Organization Design and Engineering

Co-existence, Co-operation or Integration

R. Magalhães

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137351562
• eBook ISBN: 9781137351579
• Topic: Business
• Subtopic: Business General
• Index: Business

The key aim of the volume of original papers on the theory and practice of ODE featured in Organization Design and Engineering is to contribute towards overcoming the academic challenges stated above. A secondary aim is to launch the debate about ODE, including whether or not the debate itself is warranted.

Part I

Strategizing ODE

1

The Unifying Role of Enterprise Engineering

J. L. G. Dietz and J. A. P. Hoogervorst

Great leaders may have great ideas, but only engineers¹ can change the world

1 Introduction

Fortunately, many enterprises² are led by leaders with great ideas about improving the enterprises they lead. It is one thing to know what you want to change but it is quite another thing to bring about the change. A fundamental problem with any wish to change a system is that it is mostly expressed in functional terms. A functional change, however, can only be effectuated by some modification of the system’s construction (Note: by “system” we mean any kind of system, so also enterprises). As this chapter shows, the failures of enterprise changes are almost always the consequence of the lack of attention to the need for “engineering” the change. That is what the above maxim wants to convey.

In view of the importance of engineering change, the notion of “architecture” must be well understood. This notion has been advocated for a considerable time. Nonetheless, no common, well-founded understanding about this concept seems to have developed. Numerous publications manifest divergent and inconsistent approaches that are not conducive to the proclaimed purpose of the architecture: establishing successful enterprise change. We fully support this purpose in view of the necessity to ensure enterprise performance. Arguably, securing adequate enterprise performance requires an approach (theory, concepts, and methodology) that is capable of coherently and consistently addressing enterprises in all their relevant aspects. However, historic developments in thinking about enterprises have seriously hampered that capability that in turn negatively affects individuals and society at large.

Unfortunately, reality is rife with manifestations of inadequate enterprise performance. Put differently, the poor quality of service; alienated customers and employees; inefficiency; low productivity; waste of human, natural, or financial resources; burn-outs; financial crises; or failing disaster recovery (to name but a few) are all too often the inevitable consequences of how enterprises are designed, and consequently how they operate (Deming, 1986).

This book chapter submits an approach to (1) remedy the unfortunate consequences of disparate thinking about enterprises, and (2) address the core issue of inadequate enterprise performance. We explain the firm theoretical foundations for this approach so that the concept of enterprise design can be understood and can productively be applied.

In Section 2, a historical overview is provided of the different paradigms and ways of thinking about enterprises. This results in the presentation of a theoretical fragmentation that is unfortunate and unproductive. Then, in Section 3, we present a coherent and consistent approach to enterprise design, called enterprise engineering³ that is rigorously founded on sound theories. This theoretical foundation is elaborated in Section 4. In Section 5, one of the pillars of enterprise engineering, namely enterprise architecture, is extensively discussed and precisely defined on the theoretical basis from Section 4. Lastly, in Section 6, we reflect on the advancement of our profession.

2 Thinking about enterprises – unfortunate fragmentation

2.1 Initial thinking about enterprises

All enterprises have four characteristics in common. They are: (1) social entities, (2) goal-directed, (3) deliberately structured and coordinated activity systems, and (4) linked to the external environment (Daft, 2001: 12). In view of the large scale, factory-oriented production of goods, productivity – the factory output per unit of labor – was a key concern in industrial development that initiated the methodical thinking about enterprises (Niebel, 1982).

Three theorists largely dominated this initial thinking: Henri Fayol, Frederick Taylor, and Max Weber. Taylor emphasized economic rationality by using a work analysis that resulted in standardized, routine, and repetitive tasks (Taylor, 1911). Around the same time, Fayol published his general principles of management concerning coordination, control, and planning in which specialization and the division of labor were emphasized (Fayol, 1916). Weber stressed the importance of formal bureaucratic structures (Weber, 1924). All of these ideas exemplify a reductionist approach focused on the minute division of labor and units of (managerial) control. Other contemporaries followed likewise by studying work efficiency and physical workloads. Of these contemporaries, Frank and Lillian Gilbreth were known for their extensive contribution in the area of time and motion studies (Niebel, 1982). The division of labor was accompanied further by a hierarchical structure with managerial positions as linking pins for passing down orders and securing worker contributions (Barnard, 1938). Production management and industrial engineering became important disciplines dealing with work planning, and time and motion studies (Mayer, 1968; Niebel, 1982). Stability and control were pursued through high levels of formalization (Robbins, 1990). Management is considered the locus for knowledge and control (Barnard, 1938; Taylor, 1911). Hence, a sharp distinction between management and non-management, or in other words, between thinking and doing. These ideas were established almost a century ago, when “the last great organizational transformation” took place (Bennis, 1989: 177). Collectively, these ideas constitute the structural and bureaucratic approach to thinking about enterprises: the “machine bureaucracy” (Mintzberg, 1989: 47). Within this approach, enterprise performance is considered to be higher the more employees behave according to formal, predefined work patterns. Notably, the initial thinking about enterprises expressed ideas about how enterprises should be arranged, or expressed ideas about how enterprises should be designed.

2.2 Contemporary thinking about enterprises

The initial thinking about enterprises has been severely criticized since it undervalues human cognitive and social capabilities. This instrumental view led to worker deprivation and alienation, and destroyed the meaning of work itself (Fayol, 1916; Fromm, 1955). Moreover, proper attention to employees individually and as a social group can significantly enhance enterprise performance, as evidenced by the classical Hawthorne studies on production (Mayo, 1949).

From the late 1950s onwards, various organizational theorists have stressed the importance of focusing on the “human side of enterprise” for its own sake. McGregor’s Theory Y (McGregor, 1960) and Likert’s System IV (Likert, 1965) approach to organizing have been influential in this area. The participation and involvement of employees are viewed as important and are to be arranged via participative management practices. Whereas the initial instrumental perspective tends to address work related contextual aspects under the assumption that a satisfied worker is a productive worker, the latter human-centered perspective acknowledges the need for employee development, which allows individuals to exploit their capabilities and acquire responsibilities. The meaning of work in relation to constituting meaning and purpose in human life is considered important. Motivation of employees is a core issue. Utilization of employee creativity and capacities, but even more, creating conditions for employee development, is seen as essential. Self-direction and self-control are viewed as important concepts. Under the labels theory Z (Ouchi, 1981) and type J (Pascale and Athos, 1981), the human-centered focus was likewise advocated in view of the quality and production performance of Japanese enterprises. Similarly, outstanding service to customers, the capacity for learning, and innovation and adaptation all necessitate the human-centered focus on organizing (Hoogervorst, 1998). Fairly recent research again corroborates that a tendency to the human-oriented aspects is the key condition for outstanding and continued enterprise performance in all aspects (Sisodia et al., 2007; Keller and Price, 2011). Notably, as was the case with the initial thinking about enterprises, the human-centered perspective also expresses ideas about how enterprises should be designed.

2.3 Information technology

From a historic perspective, progress in the area of information technology (IT) shows enormous dynamics. Developments directly prior to, during, and immediately after the Second World War led to the first generation of computers that turned out to be the prelude to the digital revolution and Toffler’s third wave: the transformation from the agricultural, the industrial, towards the informational era (Toffler, 1980). Roughly from the 1970s, IT developments progressed at such a pace that the term “digital revolution” was coined (Negroponte, 1995). For a long time, IT was something for specialists who carried out tasks that were troublesome to do manually on computers in remote data centers. In themselves, these tasks were thus not of such a different character that enterprise activities became essentially different: tasks were merely automated. One might, following Earl, label this period as the “data processing” period (Earl, 1989). Another common label in those days was EDP (Electronic Data Processing).

Then IT developments geared up in such a way that society and enterprises were affected fundamentally. These developments led to massive amounts of data associated with customer and operational processes. Work was no longer merely automated but became “informated” (Zuboff, 1989). The management of physical assets – a typical characteristic of the era of the industrial revolution – shifted towards the management of “intellectual assets.” As Drucker states: “The function of the organization is to make knowledge productive” (Drucker, 1993: 49). Creating and sharing knowledge was viewed as crucial for gaining competitive advantage (Nonaka and Takeuchi, 1995) . One might thus argue that the relationships between human actors in an enterprise have become primarily, if not entirely, informational ones. Information technology⁴ is seen as a technology that not only changes the internal enterprise arrangement and operation (its design) but that fundamentally changes the relationship between enterprises and their customers, since IT capabilities enable the transition from a contractually oriented relationship with customers towards a support-oriented relationship (Zuboff and Maxmin, 2002). Again, effectively exploiting the possibilities offered by IT has a bearing on how enterprises should be designed.

2.4 Theories about enterprises

Roughly speaking, systematic thinking about enterprises emerged as an academic field of interest in the 1960s (Hatch and Cunliffe, 2006). Two main perspectives can be identified: the micro-level perspective studied by the discipline commonly identified as organizational behavior (Luthans, 1992), and the macro-level perspective as studied by the discipline of organizational theory (Robbins, 1990).

Organizational behavior is focused on understanding and explaining individual and group behaviors in enterprises and is formally defined as “the understanding, prediction and control of human behavior in organizations” (Luthans, 1992: 8). It is concerned, for example, with theories about individual behavior, learning, and motivation and the relationship of those aspects with the organizational context such as the design of work and the practices of management.

Organizational theory, on the other hand, compounds the study of macro aspects of enterprises. It refers to the behavior of enterprises as conditioned by their structures and systems. Three dimensions are frequently mentioned to characterize structures and systems, namely formalization that refers to the level and intensity of the rule-making, centralization that denotes the locus of control and decision-making, and complexity that deals for instance with the number of hierarchical levels, the division of labor, and the extent of interrelated coordination mechanisms (Robbins, 1990). The concepts of functional differentiation and inter-functional coordination are also important characteristics within the structural approach (Lawrence and Lorsch, 1969). Organizational theory seems to typically emphasize structures and systems as the means to create a causal, predictable organizational “system.” All too often therefore, enterprise reengineering manifests an exclusively structural approach (Keidel, 1994). Reengineering is often synonymous with restructuring.

Arguably, organizational theory is more closely related to the initial thinking about enterprises given its focus on macro-enterprise structures and systems, whereas organizational behavior is closely linked with the human-centered perspective. Both approaches to thinking about enterpr...

Table of contents

• Cover
• Title
• Introducing the Volume
• Part I Strategizing ODE
• Part II Implementing ODE
• Part III ODE for Organizational Awareness and Knowledge
• Part IV Educating for ODE
• Index