Work organization all in one post
Thanks for coming back, thanks to Kevin Carson for noticing (damn, two weeks too early), and welcome to all of the Mutualist Blog readers. I'm looking forward to Kevin's comments regarding Lean (or kaizen or whatever you want to call the amorphous set of principles that originated in the US, attained dominance in Japan, and are slowly being repatriated). I have seen far too little informed and intelligent criticism of Lean management.
This series (links below under Production Modes) has been an extended review of Oliver E. Williamson's (OEW) The Economic Institutions of Capitalism, starting with a roundup of New Workplace books listed in a pair of posts called The New Workplace and Flow . In one chapter of that book, OEW compares the efficiency and hierarchy of different modes of organization. The purpose is to examine whether hierarchy has merely enforced itself (the power explanation), as argued by Stephen Marglin and Katherine Stone, or whether the dominant modes of organization have an efficiency explanation. In Williamson's words,
Production modes:
First, a note about the aggregation of efficiencies: As OEW notes himself, this is not a very rigorous means of comparing. He says, "Aggregation to obtain an overall efficiency rating for each mode requires that the relative importance of the eleven efficiency indicators be addressed. This will obviously vary across industries." Later, he calls this system "rough".
Obviously, there is no way to directly compare the net total economy of two modes if, for example, they have the same total score but one scores higher in transportation and another in incentive. The efficiencies are rated as either existing or not (a "bivariate" measure), and no attempt is made to calculate or assert the magnitude.
Second, there is little discussion of why this particular set of measures and no other is used. During the course of this review, I have introduced two that I thought could be relevant, especially as we note the growing dominance of the Toyota model and demise of the GM model of management. The two I have introduced were Quality Control and Worker Satisfaction. The GM model neglects both, while Toyota obtains much better economies in both areas. By this, I am not arguing that GM's quality is lower, but rather that the method by which they achieve quality is more expensive (less economical) than the method by which Toyota obtains it and that GM worker satisfaction is obtained by less economical methods than those used by Toyota. There may well be more measures of efficiency than those used by OEW than the two I have added, and some may well be more important.
Finally, I note that OEW does little analysis of the conditions in which these alternative modes are employed. The conditions of 18th century England, in which the Putting Out system was created, are different from those of 21st century United States. Yet Putting out saw its zenith in manufacturing then and there, while Putting out as a method of developing software may be still on the rise. As Kevin Carson is sure to point out, the rise of state capitalism has almost certainly corresponded with a rise in companies preferring Authority relation to more agorist modes, possibly to the detriment of all.
OEW's purpose was to demonstrate the technique, not to prove that one or another mode was superior and that his efficiency claims were definitive. The nature of the market system is that companies are always trying ideas in new combinations, so while the analysis of Authority relation may hold, in general, it is possible that someone will find a way to combine the effective parts of that mode with the effectiveness of others while suppressing the negative parts of both. For example, the Toyota style of subcontracting has much in common with both Putting out and Inside Contracting.
technorati tags: organization theory "Oliver E. Williamson" "Transaction Cost Economics" book review economics
This series (links below under Production Modes) has been an extended review of Oliver E. Williamson's (OEW) The Economic Institutions of Capitalism, starting with a roundup of New Workplace books listed in a pair of posts called The New Workplace and Flow . In one chapter of that book, OEW compares the efficiency and hierarchy of different modes of organization. The purpose is to examine whether hierarchy has merely enforced itself (the power explanation), as argued by Stephen Marglin and Katherine Stone, or whether the dominant modes of organization have an efficiency explanation. In Williamson's words,
The central issue, and my main interest here, is an assessment of alternative work modes in transaction cost terms. If, as alleged, hierarchy does not serve efficiency purposes, the power relationship hypothesis is more compelling. If, however, hierarchy serves to economize on transaction costs, then an alternative explanation for the historical events to which Marglin and Stone refer warrants serious consideration.OEW examines 6 modes of organization under 3 broad categories, two modes of contracting used by each, two types of hierarchy, and 11 measures of efficiency.
Production modes:
- Entrepreneurial
- Collective
- Communal-emh (every man for himself)
- Capitalist
- Continuous
- Periodic
- Contractual
- Decision-making
a. Product flow
1. Transportation expense
2. Buffer inventories
3. Interface leakage
3. Interface leakage
b. Assignment attributes
4. Station assignments
5. Leadership
6. Contracting
5. Leadership
6. Contracting
c. Incentive attributes
7. Work intensity
8. Equipment utilization
9. Local shock responsiveness
10. Local innovation
11. System responsiveness
8. Equipment utilization
9. Local shock responsiveness
10. Local innovation
11. System responsiveness
| Mode | # Efficiencies | Contracting | Contract Hierarchy | Decision-making Hierarchy |
| Putting out | 5 | Continuous | Medium | Medium |
| Federated | 5 | Continuous | Low | Low |
| Communal-emh | 4 | Limited periodic | Low | Low |
| Peer groups | 8 | Limited periodic | Low | High |
| Inside contracting | 6 | Continuous | High | Medium |
| Authority relation | 9 | Complete periodic | High | Very high |
First, a note about the aggregation of efficiencies: As OEW notes himself, this is not a very rigorous means of comparing. He says, "Aggregation to obtain an overall efficiency rating for each mode requires that the relative importance of the eleven efficiency indicators be addressed. This will obviously vary across industries." Later, he calls this system "rough".
Obviously, there is no way to directly compare the net total economy of two modes if, for example, they have the same total score but one scores higher in transportation and another in incentive. The efficiencies are rated as either existing or not (a "bivariate" measure), and no attempt is made to calculate or assert the magnitude.
Second, there is little discussion of why this particular set of measures and no other is used. During the course of this review, I have introduced two that I thought could be relevant, especially as we note the growing dominance of the Toyota model and demise of the GM model of management. The two I have introduced were Quality Control and Worker Satisfaction. The GM model neglects both, while Toyota obtains much better economies in both areas. By this, I am not arguing that GM's quality is lower, but rather that the method by which they achieve quality is more expensive (less economical) than the method by which Toyota obtains it and that GM worker satisfaction is obtained by less economical methods than those used by Toyota. There may well be more measures of efficiency than those used by OEW than the two I have added, and some may well be more important.
Finally, I note that OEW does little analysis of the conditions in which these alternative modes are employed. The conditions of 18th century England, in which the Putting Out system was created, are different from those of 21st century United States. Yet Putting out saw its zenith in manufacturing then and there, while Putting out as a method of developing software may be still on the rise. As Kevin Carson is sure to point out, the rise of state capitalism has almost certainly corresponded with a rise in companies preferring Authority relation to more agorist modes, possibly to the detriment of all.
OEW's purpose was to demonstrate the technique, not to prove that one or another mode was superior and that his efficiency claims were definitive. The nature of the market system is that companies are always trying ideas in new combinations, so while the analysis of Authority relation may hold, in general, it is possible that someone will find a way to combine the effective parts of that mode with the effectiveness of others while suppressing the negative parts of both. For example, the Toyota style of subcontracting has much in common with both Putting out and Inside Contracting.
technorati tags: organization theory "Oliver E. Williamson" "Transaction Cost Economics" book review economics
Labels: book, organization
<< Home