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BOUNDARY MANAGEMENT IN THE MOTOR INDUSTRY

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BOUNDARY MANAGEMENT IN THE MOTOR INDUSTRY

    STSTRUCTURING PRODUCT DEVELOPMENT IN THE 21

    CENTURY: BOUNDARY MANAGEMENT IN THE MOTOR

    INDUSTRY

    P K Smart

    The Department of Manufacturing Engineering Loughborough University, Loughborough, Leicestershire, LEI 1

    3TU Tel 01509 222924, Email: p.k.smart@lboro.ac.uk

    N J Brookes The Department of Manufacturing Engineering Loughborough University, Loughborough, Leicestershire, LEI 1 3TU Tel 01509 222924, Email: n. i .brookes@Iboro.ac.uk;

    F E Lettice Centrica Pic Staines, Middlesex;London;TW18 4AE;

    Email: fiona.lettice@centrica.co.uk

    C J Backhouse The Department of Manufacturing Engineering Loughborough University, Loughborough,

    Leicestershire, LEI 1 3TU Tel 01509 222924, Email: c.i.backhouse@ Iboro.ac.uk

    N D Bums

    The Department of Manufacturing Engineering Loughborough University, Loughborough, Leicestershire, LEI 1

    3TU Tel 01509 222924, Email: n.d.bums@lboro.ac.uk

    through the integration of different functional skills, ABSTRACT ;[25], [29];[33]. knowledge and expertise [5]The link between product development performance However, a multi-functional project team approach to and organisational structure, is an ongoing pursuit for organising product development activity is not without the academic and business communities. The its ills [31], [32]. Francis and McIntosh [15] succinctly stchallenges of the 21 Century business environment express this:- force a poignant question: Is the choice of any one ‘Moving from a wholly function based organisation to a organisational structure over another is really wholly process-based organisation conducive to improvements in product development would simply be the equivalent of moving from vertical performance?' The Working the Boundaries research to horizontal walls or barriers. project undertakes an investigation into the feasibility of

    a boundary-based view to product development in the If there are advantages and disadvantages associated automotive industry. This paper sets the research with both project and functional organisations, then it context and presents a 'tentative theorythat focuses may be supposed that there is some optimal point for on the importance of the informal organisation based on product development lying along the spectrum between the network of interrelationships between product them. However, research by Henderson [22] from the developers. Sloan Management Institute at the Massachusetts

    Institute of Technology indicates that searching for this

    Keywords: Boundaries, product development, informal optimal point is a fruitless exercise. This work, based in the Pharmaceutical industry, indicates that it is not organisation, networks, knowledge management. the type of organisation structure adopted by 1. INTRODUCTION companies that governs their product development

    success. It is the ability of the company to overcome 1.1 The Working the BoundariesResearch the boundaries of any organisational grouping in a Project fashion, which dictates the companys achievements. The Working the Boundaries research is a Henderson states that: - collaborative project undertaken by Loughborough ‘ Success (in product development) is not a University, Engineering and Physical Sciences function of a particular organisational choice ...Indeed Research Council (EPSRC) and Company. It involves an the most successful companies in our study were those investigation of the dilemmas experienced by that were never satisfied with any single answer.' companies when deciding how to organise for product

    development. Our project seeks to corroborate these propositions in a

    different industrial environment to that of Hendersons The focus of recent competitive strategies is original study by carrying out a longitudinal case study improvement in product development performance

    ICMIT 2000 412 0-7803-6652-2/2000/$10.00?2000 IEEE

with an automotive company (Company A). The 1961 [10].

    research hypothesis is as follows: Today's post-Fordist era is increasingly being

    characterised by organisations that do not want to HI. ‘Manufacturing organisations that acquire and create a non-human monolith, producing narrow exercise capabilities to overcome boundaries in their product portfolios, with little choice for customers and organisational structure can improve product poor customer service. Increasingly work is organised development performance \ in a more organic way susceptible to rapid continuous A hybrid research methodology strategy has being but sometimes discontinuous change. There are also used to gain an in-depth evaluation of the experiences many examples of organisations which have benefited of the Company A organisation. The research process from this method of operation and now stand as role uses structured and semi-structured questionnaire ; Chrysler, Toyota and models (for example GE, AT&Tsurveys and face-to-face interviews. Microsoft) for the international business community. The following sections set the research context and 2.2 New Wave Thinking: Network Theory present some preliminary findings.

    A new wave of thinking began to dominate the

    organisation theory literature in the early 1990s. It is

    called Network Theory and its conceptual origins date 2 SETTING THE RESEARCH back to the 1960s social theory [1] and 1980s CONTEXT organisational theory [13].

    An important arm of Network Theory involves the 2.1 The Impact of Organisational Structure on concept of an informal organisation. It demonstrates the Product Development Project Performance relevance of peoples networks of relationships. The The coming of age of mass production with Fordism term * network organisationhas been used with (1863-1947) and the development of Adam Smiths reference to different industries by Bums and Stalker (1776) fimdamentals by Taylor in Scientific [10] , Mintzberg [26]; Miles and Snow [24]; Eccles Management;(1913) show the deep division and and Crane [27] and Gulati et al [20]. Baker [4] specialisation of labour [10]. Since the mid 1970s suggests that the network form can be designed to inroads have been made into eradicating Taylorism handle product development tasks and market from the blue-collar work environment to improve environments that demand flexibility and adaptability. product development performance. This is usually done by the close interactions of people,

    problems, and resources. Interestingly people To ensure product development success automotive autonomously generate the necessary relationships. companies have used a myriad of business

    improvement programmes. For example Total Quality Eccles and Crane [27] also identified this self-Management, Reengineering [19]and more recently adaptability feature of the network organisation. In this Knowledge Managemnt, Platform Management [11], style of organisation novel or non-routine problems are [34] and Brand Management [35]. In many cases these routed and resolved by the shortest path to the right improvements are accompanied with the restructuring people. This emergent as opposed to prescribed of organisations to better meet the demands of the structure of network relations are unstable, and ever-changing automotive markets. therefore a less reliable guide for action [12]. Naturally

    its capability for changing and managing change is Such business improvement programmes are immense. increasingly tackling the white collar business sector in

    an attempt to narrow the gap between an organisations Krackhardt and Hanson [23] discovered informal management and its employees to create a seamless advice, trust and communication networks and organisation operating around its core areas of relationships critical for improvements in organisational competency and business vision and goals. Some of performance. Both Krackhardt and Hansons [23] and these characteristics are described in Ashkenas et als Burts [7] research places a focus on the importance of [2] Boundaryless Organisation. relationshipsbetween social actors in the workplace. In 1967 Lawrence and Lorsch [24] conducted seminal Similarly others have suggested that mastering research into how environmental factors influence organisation capabilities to learn and collaborate and internal organisational structure. They suggest stable managing knowledge and relationships is the foundation organisations tended to be more mechanistic and rely for competitive success in the future. Such findings are heavily on forms and procedures. Organisations in the echoed in the work of Athaide and Stump [3]. A better more dynamic industry were more organic. In these understanding of such relationship building capabilities organisations the span of supervisory controls were is lacking in existing organisation theory [21] and [7]. wider, there was less attention to formal procedures Complexity theorists Frank and Fahrbachs [16] and more decisions were made in the middle levels of through social network analysis show the way toward the organisation. The organic nature of organisation dynamic models of how social ties evolve over time. was a view also proposed by Bums and Stalker back in

    ICMIT 2000 413 0-7803-6652-2/2000/$10.00?2000 IEEE

Their work advocates the idea that the underlying basis was made a priority.

    of organisations is both the structure of interaction In 1977 a new CEO initiated a 13-year collaborative among members and the distribution of sentiments product development relationship with Honda, Japan. between them. This relationship was characterised by a large injection

    of design capability from Honda. In 1990 Company A Finally Boutys [6] research suggests some obvious made a profit of ?33million. In 1993 pre-tax profits of overlaps with the concepts of the informal organisation ?56million included the ?100million sale of assets to and a community based view of organisations [36]. Unipart. Farris [14] suggests that development in the field of It generally costs between ?1000million - ?1500miIIion people and organisations should focus on the individual. to design and develop a new model from scratch and He believes they are the keys to technological 4-5 year to generate sufficient funds to finance a takes innovation and their contribution depends on the way in replacement vehicle. As Company A has made little or which their organisations are organised and managed. no cash surplus for the last 20 years, the rate and Strategic partnerships between firms and the people extent to which new models can be replaced and within them are increasing becoming a popular mode of re-designed has therefore been limited. working.

    2.3 World Automotive Industry

    3 PRELIMINARY RESEARCH The automotive industry is experiencing high levels of

    global competition [37] and [18]. Recent claims are FINDINGS: TENATATIVE THEORY that the maturity of West European, North American Preliminary findings from this project based on and Japanese markets leave little room for fiirther research into Company As product development growth. As a reaction to this some key players in the process and performance are now becoming apparent auto trade like General Motors (GM), Fiat, and the BMW and are supporting Hendersons viewpoint of Group are investigating investment opportunities in the organisational boundaries. Further findings are also second world regions such as Eastern Europe, Latin becoming evident and are echoing the experience of America and Asia. other work in this area Krackhardt and Hanson [23] The industry on a global basis is also experiencing a Farris [3, 14], Baker [4]Nohria and Eccles [27], period of over capacity. This may be one of the reasons Athaide and Stump [3] and Bouty [6]. These initial for the many mergers and acquisitions leading to a findings are summarised in the sections below. rationalisation of product ranges. Although the first 3.1 Boundaries: The Division of Labour world markets are maturing they are also becoming

    increasingly fragmented. Combined with high levels of Over the last 20 years the Company A organisation has competition and new technologies the business undergone three primary changes in organisational environment has become extremely volatile. structure* These are shown below in Table 1

    according to their respective time periods. Company A Company A remained one of the most profitable UK

    organisations until 1965. In 1966 it became a wholly

    owned subsidiary of the Leyland Motor Corporation. In

    1968 Leyland Motor Corporation took over British

    Motor Corporation [28]. The new British Leyland

    Motor Corporation (BLMC) was a massive organisation

    incorporating all UK Motor manufacturers.

    Financial problems struck BLMC in a series of crises It became apparent, that to a greater or lesser degree from 1973. The company had lost money from most of of sophistication inter-disciplinary working or de facto its models, which were beginning to age in a declining teamworking was occurring at the operational level, market. The company had over stretched itself in an informally, throughout the three different time periods. attempt to become large enough to withstand Like Company A, all organisations create formal competitors from Europe, North America, Japan and boundaries around their resources. Resources or increasingly from Ford and Vauxhall in the UK. The labour are divided in two ways. In Company A the first result was that pre-tax profits had gone from ?68million involves the segmentation of different skill areas (e.g. in 1973 to losses of ?16million in the first half of 1974. powertrain, body in whiteelectrical etc). This forms In December 1974 Company A invited Government the first boundary and has been called the skills intervention, which resulted in a parliamentary study -division of labour, (s-dol). It allows for the 5British Leyland: The Next Decade. It suggested that differentiation of tasks that need to be carried out to the government would support BLMCs expansion plans create a product. The second boundary is apparent in

    terms of how that labour is to be managed and has so long as severe product and market rationalisation

    ICMIT 2000 414 0-7803-6652-2/2000/$10.00?2000 IEEE

    been called the 'management - division of labour In Company As case the changes in the nature of boundary;(m-dol). This boundary decides whether the product development task activity was intensified by skills are to be managed centrally (i.e. functional its collaborative relationship with Honda and now management style) or whether they are decentralised Company B (the new owner of Company A). Such (i.e. team management style) or in a form that falls changes have made it increasingly difficult for the along this continuum. The m-dol boundary is acting as formal organisation to remain prescriptive about where a labour grouping mechanism. It portrays the formal to place its s-dol and m-dol boundaries. The changes reporting lines converting layers in the formal in task activity have demanded high levels of organisation in the form of a hierarchy. The hierarchy interaction to allow information (e.g. regarding advice

    shows formal power, status and rank differentials. Both technical data, knowledge, tacit knowledge, and the s-dol and m-dol boundaries have existed during private/personnel aspirations) to flow at an increased Company As entire history Although they have not rate of speed and quality than would be typical in the principally changed, at a practical level they have been formal organisation. In fact a significant proportion of formally moved regularly over the last 20 years. This interviewees reported examples of interactions and movement has often been done independently of ‘informal organisation’ that communications in this

    long-term business strategy and therefore without any short cut at least 3 m- doi/s-dol boundaries in the conscious alignment. formal organisation and on occasions more. The previous 20 year period has witnessed a greater Informal interactions across formally prescribed degree of specialism at the sub and sub-sub boundaries were therefore observed as a means of engineering centre of competency (CoC) or department repositioning rigid formal boundaries, which hindered level. This has mainly been due to technological the efficiency and effectiveness of information flow. developments in design process technologies, materials The definition and delivery of product development and ever more challenging market demands. Greater tasks requires high degrees of boundary flexibility, degrees of specialism have led to an increase in the which were injected into the formal organisation by an s-dol boundaries. This increase has required further informal organisation. The informal organisation

    organisational efforts to manage them through a enables networks of unprescribed linking to take place subsequent increase in the number of m-dol in multiple directions across the prescribed links, of the boundaries. formal organisation. This is shown in Figure 2. Both the s-dol and m-dol boundaries manifest

    themselves as static formal boundaries around all

    individuals inside the organisation.

    3.2 The LinksInside the Formal Organisation (The product development taskbecomes the primary link between individuals (or even groups) within the formal organisation. This is shown in Figure 1.

    In the functionally organised product development projects the informal organisation was happening in

    pockets, due to a lets all pull together mentality during Company As financial crisis in the late 70s and early

    80s. It was a make or break time for Company A and people were reported to have 'united in the face of In a stable market environment the formal organisation adversity. During the team based organisation of the can afford to display high degrees of prescription about late 80s and early 90s the informal relationships the definition of the task and even how it should be became more widespread and formalised, partly due to delivered (e.g. process methodology). However the their success on earlier product development projects. automotive industry is characterised by a highly For the same reasons learning curves regarding the dynamic market environment. In this type of building of relationships both within and outside of their environment markets are becoming increasingly skills areas were less steep. In addition Company A fragmented and even saturated in some sectors and had taken steps to implement a formal team technological advances are widespread. This business organisational structure, which included the climate has generated changes in the nature of product decentralisation of the engineering functions, to allow development activity and tasks have become informal relationships to proliferate. Today this increasingly specialised, complex, interdependent and informal organisation is seeing a slow decline in the uncertain. volume of new relationships being struck within the

    ICMIT 2000 415 0-7803-6652-2/2000/$10.00?2000 IEEE

more functionally organised Company B. This is also a

    natural by-product of the fact that the formal

    organisation has now become a much larger and

    foreign body. Furthermore relationships have ended

    due to a significant number of Company A employees leaving the company. The decline in informal ties

    appears to be gradual due to the lasting effects of the

    strong informal relationships built up over previous

    projects.

    It was observed that the contextual unit in which the

    informal organisation operates during product

    development activity is a relationship. The building

    of a link through informal relationships was often reported to be a major contributor to product development project success. It can be suggested that Both the formal and informal organisations provide a project performance (pp) is a function of the effort to medium for which tasks are defined and delivered. informally reposition formal boundaries (e): However they do this to very different degrees. The PP =f(e) (1) formal organisation has traditionally defined tasks as a The changing nature of tasks shows the process of result of the need to breakdown the final product into collaboration between individuals, generates new manageable segments for product development tasks that also require delivery. These additional tasks activity. The formal organisation in Company A has require a skills and management division of labour become increasingly aware, particularly since 1990; of undefined by the formal organisation. To prevent the the need to also define how tasks are to be delivered. these new tasks falling between formal boundaries This effort has resulted in efforts to generate formal and risk incompletion, the informal organisation is set documented project management processes. Such into motion. In effect the informal organisation increasing levels of prescription in the formal manages the divisions of labour between formal organisation are being met with the above mentioned organisational boundaries, by setting new informal changes in product development task activity. It may boundaries around a fused set of different skills. This be argued that the resulting paradox and contradiction informal organisation self generates, self organises can be resolved through the informal organisation. The and self manages an 'informal division of labour with a strength of this organisation appeared to determine unique set of informal s-dol and m-dol boundaries. project success, in the same way it has done over the This is shown in Figure 3 and 4. last few decades.

    Although Company A had spent an enormous amount

    of effort formally moving s-dol and m-dol boundaries,

    little effort in comparison has been made to formally

    encourage their informal repositioning. The effort

    required by individuals to informally reposition their

    formal boundaries (e) is a function of the following

    factors: Skills and management divisions of labour

    boundaries (s/m-dol)the attributes of the individual (i)

    and the attributes of product development task (t).

    Therefore:

     4. SUMMARY

    Despite a series of changes in the formal

    organisational structure, an informalorganisational

    network was consistently engaged in product

    introduction and was reported as being a significant

    contributor to successful product development. This

    implies that improving product development

    performance cannot rely upon changing the formal

    organisational structure but needs to make explicit

    recognition of existing informal networks.

    ICMIT 2000 416 0-7803-6652-2/2000/$10.00?2000 IEEE

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