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Enhancing Organizational Performance (1997)

Chapter: 2 Techniques for Making Organizations Effective

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Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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2 Techniques for Making Organizations Effective

Three approaches to organizational change—total quality management, downsizing, and reengineering—are currently being used by many organizations attempting to change their designs, cultures, missions, and external relations. One attribute these techniques have in common is that they are being applied in many types of organizations across industry lines. This chapter reviews each of these approaches and their relationships to organizational effectiveness.

Total Quality Management

Total quality management (TQM) is not yet a precisely defined construct. It encompasses many management practices and prescriptions that have been part of the organizational literature for several decades. The multiple dimensions of quality make it difficult to draw precise conclusions about its relationship to organizational effectiveness. Although there is much anecdotal evidence that TQM increases the effectiveness of modern organizations, a surprising dearth of systematic empirical research exists.

Quality as a Construct

One difficulty with studying quality is that its definition is neither precise nor consensual. Quality, like terms such as effectiveness, satisfaction, empowerment, and leadership, is a construct rather than a concept, and no objective referents exist. Its definition is constructed in the minds of the definers, so no single definition is correct for every circumstance.

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

Quality is used to refer to an ultimate outcome as well as a predictor of an ultimate outcome. Prior to the late 1980s, the scholarly literature usually treated quality as an indicator of organizational effectiveness (Campbell, 1977; Conrad and Blackburn, 1985). In this first sense, quality referred to the rate of errors or defects in goods-producing organizations (Crosby, 1979), to institutional reputation in higher education organizations (Webster, 1981), to the presence of ambience and legitimacy in arts organizations (Tschirhart, 1993), and to reduced morbidity and mortality rates in health care organizations (Scott et al., 1978). In every case, quality was always used as a qualifier in describing some product or service—high-quality products, high-quality education, high-quality art, high-quality health care. It was only one aspect of what organizations were interested in accomplishing.

In recent years, the focus on quality has changed. More and more, quality has begun to take on the appearance of the summum bonum of organizational performance. Managers and other organization members have become converted to the pursuit of quality as the single most important organizational objective (Deming, 1986), and scholars have scrambled to catch up by substituting quality as the dependent variable of choice.

Attempts to Define Quality

Many scholarly attempts have been made to define quality in a meaningful way (Table 2-1). Garvin (1988) has identified four "eras" of quality development in the United States: (1) an inspection era, in which quality was associated with mistakes and errors detected in products or services after they were produced; (2) a statistical control era, in which defects were reduced by controlling the processes that produced the products; (3) a quality assurance era, in which techniques and philosophies encompassed total quality control and top management took responsibility for ensuring quality throughout the organization; and (4) a strategic management era, in which quality was defined from the customer's point of view and the organization's strategy became centered on quality.

Another perspective on quality development is the shift from a one-best-way approach to quality, to a contingency approach to quality, to a multiple-constituencies approach. For example, the first two eras, inspection and statistical control, represent a uniform approach, implying that it is good under every circumstance for every organization. This approach is best characterized by Shewhart's (1931) classic Economic Control of Quality of Manufactured Product, in which he outlined universal techniques as well as a philosophy that emphasized the one correct way to define and achieve quality. Deming (1986), the best-known disciple of Shewhart, perpetuated this view of quality to some extent. His famous 14 points were an effort to create organizational forms that prevented errors but did not

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

TABLE 2-1 Major Definitions of Quality

Approach

Definition

Example

Transcendent

"Quality is neither mind nor matter, but a third entity independent of the two … even though Quality cannot be defined, you know what it is" (Pirsig, 1974)

Innate excellence; Timeless beauty; Universal appeal

Product-based

"Quality refers to the amounts of the unpriced attributes contained in each unit of the priced attribute" (Leffler, 1982)

Durability; Extra desired attributes; Wanted features

User-based

"Quality is fitness for use" (Juran, 1989) "Quality consists of the capacity to satisfy wants" (Edwards, 1968)

Satisfies customers; Meets needs; Fulfills expectations

Manufacturing-based

"Quality means conformance to requirements" (Crosby, 1979)

Reliability; Adherence to specifications; Variation within tolerance limits

Value-based

"Quality means best for certain conditions … (a) the actual use and (b) the selling price" (Fiegenbaum, 1961)

Performance at an acceptable price; Value for the money spent; Affordable excellence

System-based

"[Quality is] a system of means to economically produce goods or services which satisfy customers' requirements" (Japanese Industrial Standards Committee, 1981)

Utilizing accepted quality procedures; Quality processes; Integrated approach

Philosophical

"[Quality] means that the organization's culture is defined by and supports the constant attainment of Mind-set customer satisfaction through an integrated system of tools, techniques, and training" (Sashkin and Kiser, 1993)

Management philosophy; Lifestyle

 

Source: Cameron and Whetten (1996).

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

discard or correct them after they had been made. The next quality era—quality assurance—sees quality as a relatively specialized function, not everyone's responsibility, and something one "inspected for" after the product was finished rather than something one "built in" to the product. Juran (1951) and Fiegenbaum (1961), for example, identify different approaches to and different meanings of quality. Quality definitions could differ among functions (e.g., manufacturing, purchasing, sales) as well as among activities (e.g., new product design, inventory control, assembly) (Fiegenbaum, 1961). The fourth era—strategic quality management—parallels the multiple-constituency approach to organizational effectiveness in emphasizing differences in the definition of quality depending on which constituency's perspective is adopted.

Juran (1989) invented a distinction to differentiate a "big Q" approach to quality from a "little q" approach. Big Q is associated with the strategy, culture, and overall functioning of the organization. Little q is associated with quality as an attribute of a product or a process; it refers to specific tools, techniques, and activities. Only recently has quality taken on the big Q connotation. The phrase total quality management is generally taken to refer to big Q quality (Sashkin and Kiser, 1993).

Dimensions of Quality

Writers who attempt to characterize quality as an attribute of products and services (little q) include Garvin (1988), Juran (1989), Teboul (1991), Fornel and Johnson (1993), Zeithaml (1988), and Maynes (1976). The dimensions they identify include such attributes as reliability, durability, serviceability (Garvin, 1988), safety, prestige (Teboul, 1991), freedom from deficiencies, meeting customer needs (Juran, 1989), quality in terms of value, and customer satisfaction (Fornel and Johnson, 1993).

In characterizing quality as a more comprehensive set of characteristics (big Q), the list of possible attributes is even longer (see Malcolm Baldrige National Quality Award, 1995; Deming, 1986; Juran, 1992):

Continuous improvement in all activities and in all people,

Customer satisfaction for internal and external customers,

Efficient deployment of resources,

Employee, supplier, and customer development and recognition,

Environmental well-being,

Exemplary, visionary, and aggressive leadership,

Fast response time,

Full participation of employees, suppliers, and customers,

Life-long relationships with customers,

Long-range perspectives,

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

Partnerships upstream, downstream, and across functions,

Prevention of error by designing in quality,

Process mapping and process improvement,

Providing customer value,

Quantitative measurement and management-by-fact,

Root-cause analysis,

Shared values, vision, and culture,

Standard quality tools,

Top management sponsorship and involvement, and

Waste reduction and cost containment.

Again, various writers have come up with different sets of dimensions they associate with TQM—big Q (Hackman and Wageman, 1995; Greene, 1993). In 1988 the U.S. Department of Commerce established the Malcolm Baldrige National Quality Award and developed a framework for quality that is claimed to be comprehensive in terms of the dimensions it incorporates. These dimensions are hypothesized to have a particular relationship to one another, as illustrated in Figure 2-1. The leadership dimension is classified as a driver of quality. Four dimensions—information gathering and analysis, quality planning, quality assurance, and human resource management—are all classified as process dimensions. Two dimensions are assumed to be desirable outcomes, namely, customer satisfaction and quality results. Empirical research on these hypothesized relationships is very scarce. In one of the few studies of the Malcolm Baldrige award, Winn (1995) found partial support for the model in a study of higher education organizations. He determined that the leadership dimension (the driver) had direct impact on the process dimensions but indirect impact on the outcome dimensions. The effect of the driver on outcomes was through the process dimensions, not exactly as the figure illustrates.

This award program (and its counterparts, the more recent European Quality Award and the older Japanese Deming Prize) have probably had as significant an effect on organizational practices as any planned change effort other than automation. Almost no organization in the industrialized world can be found that has not adopted some kind of change in order to improve its quality, partially due to the impact of these national awards on business functioning. Until recently the Malcolm Baldrige award has been limited to large businesses, small businesses, and service firms (two awards can be given in each category each year); the award program is now being expanded to include educational and health care organizations as well.

Quality and Effectiveness

Although a great deal of writing and storytelling has made a case for

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

FIGURE 2-1 The Malcolm Baldrige National Quality Award framework.

the importance of quality in ensuring organizational success, firm conclusions must be tempered by the fact that relatively little empirical work has been done to assess the relationships between TQM and organizational effectiveness. In a broad review of the literature up to 1995 in higher education, for example, Peterson and Cameron (1995) found that only 3 percent of the published articles were empirical studies of TQM, 59 percent were commentaries or editorials about TQM's merits or attributes, and 36 percent were case study descriptions of TQM's application in a single organization or setting. It seems that much more is known about the attributes and dimensions of TQM than on its impact on organizational effectiveness.

Some empirical research has been conducted on the relationships between various aspects of TQM and organizational effectiveness, but it is

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

both sparse and limited mainly to such correlated indicators of performance as productivity, customer satisfaction, and error rates. Moreover, there is no agreed-on definition of effectiveness. All investigations are correlational in their approach, and causation has not been carefully examined. Whereas these findings provide limited support for a relationship between quality and effectiveness, the popular press is becoming more and more critical of TQM based on the rate at which quality improvement programs are being abandoned—a fact that gives one pause. It is clear that many questions are yet to be addressed.

Negative Results

Some recent surveys have reported nonsupportive results in exploring the relationship between TQM and organizational effectiveness. For example, a survey by McKinsey and Company of U.S. and European firms found that 67 percent of the TQM programs that were more than two years old died for lack of results. Although quality processes and practices were pursued, an inadequate level of payoff occurred in these firms to maintain support for change efforts associated with quality. A Rath and Strong survey of Fortune 500 companies also found that only 20 percent reported having achieved their quality objectives; over 40 percent indicated that their quality initiatives were a complete flop. Ernst and Young's study of 584 companies in four industries (autos, banks, computers, and health care) in the United States, Japan, Germany, and Canada found that most firms had not enjoyed success as a result of their TQM practices. Most firms labeled TQM a failure and were actually cutting back their budgets for it. The American Quality Foundation's survey of companies found that most had adopted a "shotgun" approach to quality improvement, as evidenced by more than 945 different quality tactics, tools, and techniques employed, and such unsystematic actions led to failure. Criticism of quality programs has thus begun to escalate, especially in the popular press, and some writers have even described it as an outdated management fad of the 1980s (Jacob, 1993).

Positive Results

Despite this criticism, however, the relationship between quality and several desirable outcomes is relatively well accepted in the popular mind, even though organizational effectiveness per se has been understudied. A frequent criticism of quality as an approach to enhance organizational effectiveness is that quality processes are overemphasized to the exclusion of an analysis of outcomes and effects (e.g., Bowles, 1992; Crosby, 1992; Hammond, 1992; Crawford-Mason, 1992; McKoewn, 1992). This led the U.S. General

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

Accounting Office (1991) to conduct a study of organizations that had implemented quality processes to a significant extent. The intent was to investigate the relationships between quality processes and desirable outcomes. The 20 firms investigated all were finalists in the Malcolm Baldrige competition in 1988 and 1989. Each reported outcome data from the present back to the time they initially embarked on a path to win the award by implementing quality processes. Table 2-2 summarizes the annual percentage improvement in four categories of desired outcomes often associated with prescribed quality processes.

The major conclusion of the study was that firms that implemented the quality process advocated by the Malcolm Baldrige program experienced continuous improvement in performance indicators and exceeded the industry averages in each of the four outcome categories—employee-related indicators, customer-related indicators, operational results, and financial results.

TABLE 2-2 Results of a General Accounting Office Study of the Relationships Between Quality Processes and Desired Outcomes

Outcome Category Improvement

Reported Annual Percentage

Employee related indicators:

Employee satisfaction

1.4

Attendance

0.1

Turnover (decrease)

6.0

Safety and health

1.8

Suggestions

16.6

Operating indicators:

Reliability

11.3

On-time delivery

4.7

Order-processing time

12.0

Errors or defects

10.3

Product lead time

5.8

Inventory turnover

7.2

Costs of quality

9.0

Customer satisfaction indicators:

Overall customer satisfaction

2.5

Customer complaints (decrease)

11.6

Customer retention

1.0

Financial performance indicators:

Market share

13.7

Sales per employee

8.6

Return on assets

1.3

Return of sales

0.4

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

Of course, no causal or even statistical associations were made in this study, so whether successful firms tended to implement quality processes or whether firms that implemented these processes tended to become more successful is not known.

Other studies have focused on the relationships between particular quality dimensions and organizational outcomes.

Customer Satisfaction

Customer satisfaction has been addressed in quite an extensive literature in the field of marketing (Churchill and Surprenant, 1982; Oliver and DeSarbo, 1988; Anderson and Sullivan, 1993). Although empirical evidence is limited, increases in customer satisfaction are generally believed to shift the demand curve upward, reduce marketing costs, increase marketing costs for competitors (satisfied customers are more difficult for competitors to take away), lower transaction costs, reduce customer turnover, increase cross-selling (more products, larger accounts), lower employee turnover, enhance reputation, and reduce failure costs.

Competitiveness

Some claim that quality has a positive association with increased demand (Abbott, 1955) and with inelastic demand (Porter, 1980). Porter claimed that organizations differentiate themselves from their competitors mainly by providing more durable or reliable products, adding desirable features, providing high levels of customer service, and having an extensive dealer network—all aspects of TQM. The Profit Impact of Market Strategies (PIMS) analyses confirm this competitive advantage by showing perceived product quality to be the most powerful predictor of corporate financial success when compared with market share, productivity, low-cost production, diversified product mix, and other common predictors of performance (e.g., Buzzell and Wiersma, 1981).

Productivity

Although a number of quality gurus have been writing extensively since the early 1970s that ''quality is free" because high-quality eliminates the costs associated with lost customers, rework, excess time, indirect engineering, modified specifications, data collection and analysis, field service, reinspection, and waste (Crosby, 1979; Deming, 1982; Schonenberger, 1982; Imai, 1986; Ferdows and DeMeyer, 1990; Cole, 1993), empirical evidence remains sparse. Ittner (1992) found that nonconformance costs go down simultaneously with reductions in conformance costs, thus enhancing productivity.

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

Various marketing studies (e.g., the PIMS studies—Buzzell and Wiersma, 1981; Philips et al., 1983; Fornell and Johnson, 1993) and field studies in manufacturing (e.g., Garvin, 1988; Ittner, 1992; Khurana, 1994) found evidence that quality processes are associated with higher productivity, which in turn translates into higher firm value (Singhal and Hendricks, 1993). Reynolds (1988) surveyed 69 firms and found that quality circles lead to improved productivity, cost-effectiveness, and employee morale. Ansari (1984) surveyed 150 firms and found that just-in-time practices led to productivity improvements. Griffin (1988) found in 73 firms that productivity initially improved as a result of quality circles but then fell back to previous levels. Krafcik (1989) found that certain "lean production" techniques (all associated with TQM) led to higher productivity. Flynn et al. (1993) studied U.S. and Japanese firms and found seven critical dimensions of quality management to be associated with superior product quality.

Quality Culture and Effectiveness

As we've said, few studies have investigated directly the relationship between organizational effectiveness and quality. One of the few investigations was conducted by Cameron and his colleagues (Cameron et al., 1991; Cameron, 1992, 1995) in which they studied the relationships between quality culture and organizational effectiveness among automotive, electronics, and educational organizations. Quality culture is a particular organizational orientation toward quality—that is, a set of values, principles, and definitions related to quality. A quality culture represents a way of working, a way of thinking, a personal commitment, and a lifestyle that is shared by members of an organization.

This research was guided by investigation of a model of four quality cultures that have developed in recent decades: (1) status quo, (2) error detection, (3) error prevention, and (4) perpetual creative quality. Table 2-3 summarizes the attributes of each of these orientations to quality. Cameron and his colleagues found that organizations that had developed an advanced quality culture (i.e., error prevention and perpetual creative quality) were more successful in their downsizing activities (a finding that we return to later) and had higher levels of organizational effectiveness than organizations with a less advanced quality culture. Organizations with a less advanced quality culture (status quo and error detection) are less successful in downsizing activities and have lower levels of organizational effectiveness.

Khurana's (1994) study of the worldwide picture tube manufacturing industry also confirmed this linkage between dimensions of quality culture and organizational effectiveness. He found that organizations with strong quality cultures performed better than those without them.

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

TABLE 2-3 A Model of Quality Cultures in Three Stages

Error Detection

Regarding Products

Avoid mistakes

Reduce waste, rework, repair

Detect problems

Focus on outputs

Regarding Customers

Avoid annoying customers

Respond to complaints efficiently and accurately

Assess satisfaction after the fact

Focus on needs and requirements

Error Prevention

Regarding Products

Expect zero defects

Prevent errors and mistakes

Hold everyone accountable

Focus on processes and root causes

Regarding Customers

Satisfy customers and exceed expectations

Eliminate problems in advance

Involve customers in design

Focus on preferences or nice-to-have attributes

Perpetual Creative Quality

Regarding Products

Constant improvement and escalating standards

Concentrate on things gone right

Emphasize breakthroughs

Focus on improvement in suppliers, customers, and processes

Regarding Customers

Expect lifelong loyalty

Surprise and delight customers

Anticipate expectations

Create new preferences

 

Source: Cameron (1992).

Unanswered Questions

With the dearth of empirical research on quality and the absence of theory regarding how, why, and even whether TQM affects organizational performance, there is little clear understanding about the relationships between quality and organizational effectiveness. Serious questions remain regarding TQM as a strategy for change. Among these questions are:

  1. What is TQM? Is TQM a change strategy, a culture, a package of management principles, a set of organizational values, a definition of an organization, a constituency's evaluation, or some combination of these
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×
  1. alternatives? When writers use the term, what are they referring to? Is it the ultimate dependent variable or a fad that is likely to fade over time?
  2. What are the key dimensions of TQM? In light of the variety of models and definitions available, are some dimensions more crucial than others in defining quality? How would one determine a necessary and sufficient list of dimensions? On what basis would one select the core dimensions of TQM?
  3. What are the relationships among the dimensions of TQM? Assuming that one can identify its core dimensions, what are the relationships among those dimensions? Do they have a temporal ordering, as some models suggest (e.g., should leadership involvement precede the development of certain organizational processes as implied in the Malcolm Baldrige program)? Do some dimensions subsume others?
  4. Are TQM principles universal or are they contingent on other factors? Thus far, most TQM literature has adopted an ideal type approach. Are there situations in which TQM won't work? What aspects of TQM are situationally dependent? Is a theory of TQM possible?
  5. What is new? If TQM is in large part a restatement of traditional social science principles, as argued by Kahn (1994), is there anything new here? Have we learned anything by talking about quality as a construct? Why not go back to basic principles of empowerment, System 4 thinking, teamwork, and so on?
  6. What isn't TQM? Almost every good management practice and prescription has been included in someone's definition of TQM. What does TQM exclude? What are the conceptual boundaries of the construct? Without an understanding of what it is and what it is not, no good theory or stream of research can be developed.
  7. What is the role of timing in TQM? How much time does it take to implement TQM? Is it a short-term change strategy, a long-term change strategy, both, or neither? What aspects should be addressed first—and last?
  8. What is the relationship between TQM and organizational effectiveness? With the multidimensional nature of organizational effectiveness and the apparent multidimensional nature of TQM, how are the two constructs related? In what ways are they the same, predictors of one another, substitutes for one another, or independent of one another?
  9. How is TQM measured? What are the key indicators of successful implementation or successful accomplishment of TQM? Whose perspective is the most legitimate in assessing it (e.g., customers, those involved in the operations of the organization, those leading the organization)? Do different constituencies use different measurement criteria?
  10. What are the policy implications of TQM? Is it an organizationally specific approach, or could national policies be formulated to elevate output
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

and customer service levels for an entire nation? What aspects of TQM are or are not legislatable? Does it represent a particular set of values, making it impossible to superimpose on a diverse and eclectic set of industries and organizations?

Downsizing

The second pervasive approach for achieving improvement in organizational effectiveness is downsizing. Like TQM, the term downsizing has been used in a variety of ways to describe a variety of activities. In the literature, writers have used the term in referring to phenomena as diverse as personnel layoffs, industry consolidations, mergers and acquisitions, organizational redesign, hiring freezes, and process consolidation.

Although its definition is neither precise nor consensual, organizational downsizing can be thought of as a set of activities, undertaken on the part of the management of an organization, designed to improve organizational efficiency, productivity, or competitiveness—or all three—by reducing the size of the organization. A precise definition seems to matter much more to scholars than to managers, who use an array of terms, such as compressing, consolidating, contracting, demassing, dismantling, downshifting, rationalizing, reallocating, reassigning, rebalancing, redesigning, resizing, retrenching, redeploying, rightsizing, streamlining, slimming down, and even leaning up.

Key Attributes

Four attributes help to define and separate downsizing from related concepts: (1) downsizing is first and foremost an intentional set of activities (of course, it is clear in the psychological literature that attributing intent is fraught with difficulty; however, intent in this case differentiates actions implemented knowingly and with forethought from those that occur unwittingly, even unknowingly, by management); (2) although downsizing usually involves reductions in personnel, it is not limited solely to them; (3) downsizing is focused on improving the efficiency of the organization; and (4) downsizing affects work processes, for better or worse.

Downsizing is not the same as decline. Organizations can downsize without declining, as when downsizing is used proactively to enhance competitiveness (see Tomasko, 1987; D'Aunno and Sutton, 1987), and they can decline without downsizing. Downsizing may be a response to decline, a reaction to certain missteps or environmental constraints or, in proactive and creative instances, it can be an anticipatory action to improve organizational performance. One should be careful not to confuse cause and effect.

Downsizing is not synonymous with personnel layoffs, as some authors have implied (for example, see Gilmore and Hirschorn, 1983; Brockner,

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

1988). Whereas layoffs refer to a single tactical, reactive operation used to implement a downsizing strategy, downsizing may be both strategic and proactive, referring to an array of additional options for reducing the workforce other than layoffs.

Because the opposite of downsizing is growth, some writers have assumed that downsizing is synonymous with growth-in-reverse—that is, dynamics that are the opposite of organizational expansion. The stages in growth-in-reverse may involve more centralization, less specialization, and less boundary spanning (see Behn, 1980; Gilmore and Hirschorn, 1983; Krantz, 1985). However, neither the stages nor these organizational outcomes are necessarily associated with downsizing. The intentional nature of downsizing means that an organization may get smaller in order to decentralize, to specialize, or to become more externally connected through boundary-spanning activities—the same outcomes that are associated with growth. In diversified corporations, a form of downsizing that was pervasive in the 1980s consisted of selling off their separate divisions in order to increase efficiency and profits.

In summary, downsizing should be investigated separately from other related concepts that are associated in the literature with the dynamics of decline, ineffectiveness, layoffs, and shrinkage in organizations. Like TQM, its unique dynamics remain underdeveloped theoretically at least in part because of the lack of empirical investigations of the relationship of downsizing to organizational effectiveness.

Downsizing and Effectiveness

Ironically, downsizing remains among the most pervasive strategies for organizational change in the 1990s, despite the dearth of evidence of its success. From the research produced thus far, downsizing as a strategy for improvement has proven to be, by and large, a failure. It is true that downsizing announcements have usually led to positive reactions on Wall Street, because of the possibility of cost savings, reduced expenses, and increased competitiveness. But the pattern of evidence described below is one of negative results far outweighing positive ones.

Organizational Results

A survey of corporate executives in six industrialized countries found that less than half had achieved their cost-cutting goals, and even fewer met operating objectives, such as improved productivity (Swoboda, 1995). Another survey found that 74 percent of senior managers in downsized companies said that morale, trust, and productivity suffered after downsizing, and half of the 1,468 firms in another survey indicated that productivity deteriorated

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

after downsizing (Henkoff, 1990; Bennett, 1991). A majority of organizations that downsized in a fourth survey failed to achieve desired results, only 9 percent reporting an improvement in quality.

In a review of the scholarly literature on the effects of layoffs, turnover, and job rotation policies, Cole (1993) identified a variety of organizational problems associated with job loss resulting from downsizing: loss of personal relationships between employees and customers; destruction of employee and customer trust and loyalty; disruption of smooth, predictable routines in the firm; increases in formalization (rules), standardization, and rigidity; loss of cross-unit and cross-level knowledge resulting from longevity and from interpersonal interactions over time; loss of knowledge of how to respond to nonroutine challenges faced by the firm; less documentation and therefore less sharing of information about changes; loss of employee productivity; and loss of a common organizational culture.

Another set of negative outcomes was uncovered in a study of more than 200 organizations (Cameron et al., 1987, 1993; Cameron, 1995). Effects of downsizing included: increased centralization of decision making (less participation); the adoption of a short-term, crisis mentality; loss of innovativeness; increased resistance to change; decreasing employee morale, commitment, and loyalty; the escalation of politicized special interest groups and political infighting; risk aversion and conservatism in decision making; loss of trust among customers and employees; increasing interpersonal conflict; restricted communication flows and less information sharing; lack of teamwork; and loss of accessible, forward-thinking, aggressive leaders.

McKinley (1992) found that downsizing actually increased costs, bureaucracy, and redundancy, particularly when it was accomplished through layoffs. Other studies have reported net decreases in return on equity, net sales, and return on assets with downsizing, suggesting that it did not help reverse a performance decline in organizations that were facing one, and it may have actually caused such a decline to occur (McKinley et al., 1994). In other words, downsizing often appears to have a negative effect on organizational costs, even though reducing those costs is the single most common reason for implementing it.

Individual Results

The effects of downsizing on individuals have been no less disconcerting. A review of the research on individual outcomes by Kozlowski et al. (1993) has shown that, in a variety of types of organizations and with a variety of types of employees, downsizing has produced negative rather than positive results. In these studies, downsizing is used interchangeably with job loss. For example, financial loss, decreased job stability, and deterioration in working conditions have been found to be associated with

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
×

downsizing (Leana and Ivancevich, 1987; Podgursky and Swain, 1987; Buss and Redburn, 1987; Burke, 1986). Personal well-being is negatively affected in terms of physical symptoms of strain (e.g., headaches, stomach problems, elevated blood pressure, increases in drinking and smoking) (Burke, 1984; Kessler et al., 1987; Kasl and Cobb, 1979, 1980; Linn et al., 1985) as well as negative psychological symptoms (e.g., anxiety, depression, insomnia, feelings of helplessness, cognitive difficulties) (Dooley and Catalano, 1988; Fineman, 1983; Iversen and Sabroe, 1988; Liem and Liem, 1988; Hamilton et al., 1990; Kinicki, 1989; Shamir, 1986; Bolton and Oatley, 1987; Feather, 1989; Haworth et al., 1990).

An adverse impact has also been found on individual attitudes such as loss of self-esteem, loss of self-mastery, dissatisfaction with self, pessimism, powerlessness, and rigidity (Stokes and Cochrane, 1984; Pearlin et al., 1981; Rowley and Feather, 1987; Burke, 1984; Noble, 1987; Pliner, 1990). Marriage and family deterioration have been noted among individuals affected by downsizing, notably with decreases in family cohesion, increases in conflict, decline in spouse's psychological well-being, increases in arguments, deteriorating family climate, and a seven-fold increase in divorce and separation (Liem and Liem, 1988; Wilhelm and Ridley, 1988). Even among those whose jobs are preserved during a downsizing, researchers have found adverse effects. Reduced trust and loyalty to the organization (Buch and Aldrich, 1991), role conflict, role ambiguity, role overload, and a decrease in positive feedback (Tombaugh and White, 1990), decreased morale (Sutton et al., 1985), and feelings of guilt (Brockner, 1988) are all negative outcomes of downsizing among individuals who remain in the organization.

Reasons for Negative Results

According to Kozlowski et al. (1993), the fact that negative outcomes seem to appear in the literature more frequently than positive ones is due to poor implementation and an absence of supporting interventions, such as outplacement, counseling, and training. Their review of the literature found that when firms provided support in the form of buyout packages, outplacement services, counseling, retraining, and other similar benefits to employees affected by downsizing, the impact was positive for selected individual outcomes. A recent National Research Council report (Broderick, 1996) focuses on the results that organizations want from investments in outplacement services and the activities and practices most likely to achieve them.

For example, Greenhalgh (1983), Leana and Feldman (1989), and Schweiger and DeNisi (1991) found that communicating openly about downsizing strategies, procedures, and rationale was associated with reduced stress, increased commitment, and improved productivity. Providing adequate outplacement service,

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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training, compensation, relocation assistance, clerical support, and extended benefits also were found to have positive relationships to employee loyalty, commitment, and productivity (Feldman and Leana, 1995). Brockner et al. (1987) found that, when individuals were adequately informed, adequately compensated, treated fairly, and perceived that others were treated fairly, the negative effects of downsizing on survivors (guilt, loss of loyalty, distrust) did not occur.

Davy et al. (1991) found that perceived fairness in downsizing implementation was positively related to increased job satisfaction and organizational commitment, which, in turn, led to higher levels of effectiveness. In other words, at the individual level of analysis, the means by which downsizing was implemented—i.e., the supportive activities that supplement downsizing—explains why downsizing is sometimes positive and sometimes negative in its effects. Poorly implemented or unsupported downsizing is negatively associated with desirable outcomes, whereas supportive implementation is associated with positive outcomes.

This is the same conclusion reached by Cameron et al. (1991, 1993) in their studies of the effects of downsizing at the organizational level of analysis. They also argued that the way downsizing is implemented is more important that the fact that downsizing is implemented in affecting various dimensions of organizational effectiveness.

In sum, although downsizing is ubiquitous in the business world today, many more negative than positive associations have been reported between downsizing and organizational effectiveness. This negative association, however, seems to be due more to the manner in which downsizing is implemented than by the fact that organizations have engaged in it.

Unanswered Questions

Although case studies abound, and popular accounts of downsizing among companies are frequent, empirical research on the effects of downsizing on organization-level performance is still rare in the organizational studies literature. Much more research has been accomplished on the individual level of analysis than on the organizational level. Studies of the impacts of job loss, plant closings, and unemployment on individual attitudes, health, and behavior, in particular, have appeared quite frequently in the literature (see Price, 1990; Kozlowski et al., 1993). Systematic investigations of linkages between downsizing and organizational effectiveness, however, are hard to find. Much of the organizational literature is either purely descriptive or prescriptive in nature, and many questions about what is really going on when downsizing occurs remain unanswered:

  1. What is and what is not downsizing? Because many different kinds
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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  1. of actions can be undertaken to reduce expenses, improve efficiency, and eliminate waste, what are the conceptual boundaries of downsizing? To build theories of downsizing, it is critical that the definitional boundaries of the construct be clear.
  2. Does a hierarchy of downsizing strategies exist? Downsizing is approached in different ways by different organizations, in that some take a long time to plan and implement downsizing and others announce and implement downsizing very quickly. When conducting downsizing, is there a temporal priority to particular strategies? Are some strategies or some actions more crucial than others? What are the prerequisites?
  3. What aspects of downsizing are the most powerful predictors of organizational effectiveness? Do certain features of downsizing (e.g., time frame, communication patterns, involvement, scope) impact organizational effectiveness more than others? Are different dimensions of organizational effectiveness (e.g., financial performance, morale and cohesiveness, productivity, quality) influenced differently by downsizing?
  4. What aspects of organizations change after downsizing? Because the psychological contract between the organization and its employees is often broken when downsizing occurs, does a different set of constraints and requirements arise in organizations after downsizing? Are effective organizations managed differently after downsizing compared with those that have not downsized? What are the crucial dynamics in downsized organizations that influence performance?
  5. What is the role of environmental conditions on the effectiveness of downsizing? Downsizing can be proactive or reactive. In general, reactive downsizing occurs as a result of the organization's facing threatening financial conditions. Does downsizing have a different relationship to organizational effectiveness when the external environment is severely constrained? What features of the organization's external conditions are most important in determining an effective implementation strategy? How does proactive downsizing differ from reactive downsizing?
  6. What kinds of organizational changes must accompany downsizing to ensure that it enhances organizational effectiveness? Other than simply cutting the head count, eliminating positions or hierarchical levels, and trying to become more cost-conscious, are other organizational changes required for downsizing to positively affect organizational performance? Does the act of downsizing require that special attention be paid to other aspects of the organization?
  7. What is the relationship between downsizing and long-term effectiveness? Some discussion has occurred about the impact of downsizing on short-term and long-term costs. Trade-offs have been proposed, such that cutting the budget in the short run may help create long-term costs (e.g., replacing workers). How long does it take for downsizing to have an impact
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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  1. on organizational effectiveness? Can short-term and long-term costs be reduced simultaneously? What is the role of time frame in drawing conclusions about the relationship between downsizing and effectiveness?
  2. What policy implications associated with organizational downsizing are most important? For example, what impact does downsizing have on the overall gross domestic product in a nation? What is the implication of the elimination of several million jobs in a decade? Does downsizing help stimulate entrepreneurship and new business formation in the macro economy, or does it slow down innovation and create pockets of cynicism and deep discouragement?

Reengineering

The third strategy for enhancing organizational effectiveness we consider is reengineering. Reengineering as a strategy for change is more recently developed than either TQM or downsizing, and much less research has been conducted on its association with organizational effectiveness. In fact, the term reengineering was not used before 1990 and did not generally appear in the popular media until about 1993.

''Business process redesign," an activity similar to reengineering, has been discussed in the literature relating to applications of information technology (Davenport and Short, 1990), but little attention was paid to reengineering by organizational scholars. The redesign of work processes and work layout, also related to reengineering, has also been studied in industrial engineering since Frederick W. Taylor (1911), and work design has received attention from industrial psychologists for several decades (Hackman and Lawler, 1971).

Reengineering as applied to modern organizations, however, is somewhat different from those earlier movements (Teng et al., 1994). The initiators of the modern reengineering movement, Hammer and Champy (1993:32), defined reengineering as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed."

Reengineering is not incremental change or small alteration. It is an activity that emphasizes reinventing, or radically changing, the processes in the organization that are directly connected to producing an output. For example, reengineering is illustrated by a project at IBM in which the number of steps required to receive a customer's order and produce a sales agreement was reduced from a seven-day, six-step process to a four-hour, two-step process. It is illustrated by a project at Ford Motor Company in which the number of accounts payable employees was reduced from 500 to 125 by reconfiguring the way the people do their work. Taco Bell redesigned the food preparation process and restaurant layout so that the ratio of

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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kitchen area to customer eating area was reversed from 70 percent kitchen space to 70 percent customer space, thereby cutting costs and speeding up service.

Key Attributes

Much of the writing about reengineering has occurred in the information technology literature because reengineering often involves the application of computers or information technology to formerly manual or nonautomated work processes. Reengineering is not the same as automation, however, since it is possible to automate a process without changing or redesigning it. Automation provides a more efficient way to do something; reengineering involves rethinking how the process unfolds.

Reengineering is also not the same as restructuring. At the organizational level of analysis, restructuring involves changing the number of layers, the hierarchical arrangements of units, or the reporting relationships of functions. Traditionally, organizational structures have been built around either products or functions (and sometimes geography). Reengineering focuses instead on the work processes or work flows, regardless of the hierarchical level, the functional unit, or the product involved. Restructuring asks how various components should be arranged, whether the components should be present in the first place and, if so, then how they should be arranged to enhance a process flow.

Reengineering often involves the redesign of work, but it is not the same phenomenon that the traditional work design literature addresses. Writers on work design focus on the attributes of tasks and the structure of work. For example, Hackman and Oldham (1980) identified core task or job dimensions that must be present in order for work to be motivating. Designing work so as to include those attributes was found to lead to desirable organizational outcomes (e.g., low absenteeism and turnover, high productivity). Reengineering focuses on the flows or interrelationships among tasks more than on the design of the specific tasks themselves, as well as the interrelationships among a stream of connected tasks. Work design addresses the attributes of each individual task.

Although downsizing and reengineering are sometimes used synonymously or interchangeably, they are fundamentally distinct. Most reengineering projects have resulted in identifying excess capacity or resources that are subsequently eliminated through downsizing. Eliminating steps and the need for workers, as in the IBM and Ford examples above, led the organizations to downsize. Moreover, one of the main downsizing strategies is labeled organizational redesign, and it sometimes involves some reengineering activity. However, most downsizing activity is designed fundamentally to

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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reduce what exists in the organization, whereas reengineering activity is designed fundamentally to reconfigure what exists by starting over.

In general, reengineering is designed to dramatically change an organization's trajectory. Most organizations engage in reengineering either because they are threatened with decline or extinction or because they have the foresight and slack resources to try something entirely different from what they have been doing before. That is the intent of reengineering: begin again and design new processes from scratch. Practically speaking, reengineering relies heavily on the application of information technology to formerly slow, cumbersome processes, and it is especially intended to focus on the desired results of a process rather than the functional or unit needs (Dixon et al., 1994).

Reengineering and Effectiveness

Very little systematic research has been published on reengineering and almost none on its relationship to organizational effectiveness. By far the bulk of writing on reengineering consists of case study descriptions of projects or prescriptive articles describing how to do it. Hammer and Champy (1993), for example, described the successful reengineering activities of several firms, such as Hallmark, which now designs cards in a new way; Capital Holding's DRG business, which changed from a mass market to a customer-focused business; and Bell Atlantic, which reengineered its long-distance carrier access services. These case study descriptions are typical of the success stories that are easily found in the popular press. Reengineering is usually claimed to have produced dramatic improvements in various performance indicators in these descriptions.

Dixon et al. (1994) conducted one of the few investigations of multiple reengineering projects and the factors associated with their success. They surveyed 23 reengineering cases to identify the attributes associated with successful reengineering efforts. They found that successful reengineering was characterized by a clear vision of the future and specific goals for change, the use of information technology, top management involvement and commitment, clear milestones and measurements, and the training of participants in process analysis and teamwork. These authors did not systematically assess the impact of reengineering on organizational effectiveness, but instead merely implied that each was a successful project. They discovered that the single characteristic differentiating reengineering from other kinds of efforts at organizational change was a modification of organizational direction (p. 97):

In every case, reengineering projects involved "changing direction." Major improvement was sought, but, more important, the direction of the goal had changed. For example, flexibility replaced cost reduction, time-to-market

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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superseded product performance, or cost reduction replaced process performance as the objective considered to be most important. In other words, the set of organizational priorities had changed.

The fact that reengineering implies an alteration of direction helps explain why its success in organizations may not be predicted to be very high. Most organizations have a great deal of inertia—for reasons ranging from the expectations of the external environment, the reward system, and the organizational memory to individuals' fear of the unknown, lack of ideas for new alternatives, and distrust among organization members. A complete change of organizational direction is likely to create a great deal of resistance, not to mention stumbles along the way. Continuous improvement (Imai, 1986) or small wins (Weick, 1984) that come from ongoing incremental change are more likely to meet with success, even in the face of crisis or revolutionary change (Weick, 1993). This may explain why, other than a few highly successful and highly touted reengineering projects, the success rate of reengineering projects would not seem to be high (for examples, see Hammer, 1990; Davenport and Short, 1990; Hall et al., 1993).

This prediction is supported by a recent survey of reengineering projects conducted by the consulting firm that initiated reengineering as a change process (CSC Index, 1994). That study polled 497 companies in the United States and another 1,245 companies in Europe and found that 69 percent of firms in the United States and 75 percent of firms in Europe have engaged in at least one reengineering project. They reported that 85 percent of those firms found little or no gain from their effort. Less than half achieved any change in market share, one of the primary goals. The authors conclude that reengineering is not enough to achieve desirable change. It must be integrated with other efforts at change specified by the corporation's overall strategy.

Unanswered Questions

The lack of empirical results on reengineering thus far suggests that it may turn out to be just a management fad. Management fads follow a predictable pattern in which a new term is introduced for an apparently new activity. Promises of dramatic improvement in organizational effectiveness are made in the business press on the basis of a few visible case studies. The activity is widely applied by organizations hoping for the same dramatic success. Dramatic improvements are not forthcoming, and easy solutions to organizational problems do not occur. By the time systematic research can be produced in which the conceptual boundaries are specified (what it is and is not), the dimensions of the term are identified, relationships to effectiveness are investigated, and contingencies are identified relating to when it is and is not associated with desirable performance factors,

Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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a new term is introduced and the first one is seen as outdated. Before it is clear if and under what circumstances the concept is useful, it is abandoned. Reengineering may be well along in that process. Without systematic empirical research, it risks being cast aside as one more management fad.

Numerous questions are unanswered regarding reengineering as a strategy for improving organizational effectiveness:

  1. What are the key dimensions of reengineering? What is and what is not reengineering? How does it differ in practice and in theory from other major types of change efforts, such as transformational change or restructuring? What are the key activities that must be included in any reengineering effort?
  2. What is the relationship between reengineering and TQM? Since TQM advocates a focus on process, constant improvement, increasing efficiency and speed, is reengineering merely one technique in a broader array of approaches to change called TQM? What is similar and what is different about what TQM advocates and what reengineering advocates? Do research findings on TQM apply to reengineering?
  3. Is reengineering merely a disguised, more palatable form of downsizing? Since an important outcome of reengineering is shedding waste, redundancy, and obstacles that increase cost and time, is it simply one of the alternative approaches to be used in the organizational redesign strategy in downsizing? Is there ever a time when effective downsizing does not include some form of reengineering (i.e., systemic downsizing strategies)? Do research findings on downsizing apply to reengineering?
  4. Under what conditions is reengineering appropriate? What are the attributes or preconditions in the organization that make it ready to successfully reengineer a process? What are the environmental constraints that must be accounted for in successful reengineering?
  5. What is the role of information technology in reengineering? Can reengineering occur without the application of information technology? Is dramatic improvement in process speed and efficiency tied inextricably to the application of information technology? Does the research on automation and technology application apply to reengineering?
  6. What is the relationship between reengineering and various dimensions of organizational effectiveness? Is reengineering applicable only to outcomes such as speed and cost? What other latent outcomes are associated with reengineering? What is the impact, for example, on the human resource system, customer satisfaction, and organizational culture?
  7. What is the relationship between reengineering and time? For example, is reengineering sustainable? Is it a one-time event that reaches a conclusion? How long does it take to reengineer a complex process so that
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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  1. it functions smoothly in a new way? What are the short-term and the long-term impacts?
  2. Are there certain stages that must be followed to successfully reengineer? Does a predictable life cycle exist in reengineering projects? Do certain aspects of reengineering take temporal precedence over others?
  3. What must be measured to ascertain the success of reengineering? Aside from measures of outcomes such as profitability, response time, and productivity, do new measures of process need to be developed? How could one tell if the process of reengineering was unfolding successfully and on schedule? How do process measures relate to outcome or input measures?
  4. What are the policy implications of reengineering? Is it possible to generalize the reengineering process across industries and sectors? For example, could policies be established that prescribe reengineering as a process for cost containment? Is reengineering antithetical to policy making since reengineering, by definition, strives to eliminate buffers and entrenched procedures in organizations, whereas policy making is often focused on reinforcing buffers and entrenched procedures?
  5. Conclusions

    Three approaches to change have emerged in the past two decades as the most frequently applied strategies for trying to improve organizational effectiveness. This chapter has focused on trying to define each underlying construct and identify the relevant attributes of each. Indeed, in order to begin to build a theoretical and empirical research base, it must be clear what each of the three change approaches includes and excludes. For each technique, we have reviewed key studies of its relationship to organizational effectiveness.

    We have focused primarily on the relationship between these three approaches and their individual and organizational consequences and effects. The macro-economic, sociopolitical, and international policy implications of the three strategies have not been addressed. For example, issues such as the impact of corporate downsizing on national unemployment trends, the relationship between the adoption of TQM and national competitiveness in the semiconductor industry, and the implications of reengineering for federal deficit reduction have been ignored. Such topics are beyond the scope of this book.

    We make the following observations about the effectiveness of each of these three approaches:

    1. All three approaches to change have a number of elements in common . Six such elements seem to link TQM, downsizing, and reengineering
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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  1. together: (a) Each of these three approaches seeks to change core parts of the organization; each aims at transformational change. (b) Each approach entails a focus on teamwork and involvement. (c) Each focuses on the improvement and rationalization of processes. (d) Each advocates the involvement and support of top managers as key elements in success. (e) Each advocates that it become a way of life in the organization—continuous quality improvement, continuous downsizing and cost containment, and continuous reengineering. (f) Each approach also relies on a clear vision of the future, a tool to lead to a new, better, more effective condition rather than to merely avoid a negative or uncomfortable situation. Each should be opportunity-driven rather than crisis-driven.
  2. Each approach to change is also designed to accomplish something different. At the organizational level of analysis, writers argue that downsizing helps the organization become smaller (fewer resources utilized) and more efficient (doing things right). Reengineering is seen to help the organization become better (improves old processes) and more effective (doing the right things). TQM writers argue for helping the organization achieve perfection (zero defects) and a high degree of excellence (surprising and delighting customers).

    The three strategies range from an emphasis on smaller (downsizing) to an emphasis on better (reengineering) to an emphasis on being perfect (TQM). Similarly, moving from efficiency (downsizing) to effectiveness (reengineering) to excellence (TQM) also can be seen as a hierarchical progression.
  3. None of these three change approaches appears to have a consistently positive relationship with organizational effectiveness, although there is some limited evidence that positive results can be achieved under some circumstances. On one hand, an abundance of anecdotal evidence has been published in the popular press touting dramatic successes, and a large majority of organizations have engaged in each of these three change efforts. On the other hand, the empirical evidence to indicate the effectiveness of any of these approaches to change is limited. Also, recent survey data suggest that a large number of the organizations that implement these approaches have not achieved the hoped-for advantages. In each case, the way in which the approach was implemented is more important than the fact that it was implemented.
  4. The reasons for wide-scale failure of these approaches remain unclear. Although there is limited evidence that each of these three approaches has positive associations with effectiveness, so many negative effects have been reported that it is possible that dynamics other than poor implementation are also operating. Without systematic investigations, it is not clear what leads to a failure to achieve improvement or (in the case of downsizing) what leads to actual deterioration in organizational performance. Although
Suggested Citation:"2 Techniques for Making Organizations Effective." National Research Council. 1997. Enhancing Organizational Performance. Washington, DC: The National Academies Press. doi: 10.17226/5128.
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  1. the principles and processes of TQM, downsizing, and reengineering are reminiscent merely of commonly prescribed "good" management practice, a majority of organizations that embark on these change efforts do not accomplish their objectives.

    One can speculate that lack of success may occur because each of these approaches to change strikes at a very deeply rooted, core part of the organization. Certain aspects of organizations are difficult to change; indeed, their very inertia may contribute in some ways to their effectiveness. In the case of reengineering, an attempt to radically change the processes and direction of the organization may create enough discomfort and resistance that most efforts to switch directions fail. In the case of downsizing, the fear, distrust, uncertainty, and potential for personal harm may mitigate against any organizational downsizing strategy. In the case of TQM, changing the culture of an organization so that it is based on a new set of principles, regardless of how desirable they may be, may represent an affront to fundamental elements in an organization and therefore may be resisted. It is not yet clear why the failure rate is so high when organizations implement these three approaches to change, yet it is not hard to see that the fundamental change that each aspires to achieve is not easily attained.
  2. Key questions remain unaddressed by research regarding each of these approaches to organizational change. Among the most important questions are those relating to definitions and dimensions, contingency conditions, time frame, implementation strategy, measurement criteria, and policy implications.

It is evident that three highly popular and widely applied approaches to organizational change have captured managers' attention. Each promises dramatic improvements, increased effectiveness, and a change in the way of life in organizations. Each risks the threat of being relegated to the management fad ragbag, however, because none has been rigorously studied in systematic, empirical ways, especially regarding its impact on organizational effectiveness. Spotty evidence of impact on effectiveness exists, but evidence also exists that each is useless if not harmful. These conditions combine to produce an area that is ripe for important scholarly research.

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Total quality management (TQM), reengineering, the workplace of the twenty-first century--the 1990s have brought a sense of urgency to organizations to change or face stagnation and decline, according to Enhancing Organizational Performance. Organizations are adopting popular management techniques, some scientific, some faddish, often without introducing them properly or adequately measuring the outcome.

Enhancing Organizational Performance reviews the most popular current approaches to organizational change--total quality management, reengineering, and downsizing--in terms of how they affect organizations and people, how performance improvements can be measured, and what questions remain to be answered by researchers.

The committee explores how theory, doctrine, accepted wisdom, and personal experience have all served as sources for organization design. Alternative organization structures such as teams, specialist networks, associations, and virtual organizations are examined.

Enhancing Organizational Performance looks at the influence of the organization's norms, values, and beliefs--its culture--on people and their performance, identifying cultural "levers" available to organization leaders. And what is leadership? The committee sorts through a wealth of research to identify behaviors and skills related to leadership effectiveness. The volume examines techniques for developing these skills and suggests new competencies that will become required with globalization and other trends.

Mergers, networks, alliances, coalitions--organizations are increasingly turning to new intra- and inter-organizational structures. Enhancing Organizational Performance discusses how organizations cooperate to maximize outcomes.

The committee explores the changing missions of the U.S. Army as a case study that has relevance to any organization. Noting that a musical greeting card contains more computing power than existed in the entire world before 1950, the committee addresses the impact of new technologies on performance.

With examples, insights, and practical criteria, Enhancing Organizational Performance clarifies the nature of organizations and the prospects for performance improvement.

This book will be important to corporate leaders, executives, and managers; faculty and students in organizational performance and the social sciences; business journalists; researchers; and interested individuals.

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