often, when interventions in the production were needed, these workers, by using a radio system, informed those workers who were near the equipment to carry out the necessary interventions. Currently, some computer monitors have replaced the old electric panels, and the available information is more complete and more precise. In addition, some remote interventions can be made by the monitoring room workers through IT systems. Important information can also be available for managers in different parts of the company for possible control. Such actions can even be taken from places external to the firm through online systems, as in a manager’s residence. Obtained through interviews

11.5

The Automated Bureaucracy and the Adhocracy

Despite the inherent characteristics of Adhocracy – work by project, high production variety and low production volume, decentralization and low formalization – some structural changes are expected, given the environmental, technological, and strategic changes previously discussed.

11.5

The Automated Bureaucracy and the Adhocracy

215

However, compared with the changes that occur in Machine Bureaucracies, the changes in this structure are small, and the use of technology often appears more instrumentally and peripherally. In fact, the major production changes for these firms happened a long time ago with the advent of automation based on numerical control (NC). Still, in many aspects, these organizations have maintained more organic structures, i.e., less mechanized formats. Currently, the changes in such workplace occur with the use of machine tools and other equipment that utilize information technology, the use of systems that allow some integration and the management of projects, and, again, the outsourcing of some activities. In the first case, a good example is the use of computer numerical control machines (CNC machines), which brings incremental changes that do not significantly modify the organization of the work and the structure that existed when numerical control machines with traditional perforated paper tape were used.27 Systems based on the concept of computer-aided design (CAD) are also employed in these firms; however, as with the use of CNC machines, there are no major changes in the way the work is done. Thus, these new machines and systems based on information technology can be regarded as sophisticated tools that offer many possibilities for the operator. In the second case, there are systems based on information technology that enable the monitoring of activities and the integration of several areas of the firm, including, for instance, financial and cost control. In this aspect, a notable example is the computerized project management system, which enables the planning of a project, including its various stages, and a follow-up.28 Operations aren’t automated, as it is the case in Automated Bureaucracies; however, such system facilitates monitoring based on the original plan. There is minimal external integration in an Adhocracy, as this is often considered unnecessary because the volume of production is not large enough, and in contrast to an Automated Bureaucracy, the development and maintenance of systems for integration with customers and suppliers are not worthwhile. Finally, in an Adhocracy, some outsourcing movement also takes place to take advantage of higher supply conditions. However, for these organic firms, only the activities in support or non-production areas are outsourced. As the firm operates by project, it has to maintain diversified competencies and not focus on just one or a few. Incidentally, in these organizations temporary hires or contractual positions are frequently noted due to the specific needs of each project (ad hoc work) (Table 11.5). Table 11.5 Changes in Adhocracies New equipment Internal integration Computer numerical Computerized project management control machines system, which enables the (CNC machines) planning of a project, including its various stages, and a Computer-aided follow-up design (CAD)

Outsourcing Activities in support or nonproduction areas are outsourced. The firm has to maintain diversified competencies and not focus on just one or a few

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As a conclusion, high automation rarely happens in an Adhocracy, and its transformation into an Automated Bureaucracy is unlikely, unless the firm, i.e. its administration, chooses to engage in high-volume and low-variety production, thus changing its strategy and even its business. As a result of these quite peripheral changes, it remains, in these firms, large decentralization, low formalization and standardization of production, coordination based mainly on mutual adjustment and skills, and the great importance of sectors related to projects and development.29

11.6 1

Notes

Harry Braverman discusses Taylorist processes in offices. (BRAVERMAN. Harry. Trabalho e capital monopolista. Rio de Janeiro: Guanabara Koogan, 1987). Henry Mintzberg, featuring Machine Bureaucracy, provides examples of this type of structure in service companies. A description of Taylorist processes in banks can be seen in ZAMBERLAN, F. L. e SALERNO, M. S. Racionalizac¸a˜o e automatizac¸a˜o: a organizac¸a˜o do trabalho nos bancos. In: FLEURY, A. C. C. e VARGAS, N. Organizac¸a˜o do trabalho. Sa˜o Paulo: Atlas, 1983. 2 Several examples of automation in service operations can be seen in FITZSIMMONS, James A. FITZSIMMONS, Mona J. Administrac¸a˜o de servic¸os. Porto Alegre: Bookman, 2000. 3 This fact is better discussed in Chap. 5. 4 As explained in Chap. 5, in the front line, automation presents three possibilities: (1) activities that present no interaction between technology and client; (2) activities with passive interaction; and (3) activities with active interaction. 5 These effects on the banking sector can be seen in SANTOS, N. W. Evaluating organisational changes in Banco do Brasil: a review of a restructuring plan. London: University of Westminster - Harrow Business School, 1999. (Dissertac¸a˜o, Mestrado em Administrac¸a˜o). Maria Tereza Flores Pereira and Joa˜o Luiz Becker discuss automation in banks as bringing increase in productivity, improvement in the services offered to the customer, greater conditions of control and innovation (PEREIRA, Maria Tereza Flores e BECKER, Joa˜o Luiz. O impacto da tecnologia de informac¸a˜o (TI) sobre o processo de trabalho individual: estudo em um grande banco brasileiro. In: Anais Enanpad. Atibaia: Anpad, 2003). 6 This aspect can be seen in OLIVEIRA, Ne´lio. Mudanc¸a organizacional e qualidade de vida no trabalho: um estudo comparativo-temporal em ageˆncias do Banco do Brasil S/A. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Administrac¸a˜o). 7 Found by the author in branches of an important Brazilian bank (OLIVEIRA, Ne´lio. Mudanc¸a organizacional e qualidade de vida no trabalho: um estudo comparativo-temporal em ageˆncias do Banco do Brasil S/A. Belo Horizonte: UFMG, 2001 (Dissertac¸a˜o, Mestrado em Administrac¸a˜o)). 8 This aspect is discussed in the previous chapter. In a postal service company’s department responsible for sorting letters and that was getting adapted to automation, the existence of improvement groups was not verified. The workers informed, however, the existence of improvements groups based on total quality principles in the period before automation. 9 Activities related to call centers and telemarketing, for example, generally present low automation in operations and extensive use of labor in the process. (See article about it: O novo cha˜o de fa´brica: como as centrais de atendimento esta˜o se transformando nas linhas de montagem do se´culo 21. Revista Exame, 20/10/2002). 10 These aspects are discussed in the previous chapter.

11.6 11

Notes

217

As for bank service, several studies can be cited concerning changes and consequent problems such as SALINAS, J. L. e MAC ¸ ADA, A. C. G. Mudanc¸a radical em organizac¸o˜es complexas: o caso do Banco do Brasil. In: ENAPAD. Anais Enanpad. Foz do Iguac¸u: Anpad, 1998. COSTA, M. S. S. O prec¸o da modernidade: ajustes ou desajustes. Mudanc¸as no cotidiano dos funciona´rios de uma instituic¸a˜o financeira. Brası´lia: UnB, 1997 (Dissertac¸a˜o, Mestrado em Polı´tica Social). 12 Jaci C. Leite and Libaˆnia R. A. Paes present four possibilities of using IT in health care: administrative, social, clinical and scientific. They also discuss the instrumental use of IT by the physician (LEITE, Jaci Correa e PAES, Libaˆnia Rangel de Alvarenga. O uso da informa´tica no processo de tomada de decisa˜o me´dica: um estudo de casos em hospitais de cardiologia na cidade de Sa˜o Paulo. In: Anais Enanpad. Atibaia: Anpad, 2003). 13 Outsourcing of various activities was observed in hospitals that were undergoing automation. Such outsourcing happened even in technical support activities such as pathological examinations, physiotherapy, pharmacy and others. 14 MINTZBERG, Henry. Criando organizac¸o˜es eficazes: estruturas em cinco configurac¸o˜es. Sa˜o Paulo: Atlas, 1995. MINTZBERG, Henry. The structuring of organizations: a synthesis of the research. Englewood Cliffs, N.J.: Prentice-Hall, 1979. 15 The resistance of these professionals was verified trough interviews with workers of hospitals and universities. Jaci Leite and Libaˆnia Paes, in a research together with cardiologists, discuss this subject. They point out that doctors are not against the employment of technology in their activities, and they see it as positive to their work. However, they offer resistance to certain administrative and organizational activities such as, data entering in the system. (LEITE, Jaci Correa e PAES, Libaˆnia Rangel de Alvarenga. O uso da Informa´tica no Processo de Tomada de Decisa˜o Me´dica: um estudo de casos em Hospitais de Cardiologia na Cidade de Sa˜o Paulo. In: Anais Enanpad. Atibaia: Anpad, 2003). On a visit to a hospital, it was found that tasks related to entering with patient data used to be carried out by the secretary, not the physician, in spite of the problems of security involved. In universities, in addition to the delegation of tasks to sectors of academic department, subtilization in systems was verified. 16 This is highlighted in Chap. 4, dedicated to Henry Mintzberg’s typology. 17 Data collected from interviews with professionals involved in the automation of small businesses. 18 This is highlighted in Chap. 4. 19 Findings of interviews with consultants. 20 Findings of interviews with consultants. 21 This fact is discussed in Chap. 8 in the item dedicated to entrepreneurship. 22 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977. 23 Concept of actuator is offered in Chap. 5 on automation. 24 Research on automation on 54 petrochemical companies shows great use of systems such as programmable logic controllers and microcomputers, and little use of technologies such as robots and remote handling systems. (DIAS, Camila Carneiro e outros. Demandas tecnolo´gicas versus perfil tecnolo´gico: uma ana´lise em empresas do complexo quı´mico, petroquı´mico, de petro´leo e ga´s natural da economia baiana. In: Anais Enanpad. Atibaia: Anpad, 2003). 25 Visiting a soft drink company, it was found that tasks previously carried out by workers such as feeding machinery and unloading products could be automated. 26 In a large petrochemical processing company in Brazil, outsourcing of activities related to production was compromising the security, such as in the case of maintenance of activities. (BICUDO,Valeria Rosa. Terceirizac¸a˜o na Petrobra´s: Implicac¸o˜es Sociais, Gerenciais e Polı´ticas. In: Anais Enanpad. Atibaia: Anpad, 2003). 27 SLACK, Nigel e outros. Administrac¸a˜o de produc¸a˜o. Sa˜o Paulo: Atlas, 1997 and CORIAT, Benjamin. A revoluc¸a˜o dos roboˆs: os impactos socioeconoˆmicos da automac¸a˜o. Sa˜o Paulo: Ed. Busca Vida, 1989.

218 28

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The information systems used in project management are not discussed in the chapter on automation (Chap. 5) in order to not mislead the reader. In that chapter, only the automation systems related to Automated Bureaucracy are emphasized. Anyway, it can be said that such systems linked to project management correspond to the concept of ERP, discussed in Chap. 5. 29 Joan Woodward discusses the importance of these sectors in unit production firms. (WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977).

Part V

To Finish

Chapter 12

Final Comments

This book does not present a chapter with “Conclusion” as its title. After all, the characterization of the Automated Bureaucracy and its variations that was made in the previous two chapters can be considered the conclusion of this work – in the broadest sense, taking into account the organizational structure approach and the vision of this author, a possible conclusion to several studies that have been conducted in recent years on changes in organizations. Thus, a specific chapter dealing with conclusions is not necessary. Some final comments, however, should be made to clarify certain issues.

12.1

The Existence of the Automated Bureaucracy

A hasty reading may lead the reader to think that this book indicates the Automated Bureaucracy as an inexorable fate for organizations in general or, at least, for the Machine Bureaucracies. As a consequence, either of two positions may be adopted: agreement or opposition. In the first case, there may be those who will herald and even defend the Automated Bureaucracy as the real future of organizations. In the second, there may be those who will contest this work and the Automated Bureaucracy itself, based on the fact that modern structures exist with different structures from the format featured here. In this regard, it should be emphasized that this book aims only to describe a structure that has taken its place in the world of organizations in recent years, becoming an alternative to traditional structures, especially to the Machine Bureaucracies. At no time is there an attempt to put forward the idea that the Automated Bureaucracy is the destiny of all companies, or even, that in the future firms with different formats will not exist, even in the case of companies with highvolume and low-variety production. It is only affirmed that certain firms are adopting formats with the structural characteristics described here due to situational factors that have been presented to them. Thus, the characterization of this configuration becomes important and deserves to be studied and discussed in the management field. N. Oliveira, Automated Organizations, Contributions to Management Science, DOI 10.1007/978-3-7908-2759-0_12, # Springer-Verlag Berlin Heidelberg 2012

221

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12.2

12

Final Comments

The Automated Bureaucracy as a Descriptive Structural Model

This work presents the Automated Bureaucracy as a descriptive model of structure. In this respect, two important considerations should be made. First, there is no intention to advocate the use of the Automated Bureaucracy, presenting it as something positive and beneficial to firms and to society. Being descriptive, this work intends only to present an organizational reality. Second, as a model, the Automated Bureaucracy is a representation. Hardly will there be found firms that present structures that fit perfectly in the configuration described here. The different peculiarities of each organization lead it to use its own structures. The warning made by structuralist scholars of organizations that challenged the Weberian ideal bureaucracy cannot be forgotten. Different internal and external situations lead to the use of different structures. This fact should not be viewed as an exception, or even an idiosyncrasy, but as a rule that can be found in reality. It happens that many of these organizations have several characteristics described here, and thus the Automated Bureaucracy becomes a valid model.1

12.3

The Search for Consistency in the Appearance of the Automated Bureaucracy

Despite using the term automated as the name for the new bureaucratic structure, this work as much as possible avoids technological determinism. It even seeks to avoid any form of determinism. The various factors discussed in this book, such as strategy, technology, environment, new organizational possibilities, and new coordination mechanisms, among others, together influence the formation of this new structure. The perspective adopted in this book and which guided Henry Mintzberg’s study is that related to the search for consistency. That is, an organization or a structure emerges in the search for internal and external consistency. Thus, any determinism must be rejected when considering the present work.

12.4

The Automated Bureaucracy as a Supplement to Henry Mintzberg’s Classification

The characterization presented in this book is based on several studies, but mainly on the classification of five main structures or configurations by Henry Mintzberg. It is presented as a proposal to supplement such classification. In this regard, it should be pointed out that Mintzberg presents his proposal for a sixth format: the Missionary. However, a well-elaborated characterization for such configuration was not done, and its existence in large numbers in the world of organizations

12.6

The Limitations of This Study and the Need for Further Research

223

cannot be observed, at least for the present. Thus, with this book, the Automated Bureaucracy is being proposed as a sixth format as a supplement to Henry Mintzberg’s classification. Still on this subject, it is important to emphasize that the Automated Bureaucracy does not simply replace the previous structure models. Until there is evidence to the contrary, the six configurations, and even the variations proposed here and in Henry Mintzberg’s work, will be seen in the world of organizations.

12.5

A Seventh Configuration

At the end of his work on structure, Henry Mintzberg proposed another configuration (the Missionary) in addition to those five that he featured so well. Despite the risk to which he became subject, the importance of his proposal should be emphasized. If the strength of such configuration cannot be verified in organizational reality, at least many discussions and works that followed, including this one, have been rather influenced by such proposal. Thus, following Mintzberg’s example but with less risk, a seventh structure can be proposed here. In fact, such format is mentioned several times in this work, including with its main coordination mechanism. This is the Network Organization, or the Network Structure, which presents the contract as its main coordination mechanism. In certain aspects, this seventh format relates to the Automated Bureaucracy in a manner similar to the way the Divisionalized Form relates to the Machine Bureaucracy, both characterized by Henry Mintzberg. The Network Organization and the Automated Bureaucracy coexist in harmony with and support each other, being distinguished only in relation to the level of analysis.2 The reason for the proposal presented here being less risky is the fact that such structure already finds support in several studies. The work of Manuel Castells and the federal organization proposed by Charles Handy are examples that can be mentioned.3 It is expected that future works will verify its strengthening in practice, characterize it better, and indicate its management, economic, and social advantages and disadvantages.

12.6

The Limitations of This Study and the Need for Further Research

Admittedly, any model presents as an attempt to represent a reality, and, even, a simplification of such reality. This is true for the model proposed here, as well as for earlier models as those presented by Henry Mintzberg, and even the bureaucracy of Max Weber.4

224

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Final Comments

As for the proposal presented here, however, two considerations related to the limitations of the study should be made. First, the organizational changes that lead to automated formats are still very recent, presenting yet several possibilities. Second, there is available a small number of studies on such changes in comparison with the studies made, for example, on the Machine Bureaucracies. Thus, the alert made by Henry Mintzberg when he characterized the Adhocracy should be done here. At that time, Mintzberg stated that, as a recent structure and by virtue of the few studies made on it, his model for Adhocracy could not appropriately portray the features of the structure that he intended to describe. Due to the same factors, i.e., recent structure and scarcity of studies, the model presented here should be viewed as an initial reference for further researches, confirming or refuting it in the world of organizations.

12.7

The Adhocratic Future That Didn’t Arrive

Ever since the factors that influence organizational structures began to undergo more profound changes, authors have taken positions in the face of them. Many have argued that organizations are assuming more organic and adhocratic shapes, i.e., those more distant from the bureaucratic model. Others ventured to advocate the return of artisanal forms of production. Some of these positions, perhaps, may have been influenced by the phenomenon pointed out by Joan Woodward as similarities at the extremes, in which unit production firms (with flexible production with low volume that often uses machine tools) and firms with automated processing production have similar structural characteristics.5 In fact, structural changes are really occurring, but a departure from bureaucratic forms of structure cannot be affirmed. The Automated Bureaucracy presents itself as an alternative to the organization of work linked to Taylorism, Fayolism, and even to Fordism. However, like in these forms of work organization, the structure maintains bases similar to the bureaucracy characterized by Max Weber, especially if the functions of the structure presented in Chap. 3 – technical, relational, power regulation, and values formation – are taken into account. Routines, work procedures, rules, regulations, and formal communications remain. Naturally, many of them are embedded in an automated system. However, the workers remain subject to them, and the possibilities for autonomous decisions continue to be limited. The characteristic of impersonality could be questioned in these organizations, since the well-defined positions – the greatest materialization of impersonality in traditional bureaucracies – do not appear. However, if the employees’ activities are coordinated by the values, norms, and principles adopted by the organization, it is questionable whether, in this organization, personal characteristics are important. The impermanent relationships that emerge, including in works in teams, are another demonstration of such

12.8

The Automated Bureaucracy’s Positive and Negative Aspects

225

impersonality.6 With regard to legitimacy, which is a strong base for acceptance of the relationship in a bureaucracy, it still relies on merit and competency in the Automated Bureaucracies. Obviously, such competency is different from that required by traditional firms, but it continues to be considered as a basis of legitimacy. Finally, it should be pointed out that with the Automated Bureaucracies, there is also a search for predictability. Naturally, changes arise, but incrementally and continuously so that in the end, things continue as they were, i.e., with the maintenance of an uninterrupted flow of production – an important flow as a means to achieve certain goals or targets previously determined. In this respect the Automated Bureaucracy follows the principle of rationality. Indeed, in a more striking way than that of traditional firms, it does so by the two forms Max Weber proposed: that directed by the achievement of certain ends, and that guided by values and norms.7

12.8

The Automated Bureaucracy’s Positive and Negative Aspects

Again, it is emphasized that this work is descriptive, and does not intend to defend or criticize the Automated Bureaucracy. In this respect, it should be remembered that the traditional organizational formats brought great benefits to society, and several problems as well. Nobody today denies the disadvantages that large Machine Bureaucracies have brought to the workers, mainly in what is called the alienation at work. There is also no doubt, however, of the advantages they have brought in terms of economic and social development. Much praise has been given to Taylorism and Fordism for bringing about large production and increasing employment. Even the communist world surrendered to these forms of production. Actually, the several situational factors related to society as a whole were often more relevant to the emergence of the advantages and disadvantages of the forms of production and the structures adopted by organizations.8 The same can be said for the Automated Bureaucracy. It will surely bring other problems to society and, similarly, many benefits as well. This will occur mainly considering the position of society in the face of it. Thus, this work attempts, to the extent possible, to abstain from positions of defense or attack on the new forms of work organization and structures. Within an organizational point of view, it seeks only to point out their advantages, disadvantages, and possible problems arising, primarily, in organizational terms. It should be also emphasized here the concern of this work in cooperating with Management (science) and society, but also recognizing its limitations in presenting solutions to the problems that were here pointed out and those that will still be.

226

12.9 1

12

Final Comments

Notes

Beyond this warning made by structuralist scholars, it is important to consider the criticisms made to the Configuration School. The Automated Bureaucracy, the model here presented, was influenced by such School and, thus, it is subject to the same criticisms. Likewise, it is subject to defenses presented by Henry Mintzberg (MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000). 2 This aspect is discussed in Chap. 8, in the item dedicated to Network Organization. 3 CASTELLS. Manuel. A sociedade em rede. Sa˜o Paulo: Paz e Terra, 2001 and HANDY, Charles. Tempo de mudanc¸as. Sa˜o Paulo: Saraiva, 1996. 4 This fact is alerted by Henry Mintzberg as a defense of the Configuration School in the face of some criticisms (MINTZBERG, Henry, AHLSTRAND, Bruce e LAMPEL, Joseph. Safa´ri de estrate´gia: um roteiro pela selva do planejamento estrate´gico. Porto Alegre: Bookman, 2000). 5 WOODWARD, Joan. Organizac¸a˜o industrial: teoria e pratica. Sa˜o Paulo: Atlas, 1977. 6 This aspect is discussed in Chap. 10, considering mainly SENNETT, Richard. A corrosa˜o do cara´ter. Rio de Janeiro: Record, 1999. 7 WEBER, Max. Economia e sociedade. Brası´lia: Editora da Universidade de Brası´lia, 1999. Vol. 1. 8 The Brazilian case is worth being mentioned. In that country, compensatory social measures have not been used like in developed countries (See, for instance: GARCIA, Fernando Coutinho. A crise asia´tica e os desafios da concertazione social no Brasil. In: PIMENTA, Solange Maria (org). Recursos humanos, uma dimensa˜o estrate´gica. Belo Horizonte: UFMG, 1999).

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