The paradigm of a new decentralization. Its implications for organization and HRM
| Date | 01 December 1995 |
| Pages | 29-45 |
| Published date | 01 December 1995 |
| DOI | https://doi.org/10.1108/01425459510103479 |
| Author | Hans Jürgen Drumm |
| Subject Matter | HR & organizational behaviour |
The paradigm
of a new
decentralization
29
The paradigm of a new
decentralization
Its implications for organization and
HRM
Hans Jürgen Drumm
University of Regensburg, Regensburg, Germany
The problem and how it could be solved
Over the past few years, a series of new concepts of management relating to
decentralization have been put forward which display a number of
organizational components. Mostly they have been propounded by
management consultants, but there are also some academics among their
supporters. Buzzwords like “business re-engineering” (Hammer and Champy,
1995); “fractal and modular factories” (Fraktale Fabrik, Modulare Fabrik)
(Warnecke, 1993; Wildemann, 1992), or “virtual corporation” (Davidow and
Malone, 1993); and “atomized organization” (Atomisierte Organisation) (Ryf,
1993), arouse academic curiosity and render these concepts attractive to their
would-be users in business and management consultancy.
Apart from a “radical” restructuring, business re-engineering aims at a
renewed emphasis on customer orientation and process orientation, above all in
the services sector. Fractal and modular factories are concepts for a
divisionalization of complex industrial enterprises into smaller, less complex,
and more or less autonomous production units. The concept of the virtual
corporation aims at the development of patterns of co-operation within a
company or among different companies which may or may not be limited in
time. The concept of the atomized organization should lead to a better
utilization of a company’s human resources. Neither the concept of the virtual
corporation nor that of the atomiz ed organization differentiates between lines of
business. Both are designed as general concepts for all types of companies. So,
on prima facie evidence, all five formulations pursue different aims.
What is common to nearly all these concepts is that their design is vague,
contradictory and non-operational. They can be characterized as:
●visions of new corporate structures, lacking a theoretical foundation;
●conceptual systems of untested hypotheses (Kunstlehren).
The only concept that has been operationalized to a relatively large extent is
Wildemann’s concept of the “modular factory” (Modulare Fabrik) (1992). Scholz
(1994, pp. 9-12), too, has tried to achieve a greater operationalization of virtual
corporations as shown in his critical analysis of the concept. Employee Relations, Vol. 17 No. 8,
1995, pp. 29-45 © MCBUniversity
Press, 0142-5455
Employee
Relations
17,8
30
The concepts of decentralization may seem to be something altogether new at
first. After scrutinizing them a little closer, however, they turn out to be a
combination of well-known structural elements and a few new ones. Osterloh
and Frost (1994, pp. 357-8) have shown this to be true of the concept of business
re-engineering, whereas Scholz (1994) points out well-known components that
are to be found in the concept of the virtual corpor ation. A fascinating task may
therefore lie in checking these concepts for common structural elements,
something which the authors who invented the concepts do not elaborate on –
at least not explicitly.
Common structural elements can indeed be found. There are features
common to all these concepts which allow the generation of a synthetic
structural type of organization. This structure is first of all a result of the
paradigm of decentralization by means of a divisional organization
(Geschäftsbereichsorganisation) and secondly a paradigm which could be called
new decentralization. This paradigm of a new decentralization is best described
by attributes like “small”, “autonomous”, “process-oriented”, “customer-
oriented”, and “self-co-ordinating”. Its forerunner can be found in the key
concept of “strategic business units” (SBUs) which was essential to the concepts
of strategic planning in the 1980s.
A practical implementation of the paradigm of a new decentralization,
however, will bring to light such well-known problems as those of a hierarchical
differentiation of decision-making, market interdependencies among
decentralized divisions, co-ordination, and interface management
(Schnittstellenmanagement) – problems to which we have not much more than
second-best solutions so far. When including the numerous consequences of the
paradigm of a new decentralization for HRM in our consideration, barriers crop
up which are hard or impossible to surmount and which are, above all, a result
of the limited knowledge and abilities of the necessary personnel available and
an all too idealistic notion of human nature underlying these new concepts.
These barriers and several other HRM problems that are difficult to solve might
rebound on the success of the concepts of a decentralized organization. Neither
academic discussion (of Osterloh and Frost, 1994; Scholz, 1994) nor that among
practitioners has paid much attention to these barriers so far.
Subsequently, we shall examine the correlations of structural elements of a
new decentralization with its realization and its organizational and HRM
consequences. The results of such an analysis will be used to bring criticism to
bear on the paradigm of a new decentralization and to review its validity.
The genesis of the problem and its theoretical foundations
The MIT five-year study on the future of the automobile, published in 1990 (see
Womack et al., 1994), gave a first incentive to designing new concepts of
corporate management. So did the ideas of lean production and lean
management which followed in the wake of the MIT study. All lean concepts
were designed to reduce hierarchy which in turn led to a decentralization of
decision-making powers. A second incentive was caused by changes of strategy
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