What shaped organisations?
The basic pattern on which organisations were, and to some extent are still, based is probably a military legacy. States or Kingdoms, from the earliest times, have found it necessary to have armies to protect or increase their territory. Putting together and running an army requires an approach to organisation which must provide.
Add to the above the idea of 'strategy', the means by which the aims or intentions of the organisation will be achieved, and you can see the parallel between an army and any other organisation. Armies have been around for longer than commercial or not-for-profit organisations, and hence the military probably has the distinction of having developed organising systems first.
The adoption of the military framework into commerce and business probably arose in the eighteenth century. Up to that time people had, by and large, been self-employed. This means that farmers tended their fields and were, with some bartering or trading, pretty well self-sufficient. Those who owned the land or ran the kingdoms subsisted through taxation.
In the eighteenth century, in textile manufacturing, the 'putting out' system was used. A family had the skill, e.g. lace making, owned a loom or could execute some element of the manufacturing process. The entrepreneur or merchant provided the raw material to the family and bought back the finished or semi-finished goods.
Moving on from there, the practice of 'vertical integration' emerged, where the entrepreneur owned the means of production (e.g. the looms in the case of the textile industry) and contracted with labour to operate them. With time, more stable employment relationships emerged and the concept of bought-in labour changed to that of the employee operating within the organisational environment.
Part of the reason that organisations mirrored military precedents is because employers sought a higher degree of control over the variables and uncertainties of the manufacturing and trading processes. Responsive, obedient, predictable systems needed to be in position to make goods, serve markets and deal with competitors, just as responsive, obedient and predictable systems needed to be in position to make goods, serve markets and deal with competitors, just as responsive, obedient and predictable systems were needed by armies to defeat the enemy.
Mass production, making many identical products in a continuous line, gained momentum at the beginning of the twentieth century. It did so because it enabled greater business competitiveness by reducing the price of products; it also vastly expanded the market for them. Mass production inevitably requires higher capital investment in plant and hence larger organisations.
Mass production also contributed to a way of thinking about organisations which regarded the human ingredient as equal to part of the machinery. In this thinking a human component could be removed and replaced if it malfunctioned in the same way as a mechanical component.
In the developed economies at the end of the twentieth and beginning of the twenty-first century the organisational model of the army and mass production has come increasingly under fire for two reasons:
So the flatter, non-hierarchical organisation has emerged. Control is devolved within the organisation, rather than being exercised from the top. Decision making takes place at line rather than senior management levels. This improves the ability to change fast and creates a responsiveness which is essential for the swift adaptation modern organisations need to be able to respond to the accelerating competitive environment.
The modern employee is a knowledge worker; he or she must be encouraged to add value to processes, to improve quality and to improve customer satisfaction. To help achieve this, people tend now to work in smaller more autonomous units or teams. Knowledge and skill development is rewarded and flexibility and innovation are encouraged.
While organisations tend to get bigger, their component operating units tend to get smaller. A popular metaphor for the organisation is Charles Hand's Shamrock Organisation.
This model sees the organisation as having three parts or 'leaves'.
Here we see a model which is quite the reverse of the vertically integrated model characteristic of a mass production. Functions and activities are deliberately outsourced, and even some elements of labour, the flexible labour force, are more tenuously related to the organisation.
It would be tempting to suggest that we are almost back in the eighteenth century model of 'putting out' we described above. Undoubtedly there are elements of similarity, but it would be bending reality a bit to suggest the wheel had gone full circle.
This brief history of organisational development provides a picture of the changing perspective in how organisations are thought about and designed. We will return to some of the more important themes discussed above, especially those dealing with the changing operating environment of organisations.
Next week: Simplifying the complex
Excerpts from The University of Leicester Diploma in Management – Resource Development International (RDI) Jamaica. www.rdijamaica.com
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