Page 73 - Managing Change in Organizations

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Chapter 3 ■ The transformation perspective
Networks can save on transaction costs substantially if their members follow an
informal set of rules that require little or no overhead to negotiate, adjudicate,
and enforce. The moment that trust breaks down among members of a business
network, relations have to be spelled out in detail. [At this point the network
resembles either a market or a hierarchical organization – author’s note.]
In fact managing networks, managing professional practices, managing alliances
and joint ventures, managing virtual organizations and managing lean production
all share these characteristics.
Castells (1996) comes to a similar conclusion. For him ‘the main shift can be
characterized by the shift from vertical bureaucracies to the horizontal corpora-
tion’. This shift is characterized by seven main trends:
1 Organization around process, not task.
2 A flat hierarchy.
3 Team management.
4 Performance management based on customer satisfaction.
5 Rewards based on team performance.
6 Maximization of contacts with suppliers and customers.
7 Information, training and retraining of employees at all levels.
These developments derive from a recognition of the limits both of the original
functional, hierarchical model and attempts to modify this model via the Toyota
lean production model or later equivalents such as business process re-engineering.
Ernst (1994) identifies five types of networks,
1 Supplier networks.
2 Producer networks.
3 Customer networks.
4 Coalitions.
5 Technology cooperation networks.
The network does not replace multinational corporations but rather offers the

means through which these organizations now operate. Indeed national compa-
nies, public sector organizations and even voluntary organizations operate
within networks; hence the current interest in supply chain management and
interagency working. Networks provide the means through which we deal with
increased complexity and/or global scope.
In addition to the trends identified by Castells (1996), here are some other
approaches to developing the future organization:

■ Activity-based costing combined with customer analysis. This latter approach
identifies key processes in terms of importance and customer satisfaction (see
Gouillart and Kelly, 1995). The focus is on internal and external customers.
■ Models of managerial competence.
■ The 360° appraisal, a process in which managers are appraised by boss, peers
and subordinates thus focusing attention on the value they add.
■ Business process analysis.
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