INNOVATIVE FORMS OF ORGANISING European Experiences from the INNFORM Research Programme

1. INNOVATIVE FORMS OF ORGANISINGEuropean Experiencesfrom the INNFORM Research Programme Leona Achtenhagen Jönköping International Business School Leona.Achtenhagen@ihh.hj.se Netcode Meeting, Stockholm, May 9th 2003

2. Problems with prior research on innovative organising modes • Claims of new organisational practices, but little empirical evidence • Ideal-type organisational forms proposed • Empirical evidence anecdotal • Fragmented research • Consultancy-driven publicity

3. INNFORM project: Aim of the research • What are the key features of innovative forms of organising that distinguish it from other organisational forms? • To what degree have these features diffused over different regions, sectors, and size ranges and what are the performance consequences? • What are the management processes of the transition from traditional forms towards innovative forms of organising? • A large-scale international questionnaire survey is accompanied by extensive case studies

4. INNFORM – An international research team Warwick Business School (UK) Said Business School Oxford (UK) Jönköping International Business School (S) Erasmus University Rotterdam (NL) University of St. Gallen (CH) IESE Barcelona (E) ESSEC Paris (F) Hitotsubashi University (JAP) Duke University (USA)

5. INNFORM: The questionnaire survey • 3.500 companies contacted in Europe • Quoted and unquoted companies • Size: at least 500 employees • Only wholly domestically-owned firms • Languages: English, German, French, Spanish, Italian • 448 usuable responses (13%)

6. INNFORM findings: Complementarities of changes Boundaries • strategic alliances • outsourcing • downscoping Structures Processes • ICT • human resources • communication • decentralisation • delayering • project forms of organising Source: Whittington et al., 1999

7. INNFORM findings: Fostering change and innovation • Focus on processes rather than structures • Organising + Strategising • Challenges: • Sharing leadership • Learning conditions • Need to live with dilemmas

8. Sharing leadership: The role of interactive strategising • What is the role of leadership in innovative forms of organising? • Who are the key actors?

9. Example: Hilti AG Beyond empowerment to ’taking charge’ • Family-owned company, based in FL • Tools for professional users in construction industry • 14,000 people, sales of 3.1 bln SFR (2001) Member of the executive board: “I see my role as top manager in acting like yeast in a dough” Head of region Europe: “The aim is to communicate more about the strategy, and to achieve that all levels act in a more strategic way. Everybody shall be informed and participate”

10. Fostering learning conditions • Introduction of new ideas • Exploitative/explorative learning • Internal sensemaking • Approach to change

11. Example: Siemens Medical Engineering • Drivers for change: external pressures by financial analysts; FDA requirements • Organisational changes: from steep to delayered hierarchy; project-oriented working modes • Problems: overcome feeling of safety, replace seniority with performance and learning orientation

12. Example: Trumpf GmbH + Co • Drivers for change: crisis in machine tool industry; high costs and low productivity • Organisational changes: changes in work processes, only then acknowledgement of importance of learning • Problems: laying off people for the first time; moral issues

13. The need to live with dilemmas: Managing dualities Living with and managing hierarchies and networks Delivering a complementary and contextually appropriate set of innovations and not the latest management fad Centralising strategy and decentralising operations Standardising and customising Empowering and holding the ring Continuous innovation requires some platforms of relative stability The discipline to identify knowledge and the good citizenship to share knowledge Balancing continuity and change: ‚To change the world one must live with it‘ Greater performance accountability upwards and greater horizontal integration sideways Source: Pettigrew/Fenton, The Innovating Organization, Sage, 2000: 296

14. Empowerment – more freedom to decide on work processes Decentralisation – responsibility assigned to project teams Process-based organisation – processes and projects form a matrix Competition – resources assigned to competing progects Holding the ring – maintaining control Centralisation within the unit – tight coordination of processes; ‘top’ as central programme Hierarchy – resource allocation Cooperation – communication forums Example: Siemens Medical Engineering

15. Local market presence Decentralisation – profit centres Multiple cultures/identities – unit-based identification Managing by facilitating and coaching Global alignments of business Centralisation – ABACUS reporting system Unified culture/identity – group-wide logo, directives Managing by behavioural and output control Example: ABB

16. Remaining challenges… • Managing complexity • Micro-political conflicts • Identity creation

17. What does ’innovative’ mean? • Radical new combination of elements • Genuine wide-spread organisation innovation • Novel combination of organisational practices not previously associated • Novel recombination of previously associated practices • Organisational initiative new for the industry sector in that economy • Important criterion: adopted changes are perceived as new by their members

18. INNFORM findings: Decentralisation • Strong trend towards decentralising operational decision-making • Over 60% of companies report large or total responsibility regarding operational decisions at sub-unit levels • Highest pace of change: UK and German-speaking countries • Decentralisation of strategic decision-making much lower • Highest degree of decentralised strategic decision-making in Northern Europe and German-speaking countries • Many companies appear to delegate tasks, not responsibilities Source: INNFORM project, cf. Ruigrok et al., 1999

19. INNFORM findings: Delayering • In Europe, 30% of companies report delayering over 1992-1996 • This trend is remarkably similar across Europe • Another 20% of companies added layers • Across Europe, companies maintain largely similar levels of senior managers with profit responsibilities • National differences are insignificant: contexts do not appear to play a dominant role here

20. INNFORM findings – Project-based organisations • Traditional management functions (e.g. Marketing, HRM) continue to matter in Europe • However, companies report increasing use of project-based organisations • Strongest increase in project-based organisations in German-speaking countries • Results confirm rise of cross-functional teams and significance of seeking new combinations Source: INNFORM project, cf. Ruigrok et al., 1999

21. INNFORM findings – Use of ICT • Almost 40% of companies report that they attach much/great importance to ICT systems and email • Almost 60% of companies report that they attach much/great importance to EDI • Pace of change is highest in German-speaking countries, overall importance of ICT highest in Northern Europe Source: INNFORM project, cf also Ruigrok et al., 1999

22. INNFORM findings – New HR practices • Companies across Europe report that they have introduced innovative HR practices • Examples include cross-company conferencing, internal labour markets, internal knowledge networks • No geographical differences across Europe • Extensive use of new HR practices is strongly positively related to firm size and knowledge-intensive sectors

23. INNFORM findings – Internal networking • Companies were asked to which extent they make use of different functional and strategic linkages, horizontally and vertically • Across Europe, companies report clear increase in both horizontal and vertical linkages • Fastest pace of change in Northern Europe and German-speaking countries Source: INNFORM project, see also Ruigrok et al., 1999

24. INNFORM findings - Downscoping • Downscoping=de-diversification • Across Europe: trend is away from the single business and diversified firm towards the dominant and related business firm • Companies are seeking both internal synergies and external scope Source: INNFORM project, see also Ruigrok et al., 1999

25. INNFORM findings - Outsourcing • Outsourcing is increasing across Europe • 74% of companies reported outsourcing • 63% reported outsourcing has increased • Much less outsourcing in strategic areas (R&D, purchasing) Source: INNFORM project, see also Ruigrok et al., 1999

26. INNFORM findings – Strategic alliances • Across Europe, companies have extended their involvement in strategic alliances • Yet, the vast majority devotes only small share of assets to alliances • Great differences across countries • Alliance activity is strongly related to firm size Source: INNFORM project, see also Ruigrok et al., 1999

27. Innovative human resource practices • Job-design and control • Teamwork, leadership and new managerial roles • New psychological contract • Staffing practices • Career management • Reward systems