The New Workplace
I just finished reading Thomas Malone's The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style and Your Life (2004) on the basis of this review at the Austrian Economists blog, and because I've been searching for answers to questions that Malone purports to answer. The same review references a paper written by Tyler Cowen and David Parker called Markets in the Firm: a Market-Process Approach to Management (1997), which I read today. Of the two, Markets in the Firm was a much better value, but it still didn't answer my questions.
Malone is a professor at MIT, the same place Womack, Jones, and the Lean Manufacturing cheerleaders call home. It is also the home of Peter Senge, whose 5th Discipline (1990) was a disappointment. The 5 disciplines referenced are:
The rest of the book left me flat. I felt that Covey does a better job of describing how to build a vision and how to achieve personal mastery. Developing mental models and performing team learning mostly involve getting your assumptions out on the table and then building extensive computer programs around your processes. Both of those require skilled facilitators and model builders - since most of us don't have access to Senge and his associates for free, I think it's safe to assume that we can't access the methods described in the book.
Malone, on the other hand, stretches what should have been a 20 page magazine article in HBR into a 175 page book. Yes, the cost of communication is getting cheaper. Yes, you will be able to communicate laterally. Yes, that means that knowledge workers will be able to work in quasi-craft production groups. According to David Friedman (via Roderick Long and the Multualist Blog, there is a word for it: agoric. But after telling us that it is happening, and giving a few examples, the advice was rather sparse. As a manager, if you have the right type of firm (not clearly specified), you will have to give up command and control and instead use cultivation and coordination. What will you cultivate? Good practices. What will you coordinate? Profitable activity.
Malone specifically talks about using outsourcing so that the firm will simply be a center about which creative, productive, and profitable activity will take place. He uses Wikipedia and linux as examples, but ... Wikipedia is not done for profit, and linux has only been profitable for people who were in early. At some point, if you are in the business of selling things, someone actually has to make them. And if they want to get paid for it, they can't give them away for free.
The Cowen and Parker article was the most satisfying of the three. For one thing, it summarizes recent economic theorizing about the nature of the firm in a short section. This includes Transaction Cost Analysis, or New Institutional Economics, of which Oliver Williamson's work is the best known. For people interested in it but who don't want to tackle The Economic Institutions of Capitalism, this is the way to go. They trace the changes in industrial organization from craft production through the Industrial Revolution, Taylorism, and into the modern age. They declare Taylorism to be dead, killed by the intense competition brought by globalism.
The goal of their paper is to introduce the idea that firms are similar to states, Taylorism is analogous to central planning, and modern organizations are starting to look more like a market economy. This was obviously appealing to me in light of this post I wrote several months ago. I wrote that Lean production was Hayekian in that it allows people to share information and organizations to learn more quickly. In additioin to emphasizing that principle, Cowen and Parker write that firms should try to be more market like by design by using market-like incentives and clarifying property rights and responsibilities within the firm. They use Koch Industries as an example; Koch actually trademarked the phrase Market-Based Management (R). As the book he co-authored with Norm Bodek seemed especially concerned with the comparative accounting practices of GM (and especially Donaldson Brown) and Toyota, Bill Waddell should be especially interested in one of their closing comments:
Malone is a professor at MIT, the same place Womack, Jones, and the Lean Manufacturing cheerleaders call home. It is also the home of Peter Senge, whose 5th Discipline (1990) was a disappointment. The 5 disciplines referenced are:
- Building Shared Vision
- Mental models
- Team Learning
- Personal Mastery
- Systems Thinking
The rest of the book left me flat. I felt that Covey does a better job of describing how to build a vision and how to achieve personal mastery. Developing mental models and performing team learning mostly involve getting your assumptions out on the table and then building extensive computer programs around your processes. Both of those require skilled facilitators and model builders - since most of us don't have access to Senge and his associates for free, I think it's safe to assume that we can't access the methods described in the book.
Malone, on the other hand, stretches what should have been a 20 page magazine article in HBR into a 175 page book. Yes, the cost of communication is getting cheaper. Yes, you will be able to communicate laterally. Yes, that means that knowledge workers will be able to work in quasi-craft production groups. According to David Friedman (via Roderick Long and the Multualist Blog, there is a word for it: agoric. But after telling us that it is happening, and giving a few examples, the advice was rather sparse. As a manager, if you have the right type of firm (not clearly specified), you will have to give up command and control and instead use cultivation and coordination. What will you cultivate? Good practices. What will you coordinate? Profitable activity.
Malone specifically talks about using outsourcing so that the firm will simply be a center about which creative, productive, and profitable activity will take place. He uses Wikipedia and linux as examples, but ... Wikipedia is not done for profit, and linux has only been profitable for people who were in early. At some point, if you are in the business of selling things, someone actually has to make them. And if they want to get paid for it, they can't give them away for free.
The Cowen and Parker article was the most satisfying of the three. For one thing, it summarizes recent economic theorizing about the nature of the firm in a short section. This includes Transaction Cost Analysis, or New Institutional Economics, of which Oliver Williamson's work is the best known. For people interested in it but who don't want to tackle The Economic Institutions of Capitalism, this is the way to go. They trace the changes in industrial organization from craft production through the Industrial Revolution, Taylorism, and into the modern age. They declare Taylorism to be dead, killed by the intense competition brought by globalism.
The goal of their paper is to introduce the idea that firms are similar to states, Taylorism is analogous to central planning, and modern organizations are starting to look more like a market economy. This was obviously appealing to me in light of this post I wrote several months ago. I wrote that Lean production was Hayekian in that it allows people to share information and organizations to learn more quickly. In additioin to emphasizing that principle, Cowen and Parker write that firms should try to be more market like by design by using market-like incentives and clarifying property rights and responsibilities within the firm. They use Koch Industries as an example; Koch actually trademarked the phrase Market-Based Management (R). As the book he co-authored with Norm Bodek seemed especially concerned with the comparative accounting practices of GM (and especially Donaldson Brown) and Toyota, Bill Waddell should be especially interested in one of their closing comments:
This paper has considered some general principles which are a guide to how market economics can aid management. Future research needs to focus on the internal and institutional impediments to the use of these principles. One particular area that needs exploring is current accounting practices. The development of 'activity-based accounting' appears to be a step in the right direction by allocating joint costs or overheads more effectively so as to identify the true costs of production in various parts of the firm. [emphasis added]Still, I am dissatisfied with the general sharing of information between management science books like 5th Discipline and The Future of Work and economic theory. Cowen and Parker mention W. Edwards Deming, but don't elaborate. Markets in the Firm was written in 1997, so they would have had access to many of the Lean canon (they cite The Machine that Changed the World in the bibliography), but don't explore much of it. If an article mapping Lean methods to transaction cost economies hasn't been written, it needs to be.
Labels: book, organization
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