Question 1: What do you think of the trends revealed in the above article? To what extent do they indicate a more ‘flexible’ approach to doing business in the 21st century?
The article has been able to tackle the situation of the employees as well as the current trends of operations of service industry, specifically the call centre industries. It can be said that the trends revealed in the above article includes international human resource management, the concept of business outsourcing as well as the current situation of service industries within the context of globalisation. It also discussed the impact of international business in India and its labour forces.
The importance of the determination of the impact of international business and the new trends in the business industries has become an accepted issue by practitioners, policy makers and academics alike ( 1996). As mentioned one of the important factors to consider when talking about the increasing number of business who wants to be recognised in the global market is the context of globalisation. The term “globalisation” has acquired considerable emotive force. Some view it as a process that is beneficial—a key to future world economic development—and also inevitable and irreversible. Others regard it with hostility, even fear, believing that it increases inequality within and between nations, threatens employment and living standards and thwarts social progress.
Through this, the trend of international competitiveness has taken the quest on the alternative sources both within and outside the business environment. Such quest brought about the notion of outsourcing. Outsourcing as generally defined by those organizations that deliver such services, requires turning over management responsibility for running a segment of business. In theory, this business segment is not mission-critical, but practice dictates otherwise. Outsourcing business is characterized by expertise not inherent to the core of the client organization.
Many businesses, like the call centre industries, are cutting back on operations to focus on the core business, reorganizing their business practices by downsizing, restructuring or re-engineering, and contracting out various functions and tasks. Often a task is considered for outsourcing if the work performed by a consultant would require hiring additional staff if it were done -house. In addition, work handled by a former employee who may perform a specific service is also considered as outsourcing. The decision to outsource is mainly based on cost, set-up time, and the availability of expertise.
According to current literature, outsourcing is a trend that will continue. There are many benefits to outsourcing, including freeing up management resources, sharing costs, creating integrated networks, building new organization structures, training staff, and interfacing with other information systems. Outsourcing offers a company functional specialization and flexibility.
Fierce competition has led many businesses to restructure and downsize staffs in an effort to save money. Vendors may save money because they have much tighter control of fringe benefits and run much leaner overhead structures. Moreover, they as well use low-cost labor pools more aggressively and, with the help of modern telecommunications, can move data centers to low-cost areas. In applying world-class standards to the company’s existing staff, all of whom have to re-qualify for appointment at the time of outsourcing, they could employ more effective bulk purchasing and leasing arrangements for all hardware and software.
Similarly, companies must be flexible enough to adapt to a business environment in constant flux, so their functions have to respond quickly to changing demands. Vendors often can tap a wide range of resources, skills and capacities while internal staff may have limited capabilities. Companies often hire outsourced staff with the understanding they’ll be employed for a limited time. Thus, they can more easily drop or add people to the workforce without jeopardizing the company’s reputation as a stable employer. More important, the use of outsourced workers buffers regular employees from fluctuations in demand and enables the company to establish a stronger relationship with its regular workforce than would otherwise be possible.
With this another trends and themes are running through many of the new approaches to management, and this include of a more flexible workforce. The search for improved flexibility has, according to become employers’ new frontier in the management of labor (1990, p. 12). Flexibility can have a variety of meanings (, 1986; 1989; 1992; 1992), but fundamentally three forms of the concept can be distinguished ( 1993). Functional flexibility is the ability of the enterprise or the industry like the call centre industries to redeploy labor to cover new work tasks or new production methods. The second form is wage flexibility, in which the enterprise attempts to link wage payments to productivity and product demand. Finally, numerical flexibility is the ability to adjust labor inputs to product demand.
These forms of labor flexibility have been well documented in industrialized nations ( and , 1993). In Australia, for example, the introduction of enterprise bargaining in the late 1980s led to considerable interest in flexible work practices ( 1991). Nevertheless, these studies have not resulted in any real attempt to examine the impact of such practices. This article undertakes this task by examining the practice of outsourcing. Outsourcing contributes to all three forms of flexibility. Tasks undertaken are contract- not craft-related, payment is made only for work completed, and worker numbers can be adjusted to the production requirements of the plant.
The increasing use of contractors, both for the supply of components and for services, reflects an acceptance that the firm should concentrate on its core activities ( 1992). Non-value-adding activities, it is argued, can more efficiently be performed by firms that specialize in such tasks ( 1994). The perceived benefit to the firm is that its limited physical, managerial and financial resources can be focused on producing a quality product or service at a competitive price.
While outsourcing can improve flexibility, the argument for adopting this practice tends to focus on cost considerations (1992). As Tully contended, outsourcing “holds down the unit costs and investment” and “frees companies to direct scarce capital where they hold a competitive advantage” (1993, p. 52). Another advantage may be improved industrial relations that result from shifting industrial relations responsibility to a third party. This can be the case where the union representing the employees currently providing the service is perceived as being unduly militant or where workplace reforms are being resisted ( 1993). Outsourcing may also be an impetus and agent for change. Contractors can bring to the organization more specialized and efficient ways of undertaking the given tasks ( 1993). This is important if the enterprise has work practices that are no longer relevant or economically sustainable.
Outsourcing can, however, create problems for the enterprise. Outsourcing decisions tend to be incremental. As concluded, “a whole series of incremental outsourcing decisions, taken individually, may make economic sense, but collectively they may also represent the surrender of the business’s capability to compete” (1992, p. 7). Core products or technology may be compromised and the firm could become dependent on a large range of suppliers ( 1991). challenged the cost of outsourcing, claiming that “the economics are troubling at best and extremely costly at worst” (1992, p. 42). This view was shared by, who believed conventional accounting systems are incapable of providing the relevant cost information on which to base a decision.
In the long term, argued, outsourcing may not be the best strategy for every function (1993, p. 34). Similarly, reported that outsourcing normally occurs not as part of a coherent strategy but in order to save money (1991, p. 8). As argued, ” outsourcing can provide a short cut to a more competitive product, but it typically contributes little to building the people-embodied skills that are necessary to sustain product leadership” (1990, p. 84).
An additional problem is the coordination and supervision required when a company outsources activities. The Boston Consulting Group found “co-coordinating a gaggle of subcontractors is often more time-consuming – and costly – than managing in-house manufacture of the parts in question”. If the lack of coordination results in poor communications then this could also have “severe effects on workplace safety” ( 1994, p. 55).
After considering the financial roots of outsourcing strategies, it is not surprising that the majority of the outsourcing literature has examined the financial effectiveness of this organizational improvement strategy. Although some have suggested that outsourcing efforts have not always been successful ( 1996), financial returns have been the most convincing argument in favor of outsourcing.
It can be said that the paradox of globalization and the context of business outsourcing attached within can be considered a significant factor for the transformation of different international businesses like call centre industries ( 2001) to be more flexible in terms of management, business performance and operations and other related activities in order to survive in the stiff competition brought by these trends. Industries are now trying to find a better and effective way to be competitive in terms of its physical and economic resources and become flexible in all aspects of the business.
Question 2: TOYOTA and Fordism
In organisational development, there are different theories that are considered to be influential. One of which is the theory of Fordism. Fordism is a form of industrial production developed from Taylorist methods; the main aim is product maximisation through tight control over movements and separating planning from executing tasks. (Fordism’s proprietor) became famous for both his Model T car invention and his revolutionary system of mass production. His company, based on highly productive, mechanistic and continuous production methods, formed in 1903 as he believed craftsmen (original car producers) could not meet consumer demand Ford would create with their methods. He believed the deskilling of car production was required to achieve ‘continuous improvement’ and mass production. Whilst other observers argue Ford’s motive was to effortlessly control labour and substituting it should it be uncontrollable. The skilled mechanical craftsman then became the lowly-skilled, specialized machine operator ( 2001:426).
However, in spite of the positive influence of Fordism in the market, some automotive companies or industries has not used or apply the concept of Fordism. Such companies include Toyota, Nissan and other Japanese makers. The Japanese car industries have introduced other unique production system and reject the application of Fordism as part of their production system. Instead of using Fordism, Toyota has introduced the so-called Toyota Production System which is related to the Just-In-Time system of the Japanese.
Toyota is known to be one of the largest automotive industries in the world. The company was founded in 1937 as a subsidiary of Toyota Automatic Loom Works. Toyota’s first car was launched in 1947, with global expansion beginning in Brazil in 1959. A significant early competitive advantage (especially in terms of cost) for Toyota was its focus on improving production systems, based on Just-In-Time and Kaizen methods. Toyota listed its shares on the New York and London stock exchanges in 1999. While the automotive manufacturing and financing businesses are its primary sources of income, the company also offers financing in relation to its vehicle business, as well as other small business units including telecommunications, industrial products, housing, and boats.
Along with Ford and GM, Toyota is seen as one of the most recognizable global auto brands. Its scale and depth of products enables Toyota to minimise risk of introduction of new models, and spread costs over a wide range of models. Toyota’s wide range of brands allows the company to capture revenue from a broad section of consumer segments. Toyota’s recognized superiority in high-tech production gives it a large advantage over its rivals. One of Toyota’s main concerns is to attract and retain innovative engineers to sustain this competitive advantage.
Toyota, being Japanese has used Just-In-Time (JIT) production method allows companies to gain supplies just before its intended use, hence flexibility to the economic conditions of demand. However, it could be argued that JIT is a Fordist regime. But, not all companies can afford to implement such systems (technology is expensive); it could be argued only national/multinational corporations can meet the cost, so flexibility is limited. The view that industry has now become Post-Fordist is supported by (1991 whereby firms are less hierarchical and produce small batches of specialised commodities. ( 2000:73), as opposed to Fordist massively produced homogeneous products.
The JIT method is flexible to demand conditions, allowing companies to gain supplies just before their intended use. Also, JIT requires a skilled and trained workforce due to varied work and quality discussion circles on how to improve production; thus Post-Fordism requires a higher trained workforce than Fordist managed strictly controlled labour. However, it could be argued that JIT is a Fordist regime. Also, Fordism had resource usage problems e.g. extreme use of natural resources (fuel, energy, etc).
Just-in-time production is closely associated with the Japanese motor industry and particularly Toyota. This approach to the management of stocks and material flow was popularized in the West by business writers such as (1982; 1986) and began to receive widespread attention, particularly in the USA, as the Japanese car makers gained a share of the market and then set up overseas operations.
The final key ingredient in the Toyota management strategy was the system of small-lot production. In the context of limited and rapidly shifting markets, Toyota could not mass produce on the Fordist blueprint, but had to use its factories flexibly to manufacture a variety of automobile models in relatively small quantities. , however, recognized that the American system—with automakers churning out standard products in large volumes using specialized equipment—had its limitations and that manufacturing a wide array of products in low volumes with multipurpose machine tools, when allied with the “clockwork-like meshing of just-in-time,” ( 1992) could be even more efficient than traditional Fordist arrangements.
Crucial to ‘s vision was the perfection of a system for drastically reducing machinery setup times, allowing for the sequential production of small lots without long, unproductive periods of retooling and recalibration. Under the guidance of , an industrial engineer and consultant to Toyota, a number of creative means for rapidly changing dies in machine tools were developed. By the end of the 1960s, had so simplified setup procedures for stamping presses—a complex operation which required hours or even days in Western factories—that Toyota could complete a full changeover in less than ten minutes ( 1985, , 1989). With such techniques in place, Toyota’s “lean” production paradigm was complete, and the mature system was diffused throughout the company’s workshops by the early 1970s.
For all the declarations of the Toyota production system’s distinctiveness— one observer judged it “completely independent from conventional expertise,” others have proclaimed it “unique and unparalleled” (, 1984) “lean production” was constructed from classic Taylorite assumptions and the time-tested methodologies of Scientific Management. The ideological backbone of “Toyotism” was patently Taylorite: at the core of the “lean” model lay a compulsive urge to eradicate all waste within the manufacturing process, reduce costs, and boost the efficiency of labor.
The most important objective of the Toyota system has been to increase production efficiency by constantly and thoroughly eliminating waste. In fighting managerial fat, science and empirical rationality were to be the weapons of choice. The Toyota approach, one study concluded, was “a system of production, based on the philosophy of total elimination of waste, which seeks the utmost in rationality in the way we make things.” “Lean production” was premised on a “scientific attitude emphasizing facts” or, as put it, on a “scientific and rational nature.” In stressing the evils of waste and the potential of science, the ideologues of “lean production” echoed the spare homilies of the efficiency movement and the economizing prescriptions of generations of Japanese scientific managers.
Another Taylorite preoccupation reaffirmed in the Toyota system was a passion for the setting of explicit work standards and the enforcement of strict labor regimens. Even in the early days of automobile production, Toyoda (1987) was an advocate of the rigorous standardization of procedures.
Moreover, “lean production” techniques were fully consistent with traditional Taylorite notions of simplification and specialization. The architects of the Toyota system were sanguine—and surprisingly overt—in seeking to extract skills and information from shop-floor workers and invest any such commandeered knowledge in new machinery or standard work routines.
Automation was a crucial aspect of the Toyota strategy, as engineers endeavored “to transfer the work of human hands to machines, and … to transfer the work of the human brain to machines (, 1989). As declared, “The key is to give human intelligence to the machine and, at the same time, to adapt the simple movement of the human operator to the autonomous machines (, 1988). Indeed, “lean production,” like the textbook application of Scientific Management, appeared “human centered” only to the extent that tapping the skills and defining the duties of individual workers would allow for the further ascent of labor productivity.
Toyota tries to preserve its home-grown economic model such as the values it practices in its business practices to be able to retain their competitive advantage. Indeed, it is a hard task for the company to preserve its locally conceptualized model while maintaining linkages with the global economy. However, because critical success factors are established as key aspects needed by a company, this has become easier in dealing with the issue of globalization.
Although the core values which have distinguished the management of Toyota are still retained, the company has stepped out to shine for the rest of the world. The latest developments in the company proved that it is stronger than ever, emerging victorious from otherwise discouraging situations such as the adverse effect of the strong yen.
Reference
Question 1
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