Improving the quality of the processes toward a learning organization

I. Abstract

The name of the game today is level of quality and rate of innovation.
There are 2 main management methods that try to cope with these issues: The following is an approach in-between the two methods cited above.
One has to redefine the company within its environment (globalisation, outsourcing) as a kind of network and to introduce IT taking into account its key roles, the evolution of computers (from mainframes to networking of networks), and the growing use of mobile communication.
The approach focuses on every transaction that is taking place, studies the quality of the process and the management quality. For each transaction, there is a human and technical cost. It is also important to understand the nature of the relationship (hierarchy, market or team ) between the parties: the communication is different and requires different means (from EDI to groupware as it will be shown using various examples) depending on the organizational arrangement.
Information & Communication Technology is concerned with the fact that it can reduce the cost of performing each transaction and support the creation of a learning and virtual organization.

Table of content

TQM and Reengineering 
TQM
Reengineering
Consequences 
The method 
Organization and IT
Guidelines for implementing the approach 
From EDI to Groupware using the matrix
Practical measures for the set up of the learning (and virtual) company
Conclusion
References

II. TQM and Reengineering

1. TQM


1.1. Definition

TQM is not new: it was first developed in the 20s by the Bell Labs! There is no point in developing here the content of this method. One can say that it deals with the importance of the involvement of workers, the continuous improvement of processes, the creation of trust relationships between workers and the management, and the fact that business strategies become more market-driven and customer-oriented.

1.2. Situation in Israel

There has been much talk about and use of TQM during the past few years in Israel. Almost every company was working on a TQM program but it is interesting to notice that one of the champion of TQM - Ciclon Co. - did fail because conflicts between workers and the management(1).

1.3. Some of the features

a. Close to the market
People had just forgotten this key issue. But, this is not new: as long ago as 1954, Peter Drucker had written: "There is only one valid definition of business purpose: to create a customer. It is the customer who determines what business is."

b. Continuous improvement
There is nothing wrong with continuously trying to improve the processes, except when it turns out that the whole process needs to be changed.

c. Empowering employees
Theoretically, it is good that people get empowered but one should know that it does not work for everyone (as we shall see in the following: there are other means). Moreover, firing some people on one hand and empowering others on the other hand do not fit well together (problems with unions, (1), etc.)

1.4. Issues

a. IT
TQM does not take into account enough the importance of IT, its influences on work processes, on the structure of the company and on the behavior of people.

b. Conventional vision of the company
The company is still too much considered as a pyramid with clear borders.

c. Employees
Because of the growing number of freelances, temps and high turnover of low-paid employees who are very often the closest to the client, it is difficult to implement the TQM concepts.

d. TQM takes for granted that employees will collaborate and there will not be any cheating or shirking
People assume that creating a team-like situation is simple and can work for most tasks.
Concerning cheating and shirking, it is interesting to notice that many applications programs now have games built into them for workers to play when the boss isn't looking -- along with "boss" keys which can instantly throw onto the screen a spreadsheet or some other serious-looking display. The Gartner Group calculates that US businesses lose 26 million hours of employee time (or $750 million a year) from game playing (2).

2. Re-engineering

2.1. Definition

Re-engineering has "officially" (many argue that it has always existed) started when Professor Michael Hammer from MIT published an article in the Harvard Business Review in July-August 1990 under the title: "Reengineering work: don't Automate, Obliterate." The concept is simple: analyze all the processes in the company and ask oneself what the company would be like if it was created from scratch today - taking into account the existing knowledge and the new technologies.

2.2. Some figures concerning Reengineering

A survey of 600 top companies (3) in Europe and the US found:
75% of European companies and 69% of US companies have implemented at least one re-engineering initiative. What are the results of reengineering?
Cut costs: 44 % European, 38 %US. Increased revenue: 15% European 15% US
Cut cycle times 24% European 23% US. Increased productivity: 29% European 27 %US.
This is a somewhat better result than the classical figure of 70% failures (4) but there is plenty of room for improvement if they want to reach the gains promised.

2.3. Some innovative features

a. Transversal vision of the company
Traditional companies are based too much on the Taylor system. We have to take into account the following: - Globalisation: there is an emergence of transnational companies; the boundaries of the organizations are no longer clear. There is an interlinkage between companies, suppliers, clients and various institutions (universities, Governmental institutions etc.).
-There is a switch from the classic and well-known make or buy alternative to a make or buy or collaborate alternative. One may cite the emergence of the joint ventures, the strategic alliances etc.

b. Focus on processes instead of functions
In other words, it is more important to study the processes between people or departments than to analyze who they are and what their individual needs are. In organizations, the key issue is collective, coordinative problem solving (5).

c. Drastic change
M.Hammer claims that improvements are drastic: " a lowering of 78 days of an 80-day production delay, reduce overhead by 75 % and eliminate 80 % of our mistakes" (6).

d. Allows to appreciate the value chain in its whole
A correct use of reengineering is decided at the level of the CEO and one can determine what steps have really contributed to an added value.

e. Importance of IT (Information Technology)
Reengineering does take into account IT and uses it as its main tool for redesigning the company.

f. The middle managers
"To oversimplify, there will be two main flavors of [new style] managers: process managers and employee coaches" (7)

2.4. Issues

This method raises the following issues:

a. Is this just an excuse for firing people?
Michael Hammer leaves no doubt where he stands: "Middle management as we currently know it will simply disappear" (7).
Note: Professor Nonaka from the Hitotsubashi University (Japan) takes a very different direction since he relies on the middle managers to implement what he calls a "Middle Up Down Strategy".

b. Learning organization
By so drastically and blindly reducing the number of employees and managers, there is a danger of impoverishing the company, reducing its core competencies and therefore its competitive advantage.

c. Danger of going back to an old definition of a company
Despite the growing number of self-employed, freelances, part-time, temps, and despite the effects of globalisation, outsourcing, telecommuting, fading borders between companies etc., people still have a conventional view of an organization or at best would define a company as a kind of network, flattened hierarchy but with not enough accuracy.

d. Not global enough
The first example that people usually take when defining reengineering is the accounting department of Ford. Actually, this example does not mean much. Even if the results seem to be drastic, they are just local and not global enough. We have not heard that Ford has drastically reduced the time needed to launch a new model...

e. Processes
There is a need to focus on processes but there is not enough precision on the definition of a process, what it includes and what it implies.

f. Existence of conflict of interests
Reengineering tends to take for granted that people will willingly collaborate. It is an ideal vision of the business world. One should be very pragmatic and take as a basis that people do not freely collaborate. They very often retain information or data that is useful to other parties.

g. Need to be creative
Last but not least, the key to the success of this method is to come with new ideas, new concepts. And yet, we see that:
- The traditional management consultants and the "TQM experts" have become very rapidly the so-called "re-engineering experts".
-Managers are in a difficult situation: in case of success they risk being fired and in case of failure they may also be fired. In such conditions, we understand that it is difficult to be creative...and we understand the conclusion that M.Hammer draws: "the fault is not in re-engineering, but in ourselves" (4).

3. Consequences

The rest of the paper deals with the need:
- to define what is an organization (whatever its size)
- to describe what a transaction (process) is
- for creativity and innovative tools
- to efficiently introduce IT
- to give practical measures for the set up of a learning and virtual company

III. The method

1. Organization and IT

1.1. A parallel between the evolution of organizations and computers

Organizations are no longer seen as pyramids but as a network of contracts which govern exchange transactions between members having only partially overlapping goals. (5) Members may also be situated beyond the boundaries of the organization, i.e. suppliers, clients, competitors, Governmental institutions etc.
We can draw a parallel between the evolution of a company (from pyramid to network of contracts) and the evolution of the computers. According to Vary T. Coates who is senior associate at the Office of Technology Assessment, U.S. Congress, the adoption of computers in large organizations has gone through four distinct phases: large central mainframes, personal computers and distributed data processing, the networking of microcomputers and now the networking of networks.
Yet, when D.P managers implement downsizing, there is usually no organizational change implemented simultaneously. They usually stick to the conventional data flow analysis or with a decision-making view that do not represent the real flow of information.(Examples during conferences in 1993-94 of work groups of the Israel Data Processing Association).

1.2. Transaction - process

a. Definition
Transactions refer to the transfer of a good or service between individuals and departments or organizations. A transaction is a social relationship between the parties.
Note: we prefer to use the word transaction rather than process since we base our work on the transaction cost methodology and the TMS (Teams, Markets and Systems) methodology.(5,8,9,10,11).

b. Description
A relationship can be viewed as a bundle or "package" of items:
- The object (product or service) of the transaction;
- The type of contract that regulates the transaction (structured, semi-structured or unstructured);
- The organizational arrangement (a team, a market, a hierarchical relationship) that governs the execution and completion of the contract, and sets the contexts for its further modifications and renewal;
- The information infrastructure (information systems, computer networks& Telecom infrastructure);
- The parties involved, their goals in engaging the transaction(behavioral uncertainty);
- The complexity of the product/service (natural uncertainty)
- The broader context where the transaction occurs (number of players; public bodies emanating, regulations and norms; state of the technology). 

1.3. The organizational arrangements

a. Market - Invisible hand
The market system requires very little knowledge of the participants, i.e. their own needs and the prices. Moreover, the market can be guaranteed by mechanisms such as the company "Orot Adoumim- Bezeq Zaav" that gives indications on-line concerning the well-being of potential parties (debts, bankruptcy, ...).

b. Hierarchy - Visible hand
In a firm market transactions are eliminated and in their place we find an entrepreneur-coordinator who is the authority who directs production.

c. Team (notion of clan) - Invisible hand-shaking
Network of exchanges are governed in a stable manner by informal relationships of trust (rituals). There is a strong interaction ( large volume of information) between members.
There is a cost to build up a team. For instance when a Car Manufacturer such as Rover or Fiat is setting up its core team of suppliers, there are several steps: search of the supplier, negotiations, control of the transaction (it can take several years before the level of trust is high enough), maintenance and completion of the transaction (12). Then, the result is for instance that on the Punto 92% of parts have one supplier, and the transaction costs are lowered.
Concerning the way a team functions, one should recall what the philosopher Gurdjieff was saying as long as 75 years ago: "The rule of common responsibility must be borne well in mind. It has another side also. Members of a group are responsible not only for the mistakes of others, but also for their failures. The success of one is the success of all. The failure of one is the failure of all. A grave mistake on the part of one, such as for instance the breaking of a fundamental rule, inevitably leads to the dissolution of the whole group. The benefit of usefulness of groups is determined by their results.
The work of every man can proceed in three directions. He can be useful to the work. He can be useful to the group leader. He can be useful to himself. The last is very important because if he is not useful to himself it cannot last long." (13)
We have to realize that setting up a team is not as easy as people are used to being told. The following will show in what circumstance it is best to have a team-like situation.

1.4. The key roles for IT as identified by C.Ciborra (5)

a. Automate:
-To standardize tasks, thus reducing task uncertainty
-To standardize interfaces between execution of subtasks, thus streamlining coordination
-To facilitate reporting, monitoring, etc. of performance, thus reducing cheating & shirking

b. Informate:
-To encourage communication through the creation of new channels or the improvement of existing ones, thus reducing hierarchical barriers and allowing new ideas to flow more easily.

1.5. Interaction between organizational arrangement, IT and uncertainty

Natural and behavioral uncertainty are the obstacles for a better quality of the processes. Task uncertainty varies in that the more uncertain the task, the greater the amount of information required to be processed by team members for coordination purposes. Goal congruence among members may be thought of as trust.
The following table describes what is the best organization according to the level of goal congruence of the different parties and the level of uncertainty of the task to be accomplished.
One may define the transaction as a make (hierarchy) or buy (market) or collaborate (team). If the task uncertainty rises, there is a need for more information and thus for informating. If the task uncertainty gets lower, the need of information declines (e.g. formatted information), and thus there is place for automating.

See graph:

2. Guidelines for implementing the approach

Now that we have defined the notions of organization, transaction and the way IT is involved, we can briefly describe what the work of a consultant consists of:

2.1. analysis of the present relationship and its main dimensions
2.2. Description of the relationship as a network of sublinks (information flow problems)
2.3. Analysis of the cost of the present system (transaction costs)
2.4. Evaluation of the existing information system
2.5. Analysis of breakdowns, stress situations and evaluation of a new package (IT and organizational change such as a switch from a hierarchy to a team arrangement)

IV. From EDI to Groupware using the matrix

1. EDI Electronic Document Interchange

Using the model shown above, it is clear that EDI can be implemented when the uncertainty is low: the task is standardized and thus can be automated. There is no need for a special relationship between the parties. As we can see for example in the car industry, this works well for standard parts. Whenever the design of the part gets too complex and requires a broader communication between parties, there is no way implementing EDI.

2. Groupware

One of the most fashionable key words of the 90s is indeed groupware. Using the model, we are situated in the upper right of the matrix, on the arrow of informate. There is a need to carefully analyze the processes and the organizational arrangements of a company before implementing some groupware tools.
For instance, although Boeing conducted rigorous experiments in 1991 that found that meeting software could cut the time some projects take by 90%, the aircraft giant is not using it at all today. Managers may not have enjoyed finding themselves in an electronic spotlight where decisions that had once been their sole province were now fair game for comment and change by everyone. Possibly Boeing decided that its old-style bosses were uncomfortable, it didn't matter that the decision process was dramatically faster.
Clearly, a team-like situation in a hierarchy-like environment do not fit together.
One of the most popular groupware is Lotus Notes. It is useless to buy such a product and then to use it without a specific purpose. Moreover, it can bring a huge amount of useless information (junk) just as it is now the case with email. A good example of the use of Lotus Notes is when a proposal needs to be put together and people are located in remote places. One should add that companies with large Note installations calculate that besides the software itself, telephone connections, and servicing runs $200 to $500 a year per employee, in addition to the cost of the network. There's more: Lotus estimates that for every $1 customers pay for the software, they spend another $3 for consultants, trainers, and optional software to help them make optimal use of it. (14).

3. Email

Email is a powerful tool to promote communication and flatten hierarchies. It can be a means to reinforce a hierarchy or to support team work. It is also a way to contact individuals, other organizations that do have email (and not only internal), various scientists, market a product plus all the other functions that are now exploding with the use of Internet. Email goes along the line from automate to informate.
There are ways to limit the use of email (enforce hierarchy) such as the following:

4. Mobile communication

There is a growing use of mobile communication (cellular phones, laptops connected to cellular phones) and there is even a nickname connected to it: the TOMPs -- Technologically Optimistic Mobile Professionals. Thomas W. Malone professor of information systems at MIT says that "The technological nirvana of being able to work at anytime, anyplace, anywhere may actually be the personal hell of working anytime, anyplace". An analysis of the transactions and the user needs should help support telecommuting and the creation of the "virtual" company

V. Practical measures for the set up of the learning (and virtual) company

1. The "Virtual company" - Telecommuting

The definition that we gave concerning the organization applies obviously for an organization that includes a large number of telecommuters.
There are some clear savings such as the ones that the director of marketing for AT&T Virtual Office Solutions says:"for every dollar spent, we saved $2," on their telecommuting project. With approximately 8.000 employees functioning in the virtual world, managers report productivity up 45% and office space savings up 50%.(15).
But the soft parameters (behavioral uncertainty, low morale...) need to be carefully examined.
Indeed, An office in the home or mobile computing devices means that there is no clearly defined end to the workday, and one Compaq vice president worries about getting her staff to stop sending faxes in the middle of the night. "People are now thinking and working on the job 12 to 18 hours a day," she says. Employees who are forced into telecommuting also sometimes feel taken advantage of. "Everybody feels that having an office in their home is kind of a sacrifice for the company," says a manufacturer service rep. (16).

1.1. The California-based advertising company Chiat/Day

The employees no longer have any specific office but collective workspaces and they have their own phone number, a cellular phone and a laptop computer. A voicemail and an email system supports such an organization.

2. Role of the Human Resource Manager

To make it short, one may say that first he was a personnel manager then he has become a human resource manager. Now the trend is to consider him as an hybrid manager whose function has a (human and technical) resource aspect and information manager.(17)

3. Innovative use of IT

One can imagine scenarios, simulate situations using IT in an innovative way.
During consulting projects in which I participated, usually the work given to the client consisted of two parts:
- The written report
- A prototype using a multimedia software such as Hyper-Card from Macintosh. It allows to build in collaboration with the client a "quick and dirty" prototype that simulates work environments, desktops, processes, interactions between people etc. Therefore, the implementation step was already part of our work. Moreover, it is a tool that can be understood by everyone in the company and constitutes a good working material for software engineers who will have then to build the system incrementally.

4. Technographer

Use of a computer connected to a large screen during meetings (18).

5. Info centre

The function of archivist used to be very poorly considered. Now, it is upside down: we are dealing with the wealth of the company. This gives a competitive advantage: indeed it is possible to copy almost everything but not the people and its collective memory and competencies.
The info-centre is a place for defining and spreading the strategy, the vision of the company and thus its identity. The idea is to set up an info centre that will serve as a platform for the gathering of the data, the processing of it and then its distribution to the interested parties.
The real function of the info centre is to process data to a usable information and then to be the catalyst for the transformation of information into knowledge - wealth of the company. This knowledge can be considered as the added value to this system. But, we have to keep in mind we are in a GIVE & TAKE situation: people will give information if they receive some.
On top of that, this centre will be the basis for collective problems solving through electronic forums, etc.

5.1. Info-centre manager

We have seen companies that have given the responsibility of the info-centre almost "naturally" and without any thinking to the DP manager since he or she was in charge of the server. And yet, this function turns out to be one of the main functions and responsibilities in a company.

5.2. "War stories"

This expression - which has a negative connotation especially in Israel- was used by J.S Brown (PARC Institute of Xerox) during a conference at Theseus Institute.
Part of the competencies of a company rely on the collective memory of its employees. For instance, the way they got organized to solve a specific problem or a breakdown. Long-term employees are very often full of "war stories" and tips. It would be a real loss to see them leave the company with such information. Thus, we get to the notion of working with wisdom (19).

5.3. Knowledge-based system

It deals with the creation of a multimedia database: it connects - using hypertext concepts - all kinds of information in every form (text, image, sound, video etc.).
A good example of such a system can be found in servers connected to Internet and accessible via a computer, a modem and specific software (public domain)such as Mosaic.

6. (In-house) consultant who gathers innovations by "walking around"

The point is to find innovations (that sometimes do not even seem to be innovative to their author) and make them available to others.

VI. Conclusion

In this paper we have defined an approach that takes into account the concepts of TQM and reengineering. But there was a need to correct some of their assumptions and start on a pragmatic basis. This is why we came back to the basic issues of what an organization is, the role of IT and how we can improve the quality of the processes and operate organizational change.
There are some concrete recommendations for the set up of a learning organization but there is a need to do further research in this field.

VIII. References

1. Globs 4/28/94 - TQM is buried by the strike
2. Atlanta Journal-Constitution 7/3/94 R8
3. International Management Magazine September 1994
4. Hammer, M. No need for excuses p14 Financial Times Oct, 5 1994
5. Ciborra, Claudio U. Teams, market and systems University Press, Cambridge U.K 1993
6. Hammer, M. "Reengineering work: don't Automate, Obliterate." HBR July-August 1990
7. Hammer, M. Reengineering the book
8. Williamson, O.E, 1975. Markets and Hierarchies: Analysis and Antitrust Implications. the free Press, NY
9. Williamson, O.E, 1981. The economics of organization: the transaction costs approach. Amer. J. Sociol.,87(3):548-577.
10. Scheimann, P The T.M.S Methodology 2nd Congress of the Israeli Quality Association, Nov. 1993
11. Scheimann, P The integration of IT in organizations 7th Congress of MIS of the Adams Institute (Tel-Aviv University) May, 1993
12. Ciborra, C., Pagani, D.,Qvortrup,L., Scheimann,P., Stepp,R. (1992). The interaction between automotive and Supplier industry- Report for the EC (Race2 Project).
13. Ouspensky PD -In Search of the miraculous .Editions Routledge & Kegan Paul
14. Kirkpatrick, D. Groupware goes boom, Fortune Dec27, 1993)
15. San Francisco Examiner 5/29/94 C5
16. Wall Street Journal 8/17/94 B1
17. Liddington,R., Scheimann, P., Consulting Report for the HR Department of the Holding Total 1991
18. DeKoven, B. Connected executives Institute for Better Meetings Palo Alto, Ca
19. Aubrey, B. Le travail après la crise InterEditions 1994

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