New forms of organizations in the knowledge economy. The concept of a flexi organization.

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1 dr inŝ. Małgorzata Zięba Zakład Zarządzania Wiedzą i Informacją Naukowo-Techniczną Politechnika Gdańska New forms of organizations in the knowledge economy. The concept of a flexi organization. Summary The article presents various forms of organizations, which are the answer to the challenges of a knowledge-based society. Nowadays organizations need to transform themselves into new units and act according to new rules. The asset of crucial importance is not land or capital, but knowledge. The success of an organization depends to a great extend on this how it can collect, store, use and share its knowledge about customers, processes or competitors. The article first describes new organizational forms and then presents the concept of a flexi organization. 1. The characteristic of knowledge economy Despite the fact that present economy is more and more often called knowledge economy or knowledge-based economy, it is a great challenge to define what knowledge economy really is. Despite the fact that many descriptions of knowledge economy can be found in the literature, there is still no consensus on the definition of this kind of economy. For example, according to Bryans and Smith 1 in knowledge economy the development and application of knowledge replaces capital, raw materials 1 Bryans P., Smith R., Beyond training: reconceptualising learning at work, Journal of Workplace Learning, Vol. 12, No. 1, 2004

2 and labour as the main means of production. This definition seems to highlight the growing importance of the major asset nowadays knowledge. In the past various resources were the basis of economy: first it was land, then work and capital. Only recently knowledge is considered to be the fuel of economic development. What are the reasons for this situation? Why is knowledge gaining such a remarkable position? To answer these questions one has to analyse several processes taking place in the contemporary economy. First of all, the resources of information and knowledge are growing at a tremendous speed and are becoming easier to reach with the use of the Internet and modern technologies. Secondly, as Castells and Aoyama 2 noticed, the object of economic activity is not only the production of goods, but to a growing extend the delivery of services. In the industrial economy the manufacturing sector was of the greatest significance. Presently, the greater the level of economic development is, the greater percentage of employment is devoted to services. Thirdly, the development of a knowledge-based economy would not be possible without a great boom of information and communication technologies (ICT), observable in the last decades. These technologies eliminated the barriers of time and space and brought new opportunities to companies. ICTs are powerful tools in hands of a manager as they contribute to a better efficiency of various economic activities and support innovative actions 3. Finally, the process of globalization, i.e. integration of economies and societies all over the world into one, global economy. This process spurs the development of knowledge- 2 Castells M., Aoyama Y., Paths towards the informational society: Employment structure is G-7 countries, , International Labour Review, Vol. 133, No. 1, Anell B. I., Wilson T. L., Prescripts: creating competitive advantage in the knowledge economy, CR, Vol. 12, No. 1, 2002

3 based economy as it allows the distribution of knowledge with enormous speed despite any barriers. 2. Organizations in the knowledge economy Due to the above-mentioned phenomena, economies all over the world are transforming from industrial economies into knowledge-based ones. This can be observed on the example of companies, which value results from non-material resources. The most popular examples of this kind are: Coca Cola company, which major value constitutes its logo, and Microsoft, deriving its profits from the knowledge on software. Organizations are becoming aware of the fact that knowledge can be their source of long-term competitive advantage as non-material resources are difficult to copy by other organizations. As Kessels 4 highlights, the ability to gather information, generate new knowledge, disseminate and apply this knowledge to achieve improvement and innovation is an organization s knowledge productivity. Knowledge productivity will remain the dominant economic factor in a knowledge society. Therefore, organizations have to focus on effective use of their knowledge in order to reach a better position on the market. This is a difficult task though as organizational knowledge is usually tucked away in employees heads. Furthermore, constant fluctuations in the environment force organizations to being flexible and adaptable. Customers demands are becoming more and more complex. Only those organizations which detect and fulfil new needs and demands of their customers better, faster and cheaper than others will achieve success. 4 Kessels J. W. M., Learning in organizations: a corporate curriculum for the knowledge economy, Futures, Vol. 33, 2001

4 3. New forms of organizations Organizations try to cope with the above described challenges in various ways. Some of them introduce processes such as decentralization or flattening of their structures. Others convince their employees to team working, continuous learning and knowledge sharing. Finally, organizations experiment with new organizational forms. In the following part of the article, the author will try to analyse selected organizational forms and propose an integrated approach of a flexi organization. Learning organization This concept of an organization, created by Peter Senge 5, is quite popular among managers and directors. According to this concept, organizations should focus on the constant process of learning, which allows to build and sustain the competitive advantage 6. In a learning organization people are not afraid to think and present their ideas. The learning process is not limited to the learning of individuals, it is extended to the learning of the whole organization: teams, project groups, units, etc. The concept of learning organization highlights the importance of absorbing new knowledge and experience for the organization. In the environment where new technologies and methodologies substitute older ones at an enormous speed, people are permanently faced with the need of learning new tools, ways of action, behaviour, tasks and functions 7. Learning in an organization means constant testing of experience and transforming 5 Senge P. M., Piąta dyscyplina. Teoria i praktyka organizacji uczących się, Dom Wydawniczy ABC, Warszawa Stanczyk-Hugiet E., Organizacja ucząca się, in: Krupski R., Zarządzanie przedsiębiorstwem w turbulentnym otoczeniu, Polskie Wydawnictwo Ekonomiczne, Warszawa Brilman J., Nowoczesne koncepcje i metody zarządzania, Polskie Wydawnictwo Ekonomiczne, Warszawa 2002

5 it into the knowledge available to every person in an organization and crucial from the point of view of the major organizational goal 8. Agile organization The concept of agile organization originated in manufacturing research by the Iaccoca Institute. The agility of an organization is its ability to quickly react to changes on the market and in the business environment. An agile organization can easily adapt to unexpected changes in order to cope with business threats. A great role in the agility of an organization play information systems and ICT 9. The assumption of this concept is that competitive advantage may be obtained not as a result of copying methods and tools used by the Japanese in lean production, but a result of implementing such solutions which are not used by competitors 10. The idea is to give the enterprise the characteristics of agility, which on the basis of knowledge supports its adaptation to changes in the business environment. One can state that knowledge is the major resource in the creation of organizational agility. An organization is not agile when it just eliminates activities that does not bring profits or increases its efficiency; it is agile when it achieves successes in turbulent and unpredictable environment. Organizational agility is determined by the knowledge, experience and invention of its members. Network organization 8 Senge P. M., Kleiner A., Roberts Ch., Ross R. B., Smith B. J., Piąta dyscyplina. Materiały dla praktyka, Oficyna Ekonomiczna, Kraków Breu K., Hemingway Ch. J., Strathern M., Bridger D., Workforce agility: the new employee strategy for the knowledge economy, Journal of Information Technology, Vol. 17, 2001, pp Trzcieliński S., Modele zwinności przedsiębiorstwa, in: Trzcieliński S., Nowoczesne przedsiębiorstwo, Politechnika Poznańska, Poznań 2005

6 A network organization is created as a combination of autonomic and specialised units or enterprises for the purpose of a common aim realization. This organizational form benefit from the synergy effect. According to K. Łobos 11, the network organization is based on the following characteristics: decisions on resources are undertaken not only by the sides of transactions, but also together by the cooperating sides; resource flow between the cooperating partners is of repetitive, not temporary character; mutual expectations of the cooperating sides cover long-term horizon; information available to the cooperating sides are more extensive than in the case of market coordination; the form of action coordination between the cooperating sides are negotiations and agreements, not competition. In a network organization a significant emphasis is placed on the idea of information exchange and mutual trust. In order to convince the employees of an organization to share all their knowledge and wisdom with others, it is necessary to provide an atmosphere of trust and security. Another aspect of a network organization, highlighted by researchers, is its strong dependence on information and communication technologies 12. ICTs in a network organization are claimed to foster the development of innovative products and a speedier response to change. Virtual organizations 11 Łobos K., Organizacja sieciowa, in: Perechuda K., Zarządzanie przedsiębiorstwem przyszłości. Koncepcje, modele, metody, Agencja Wydawnicza, Warszawa See for example: Symon G., Information and communication technologies and the network organization: A critical anaylis, Journal of Occupational and Organizational Psychology, 73, 2000

7 Virtual organization is sometimes considered as a special form of a network organization. In this kind of organization, the cooperating units exchanging competencies are dispersed in various locations. According to Niemczyk and Olejczyk 13, the aspects of a virtual organization often highlighted in the management literature are as follows: the significance of information resources in the organization; kind of goals, which the organization should aim at; dominating features of organizational relations with its environment. Grudzewski and Hejduk 14 define a virtual organization as a dynamic management tool based on computer networks and the possibilities of using information banks, such as the Internet, ideal for reaching comparative advantage. Virtual enterprises can also be perceived as a temporary consortium of enterprises that strategically join skills and resources, supported by computer networks, to respond better to a business opportunity 15. To sum up, this kind of organization also to a great extend relies on ICT, which serve to eliminate the boundaries of time and location. Process organizations A process organization consists of units attributed to particular processes, where processes are actions connected with the realization of customer s needs. As Cieśliński 16 wrote, the role of process management in organization is: 13 Niemczyk J., Olejczyk K., Organizacja wirtualna, in: in: Krupski R., Zarządzanie op. cit. 14 Grudzewski W., Hejduk I., Przedsiębiorstwo przyszłości, Difin, Warszawa Camarinha-Matos L. M., Afsarmanesh H., Rabelo R. j., Infrastructure developments for agile virtual enterprises, Int. J. Computer Integrated Manufacturing, Vol. 16, No. 4-5, Cieśliński W., Zarządzanie procesami, in: Perechuda K., Zarządzanie op. cit.

8 1. to increase the effectiveness of human actions by structuring the activities according to the criterion of value added; 2. to structure actions by defining: tasks, decisions, documentation and their flows; 3. to describe the process in an enterprise in a dynamic and spatial approach; 4. to indicate the dominating role of the customer. Process organization is often a matrix organization in which coworkers are included in competence units, product areas, etc, and business processes are imposed on them 17. In a process-oriented organization the greatest focus is on the customer and products delivery. 4. Flexi organization an integrated approach The concept of a flexi organization is another proposition for managers and company owners aiming at success in a knowledge-based economy. The word flexi is an abbreviation of flexible. The word flexible generally denotes the ability to adapt to changes and alterations in the environment. Flexibility in the organizational context might be applied in a variety of dimensions, which is depicted in the picture below. 17 Karlof B., Loevingsson F., A to Z Management Concepts and Models, Thorogood, 2005, p. 290

9 Political environment Social environment Labour force Suppliers Company Customers Economic environment Picture 1. Dimensions of flexibility in a company. Source: Own. Organizations may undertake attempts to introduce flexibility in three major dimensions: labour force, customers and suppliers. Below all three dimensions are described in detail. Labour force flexibility Many years ago Charles Handy 18 described contemporary organization by the metaphor of a shamrock. According to his concept, organizations should comprise of three groups of employees: one-third core staff, one-third subcontractors and one-third part-time staff and professional advisers Handy Ch., Wiek paradoksu, Dom Wydawniczy ABC, Morgan R. E., Outsourcing: Towards the Shamrock Organization, Journal of General Management, Vol. 29, No. 2, Winter 2003

10 Nowadays the proposal of Charles Handy is more attractive than ever. Many organizations employ temporary workers, specialized vendors, and consultants in order to flexibly cope with new opportunities or threats 20. Furthermore, the practical knowledge of employees and their ability to quickly deal with unanticipated situations has become an essential resource of every organization 21. Therefore, the flexibility with regard to employees does not only encapsulate resilient employment management, but also the flexible behaviour and abilities to act of the employees. Customer flexibility The second dimension of flexibility regards customers. Their present needs fluctuate at incredible speed. Many products become obsolete from day to day. It is of crucial importance for every organization to quickly respond to market demands and competitors undertakings. Knowledge on customers and their needs gives the basis for the company to react ahead of time and to obtain revenue growth and customer satisfaction. Flexibility with this regard require the implementation of knowledge management strategies. The ability to gather, store, use and share knowledge on customers might be the source of a long-term competitive advantage. Supplier flexibility The third dimension of flexibility concerns suppliers. Similar to the second dimension, it also requires the implementation of knowledge man- 20 Bahrami H., The emerging flexible organization: perspectives from Silicon Valley, California Management Review, Summer Shoham S., Hasgall A., Knowledge workers as fractals in a complex adaptive organization, Knowledge and Process Management, Vol. 12, No. 3, 2005

11 agement strategies. Being in the possession of data about suppliers and their production process, organization may negotiate profitable agreements. It may also select the best suppliers, and if need be, quickly change the supplier. Apart from the close environment, organization are vulnerable to contingencies from political, social and economic environment. These contingencies are in most cases impossible to predict. Therefore, it depends on the flexibility of an organization whether it will be able to survive in unfavourable circumstances. 5. Conclusion To sum up, the concept of a flexi organization is a proposal for companies to cope with the challenges of a knowledge-based economy. This article presents a flexi organization within the scope of flexibility dimensions. Further studies will aim at clarifying what practical implications this idea bears. Bibliography Anell B. I., Wilson T. L., Prescripts: creating competitive advantage in the knowledge economy, CR, Vol. 12, No. 1, 2002 Bahrami H., The emerging flexible organization: perspectives from Silicon Valley, California Management Review, Summer 1992 Breu K., Hemingway Ch. J., Strathern M., Bridger D., Workforce agility: the new employee strategy for the knowledge economy, Journal of Information Technology, Vol. 17, 2001, pp Brilman J., Nowoczesne koncepcje i metody zarządzania, Polskie Wydawnictwo Ekonomiczne, Warszawa 2002 Bryans P., Smith R., Beyond training: reconceptualising learning at work, Journal of Workplace Learning, Vol. 12, No. 1, 2004

12 Camarinha-Matos L. M., Afsarmanesh H., Rabelo R. J., Infrastructure developments for agile virtual enterprises, Int. J. Computer Integrated Manufacturing, Vol. 16, No. 4-5, 2003 Castells M., Aoyama Y., Paths towards the informational society: Employment structure is G-7 countries, , International Labour Review, Vol. 133, No. 1, 1994 Cieśliński W., Zarządzanie procesami, in: Perechuda K., Zarządzanie przedsiębiorstwem przyszłości. Koncepcje, modele, metody, Agencja Wydawnicza, Warszawa 2000 Coulson-Thomas C., IT and new forms of organisation for knowledge workers: Opportunity and implementation, Employee Relations, Vol. 13, No. 4, 1991 Foss N. J., Coase vs Hayek : Economic organization and the knowledge economy, International Journal of the Economics of Business, Vol. 9, No. 1, 2002, pp Grudzewski W., Hejduk I., Przedsiębiorstwo przyszłości, Difin, Warszawa 2000 Handy Ch., Wiek paradoksu, Dom Wydawniczy ABC, 1996 Karlof B., Loevingsson F., A to Z Management Concepts and Models, Thorogood, 2005, p. 290 Kessels J. W. M., Learning in organizations: a corporate curriculum for the knowledge economy, Futures, Vol. 33, 2001 Łobos K., Organizacja sieciowa, in: Perechuda K., Zarządzanie przedsiębiorstwem przyszłości. Koncepcje, modele, metody, Agencja Wydawnicza, Warszawa 2000 Morgan R. E., Outsourcing: Towards the Shamrock Organization, Journal of General Management, Vol. 29, No. 2, Winter 2003 Senge P. M., Piąta dyscyplina. Teoria i praktyka organizacji uczących się, Dom Wydawniczy ABC, Warszawa 1998 Senge P. M., Kleiner A., Roberts Ch., Ross R. B., Smith B. J., Piąta dyscyplina. Materiały dla praktyka, Oficyna Ekonomiczna, Kraków 2002 Shoham S., Hasgall A., Knowledge workers as fractals in a complex adaptive organization, Knowledge and Process Management, Vol. 12, No. 3, 2005 Stanczyk-Hugiet E., Organizacja ucząca się, in: Krupski R., Zarządzanie przedsiębiorstwem w turbulentnym otoczeniu, Polskie Wydawnictwo Ekonomiczne, Warszawa 2005 Symon G., Information and communication technologies and the network organization: A critical analysis, Journal of Occupational and Organizational Psychology, 73, 2000

13 Trzcielinski S., Modele zwinności przedsiebiorstwa, in: Trzcielinski S., Nowoczesne przedsiębiorstwo, Politechnika Poznańska, Poznań 2005

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