Vision

In the previous section we have seen that certain trends occur in almost all companies, regardless of the sector of industry. Companies are concentrating more and more on their core activities, contract out work, are trimmed down and intensify their co-operation with other companies. In this process, we see the development of ever larger international interorganisations of co-operating companies. The customers demand products and services that are tailored more to their personal taste and situation. The trends together enforce the flexibilisation of business operations and an increasing co-operation between companies and between the people working in those companies.

From hierarchy to network
The trends lead to changes in the internal organisation, in which the role of the traditional hierarchical organisation is pushed to the background. The accent shifts towards organisational forms based on networks of people and networks of organisations. This change is a fundamental one. The familiar authority-based relationship between manager and employee, typical of the hierarchical organisation, is gradually abandoned. It is replaced by an equal, consultation-based relationship between people, typical of a network organisation.

This shift of accent in the organisational form from hierarchy to network has a number of implications:

• Many relational networks between groups of employees emerge in an organisation. The activity and creativity of these - often invisible - networks increasingly determine the success and the actual course of the company.
• The collaboration shifts from rigid and formal to more flexible and informal. This is also noticeable in external relationships and will eventually change the corporate image.
• Mutual agreement with respect to adaptations and transformations will dominate. Hierarchical decisions and influences are diminishing.
• Employees on a lower hierarchical level will receive far more authorisations. This will reduce the number of layers in the hierarchy.
• Activities are controlled less through vertical interaction between top, middle management and operational staff and more through horizontal interaction between the operational staff themselves.
• The communication with third parties - such as suppliers and customers - will also run less via the managers and more via purchasing and sales staff.
• Employees work in teams more, that have a greater degree of independence in deciding how the work is done. Teams recruit and assign their own members.
• Standardisation no longer focuses on complete products and services and their production processes. On behalf of flexibility, the emphasis is on the standardisation of components of products, services and processes.
• Employees in a network organisation have a broader task definition.

 

Tabel 2.1 Network versus hierarchy.

Conclusion: not only companies, but also groups of employees will co-operate more intensively. Flexibilisation and complexity of products or services and of the business processes necessitate this. There will be roughly two forms of co-operation:

• with respect to production: chains of suppliers, manufacturers, transporters, distributors and sellers of goods and services;
• with respect to support: service supplying and supporting companies that support other companies in transforming their business processes and organising and maintaining their human organisation and their company infrastructure.

The choice between hierarchy and network
As a result of the different trends, companies today have a problem with finding a suitable form for their internal organisation. From the perspective of efficiency, the highly organised, stable organisation in which the tasks of employees are clearly defined, seems to be preferable. The hierarchical organisation should then be preferred. However, to be able to respond to changes in the environment fast and flexibly, one needs a flexible organisation in which employees have a high degree of freedom to decide how to do their work. In that case, a network organisation is to be preferred.

This therefore concerns a choice between two basic organisational forms: the hierarchical organisation and the network organisation. These two types of organisational forms are based on different views on the nature of an organisation.

The hierarchical principle of organisation is based on a mechanistic view on organisations. Often, people are not or insufficiently aware of this. The mechanistic view means that the organisation is regarded as a clockwork in which people and resources are the cogs. The place of people and resources in the organisation and the functions they perform are fixed, just like the cogs in a clockwork. The entire organisation is organised like a production line, aimed at producing a limited number of standardised products or services.
The principle of a network organisation is based on an organic view on organisations. In this view, an organisation is looked upon as an organism. People are the autonomous cells, or organs, that collaborate in the ‘corporate body’. The organisation is supported and kept together by its infrastructure. Two important functions of the infrastructure are: transport and communication. The transport runs through the blood circulation, in this analogy. It transports the food as ‘raw materials’ and the oxygen as ‘energy’ to the cells, and it removes the waste material. The communication runs via the senses and the nerve system, that handle the observation, transport and exchange of data – this concerns data on things perceived in the internal and the external ‘world’.

Each company has processes that are strictly regulated and tightly organised. In those processes, the mechanistic aspect dominates. There are, however, also processes that cannot be strictly regulated and of which the results and procedures have to be agreed on shortly before or during their execution. In that case, the organic aspect dominates, in the form of consultation between the people involved in the control of the processes. It is therefore better to determine for each business unit which form of organisation is the most appropriate one. The result will be that the organisation consists of business units that are tightly organised as production lines, and units in which people work in teams. Besides this, there will be informal groups of people who share interests and who exchange knowledge and information, thus giving the company a close informal coherence. Overall, the entire organisation of a company should have the nature of a network to be able to meet the present demands with respect to flexibility and co-operation.

Many companies experience the choice between the hierarchical organisation and the network organisation as a difficult dilemma. Why choose a different organisational form, if the hierarchical form has brought prosperity for the past 150 years? The disadvantages of the hierarchical form have only surfaced over the past few years, partly under the influence of the trends we described. Strongly hierarchical organisations are impersonal and rigid and show little inclination towards external co-operation. The great changes in society and in the sectors of industry require companies to be more flexible, to have the capacity to adapt and the will to co-operate. This explains trends such as interorganisation, decentralisation and contracting out. Large, centrally controlled companies are increasingly becoming networks of co-operating smaller companies. At the same time, small, specialised companies are starting to co-operate more and more in networks for the production of complex products

Stability and flexibility
The transition from hierarchy to network is also related to the balance companies seek between stability and flexibility.
Stability is derived from matters that are fixed and that will not change for a long time. Standardisation contributes to stability in that respect. Hierarchical organisations are inclined to standardise large business processes and uniform products and services. This happens at the cost of their flexibility.
Flexibility is derived from matters that are handled and decided on the basis of current events, for example the demand of a customer for a certain product. If standardisation is carried through in a well-balanced way, this will contribute to the flexibility. The accent should be on the standardisation of subprocesses in the production process and of components of products and services. This creates the possibility of re-use of these subprocesses and components in other production processes and products and services. This makes it much easier to compose tailor-made products and services.
Network organisations are especially suitable for standardisation that is not primarily aimed at the entire process of product, but on product components and on subprocesses. This approach not only applies to companies that produce material or immaterial products. Companies in the service industry can also divide their services into components that can be offered in various combinations.

IT facilitates network organisations
Network organisations are based on the communication between the participating people. They communicate to make agreements and supply each other with sufficient data and knowledge to be able to properly co-ordinate, control and execute their work. When a network organisation gets bigger and wants to be more flexible in responding to the customer’s demands, the need for communication strongly increases. Large network organisations used to be difficult to co-ordinate and control. They lacked the resources to meet this great need for communication. In the past, large companies were therefore dependent on a hierarchical structure to be able to control the complex co-operation between people and resources in the business processes. In this form of organisation there is less need for communication between the participants. This reduces the flexibility of the organisation. Here, the combination of IT and telecommunications in computer networks provides a solution. Network systems are very well capable of supporting the required communications within and between companies.

Multidisciplinary working
The complex products and services and the necessity for co-operation make it almost impossible for one individual or even one company to solve all the aspects of a problem or to realise a new product or service. There is therefore a strong tendency towards intensification of the co-operation between individuals and companies. The organisation of tasks therefore shifts to working in teams and to other forms of collaboration, such as interorganisations.
The results a company is supposed to yield, will depend more and more on the flexible collaboration between individuals inside and outside the own organisation. Less and less people will be working in fixed production lines in which the role of each individual is prescribed and in which the consultation between people is restricted to a minimum. As a result, not the individual, but the team is responsible for certain results. Quality will eventually be based on the individual awareness and insight that the quality of the entire product depends on the quality of all the individual contributions. Solo performances are almost impossible. Every working person will therefore have to be able to work in multidisciplinary teams or in any other form of collaboration. People will increasingly be expected to be able to communicate effectively and have excellent social skills.
This new requirement of ‘collectivisation’ through constructive collaboration of autonomous individuals and companies seems to contradict the current trends of individualisation of people and of increasing competition between companies.

Flexible use of human resources
The increasing dynamics in companies and their environment requires the same dynamics in the business operations and the use of human and other resources. This especially requires people to be creative and flexible. This enables the company to adapt swiftly and alertly to changes in the environment, and to influence these changes if possible.

The flexible use of human resources has various forms and levels. First of all there are flexible working hours and locations, for example working in shifts, temporary jobs, working on call and working in projects.
Another form of flexibility concerns the knowledge and skills of the employee. People who work in teams must be able to switch roles flexibly, but effectively. Different tasks and activities are executed in teams. People generally have more responsibility.
A third form lies in the combination of the previous two. Employees can be members of different teams, simultaneously or alternately.

Finally, flexibility makes heavy demands of the learning capability of the people involved. In order to be flexible, companies as a whole have to learn quickly from their own behaviour and from changes in their environment. This leads to quick improvements and innovation. A company can only succeed in this if its employees are prepared to learn, from the top down to the shop floor.

Personal responsibility
People’s position in the organisation of companies is changing. People are on average better educated and trained. They want to be more directly involved in the definition of the company policy and the control of the business processes. They especially want more personal responsibility and ample room for personal development and growth.

The necessity of working in multidisciplinary teams offers a great deal of room for this. The flexible way of working in teams is ideally suited for the delegation of authority and for assuming personal responsibility for ones own career, development and work method. At the same time, team work reduces the risk that employees isolate themselves or embark on solo operations. Personal development of employees and the development of companies go side by side, both are stimulated by intensive collaboration with others in teams.

This also leads to changes in personnel management. The time when a central personnel department mediated in the relationship between employer and employee, and assigned people to clearly defined functions with a fixed career development for a long period of time, seems to have passed. Nowadays, the personnel function is called Human Resource Management (HRM). The accent is on the management of assignation, knowledge and skills of employees in relation to the business objectives. Flexibilisation here means that it is less and less decided centrally which functions employees are assigned. This is more and more decided by managers, teams or the employee himself.

For the assessment and reward of employees it is less and less important that a person performs well in a certain function in the organisation for a fixed number of hours a week. The importance of the individual results in this matter is increasing. The contributions of these results to the performance of the team and the company results are also taken into account. Other points of assessment are the capability to work effectively as a ‘team player’ and the competence to perform different roles in the business process.