Authority Relation
The last production mode listed by Williamson (OEW) in The Economic Institutions of Capitalism is "Authority Relation". It is what most of us have come to know as the "normal" work environment, with a boss directing workers (and perhaps that boss has a boss, and that boss has a boss, and so on up to the capo di tutti capo).
Efficiencies:
a. Product flow
1. Transportation expense - Economic, everyone under the same roof.
2. Buffer inventories - Can be controlled economically. Fiat takes the place of pecuniary penalties to eliminate these.
3. Interface leakage - Workers making a salary have no incentive to "shade quality" as they would under Inside Contracting
b. Assignment attributes
4. Station assignments - Effective. In comparison to Inside Contracting especially, workers in this mode "are less given to aggressive subgoal pursuit and do not resist adaptations because they do not possess the requisite property rights."
5. Leadership - Effective.
6. Contracting - Effective.
c. Incentive attributes
7. Work intensity - Not efficient. The worker's compensation is not tied directly to his productivity. I'm not sure I agree: recent studies have shown that the people working the longest hours are professionals and white collar workers whose compensation is highest, and I don't know if he is considering workers making piece rate. I intend to say more about this some time in the future, but for now, please consider the work of Edward Lazear (via MarginalRevolution and Kathleen's informed comments at Fashion-Incubator).
8. Equipment utilization - Effective.
9. Local shock responsiveness - Effective.
10. Local innovation - OEW finds this mode to lack economy with respect to this attribute, but doesn't explain himself (or maybe I just can't find it). It seems to resonate with the finding for work intensity, but again I think that the rediscovery of Deming may work counter to this. The entire goal of (insert favorite descriptor here - kaizen, TQM, Quality Circles, TWI, Lean) is to encourage local innovation. To the extent that these management techniques are actually (not rhetorically) adopted, workers are also happier with their work.
11. System responsiveness - Effective. Workers may slack off under supervision, but the flip side is the ability to direct change effectively.
Although not covered in these areas of efficiency, Quality Control is again not explicitly addressed. Workers encouraged to work faster may cut corners, requiring oversite and inspection. That is a diseconomy. A culture where active participation exists will be more economical WRT quality control.
Also not covered explicitly is Worker Satisfaction, which I find surprising given the attention given to the subject of labor organization and unions later in the book. While this measure may be implicit in Work intensity and other incentive attributes, it isn't addressed directly. Admittedly, OEW and others might protest that Worker Satisfaction is no measure of efficiency, but I would beg the case that it is. Workers who find little job satisfaction may have to be placated with other concessions, including pay, perquisites, vacation, health care, and so on. Workers finding none of the above may leave, which could be detrimental if they take any significant investment in training with them, or seek alternative means of protest including strikes, slacking off, spreading hatred and discontent, and a host of aggressive and passive-aggressive behaviors that serve as disincentives to others.
Bottom line: Williamson finds Authority Relation to be not only very hierarchical, but also very efficient. It succeeds in 9 of the 11 areas of efficiency. This exceeds the Peer Group mode's 8 of 11 efficiency score by 1, so it is neither much more efficient nor much more hierarchical that that collective mode.
Next: a wrap-up.
- It is classified by OEW as a "capitalist mode" (as opposed to entrepreneurial or collective)
- Not compatible with agoric modes almost by definition
- This form seems to have existed from the Renaissance forward, but apparently does not seem to have taken hold in large scale (manufacturing) organizations until the 18th or 19th century, after "putting out" and "inside contracting". Certainly, the M-corporation (multi divisional) did not come along until the 20th century, with GM as the archetype.
- OEW considers it to be a "periodic contracting" mode. However, he qualifies this: "Contracting under Authority Relation is apt to be somewhat more complete, in that explicit and implicit understandings regarding the zone of acceptance of the employment relation [...] need to be reached. Once agreement has been reached, however, this is an essentially noncontractual mode. Adaptations of an operating kind are made within the framework of that rather general contract, whereby boss and worker essentially agree to "tell and be told."
- In terms of contractual hierarchy, OEW classifies it at the top (very hierarchical), tied with Inside Contracting.
- In terms of decision-making hierarchy, this is the most hierarchical.
Efficiencies:
a. Product flow
1. Transportation expense - Economic, everyone under the same roof.
2. Buffer inventories - Can be controlled economically. Fiat takes the place of pecuniary penalties to eliminate these.
3. Interface leakage - Workers making a salary have no incentive to "shade quality" as they would under Inside Contracting
b. Assignment attributes
4. Station assignments - Effective. In comparison to Inside Contracting especially, workers in this mode "are less given to aggressive subgoal pursuit and do not resist adaptations because they do not possess the requisite property rights."
5. Leadership - Effective.
6. Contracting - Effective.
c. Incentive attributes
7. Work intensity - Not efficient. The worker's compensation is not tied directly to his productivity. I'm not sure I agree: recent studies have shown that the people working the longest hours are professionals and white collar workers whose compensation is highest, and I don't know if he is considering workers making piece rate. I intend to say more about this some time in the future, but for now, please consider the work of Edward Lazear (via MarginalRevolution and Kathleen's informed comments at Fashion-Incubator).
8. Equipment utilization - Effective.
9. Local shock responsiveness - Effective.
10. Local innovation - OEW finds this mode to lack economy with respect to this attribute, but doesn't explain himself (or maybe I just can't find it). It seems to resonate with the finding for work intensity, but again I think that the rediscovery of Deming may work counter to this. The entire goal of (insert favorite descriptor here - kaizen, TQM, Quality Circles, TWI, Lean) is to encourage local innovation. To the extent that these management techniques are actually (not rhetorically) adopted, workers are also happier with their work.
11. System responsiveness - Effective. Workers may slack off under supervision, but the flip side is the ability to direct change effectively.
Although not covered in these areas of efficiency, Quality Control is again not explicitly addressed. Workers encouraged to work faster may cut corners, requiring oversite and inspection. That is a diseconomy. A culture where active participation exists will be more economical WRT quality control.
Also not covered explicitly is Worker Satisfaction, which I find surprising given the attention given to the subject of labor organization and unions later in the book. While this measure may be implicit in Work intensity and other incentive attributes, it isn't addressed directly. Admittedly, OEW and others might protest that Worker Satisfaction is no measure of efficiency, but I would beg the case that it is. Workers who find little job satisfaction may have to be placated with other concessions, including pay, perquisites, vacation, health care, and so on. Workers finding none of the above may leave, which could be detrimental if they take any significant investment in training with them, or seek alternative means of protest including strikes, slacking off, spreading hatred and discontent, and a host of aggressive and passive-aggressive behaviors that serve as disincentives to others.
Bottom line: Williamson finds Authority Relation to be not only very hierarchical, but also very efficient. It succeeds in 9 of the 11 areas of efficiency. This exceeds the Peer Group mode's 8 of 11 efficiency score by 1, so it is neither much more efficient nor much more hierarchical that that collective mode.
Next: a wrap-up.
Labels: book, organization
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