The learning organization concept applied to small and medium size manufacturing enterprises

In this period of rapid changes and killing competition, the type of organization that finds the most difficulty in adapting to the external challenges is the small and medium size enterprise. In this reality, the choice of the organization can be considered better in its micro structure (the macro and meso dimensions are too big in this case to be chosen as a reference of the analysis).
The analysis of the microstructure is centered on the study of the different jobs inside an organization. The study goes through their their description, their specification and their evaluation. Also is this case, the design process will start from the analysis of the main variables (level of specialization, specificity of the jobs, their interdependence, etc.).
One new variable here is the characteristic of the jobs on which the actors nourish preferences. They can be expressed by their variety (jobs characterized by a low level of interest and autonomy or by high level of discretion and with a strong sector orientation), their autonomy (level of responsibility), their identity (complete task), social interactions (type of persons involved in the job, concentration and energy requested by the job), development (professional), auto-realization (satisfaction of expectations, competence feeling, utilization of the personal skills), health, safety and quality of the job (job’s effects on accident risks and on personal life).
In evaluating the alternatives the process moves towards the three main steps in organizing the microstructure. There are many approaches for doing so and they could be classified by the environment, by the key variables (on which the attention is centered), by the process driver (main criteria that guides the choices), and by the characteristics of the organizational solution.
The engeneeristic/taylorist approach is applicable in environments in which the mass production plays a key role. The key variable is the analysis of the work-flow. In this case the process driver is the scientific method (objective rationality principle). Usually, the best solution is one that can permit the division of the jobs.
The motivational approach stresses the attention on the psychological and social variables highlighting the personal preferences, using as driver of the process the equation ‘equality = efficiency’ (the satisfaction of the personal preferences produces in turn the organizational efficiency). The solution here is the re-composition through the job design (job re-engineering).
The social-technical approach is applicable when environment turbulences are present (institutions sensible to the social problems and/or technologic developments). In this case the social system becomes one organizational component with the assumption that technical and social systems are complementary. Through the optimization of the efficiency, the organization is based on semi-autonomous working groups.
Where complex industrial relations characterize the environment the negotiation approach is preferable. With this condition, the individual’s interests enter in the usefulness range of the organization. The preferences of all the actors are driving the negotiation for a long time and the consideration of efficiency and equality is the solution to this status.
The last type of approach, the economic, gives emphasis to the transition costs. The intrinsic nature of the activities allocates the different organizational values (property, control, decision, action, etc.) depending on the production and transition costs.

When it comes to the final choice of the organizational structure that best fits the conditions above described, there are at least two kind of possibilities that can be chosen: capitalistic and entrepreneurial.
The capitalistic form has three approaches: burocratic/taylorist (maximum division of jobs applicable when the technology offers a stable environment and the competitiveness is based on costs), composed (characterized by the concept of job rotation, enlargement and enrichment in presence of unstable environment and where the uncertainties and the interdependences are high), reticular (where the job is defined by groups and not by individuals exploiting the flexibility of the approach).
The capitalistic form assumes that the coordination model of reference is the authority while the entrepreneurial form leaves more the coordination mechanisms to be closed to those of the free market. Both of these forms involve different combinations and allocations of organizational rights (action, decision, control, reward and property).
The entrepreneurial form can be achieved through the stipulation of internal contracts (inside the enterprise) or through the creation of a network among enterprises (outside the enterprise). While the first is particularly close to the capitalistic form, the second can be obtained either with the decentralized production (centered network) or with the industrial districts (not centered network). In the first case there is a central actor who controls the critical phases with the functions of regulation and control (the market is assisted in this case by rules and hierarchies). In the second case no central actors are present but all the enterprises forming the industrial cluster adopt an equality arrangement in which the actors practice have an equal influence. This form is particularly efficient when the interdependence is not extremely high and the level of uncertainty is not high.

In the small and medium size manufacturing enterprises nowadays is of particular importance the composed model in which the individual has the possibility to vary her job (horizontal direction, job enlargement) and become more autonomous than before (vertical direction, job enrichment). This is especially true for the firms that have succeeded to transform their culture from a simple ‘one family/owner’ approach (typical of these firms with such a small size) to a managerial one.
In these cases, the notion of the job rotations can integrate both of the two modifications in the job philosophy. The rotation, in fact, can not only be simple (only in the horizontal direction), but also complex (in the horizontal and vertical directions). With this approach today, these kind of enterprises are trying to give the individuals more rooms for self-development and self-realization that, in turns, are translated as motivation toward the job carried out by the individuals. From positions characterized by high horizontal and vertical specialization (operative job), the individual can pass then to positions of low horizontal and high vertical specializations (supervision jobs), to positions of high horizontal and vertical specializations (professional job), to, again, positions of low horizontal and vertical specializations (directive job).
This approach is more often coupled with the reticular one in which groups are the decisional, control and reward centers. With solutions like semi-autonomous workgroup (one individual, all the jobs) or internal network (one individual, one job) the demand of different levels of specialization can be satisfied giving the preference also to the social interaction.
A similar internal environment should push the individuals to move from the job field to the competence field emphasizing not only their knowledge but also their skills. The social role of any single individual is therefore improved through the acquired self-confidence derived from the integration either through the dynamics or through the network of jobs. Again this situation would improve considerably the motivation of the individual.

When the learning organization fails - an example from the Engineering and Construction companies

In general the failure of the organization structure is spotted by different symptoms. Decisions are slow to be taken and they are not accurate, the organization doesn’t react innovatively to the external changing environment, the number of conflicts is high. Time is then spoilt in the generation of several information not useful for the prosecution of the works causing in turn a loss in terms of effectiveness.

In the Engineering companies, usually organized in matrix structures as to increase the flexibility and then the efficiency of the whole process, even if the use of task forces is intense (stimulating therefore the learning process), the main vertical organization influence (with its rules and its central decisional system, deterrents of the learning process) is still strong.

To higher organizational costs should correspond an increase in the response and decisional times. Yet, elements like the high number of meetings held are a symptom that shows that the organization even if directed toward the increase of the effectiveness is, actually, obtaining the opposite. In fact, meetings in which neither the objectives nor the agenda are well determined or in which many people are requested to attend without a specific reason or, again, meetings that are neither facilitated nor oriented, bring the participants to confusion on whom is the actor or must be considered accountable for taking the decision and on what is the action to be done in order to solve the highlighted problem. Moreover, a late preparation of the minute of meeting can increase the lack of information on the actions that must be carried out.

The reason why task forces sometimes are not effective is because they are the organization forms that have the higher needs in terms of uncertainty, interdependence and differentiation. As a consequence, the presence of coordination mechanisms must be much higher than in the other organization forms. Moreover, in task forces activities with different uncertainty levels are often found. This condition won’t permit the task force to realize one of the main targets of its nature: maximize the interdependence among the units (departments or workgroups). If the task force operates inside centralized divisional organization where the internal transferring of information is rigid and predetermined, it will never release its intrinsic potential of effective organizational form. In this case more integrate, reticular or, much better, decentralized divisional organizations would help to solve the controversial problem. This circumstance is much more emphasized in old organizations in which coalitions have been already formed from long time shifting the decisional process from elaboration or problem framing to politicize it (importance of personal objectives, importance of source of power). This would be one of the most significant elements of resistance in the democratization of the organization. Furthermore, big companies have to face also the higher span of control that certain positions have by their traditional nature.

All over the world there are many Engineering and Construction companies that have been established long time ago with the help of government funds. In this condition both of the two major barriers in forming a more flexible organization are usually found: age and dimension. The attempt to re-design the organization and the whole process of flow of information among individuals through the introduction of new coordination mechanisms could degenerate in a puzzle status especially in case of projects that are required to be engineered and built in a ‘fast-track’ schedule (all the durations of the project activities are cut, leaving the total project duration without contingencies in terms of time). When the Engineering and Procurement staffs (organized in vertical with elements of a matrix structure) have to collaborate with the organizational structure of the Construction staff (usually organized in amore horizontal structure so that to better adapt to the unexpected events that always characterize a construction process) occurs that, even in presence of facilitators roles (ex. engineering team supporting the construction team directly at the building site), the time constraint forces the Construction’s organization (at the beginning of its activities) to adapt itself to the Engineering and Procurement one (at the peak of the activities).

Without the latter empowered by flexibility in its work process and adaptable to the request of the former, the outcome could be so disruptive that even the utilization of specific human resources in certain activities (considered highly critical for the project) doesn’t make any difference anymore. This condition is right one of the main disadvantage of the vertical organization highlighting the fact that this organization is so strong in the company that its carachteristics overcome those of the matrix structure. In a few words, task forces have failed.

The single resource’s criticality (relevance of the resource for that specific activity) and her uniqueness (impossibility to substitute that resource in that specific activity) have lost in this situation their effectiveness and have generated in turn the appearance of one of the most disruptive disadvantage typical of all (not only vertical) organizations in crisis: a significant decline of the human resource motivation.

Self-organization

During the course of years, while the external environment required that organization be more flexible, the internal environment required find solutions for the situations that fell in the gray areas of corporate rules and regulations. The solutions to this kind of circumstances have always been accounted to what is called ‘self-organization’.

Self-organizing systems have the ability to continually change their structure and internal processes to conform and to feedback with the environment. Some people use the analogy of biological systems as self-organizing systems. Their ultimate purpose is to stay alive and duplicate. They exist in increasing complexity and adapt their structures and forms to accommodate this complexity. Ultimately, they change structure dramatically to adjust to the outer environment. In this organizations is geared more focus on learning than on method.

A self-organizing system requires a strong current goal or purpose. It requires continual feedback with its surrounding environment with a continual reference to a common set of values that permit its members to share suggestions on the system's current processes. The manager of this type of organization requires high communication skills and a great deal of patience along with the ability to focus more on outcomes rather than on outputs.

Sometimes, inside self-organized systems exist what are called self-organized teams. These teams usually include 5-15 people. They provide a range of the skills needed to produce the requested product or service. The team is given sufficient authority and access to resources to accomplish their target. Members manage their own group, and develop their own process for identifying and rotating members in managerial roles. Often, authority is given to whom has the most expertise about the current task in the project. Members are trained in various problem-solving and team-building techniques as to work in environments where the technologies to deliver the product or service are highly complex and the marketplace and organization environments are continually changing. Self-managed teams pose a unique challenge for the traditional manager. It can be extremely difficult in fact to support empowerment of self-managed teams with the risk of losing control on them.

Self-organization calls for group dynamics fundamentals. The coordination among the actors involved in a process is usually realized directly by the actors themselves through the mutual adjustment (multilateral communication and relative decisional process). The mutual adjustment system is based on two different ideas: the total communication network and the comparison method as a method to solve the conflicts. The main outcomes in implementing the two ideas are the presence of a high number of alternatives, the increasing in the elaboration capacity, a major understanding of the decision made and, in turn, a major acceptance of the decision taken. As a consequence, toward an increase in terms of time and money consumed, the actors will be much more motivated in implementing the decision made and their professional development will be fast with their psychological needs satisfied.

There are, though, situations in which the group instead of evolving, defining the roles and leaderships of its components, just fails. This is mainly due to conformism, lack of groupthink, polarization, social loafing and incapacity of spread the responsibilities among the group. Moreover, the lack of clarity in defining and then accepting the roles of the components could drag the group to conflicts.

If a group wants to win through the self-organization, it must be therefore formed by individuals who accept their roles inside the group, able to define their own objectives, willing to perform several analysis taking in consideration different alternatives for the solution of the tasks and motivated to drag the conflicts on the facts and not on the people and with roles differentiated one in respect to the other.

While more costly in terms of human resource development, the self-organization of groups permit the individuals be enriched of different tasks that, if well established as described, will enhance the organization performance.

Organizational Theories

The traditional organizational theories are based on the division between planning and execution of the work (Fayol) and the utilization of scientific methods on how the work should be carried out (Taylor). The latter is based on finding the best way on how to execute the single phases of the work process. This is achieved trhough the analysis of the durations and the use of methods as to standardize the single activities. The direct way for doing so was to think at the organization as a bureaucratic system (Weber) that ‘regularizes the administration processes as well as the machine regularizes the production’.

The traditional way called bureaucratic an organization characterized by precision, procedures, rapidity, clarity, efficiency, regularity and reliability. This kind of organization identified a rigid scheme of division through actors, then a hierarchy supervision and, as a consequence, a system formed by detailed rules and regulations. Basically, this approach doesn’t leave any room to the human factor and provides a definition of the organization as a close system.

The next step then has been done by Maslow and his motivational theory that states that the individuals perform better when their needs are satisfied. Nowadays in fact the complex interactions between individuals and the different organizations call for an integration of the human aspects as much as those technique related to the work process. The organization has begun to be conceived as a ‘social-technical’ system.

Because the organizations are influenced by the environment in which they have born, they are considered more and more as open systems (Bertalanffy). Nevertheless, the environment is in continuous change. During the last 40 years increasing in utilization of telecommunications and changes in workers’ perspectives has demanded organizations be more socially responsible. Furthermore, with the many third-world countries joining the global marketplace and creating a wider arena for sales and services, organizations have become more responsible not only to stockholders but also to a wider community of stakeholders. As a result of these driving forces, organizations are now required to adopt a more sensitive, flexible and adaptable view of the world. Many organizations have abandoned or are abandoning the traditional top-down, rigid and hierarchical structures to more organic forms.

From this point of view, flexible and open directional styles are necessary. Today's leaders must deal with continual, rapid change. Managers faced with a major decision can no longer refer back to an earlier developed plan for direction. Management techniques must continually be adjusted to the actual situation. In order to do so, managers can't know all for every situation but they must listen more and count even more on their employees.

Several psychological studies have been done on the human relations in order to stimulate the motivation and the productivity. As already said, from a mechanic approach (vertical structure, routine duties, formal systems, competitive strategy, rigid culture), organizations living in a less stable environment where the technology used is conventional (Woodward) have to move to an organic approach (horizontal structure, roles enrichment, shared information, collaborative strategy, adaptive culture), more adaptable to the environmental changes (Hurst). A condition of harmony must be present among strategy, structure, technology, needs and aspiration of the departments and the external environment (Burns & Stalker) so that a philosophy of internal differentiation can be introduced.

Even if different market conditions call for different organizations, the majority of companies that operate today in environments where the grade of uncertainty is high must have a degree of internal differentiation more developed than others (Lawrence & Lorsch).

Designing the correct organization

A design of an organization begins when there is an observed problem that must be solved. Through its analysis, alternatives are evaluated and the best is chosen and then implemented. This process is finalized to improve the efficiency and effectiveness of the whole organization, increasing at the same time the probabilities that the organization won’t perish thank to this innovation process.

In navigating the process there are two groups of variables that are taken in account: one regarding the specialization of the work and that regarding its coordination. The first means choosing between the horizontal and the vertical structure while the second investigate the different coordination and integration mechanisms to be implemented along with their combinations.

The logics of structure, instead, decide between a top-down approach or a bottom-up one. This choice would basically depends upon the age of the organization: is it a green field (start-up companies or existing situation not taken in consideration) or a brown field (solutions that modify the past choices) situation? Are we going to incrementing the organization (different extension, depth, timing, investments, competencies, objectives and actors involved) or radically changing it? The bottom-up approach evaluates first of all the single tasks of single individuals (local problems), it moves then up toward the jobs of groups of individuals (highlighting the multiplicity of choices) and to the characteristics of the organizational units (their specialization criteria, their boundaries and dimensions), it deals with the hierarchy (number of layers and line-staffs), and, finally, it decides the coordination mechanisms to employ. The top-down approach starts instead from deciding the organizational form (functional, divisional, etc.), then its characteristics.

In both of the cases the costs of the change has to be carefully evaluated. Moreover, the organizational change must be approached under four points of view: its development (set of activities and techniques to manage change), the structural interventions (re-organization, new reward systems, cultural change), the task-technology interventions (job re-design, socio-technical systems, quality of working life) and the involved people-focused interventions (sensitivity training, survey feedback, process consultation, team building, inter-group development). Many organizational re-design fail because of a lack of accuracy in evaluating this last important aspect along with the resistances that the change could generate inside the management because of high costs, fright of the unknown, scarcity of resources and power problems. If this step (unfreezing) is not overcome (changing), the organization risks to don’t change (freezing) leaving the spotted problems unsolved (Lewin) with a clear disadvantage in comparison to its competitors.

In order to avoid this dangerous status, the change must be communicated as to be felt urgent, supporting it with a clear vision of the future, eliminating the obstacles that could jeopardize its achieving. Intermediate targets must be defined looking principally at the short-term period. This is also the only way to don’t let the change to be institutionalized.

How to achieve the correct organization

The company organization that best fits the company requirements in terms of strategy and line of business is achieved through several steps that involve the organizational design. Organizational design is a process for improving the probability that an organization will be successful, by assessing and re-shaping the structure and positions to better meet their goals.

More specifically, organizational design is a formal, guided process for integrating the people, information and technology of an organization. It is used to match the form of the organization as closely as possible to the purposes of the organization. Through the design process, organizations act to improve the probability that the collective efforts of members will be successful. Managers and staff work together to define the needs of the organization, then they create the systems to meet those needs most effectively.

One of the most important theories used in this regard is the organizational configuration proposed by Mintzberg. The model divides the organization in five parts, each designed to carry out the specific function of the realative sub-system. The core of the operations contains the resources that operate in the core business of the company (ex. production department). The techno structure helps the organization to change and adapt to the changes spotting the problems and analyzing opportunities and threats. It is also responsible for the innovation in the core of the operations (ex. R&D department). The supporting staff is responsible of the activities functions and the maintenance of their human and physical components (ex. Human Resources department). The top staff is in charge of the control and the coordination of the other parts of the organization. It is completely separated from the other parts of the organization and it supplies the politics, the strategy, the guidance and the targets. The intermediary line deals with the implementation of the main guidelines inside the units. In the traditional organization it is responsible of the coordination between the top staff and the core of the operations through the management of the flow of information in both directions.

In defining the best organization two different kind of organizational dimensions must be taken then in account: structural and contextual. The first regards the levels of formalization (quantity of documentation written that guide the core of the operations), specialization (degree of which the duties are divided among the job positions), hierarchy (who reports to whom), centralization (hierarchy level that has the authority to take a decision), professionalism (formation and education level of the individuals), human resources indicators (use of the individuals in the different functions and offices). The second accounts the dimension (number of people who work for the organization), technology (tools, techniques, actions used for transforming the inputs to outputs), environment (all the elements external to the organization), strategy and objectives (scope and techniques that distinguish one organization from the others), culture (the overall not written values, knowledge and rules shared among the individuals). This last concept is particularly important when attempting to manage organizational change. Despite the best-laid plans, in fact, changes must include not only structures and processes but also corporate culture. This is because change failure is more and more credited to lack of understanding about the strong role of culture and the role it plays in established organizations.

Therefore, the design of an organization has to take in account the following crucial factors: span of control (reporting range of the employees to a managerial position), authority (influence of a position to make decisions, pursue goals and get resources), responsibility (carry out an assignment or conduct a certain activity), delegation (assign a task to a subordinate along with the commensurate responsibility), chain of command (lines of authority in an organization, who reports to whom), accountability (responsibility for the outcome of the process), line authority (type of authority where managers have formal authority over their subordinates' activities), staff departments (type of authority where managers influence line managers through staff's specialized advice). The organizational design is based on the analysis of these key concepts. They permit to define, measure and make available the results achieved by the company.

Lifecycles of organizations

Organizations go through different life cycles just like people do. Characteristics of new organizations are usually different from older organizations. For instance, founders of start-up organizations and its various members have to do whatever it is necessary in order to just to stay in business. Leaders make highly reactive decisions because they fear to take the time to slow down and do planning. This is similar to people in early-teenage phase. As people continue to mature, they begin to understand more about the world and themselves. Their wisdom on how to face the challenges in life and in work increases with time. They learn to plan and to use a certain amount of discipline to get through these plans. Basically, they learn how to manage themselves (McNamara).

Organizations, if they want to survive in the future, must be able to do the same. Experienced leaders have learned to recognize the particular life cycle that an organization is in a certain moment. These kinds of leaders understand the types of problems faced by the organization with a sense of perspective that helps them to decide how to respond to decisions and problems of the organization.

To the age of an organization corresponds then an increase of size and level of bureaucracy. The division of labor is characterized at the beginning by overlapping tasks that, with time, become small jobs with many descriptions. The one person rule is substituted then by a heavy top management with an extensive formalization against the initial absence of rules. The use of both internal systems and lateral teams (task forces, etc.) is then more and more required as the organization grows older (Daft).